RESTRICTED WORLD TRADE
ORGANIZATIONWT/WGTCP/M/6
16 November 1998
(98-4547)
Working Group on the Interaction
between Trade and Competition Policy
REPORT ON THE MEETING OF 28-29 SEPTEMBER 1998
Note by the Secretariat
1. The Working Group on the Interaction between Trade and Competition Policy held its sixth
meeting on 28-29 September under the Chairmanship of Professor Frédéric Jenny.
2. The substantive agenda for the meeting comprised the following items:  the relationship
between the trade-related aspects of intellectual property rights and competition policy (third tiret
under Item III of the Checklist of Issues Suggested for Study);  the relationship between investment
and competition policy (fourth tiret under item III of the Checklist of Issues);  the relationship of trade
and competition policy to development and economic growth (topic under item I of the Checklist);stocktaking and analysis of existing instruments, standards and activities regarding trade and
competition policy, including of experience with their application (item II of the Checklist); the
impact of anti-competitive practices of enterprises and associations on international trade (first  tiret
under item III of the Checklist); the impact of state monopolies, exclusive rights and regulatory
policies on competition and international trade (second tiret under Item III of the Checklist of IssuesSuggested for Study); and the impact of trade policy on competition (fifth tiret under item III of the
Checklist).  In addition, the Group had an initial discussion on the structure and content of its planned
report to the General Council at the end of 1998, including on possible recommendations on areas that
merited further consideration within the WTO framework.  Two requests for observer status from
intergovernmental organizations were considered.  Under the heading of other business, the Group
considered two matters:  the Chairman's oral st atement to the Working Group on the Relationship
between Trade and Investment Policy later in the week; and the organization of work for the nextmeeting of the Working Group on the Interaction between Trade and Competition Policy.
I. THE RELATIONSHIP BETWEEN THE TRADE-RELATED ASPECTS OF
INTELLECTUAL PROPERTY RIGHTS AND COMPETITION POLICY
3. This matter was the subject of discussion at the Working Group's meeting in September 1998.
The European Community and its member States;  the United States
;  New Zealand ;  Hong Kong,
China;  Korea ;  and Japan  introduced written submissions relating to this subject (documents
WT/WGTCP/W/99, 101, 103, 104, 105 and 106, respectively).  Turkey presented a non-paper.
Australia, India  and Canada , as well as the observers from UNCTAD  and Croatia,  made oral
statements regarding this subject.  The United States;  Pakistan ;  the European Community and its
member States;  New Zealand ;  and Hong Kong, China  contributed comments on the above
presentations.
4. The representative of the European Community and its member States said that there was a
consensus now about the complementarity between intellectual property (IP) law and competition
law.  Competition law generally took a positive attitude towards intellectual property rights (IPRs)
and licensing agreements.  Three points needed to be emphasized in this regard.  First, an exclusiveright in itself did not confer market power and ther efore the exercise of an exclusive right could not be
considered to constitute an abuse of a dominant position.  Rather, under competition law standards the
relevant considerations were:  are there substitutes in the market for the product subject to theWT/WGTCP/M/6
Page 2
exclusive right;  if not, does the conduct of the right holder constitute an abuse of a dominant position.
Second, licensing was generally pro-competitive and should not be subject to excessive regulation
under competition law.  Third, there had to be a balance and thus the exercise of IPRs resulting in
anti-competitive practices should be fully subject to competition law disciplines.
5. Within the framework of the WTO, the TRIPS Agreement set out minimum standards for the
protection of IPRs, recognizing at the same time the right of Members, under certain conditions, to
limit the exclusive nature of IPRs.  In particular, the Agreement, in Articles 8 and 40 especially,
explicitly recognized that the exercise of IPRs could be limited by reasons of competition policy to
restrain anti-competitive practices;  this was of particular relevance for discussions in the Working
Group.  The Agreement did not provide, however, a definition of the term "anti-competitive
practices".
6. In regard to international cooperation, the TRIPS Agreement included an important provision
referring to two distinct situations.  In the first case, a WTO Member applying its own competition
law in relation to an anti-competitive practice concerning an IPR could require assistance from other
WTO Members.  This assistance could include the provision of non-confidential information and,
subject to appropriate guarantees such as bilateral agreements, confidential information.  In the second
case, a firm from a WTO Member subject to a competition law proceeding in another WTO Membercould ask its government to engage in consultations to discuss aspects of the application of
competition law in its particular circumstances.  However, such provisions had not been very widely
used so far and it was interesting to reflect why this was so.  Possible explanations were that the
TRIPS Agreement was relatively new, and that some forms of TRIPS-related cooperation needed to
be complemented through bilateral cooperation agreements, and few of these agreements had beenconcluded.  It could also be that issues related to competition law in the context of IPRs were not so
important at present.  More generally, there was a question as to whether a cooperation provision in
the TRIPS Agreement, exclusively devoted to a specific area of competition law, was the most
effective way to channel cooperation among national competition authorities.  Perhaps a broader
horizontal framework was needed to create sufficie nt incentives for international cooperation.  His
delegation was of the opinion that the promotion of  international cooperation on competition matters
was an important issue for discussion by the Group and concurred with other Members in highlighting
this aspect.  In the area of the enforcement of IPRs, the TRIPS Agreement was unique in that it
included highly detailed provisions about the commitments undertaken by Members.  Compliance
with such provisions required effective implementation, transparency and due process.  These
concerns were equally important within competition law and policy.
7. Another representative of the European Commun ity and its member States commented on the
application of Community competition law in relation to IPRs.  To avoid the Community market
being segmented by an abusive exercise of IPRs, Community law prohibited blocking the importation
of parallel imports into the national markets of the member States when such goods had been brought
into the Community with the consent of the licence holder.  There was a question as to whether some
export restrictions written into licensing agreements were subject to Community competition law,since such law only applied when the practice concerned produced a sensible effect on competition
within the Community and on trade between the member States;  this did not always apply in the case
of export restrictions.  With respect to Community practice concerning abuse of dominance in the
case of IPRs, he observed that the European Court of Justice had ruled in the Magill  case that in
exceptional circumstances the exercise of an exclusive right could constitute an abuse of a dominantposition.  Such circumstances could occur when refusal to grant a licence made it impossible to create
a market.  He also observed that merger reviews co uld have implications for IPRs.  For instance, the
Commission had recently conditioned its consent to a planned merger on the granting of a licence to a
third party.
8. The representative of the United States said that there was a complementarity between
competition law and IPRs.  This conclusion contradi cted the superficial presumption that competitionWT/WGTCP/M/6
Page 3
law and IPRs operated at cross-purposes because competition laws limited the full exploitation of
IPRs, and IPRs inherently had an exclusionary effect which of course reduced competition in the
market.  In fact, competition law and IPRs were compatible and mutually reinforcing as long as
competition law was properly applied to the exercise  of IPRs.  A proper application of competition
law should avoid two extremes.  Too stringent an application of competition law to IPRs could lesseninnovation.  In turn, an ineffective or insufficient application of competition law to IPRs could result
in an over-extended grant of monopoly power.  Bo th outcomes would have an adverse impact on
output as well as an inhibiting effect on trade.  In addition, the application of competition law to IPRs
in a balanced way, coupled with the observance of the principles of non-discrimination and national
treatment, would ensure the maximization of trad e flows.  He also commented on the importance of
the TRIPS Agreement focusing on three aspects.  This was the first international agreement on IPRs
matters covering all relevant disciplines, including enforcement provisions, and subject to bindingdispute settlement.  The Agreement was also important because it had applied multilateral trade
principles such as national and MFN treatment  in the area of IPRs, while Articles 8 and 40
specifically addressed competition concerns.
9. Another representative from the United States offered some comments on the application of
United States competition law to IPRs.  He observed that the enforcement policy of the two UnitedStates antitrust agencies towards IPRs had evolved remarkably over the past decades.  In the 1960s
and 1970s, there had been a strict approach to the application of competition law in relation to
restrictive licensing agreements.  This reflected a certain hostility towards the exercise of IPRs on the
part of the enforcement agencies generally.  In the 1980s, views had shifted noticeably with the
infusion of economic principles into antitrust analysis.  There had been much greater recognition ofthe value of IPRs in promoting innovation and hence competition, and a much greater appreciation of
the efficiency benefits arising from licensing.  In addition, the assumption that IPRs necessarily
conferred market power had been challenged.  Overall, the 1980s had been characterized by an
exceptionally tolerant approach to the application of competition policy vis-à-vis  IPRs.  In the 1990s,
the advances from the economic theorizing of the 1980s had been maintained, with the addedadvantage that competition practice with regard to IPRs had been further refined in light of additional
experiences, and had benefited from exposure to newly developing issues such as network effects in
high-technology industries.
10. The United States antitrust agencies had seen a need for predictability and indeed
transparency in the regulation of IPRs and had therefore developed a set of guidelines, issued in 1995,
enunciating the basic principles to be used in a welfare analysis of IPR issues.  The guidelines applied
to patents, copyrights, trade secrets and know-how.  One such principle was that there was nopresumption that IPRs conferred ma rket power.  Of course, IPRs granted the power to exclude, but
often there were enough substitutes in the market to prevent the right holder from actually gaining
market power.  Since the availability of substitutes was an empirical question, the examination of the
effects of IPRs called for a case-by-case approach.  Another core principle was that licensing was
generally pro-competitive.  In fact, the guidelines incorporated a safety zone with respect to certain
kinds of licensing restraints.  Absent extraordinary circumstances, if a restraint was not anti-
competitive on its face, meaning that it did not fall under a category of per se  illegality under United
States antitrust law such as price-fixing, and if the combined market share of the licensor and the
licensee in the relevant markets affected by the licensing restraint did not exceed 20 per cent, the
restraint was seen as presumptively lawful.  Outside this safety zone, the restraint was unlawful if itharmed competition either horizontally or vertically, and if there were no pro-competitive benefits
which might outweigh its anti-competitive effects.  That is, non-price vertical licensing restrictions
were generally examined under a "rule of reason".  Under this standard, most restraints were
ultimately judged lawful.  The contribution submitted by his delegation outlined a number of United
States cases in considerable detail, highlighting their implications on trade.
11. The representative of New Zealand, introducing document WT/WGTCP/W/103, said that the
contribution submitted by his delegation looked at the extent to which IPRs were underpinned byWT/WGTCP/M/6
Page 4
sound competition principles.  The conclusion of the paper was that more attention should be given to
promoting global welfare in the area of IPRs, and that future negotiations in this area should give
equal weight to recognizing the risks of both under- and over-protection of IPRs.  For instance, an
increase in protection of IPRs could be counter-productive from a global welfare perspective if the
gains to producers were outweighed by losses to consumers.  Thus, it was desirable to requireadvocates of change in the area of IPRs to demonstrate empirically that the changes they proposed
were likely to increase global welfare.
12. The representative of Hong Kong, China,  introducing document WT/WGTCP/W/104, said
the Working Group should firmly focus on the interaction of trade and competition policies, with
priority accorded to governmental measures affecting competition.  This approach was applicable to a
wide spectrum of WTO rules, including IPRs.  There was a degree of contradiction between
encouraging competition and the effective protection of intellectual property.  In products whereresearch and development was important, there was a case to provide entrepreneurs incentives to
invest and recoup such investment through a limited monopoly.  However, over-protection in IPRs
went against the equally important objective of enco uraging the diffusion of new technology.  Further,
IPRs might contribute to the entrenchment of horizontal and vertical restraints, for example through
patent pooling among competitors, and the prohibition of parallel imports of patented, copyrighted ortrademarked goods.  Therefore, the application of competition law to IPRs was crucial towards
striking a balance between safeguarding IPR holders' interests and avoiding the prejudicial anti-
competitive use of IPRs.  The TRIPS Agreement reflected the thinking that IPR regimes should be
balanced by safeguards intended to restrain anti-competitive practices involving the use of IPRs, yet it
had not gone into clarifying the practices that could be treated as abuse and the remedies thatMembers could apply in the event of abuse.  Since IPRs were a double-edged sword which could
either promote or frustrate economic efficiency, focusing on the interaction aspects between
competition and IPRs provided a good sense of perspective on how to avoid abuses of IPRs.  This
approach would help increase the synergies between competition and IPRs within a WTO framework.
13. The representative of Korea began his presentation by outlining the main elements of the
submission by his delegation (document WT/WGTCP/W/105).  The paper analysed first the relation
between IPRs and competition law in terms of short-run static efficiency and long-run dynamic
efficiency, the possibility that IPRs could generate monopoly power, and the use of a "rule of reason"
principle in examining the welfare effects of horizontal and vertical practices resulting from IPRs.
These issues had been discussed in the OECD report for the October 1997 meeting of its Committee
on Competition Law and Policy. Section II of the Ko rean submission examined the provisions of the
TRIPS Agreement related to competition policy, such as Article 6 on the principle of exhaustion,Article 31 on compulsory licensing, and Article 40 on the control of anti-competitive licensing.
Section III of the submission described competition practice in Korea in the area of IPRs.  The
concluding part of the paper provided Korea's views on how to solve the potential conflict between
IPRs and competition and how such views could benefit the work of the Group.  Korea's
recommendation was that the conflict between IPRs and competition could be solved by adopting theaxiom that IP law should not grant excessive prot ection or undue monopoly pow er to IPR holders.  In
other words, competition law should play the role of arresting excessive protection of IPRs.  At the
same time, a mechanism should be designed to prevent the abuse of IPRs.  It was important to achieve
a proper balance in pursuing the objectives of IPR laws and competition laws, taking into
consideration the specific conditions of each c ountry.  Closer coordina tion between IPR authorities
and competition authorities was important to this end.  In the case of Korea, the competition agency
(the Fair Trade Commission) and the IP agency (the Korean Property Office) had established a
mechanism for consulting each other in an efficient manner.  Further, ways to enhance international
efforts to harmonize differences among countries in the enforcement of their relevant domestic laws
and policies should also be explored.  In addition, the development of clearer disciplines within theTRIPS Agreement on the interaction between IPRs and competition merited further examination in
the WTO.WT/WGTCP/M/6
Page 5
14. The representative of Japan, introducing document WT/WGTCP/W/106, said that, although
IPRs and competition policy had the same ultimate objective of promoting economic growth and
development, there were some conflicts between the two policies.  On the one hand, as IPRs allowed
a certain amount of monopolistic use of new technology and knowledge, the abuse of IPRs could have
an adverse effect on competition.  On the other hand, inadequate protection of IPRs not only reducedthe incentives and therefore the allocation of resources for new product development, but also
impeded and impaired investment and technology transfer from foreign countries.  Excessive
protection or discrimination against foreign interests in the area of IPRs could also distort trade.
Although the TRIPS Agreement addressed the trade-distorting effects of IPRs, it was not sufficient
and further international coordination was required in this regard.  There were two major issues at the
international level concerning the relationship between IPRs and competition policy:  first, refusal to
license and anti-competitive practices in licensing agreements;  and second, international exhaustionand unreasonable obstruction of parallel imports.  The prohibition or refusal to license IPRs for which
there was no alternative technology might be anti-competitive.  In addition, even when licences were
provided, anti-competitive conduct could occur if th e IPR allowed the licensor to restrict the quantity
or the price of the product subject to an IPR.  At present, there was no international standard and
national competition authorities regulated the abuse of IPRs in accordance with domestic law. WTOMembers should seek to harmonize domestic standards.  When discussing the second issue, he said
that exhaustion of IPRs meant that, once a right holder released products subject to IPRs, its IPRs
were considered to be exhausted and then the use or sales by third parties of such products was not
seen as an infringement of IPRs. This was the exhaustion concept in a domestic context.  As for
international exhaustion, the problem was whether a right holder could prevent imports once theproducts subject to IPRs had been legitimately sold in a foreign market.  Parallel imports promoted
competition in the importing country and therefore should be examined both from an IPR perspective
and from a competition perspective.  Conduct recognized as a proper exercise of IPRs was exempted
from the Japanese anti-monopoly law.  This provisi on was meaningless without further elaboration or
guidance.  Therefore, to make the interpretation of Japanese competition law with respect to IPRs
more predictable, the Fair Trade Commission had issued three sets of Guidelines addressing different
kinds of IPRs.  Another Japanese delegate made a number of comments concerning parallel imports.
The basic question here was whether IPRs should enable right owners to stop parallel imports.
Countries' positions on this issue varied and depended upon the specific types of IPRs under analysis.
During the Uruguay Round negotiations in the area on IPRs, parallel imports had been one of the
most important topics, but after serious discussions Members had agreed that the TRIPS Agreement
should not provide any rules on this matter.  In fact, Article 6 specified that for dispute settlementpurposes "nothing in this Agreement shall be used to address the issue of the exhaustion of IPRs".
Practices in this area had been decided mostly by judicial precedent.  In Japan, a Supreme Court
decision allowed parallel imports of patented products under certain conditions.  The relationship
between IPRs and parallel imports merited further examination by the Working Group, and this
examination should cover the question of international exhaustion with reference to the question ofparallel imports.
15. In his presentation, the representative of Turkey laid special emphasis on the territorial
protection of IPRs.  He said that licences granting absolute territorial protection were anti-competitive
and the doctrine of "exhaustion" was commonly used as an effective instrument to prevent this
situation.  As applied to patents, the doctrine held that the holder of a patent exhausted its rights withrespect to a patented good once this good was sold.  This meant that a licensor granting exclusive
rights to two licensees in two different countries could require both of them to refrain from
conducting sales in each other's territory, but neither he as a licensor nor his licensees could prevent a
"free rider" from trading the patented good across the licensees' territories, because the sale of the
patented goods would have exhausted the exclusive rights granted by the intellectual property law.The "exhaustion" principle had been adopted under Turkish competition law.  As a result, when patent
rights were granted in different regions of Turkey, third parties could not be prevented from re-selling
inside Turkey the patented goods sold by the licensees.  He said further that Turkish competition law
allowed individual or group exemptions for agreements restraining competition provided theyWT/WGTCP/M/6
Page 6
satisfied conditions stated in the law such as the promotion of technical and economic progress, and
passed on to consumers a fair share of the benefits involved.  The Turkish competition agency had
issued group exemptions with respect to certain exclusive distribution agreements, certain exclusive
purchasing agreements and exclusive servicing agreements relating to motor vehicles.  At present,
however, it had not yet granted any group exceptions regarding the exploitation of IPRs.  But, asnoted, from a legal viewpoint it was entirely possible that a group exemption be granted with respect
to exclusive licensing agreements containing clauses about, for example, export bans or the
prevention of active sales.  In concluding his remarks, he said that Turkey believed that discussions by
the Group referring to the relationship between IPRs and competition policy should pay special
attention to the doctrine of "exhaustion", as this doctrine helped create a more competitive
environment by facilitating the realization of para llel imports across national markets and by opening
up a multiplicity of sources of supply within a single market.  Turkey was of the view that thedoctrine of "exhaustion" should be adopted by all WTO Members, especially those lacking a
competition law, in order to ensure freer trade.
16. The representative of Australia said it was important for the Working Group to focus on the
relationship between competition and IPRs and the interaction between the two.  There were potential
tensions between competition policy and IPRs.  An IPR regime prevented free riding on inventive orcreative activities and the use by others, without payment, of assets resulting from intellectual work,
which could lead to insufficient remuneration to those investing in this kind of capital, with a resultant
misallocation of resources.  In contrast, excessive or wrongly administered IP protection could create
monopolies on information, and could give rise to practices such as excessive prices, price
discrimination, and raising barriers to entry in both the immediate and the downstream market.  Infact, Article 8 of the TRIPS Agreement acknowledged the potential for IPRs to be misused, especially
via licensing or other contractual arrangements;  he r delegation believed that it would be worthwhile
for the Group to discuss Members' experiences to deepen understanding of the subject.  In conclusion,
properly administered IPRs contributed to the creation of a healthy competitive environment, as did
any other instrument of competition policy.
17. The representative of India said a demand for increased protection of IPRs co-existed at
present with considerable suspicion and criticism of that protection.  Two points were worth noting.
First, developing countries had yet to exploit to a substantial extent IPRs of the kinds covered by
existing laws, and their trade in products subject to IPRs was mostly in areas that were not necessarily
covered by existing disciplines.  Second, in order to promote economic progress, developing countries
needed to acquire technology from advanced nations, but this might not be forthcoming given the IPR
holders' own need to maximize profits.  The prot ection of IPRs resulted at times in exclusionary
behaviour.  This had led to the imposition of competition law controls upon at least the most visible
exclusionary arrangements, such as patent pools, copyright collecting societies, and the suppression of
the initiative and independence of licensees.  The challenge lay in striking the correct balance between
promoting market incentives and limiting monopolistic and unfair business practices.  In this
connection, it was important to realize that the conflict between the protection of competition and theprotection of IPRs was not as severe as first t hought, since it was now recognized that the mere
possession of a patent or any other IPR would not give rise to a dominant position in the market, as
long as there were effective alternatives on the market for the product subject to IPRs.  The Indian
delegate went on to describe the elements of I ndian law that dealt with IPRs and explained how
competition concerns were addressed in this context.  Similarly, she reviewed the provisions of theTRIPS Agreement touching upon competition policy.
18. The delegate of Canada said that two principles underlay the interaction of IPRs and
competition policy.  The first such principle was th at innovation was encouraged by the possibility of
being granted exclusive property rights.  The second was that competition laws provided the
mechanism to correct any risk that a property owne r might dominate the market to the extent that it
was immune from the discipline exerted by other participants and abuse its position to manipulate the
allocative outcome of the market to the detriment of the public.  In other words, IP laws provided forWT/WGTCP/M/6
Page 7
intellectual property to be valued and exchanged in  the market.  Competition laws ensured that the
market assigned a fair and efficient value to this property.  This interdependence underlay the need for
strong laws to protect both the IP and the competition regimes, and was recognized by the TRIPS
Agreement.  In general, the Canadian competition law offered a flexible market-oriented framework
for dealing with business arrangements and practices relating to IPRs.  Remedies were provided todeal with a wide range of anti-competitive practices.  The relevant statutory provisions incorporated
appropriate filters which focused on situations involving significant market power, and facilitated
consideration of potential efficiency considerations for particular practices.  This kind of analysis was
pursued case by case, requiring coherent theories to demonstrate the anti-competitive effects of any
type of behaviour.  The Canadian delegate closed her remarks by mentioning some provisions of the
Canadian Competition Act that dealt specifically with IP and IPRs.
19. The observer from OECD drew the attentio n of the Group to two publications by his
organization.  They were both entitled "Competition Policy and Intellectual Property Rights" and had
been published in 1990 and 1998, respectively.  Both had resulted from work undertaken by the
OECD's Committee on Competition Law and Policy.
20. The observer from Croatia said that, according to the practice of the Croatian competition
authority in the area of IPRs, trademarks had been far more important than patents, and suggested that
the Working Group look into this issue in particular.
21. The representative of the United States said that comments on the alleged over-protection of
IPRs were off target.  WTO Members had already agreed in the TRIPS Agreement on what should be
the appropriate level of protection for patents, copyrights and other intellectual property rights.  What
was therefore material for the purposes of discussion was not the level of IPR protection, but ratherhow the right holder used such protection in the market.  If the right holder behaved anti-
competitively, then competition policy provided remedial measures to correct such market behaviour,
without abridging the level of protection afforded by either the TRIPS Agreement or by the national
IPR regime.  He reiterated the view of his delegation that there was no contradiction between IPRs
and competition policy, and that the proper application of antitrust law to IPRs yielded resultsconsistent with the goals of both IPRs and competition policy.
22. The representative of Pakistan said that the previous interventions and papers had not really
addressed to what extent remedies for the abuse of  IPRs could be sought within competition policy,
and to what extent such remedies could be found by  introducing or strengthening features of laws on
intellectual property, such as compulsory licen sing.  In his opinion, New Zealand's view on the
protection of IPRs was simply that there had to  be a balance between under-protection and over-
protection.  He understood the argument made by the United States that the Group should take theIPR framework as given, focusing on whether the IPRs within that framework were being used anti-
competitively and how this situation could be addressed by competition rules.  He wondered,
however, whether this was a good approach in cases where the IPR framework itself was inherently
prone to situations leading to anti-competitive prac tices.  This was the issue that New Zealand's paper
was drawing attention to and he believed that the Group should address it at least in broad terms.  Healso completely agreed with New Zealand's suggestion to emphasize the preparation of empirical
studies to back-up proposals to extend the life of IPRs.
23. The representative of the European Community and its member States said that the issue of
the level of protection of IPRs, as set out in the TRIPS Agreement, was clearly distinct from the issue
of the exercise of IPRs and to what extent this exercise might result in anti-competitive practices.  Heagreed with the comments made by the United States that the Working Group should concentrate on
the latter issue.  With respect to a question from Pakistan, as far as the enforcement of competition
law in connection with IPRs was concerned, the European Community had not actually experienced
any particular problems for which it had required recourse to the consultation provisions in Article 40
of the TRIPS Agreement.  This did not imply that such cases might not appear in the future.  HisWT/WGTCP/M/6
Page 8
observation was of a more general nature:  a number of developing countries had indicated to the
Group that they saw some difficulties relating to the enforcement of competition law and this was
exactly the situation foreseen in Article 40 of the TRIPS Agreement.  There was value in discussing
how provisions for international cooperation among competition authorities could be promoted by the
WTO.  Such cooperation seemed difficult to put in to practice exclusively within the limited context of
the IP system and the TRIPS Agreement.  Perhaps more general provisions of cooperation among
competition authorities might help foster closer cooperation among competition authorities in relation
to cases with a connection to IPRs.
24. The representative of New Zealand said his delegation appreciated the point of view
expressed by the United States and the European Comm unity.  Nonetheless, he wished to reiterate that
there were inherent flaws, loopholes and weaknesses in the current international framework and this at
times led to an abuse of IPRs or over-protection; the issue of provisions affecting parallel importingwas a case in point.  Consideration should be gi ven to a framework ensuring a balanced protection of
IPRs, leading to the promotion of total global welfare.  The representative of Hong Kong, China urged
the delegations of the United States and of the European Community and its member States to have anopen mind and explore whether the level of protection itself might have anti-competitive effects.  A
reading of Article 40.1 of the TRIPS Agreement suggest ed that the level of protection itself might be
a problem.  At any rate, the statement made by her delegation with respect to over-protection was a
statement about the cost of over-protection, and not about whether this resulted from the TRIPS
Agreement.  Her delegation was open to discuss what further work could be done by the Working
Group in this context.
25. The Chairman provided some summary comments as follows.  There had been a general
recognition that IPRs could lead at times to market  abuses, that some way to control these abuses was
necessary, and that this could be achieved through a combination of IPR and competition law.  Seen
in this light, "properly applied" competition law was highly complementary to IPRs, but this raised
the question as to what the proper application of competition law was with respect to IPRs.  In some
countries, what was considered the proper application of competition law to IPRs had changed overtime as economic analysis had progressed.  In addition, whether the standards for a proper application
of competition law were universal, or whether they hinged partially on the particular circumstances of
the countries concerned, was not clear.  There had been a large degree of consensus about the idea
that abuses of IPRs should be considered in a "rule of reason" fashion.  However, it was not clear
whether the TRIPS Agreement provided enough guidance as to how to assess market abuse linked to
IPRs.  Several contributions had suggested that the Group would benefit from discussing this issue
further.  Another important question had been the extent to which holders of IPRs could prevent
parallel imports.  A further question had been whether remedies against the abuse of IPRs should be
based on competition law, or whether they could be based alternatively on IP law itself.
26. In the course of discussions, a number of su ggestions had been made by various delegations
about the future work that could be considered.  On the basis of a proposal by the Chair, the Group
agreed that the Secretariat should prepare for the next meeting of the Group a list of questions that had
been raised as deserving further consideration on the issue of IPRs and competition policy.
II. THE RELATIONSHIP BETWEEN INVESTMENT AND COMPETITION POLICY
27. The European Community and its member States;  the United States ;  Hong Kong, China ;
Venezuela;  Korea ;  and Japan  introduced written submissions relating to this agenda item (documents
WT/WGTCP/W/99, 102, 104, 107, 109 and 108, respect ively).  In addition, Canada, India  and
Norway made oral statements regarding this item, as did the observer from UNCTAD , who also
provided information on relevant studies of her organization.  Brazil and the European Community
and its member States commented on the above submissions.WT/WGTCP/M/6
Page 9
28. The representative from the European Community and its member States, introducing
document WT/WGTCP/W/99, said that in the last decade there had been a re-thinking of the core
economic tasks of governments, spanning policy areas such as trade liberalization, the liberalization
of foreign investment, regulatory reform, privatization and, of course, competition policy.  These
policies had to be seen as a whole, because implementing individual policies in isolation might lead totheir effects being negated, impaired or even counteracted.  For instance, if a public monopoly were
privatized absent a competition framework, then  the resulting private monopoly could have the same
detrimental effects upon the economy as the old public monopoly.  Hence, there was a need to have a
coherent policy across the board if economic reform was to bear fruit as intended.  In the last decade,
there had been an enormous change in the attitudes of countries at all levels of development towards
foreign investment.  The prevailing opinion, shared by economists and policy makers alike, was that
the effects of foreign investment were overwhelmingly benign.  It was acknowledged that foreigninvestment provided benefits to the host country by way of boosting export earnings, serving the
domestic market, creating jobs and transferring technology.  In developed countries, the export of
capital had been seen rather fearfully in the past but today there was a recognition that this activity
also generated welfare for the exporting country.
29. The submissions to the Working Group reflected the conclusion that the liberalization of
foreign direct investment, together with the adoption of competition policy, could be seen as a
development tool.  There had been a trend to replace foreign investment screening procedures by
more open legislation, but this had been balanced by the application of competition law in order to
ensure that both the entry of foreign investors a nd their behaviour post-entry took place under sound
conditions of competition.  There were two additional reasons relating to liberal foreign investmentrules and sound competition regimes.  First, foreign companies - and this was stressed in many
submissions - placed a premium on the stability of policies, including sound competition policy, in
host countries.  The more stable the policies, the more likely a country was to attract foreign
investment.  Neutrality and transparency were important features of a sound competition policy.
Second, domestic companies sought certain guarantees against the abuse of market power bymultinational investors.
30. The representative of the United States, introducing document WT/WGTCP/W/102, said that
much of the analysis of the economic implications of direct foreign investment (FDI) had focused on
countries that were net recipients of investment, not providers;  however, the economic benefits to
providers were generally recognized as well.  Some countries and regions, like the United States and
the European Community, were both very large recipients and very large providers of FDI.  In the
view of his delegation, a modern pro-consumer competition policy enhanced the value of an openinvestment regime to both investors and consumers.  From this perspective, investment policy and
competition policy could and should be mutually reinforcing, leading to a virtuous cycle of progress.
Free flows of investment greatly increased the prospects for new entry and thus increased competition
in specific markets.  This was true not only for markets which were national or international in scope,
but also for markets that were more local in their geographic definition, such as many service markets.Investment could not only supplement open international trade, but it could also take hold where trade
had not yet reached.  For instance, liberal investment rules could mitigate or eliminate local
distribution bottlenecks that might frustrate trade in goods.  Under such rules, an exporter who could
not place his goods through established wholesalers or retailers owned or controlled by one or more
local producers could create new distribution channels or, perhaps, acquire old ones, to the benefit ofconsumers.  Thus, through a liberal FDI regime, new suppliers, actual and potential, became
available, clearly enhancing competition.  The contribution by his delegation made reference to
numerous studies supporting the conclusion that fr ee flows of investment increased competition.
31. In turn, a modern, pro-consumer competition policy significantly augmented an open
investment policy.  Specifically, sound competition laws or regulations assisted investors bypreventing local cartels or monopolies from abusing new entrants or driving them out.  This was
especially true for network industries, such as telecoms or electricity, where investors relied uponWT/WGTCP/M/6
Page 10
local bottleneck transmission facilities to provide a competitive service.  In the GATS Basic Telecom
negotiations, this situation had been resolved by requiring through the so-called "Reference Paper"
that national telecom regulators be established and referee interconnection with former (or even
existing) monopolies.  Additionally, competition laws could prevent new market entrants from
themselves engaging in collusive or monopolistic conduct.  There was a question as to the"sequencing" regarding the introduction of new investment and competition rules.  Countries were
better off applying both sets of rules concurrently, the sooner the better.  As noted, competition policy
accompanying investment liberalization was valuable in dealing with two possible harms to
consumers:  anti-competitive practices by local companies aimed at new investors, and such practices
by investors in the local market.
32. In contrast, experience had shown that excessive investment regulation, including regulation
purported to be competition-oriented, could harm both investment and competition.  In the past, many
countries had maintained international (or even in ternal) investment screening regulations, using such
regulations to force investors to meet performance requirements, including technology transfer
requirements or the mandatory use of local business partners.  The adverse effects of these restraints
on investment flows and economic growth were now widely recognized.  They were likely to deter,
not encourage, beneficial flows of capital and tec hnology, and hinder the stimulation of competition
in local markets.  Sometimes these investment screening regimes had been given a competition policy
rationale, based on the alleged concern that efficient new market entrants could harm existing local
competitors and perhaps achieve a local monopoly.  However, competition policies that attempted to
protect (established) competitors, rather than consumers, were inherently suspect; after all,
competition laws should protect competition, not competitors.  Besides, concerns about the impact ofnew market entrants were largely misplaced, especially if foreign entry was by way of "green field"
investment rather than through acquisition of a local competitor.  Further, if a new foreign entrant did
possess clear and sustained advantages over the older domestic market players, the way to prevent the
new firm from enjoying monopoly power was by having an open foreign investment regime
welcoming other new entrants too.  Conversely, restrictive investment regulations limiting entry byforeign firms were likely to result in monopolistic effects.
33. The representative of the United States said further that there were very few institutional
overlaps between international investment treaties and instruments regarding international cooperation
on competition matters.  This, however, was neither an accident nor a problem, given the constructive
parallels between the two.  The contribution by his delegation described international investment
initiatives, without offering detailed evaluations of them or of their likely outcomes.  He concluded
his presentation by reiterating that the free flow of investment almost always facilitated competitionand complemented sound competition policy.  Competition policy could, in return, help maximize the
benefits of liberal investment, not least by making sure that any residual local monopolies did not
nullify those benefits.  Investment liberalization had gathered and should continue to gather speed
through the use of investment-specific international instruments.  In the same way, governments
should continue to create and enhance a culture of competition that allowed the full consumer benefitsof investment liberalization to be realized.
34. The representative of Hong Kong, China, introducing document WT/WGTCP/W/104,
remarked that work alone on the linkage between competition and investment policies was relatively
sketchy.  It merited further deliberations in the Working Group. Hong Kong, China believed in a
liberal, open investment environment underpinned by an effective competition regime.  Mutuallyreinforcing investment and competition policies provided a solid foundation for economic growth as
well as for the enhancement of economic efficiency and consumer welfare.  Conversely,
discriminatory investment or anti-competitive policies caused distortive effects resulting in welfare
losses in the host economy.  In a globalized economy, competition and investment policies were
inextricably linked to each other.  It was virtually impossible to introduce a competition policywithout creating ripple effects on the investment environment and vice versa.  An effective
competition policy removed entry barriers into markets thereby providing a favourable environmentWT/WGTCP/M/6
Page 11
for FDI.  In turn, a liberal FDI policy fuelled co mpetition in the host economy.  Hong Kong, China
had all along professed the importance of addressing investment and competition in a WTO
framework.  A one-sided approach was not adequate to reap the full benefits of a mutually reinforcing
investment environment and competition regime.  As an illustration, there was a growing concern,
particularly among developing economies, that the liberalization of FDI may entail private restrictivebusiness practices by foreign investors if the host economy did not protect the contestability of
markets through proper competition policies.  The interlinkage between investment and competition
was already recognized in a number of WTO instruments, such as the GATS, and the TRIMs and
TRIPS Agreements.  Nevertheless, apart from providing for cooperation and consultation procedures,
and paving the way for more detailed rules, the existing instruments fell short of preventing restrictive
business practices or limiting regulatory abuses in the field of competition policy.  The challenge was
to remove the inadequacies of existing WTO rules in addressing the interaction issue and to increasethe synergies between investment and competition policies in a more systemic manner.  Finally, it was
increasingly difficult to separate those aspects of conditions of international competition related to
trade in goods and services from those relating to movements of factors of production and, in
particular, movements of capital.  Recent discussions in international fora reflected a growing
recognition of a close relationship between investment policy, trade policy and competition policy,and the need to ensure consistencies.  Her delegation hoped to see further work on how to address the
interlinkages in a more consistent and compre hensive manner to produce mutually reinforcing
outcomes.
35. The representative of Venezuela, introducing document WT/WGTCP/W/107, said that a
number of conceptual clarifications were in order with respect to the issues being discussed by the
Working Group.  Although there was a general consensus as to the need to promote market forces as a
mechanism to produce and distribute goods and services in an efficient manner, there was also a
perception that a body of rules that would avoid the abuse of economic power by multinational firms
should be established.  The idea underlying the latter objective was that multinational firms had
certain characteristics which led such firms to behave anti-competitively when operating in
developing country markets. Thus, there seemed to be two, somewhat contradictory, trends.  On the
one hand, there was a trend to guide the design of policies in order to promote market forces.  An
emphasis on the need to liberalize capital flows to promote investment was part of this trend.  On the
other hand, there was a tendency to set up a rule-making system which would regulate some of the
capabilities of multinational corporations with a view to controlling anti-competitive behaviour.  The
best way to resolve this contradiction was to desi gn a set of rules regulating international investment
flows on the basis of the same principles that regulated the protection of competition.  In other words,the relevant problem was to identify a set of objectives and basic principles that would serve as a
guiding light in the design of the different po licies affecting both investment and competition.
36. The representative of Korea, introducing document WT/WGTCP/W/109, remarked that
Korea's policy towards FDI had taken a major turn since the onset of the financial crisis at the end of
1997.  The Korean Government was taking strong measures to liberalize as a way to offset theexternal financial crisis, particularly by reducing barriers to FDI.  The interface between competition
policy and investment policy was part and parcel  of the growing globalization of business.  As
national economies became more integrated, the distinction between policies dealing with domestic
business practices and those dealing with international ones became increasingly blurred.  In other
words, investment policy and competition policy were becoming more and more interdependent.  TheKorean delegate went on to offer some comments on the effects of FDI on competition and the impact
of competition on FDI.  With respect to the first issue, he observed that, traditionally, competition
policy had been concerned with static economic efficiency.  However, when countries went through
economic restructuring, it was important to focus on dynamic efficiencies arising from foreign
investment inflows.  Increased FDI benefited th e host economy by way of augmenting both actual and
potential competition, the latter meaning "contestability".  If entry and exit into a market were freed
by the deregulation of foreign investment flows, potential competitors would bring pressure upon
incumbent firms to behave more competitively.  Thus, since potential competition by foreignWT/WGTCP/M/6
Page 12
investors would introduce economic efficiency into domestic markets, the actual degree of
concentration in those markets should not be the sole criterion for assessing whether or not they were
competitive.
37. With respect to the impact of competition polic y on FDI, the representative of Korea said that
there was a risk that, as FDI barriers were brought down, incumbents could establish other barriers tocompetition in the form of vertical and horizontal restraints.  Competition law was intended to deal
with such practices but weak enforcement thereof would tend to protect incumbents' firms and deter
the entry into the market of new competitors.  For example, in the case of telecommunications
services, monopoly ownership of a local telephone network could be used to deter or delay entry of
competitors relying on access to the local network.  In the area of mergers and acquisitions, the most
importance interface between competition laws and FDI occurred when foreign affiliates established
in the host country became involved in significant mergers, acquisitions or joint ventures.Competition issues were raised before and after the foreign affiliates merged.  For instance, as a result
of the merger of two foreign firms abroad, their affiliates in the host country would intend to merge as
well, but this outcome could reduce competition.  In many countries, issues of national interest were
taken into consideration in merger reviews.  Due to the process of economic restructuring that Korea
was currently undergoing, the liberalization of FDI provided opportunities for foreign investors to buy
into local firms.  The effects upon competition of  these mergers and acquisitions would have to be
reviewed by the Korean competition authority.  Similarly, as part of the programme of economic
restructuring, a number of public monopolies were being privatized.  However, in this case, the firms
concerned would initially maintain their monopoly status which would mean that privatization would
have very little effect upon competition.
38. The Korean delegate also said that, when co nsidering the relationship between competition
policy and investment policy, the role of trade policy had to be taken into account as well.  At the risk
of over-simplification, one could generalize that trade policy determined the relevant market for
competition policy, and investment policy determined the relevant players in the market.  Therefore,
investment policy could not attain its competition objectives unless the effects of trade policy indetermining the relevant market were carefully considered.  His delegation felt that the future work of
the Working Group should touch upon this area.
39. The representative of Japan, introducing document WT/WGTCP/W/108, said that, in general,
his delegation believed that investment and competition had a positive relationship.  The prime
benefits that investment provided in terms of co mpetition had been underlined in the Secretariat's
paper for the WTO Working Group on the Relationship between Trade and Investment
(WT/WGTI/W/38).  They basically consisted of encouraging market participation by new entrants,both domestic and foreign, and strengthened competitiveness in the market as a whole, including on
the part of incumbent domestic firms.  Additionally, market entry by multinational corporations with
advanced technologies was an effective way of boosting the efficiency of local companies through
technology transfers.  The Government of Japan was quite conscious of the economic benefits
accruing from foreign investment and for this reason it had taken measures recently to liberalizefinancial markets.  The contribution by his delegation referred in detail to the major steps taken during
this process.  Conversely, one of the notable benefits of competition was the promotion of new
investment.  An effective competition policy was capable of eliminating domestic cartels, abuses of
market power by firms with a dominant position in the domestic market and other barriers that
typically thwarted market entry by foreign firms into a host country.  Furthermore, guaranteeing acompetitive business environment for foreign entrants could help foster heightened flows of
investment from abroad.
40. In contrast, there could also be a negative relationship between investment and competition.
There was a risk that the liberalization of foreign investment could result in market dominance and
anti-competitive practices by foreign corporations.  The liberalization of foreign investment couldpave the way for entry by large multinational corporations that were overwhelmingly competitive.WT/WGTCP/M/6
Page 13
This state of affairs could deal a heavy blow to local companies which were less competitive, both
financially and technologically.  One should recognize, nevertheless, that in countries with
competition regimes in place, these harms would be transient in nature because a liberalized
investment environment and an even playing field could be expected to encourage other
multinationals, as well as local start-ups, to compete with the dominant multinational.  A secondconcern was that multinationals with market power could enlist their unique cross-border networks to
exclude competitors, pursue restrictive business practices and engage in other forms of anti-
competitive behaviour.  Such monopolistic abuses of power, however, would also be banned by an
effective implementation of competition law.  This remedy would also counteract the exercise of
monopolistic power in host countries by foreign companies engaged in cartel arrangements.  Common
undertakings by domestic and foreign investors including mergers, acquisitions and joint ventures
could also have an adverse effect on market competition and therefore needed to be examined ex ante
by the competition authorities.  By way of illust ration, he pointed out that the Fair Trade Commission
had recently reviewed an important joint venture in the beer market, involving leading foreign and
domestic producers, and had issued a decision to the effect that the joint-venture concerned had to be
temporary and limited in scope, given that it would otherwise strengthen the position of the local
company which already enjoyed a dominant position in a rather oligopolistic domestic market.  For allthese reasons, to maximize the benefits from foreign investment, it seemed vital for host countries to
establish effective competition regimes.  In sum, his delegation was of the view that competition and
foreign investment generally had complementary effects, and that the adverse effects of investment on
competition could be controlled precisely through th e exercise of a vigorous competition policy.  For
the flow of international investment to increase it was desirable for competition policy, particularly indeveloping countries, to be strengthened.  Finally, the Japanese delegation looked forward to a
meaningful discussion in the Working Group of the role of and potential for international
harmonization and cooperation regarding competition policy.
41. The representative of Canada observed that FDI was an increasingly important vehicle to
access and supply foreign markets.  Effective domestic competition policies together with a
commitment to investment liberalization could be mu tually reinforcing in facilitating competition in
the market-place and maximizing economic welfare.  On the one hand, liberalization of government
measures restricting investment could contribute to  greater competition in the market-place.  On the
other hand, domestic competition policies could facilit ate investment by removing obstacles to market
entry for all investors.  Domestic competition policies also provided greater certainty as to the rules of
doing business, which in turn had a positive feedback upon investment flows, and promoted a level
playing field among competitors.  In particular, effective, transparent and predictable competitionpolicies could contribute to a stable and competitive economic environment and hence could help
countries attract an inflow of foreign investment.  In addition, an effective competition regime served
as a non-discriminatory mechanism for addressing anti-competitive practices whether entered into by
domestic or foreign investors, thus providing an objective tool to protect the competitive process in
the domestic market-place.
42. The representative of Canada said further that foreign firms were very much affected by the
competition regime of the host country regarding investment, especially by the rules concerning
reviews of mergers, acquisitions and joint ventures .  The growing international dimension of doing
business, combined with deregulation and privatization initiatives, meant that a greater proportion of
economic activity was coming under the purview of competition agencies.  The jurisdictional natureof these reviews suggested the importance of cooperation between competition agencies in the
enforcement of competition policy.  With respect to mergers across international borders,
substantially different notification and procedural requirements applied.  Duplication of procedures
could also be an issue with respect to merger s involving multinational companies.  This again
suggested the need for enhanced cooperation among competition agencies to minimize these costs andfacilitate investment.  The cross-overs of competition policy with investment were recognized within
the WTO.  Indeed, Article 9 of the TRIMs Agreement specifically required a review of the Agreement
not later than five years after its entry into force.  In the course of this review, parties were to considerWT/WGTCP/M/6
Page 14
whether the Agreement should be complemented with provisions on investment policy and
competition policy.  Article 9 of the GATS provided for consultations and cooperation among parties
on matters relating to competition policy.
43. The representative from India said that in the last decade there had been a notable process of
liberalization of FDI.  This had been in harmony w ith the broader liberalization of international trade
in goods and services, and inflows of finance and t echnology.  By and large, two dimensions of the
process of FDI liberalization had drawn attention; namely, the reduction of restrictions on FDI and the
establishment of standards of treatment and protecti on of FDI.  The focus was now turning to a third
dimension of liberalization, namely, maintaining proper functioning of the market.  It was in the
context of this third dimension that competition policy assumed importance.  Considerations relating
to competition and competition policy had not only great relevance but also far-reaching implications
for developing countries as they sought to get more closely integrated into the world economy.
44. Trade policies, FDI policies, and competition policies engendered contestability and
competition in markets.  These three policy tools had a high degree of interdependence and could only
ensure efficient resource allocation and economic development if they were appropriately configured
to be consistent with one another and mutually rein forcing.  Otherwise, they could result in distortions
and reduced welfare gains.  For example, if there was a liberalized FDI regime, but trade policiesremained restrictive, the scope for domestic firms and foreign affiliates to abuse their market power
could increase, giving rise to competition concerns.
45. It was conceivable that an open investment regime could give rise to undesirable business
practices on the part of both foreign and domestic firms.  Thus, alongside FDI liberalization, it was
imperative to apply competition law so that firms, be they foreign or local, refrain from indulging inbusiness practices detrimental to consumers.  The ap plication of competition law was essential to stop
both foreign and local firms from setting up barriers to market entry by new competitors.  This called
for the formulation and implementation of a competition regime supportive of a liberalized investment
regime.
46. One could generalize that competition will always lead to economic efficiency and ultimately
to economic growth and development, but there could be very valid and legitimate reasons for some
developing countries to limit the pursuit of efficiency as an immediate economic objective.  Such
reasons could reflect competing objectives, including in particular development considerations.  In
addition, while exposure to competition through FDI would generate, in the long run, efficiency in
resource allocation, in the short run competition could result in excess capacity or cause diseconomies
of scale or weaken the market position of domestic enterprises vis-à-vis those of foreign firms.  These
costs should not be underestimated.  Thus, when formulating FDI liberalization policies, developing
countries, in particular, should study their existing domestic market and export potential, with
particular reference to the goods and services forming their primary economic activities, and examine
the impact an open investment regime was likely to have on those primary activities.
47. This did not mean of course that developing countries should abandon the goal of rendering
their markets contestable and competitive through FDI liberalization.  Rather, developing countriesconfronted a complex challenge of identifying and implementing policies to achieve their long-term
economic development objectives, while ensuring the positive benefits resulting from enhanced FDI
flows.  Perhaps one way to do this was by designing competition rules in a flexible manner so as to
not adversely affect growth or developmental goals.  The special and differential needs of developing
countries also had to be duly taken into account when designing competition rules.  This exercisecould feed on existing experiences.  A number of competition laws featured objectives not necessarily
related to efficiency considerations such as controlling the concentration of economic power,
promoting the competitiveness of domestic industries, encouraging innovation, supporting small and
medium-sized enterprises and encouraging regional integration.  Furthermore, even when efficiency
objectives prevailed in the design of competition rules, a number of competition laws contemplatedWT/WGTCP/M/6
Page 15
exemptions and exceptions for certain types of joint ventures, certain types of industries, small
transactions, or cooperative arrangements among small enterprises.  Thus, developing countries
should have some elbow room to design the kind of  competition policy with re spect to FDI that suited
their conditions best, subjecting this policy to periodical reviews, and avoiding prescriptions based on
over-simplified models of markets.
48. The representative from Norway observed that there were a number of competition-related
provisions and investment-related provisions in  a number of WTO Agreements such as TRIPS and
Government Procurement.  He was of the opinion that the Working Group had to look beyond these
specific rules and focus on rules of a horizontal nature with a general application.  In the investment
field, there were some horizontal rules in the WTO, although not of a comprehensive character,
governing the treatment of foreign investment in agreements such as the TRIMs Agreement or the
GATS.
49. If the Working Group was to consider whether there was a need to develop a competition
policy framework applicable to companies, whether foreign or domestic, in their roles as traders of
goods and services, and investors, it had to be borne in mind that nationality was not a criterion within
competition policy.  Approaches to the entry of  foreign investment varied considerably between
Members.  On the multilateral front, the GATS covered investment as a mode of supply of services,through the concept of commercial presence.  It therefore imposed an obligation on WTO Members to
apply MFN treatment to foreign investors;  national treatment, however, only applied to the extent
that a Member had positively scheduled obligations in certain sectors.  The GATS was thus limited in
that it was only applicable to investors in the service area and followed a "bottom-up" approach to
national treatment.  There were Members which had committed themselves to abolish in substancebarriers to investment in the context of regional agreements and accorded a non-discriminatory right
of establishment to regional investors.  Agreements like the European Communities and the European
Economic Area came to mind as illustrations of this approach.  Within these agreements, common
competition rules were in place.  Other Members taking part in narrower agreements, mainly bilateral,
applied national treatment and MFN principles with respect to investment inflows from parties to suchagreements.  Within these agreements, competition rules were covered, although to varying degrees.
Whether or not discussions in the WTO might eventually lead to a decision to negotiate more
comprehensive multilateral rules in the investment field was still an open question.  At any rate, an
effective domestic competition policy was a pre-condition for a successful implementation of a liberal
investment policy.  A general application of natio nal treatment and MFN treatment in the competition
area was of particular importance for this purpose.
50. The observer from UNCTAD drew attention to the fact that the 1997 World Investment
Report published by her organization focused on the relationship between FDI, market structure and
competition policy.  She said the importance of  FDI in the world economy was growing.  In 1997,
global FDI flows had exceeded $40 billion.  Judgin g from the value of sales by foreign affiliates
(estimated to be $6.4 trillion in 1994) as compared to the value of world exports ($5.0 trillion in the
same year), it seemed that FDI had become more  important than trade for delivering goods and
services to foreign markets.  A number of interesting features of the growing importance of FDI were
worth noting.  One was that, although developed c ountries dominated the picture (with two thirds of
world FDI stock and nearly 60 per cent of inwa rd FDI flows), developing countries had been
receiving an increasing share of FDI.  A second feature was that mergers and acquisitions – especially
large-scale mergers and acquisitions – had been playing an important role in FDI flows, mainlyamong developed countries.  A third feature was that, over time, services had become the principal
sector for FDI, especially in developed countries.  A fourth aspect was the emergence of outward FDI
from developing countries, which accounted for 15 per cent of world FDI in 1996, rising from 1 to
2 per cent at the beginning of the 1980s.  This all meant that FDI had emerged as an important factor
contributing to the integration of markets across the world.WT/WGTCP/M/6
Page 16
51. Nearly all countries tried to attr act FDI with a view of course to benefiting from it in terms of
their economic performance and economic development.   One way to attract FDI was by liberalizing
regulatory regimes for FDI and thus creating a fav ourable environment for foreign investors.  There
had been, indeed, a strong trend towards FDI liberalization, particularly at the national level.  Thus, in
recent years, the overwhelming majority of national regulatory changes had been in the direction ofreducing control over, improving treatment of, or increasing incentives for FDI.  These unilateral
efforts were supplemented by facilitation and protection efforts at the bilateral level.  Bilateral
investment treaties and agreements, including double taxation treaties, had proliferated significantly.
52. With respect to the interaction between fo reign investment and competition, the observer
from UNCTAD said that the global trend towards the liberalization of FDI generally strengthened
competition in host markets.  It was true, however, that the entry of foreign firms could also increase
concentration levels in liberalized markets because of the competitive advantages that foreign firms
often had, and increased concentration could result in anti-competitive practices.  To some degree,
this problem could be remedied by the liberalization of foreign investment inflows itself, which added
substantially to the prospects for continuing external  competition.  Still, additional foreign investment
flows could be blocked by private barriers to market entry.  Thus, to reap the full benefits of
liberalization, pro-competitive measures should be ta ken to ensure the proper functioning of markets
including, in particular, measures to control exclusionary behaviour and anti-competitive practices by
firms.  From this perspective the adoption of a competition regime could be seen as an integral part of
FDI liberalization.
53. Countries liberalizing their FDI regimes should take into account three objectives.  First, it
was necessary to develop a culture of competition, complementing the culture of FDI liberalizationthat has grown worldwide and has become pervasive.  Second, it was necessary to devote increased
attention to the question of formulating and implementing a clear competition policy.  In particular,
when formulating competition policies, countries needed to keep in mind that competition policy was
not a substitute for FDI policy and trade policy, but rather that all three were mutually supportive in
ensuring that markets functioned properly.  Third, competition authorities needed to cooperate amongthemselves.  In today's globalized world, competi tion issues relating to FDI increasingly involved
more than one country and therefore required international policy responses.
54. It was also important to note that, while FDI liberalization and competition generally
contributed to economic welfare, there might still be limitations to the pursuit of competition,
especially in developing countries.  For instance, factors such as economies of scale, high sunk costs
and high-risk related costs could make some markets difficult to contest by firms from developing
countries.  In addition, there were competing objectives to economic efficiency through morecompetitive markets, including safeguarding national security, protecting labour rights, promoting
positive externalities, avoiding negative externalities, and promoting small and medium-sized
enterprises.  Where such conflicts occurred, their resolution could require a mix of policies that
limited contestability for a period of time, and achieved the right balance between efficiency and non-
efficiency objectives in a dynamic context.  Possible exemptions or exceptions to competition neededto be tempered by the recognition that they often entailed trade-offs with efficiency.  Thus they should
be the least damaging from an efficiency perspective, should be transparent, and should be subject to
review in light of changing conditions.  Fina lly, the observer from UNCTAD noted that her
organization was currently engaged in work related to a possible multilateral framework on
investment and, if desired, would be pleased to provide further details of that work to the WorkingGroup.
55. The representative from Brazil said that the contribution submitted by his delegation
describing Brazil's experience in the area of competition policy (WT/WGTCP/W/93) briefly dealt
with the positive effect a transparent competition regime could have in attracting FDI.  In addition, he
observed that the submission by his delegation discussing an international approach to competitionWT/WGTCP/M/6
Page 17
(WT/WGTCP/W/100) argued that the incorporation of WTO principles such as national treatment in
the application of competition law could also have the same favourable effect upon FDI inflows.
56. The representative from the European Community and its member States offered a series of
comments on the foregoing presentations.  There was a general recognition of the benefits of an open
investment policy for market competition.  He considered that there seemed to be an agreement as tothe complementarity between an open investment policy and a liberal competition policy.  There also
was a recognition that there were circumstances under which foreign investors could engage in
conduct with a negative impact on competition.  The basic question here was what were the right
institutional responses to these competition concerns;  in particular should these concerns be looked at
on a pre-entry or on a post-entry basis?  There seemed to be very little in the way of a competition
justification for pre-entry controls, except for the special case of mergers and acquisitions.  In
contrast, there was always a competition case for post-entry controls, but these were the kind ofcontrols that were based upon the application of competition law on a neutral and non-discriminatory
basis.  This led to the observation, made already by the Venezuelan delegation, that one should not
assume that all types of competition policy would be favourable to foreign investment.  This
depended on the extent to which competition polic y was based on efficiency principles, on whether
competition policy was applied in a transparent manner, on whether there was legal predictabilityabout the decisions of the competition authority, on whether a proper judicial review mechanism was
in place, and on other factors.  Indeed, in discussing the mutual complementarity between competition
policy and investment policy, how the principles of transparency and non-discrimination related to
competition policy was an important element.  Finally, the link between competition and investment
was one of the clearest illustrations of the fact that competition policy was becoming more and moreinternational in nature, increasingly affecting a large number of jurisdictions.  This was clearly the
case with respect to mergers and acquisitions, and one had to consider very seriously the role that the
WTO should play in supporting cooperation among national competition authorities.
57. The Chairman observed that, in the presentations relating to this agenda item, the areas of
convergence had been many.  There had been no dispute regarding the fact that FDI was an important
factor contributing to economic development.  However, there were concerns that the interaction
between FDI and competition could be problematic.  Two major concerns had been outlined in this
regard.  The first related to the possibility that foreign firms might take advantage of investment
liberalization to engage in anti-competitive conduct.  In addition, much FDI took the form of mergers
and there were cases where those mergers could in fact create a competition problem.  The second
concern related to the possibility that incumbent firms, be they local or foreign, could set up private
restraints to prevent or defeat the liberalization of FDI.  Many had accepted the idea that theapplication of competition law could control anti-competitive behaviour and dismantle private barriers
to market entry, and that in this sense there was a clear complementarity between competition policy
and the liberalization of FDI.  They could be mutually reinforcing and generate a "virtuous circle".
58. It had been observed that, in the past, competition concerns arising from the liberalization of
FDI had been addressed by other policy tools, including ex ante  controls such as performance
requirements.  Generally speaking, such controls had now been abandoned in favour of the adoption
of a competition regime.  Independently of the effect that these controls had had in discouraging FDI,
they had not done anything with respect to regula ting anti-competitive behaviour by domestic firms
towards FDI.  In addition, competition law, on top of being able to address the behaviour of foreign
investors, as well as the behaviour of domestic firms towards foreign investors, had the addedadvantage that it created a framework and an envi ronment favourable to business through providing
legal certainty and an institutional commitment to market mechanisms that, in itself, might induce
more FDI inflows.
59. There were, however, areas where differences of opinion had emerged.  Competition policy,
in order to attract FDI, had to be enforced in a non-discriminatory way.  There was a worry that anenforcement of competition policy affected by the consideration of narrow national interests wouldWT/WGTCP/M/6
Page 18
result in the creation of entry barriers.  There had been some discussion of the multilateral framework
for FDI, particularly certain WTO provisions.  Market access commitments were now often tied to
some kind of commitment that the local monopolies would not behave in a manner that would be
inconsistent with the market access commitment.  It had been asked whether there were enough rules
on competition matters in the WTO context, and whether the principles underlying the WTO shouldnot be used in a more comprehensive way to esta blish multilateral rules with respect to competition
policy in general and FDI in particular.  The lack of a definition of anti-competitive practices in the
multilateral context, especially with respect to FDI,  was possibly a problem in this regard and there
could be value in trying to outline this concept more  precisely, in order to minimize trade frictions and
possibly minimize recourse to the dispute settlement mechanism.
60. There was a question as to whether the disruptions that could be caused by increased
competition, particularly from foreign investors, should be addressed by developing countries, even ifthose countries did not question the long-term benef its of introducing more competition into their
markets through the liberalization of FDI.  In this regard, it had been pointed out that competition
policy could have both efficiency and non-efficiency goals.  The latter goals could include national
priorities, promoting small and medium-sized firms or development objectives.  The question was
then whether one could adopt ways to diminish, at least in the short term, the costs of adjustment toincreased FDI inflows, perhaps by way of exemptions or exceptions, keeping in mind that such
exemptions or exceptions should be carved out narrowly and with the least adverse effects upon
efficiency.  More generally, the question had been raised as to how flexible competition law should be
in developing countries.  There were developing countries confronting very rapid restructuring.  Here
competition policy and investment interacted in a different context.  Finally, since much FDI cameinto the market by way of mergers, it appeared that there was a need for increased cooperation among
national competition authorities.
III. THE RELATIONSHIP OF TRADE AND COMPETITION POLICY TO
DEVELOPMENT AND ECONOMIC GROWTH
61. The Chairman noted that, as had been requested by Members at a previous meeting of the
Group (see document WT/WGTCP/M/4, paragraph 78), the Secretariat had prepared and circulated a
synthesis paper on the relationship of trade and competition policy to development and economic
growth (document WT/WGTCP/W/80, circulated 18 September 1998).  A representative of the
Secretariat, introducing the paper, said that, consistent with the Group's instructions, it was not
intended to be an original or empirical study of the topic.  Rather, the paper was intended to bringtogether the issues that had been raised and points that had been made on the topic in the Group,
based on the various oral and written contributions relevant to this topic, including contributions byMembers and the work done in UNCTAD and other intergovernmental organizations that had been
brought to the attention of the Group.  It was organize d in five substantive parts.  Part II of the paper
discussed the various reasons that had been given in the Group for the implementation of competition
law and policy in developing market economies.  Part III set out points that had been made regarding
the interconnections between trade and competitio n policy in fostering sound economic development.
Part IV considered a number of reservations and/or practical considerations regarding the need for
and/or design and application of competition law and policy in developing market economies that had
been put forward in oral and written contributions.  Part V set out points that had been made regarding
the role of international cooperation, including technical cooperation, in facilitating the
implementation of competition policy in developing countries.  Part VI provided concluding remarks.
62. The representatives of the United States; the European Community and its member States
; the
Dominican Republic; Hong Kong, China ; Canada ; Argentina ; Korea ; Brazil ; Japan ; Malaysia ;
Norway; Venezuela ; India  and Pakistan , and the observer from Croatia  said that the paper by the
Secretariat provided a useful synthesis of points that had been made on the topic, which reflected the
richness of the discussion on this matter that had taken place in the Group.  The representatives of theEuropean Community and its member States and Norway
 said further that the paper revealed theWT/WGTCP/M/6
Page 19
significant degree of consensus that had emerged in the Group on the usefulness of competition policy
as a tool of economic development, which was a central consideration in regard to the overall mandate
of the Group.  They said that the paper (particularly in paragraph 12) also reflected a high degree of
consensus, from an analytical point of view, on the kinds of anti-competitive practices of enterprises
that could impact adversely on international trade,  and therefore on development and growth.  It aptly
summarized views that had been expressed by many Members in the Group regarding the
fundamental complementarity of competition policy and trade liberalization.  It showed, in particular,
that an effective competition policy was necessary to realize the full benefits of trade liberalization.
The representative of Norway said that, from his delegation's point of view, the specific reasons cited
in the paper for adoption of competition laws and policies, including the promotion of economicefficiency, the protection of consumer welfare, and attracting and maximizing the benefits of foreign
investment, in addition to the overall observations in the section on Concluding Remarks, were welltaken and could be reflected as substantive findings of the Group in the planned report to the General
Council at the end of the year.  With regard to the general complementarity of trade and competition
policy, he noted that this was similar to the relationship that Members, in other fora, had found to
exist between trade and environmental policy.
63. The representatives of the United States and the European Community and its member States
noted that a key observation in the paper was that, in many cases involving developing or transition
economies that had implemented or strengthened competition laws during the past decade or so, this
had been done not in isolation, but rather as one element of a package of interrelated reforms of
policies aimed at promoting economic and social development in a globalizing world economy.  The
other reforms included external market-opening measures (including liberalization of trade andforeign investment regimes), privatization and sector-specific regulatory reforms/deregulation.  The
various elements of the package were considered by many such countries to be mutually reinforcing.
In fact, in many cases, competition policy could be seen as a focus of the reform efforts and had
served as a catalyst for related reforms.  The representatives of the United States said further that,
from their delegation's perspective, an important and closely related point concerned the critical role
of the rule of law in a healthy market-based economy.  This was a vital underpinning of a competition
culture.  Developments in the world economy during the past year had highlighted the problems that
could result from a lack of transparency in the law enforcement process and a breakdown of good
governance.  The importance of establishing credible institutions that would enjoy public confidence
and support had also been emphasized by participants from developing countries in the joint WTO-
UNCTAD-World Bank Symposium on Competition Policy and the Multilateral Trading System:
Issues for Reflection in the International Community which had taken place in July.  Therefore, itwould be desirable to give further consideration in this Group and/or other fora to the question of
ways and means of developing and putting in place transparent, rules-based enforcement and
adjudicatory institutions and processes that would enjoy a high degree of public understanding,
acceptance and support, and thereby would help to maximize the effectiveness of market-oriented
reforms including, but not limited to, the introduction of competition law and policy.  Therepresentatives of  Venezuela and Canada
 agreed that the rule of law and enforcement considerations
were essential elements of an effective competition policy.  The observer from Croatia said that the
goals of competition law and policy were economic in nature; without commenting on the situation in
the United States, she was unsure as to whether the courts in other countries would have sufficient
sophistication in this area.
64. The representative of the European Community and its member States said that, in light of the
comments synthesized in the paper, it was important that competition policy be thought of, first and
foremost, as a tool for development.  Given this, it was clear that the development dimension should
be and was at the centre of the Group's analysis of the interaction between trade and competition
policy.  In fact, the role of competition policy as a tool of development had acquired greaterimportance than it had been given in the past.  This reflected two considerations, both emanating from
the phenomenon of globalization.  First, in a globalizing economy, integration in world markets was
increasingly a pre-condition for the competitiveness of enterprises.  Competition policy couldWT/WGTCP/M/6
Page 20
facilitate this.  Second, anti-competitive practices themselves, increasingly, had an international
dimension.  Such practices could thwart the potential benefits of globalization and the
internationalization of markets.  He noted further that the paper had also raised the related question of
whether developing countries were particularly vulnerable to such practices.  While he did not think
that it was possible to give a final answer to this question, there were three reasons why this mightwell be the case.  First, experience, including that of the European Community and its member States
themselves, confirmed that when countries undertake a process of market opening, there is a risk of
increased anti-competitive practices by the affected enterprises that can thwart the goals of the
market-opening process.  This danger had also been emphasized in the remarks of several speakers
from developing countries at the Symposium that had been held in July.  A second reason was that, as
was reflected in earlier comments by the representatives of some developing countries that were
referred to in the paper by the Secretariat, developing countries were likely to have particulardifficulties in addressing anti-competitive practices of enterprises that had an international dimension.
Third, it seemed plausible that developing countries, being new entrants to other countries' markets in
many cases, could be particularly affected by anti-competitive practices of enterprises that had
exclusionary effects, vis-à-vis either exports or foreign investment.
65. The representatives of the United States, the European Community and its member States
,
Brazil and Norway  said that the paper clearly reflected and/or reinforced a key conclusion from the
Group's debate on the relationship between investment  and competition policy:  namely, that, in the
current, globalizing environment, a well-constituted and credible competition policy administered in a
manner consistent with the rule of law could be an important factor in enhancing the attractiveness of
an economy to foreign investment.  A key consideratio n in this regard was that foreign investors could
be confident that their interests would be treated in a non-discriminatory fashion.  The representative
of the United States emphasized, nonetheless, that  competition law and policy must not be seen or
employed simply as a traditional foreign investment screening tool, with another name.  The
objectives and operational modalities of foreign investment screening and competition law were
fundamentally different.
66. The representatives of Venezuela and India  said that, in addition to other factors noted in the
Secretariat's paper, an analysis of the reasons for introducing competition policy should also make
reference to the important benefits of such a policy in promoting innovation and efficient market
operations.  There had, perhaps, been insufficient emphasis in the discussions in the Group on such
matters, as well as in the paper.  The representative of Venezuela said further that a lack of attention
to the process by which new products and technology were developed and introduced in an economy
was a principal reason why developing countries continued to lag behind certain other countries intheir levels of development.  Competition policy had an important role to play in reinforcing the
incentives for innovation, though sometimes it was also necessary to permit mergers and the
accumulation of capital or cooperation between enterprises because this was necessary to foster
innovation and growth.  The representative of India said, nonetheless, that relevant studies suggested
that the relationship between patterns of technolog ical specialization and competition through FDI,
which had also been touched upon in the preceding debate on the relationship of investment and
competition policy, was not well understood.  Furthermore, important questions for developing
countries regarding pre- and post-establishment competition policy were raised by FDI liberalization
policies which involved market power inducements.  Both these aspects merited further study.
67. The observer from Croatia, reflecting on the paper by the Secretariat and related comments of
various delegations, noted that the goals served by competition policy could include promoting
efficiency in the allocation of resources;  encouraging research and development and innovation;
promoting consumer welfare;  fostering international integration and foreign direct investment;
supporting the role of small and medium-sized enterprises;  maximizing employment opportunities;
reinforcing trade liberalization, deregulation and privatization;  preventing industrial concentrationwith its adverse effects;  and reinforcing the economic foundations of democracy.  However, the goals
that were actually served by such legislation could vary with respect to the specific aspect of theWT/WGTCP/M/6
Page 21
competition legislation in question, and the economic, social and political situations of individual
States.  The representative of Canada said that it was important to continue seeking clarity and
understanding of the implications for the discussion s in the Group of the differences among countries
with respect to their stages of economic development and policy objectives.
68. The representative of Brazil noted that the paper had referred to previous comments of his
delegation regarding the sequencing of competition policy and other economic reforms (e.g., trade
liberalization and regulatory reform).  He wished to ensure there was no misunderstanding of his
delegation's position on this matter:  in particular, his delegation rejected both of the extreme views
referred to in paragraph 44 of the paper, namely:  (i) the view that countries should liberalize first and
implement competition policy at a later stage of de velopment;  and (ii) the view that countries should
first industrialize their economies through government targeting of industries, and implement
competition policy later.  Rather, a better approach was to adopt competition policy simultaneouslywith trade liberalization and other economic reforms such as privatization and deregulation, as this
permitted competition policy to act as a catalyst for economic reform and development based on
market-oriented principles.  The representative of Norway expressed agreement with this view.
69. With regard to the separate question of priorities for the design and implementation of
competition law and policy in a developing economy setting, the representative of  Brazil affirmed his
delegation's view (noted in the paper) that a phased approach to such policy might well be warranted.
Under this approach, a national competition authority would first focus on the suppression of
horizontal cartels (the most unambiguously harmful type of enterprise practice) and on basic
competition advocacy activities relating to essential market reforms.  After gaining adequate
experience in these areas, it would then take on additional responsibilities for matters such as mergerreview and dealing with anti-competitive vertical restraints.  In the last stage, it would take on more
sweeping responsibilities for competition advocacy activities relating to all aspects of the interplay
between competition policy and regulation.  The representative of  Venezuela agreed that the role of a
competition agency in advocating pro-competitive changes in government policies and promoting a
competition culture was very important.
70. The representative of Korea said that, as described in the paper by the Secretariat (especially
footnote 21), his country's experience illustrated the importance of introducing competition policy
early in the development process.  In Korea's case, this would have helped to avoid or minimize the
major challenges of adjustment and restructuring which it was currently facing.  However, his
Government now attached very high importance to the role of competition law and policy as an
instrument of sound economic development, and was in the process of strengthening both competition
law and policy in Korea.  This would include a strengthening of legislation dealing with cartels.International developments such as the adop tion of the OECD Recommendation on Hard-Core
Cartels
1 had been helpful in fostering understanding and creating support for this to happen.
71. The representatives of Hong Kong, China;  Malaysia ;  Norway ;  Venezuela ;  India ;  Pakistan
and the observer from Croatia said that, although the paper's coverage of anti-competitive practices of
enterprises that affected development was welcome and informative, the analysis would have been
more comprehensive if it had also taken account of views that had been expressed in the Group
regarding the impact of anti-competitive policies and measures of governments.  This could include,
where applicable, the behaviour of federal, sub-federal and local government organs.  In many cases,
the adverse impact of state measures on efficiency and consumer welfare could be as great or greater
than that of purely private anti-competitive practices.  Furthermore, the representative of  Venezuela
noted that, in many cases, ostensibly private anti-competitive behaviour was itself prompted or
facilitated by government actions.  With regard to the coverage of private anti-competitive conduct,
                                                     
1 See Recommendation of the Council Concerning Effective Action Against Hard-Core Cartels, OECD
document C(98)35/FINAL.WT/WGTCP/M/6
Page 22
the representative of India said that the discussion of practices involving foreign and domestic firms
should be balanced.
72. The representative of India further said that it was desirable to consider in greater depth the
relationship of competition policy (and its links with trade and investment policy) vis-à-vis the matter
of employment in developing countries.  It was her delegation's belief that decisions regardinginvestment were not always positive for employment, and in fact depended on the nature of FDI
flows.  While resource-seeking and market-seeking FDI was likely to be employment-enhancing,
efficiency-seeking investment decisions including mergers, acquisitions and take-overs caused
unemployment.  In this regard, the entire gamut of pre- and post-entry activities of transnational
corporations would need to be assessed.  A second dimension of the employment issue was that
relocating FDI often resulted in labour force problems.  This was a crucial aspect for developing
countries which also merited study by the Group.
73. The representative of the United States said  that the reference to the interface between
competition law and sectoral regulation in his country (referred to, in passing, in paragraph 24 of the
paper by the Secretariat) could usefully have been elaborated upon.  While recognizing that, through
appropriate action by the legislative branch of government, the role of competition law in his
jurisdiction could be displaced, in whole or in part, by regulations affecting particular economicsectors, it was worth noting that considerable emphasis had been placed on this being done in a clear
and transparent fashion.  Furthermore, over time, competition authorities in his country had worked
together with sectoral regulators and policy makers to limit the scope of regulation and to ensure that
such regulation as remained was implemented in as pro-competitive a manner as possible, given the
relevant constraints.  Further information on these efforts had been provided in his delegation'scontribution to the meeting of 28-29 July.  The representative of the Dominican Republic said that he
did not see clearly the relationship between these points by the delegation of the United States and thecentral concerns of the paper as delineated in the introductory paragraphs.  He believed, nonetheless,
that it would be desirable for the Group to give further consideration to the question of trade in
services, and particularly the implications of sectoral regimes and the role of competition policy inthis area, with particular reference to its interna tional dimension.  This was an important concern for
developing countries.  The representatives of Brazil and India
 said that it would be desirable to have a
deeper discussion on the ways in which exceptions and exemptions from competition law could arise.
74. The representative of Pakistan emphasized the importance that his delegation attached to the
concept of flexibility in the design and administration of competition law and policy.  This concept
definitely deserved further study.  One important aspect of flexibility, as had been stated by some
other delegations, concerned the treatment of small and medium-sized enterprises.  However, in hisview, it was a more expansive concept than this, and also encompassed the right of developing
countries to tailor their competition policies to th eir particular needs and circumstances.  This would
include implementing exceptions and exemptions from such policy, which could be particularly
important in a developing country context, for example to promote activity in undeveloped sectors.
Whether competition policy should apply in a non-discriminatory fashion across the board was also aquestion for countries to determine with reference to their particular needs and circumstances.  He
emphasized, nonetheless, that it remained important for countries to exhibit transparency with regard
to whatever regimes were in place.  In response, the representative of the United States said that, in
his delegation's view, it would be inappropriate for a competition agency to discriminate on the basisof nationality in the application of national competition policy.  Certainly, this was not done in theUnited States.  Furthermore, in his experience, it was very rare for competition agencies in any
countries to discriminate on the basis of nationality.  The representative of Venezuela also emphasized
the importance of a transparent and non-discrimina tory institutional framework with as clear a
demarcation as possible of the rights of individuals in markets in reinforcing incentives for efficiency,
innovation and growth.WT/WGTCP/M/6
Page 23
75. The observer from UNCTAD provided an update on the ongoing activities of his organization
which were relevant to this agenda item.  He referred to work that was under way on the topics of:
(i) the importance of introducing competition policy at the global level;  (ii) the links between
competition policy, competitiveness and development;  (iii) electronic commerce;  and (iv) the role of
competition and competition policy in least developed countries.  Some of this work had already beenpresented at the High Level Segment of a recent meeting of the Trade and Development Board; other
aspects of the work would be presented at an expert meeting in spring 1999.  With the agreement of
the Group, copies of relevant documentation were made available informally to delegates.
76. The representatives of the European Community and its member States, Argentina
, Korea,
Brazil, Japan  and Norway  said that the viewpoints and concerns of Members summarized in the paper
highlighted the importance of international coop eration as a tool for promoting the effective
implementation of competition law and policy, particularly with reference to developing countries,and/or called for further discussion in the Group of this matter.  The subject of cooperation was
relevant to countries at all stages of development.  However, it also had particular relevance for
developing countries.  Therefore, consideration should be given by all Members to:  (i) forms of
cooperation which would facilitate the effective application of competition law generally;  and
(ii) cooperation which would facilitate the progressive application of competition law and policy indeveloping countries.  It was noted further that some specific forms of cooperation would include:
(i) at the most basic level, the sharing of relevant case law and other legal and economic information
that was relevant to case development;  (ii) inter-agency consultation in the assessment of mergers;
and (iii) technical assistance for countries that were in the process of developing or implementing
competition law and policy.  Further to this point, the representative of Japan said that a large
proportion of WTO Members still did not have in  place competition laws.  This provided an
appropriate starting-point for enhanced international cooperation in this area.  In particular, he said
that the Group should put more emphasis on having States introduce competition laws, and on the
kinds of international cooperation (including, particularly, technical cooperation) that were necessary
to achieve that result.  It would be desirable to have a detailed discussion on this matter.  Of course,the matter of enforcement cooperation was also important, but the matter of technical cooperation to
put in place effective competition laws and policies should receive priority attention.  The
representative of Norway agreed that this was important.
77. In response to the suggestion made by the representative of Japan, the representative of
Malaysia, referring to the previously stated views of his own delegation and of ASEAN WTO
Members, said that what was important was that Members have in place policies to enhance
competition.  The question of whether such policies had to include a competition law should be left tothe wisdom of national legislatures.  Other organizations such as UNCTAD could be called upon to
assist in this area.  The representative of India said that, in her delegation's view, recognition of the
right to determine national priorities would imply the freedom to specify exceptions and exemptionsfrom the application of competition law and policy.  In this regard, she also recalled comments made
by the representative of the United States regarding the role of exceptions and exemptions in hiscountry and indicated that, in her view, the ability to implement appropriate exemptions was even
more important in a developing economy setting.
78. In reflecting on the various suggestions for further study that had been made, emanating from
the paper, the representative of the United States said that these could be pursued in a variety of
contexts, including further discussions in the Group.  His delegation, too, would appreciate further
discussion of particular matters, for example historical experiences of countries undergoing transition
to a market-based economy, and the challenges that they had faced.  He nonetheless felt that it was
important to preserve the existing focus of the present Secretariat paper and was therefore not
suggesting additions to it.  The representative of the European Community and its member States
agreed that it was important to preserve the current focus of the paper.  On the other hand, the
representative of India recalled that, under paragraph 20 of the Singapore Ministerial Declaration, the
Working Group was mandated to identify any areas that merited further consideration in the WTOWT/WGTCP/M/6
Page 24
framework.  Accordingly, she felt that the matters ra ised by Members in reflecting on the paper by the
Secretariat should find a place in the Group's overall analysis.
79. The representative of the Secretariat, thanking the delegations for their comments on the
paper, said that it had been intended as a vehicle to carry forward the discussion on the development
dimension of the issues before the Group and to facilitate the identification of issues that mightrequire further work.  The discussion seemed to indicate that it had been of some value in that
connection.  With regard to the matter of the treatment of governmental measures in the paper, he
made two comments.  First, in preparing the paper, the Secretariat had not been asked to look at the
sources of a lack of sufficient competition in markets or economies.  Rather, it had been asked to
focus on the question of the relationship of competition policy to development and economic growth.
Of course, this had involved looking at the contribution that competition policy could make toward
promoting competition and efficiency in economies.  Secondly, in taking this approach, theSecretariat had addressed government measures, at least to an extent, though he recognized that some
delegations felt that the subject deserved more attention.  For example, the section of the paper that
started off at paragraph 21 dealt with the role of competition policy in connection with privatization
and regulatory reform.  The following section exam ined the advocacy role of competition authorities
and the creation of a competition culture, which were clearly concerned with government measuresthat affected competition.  The section on the interconnections between trade policy and competition
policy, which had examined points that many delegations had made about the basic complementarity
of trade and investment liberalization and compet ition policy, was also concerned with government
measures.  Regarding the impact of competition policy in promoting innovation, while there was
some mention of this in the paper (e.g., in paragraph 9), the paper had, of course, been drafted withoutthe benefit of the fuller consideration of this issue which had taken place in the discussion on the
relationship of trade-related intellectual property rights and competition policy earlier in the current
meeting.
80. In concluding the discussion on this item, the Chairman said that, among many other points
that had been made, the importance of international cooperation had been noted several times in the
discussion, at different levels.  One of them had been at the basic level of finding relevant case law
and other references which were important but could be difficult to obtain for new organizations in
the field.  Another had been with respect to mergers, something related to the discussion on
investment held earlier in the meeting.  A third dimension of cooperation had been technical
assistance to help countries wanting to develop competition policy or competition law.  Important
issues had also been raised regarding the development of a competition culture and the progressive
nature of the implementation of competition law a nd policy in developing countries.  The importance
of the advocacy function of competition authorities had been emphasized by several speakers.
Important issues had also been raised by a couple of delegates regarding the relationship between
competition policy and technological innovation.  This was clearly a complicated issue which the
Group may wish to explore further.  This matter of flexibility in the administration and enforcement
of competition law would also seem to merit further consideration.  Any of these points could begiven further consideration when the Group proceeded to item IV of the Checklist relating to matters
that merited further consideration in the WTO framework.
IV. STOCKTAKING AND ANALYSIS OF EXISTING INSTRUMENTS, STANDARDS
AND ACTIVITIES REGARDING TRADE AND COMPETITION POLICY,
INCLUDING OF EXPERIENCE WITH THEIR APPLICATION
81. For the information of delegates, the Chairman recalled that, at the Group's previous meeting
on 27-28 July, the Secretariat had been asked to prepare a factual compilation of the key elements of
Members' national competition legislation based on the input that had been provided on this item by
various Members.  He understood that, due to the shortness of time and other priorities, it had not
been possible for the Secretariat to commence prep aration of such a document for the current meeting.WT/WGTCP/M/6
Page 25
However, an effort would be made to complete th e document in advance of the November meeting of
this Group.
82. The observer from Croatia, introducing an inform al paper on Existing Instruments, Standards
and Activities Regarding Trade and Competition Policy and Access to Distribution Systems in
Transition Economies, said that the focus of her paper was on the interdependence of domesticcompetition policy and free trade in both goods and services.  It discussed existing provisions of the
General Agreement on Trade in Services, in addition to the impact that private barriers could have on
distribution channels.  In regard to the latter, it made the point that successful liberalization of trade in
goods and services depended on an active competition policy vis-à-vis the distribution and retail
sectors.  Existing GATS rules related to this matter were limited in their scope.  The paper suggested
that, in some of the transition economies of Central and Eastern Europe, markets were increasingly
becoming foreclosed to new competition by long-term exclusive contracts and related arrangements.To address the problems in this area, rules, policies and procedures based on existing GATS
provisions would have to be developed.  In the future work of the WTO, with particular reference to
practice under the GATS, more developed standards of competition enforcement policy could make
an important contribution to the free flow of trade in services and the efficiency and efficacy of
national competition authorities.
V. THE IMPACT OF ANTI-COMPETITIVE PRACTICES OF ENTERPRISES AND
ASSOCIATIONS ON INTERNATIONAL TRADE
83. No contributions were introduced or statements made on this item.
VI. THE IMPACT OF STATE MONOPOLIES, EXCLUSIVE RIGHTS AND
REGULATORY POLICIES ON COMPETITION AND INTERNATIONAL TRADE
84. The Group took note of a list of questions pose d and suggestions for further study that had
been put forward on this topic at the meeting on 27-28 July, and which had been circulated by the
Secretariat, as requested by Members (see Informal Note by the Secretariat (Job No. 5126), dated
23 September 1998).
VII. THE IMPACT OF TRADE POLICY ON COMPETITION
85. The representative of Japan informed the Group that, at a future meeting, his delegation
would introduce a paper responding to arguments that had been put forward by the delegation of the
United States in its paper on anti-dumping measures.
VIII.  INITIAL DISCUSSION ON THE GROUP'S REPORT TO THE GENERAL COUNCIL
AT THE END OF THE YEAR
86. Brazil and Hong Kong, China  introduced written contributions relating to this agenda item
(documents WT/WGTCP/W/100 and 104, respectively).  In addition, the European Community and
its member States, the United States , Japan , Korea , Canada , India , Australia , the Dominican Republic ,
New Zealand, Turkey , Norway , Switzerland , Pakistan , Singapore , Tunisia  and Venezuela  made oral
statements on the item.
87. In introducing the topic, the Chairman reminded delegates that the need for the report arose
from paragraph 20 of the Singapore Ministerial Declaration.  Paragraph 20 established a Working
Group to study issues to be raised by Members relating to the interaction between trade and
competition policy, including anti-competitive practices, in order to identify any areas that might
merit further consideration in the WTO framework.  In the same paragraph it was stated that the
General Council would keep the work of each  Working Group under review and would determine
after two years how the work of the Group should proceed.  Reflecting this requirement, Item IV ofWT/WGTCP/M/6
Page 26
the Checklist of Issues Suggested for Study, which the Group had not yet discussed, also referred to
the identification of any areas that might merit further consideration in the WTO framework.  For this
purpose, it would seem desirable that the Group come to a general understanding at the current
meeting regarding the overall structure and content of  its report, in order that the Secretariat could
commence the necessary drafting.  The report could then be reviewed and approved at the Group'snext meeting in November.  If it was agreeable to Members, it would seem logical that the report
contain two basic elements:  first, a description of the work that had been done in the Group;  and
second, any recommendations to the General Council upon which the Group could agree regarding
areas that merited further consideration in the WTO framework.  With this broad guidance, the
Secretariat could commence drafting the descriptive part of the report, to be made available in
advance of the meeting in November.  The matter of specific recommendations to be included in the
report would be discussed further at the meeting in November, before decisions were taken.However, it would be helpful to have an initial discussion of possible recommendations and proposals
for the future at the current meeting.
88. In the course of the discussion on this matter, the following comments were made by
Members regarding the drafting of the first part of the report:  the report should be based principally
on the minutes of the Group's meetings and should reflect the breadth and depth of the workundertaken in the Group;  it should be drafted in a clear and concrete manner and should present a
balanced account of the Group's deliberations to date;  it should synthesize the major themes flowing
from the views expressed by Members regarding the various elements of the Checklist of Issues
Suggested for Study;  it could be inspired partly by elements of the synthesis paper on the relationship
of trade and competition policy with development and economic growth (documentWT/WGTCP/W/80), which covered many of the points that had been made by delegations in the
Group;  it should be factual and non-contentious, faithful to the discussions that had taken place and
should provide a succinct account of the important issues raised and points made in the Group;  it
should not attempt to reflect convergence or divergence, and particularly should not aim to draw
conclusions;  it would be desirable for the report to identify the areas where there was consensus andthose where there was a divergence of views;  the effort to provide a detailed description of the work
to date could lead to protracted negotiations on the wording of this part of the report;  if the
preparation of the report was taken to imply that the consideration of issues dealt with in it had been
exhausted, then it would be unfair to those delegations which were using the process as a genuinely
educational one;  and Members should avoid a detailed negotiation on the descriptive part of the
report.
89. Following discussion, the Group agreed with the Chairman's proposal for a two-part report,
with one part providing a descriptive overview of the work done to date in the Group, and the second
part embodying any recommendations regarding issues that merited further consideration in the WTO
framework.  It was further agreed that the Secretariat would be asked to prepare a draft of the
descriptive part of the Group's report to the General Council for consideration at the Working Group's
next meeting, in November.  This part of the report would describe the substance of the work whichhad been done so far in the Group, and would be based on the records of the meetings.  It was
understood that this part of the report should be factual, descriptive and balanced, it should reflect the
views that had been expressed by Members and should not attempt to highlight areas of agreement or
disagreement.  It would also be without prejudice to  the possibility of any issues being reverted to in
the future work.
90. With regard to possible recommendations to be contained in the second part of the report and
related matters, the representative of Brazil, introducing document WT/WGTCP/W/100, noted that
the document had been prepared as a general contribution on the future work of the Group, not merelywith reference to the discussion on the structure a nd content of the Group's report.  Nonetheless, he
was happy to introduce it in this context, to which it was certainly relevant.  The basic premise of thedocument was that trade liberalization and globalization had brought about the need, as his delegation
saw it, to debate the issue of competition policy at an international level.  The lowering of traditionalWT/WGTCP/M/6
Page 27
barriers had made the impact of restraints caused by private actions more evident.  Two examples
were international cartels that raised prices and/or divided up world markets, and vertical agreements
that restricted access to markets by new suppliers, whether domestic or foreign.  In addition, an
increasing number of mergers affected more than one jurisdiction.  The paper also noted that perhaps
70-80 WTO Member countries now had competition laws.  With this background, the paper putforward several proposals for discussion and debate in the Group.  The first proposal concerned the
strengthening of communication and cooperation among competition authorities of different
countries.  Such cooperation could be directed at both the strengthening of competition law
enforcement vis-à-vis hard-core cartels, which were widely (and justifiably) condemned, and at
reducing transaction costs and providing increased certainty with respect to mergers that affected
more than one jurisdiction.  With regard to the former, there was increasing recognition of the heavy
costs of such arrangements and the potential advant ages of international cooperation in curbing them.
In regard to the latter, there could be a progressive harmonization, if not in the format then at least in
the content, of the information required by each jurisdiction.  This would certainly help to reduce
costs to enterprises, and could also reduce the delays involved in merger approvals in various
jurisdictions and therefore reduce uncertainty.  The experience to date in the context of MERCOSUR
had already demonstrated the benefits of cooperative approaches, particularly with respect to mergerreview.  A second major proposal in the paper referred to the possibility of applying general WTO
principles to the domain of competition law at the international level.  The paper explored, in
particular, the relevance of two general principles, namely transparency and national treatment.  A
related concept discussed in the paper was respect for the due process of law.  The concluding section
of the paper provided a general discussion of the benefits of addressing competition policy in theWTO.  Specifically, his delegation foresaw that linking competition policy with the well-known and
widely accepted rules of the WTO would be very helpful in spreading the culture of competition
across diverse regions of the world, in disseminating information and facilitating mutual assistance
and the adoption of sound analytical methodologies and techniques by participating governments and
in reducing transaction costs on a variety of different fronts.
91. The representative of Hong Kong, China, introducing the relevant portion of document
WT/WGTCP/W/104, said that his delegation had benefited from the many insightful submissions and
stimulating deliberations in the Group.  While the discussions in the Group had certainly been useful
in fostering a better understanding among Members on the relation between trade and competition
policies, they had opened up additional areas that merited further consideration.  Therefore, his
delegation would like to see the work in the Working Group continue, with a view to making
recommendations on possible future work, bearing in mind the work plan for the General Councilpreparatory process.  Before talking specifica lly about the future of the Working Group, it was in
order to review past discussions in the Group.  In this regard, he wished to make four major
observations.  First, trade and competition policies impacted on each other in various ways.
Positively, trade liberalization and pro-competition policies shared the same broad goal of
contributing to economic efficiency and consumer welfare.  Negatively, conflicting trade andcompetition policies could undermine each other's objectives and frustrate the functioning of the
multilateral trading system.  Second, inconsistencies between trade and competition policies did exist,
in reality.  The challenge for the Working Group was to explore how to increase the synergies
between trade liberalization and pro-competition policies and to reduce the welfare-reducing effects
of trade restrictions and exemptions from competition rules.  Third, it was clear from Members'submissions and statements that both governmental measures and private business practices could
have a negative impact on international trade and competition.  Priority should be accorded to the
most restrictive trade barriers and competition dist ortions.  In the view of Hong Kong, China, these
remained in the domain of governmental measures.  Fourth, deliberations in the Working Group had
revealed a lack of consensus on what should constitute an optimal competition policy.  Anotherdisparity among Members was in their approach to promoting competition.  If a multilateral approach
to competition policy was to be explored, it was important that such studies not be undertaken with a
presumption that the legislative route was the only acceptable approach to promoting competition in a
multilateral context.  Diversities between WTO Members should be taken into account.  Specifically,WT/WGTCP/M/6
Page 28
the choice of instrument should take into account the characteristics, development history and socio-
economic background of each WTO Member.  Regarding the way forward, much remained to be done
to increase the synergies between trade liberalization and pro-competition policies and to reduce the
welfare-reducing effects of trade restrictions and exemptions from competition rules.  In this context,
Hong Kong, China considered that the Working Group should follow the traditional GATT and WTOapproach - i.e., to focus firmly on the interaction between trade and competition policies, to avoid
dealing with private anti-competitive practices in a one-sided manner without according priority
attention to more harmful governmental market distortions, and to give priority to pro-competitive
remedial measures which corrected distortions directly at their source, without creating additional by-
product distortions.  The WTO approach was of genuine systemic concern because it was relevant for
the consideration of a wide range of interaction issues which cut across a wide spectrum of WTO
agreements.  This point had been illustrated in his delegation's submission using the interaction ofcompetition with intellectual property rights and investment policy as examples.  Looking ahead,
much work remained to be done.  His delegation, therefore, supported the continuation of the work of
the Working Group.  Concerning its report to the General Council, Hong Kong, China believed that
the report should reflect the past work of the Group, highlight progress, proposals and major
observations, and set out guiding principles and broad directions for future work.
92. The representative of the European Community and its member States expressed his
delegation's appreciation for the substantive contribution to the discussion that had been provided by
Brazil (document WT/WGTCP/W/100).  His delegation agreed with the essential analysis presented
in the paper by Brazil about the need for considerat ion of the international dimensions of competition
policy in the WTO, and also with the points made regarding why these issues needed to be consideredwithin the WTO framework.  It further agreed that the specific issues that had been raised by Brazil as
meriting further consideration in the Group were indeed worthy of Members' consideration.  He also
wished to stress his delegation's satisfaction with the remarkably high degree of interest and
participation that had been shown on the part of countries at all levels of development in the work of
the Group.  This had been reflected in the large number of submissions presented by WTO Membersas well as in the quality and the openness of the discussions held on the different items of this agenda.
While it was certainly true that divergences of views remained on some subjects, and would need to
be reflected in the report, he also considered that there was a high degree of convergence on some key
aspects of the interaction between trade and competition policy, and that this convergence should be
reflected in the report.  He noted that the Singapore Ministerial Declaration called upon the Group to
study issues in order to identify any areas th at might merit further consideration in the WTO
framework.  His delegation considered, therefore, that  the second section of the report could include
some common conclusions arising from the Group's work in addition to some indications, although of
a general and non-prejudicial nature, about the interests of Members in seeing further WTO work in
different areas.  In broad terms, and as a preliminary contribution, his delegation wished to highlight
several areas for consideration regarding possible conclusions and recommendations to be
incorporated in the report.  The first area related to an issue that had also been raised by Brazil in itscontribution, namely the question of identifying key elements of competition law and policy and
considering their relationship with WTO principles.  The second area, where again his delegation's
views seemed to have elements in common with the proposals that had been set out by Brazil, was the
need to strengthen international cooperation in the field of competition law and policy.  Thirdly, his
delegation believed that further consideration and discussion should be given to possible approachesto address the impact of anti-competitive practices of enterprises on the multilateral trading system.
While the Group had already undertaken significant analysis of this matter, further discussion was
desirable on the question of which specific practices were likely to be of particular concern from the
point of view of the multilateral trading system.  Fourthly, his delegation had noted that, throughout
the Group's deliberations, a great deal of interest had been expressed in the concept of competitionadvocacy and the role that competition authorities could play in relation to other government policy
issues.  He therefore believed that the issue of competition advocacy was something that, if the Group
could define it in a manner which was productive for its discussion, would also merit further
consideration in the context of the Working Group.  He emphasized that, from his delegation's pointWT/WGTCP/M/6
Page 29
of view, each of the areas that he had mentioned should be permeated by the development dimension
of the issues.  These views were presented as a contribution to a first exchange of views on this
subject and were, therefore, without prejudice to any further ideas which his delegation might wish to
present in the context of the discussion of the report.  His delegation was, moreover, open to any
suggestions by Members about the most productive wa y to continue the discussion in the Group.  In
sum, his delegation considered that further work in the Group would provide a useful opportunity to
deepen its work on a number of issues.  It therefore supported the continuation of the Group's work.
This should not, however, detract from the need to present a substantive report to the General Council
along the lines that had been discussed, consistent with the mandate given in the Singapore
Ministerial Declaration.  His preliminary view was that the proposed extension should take the form
of two or three additional meetings to be scheduled over the first half of 1999.  This would allow the
General Council to take stock of all the work completed in the Group in its preparations for the 1999Ministerial.  His delegation also considered that there would need to be a well-focused programme of
work for the issues to be discussed in such additional meetings.
93. The representative of the United States said that his delegation was still considering whether
it would be productive to continue the Group's work beyond the expiry of its current mandate.  It was
certainly the case that there had been some fascinating and useful exchanges in the Group during thepreceding 18 months, and he felt that everyone would agree that WTO Members' knowledge of
competition law questions and their relation to international trade had been broadened and deepened
tremendously.  His delegation had, moreover, been genuinely pleased by the interest and substantive
contributions which delegations had brought to the Group's discussions.  It had supported this aspect
of the work programme, in particular, because it knew that the institution of competitive marketstructures not only helped the economy and consumers of the country concerned, but could also help
to ensure better market access opportunities for firms exporting to those countries.  However, whether
it would be profitable to continue the work of the Group into 1999 would depend upon the content of
the work which would be undertaken in the additional period.  In this regard, it appeared that the
contribution by Brazil contained some interesting proposals to consider matters such as the ways inwhich WTO principles such as transparency and non-discrimination might pertain to competition law
enforcement.  This could be an important new area which the Group might look into.  Between the
current meeting and the meeting in November, his delegation would reflect further on whether there
were additional competition issues which could usefully be the subject of discussion in the Group.
His delegation did not, however, see any merit in returning to issues where there had been
fundamental disagreement among Members of the Group and it would not support further work in
such areas.  Certainly, it would not agree to a renewed discussion in 1999 on the impact of tradepolicy on competition.  Subject to this concern, it could envision agreeing on a recommendation to the
General Council that the Working Group's educative work be continued in 1999.
94. The representative of Japan said that his delegation, too, had appreciated the depth and
substance of the discussion which had taken place in the Working Group, and wished to see that it
was properly reflected in the Group's report.  Regarding the section on recommendations, hisdelegation would support the continuation of the Group's work beyond the end of the current year, for
perhaps another six months.  This would permit an additional two to three meetings.  Regarding the
specific items to be taken up in the coming year, he welcomed the proposal by the European
Community and its member States, and would study it.  His first reaction was that it seemed to be a
good basis for discussion.  His delegation, too, believed that the Group should include in its report thepossibility of exploring an international common rule-making on competition law and policy.  It
would, however, be important to take up all of the items raised by Members, when the Group
considered its future work programme, in a balanced manner that reflected the mandate given to the
Group in the Singapore Ministerial Declaration.  Specifically, his delegation had noted the fourth
element in the proposal by the European Community  and its member States relating to competition
advocacy, a subject that had already benefited from extensive discussion in the Group, but considered
that, in the same manner as other items already discussed such as the impact of trade policy on
competition, it also merited further discussion.WT/WGTCP/M/6
Page 30
95. The representative of Korea said that the Group's report should deliver a clear message so that
the General Council could make a decision on the next steps to be taken in this area.  Concerning
possible conclusions and recommendations, his delegation supported the proposal to extend the
mandate of the Working Group into the next year.  It shared the view that it would be difficult to
reach agreement by the end of the current year on substantive recommendations with regard to futurework on competition-related issues in the WTO framework.  He emphasized, however, that the
duration of the extension of the mandate should be limited to six months, to avoid conflicting with the
General Council's preparatory work for the Third Mini sterial, to be held in the autumn of 1999.  His
delegation would also like to have a focused agenda for the Group's meetings in 1999.  While it could
go along with the elements set out in the proposal by the European Community and its member States,
the four elements described in the proposal by Hong Kong, China also deserved the Group's
consideration.  His delegation supported the latter proposal.  He subsequently clarified that it was theposition of his delegation that no particular agenda items should be excluded from the future work of
the Group, only that the work should be structured as efficiently as possible.
96. The representative of Canada said that, since its inception, the Working Group had engaged in
a productive and rewarding dialogue.  It had had the opportunity to consider matters such as the
design and application of domestic competition policy, bilateral and regional agreements relating tosuch policy, and the cross-overs between trade, competition and investment policy.  The work had
shown that competition policy could serve as an important instrument to enhance market access.
Furthermore, it was clear that there were many areas in which competition policy principles and
policy objectives could serve to inform debate in the trade policy area.  As evidenced in the
discussions in the Group, there was an increasing consensus regarding the benefits of domesticcompetition rules with effective enforcement struct ures.  With regard to possible recommendations to
be contained in the Group's report, her delegation would support a recommendation calling for an
extension of the Group's mandate, to allow it to continue its productive work.  A number of issues
could be considered.  For example, important considerations remained to be explored with reference
to developing economies.  Her delegation would, as well, see benefit in exploring the application oftrade policy principles to competition policy.  It would also be useful for the Group to explore
fundamental principles and standards relevant to competition policy and enforcement, and to analyse
their impact; to examine approaches to internati onal cooperation;  to explore further the role of
competition advocacy;  and to undertake further analysis of the impact of private anti-competitive
practices in international trade.  Further work by the Group should be coordinated with the
preparatory work being undertaken by the General Council, and by other Groups.
97. The representative of India said that there was unanimous agreement in the house that the
Group's work had been a useful experience for all concerned.  It was important, however, to
acknowledge that not all delegations had been in a position to participate in the dialogue to the same
extent or at the same level.  Basically, therefore, it was his delegation's position that the educational
process the Group had started had been extremely us eful and that a way should be found to continue
the process in a non-prejudicial way, without any co mmitment to include or exclude any aspects.  In
this connection, he also wished to mention two points which, he understood, were implicit in the
relevant portions of the Singapore Ministerial Declaration, but should perhaps be made explicit. First,
he said that it was incorrect to assume that the mandate of the Group would expire automatically at
the end of 1998, unless renewed.  Paragraph 20 of the Singapore Ministerial Declaration indicated that
the General Council would keep the work of the bodies created in that paragraph under review and
would determine after two years how the work of each body should proceed.  In his view, this
wording implied that, in all probability, the General Council would ask the bodies created to continue
with their work.  He also pointed out that, although admittedly it was a technicality, there was no
explicit reference in the Ministerial Declaration to the submission of a report by this body to the
General Council.  He would concede, in fairness, that if the General Council was to review the work
of the Working Group, there should be some input to the Council from the Group.  Nonetheless, he
wished to draw the Group's attention to the fact th at nothing about a report to the General Council at
this stage was explicitly contemplated in the Declaration.  Members would also have noted that theWT/WGTCP/M/6
Page 31
mandate given in paragraph 20 of the Singapore Declaration was worded differently in respect of the
Working Groups dealing with competition and investment.  In the case of the Working Group on the
Relationship between Trade and Investment, the direction was to examine this relationship, whereas
in the case of the Working Group on the Interaction between Trade and Competition Policy, the
instruction was to study issues raised by Members relating to the interaction between trade andcompetition, including anti-competitive practices, in order to identify any areas that merited further
consideration in the WTO framework.  As far as his delegation was concerned, in order to carry out
the mandate given by paragraph 20 – i.e., to identify any areas that may merit further consideration in
the WTO framework - further understanding of this complex issue was required.  Currently, it was not
possible for it to say categorically that any particular area might merit further consideration in the
WTO, or not.  Therefore, his submission was that the Group should provide a report to the General
Council indicating that Members would like the educational process in the Group to continue.  Thenext question to be considered was for how long it should continue.  While he had heard various
suggestions, considering the complexity of the issue, his delegation's view was that the work should
continue for a period of two years.  From a long-term perspective, it would not be productive to
proceed more quickly.  Regarding the possibility of reaching agreement on recommendations
regarding specific areas that merited further consideration in the WTO framework, he did not thinkthat it would be possible to reach agreement on such recommendations at the current stage.  The
reason was that, if the Group took this step, it would be moving beyond the educational process.  In
this regard, it was also worth recalling how the wording of paragraph 20 was negotiated at the
Singapore Ministerial Conference.  With reference to statements by some delegations to the effect that
some issues should not be considered in the futu re work of the Group, ultimately this would be a
consensus-based decision.  He was concerned, however , that if the Group agreed at this point that one
particular issue should not be considered, it would create a precedent and that some other delegation
might say, at a future meeting, that certain other matters, for example restrictive business practices by
multinational enterprises, were also not to be di scussed.  The latter was a sensitive issue for his
country.  Therefore, he would request that all delegations consider carefully whether, in aneducational process, when substantive decisions were not being debated, such conditions should be
imposed on the scope of the discussion.  In closing, he emphasized that he hoped the educational
process would continue, for the benefit of all concerned.
98. The representative of Australia said that she would agree with those delegations who had
suggested that, given the complexity of the issues, and indeed the huge input and interest which had
been manifested in the Group's work, it made sense to continue the educational process into the
coming year. An extension until the middle of 1999 appeared to be logical, although she wasconcerned that the Group take into account the preparatory process for the next Ministerial that would
be under way during the year.  The timing of the mandated review of the TRIMs Agreement, in
addition to the work of the Working Group on the Relationship between Trade and Investment, should
also be considered.  Regarding areas for further study, her delegation had listened with interest to the
various proposals that had been put forward regard ing possible issues to be discussed, should the
Group agree to recommend that its mandate be extended.  She could certainly agree that it was
desirable to refine the programme.  She would like to reflect further on the various proposals which
had been put forward for consideration.  In this re gard, it would be helpful if the Secretariat could
compile a list of the outstanding questions or issues on which the Group felt the debate had been less
than complete, and therefore would merit consideration in future meetings.
99. The representative of the Dominican Republic said that his delegation agreed with what had
been said by the representative of India, except  with regard to the time-frame.  He believed that
Members represented in the Group were fully aware of the value of the educative work on
competition policy that had been initiated in the WTO.  As an example of the relevance of this work,
he referred to the discussion on telecommunications that  had finished with the fourth protocol.  At the
same time, consideration had been given to the reform of telecommunications legislation in the
Dominican Republic.  At the end of the process, the two approaches were fully in harmony.  This
illustrated that such work had had consequences at the national level which were very important.  ThisWT/WGTCP/M/6
Page 32
was to say that, at the national level, rules were needed that functioned well and were coherent with
international best practices.  It was, therefore, obvious that the process could not be stopped,
especially because the mandate given in the Singapore Ministerial Declaration called for the Group to
identify areas that might merit further consideration in the WTO framework.  It was unclear to his
delegation whether the Group was in a position or would be in a position at the meeting in Novemberto identify areas that might merit further consideration in the WTO framework.  He considered, rather,
that it was necessary to debate some matters more deeply as had been suggested by the delegation of
the United States or even, possibly, new matters th at had been proposed.  The delegations of Brazil;
Hong Kong, China;  the European Community and its member States;  and Canada had all mentioned
some interesting aspects.  While this had been a preliminary discussion of the areas that merited
further consideration, it definitely did show that there were areas that merited further consideration
and that should be discussed.  Therefore, his dele gation would like to offer a few preliminary ideas of
its own.  As he had indicated during the debate on the relationship of trade and competition policy
with development and economic growth, it seemed to  him that it would be useful for the Group to
discuss the relation between trade in services and competition policy.  While this had not, to date,
been the subject of much discussion in the Group, it was clearly important, as was manifested in the
case of telecommunications, where Members had felt that it was not sufficient to have commitmentsof sectoral liberalization without also adopting the pro-competitive regulatory principles that were set
out in the Reference Paper.  Another matter for study was the question of whether the TRIPS
Agreement could serve as a model for a possible multilateral discussion on competition rules.  In this
regard, delegations would recall that, when it was proposed to discuss TRIPS and when the
negotiations were completed, most of the Members of the WTO did not have national intellectualproperty legislation.  In fact, many did not even have  such legislation now.  It seemed, therefore, that
this was an interesting model to consider with reference to a possible arrangement on competition
policy at the multilateral level.  Such an arrangement might include minimum rules and procedures
that did not prejudice any decision at the national level because, as Hong Kong, China had said, not
all countries addressed the problems the same way.  Finally, as several delegations had noted, it wasimportant to consider the preparatory process that was getting under way.  This would take into
account many topics.  For example, some delegations  wanted to see negotiations on investment, while
other delegations wished to enter into negotiations on electronic commerce.  For his delegation, future
negotiations in these areas would require progress on the question of competition since it was closely
related.  The connection was particularly clear for the new negotiations on services which were called
for in Article 18 of the GATS.  To his delegation, it was clear that these negotiations would have to be
balanced with multilateral deliberations on competition policy.  He wished to make this point veryclearly, and noted that it would also be made by his delegation in the General Council, since his
delegation saw a very close relationship between these matters.  He would, therefore, like to see the
discussion in the Working Group continue, in order to clarify the proper role of competition policy in
the WTO.
100. The representative of New Zealand said that his delegation was somewhat uncomfortable
with the idea of trying to reach agreement on substantive conclusions at this time, since this would be
likely to involve a protracted, line-by-line negotiation.  It had welcomed the establishment of the
Working Group following the 1996 Singapore Ministerial.  It was pleased that the Group had
examined a broad range of issues.  His delegation's objective in this work had been to see how
elements of competition policy could be integrated into the WTO framework.  The Group hadexpanded its understanding of the interaction between trade and competition policy, through both the
quality and number of contributions from Members,  and related discussions in the Group.  However,
it seemed to his delegation that the Working Group had only just begun its consideration of the issues.
Further, it was his view that if Members wished to make progress, then the agenda must be kept
broad.  In this vein, his delegation proposed that the agenda include empirical research into the impacton global economic welfare of the various interactions between trade and competition policy that had
already been identified.  This would allow Members to deepen their understanding and determine
priorities based on those interactions that had the greatest adverse impact.  Consideration could then
be given to which of the issues were best suited to further consideration by the WTO, which wasWT/WGTCP/M/6
Page 33
primarily a body that dealt with government acti ons, rule-making and dispute settlement, and which
issues were better dealt with by other international fora or through other processes such as bilateral
agreements.  It was New Zealand's view that one particular area that was suited to further
consideration by the WTO was the relationship between regulation, competition policy, and trade.
There remained many behind-the-border, regulatory barriers to trade.  These regulations often acted asan impediment to national treatment and other core principles of the multilateral trading system.
There was scope to strengthen competition by promoting greater consistency with these trade policy
principles.  Similarly, consideration could be given to promoting policy coherence from a competition
policy perspective across the WTO, as the WTO dealt with a wide range of issues that impacted on
domestic and international competition.  In summary, his delegation remained supportive of the work
of the Working Group and wished to see it stay on the WTO's agenda.  If progress was to be made, it
was desirable to keep the focus of the Working Group as broad as possible.
101. The representative of Turkey said that the studies conducted by the Working Group had
revealed, through a significant number of contributions, that Member countries attached particular
importance to the trade-related aspects of competition policy.  Turkey, as a country appreciating
competition as an effective means to foster efficient resource allocation and maximization of
consumer welfare, was of the belief that competition and trade policies should be mutually reinforcingand found the contributions of Members in this respect very beneficial to all countries.  During the
productive discussions that had taken place in the Working Group, crucial steps had already been
taken towards the creation of a common language on trade-related aspects of competition policy.
Therefore, his delegation was of the view that thes e efforts should be maintained and that, in the
future studies of the Working Group, priority should be accorded to the impact of competition policy
and anti-competitive practices on trade, and in particular, to the anti-competitive practices of exporters
in international markets.  In this respect, Turkey proposed that the Working Group focus on:
(i) working on a "vocabulary" on the key concepts of competition and trade policies with the purpose
of achieving common understanding on the standards of competition policy and its implementation;
and (ii) considering how bilateral and regional agreements dealt with competition-related issues,especially with respect to information flow, transparency and confidentiality, positive and negative
comity, and joint actions with the purpose of assessing the practical benefits, and especially the
practical deficiencies and difficulties, of these agreements.
102. The representative of Norway said that regarding the question of further work to be
undertaken in the Group, his delegation was in agreement, as a point of departure, with the proposals
that had been made by the European Community and its member States.  His conclusion was that the
Group should recommend in its report to the Gene ral Council that the mandate of the Working Group
be extended up to mid-1999.  In addition, although further work by the Group would ideally be
devoted to new and clearly defined issues, perhaps it could also be possible for delegations who
wished to do so to revert, at the additional meetings, to items contained in the existing work
programme.  But such items should, in that event, be taken up as the last substantive item on the
Group's agenda.
103. The representative of Switzerland said that the complexity of the issues discussed and the
number of questions outstanding meant that her delegation also felt that the Group's mandate should
be prolonged until June 1999 (i.e., for a period of six months maximum).  Concerning the issues
meriting further attention, she said that further debates in the Group should be focused on more
specific demarcations between the multilateral instruments which could be contemplated in theframework of discussions on trade and competition.  More precisely, she proposed that the analysis be
focused more on the relevant basic principles, and on the feasibility of applying these principles,
making a distinction (as had been done in a previous contribution by her delegation) between the
countries that had laws on competition and those that did not have such laws.  In a second phase, the
Group could go deeper into the analysis of links between competition policies with other disciplinessuch as intellectual property law, investment and anti-dumping measures, referring specifically to
questions which had been demarcated and circumscribed.  To avoid scattering the Group's attention,WT/WGTCP/M/6
Page 34
the Group could have for reference the questions that had already been enumerated by the Secretariat
on various matters, and further questions to be circulated following the current discussion.
104. The representative of Pakistan said that, regarding possible recommendations to the General
Council, his delegation felt that the Group could only ask for an extension of the educative process,
for at least one year.  He agreed with those delegations which had emphasized that the Group must notcircumscribe, in advance, the areas to be discussed in the coming year in an extended educational
phase.  Circumscribing the work programme would have implications for other Working Groups and
other exercises which WTO Members might get into, and there would be a precedential effect upon
which delegations might wish to ponder.  Furthermore, it was important that the work continue in an
educative spirit.  Accordingly, his delegation would be comfortable with a recommendation which
went to the General Council saying that the Group would re-visit some of the existing issues on the
Checklist of Issues Suggested for Study as well as, perhaps, taking up new issues.  Perhaps by the endof the next year he would be more comfortable with identifying specific areas meriting further
consideration in the WTO framework, as the Group was mandated to do.
105. The representative of Singapore, speaking on behalf of ASEAN WTO Members, said that the
educational dialogue in the Group had been extremely productive and useful.  For many ASEAN
Members, the two main areas of discussion, one being the discussion on the impact of trade policyand competition and the other private anti-competitive practices, had brought tremendous new
perspectives.  For instance, with regard to the impact of trade policy on competition, the discussion
had brought a fresh perspective to many long-standing concerns.  On the other hand, the treatment of
private restrictive business practices, at least for many ASEAN Members, was a nascent policy field.
Notwithstanding this, the discussions in the Group on this matter had also been extremely useful.Given how productive the Group had been and the benefits that could be derived from further work,
his delegation would support an extension of the mandate of the Group into 1999.  The extension
should allow the Group the leeway it would need to manage the broader preparatory process
mandated by the second Ministerial Conference.  Given the complexity of the issues that had been
raised and discussed, and taking into account the points that had been made by India and NewZealand, his delegation would be wary of any substantive recommendations.  In addition to his
tremendous sympathy with the concerns that had been  raised by India, he would also find it difficult
at this point to exclude, a priori , any particular issue from the future work programme of the Group.
106. The representative of Tunisia said that his delegation supported the idea that the Group's work
should continue, particularly since there were many issues and areas which had already been
identified as requiring further study.  The Group's future work should be conducted on the basis of a
flexible work programme as this approach had proven very useful thus far, and had enabled Membersto have a helpful exchange of views.  In addition to any new issues, delegations should be permitted
to come back to subjects that had already been addressed in the discussions to date.
107. The representative of Venezuela said that he would like to suggest that the issue he had
brought up during the debate on the relationship between competition policy and economic
development, namely the relationship between competition and innovation, be considered as a topicfor further study.  In addition, taking account of proposals that had been made by the delegations of
New Zealand and Hong Kong, China, his delegation would support consideration of the scope for
further convergence in the aspects of trade and competition policy, and the related question of what
would be the appropriate institutional structure to  promote this convergence.  This would be an
interesting topic to explore, given the diverse institutional authorities and legislative frameworks thatit touched upon.
108. The Chairman offered the following reflections on the views that had been expressed
regarding possible recommendations to be included in the report.   He noted that there were two
possible interpretations to paragraph 20 of the Singapore Ministerial Declaration.  One was that
recommendations would be made to the General Council for work to be taken up in other fora withinWT/WGTCP/M/6
Page 35
the WTO.  Another was that the Group would make recommendations regarding areas that merited
further consideration within the Group itself.  This would be without prejudice to general
recommendations that the Group might make at the end of its mandate regarding further work to be
taken up elsewhere in the WTO.  His understanding was that the possible recommendations to which
the Group was currently giving consideration were in the second category - i.e., they wererecommendations regarding areas for further study by the Group itself - and would be without
prejudice to further recommendations that might or might not emerge at the end of the study process.
With regard to specific recommendations, one view was that, since there would be time for only two
or three additional meetings in 1999, before the focus of attention would shift to the preparatory
process in the General Council, if the meetings were to be productive it was desirable to focus them
on some specific topics of study.  Another view was that it was undesirable to specify in advance the
focus of the meetings since this would imply that certain other topics were excluded a priori .  A third
approach, suggested by the Norwegian delegate, was really a combination of the first two approaches.
Under this approach, the Group could identify perhaps three or four themes which it wished to address
specifically in its future meetings, while also stipulating that, at the end of each meeting, there would
be an opportunity for delegates to come back to any issues which had already been discussed, but
regarding which they wished to provide further comments or input.  With regard to the continuation ofthe Group's work, although he had noted that there were different views about the appropriate length
of the period of further study, it appeared that all delegations were favourably disposed toward the
work continuing, with the qualification that one delegation had signalled that its support for
continuation would be contingent on the Group's reaching agreement on its future work programme,
or at least on an understanding that certain subjects would not be part of the programme.  A number ofdelegates had mentioned, further, that the first six months of 1999 would be an appropriate period of
extension, taking into consideration the preparatory process which the General Council expected to
take up, and other exercises under way in the Organization.  Some delegates had suggested that the
period be longer, perhaps a year or two years, but it seemed that an extension for an initial period of
six months would meet everyone's expectations, at least for a first phase of renewed work.  Regardingthe question of specific proposals for further study, there had been a large number of suggestions,
some of them overlapping, for issues that might be considered, many of them building on matters that
had already been addressed in the Group in a preliminary way.  In this regard, he wondered if it might
be useful for the Secretariat to compile a list of su ggestions that had been made, and that this be the
basis for further discussion at the Group's next meeting in November.
109. Following informal discussion, the Group deci ded that it would revert to the question of
possible recommendations to the General Council, including on areas for further study, at its next
meeting.  To assist in the further deliberations at that time, the Secretariat was asked to compile a list
of proposed topics for further study that had been put forward by Members, and to circulate this in
advance of the meeting in November.
IX. REQUESTS FOR OBSERVER STATUS
110. The Working Group agreed to revert to requests made by SELA and the Organization of the
Islamic Conference at its next meeting, having regard to the ongoing consultations on related matters
in the framework of the General Council.
X. OTHER BUSINESS
(a) Chairman's statement to the Working Gr oup on the Relationship between Trade and
Investment
111. The Chairman informed the Group that he had been asked to make a brief oral statement at
the next meeting of the Working Group on the Relationship between Trade and Investment regarding
the discussion of the interface between investment and competition policy which had taken place in
the current meeting of the Working Group on the Interaction between Trade and Competition Policy.WT/WGTCP/M/6
Page 36
His statement would be a factual summary of the discussion that had taken place in the Group and
would be based on the summary observations that he had made at the conclusion of that discussion.
(b) Timing and organization of work for the next meeting of the Working Group on the
Interaction between Trade and Competition Policy
112. The Chairman noted that the next meeting of the Working Group would take place on 17-
19 November.  The main purpose of the meeting would be to review and approve the Group's report
to the General Council.  In the context of this discussion, the Group would consider item IV of the
Checklist of Issues Suggested for Study, namely the identification of any areas that might merit
further consideration in the WTO framework.  To facilitate discussion of these matters, the draft
descriptive part of the Group's report and the requested compilation of possible issues for further
study would be circulated by the Secretariat in advance of the meeting.  In addition, as had been
agreed all along, particularly in document WT/WGTCP/M/3, paragraph 71, an opportunity would beprovided for Members to come back to any aspects of the Group's work programme on which they
wished to provide further input.  Members were encouraged to provide their written inputs to the
meeting no later than 6 November 1998.
__________