RESTRICTED
WORLD TRADE WT/WGTCP/W/57
4December 1997
ORGANIZATION(97-5317)
Original: English Working Group ontheInteraction
between Trade andCompetition Policy
SUBMISSION FROM CANADA
Thefollowing communication, dated 27November 1997, wasreceived from thePermanent
Mission ofCanada withtherequest thatitbecirculated toMembers.
______________
Statement bytheDelegation ofCanada
National treatment intheapplication ofcompetition law
Introduction
Atourmeeting inSeptember, ourdelegation spoke about theimportance ofdiscussing the
principles, standards andenforcement mechanisms oftrade andcompetition policies sothatwecan
better understand theirlinkages. Today, wewould liketodiscuss theapplication ofakeytradepolicy
principle -national treatment -tocompetition law. Ourintervention focuses onananalysis Canada
undertook fortheNAFTA Working Group onTrade andCompetition. Thisstudy demonstrated that
theconcept ofnational treatment incompetition lawislargely unproblematic indealing withbusiness
practices intheNorth American FreeTrade Area.
Tobegin, Iwould liketosayafewwords about theprinciple ofnational treatment.
Non-discrimination isafundamental principle intheprocess oftradeliberalization. Application
ofthisprinciple byallsignatories toatrade agreement isessential tothesecurity andpredictability
ofmarket access.
Within theGATT system, non-discrimination hasbeenpursued viatwocentral concepts:
most-favoured-nation (MFN) andnational treatment. MFN isdirected attheissue ofexternal
discrimination, andobligates contracting parties nottodiscriminate among sources ofimports. National
treatment, ontheother hand, addresses theissueofinternal discrimination. Theobligation ofnational
treatment within theGATT means that,onceforeign goods haveentered one'smarket, theywillbe
treated nolessfavourably thangoods ofdomestic origin.
Itshouldbenotedthattheobligationofnationaltreatmentdoesnotimplyanyrequireduniformity
between jurisdictions. National treatment, forexample, doesnotnecessitate thatforeign goods are
tobetreated astheywould beintheircountry oforigin. Infact,itisperfectly consistent forsignatories
tomaintain different regulatory regimes andstandards, forexample, withrespect tophytosanitary
regulations, solongasforeign goods inthedomestic market aretreated nolessfavourably thandomestic
goods withrespect tothemeasure inquestion.WT/WGTCP/W/57
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Atthesame time, weshould keepinmind thatitistheeffect ofagiven domestic measure
onaforeign product, rather thanitsformal provisions, which iscentral inensuring thattheobligation
ofnational treatment hasbeenmet.
IntheWTO agreements relating toinvestment measures, intellectual property andservices,
therequirementofnationaltreatmentisafundamentalobligation,althoughitsdescriptionandapplication
varydepending ontheagreement inquestion.
TheNorth American FreeTrade Agreement (NAFTA) adopts anambitious application ofthe
concept ofnational treatment tothedisciplines andobligations undertaken bytheparties. TheNAFTA
includesnationaltreatmentwithrespecttomarketaccessforgoods,andextends(withspecificexceptions)
national treatment toinvestment measures, services andintellectual property.
While theWTO andNAFTA haveextended theconcept ofnational treatment tonon-goods,
thedegree towhich thisobligation could bemetintheapplication ofcompetition policy hasyetto
befullyconsidered.
TheNAFTA mandates aWorking Group, established under Article 1504, toexamine relevant
issues concerning therelationship between competition lawsandpolicies andtrade inthefreetrade
area. Given theprimacy accorded totheconcept ofnational treatment intheNAFTA andthemandate
facing theNAFTA 1504 Working Group, areview oftheextent towhich national treatment applies
intherespective competition lawsofCanada, Mexico andtheUnited States wasatopic foranalysis
early inthegroup 'smandate.
NAFTA study
(i) Analytical method
Aspartoftheanalysis within theNAFTA Working Group ofnational treatment under our
competition laws, theCanadian delegation compared therespective legislative provisions ofCanada,
Mexico andtheUnited States competition laws. Weexamined therelevant provisions ofthethree
competitionlaws,takingnationaltreatmentasdefinedintheGATTandNAFTAastheguidinganalytical
mechanism forthisexercise.
Ouranalysis contrasted thecorestandards ofthethree NAFTA parties 'competition laws:
theirtreatment of(i)horizontal restraints, suchascollusive agreements inrestraint oftrade, pricefixing
andbidrigging; (ii)vertical restraints involving distribution strategies, predatory pricing andrefusal
todeal; (iii)abuse ofdominance; and(iv)mergers. Along witheachofthese keystandards, we
analysed therelevant defences provided ineachlegalregime.
Inaddition, sectoral exemptions based onspecific sectors andtypes ofactivity applicable under
thecompetition lawsofthethree countries were delineated.
Theanalysis thenoutlined thelegalregimes involved incompetition lawenforcement.
Afinalstage intheprocess involved highlighting those points where issues related tonational
treatment might ariseintheapplication ofcompetition lawineachofthethree NAFTA countries.WT/WGTCP/W/57
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(ii) Results
Given thesimilarities intheintent andapproach between theCanadian, Mexican andAmerican
competition laws, itwashardly surprising thatthisfinalstage almost always confirmed anabsence
ofnational treatment problems intheapplication ofcompetition lawinthethreecountries. While there
areunderstandable differences among thethree lawsinthemanner inwhich particular standards are
pursued, andwhile certain provisions bytheirnature limittheircoverage tothedomestic market, it
wasclearthatthetreatment intherespective lawsofdomestic firms incontrast toforeign firms only
rarely engenders points ofcontention.
Ouranalysis demonstrated thattheconcept ofnational treatment incompetition lawshould
belargely unproblematic inthecontext ofthetreatment ofbusiness practices across theNorth American
FreeTrade Area.
Conclusion
Theanalysis intheNAFTA context demonstrates thatnational treatment isanimportant concept
forbothtrade andcompetition law. Theincorporation ofnational treatment during theformulation
ofnationalcompetitionlawsisnecessarysoastoensurethatcompetitionlawsdonotthemselvesinterfere
withthecross-border flowofgoods andservices. National treatment isequally important inthe
application andenforcement ofcompetition laws. Webelieve thatthiskeyelement important toan
effective competition policy cancontribute tofurthering theobjectives oftrade liberalization andthe
objectives oftheWTO system. Thedelegation ofCanada would welcome theopportunity todiscuss
further suchissues astheapplication ofthenational treatment principle tocompetition lawinfuture
discussions ofthisWorking Group.