WT/WGTCP/W/228
Page 91
Table III.T6: Economies whose firms were found to be engaging in cartelization by the
US and the EC during the 1990s
Economy Cartel
Angola Shipping
Austria Cartonboard, citric acid, newsprint, steel heating pipes
Belgium Ship construction, stainless steel, steel beams
Brazil Aluminum phosphide
Canada Cartonboard, pigments, plastic dinnerware, vitamins
Denmark Shipping, steel heating pipes, sugar
Finland Cartonboard, newsprint, steel heating pipes
France Aircraft , cable-stayed bridges, cartonboard, citric acid, ferry operators,
methionine , newsprint, plasterboard , shipping, sodium gluconate, stainless
steel, steel beams, seamless steel tubes
Germany Aircraft , graphite electrodes onboard, citric acid, aluminum phosphide,
lysine, methionine , newsprint, pigments, plasterboard , steel heating pipes,
seamless steel tubes, vitamins
Greece Ferry operators
India Aluminum phosphide
Ireland Shipping, sugar
Israel Bromine
Italy Cartonboard, ferry operators, newsprint, stainless steel, steel heating pipes,
seamless steel tubes
Japan Graphite electrodes, lysine, methionine , ship transportation, shipping,
sodium gluconate, sorbates, seamless steel tubes, thermal fax paper,
vitamins
Luxembourg Steel beams
Malaysia Shipping
Mexico Tampico fiber
Netherlands Cartonboard, citric acid, ferr y operators, Ship construction, sodium
gluconate, Tampico fiber
Norway Cartonboard, explosives, ferrosilicon
Singapore Shipping
South Africa Diamonds, newsprint
[Korea] Lysine, methionine , ship transportation, shipping
Spain Aircraft , Cartonboard, stainless steel, steel beams
Sweden Cartonboard, ferry operators, newsprint, stainless steel
Switzerland Citric acid, laminated plastic tubes, steel heating pipes, vitamins
[Chinese Taipei] Shipping
UK Aircraft , cartonboard, explosives, ferry operators, newsprint, pigments,
plasterboard , shipping, stainless steel, seamless steel tubes, steel beams,
sugar
US Aircraft , aluminum phosphide, bromine, cable-stayed bridges, cartonboard,
citric acid, diamonds, ferrosilicon, Graphite electrodes, isostatic graphite,
laminated plastic tubes, lysine, maltol, methionine , pigments, plastic
dinnerware, Ship construction, ship transportation, sorbates, Tampico fiber,
thermal fax paper, vitamins
Zaire Shipping
Source:  Evenett, Levenstein, and Suslow (2001).
Note: Products in italics were under investigation at time of publication.WT/WGTCP/W/228
Page 92
E. THE EFFECTS OF PRIVATE INTERNATIONAL CARTELS ON DEVELOPING COUNTRIES
293. In the last three years a number of studies have identified and estimated the costs to
developing countries of the private international cartels that were prosecuted in the 1990s.69
These studies have grown in sophistication, reflecting the cumulative efforts of scholars,government officials, and international organizations in collecting data on this subject. As willbecome evident, the focus of much research has been on estimating the overcharges paid by
purchasers in developing countries. However, evidence is coming to light that suggests that
exporters in developing country have been hurt by these cartels too. This further reinforces
the case for strengthening policies and enforc ement institutions to take against anti-
competitive practices that impinge on developing economies.
294. Although estimates vary the price increases caused by international cartels are of the
order of 20-40 percent (Connor 2001, Levenstein and Suslow 2001, and OECD 2002a,b). Theprice increases generate sizeable overcharges, especially given the large amount of imports by
developing economies of cartelized products. Ov er time research has refined the calculations
of harm done to purchasers in developing economies by international cartels. The first such
calculation was performed by Levenstein and Suslow (2001).
295. In a background paper for the World Bank's World Development Report 2001 ¸
Levenstein and Suslow (2001) identified th e international trade flows in 1997 that best
matched the products sold by sixteen international cartels which operated at some point
during the 1990s.
70 Developing countries' imports of these goods in 1997 amounted to US
$81.1 billion, an amount that represents 6.7 percent of these countries' imports and 1.2 percent
of their national incomes. (For the least developed countries these percentages were evenhigher.) With an estimated increase in prices of between 20 and 40 percent, one can then
calculate a range of estimates for the overcharges paid by developing countries in 1997 had
all sixteen of these cartels been in operation during that year. These overcharges are in the
range of US $16-32 billion, which are large sums when one appreciates that they are
equivalent to between one third and two thirds of the annual total multilateral and bilateral aidreceived by developing countries in the late 1990s.
296. An alternative approach to Levenstein and Suslow (2001) is to calculate year-by-year,
throughout the 1980s and 1990s, the value of developing country imports that are affected by
international cartels. Evenett and Ferrarini (2002), in a background paper for the World
Bank's Global Economic Prospects 2003 , performed these calculations for twelve of the
                                                     
69 Although this section focuses on the scale of recently prosecuted international cartels, it is
worth observing—for comparative purposes—that in the 1930s international cartels were thought to
control to some degree between 30 and 50 percent of world trade (Scherer 1994, page 46.) In none of
what follows is it suggested that the proportion of international trade flows currently affected by privateinternational cartels has reached levels observed in the 1930s. Nevertheless, given that scale ofinternational commerce today is much larger than it was in the 1930s, even if very small percentages ofinternational trade are affected by private international cartels then it is quite plausible that billions ofdollars of harm—perhaps even tens of billions of dollars of harm—are being inflicted on customers
around the world. In the year 2002 the total value of merchandise imports equaled US$6.501 trillion
dollars. Of that amount, US$1.704 trillion was imported by developing countries. The latter figures aretaken from WTO (2003).
70 These authors were able to identify for each of the sixteen cartels in their study the four-
digit United Nations' international trade flow that best corresponds to the cartelized product. Their
study used 1997 data on international trade flows b ecause—at the time they prepared their study—this
year's data was the last year of such United Nations' data that was inexpensively available to
academics. Data after 1997 and data that is more disaggregated than that reported by the UnitedNations is available but at a cost that is beyond the reach of many academic researchers in the UnitedStates and in Western Europe.WT/WGTCP/W/228
Page 93
sixteen international cartels studied by Levenstein and Suslow. This approach has the
advantage of only counting the imports of developing countries as being affected in a given
year—say 1993—if the international cartel in question was in operation in that year. Figure
III.F2 plots in year 2000 US dollars the total value of developing country imports that are
affected by twelve private international cartels.  What is evident is that a substantial amount of
developing countries' imports are affected by such cartels. Since 1995, developing countries
imports of these twelve cartelized products exce eded US $8 billion in all but one year; and in
2000 the value of such imports exceeded US $10 billion. The overcharges on such imports
amount to a recurring drain on the purchasing power of developing country purchasers of the
affected goods. It is also worth noting that the data reported in figure III.F2 does not include
date on 28 of the 40 private international cartels that have been prosecuted in the 1990s. The
true value of the developing country imports is likely to be multiples of the numbers reportedhere.
Figure III.F2: Total imports of twelve cartelized products by developing economies,
1981-2000
024681012
Year
Note: Values reported in year 2000 United States dollars.
297. Further details on six high profile international cartel prosecutions are given in
Appendix III.C. The fact that each of these cart els involves the sale of intermediate goods is
not atypical—and suggests that the costs of those corporate purchasers of intermediate
products are also adversely affected by cartelization. To the extent that these buyers of
intermediate inputs face stiff competition for sales of their products in international markets,
then export performance is being hindered by international cartels too. (See box III.B2 for acase study that highlights this point.) Furthermore, for these six international cartels, the
estimated price increases due to cartelization do vary widely—from 10 percent for stainless
steel tubes to 60-70 percent for graphite electrodes. Given these percentage price increases, it
is not surprising that two of these six cartels alone (vitamins and graphite electrodes) have
resulted in estimated overcharges of over a billion US dollars each.WT/WGTCP/W/228
Page 94
298. Given the cartels in Appendix III.C lasted several years, it is noteworthy that the fines
imposed by authorities often fell well short of the estimated overcharges. Of course,
overcharges are not the same as the additional profits obtained from cartelization. However,
given that forward looking firms will discount any fines for engaging in cartelization by the
probability of getting prosecuted, on the basis of some of the fines imposed during the 1990s,concerns may well arise about the strength of the deterrence of certain national anti-cartel
regimes (OECD 2002a).
Box III.B2: The graphite electrodes cartel, 1992-1997
Graphite electrodes are used primarily in the production of steel in electric arc furnaces. In a
highly concentrated world market, two firms (one German and one American) had a
combined market share of roughly two-thirds at the beginning of the 1990s. Japanese
producers supply a considerable part of the remainder, with modest contributions from a
number of smaller producers based in certain developing countries, principally India and
China. All of the major producers in this market operate production facilities in a number of
countries, including developing countries such as Brazil, Mexico, South Africa, Russia, and
Poland, and sell their products throughout the world.
In 1999, all seven major producers of graphite electrodes plead guilty to price-fixing between
1992 and 1997, following an investigation by the United States Department of Justice.
Similarly, major firms in the Canadian, European Union, and Korean markets were convicted
and fined by those jurisdictions' respective authorities.
According to US and European Commission documents, cartel members agreed to:
1. increase and maintain prices,
2. allocate volume among conspirators,
3. divide the world market among themselves,
4. reduce or eliminate exports to members' home markets,
5. restrict capacity,
6. restrict non-conspirator companies' access to certain technology,
7. exchange sales and customer information in order to monitor and enforce the cartel
agreement,
8. issue price announcements and price quotations in accordance with the agreement.
The OECD estimates that:
"the cartel affected $5-7 billion dollars in sa les world-wide. Throughout the world, the cartel
resulted in price increases from roughly $2000 per metric ton to $3200-$3500 in various
markets" (OECD 2000, page 13).
Graphite electrodes prices in the US market ar e shown the figure below. Prices started rising
immediately after the conspiracy started, and display a clear downward trend since the break-
up of the cartel in 1997. Although there is some evidence that actual transaction prices paid
by developing country purchasers were in some cases lower than for consumers based in
advanced economies, the fluctuations in the US price can be assumed to accurately represent
the changes in prices in world markets. Clearly, the cartel's negative effects on developing
country purchasers were significant, especially for those depending on graphite electrodes
imports for steel production. High prices in the graphite electrodes markets translated into
higher import prices of steel-based intermediate products for developing countries
(Levenstein and Suslow 2001).WT/WGTCP/W/228
Page 95
The only direct estimate of pecuniary harm caused to purchasers in developing countries
comes from the Korea Fair Trade Commission (KFTC), which in March 2002 convicted six
graphite electrode manufactures from the US, Germany, and Japan.  According to KFTC,
Korean steel manufactures
"imported graphite electrodes amounting to US$553 million from the six companies from
May 1992 to February 1998, and during the period the import price increased from an average
of US$2,225 per ton in 1992 to an average of  US$3,356 in 1997 (about 48.9% price increase).
The damage incurred by the companies importing graphite electrodes is estimated at
approximately US$139 million. Korea's major industries such as automobile and shipbuilding
that consume much steel were also influenced by this international cartel" (KFTC 2002,
page 2).
Since the break-up of the cartel, the industry has seen the formation of several joint ventures,
such as the one between UCAR, a leading US  corporation, and Jilin  Carbon, the largest
Chinese producer of graphite electrodes.
Figure III.F3: Graphite Electrode Prices, 1980-2000 (Cartel:  July 1992-1997)
Source of figure: Levenstein and Suslow 2001, page 83.
Notes: The above figure refers to prices of graphite electrodes in the US market. There is
anecdotal evidence th at transaction prices paid by deve loping count ry purchasers were lower
than in the US Nevertheless, the fluctuations in US prices shown above can be assumed to
represent an approximate trend of prices in the world markets.WT/WGTCP/W/228
Page 96
299. The effects of certain individual private international cartels have been analyzed with
econometric techniques (Connor 2001, White 2001, and Clarke and Evenett 2003). A recent
analysis of the international vitamins cartel, which divided up the world markets for various
types of vitamins from 1989 until 1999, was able to recover estimates of the overcharges paid
by 90 vitamins importing nations throughout the 1990s. Table III.T7 presents the estimatedovercharges on vitamins imports by 90 economies for the duration of this cartel (see Clarke
and Evenett 2003, for further details.
71) The total overcharges in four developing countries
exceeded US$100 million (in year 2000 US dollars) and in six more they exceeded US$50
million. The total overcharges for the ten European Union members reported in table III.T7
was estimated to equal US $660.19 million; that is, two thirds of a billion dollars.72 The total
overcharges by these 90 importers amounted to US$2709.87 million throughout the 1990s;
just under two and three quarter billion dollars for this one cartel alone. In essence, theinternational vitamins cartel—like a number of other contemporary private international
cartels—exploited the very open markets that the multilateral trade reforms seek to encourage
so as to raise prices and transfer billions of dollars of rents from purchasers to cartel members.
300. Clarke and Evenett's (2003) analysis of the vitamins cartel also revealed that countries
in Asia, Latin America, and Europe that did not have records of national cartel enforcementtended to be particularly targeted by the international vitamins cartel. For example, Latin
American countries without a recent record of cartel enforcement saw their total import bill
for vitamins rise by 53 percent after the formation of the cartel, whereas those nations with
cartel enforcement records saw imports rise by 38 percent. This finding attests to the deterrent
value of more strenuous national cartel enforcement efforts as it suggests that the vitaminscartel members decided to raise prices less in those economies with active anti-cartel policies.
That is, even though active cartel enforcement did not deter the formation of this cartel in the
first place, it would appear that the credible threat of potential future enforcement did
discourage the members of this international cartel from raising their prices as much as in
jurisdictions with little or no cartel enforcement.
301. These estimates of the deterrent effect of active cartel enforcement regimes may shed
some light on the relative magnitudes of the costs to national treasuries and of the benefits
more generally of adopting multilateral provisions on cartels. To recap, the associated state
outlays and benefits include (i) the cost of drafting and enacting a cartel law, the cost of
establishing the relevant enforcement agency and of developing the necessary expertise,  (ii)
the ongoing budgetary cost of enforcing a cartel law, (iii) the costs to the private sector of any
unwarranted bureaucratic harassment that may follow enactment of a cartel law, (iv) anybenefits to the national treasury associated with deterring the formation  of bid rigging cartels
in the first place , and (v) any benefits associated with deterring the formation  of cartels that
target private sector customers in the first place , (vi) any benefits to national treasuries that
accrue from bid rigging cartels setting submitting lower bids in jurisdictions with active cartel
enforcement regimes, and (vii) any benefits to private sector customers that accrue from cartelmembers setting lower prices in jurisdictio ns with active cartel enforcement regimes.
302. In the context of the international vitamins cartel, the findings in Clarke and Evenett
(2003) enable a direct comparison of cost (i) and benefit (vii) for a number of developing and
industrial countries, and their focus should not be taken to mean that these authors regard the
other costs or benefits as unimportant. Thus, the reduction in overcharges on vitamins importsassociated with stronger cartel enforcement ef forts is a benefit is compared to the cost of
implementing national competition policies. Table III.T8 presents estimates, for three Latin
                                                     
71 Critical to this empirical analysis is the assumption—backed up by industry evidence—that
the demand for vitamins is price-inelastic.
72 No doubt differences in the size of the economies in India and the EU account for much of
the difference in the amount of overcharges.WT/WGTCP/W/228
Page 97
American economies and 10 members of the European Union, of the additional overcharges
on vitamins imports that these nations would have paid if they did not have a cartel law or an
active cartel enforcement regime. These additional overcharges are compared in this table to
the fiscal "saving" that would have resu lted from shutting down each nation's entire
competition enforcement apparatus. As reported in the fifth column of table III.T8, theadditional overcharges from this single cartel are equivalent to seven, 46, and 66 percent of
the public outlays on Peru's, Mexico's, and Brazil's competition authorities.73 In the 10
European Union members mentioned in table III.T8 the comparable percentage was 96,
implying that the reduction in overcharges on one international cartel alone almost covered
the entire cost of these ten economies' national competition authorities and the Brussels-based
enforcer of competition law.
303. Findings such as those above imply that just one of the four benefits of active cartel
enforcement (benefit (vii) listed above) may be of a sufficient order of magnitude to justify
the public outlays on cartel enforcement and supports the view that there are likely to be
sizeable benefits from implementing multilateral provisions on hardcore cartels.
74 Moreover,
to the extent that the proposed multilateral provisions on voluntary co-operation further
strengthen the ability of competition agencies  to successfully conduct investigations into
hardcore cartels, then this will increase the deterrents to cartelization—the values of which are
central to the cost-benefit calculations reported above.75
304. In fact, the evidence points to the possibility that the benefits to developing countries
of effective measures to tackle international hardcore cartels could exceed  the welfare gains
from liberalizing certain impediments to market access in the context of the Doha Round. Forexample, in the September 2002 edition of the IMF's World Economic Outlook  it is estimated
that the increase in the welfare of developing countries that would result from measures to
liberalize the agricultural policies of industrialized economies would be approximately US$8
billion per annum.
76 Undoubtedly, this constitutes a sizeable potential benefit for developing
economies. However, it might also be borne in mind that in 2002 developing countriesimported merchandise worth US$1.704 trillion.  In fact, in order for disciplines on hardcore
cartels and on voluntary cooperation to yield a US$8 billion reduction in overcharges to
developing countries—that is, a benefit to developing countries of the same scale as the IMF
estimate of the welfare gain to them from liberalizing industrial countries' agricultural
                                                     
73 The US$10.963m figure reported in Table III.T8 is the annual budget of the three
government agencies in Brazil that play some role in enforcing its competition laws; namely, the
Secretariat for Economic Monitoring (SEAE), the Secretariat for Economic Law (SDE), and the
Administrative Council for Economic Defense (CADE). The source of this figure is Brazil Ministry ofFinance (2002).
74 It should also be added that to the extent that private firms respond to stronger cartel
enforcement measures by adopting price-raising but not cartel-like practices—such as collusion and
price leadership—then this may detract from the benefits of properly implementing national cartellaws. This concern is of especial importance if the new practice is less easy to deter or prosecute under
national competition law.
75 The reader may have noticed that the calcula tions reported here are stacked against finding
net benefits to cartel enforcement. For starters, one of the benefits of such enforcement (reduced
overcharges) is compared to the government outlays on the entire  competition authority.  Such
authorities tend to engage in a number of other activities (including merger review and examiningvertical restraints) that involve resources and add to the public outlays on competition enforcement.  Onthe other hand, to the extent that competition enforcement agencies in developing countries arecurrently  under-funded, then the calculations discussed in the text may overstate the net benefits to
cartel enforcement. Having said that, the sizeable magnitudes of the deterrent effects reported in Table
III.T8 s uggest that there is ample room to expand government outlays on competition enforcement
before the subsequent outlays exceed the likely benefits of active cartel enforcement.
76 For comparative purposes, Chadha et al (2000) estimate the gains for developing countries
resulting from a 33 % overall reduction of agricultural tariffs to be $ 5.7 billion annually.WT/WGTCP/W/228
Page 98
policies—international hardcore cartels controlling as little as 1.8 to 3.1 percent of developing
countries' imports would have to be deterred or stopped by the implementation of such new
disciplines.77  It is worth pointing out, in this regard, that 1.8 to 3.1 per cent of total
developing countries' merchandise imports in 2002 amounts to US $ 28-48 billion of imports
– a range that is much less than the $ 81.1 billion of developing countries' imports thatLevenstein and Suslow estimated might have been affected by international cartels prosecuted
in the 1990s.  Those inclined to believe that the imports of developing countries are especially
susceptible to international hardcore cartels and that multilateral disciplines on competition
policies will go a long way to deterring these cartels might, on the basis of the calculations
above, come to the conclusion that such di sciplines offer greater benefits to developing
countries than certain prominent market access reforms.
F. 
SUMMARY
305. Readers of this section may have noticed that almost all of the bibliographic
references relate to materials that have become available in the last five years. This underlines
the fact that the evidentiary record on the pr evalence of anti-competitive practices affecting
commerce in developing countries has grown considerably in recent years.
306. The economic analyses of the harm done by anti-competitive practices, such as
private international cartels, are becoming more sophisticated over time. In one such analysis,
the overcharges on cartelized vitamins imports was found to be much higher in Asian, Latin
American, and Western European jurisdictions that do not have vigorous cartel enforcement
regimes. This finding highlights one of the important benefits of cartel enforcement; namely
providing incentives to those cartels (that do have the audacity to form) to limit the amount
they overcharge customers in a given jurisdiction.78
307. When quantitative estimates of these benefits were compared to the costs of running
the agency responsible for enforcing competition laws, considerable returns were found to
investments in cartel enforcement activities. It remains to be seen whether other studies will
bear out these conclusions. To the extent that they do, such research will further reinforce thecase for adopting and enforcing national cartel laws and the associated measures that
underpin the effective enforcement of national competition laws in general—both of which
can be found in current proposals for a multilateral framework on competition policy. The
return on these investments in national cartel enforcement can be further enhanced by
capacity building and technical assistance measures.
                                                     
77 These calculations assume that the price increase with international cartelization is between
20 and 40 percent, consistent with the findings of Levenstein and Suslow (2001).
78 Of course, one of the other benefits of having a vigorous cartel enforcement regime is that it
deters the formation of cartels in the first place.WT/WGTCP/W/228
Page 99
Table III.T7: Estimated overcharges from the vitamins cartel, 1990-1999, in year 2000
US dollars; by importer
Overcharges
paid on
vitamins
imports during
the conspiracyTotal value of
imports during
years whe n
importer did not
have a cartel
lawTotal value of
imports during
years whe n
importer did
have a cartel
lawOvercharges
paid on
vitamins
imports during
the conspiracyTotal value of
imports during
years when
importer did
not have a
cartel lawTotal value of
imports during
years whe n
importer did hav e
a cartel law
Economies with evidence of cartel prosecutions in OECD documents Economies with no evidence of cartel prosecutions in OECD documents
         Brazil 183.37 0.00 665.19 (continued)
         Australia 154.70 0.00 333.63          Guatemala 10.41 30.05 0.00
         Italy 153.78 0.00 1040.09          Nigeria 7.00 20.14 0.00
         Mexico 151.98 111.33 411.38          Bangladesh 6.42 22.26 0.00
         UK 147.64 0.00 998.57          Syria 5.79 20.08 0.00
         Denmark 138.49 0.00 936.62          Paraguay 4.57 13.18 0.00
         South Africa 99.93 173.56 39.57          Tunisia 4.45 12.80 0.00
         Spain 91.89 0.00 621.47          Vietnam 4.38 15.19 0.00
         China 77.61 72.35 56.73          Costa Rica 3.82 11.03 0.00
         Austria 44.22 88.34 94.16          Bolivia 3.45 9.97 0.00
         Chile 38.43 0.00 139.41          Zimbabwe 3.41 9.80 0.00
         Poland 31.50 0.00 213.07          Lebanon 3.11 10.77 0.00
         New Zealand 29.26 0.00 63.11          Dominican Republic 3.07 8.86 0.00
         Hungary 24.71 48.73 54.11          El Salvador 2.70 7.80 0.00
         Sweden 23.47 36.10 75.03          Jordan 2.54 8.82 0.00
         Norway 19.27 34.85 49.47          Jamaica 2.11 6.09 0.00
         Romania 18.99 48.36 16.29          Kenya 1.79 5.16 0.00
         Peru 18.91 3.32 64.43          Ghana 1.32 3.81 0.00
         Ireland 17.76 0.00 120.10          Nepal 1.21 4.21 0.00
         Finland 16.44 28.06 46.08          Nicaragua 1.20 3.46 0.00
         Greece 13.73 0.00 92.83          Cote D'Ivoire 0.88 2.53 0.00         Portugal 12.77 0.00 86.39          Senegal 0.82 2.36 0.00
         Bulgaria 5.04 2.87 27.47          Trinidad Tobago 0.81 2.33 0.00
         Zambia 0.06 0.14 0.01          Panama 0.68 1.96 0.00
         Madagascar 0.60 1.73 0.00
Economies with no evidence of cartel prosecutions in OECD documents          Ethiopia 0.59 1.69 0.00
         Singapore 245.22 849.93 0.00          Yemen 0.58 2.02 0.00         HK, C 178.48 618.61 0.00          Mali 0.49 1.41 0.00
         Turkey 82.89 287.31 0.00          Mauritius 0.46 1.33 0.00
         Thailand 78.45 271.91 0.00          Cameroon 0.39 1.12 0.00
         Argentina 73.83 213.08 0.00          Cambodia 0.28 0.98 0.00
         Colombia 54.95 158.60 0.00          Benin 0.22 0.63 0.00
         Indonesia 48.72 168.85 0.00          Togo 0.19 0.53 0.00
         Venezuela 45.32 130.81 0.00          Tanzania 0.16 0.46 0.00         Iran 44.25 153.35 0.00          Haiti 0.11 0.33 0.00
         Egypt 38.49 110.66 0.00          Angola 0.11 0.33 0.00
         Pakistan 36.82 127.62 0.00          Gabon 0.09 0.27 0.00         Israel 32.30 111.97 0.00          Niger 0.07 0.19 0.00
         Philippines 29.58 102.53 0.00          Congo 0.06 0.19 0.00
         Honduras 25.87 74.65 0.00          Burkina Faso 0.06 0.17 0.00         India 25.71 89.12 0.00          Malawi 0.05 0.13 0.00
         Malaysia 22.94 79.50 0.00          Rwanda 0.04 0.12 0.00
         Ecuador 14.82 42.78 0.00          Uganda 0.03 0.10 0.00
         Saudi Arabia 13.11 45.43 0.00          Guinea 0.03 0.09 0.00
         Morocco 12.44 35.77 0.00          Laos 0.03 0.10 0.00
         Algeria 11.09 31.88 0.00          Chad 0.01 0.04 0.00
         Mozambique 0.00 0.01 0.00
Notes:
1. Total value of overcharges for imports into these 90 economies is 2709.87 million US dollars.
2. This table does not include overchar
ges for Pa pua New Guinea or for Korea.Millions of US dollars Millions of US dollars
Importing economy Importing economyWT/WGTCP/W/228
Page 100 Table III.T8: Estimating the average savings- per-dollar spent on competition enforcement
 
Total throughout 
the conspiracyAnnual average 
during 1990-9
         Austria  27.96 2.80 44.22
         Brazil  72.09 7.21 10.96 0.658 183.37
         Chile  15.11 1.51 38.43
         Denmark  278.11 27.81 8.70 3.20 138.49
         Finland  13.68 1.37 3.40 0.40 16.44
         Greece  27.56 2.76 13.73
         Ireland  35.66 3.57 1.60 2.23 17.76
         Italy  308.83 30.88 153.78
         Mexico  44.59 4.46 9.70 0.46 151.98
         Norway  14.69 1.47 7.70 0.19 19.27
         Peru  6.98 0.70 10.05 0.07 18.91
         Portugal  25.65 2.57 12.77
         Spain  184.53 18.45 91.89
         Sweden  22.28 2.23 7.30 0.31 23.47
         UK  296.51 29.65 46.60 0.64 147.64
            Sum of entries for EU members above  1220.78 122.08 127.50 0.96 660.19
Note: 
The cost of the European Commission's competition enforcement authority was added to the line "EU members above." 
Memorandum:  EconomyAdditional overcharges in the 
absence of a cartel law (millions of 
US dollars)Annual cost of  
competition  
authority   (1999-  
2000)  Savings on each 
dollar spent: ratio 
of last two 
columnsOvercharges 
actually paid 
(millions of US 
dollars)WT/WGTCP/W/228
Page 101
Box III.B3: The Lysine Cartel, 1992-1995
Five producers, Ajinomoto and Kyowa Hakko (both from Japan), Sewon/Miwon and Cheil
Sugar (both from Korea), and Archer Daniels Midland (an American firm) participated in the
lysine cartel between 1992 and 1995. Together these firms controlled 97 percent of global
capacity during three years (Connor 2001, page 176). These cartel members engaged in price-
fixing, allocation of sales quotas, and the monitoring of volume agreements. At the peak of
the cartel's effectiveness in 1994, the price of lysine reached about $1.20 per pound, which
was approximately $0.50 above the competitive price level in the long-run (Connor  2001).
Estimates of the overcharges to US customers during the conspiracy period vary and are as
high as $141 million (Connor 2001, page 264). Although no formal analysis of overcharges
outside the United States is available, the lower prices observed in Asia suggest that
overcharges in the rest of the world may be lower than those in the United States. According
to Connor, a reasonable projection of the global overcharge by the lysine cartel would be in
the range of $200-$250 million (Connor 2001, Table 8.A.4).
It is estimated that the lysine industry produced at least 20 percent less in 1994 than it would
have made had there been perfect competition (Connor 2001, page 247). Moreover, the
advent of the cartel had the effect of freezing the relative positions of the leading firms in the
market, in contrast to the very fluid situation prior to the conspiracy. After the cartel broke up
in late 1995, some notable changes in global production shares were observed. In particular,
production shares of Sewon and Cheil, the Korean cartel members, increased from 15 percent
to 18 percent and from 7 percent to 12 percent respectively, at the expense of other companies
(Connor 2001, table 8.A.3).
As to the cartel's effects on developing country producers, clearly the two Korean members
benefited from higher sale prices generated by the cartel. On the other hand, potential
competitors from developing economies were adversely affected by the aggressive means
used to preserve the market allocation agreements by the dominant firms.
Although there were some individual instances of extra-cartel entry by relatively small
producers during the 1990s (mainly from Hungary, Slovakia, and South Africa), most of the
new entrants began production only after the lysine cartel had broken up in 1995. China
seems to be the fastest growing location for new ventures in lysine manufacturing. Several
joint ventures began operating in China as early as 1993, and by 2000, the productive capacity
of these Chinese operations was estimated at about 13% of world capacity (Connor 2001,
figure 7.A.3).WT/WGTCP/W/228
Page 102
APPENDICESWT/WGTCP/W/228
Page 103Appendix I.A: The role of government policy in competitive Japanese industries
Policies
towards…Entry Rivalry Operating subsidies Technology Suppliers Demand
Examples of
suchpolicies…Importing controls;
foreign entryrestrictions; entryrestrictionsSubsidies; low-interest
loans; tax incentivesR&D support; standards
settingR&D support;
standards settingInterventions in
supplier industriesGovernment procurement; influence
on demand
Automobiles 1. GM and Ford were
prohibited from carassembly in Japan,and imports were
banned in 1936.
2. Import quotas were
abolished in 1963.
3. Tariffs were set to
protect small domestic
cars. Tariff rates weregradually reduced andabolished in 1978.
4. Liberalization of
inward FDI began in1971.1. MITI sought to
standardize products in1955 to exploit economiesof scale and in 1961 to
reduce the number of
competitors (formingthree product groups ofproduct category, of two
to three firms each). This
effort failed.
2. Japan Development
Bank loans were provided
to promote mergers
(1966-71). Littleconsolidation occurred.
3. Voluntary export
restraints since 1981.1. Japan Development Bank
loans for capital equipment(1954-71).
2. Accelerated depreciation
(beginning in 1951).
3. Tariff exemption for
production equipment.1. R&D subsidies to the
industry association(1951-59).
2. R&D consortia
beginning in 1971 on
various issues (emissioncontrol, electric car,automated control
system, combustion
system)
3. Subsidies for the
electric car were paid
back to the government,
indicating the success ofthe project.1. Auto suppliers were
designated as one of thetargeted industriesunder the Temporary
Law for Machinery
Industry (1956-70).About 500 companiesreceived favourable
loans of a total of $100
million over 15 years, aswell as incentives suchas accelerated
depreciation.
2. Between 1960 and
1965, firms thatreceived favourable
loans achieved 4%
higher growth rate thannon-receiving firms, butthe stronger firms might
have been the ones to
receive support. (Coleand Yakushiji 1984,page 87)1. Commodity tax favoured small cars
in the 1950s, which wasdisadvantageous for imported largecars. Tax rates were gradually reduced
from 1962 and abolished in 1989.
Cameras None 1. Recession cartel to limit
production volume in1965 lasted nine months.Firms directed their
efforts to exports.None 1. R&D consortia on
optical technologymembers include all themajor companies in
optical technology
including smallcompanies (1962-81).Total budget ¥1.66
billion ($8 million by $1
= 220 yen)None NoneWT/WGTCP/W/228
Page 104Policies
towards…Entry Rivalry Operating subsidies Technology Suppliers Demand
Examples of
suchpolicies…Importing controls;
foreign entryrestrictions; entryrestrictionsSubsidies; low-interest
loans; tax incentivesR&D support; standards
settingR&D support;
standards settingInterventions in
supplier industriesGovernment procurement; influence
on demand
Car audio None None None None 1. Support provided to
the semiconductorindustry.None
Carbon fibres None None None 1. Dr. Shindo at the
Osaka IndustrialTechnology testingdiscovered the world's
first PAN-based carbon
fibre in 1961.None None
Continuous
synthetic
weavesNone 1. Attempt to scrap-and-
build capacity in the mid-
1980s led to expansionsince the newer loomsgenerally were of higher
capacity than old looms.None None 1. Synthetic fibre (1949)
– tax incentive and
favourable loan.
2. Attempt to reorganize
and reduce capacity in
the synthetic textile
industry: recessioncartels (1975, 1978-79,1981).1. Government procurement of
synthetic fibres (1953) – effect
unknown.WT/WGTCP/W/228
Page 105Policies
towards…Entry Rivalry Operating subsidies Technology Suppliers Demand
Examples of
suchpolicies…Importing controls;
foreign entryrestrictions; entryrestrictionsSubsidies; low-interest
loans; tax incentivesR&D support; standards
settingR&D support;
standards settingInterventions in
supplier industriesGovernment procurement; influence
on demand
FacsimilemachinesNone None 1. Low-interest loan to reduce
protection costs and toshorted transmission time
(existed at least in 1979).1. MPT accelerated the
standardizationfacsimiles in the early
1970s – ensured that all
facsimiles were basedon the same technology.
2. NTT began issuing
"type approvals" blanket
approvals for facsimilemachine models thatmet NTT standards in
1976 – stimulated
demand.
3. NTT lab conducted
research on technologythat directly transmitted
thick documents using a
technology called "BookFacsimile technology"in the early 1980s. NTT
also lab developed an
ultra-high speedfacsimile thattransmitted a page in
three seconds – assisted
existing manufacturersin helping build astronger technological
foundation.1. Support to the
semiconductor industry.1. NTT allowed full facsimile
transmission over the public telephonesystem using dedicated lines in 1973
and over regular phone lines in 1974.
2. NTT advertized and marketed
facsimile machines in the 1970s.
3. MITI reduced the depreciable life for
facsimiles from ten to five years in
1977. This stimulated the purchases ofnewer, higher priced, higher value-added machines.
4. Patent Office approved applications
by facsimile as legal documents in1985. This gave credibility to thefacsimile's existence as a validcommunications method in Japan.WT/WGTCP/W/228
Page 106Policies
towards…Entry Rivalry Operating subsidies Technology Suppliers Demand
Examples of
suchpolicies…Importing controls;
foreign entryrestrictions; entryrestrictionsSubsidies; low-interest
loans; tax incentivesR&D support; standards
settingR&D support;
standards settingInterventions in
supplier industriesGovernment procurement; influence
on demand
Fork lifttrucks1. Import barriers
were completely liftedin 1964-65, spurring
improvement by
Japanese competitors.None 1. Small loans were made to a
few manufacturers in 1954 toupgrade quality.
2. Some low-interest loan
were made available tosmaller lift truck companiesin 1964, enabling the
company to improve the
confidence of its banks, andloans from banks becameeasier.None None None
Home air
conditionersNone None None None None 1. The Energy Conservation Law of
1979 led to efforts to reduce energyusage. Led to the invention of the rotarycompressor.
Home audioequipmentNone None None None 1. Support to the
semiconductor industryNone
Microwave
and satellite
communicationsequipment1. No official entry
restriction, but "NTT
family" companies(NEC, Mitsubishi,Oki, and Hitachi)
received favourable
treatment.None None 1. NTT developed
microwave systems
jointly with NEC,Mitubishi, Oki, andHitachi.
2. NTT
TelecommunicationsLaboratories conductedbasic research on
microwave and satellite
communicationtechnology.None 1. Government was a major buyer for
microwave equipment: NTT
(government owned until 1985)accounted for over 50% of sales. Othermajor buyers were government
agencies. Though purchases were
conducted through international opentender, it became a mere formality sinceNTT knew the technological capability
of each manufacturer.
3. Government agencies or government
related organizations were major buyersfor domestic and regional satellite
communication.
Musical
instrumentsNone None None None None 1. Government stimulated early demand
for instruments through musical
programs in elementary schools.WT/WGTCP/W/228
Page 107Policies
towards…Entry Rivalry Operating subsidies Technology Suppliers Demand
Examples of
suchpolicies…Importing controls;
foreign entryrestrictions; entryrestrictionsSubsidies; low-interest
loans; tax incentivesR&D support; standards
settingR&D support;
standards settingInterventions in
supplier industriesGovernment procurement; influence
on demand
Robotics None None 1. Low interest loans made
available for robotmanufacturers in the 1970s.
Few companies availed
themselves of these loansbecause the interest ratedifferential was small and
companies had adequate
resources.1. Government
sponsored research-at alevel far below that
undertaken by the
companies themselves.
2. R&D consortia on the
development of special-
purpose robots for use
in space, under water,and in nuclear powerplants (1983-1991).
Total government
contribution of ¥20billion ($16 million)None 1. Establishment of a leasing system
and of Japan Robot Leasing Co.designed to popularise industrial robots
among small and medium sized
enterprises in 1980.
2. Special finance to small and medium
enterprises for introducing industrial
robots designed to insure worker safety
in 1980.
3. Establishment of a special system for
high performance industrial robots
provided with computers in 1980.
4. Application of loans and leasing
programmes to industrial robots bylocal governments to help minorenterprises in modernising their
equipment in 1980.
5. Establishment of a tax system for
promoting investment in advancedequipment provided with electronics for
smaller enterprises in 1984.
6. It was believed that these measures
were not very important in the growthof the industry.WT/WGTCP/W/228
Page 108Policies
towards…Entry Rivalry Operating subsidies Technology Suppliers Demand
Examples of
suchpolicies…Importing controls;
foreign entryrestrictions; entryrestrictionsSubsidies; low-interest
loans; tax incentivesR&D support; standards
settingR&D support;
standards settingInterventions in
supplier industriesGovernment procurement; influence
on demand
Semi-conductors1. Successfully
delayed the entry ofTexas Instruments into
Japan. By agreement
reached in 1968, MITIdid not allow theestablishment of 100%
subsidiary (50-50 JV
with Sony,  laterbecame a 100%subsidiary).
2. Liberalization of
import and foreigninvestment inDecember 1974,which was later than
other industries.None 1. Japan Development Bank
provided low-interest loansfor capital investment from
1966. Amounted to only ¥6
billion ($14 million) in 10years.
2. Accelerated depreciation of
production equipment from
1960s.1. MITI electronic
research lab producedthe first domestic IC in
1956.
2. 50% subsidy for LSI
development: 1973-74,¥3.5 billion ($9.7
million)
3. VLSI project (1976–
86) ¥130 billion – 22%that was financed by the
government led to
advancement in themanufacturingtechnology.
4. Intellectual property
rights for the design of
LSI strengthened in1985.
5. The number of
college graduates with
electronics engineeringdegree was 1.8 timeshigher than that in the
US in the 1970s.1. Semiconductor
manufacturingequipment suppliers
benefited from the VLSI
project (though notofficial members).1. Establishment of the computer
leasing company (JECC) in 1961 –Japan Development Bank loan for the
purchase of computer – JECC
accounted for 30-70% of the domesticcomputer demand until 1980s.
2. Series of computer joint development
projects since 1962.WT/WGTCP/W/228
Page 109Policies
towards…Entry Rivalry Operating subsidies Technology Suppliers Demand
Examples of
suchpolicies…Importing controls;
foreign entryrestrictions; entryrestrictionsSubsidies; low-interest
loans; tax incentivesR&D support; standards
settingR&D support;
standards settingInterventions in
supplier industriesGovernment procurement; influence
on demand
Sewingmachines1. Little or no
allocation of foreignexchange for the
import of light
machinery in the earlypostwar period.Sheltered the domestic
industry.1. Price controls: fixed the
manufacturer's sellingprice and the resale price
of the standardized model,
HA-I, at the low level fro1946 to 1951. Helpedstimulate demand forced
manufacturers to cut
costs.1. Temporarily se the
exchange rate at 415 yen tothe dollar in 1948, versus 170
yen to the dollar previously,
to provide incentives formanufacturers to allocateproduction for export to
sewing machines.1. The Sewing Machine
Technology Council,under the guidance of
MITI, set uniform
standards for sewingmachines andcomponents and created
the first standardized
model, the HA-I, with130 components in1947.  Allowed the
entry of numerous small
and medium sizedsubcontractors into theindustry, reducing costs.
2. Voluntary inspection
councils judged
products on a number ofdimensions in 1947.This stimulated product
quality improvement
and upgrades.(See technology) 1. Mandatory swing classes for girls at
public elementary and junior highschools, Ministry of Education
provided subsidies toward sewing
machine purchases – helped stimulatedemand.
2. MITI designated four companies to
manufacture 800 household sewing
machines for export, and MITI servedas a trading company in 1947 –stimulated exports and opened the
industry to international competition
early on.
3. Elimination of cumbersome paper
work and government approvalprocedures for export in 1948 –drove
exports further.
4. Termination of the export quality
inspection system in 1960 –government involvement came to an
end.
Soy sauce None None None None None 1. Establishment of product standards in
1953 to ensure consistency of product
quality.
Tires for
trucks andbussesNone 1. Recession cartel in
1965. Restriction ofproduction
volume/allocation of
market share.
2. Government "guidance"
encouraged reduction in
the number of varieties
from 167 to 58.Encouraged revision ofthe production system in
1965.None None None NoneWT/WGTCP/W/228
Page 110Policies
towards…Entry Rivalry Operating subsidies Technology Suppliers Demand
Examples of
suchpolicies…Importing controls;
foreign entryrestrictions; entryrestrictionsSubsidies; low-interest
loans; tax incentivesR&D support; standards
settingR&D support;
standards settingInterventions in
supplier industriesGovernment procurement; influence
on demand
Trucks 1.  Restriction
on the number oftrucks produced by
foreign makers in
Japan in 1936.
2. Tariff
increase in 1936.
3. Required permits fo r
production: onl y
Toyota,  Nissan, an d
Isuzu received permits
in 1936. this polic y
encouraged industr y
consolidation during the
pre-war period.
4. Import prohibition
was lifted in 1961.
Few imports occurredbecause of the lowdomestic price and
different local needs
(small trucks).None 1. Prioritized allocation of
materials, capital and labour,special loans in the
immediate post-war years
helped the development ofthe industry.
2. Low interest rate loans, a
reduction or exemption from
taxes, special depreciationrules,  reduction or exemptionof taxes related to importing
of equipment from 1951.
Loans only accounted for asmall percent of totalinvestment.None 1. Low interest rate
loans to partsmanufacturers from
1956 – accounted for
30% of total equipmentinvestment.None
Typewriters None None None None Support to the
semiconductor industry.None
VCRs None None None 1. MITI provided R&D
subsidy in 1958. Sonyand NHK copied
Ampex's (US) VCR,
learning the technology.
2. Government
attempted through
guidance to build an
industry consensusaround the betastandard. The effort
failed.Support to the
semiconductor industry.NoneWT/WGTCP/W/228
Page 111Policies
towards…Entry Rivalry Operating subsidies Technology Suppliers Demand
Examples of
suchpolicies…Importing controls;
foreign entryrestrictions; entryrestrictionsSubsidies; low-interest
loans; tax incentivesR&D support; standards
settingR&D support;
standards settingInterventions in
supplier industriesGovernment procurement; influence
on demand
Video games None None None None Support to the
semiconductor industryNone
Source: Porter et al.  (2000)WT/WGTCP/W/228
Page 112 Appendix I.B: The role of government policy in uncompetitive Japanese industries
Policies
towards…Entry Rivalry Operating subsidies Technology Suppliers Demand
Examples of
suchpolicies…Importing controls;
foreign entryrestrictions; entry
restrictionsSubsidies; low-interest
loans; tax incentivesR&D support; standards
settingR&D support;
standards settingInterventions in
supplier industriesGovernment procurement;
influence on demand
Apparel None None None 1. R&D consortia on the
automated sewing
system (1983-91).1. Support to synthetic
fibre industries.1. Large-Scale Retail Store Act limited
the development of alternative
channels, encouraging strong
relationship between apparel makersand department stores.
Chemicals 1. Government owned
plants to provide raw
material for thechemical fertilizerindustry dating back to
the 1870s.
2. Petrochemicals: entryapproved (1956-72).Though virtually all the
applications were
ultimately approved,this policy hinderedcompetition. Even
though a minimum
scale was set forapproval, many plantsdid not achieve
economies of scale.1. Chemical fertilizers
price control (1946-89)
and supply control (1946-89). Delayed the chemicalsector's shift to
petrochemicals.
2. Petrochemicals –approval of capacityexpansion, promotion of
joint investment (1956-
87).3. Recession cartels forpetrochemicals (1972,
1982), synthetic resin
(1959, 1966, 1972, 1977,1982), and fibre (1975,1978-79, 1981).
4. Excess capacity scrap
by petrochemicals (1978-88), synthetic fibre andchemical fertilizers (1978)
through cartel formation,
with favourable loans andtax incentives.5. Promotion of mergers,
joint production, and
sales.1. Prioritized foreign
exchange allocation to the
chemical fertilizer industry in1946.2. Chemical fertilizers: aid for
production facilities, low-
interest loans, preferredallocation of raw materials forthe introduction of new
production facilities since
1954.3. These policies delayed thechemical sector's shift to
petrochemicals.
4. Synthetic resin and fibre(1949), petrochemicals: taxincentive and favourable
loans.
5. Petrochemicals: low-interest loans, accelerateddepreciation, approval of the
import of technologies,
allocation of foreignexchange, and tariffexemption for the import of
equipment were provided for
the government-approvedinvestment plans since 1956.1. Approval to import
foreign technology
through foreignexchange allocation(1949-1972).
2. Process patents prior
to 1975. Thisdiscouraged newproduct development.
3. Cooperative R&D to
reduce energy, reduceraw materials costs, anddevelop new products
since 1967.
4. Favourable loans fornew technologycommercialization
(1951-).1. Support to the Iran-
Japan Petrochemical
project (1973-mid-19880s) – discontinuedafter the Iran-Iraq war.
2. Petroleum industry:
approvals for entry,production, capacityexpansion, allocation of
crude oil throughput to
each company ( 1934-
192) – petroleumindustry remained
uncompetitive.
3. Insufficient numberof college graduateswith chemical degrees.
4. Weak research in
chemicals – limited newproduct development.1. Government procurement of
synthetic fibres (1953) – effect
unknown.2. Formation of joint sales companiesfor polyvinyl chloride (four companies
from 1982) – MITI's intention was to
induce industry consolidation andpromote competition between jointsales companies, but in effect the
policy worked to establish a joint
monopoly.WT/WGTCP/W/228
Page 113Policies
towards…Entry Rivalry Operating subsidies Technology Suppliers Demand
Examples of
suchpolicies…Importing controls;
foreign entryrestrictions; entryrestrictionsSubsidies; low-interest
loans; tax incentivesR&D support; standards
settingR&D support;
standards settingInterventions in
supplier industriesGovernment procurement;
influence on demand
Chemicalscontinued6. All these practices
nurtured the cartel natureof the industry, let the
weakest players survive,
removed upgradingpressure, delayed productinnovation, and reduced
rivalry, resulting in few
strategy differencesamong companies.
Civil aircraft 1. Licensing
requirements for
manufacturers andrepairers. Thoughvirtually all the
companies that had
planned to enter didenter, this practicefostered the cartel
nature of the industry.1.All aircraft and engine
development projects
since 1953 arecollaborative withpredetermined work
allocation. No rivalry
developed-None 1. Limited support for
basic research facilities
and university research.1. Small military
demand.1. Military procurement since 1930,
restarted in 1956 – helped the
development of the industry, butlimited supply of pilots (comparedwith US and European countries) as a
springboard to develop commercial
aircraft. Domestic development of themilitary aircraft largely ceased by1977.
2. Prohibition of exports of military
aircraft I 1967. Firms could only servedomestic markets.3. Heavily regulated airline industry
and stunted domestic demand because
of the policy choice to promote publicground transportation and the limitedcapacity at major airports and
commuter airports – limited demand
for commuter airlines.WT/WGTCP/W/228
Page 114Policies
towards…Entry Rivalry Operating subsidies Technology Suppliers Demand
Examples of
suchpolicies…Importing controls;
foreign entryrestrictions; entryrestrictionsSubsidies; low-interest
loans; tax incentivesR&D support; standards
settingR&D support;
standards settingInterventions in
supplier industriesGovernment procurement;
influence on demand
Chocolate 1. Imported quota
abolished in 1974.2. 35% tariff since 1974
– reduced to 20% in
1983 and to 10% in1988.None 1. Export promotion: subsidy
(1939-1949) and tariff reliefon primary ingredients in the
1930s. Limited success in
promoting exports.None 1. Promotion of the
establishment of sugarand cacao plantations in
[former] Japanese
colonies in 1939.2. Abolition of importtariffs on cacao beans in
1929. Helped the
development of theindustry, but did notcontinue because of
WWII.
3. Restriction of importsof cacao beans in 1937;imports prohibited in1941.
4. Import quotas on
cocoa in the 1950s.Abolished in 1960.5. Import quotas and
domestic subsidies on
sugar and milk since1961.35% tariff on sugar and
milk since 1974.  Made
essential chocolateingredients moreexpensive, Japanese
companies were driven
to develop a chocolatesubstitute.1. Lax regulation of the percentage
requirements of cocoa and cocoabutter in grades of chocolate.
Indirectly sanctioned the domestic
productions of inferior qualityproducts.
Detergents 1. Restriction of inward
FDI until 1970. Delayedforeign entry.1. Abolition of the Resale
Price MaintenanceSystem in 1973. Invited
price reduction, made the
industry even lessprofitable.None 1. Process patent (not
product patent) onchemicals prior to 1975
discouraged new
product development.1. Support of the petro-
chemical industry.NoneWT/WGTCP/W/228
Page 115Policies
towards…Entry Rivalry Operating subsidies Technology Suppliers Demand
Examples of
suchpolicies…Importing controls;
foreign entryrestrictions; entryrestrictionsSubsidies; low-interest
loans; tax incentivesR&D support; standards
settingR&D support;
standards settingInterventions in
supplier industriesGovernment procurement;
influence on demand
Securities 1. Registration system
from 1948 to 1965.2. Licensing system by
the line of business
since 1965.3. Branch officelicenses were not
granted to foreign firms
until 1971.4. Tokyo StockExchange membership
was not granted to
foreign firms until1986.5. These policies alleffectively worked as
entry barriers and
suppressed competition.1. Allocation of corporate
bond underwriting sharessince 1951.
2. Allocation of
government bond under-writing shares (1965-77).3. Approval or guidance
for setting up new
branches, mergers, entryto new businesses since1965.
4. Fixed commission for
brokerage and under-writing until the mid-1980s.5. Fixed pricing scheme
for bond issues.
6. Division of workbetween banks andsecurities firms since
1948.
7. All of these policiesallowed the weakestplayer to survive, and
discourages innovation.
8. …. Encouraged thesales-driven nature of thebusiness and contributed
to stock price
manipulation.1. Emergency loans during
the 1964 securities panic andthe stock market crash in the
1990s – allowed the weakest
player to survive, thoughYamaichi eventually wentbankrupt.None None 1. Securities purchase during the 1964
securities panic – effectivelyweathered the market downturn.
2. Lenient disclosure requirements and
complicated rules for take-over bids –discourages M&A and relatedbusinesses.
3. Restrictions on overseas issuance of
debt securities by Japanese firms until1973 – discouraged overseas business.WT/WGTCP/W/228
Page 116Policies
towards…Entry Rivalry Operating subsidies Technology Suppliers Demand
Examples of
suchpolicies…Importing controls;
foreign entryrestrictions; entryrestrictionsSubsidies; low-interest
loans; tax incentivesR&D support; standards
settingR&D support;
standards settingInterventions in
supplier industriesGovernment procurement;
influence on demand
Software 1. MITI represented
computer makers innegotiating with IBM
for licensing
agreements in return forallowing IBMproduction in Japan in
1960. Government
approval requirementsdelayed IBM's full-fledged entry to the
Japanese market.None 1. Loan guarantees by IPA to
computer service company.2. Tax incentives for software
companies to promote after-
sales maintenance, packagedsoftware development (1979),and system integrators.
Effects hard to quantify, but
apparently did not yieldvisible results.1. R&D subsidy.
2. R&D consortia since1962.
3. Formation of three
groups to develop newcomputers in 1971, 50%subsidy provided.
Contributed to the
establishment ofcomputer businessesand software business to
some extent, but market
forces (that is, USdominance in software)are far stronger thanwhat Japanese
companies can do to
obtain de facto
standards.1. Training centre for
programmers, SEs.2. Qualification exam
for programmers.
3. Lagged in softwareresearch and educationat the university level.
Shortage of
programmers andsoftware engineers, lowproductivity.
4. The Law for Labour-
Dispatching Business in1986 discouraged thepractice of dispatchingsoftware development.
This contributed to
correct the "body shop"nature of the industry.1. Establishment of a government-
sponsored computer leasing company,low-interest loan provided –
contributed to increase the installed
base of computers.2. Prohibition of on-line datatransmission until 1972, data exchange
via computer until 1982 – regulation
lasted longer than the US (allowed theconnection of computers in 1968, totalderegulation of data communication in
1980), discouraged on-line Data
processing and the development ofcomputer networking.3. Promotion of general-purposesoftware development and sales
through IPA in 1979 – did not play a
major role.4. Copyright law to protect software in1986 – discouraged illegal software
copying.
5. Promotion of computer education atjunior and senior high school level in1993 – came much later than the US.
Source: Porter et al.  (2000)WT/WGTCP/W/228
Page 117
Appendix II.A: Contributions to the Working Group relevant to core principles,
including transparency, non-discrimination, and procedural
fairness
SYMBOL:
(WT/WGTCP/-)MEMBER/
OTHER SOURCEPARAGRAPH/
PAGE
REFERENCEMATTERS DISCUSSED
W/26 Hong Kong, China page 1 non-discriminatory trade
liberalization tends to enhance
microeconomic "technical
efficiency"
W/42 Canada page 2 importance of non-discrimination;
transparency; and procedural
fairness
W/45 European
Communitypages 4-6 the principles of transparency and
non-discriminatory treatment offoreign and domestic firms are
common to both competition law
and the multilateral trading system
W/57 Canada passim application of the principle of
national treatment to competition
law
W/89 Switzerland pages 2 et seq. preliminary elements concerning
the relevance of the principles of
national treatment andtransparency
W/100 Brazil pages 3 et seq. extension of WTO principles of
transparency and national
treatment to the antitrust sphere
W/115 European
Communitypages 3 et seq.
pages 8 et seq.
pages 11 et seq.key elements of competition law
and policy and their relationship to
transparency and non-
discrimination
the contribution of competitionlaw towards ensuring non-
discrimination and transparency in
international trade
Scope for developing within WTO
core principles of Competition law
and its enforcement
W/117 Switzerland pages 2 et seq. reference to the experience
acquired in the area of TRIPS
W/119 Japan page 3 importance of basic principles of
"most-favoured-nation treatment",
"national treatment",
"transparency" and "competition-
oriented principle"WT/WGTCP/W/228
Page 118
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PAGE
REFERENCEMATTERS DISCUSSED
W/120 Japan pages 1 et seq.
pages 4-5applicability of WTO Principles to
Competition Policy in light of
Japan's experience
implications that the basicphilosophy of competition policy
has for the WTO principles
W/131 United States page 1 et seq. relationships of WTO principles to
antitrust law enforcement and
competition policy
W/149 India page 1 importance of the principles of
non-discrimination and
transparency to the multilateral
trading system
W/160 European
Communitypage 2 there is a need for the inclusion of
the principle of non-discriminationin a WTO framework agreement
on competition by way of a
separate specific provision
W/165 Czech Republic page 3 a WTO framework agreement
should be based on the principles
of non-discrimination and
transparency
W/173 Canada and Costa
Ricapage 1 the Canada-Costa Rica Free Trade
Agreement contains commitmentto the principles of transparency;
non-discrimination; and procedural
fairness
W/174 Canada page 3 importance of a commitment to
transparency and
non-discrimination in a
multilateral agreement oncompetition
W/175 European
Communitypage 3-4 how a number of developing
country interests and concerns
could be addressed in relation to
certain core principles such as
transparency and non-
discrimination
W/209 Secretariat Entire document Role of core principles
W/210 New Zealand Entire document Role of core principles
W/211 Australia Entire document Role of core principles
W/212 Korea Entire document Role of core principles
W/213 Rev1 Thailand Entire document Role of core principles
W/214 Switzerland Entire document Role of core principles
W/215 India Entire document Role of core principles
W/216 India Entire document Role of core principles
W/217 Japan Entire document Role of core principles
W/218 United States Entire document Role of core principles
W/219 United States Entire document Role of core principles
W/220 South Africa Entire document Role of core principlesWT/WGTCP/W/228
Page 119
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PAGE
REFERENCEMATTERS DISCUSSED
W/221 OECD Entire document Role of core principles
W/222 EC and member
StatesEntire document Role of core principles
SOURCE: WTO ( 2002a ).WT/WGTCP/W/228
Page 120
Appendix II.B: Contributions to the Working Group relevant to the treatment of
hardcore cartels
SYMBOL:
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PAGE REF.MATTERS DISCUSSED
W/17 UNCTAD para. 12 (c) techniques of cartel control
W/21 OECD passim OECD experiences with cartels
W/23 Poland page 1 national institutions lacking means
to deal with international cartels
W/28 Singapore para. 11, 15 (b) implications of exemptions for
import and export cartels
W/42 Canada page 3 implications of exemptions for
export cartels
W/43 Turkey pages 3, 4, 6 necessity of suppression of cartels
page 5 analysis of horizontal restraints
page 8 problems of developing countries
with international cartelsW/45 European
Community
page 9 priority for examination of
hardcore cartels
W/48 United States page 4 mentioning the OECD
Recommendation on Cartels
W/51 Canada page 19 international cartels as emerging
problem for competition policy
W/56 Korea page 2 implications of exemptions for
export cartels
W/61 European
Communitypage 3 role of competition authorities in
preventing cartels
pages 4 et seq. analysis of cartel cases in
European lawW/62 European
Community
pages 13 et seq. proposals for WTO discussions on
cartel issues
W/66 United States passim experiences with international
cartels
W/70 Canada pages 2-3 examples of enforcement action
against cartels
W/71 Czech Republic page 3 export cartels
W/72 Canada page 5 focus of Canadian authorities on
cartel cases
W/78 European
Communitypage 14 benefits of a WTO commitment on
hardcore cartels
W/95 Kenya para. 9 (e) significance of cartels in the
informal sector
page 1 impact of cartels W/100 Brazil
page 2 cooperation to prevent cartels
W/104 Hong Kong, China para. 13 exemption of export cartels from
competition law in some countries
page 2 competition policy as a tool for
addressing hardcore cartelsW/108 Japan
page 3 cooperation between national
competition authoritiesWT/WGTCP/W/228
Page 121
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PAGE REF.MATTERS DISCUSSED
W/115 European
Communitypage 5 et seq. implications of exemption of
export cartels from national
competition laws
page 5 cooperation agreements and
control of cartelsW/116 United States
page 7 reference to OECD
Recommendation on HardcoreCartels
para. 8 (and 16) desirability of prohibition of
hardcore cartelsW/117 Switzerland
para. 12 publication of anti-cartel laws
W/118 Hong Kong, China para. 9 implications of exemption of
export cartels from nationalcompetition laws
pages 2, 4 importance of suppressing
hardcore cartelsW/119 Japan
page 4 exemption of export cartels
W/124 Korea page 3 OECD Recommendation on
Hardcore Cartels
W/126 Zimbabwe
on behalf of the
African Grouppage 2 cartels as priority for developing
countries in their approach to
competition policy
W/130 European
Communitypage 4 need for provisions on hardcore
cartels
W/133 Korea para. 12 feasibility of common
understanding on prohibition of
hardcore cartels
page 1-2 cartels and development (including
in domestic markets)W/134 Japan
pages 2-3 formerly authorized cartels in
Japan
W/135 Japan passim impact of cartels on international
trade
page 3 impact of international cartels on
developing countries
pages 6, 8-9 cooperation in cartel cases
page 8 need for agreement of WTO
Members on hardcore cartelsW/140 European
Community
pages 13 et seq. cartel cases:  examples
W/141 Hong Kong, China para. 10 (a) relevance of differing approaches
to export and import cartels among
WTO Members
W/143 Trinidad and Tobago page 3 impact of international cartels on
small open economies
W/145 Japan page 4 anti-cartel legislation as priority
for competition law enforcement
W/149 India page 2 potential advantages of cartels as
reflected in some countries'industrial policies
W/151 Switzerland pages 2, 4 anti-cartel provisions necessary on
a multilateral levelWT/WGTCP/W/228
Page 122
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PAGE REF.MATTERS DISCUSSED
W/152 European
Communitypage 2 importance of anti-cartel law
enforcement
pages 5, 7, 8 feasibility of a multilateral
framework to address anti-
competitive practices
pages 11-12 cooperation and assistance in
regard to cartelsW/154 Korea
pages 2-3 cartels as problem for the
international trading system
W/155 Canada page 2 importance of national rules and
international cooperation
page 4 OECD Recommendation on
Hardcore Cartels
page 6 common enforcement action as
first step of cooperationW/156 Japan
para. 3 (b) unique added value of multilateral
agreement in area of export cartels
W/160 European
Communitypages 4-5 examples of EC cartel cases as
argument for internationalcooperation
page 7 cartel legislation as priority for
developing countries and for a
multilateral agreementW/161 Romania
pages 1-2 cartels as major topic for
multilateral agreement
W/164 United States page 2 anti-cartel law enforcement as
priority of antitrust agencies
W/165 Czech Republic pages 1, 4 anti-cartel legislation as a priority
for a multilateral agreement
W/168 Japan para. 2, 5 et seq. cartels as a problem for trade and
development;  examples
W/173 Canada and Costa
Ricapage 1 provisions addressing cartels/other
matters in a bilateral free trade
agreement
W/175 European
Communitypassim effects of cartels, development
dimension
W/176 Japan para. 8 et seq. adverse effects of cartels on
development
W/177 Japan passim status of cartel exemptions in
Japan
W/179 Trinidad and Tobago page 2 enforcing anti-cartel legislation as
a priority for small developingeconomies in area of competition
policy
page 3 importance of universal ban on
hardcore cartels
page 5 exchange of information in cartel
casesW/184 European
Community
page 8 impact of cartels on developing
countriesWT/WGTCP/W/228
Page 123
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PAGE REF.MATTERS DISCUSSED
W/185 United States passim importance of anti-cartel
provisions as component of
national competition policy
W/188 Thailand Entire document Provisions on hardcore cartels
W/189 Korea p. 6 Provisions on hardcore cartels
(national experience)
W/191 Secretariat Entire document Provisions on hardcore cartels
W/193 EC and member
StatesEntire document Provisions on hardcore cartels
W/194 Switzerland Entire document Provisions on hardcore cartels
W/196 Mexico Entire document Provisions on hardcore cartels
W/197 UNCTAD Entire document Provisions on hardcore cartels
W/200 Korea Entire document Provisions on hardcore cartels
W/201 Canada Entire document Provisions on hardcore cartels
W/203 United States Entire document Provisions on hardcore cartels
W/208 OECD Entire document Provisions on hardcore cartels
Source: WTO (2002b).WT/WGTCP/W/228
Page 124
Appendix II.C: Contributions to the Working Group on the matter of
international cooperation
SYMBOL:
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PAGE REF.MATTERS DISCUSSED
W/48 United States Whole
documentExperience with cooperation
especially at the bilateral level
W/116 United States Whole
documentObjectives of cooperation;
approaches at bilateral, regional and
multilateral levels
W/121 Japan Pages 1 and 2 International cooperation
W/124 Korea Whole
documentApproaches to cooperation at
bilateral, regional and multilateral
levels
W/125 Australia Page 1 Approaches to cooperation and
communication among WTO
Members
W/126 Zimbabwe on behalf
of WTO African
GroupPages 2 and 3 Competition policy and
development; role of international
cooperation
W/129 European Community
and its member StatesPages 9 to 13 Proposal for cooperation on
competition policy in context ofWTO
W/132 Romania Pages 1 and 2 Objectives of cooperation and
enforcement measures at national
and international level
W/140 European Community
and its member StatesPages 7 to 10 Key elements of a multilateral
framework agreement, and
perceived benefits for LDCs
W/143 Trinidad and Tobago Pages 2 to 6 Role of cooperation at multilateral
level; concerns of smaller countries
W/148 Australia Pages 2 to 5 Australia's experience with
cooperation agreements
W/151 Switzerland Pages 2 to 6 Possible elements of cooperation at
the multilateral level
W/152 European Community
and its member StatesWhole
documentMultilateral negotiations; elements
of possible future WTO agreement;
types of cooperation
W/154 Korea Page 2, para. 1 Effects of companies' anti-
competitive behaviour and
governmental measures; WTO asappropriate forum
W/155 Canada Pages 3 to 7 Cooperation in a multilateral setting
W/156 Japan Pages 2 to 5 Role of international cooperation;
need for a multilateral agreement
W/160 European Community
and its member StatesWhole
documentElements of a WTO framework
agreement
W/161 Romania Paras. 3 and 5 Anti-competitive practices;
progressivity and flexibility in a
multilateral framework
W/162 Colombia Whole
documentAnti-competitive practices and
cooperation in context of WTOWT/WGTCP/W/228
Page 125
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PAGE REF.MATTERS DISCUSSED
W/165 Czech Republic Sections B and
CObjective of international
cooperation;  principles for a
multilateral framework
W/167 Japan Sections II, III
and IVInternational cooperation and WTO;
relation to economic development
W/168 Japan Whole paper International cartels and WTO's role
W/169 Uruguay Pages 3 to 5 Dev elopment dimension and S&D
in a multilateral framework;
importance of comparative lawperspective
W/173 Canada and Costa Rica Page 2, para. 3 Cooperation on competition policy
in a bilateral trade agreement
W/174 Canada Pages 2 to 5 Nature of cooperation at different
levels
W/175 European Community
and its member StatesWhole paper Elements and benefits of a WTO
competition agreement
W/176 Japan Pages 1 to 3 Impact of anti-competitive practices
on developing countries
W/177 Japan Page1, para. 1 Progressivity and flexibility in a
multilateral framework
W/184 European Community
and its member StatesWhole paper,
especially
pages 2-5Modalities for voluntary cooperation
in a multilateral framework
W/189 Korea Passim International cooperation activities
W/192 Secretariat Whole paper Modalities for voluntary cooperation
W/195 Japan Whole paper Modalities for voluntary cooperation
W/199 Australia Whole paper Modalities for voluntary cooperation
W/202 Canada Whole paper Modalities for voluntary cooperation
W/204 United States Whole paper Modalities for voluntary cooperation
W/205 Thailand Whole paper Modalities for voluntary cooperation
W/207 OECD Whole paper Modalities for voluntary cooperation
Source: WTO (2002c).WT/WGTCP/W/228
Page 126
Appendix II.D: Contributions to the Working Group on the matters relating to
the progressive reinforcement of competition institutions in
developing economies through capacity building
Symbol
(WT/WGTCP/ -)Member/Other source Section/Paragraph/Page
reference (where relevant)
W/17 UNCTAD Pages 3 - 5
W/18 APEC Page 4
W/67 United States Paragraphs 7 and 9
W/116 United States Section II.B
W/121 Japan Section III
W/125 Australia Page 2
W/126 Zimbabwe on behalf of the African Group Sections III and IV
W/129 European Community and Member States Sections I.C and II.E
W/130 European Community and Member  States Sections I.C(a) and II
W/137 Mauritius Whole paper
W/138 Republic of South Africa Paragraphs 4 and 6
W/139 New Zealand Paragraphs 6-10 of APEC
Principles to Enhance Competition
and Regulatory Reform
W/140 European Community and Member States Sections 2.1, 3.1, 3.2 and 3.3
W/142 United States Whole paper
W/143 Trinidad and Tobago Sections III, IV, VII and VIII
W/145 Japan Section II.D
W/148 Australia Sections I and IV
W/151 Switzerland Section C
W/152 European Community and Member States Pages 3, 4, 6, 7, 10 – 12
W/154 Korea Paragraph 4(3)
W/155 Canada Section IV:A
W/156 Japan Paragraph 2(b)
W/158 Republic of Croatia Paragraph 4
W/159 Australia Paragraphs 11-14
W/160 European Community and Member States Paragraph 4
W/161 Romania Page 3
W/162 Colombia Paragraph 4
W/164 United States Whole paper
W/165 Czech Republic Section B.5
W/167 Japan Whole paper
W/175 European Community and Member States Paragraph 1(c)
W/179 Trinidad and Tobago Page 2
Source: WTO (2002d).WT/WGTCP/W/228
Page 127
Appendix II.E: Framework agreements on cooperation on competition law
enforcement and related matters with the European Commission
or European Communities
Party Framework
Argentina Framework Agreement of 1990
Austria European Economic Area Agreement (EEA) of
1993
Belarus CIS Agreement of 1995
Brazil Framework Agreement of 1995
Bulgaria Europe Agreement of 1991
Canada Bilateral Cooperation Agreements of 1999 and
2000
Central American republics Framework Agreement of 1993
Chile Framework Agreement of 1996
Cyprus Free Trade Agreement
Estonia Europe Agreement of 1995
Finland European Economic Area Agreement (EEA) of
1993
Hungary Europe Agreement of 1991
Iceland European Economic Area Agreement (EEA) of
1993
Israel Euro-Mediterranean Agreements of 1995
Jordan Euro-Mediterranean Agreements of 1997
Kazakhstan CIS Agreement of 1995
Kyrgyz Republic CIS Agreement of 1995
Latvia Europe Agreement of 1995
Liechtenstein European Economic Area Agreement (EEA) of
1993
Lithuania Europe Agreement of 1995
Member countries of ACP Cotonou Agreement of 2000
Member countries of MERCOSUR Framework Agreement of 1995
Member countries of the Andean Pact Framework Agreement of 1993
Moldova CIS Agreement of 1994
Morocco Euro-Mediterranean Agreements of 1996
Norway European Economic Area Agreement (EEA) of
1993
Palestinian Authority Euro-Mediterranean Agreements of 1997WT/WGTCP/W/228
Page 128
Party Framework
Poland Europe Agreement of 1991
Russia CIS Agreement of 1994
Slovakia Europe Agreement of 1995
Slovenia Europe Agreement of 1995
Sweden European Economic Area Agreement (EEA) of
1993
Tunisia Euro-Mediterranean Agreements of 1996
Turkey Free Trade Agreement of 1961 and 1995
Ukraine CIS Agreement of 1994
United States Bilateral Cooperation Agreements of 1991 and
1998
Source: UNCTAD, Experiences gained so far on international cooperation on competition policy
issues and the mechanisms used, TD/B/COM.2/CLP/21, 19 April 2002WT/WGTCP/W/228
Page 129
Appendix II.F: Documented number of cases notified by and to the European
Commission during 1991 - 2001
Merger cases Non-merger cases Total Cases notified
EC-US US-EC EC-US US-EC EC-US US-EC
1991 3 9 2 3 5 12
1992 11 31 15 9 26 40
1993 20 20 24 20 44 40
1994 18 20 11 15 29 35
1995 31 18 11 17 42 35
1996 35 27 13 11 48 38
1997 30 20 12 16 42 36
1998 43 39 9 7 52 46
1999 59 39 11 10 70 49
2000 85 49 19 9 104 58
2001 71 25 13 12 84 37
Cases notified 6.1999-12.1999 1.2000-12.2000 1.2001-12.2001
EC – Canada 4 9 8
Canada – EC 3 10 10
Key : X-Y means notifications by X to Y.
Source: Annual Reports from the European Commissi on to the European Council and the European
Parliament on the application of the Agreement between the European Communities and theGovernment of United States (and in the relevant years Canada) regarding the application of theircompetition laws.