WORLD TRADE
ORGANIZATIONWT/WGTCP/W/174
2 July 2001
(01-3292)
Working Group on the Interaction
between Trade and Competition PolicyOriginal:  English
COMMUNICATION FROM CANADA
The following communication, dated 28 June 2001, has been received from the Permanent
Delegation of Canada with the request that it be circulated to Members.
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Over the last four years, the Working Group on the Interaction between Trade and
Competition Policy (WGTCP) has had the opportunity to cover a broad range of issues.  Canada has
actively supported the WGTCP in pursuing its analytical and educational priorities.  Canada's recent
contributions with respect to advocacy by competition authorities, as well as on cooperation on
competition matters between countries, have been designed to address in a concrete, practical manner
some of the aspects relevant to the internationalisation of competition policy, notably with respect tothe challenges facing developing countries.
At this point in the WGTCP's proceedings, the Chairman's "Updated Checklist" is useful in
detailing those questions which have been posed by Members of the Group which may still require
some attention.  Although many of these questions have already been addressed in papers previously
submitted to the WGTCP, or in the discussion following their presentation, re-focussing this material
in terms of specific questions should be helpful in clarifying certain outstanding issues.
It is in this spirit that Canada would now like to share its current submission.  It will be noted
that we have chosen mostly to address those groups of questions in the Checklist which related to
points made by Canada on earlier occasions.  It is hoped that we will thereby manage to complete the
Group's understanding in these areas.
If cooperation is to be essentially voluntary in nature, why is it necessary to have a
multilateral framework?  Would voluntary tools of cooperation be sufficient to address the
problems and concerns of developing countries in the are of anticompetitive practices,
particularly in the light of existing disparities of bargaining power and resources?
How would an agreement on international cooperation apply to and generate benefits
for countries at different stages of development and with differing degrees of experience and
resources in competition law and policy?
How would the cooperation provisions in a multilateral framework, for example
regarding the exchange of information and enforcement assistance, actually operate?
As has been discussed in the WGTCP, cooperation by definition can only be voluntary in
nature.  Countries cannot be mandated to cooperate and therefore precise and detailed obligations in
this area would be inappropriate.  Given this, the question is then why a multilateral framework with
certain obligations is required in order encourage cooperation.  The resolution to this apparentWT/WGTCP/W/174
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paradox lies in the realisation that, while cooperation must itself be voluntary, it is founded upon
certain pre-requisites, notably that of mutual trust.  Trust is also something which cannot be mandated
by international agreement, nor can it be subject to  rules - but an international agreement can play an
important role in facilitating trust by promoting convergence amongst the signatories.  The key
element in this is encouraging familiarity amongst the countries in question.  Such familiarity is in
part encouraged via growing convergence with respect to the basic competition principles, and is
linked to such aspects as having a competition law with appropriate scope, administrative and
enforcement provisions, and the provision of due process.  A multilateral agreement where countries
commit themselves to certain common approaches on competition policy would provide over time the
practical basis for such trust to emerge by broadening the convergence on best practices on
competition between Members.  To the extent that relationships of trust are established between
competition authorities in different countries and as convergence on best practice gradually develops,the question of disparities between Members in bargaining power and resources becomes increasingly
irrelevant as all parties should enjoy the mutuality of benefits which arises from cooperation.  Nor do
differences in standards, thresholds, economic tests, etc. necessarily affect the capacity and the need
for cooperation between countries.  A case in point is Canada, which already cooperates on
competition matters with both the likes of the United States and with a number of countries in LatinAmerican and the Caribbean, even if this cooperation takes place in the face of considerable
disparities in size and between differing competition regimes.  Absent a multilateral agreement,
however, the fundamentals necessary to encouraging such cooperation will be more difficult to
generate on a broad basis.  Finally, it should be noted that a multilateral agreement on competition
would enable members to engage in dialogue and exchange views across the full range of competitionissues relevant to the goals of the WTO.  Given the quite general and minimalist obligations implied
by such an agreement and the need for a cooperative and non-adversarial approach, it is Canada's
view that peer review is the most appropriate avenue for addressing potential differences between
Members.
The type of cooperation which could take place between any given set of countries can be
quite varied depending on the specific needs of these countries.  Cooperation can address issues
relating to institutional arrangements, such as sharing best practices on case management or on the
role of advocacy.  Cooperation can also entail sharing some of the non-confidential but non-public
background information to a given case, eg. on market-definition.  Such cooperation is likely to entail
significant savings for competition authorities by reducing duplication of efforts.
It is possible to envisage a long-term plan allowing for cooperation in a multilateral
agreement via a 2-phase roadmap.  The initial phase would be educative and would concentrate on the
development of institutional support and enforcement capacity, reinforced by the exchange of
background information and technical assistance.  The second phase would have as its primary feature
the development and implementation of notification procedures, its objective being to ensure aminimum level of awareness about the activities of the other competition authorities.
To the extent that action on [international modalities of international cooperation] is
warranted, to what extent would it require a comm on basis in terms of : (i) shared principles;
(ii) enforcement structures and machinery; and (iii) legislative provisions?
Does the non-discriminatory application of competition policy give rise to conflicts with
economic development and/or policies favouring th e advancement of particular social groups?
How would the independence of national competition authorities be reconciled with a
multilateral agreement?
As has become increasingly clear from the recent deliberations of the WGTCP, what would
be required in a multilateral agreement on competition policy is the establishment of certain commonWT/WGTCP/W/174
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approaches.  Most obvious amongst these would be a commitment to transparency and
non-discrimination, which, as has been noted, are in fact intrinsic to the effective pursuit of
competition.  Just which forms of anticompetitive behaviour would be addressed by a multilateral
agreement is of course a matter for negotiations:  Canada has suggested that general obligations
relating to hard-core cartels would be useful in this respect.  Finally, a multilateral agreement wouldalso have to include certain general provisions with respect to having a competition law and an
independent authority to administer it in order to provide the practical means for Members to respond
to their undertakings.  The aim of these various common approaches would be to encourage a degree
of compatibility between Members in the application and enforcement of the basic objectives and
rules relating to competition, without compromising  a country's fundamental jurisdiction over conduct
affecting its own territory.
Beyond these common approaches, however, a multilateral agreement on competition would
in fact leave open large areas of policy to domestic in terpretation.  Indeed, such flexibility is essential
in order for competition policy to be able to address the socio-economic, legal and judicial specifics of
a given domestic market.  For example, while a general and minimalist multilateral agreement would
require a Member to have a competition law, the particulars of this law would be defined by eachMember as it saw fit.  As a case in point, it should be kept in mind that some of the leading
practitioners of competition policy - eg. Canada, the United States of America and the European
Union - while they have certain priorities in common, in fact have competition laws and systems
which differ in a number of quite obvious respects.  In addition, even though the convergence on
competition policy amongst OECD countries is quite evident, what is less obvious is that there is stillquite a substantial variation between the OECD c ountries in terms of the dimensions of their
respective competition bureaucracies.
The necessity for flexibility in any multilateral agreement on competition is of direct
relevance to countries facing specific developmental challenges as well as to developed countries.  Acommitment to the implementation of a competitio n law still leaves open the possibility for a
government to provide for specific exceptions of exemptions to this law.  For example, it is not
uncommon for a competition law to have provisions exempting the activities of state-owned
enterprises from the coverage of the law.  Similarly, certain competition regimes include aspects
which give preference to small- and medium-sized enterprises.  As such, it is clear that a multilateral
agreement on competition policy would not entail any necessary conflict with domestic policies with
respect to economic development or in favour of particular constituencies.  The key in terms of aWTO agreement is to ensure that there is transparen cy with respect to such exceptions or exemptions,
while ensuring non-discrimination.
The fact that one of the common approaches necessitated by a multilateral agreement on
competition would require a Member to have a competition law does not impinge upon theindependence of the national competition authority in question.  As has been noted above, the proper
functioning of such an agreement is in fact founded upon the ongoing independence of national
competition authorities.  While it may be suggested that there is an apparent paradox in countries
being obliged to meet certain competition obligatio ns while also being required to maintain the
independence of their competition authority, this is readily resolved when one realises that theobligations which would flow from a multilateral agreement would be very general in nature and
would not - indeed, should not - speak to the deta ils of competition enforcement in specific cases.
Is the WTO an appropriate forum in which to  take action on competition policy at a
multilateral level?  What might be the adva ntages/disadvantages of unilateral action or
cooperation in bilateral and/or regional contexts or in other multilateral fora, as compared to
action in the WTO, to address the perceived de trimental impact of anticompetitive practices on
international trade and/or development?  Co uld the proposed elements of a multilateralWT/WGTCP/W/174
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framework dealing with technical assistance be more expeditiously pursued outside the context
of the WTO?
How far could the problems identified be addressed through existing WTO
agreements/activities touching on competition policy questions?  To what extent is application ofthe Dispute Settlement Understanding a n ecessary component of action in the WTO
framework?
As our work in the WGTCP has revealed, there are a number of anticompetitive practices
which impact directly upon trade and development.  Hard-core cartels, notably, can grossly distort the
price of key products or preclude trade beyond the internal boundaries set by the cartel.
While competition policy can thus have an impact upon international trade, the question still
remains as to why it is best for this topic to be addressed at the multilateral level.  There are after all
obvious examples of the success of unilateral or bilateral action against international cases of
anticompetitive behaviour, and there are a number of moves afoot to implement similar action at a
regional level.  In spite of these successes, each of these options has its limitations.  The unilateralapproach, even for those rare countries powerful enough to have the resources to implement it, suffers
from the fact that the evidence necessary to prosecute competition cases is often spread amongst
various jurisdictions, and as such cooperation provisions are necessary to get access to this evidence.
In addition, unilateral actions often lead to objections by the other jurisdictions affected simply due to
the extra-territoriality involved.  Bilateral and/or regional actions have the potential to address theproblems of accessing evidence and of mitigating extra-territoriality, but it is still true that the key
evidence for a case can easily remain in a jurisdiction outside the agreements in question (indeed,
cartels are likely to structure themselves in such a manner as to take advantage of these weak points)
or that action by a regional grouping will affect the important interests of non-members.  While
actions at the unilateral or regional levels are obviously complementary to multilateral ones, it is onlyby having a fully multilateral system that these critical problems can be avoided.
If this is the case, then why the WTO rather than some other multilateral organisation?  After
all, as certain commentators have pointed out, WTO rules are targeted at governmental behaviour
rather than private actions.  Furthermore, the WTO – unlike UNCTAD or the World Bank –  is not
designed to be a major provider of technical assistance.  The answer to this question lies in the
realisation that the WTO is only a part – albeit a critical one – of what is required to addressinternational competition issues.  It is obvious, for example, that the WTO cannot – nor should it –
become a supra-national competition authority:  there are many competition issues which have no
bearing on trade, just as there are many trade issues which are not of concern to competition policy.  It
is equally obvious that UNCTAD and the World Bank are far better qualified, both in terms of
experience and resources, to address the technical assistance needs which would clearly need to beprovided for as part of a multilateral agreement on competition.  In fact, UNCTAD even has in place
voluntary provisions on competition policy in the form of the "Set".  Be this as it may, it is equally
true that neither UNCTAD nor the World Bank is in a position to furnish all the essential elements of
a multilateral agreement on competition.  What they are critically lacking – and what the WTO brings
to the table – is a broad membership and the ability to require Members to implement a law.
Of course, there are already some limited competition provisions in existing WTO
agreements.  The GATS, notably, addresses competition questions via Article VIII and IX, and the
related Telecommunications Reference Paper (RP) has provisions against anticompetitive
cross-subsidisation.  The problem with existing provisions is that they address only a portion of thenormal coverage of competition policy and they are only vaguely defined.WT/WGTCP/W/174
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In sum, it is clear that the WTO has a unique role to play in addressing some of the
international issues facing competition policy, but that new provisions will need to be negotiated in
order to allow the WTO to begin fulfilling this role.
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