WORLD TRADE
ORGANIZATIONWT/WGTCP/W/160
14 March 2001
(01-1251)
Working Group on the Interaction
between Trade and Competition PolicyOriginal:  English
COMMUNICATION FROM THE EUROPEAN COMMUNITY
AND ITS MEMBER STATES
The following communication, dated 9 March 2001, has been received from the Permanent
Delegation of the European Commission with the request that it be circulated to Members.
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Introduction
In previous submissions to the Working Group, the European Community (EC) and its
member States have addressed a number of specific issues as they arise in relation to a possible WTO
framework agreement on competition, including the development dimension of competition law andpolicy.
1  In its submission to the October 2000 meeting of the Group, the EC and its member States
presented its ideas on possible elements that could be included in such a framework agreement and
offered its views as to why an agreement on competit ion policy would be in the interest of all WTO
Members.2
We have considered it useful in the present submission to address some of the questions that
have been raised by other Members during previous meetings of the Group and which are now
contained in the Note by the Chairman of 24 January 2001.3  In particular, we have focused on those
questions which relate to the elements of a possible WTO framework agreement – as proposed by the
EC and others – as well as to the development dimension of any such agreement.  For ease of
presentation, questions have been grouped into a few clusters, although some of the questions relate to
more than one cluster.
1. Possible elements of a WTO framework agr eement on competition, the adequacy of
existing WTO agreements and the applic ation of the WTO dispute settlement
mechanism
With regard to the assertion that the principles of non-discrimination and transparency are
fundamental to competition law and/or policy, is there any evidence that those principles are not
being observed by Members in their competition law/policy regimes?  Is an additional multilateralinstrument needed given that there are already non-discrimination obligations in relation to trade
in goods?  Would a transparency obligation in relati on to competition apply to states, institutions or
to private sector entities?
                                                     
1 See e.g. submission from the EC and its member States, WT/WGTCP/W/140.
2 See WT/WGTCP/W/152.
3 Updated list of questions raised by Members (Job 520), 24 January 2001.WT/WGTCP/W/160
Page 2
Does the non-discriminatory application of competition policy give rise to conflicts with
economic development and/or policies favouring the advancement of particular social groups?
How far could the problems identified be addressed through existing WTO
agreements/activities touching on competition policy questions?  To what extent is application of
the Dispute Settlement Understanding a necessary component of action in the WTO framework?
The principles of transparency and non-discrimination are the cornerstones of the multilateral
trading system.  Together, they ensure a level playing field and equal competitive opportunities for
firms, their products and services, and help bring about a higher degree of predictability to enable
firms to familiarise themselves with existing rules and regulations before making major business
decisions, just as consumers may become more familiar with their rights.
Transparency is already firmly incorporated in a number of WTO Agreements such as GATT
(Article X) and GATS (Article III), but as an overall principle, transparency goes further than what isset out in these provisions.  Specific transparency provisions are included in most WTO agreements.
Such provisions are specifically tailored for the type of government measures covered by the
agreement.  The same goes for the existing provisions on non-discrimination to be found in WTO
agreements such as GATT and GATS.
As regards transparency in the competition field, any commitment would obviously apply to
laws, regulations and other government measures taken in application of domestic competition law.
The transparency obligation would apply not only to publications of relevant laws and regulations, but
also, perhaps more importantly, to guidelines, as  appropriate, for their future application and
interpretation, as well as possible exclusions and exemptions as they may apply.
4
The application of the principle of non-discrimination, i.e. MFN and national treatment,
within the context of competition law and policy would mean an obligation not to formally
discriminate against firms on the basis of their corporate nationality.
Although the overall aim of non-discrimination will generally be the same under the various
WTO agreements, namely that of ensuring a level playing field between domestic and foreign
operators (and their goods and services) as well as between all foreign operators, the manifestation ofdiscriminatory treatment takes widely differing fo rms such as the discriminatory use of internal
taxation and other measures under the GATT, cf. GATT Article III.  Consequently, we believe there
is a need for the inclusion of the principle of non-discrimination in a WTO framework agreement on
competition by way of a separate, specific provision, which would take into account the particularities
of competition law and policy.  Similarly, despite the competition-related provisions in a number of
existing WTO agreements such as TRIPS and GATS (including the reference paper on basic
telecommunications), all of these are area and/or issue-specific.  The globalisation of our economycalls for a horizontal, generally applicable framework.  Clearly, principles on interconnection for
telecommunication would alone offer little help in tackling international cartels.
It is our assessment that most existing domestic competition laws – if not all - do not
prescribe discrimination against firms on the basis of corporate nationality.  Although there are
significant substantive differences to be found between domestic competition laws, both transparencyand non-discrimination are important elements of commonality in these laws.
The fundamental importance of transparency and non-discrimination does not depend,
however, on the extent to which current laws are or not in contradiction with such principles.
                                                     
4 The panel in the Kodak-Fuji case interpreted GATT Article X as also covering administrative rulings
in individual cases where such rulings establish or revi se principles or criteria applicable in future cases.WT/WGTCP/W/160
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Affirming such principles as WTO commitments would reinforce their value in the domestic legal
system and establish a stronger basis for mutual trust and cooperation among competition authorities.
Furthermore, for those WTO Members who have not  yet adopted domestic competition laws, a WTO
agreement would provide important principles to be incorporated in the drafting of domestic
competition law.  Finally, a WTO Agreement would help lock Members into the principles oftransparency and non-discrimination, making their legal regimes transparent and predictable and
limiting the possibility of recourse to formal discriminatory treatment at a later point in time.
There is no reason, a priori , to consider that the non-discriminatory application of
competition policy could be in conflict with industrial or social policies.  The instruments typically
used to promote such goals – principally certain forms of subsidies and temporary border protection –
are covered by other disciplines in the WTO and would not be affected by a WTO competition
agreement.  In some cases, there may be an interface between industrial policy considerations andexceptions from the application of competition law.  The EC considers that a WTO agreement should
follow a flexible approach to the issue of except ions from the application of domestic competition
law.  This is the reason why we suggest that, as regards exceptions and exemptions, disciplines could
focus on transparency.  In general, a competition agreement should be firmly based on flexibility and
progressivity so as to be fully responsive to deve lopmental concerns, including those relating to the
promotion of certain industries.
Finally, as regards the application of the DSU, we believe this should be limited to the
obligation of WTO Members to have a domestic competition law based on the core principles.  In
other words, application of the DSU to individual decisions of competition authorities would be
excluded.  The application of the DSU would play an important systemic role in ensuring credibilityof the commitments assumed by WTO Members.  The particular modalities of dispute settlement
should of course be subject to discussions and negotiations among WTO Members.
2. A WTO framework agreement and international cooperation
How would an agreement on international coope ration apply to and generate benefits for
countries at different stages of development and w ith differing degrees of experience and resources
in competition law and policy?
How would the independence of national competition authorities be reconciled with a
multilateral agreement?
How would the cooperation provisions in a multilateral framework, for example regarding
the exchange of information and enfo rcement assistance, actually operate?
If cooperation is to be essentially voluntary in nature, why is it necessary to have a
multilateral framework?  Would voluntary tools of cooperation be sufficient to address the
problems and concerns of developing countries in the area of anti-competitive practices,
particularly in light of existing dispar ities of bargaining power and resources?
To the extent that action on the proposed new modalities for cooperation is warranted, how
should it take into account the diversity of, and asymmetries in, Members' national economic
situations, competition regimes and resources, and legal and constitutional cultures?
In an increasingly globalized economy, we remain convinced that all WTO Members –
developing as well as developed - would sta nd to benefit from international cooperation on
competition matters.  It is a widely documented fact that firms of today are essentially global in nature
and that they conduct their activities globally as well.   When firms in addition to this also engage in
international anti-competitive practices such as hard -core cartels, these practices adversely affect aWT/WGTCP/W/160
Page 4
multitude of jurisdictions.  This leads to complicate d jurisdictional issues regarding the application of
domestic competition laws when faced with such in ternational anti-competitive practices, just as there
are a number of practical problems that arise, most  notably impediments to the collection of evidence.
The question of gathering evidence located outside the jurisdictional reach of the intervening
authority provides a good example of how internat ional cooperation would be a two-way street that
could benefit all WTO Members.  In the French/West African Ship Owners Conference case , the
European Commission was investigating a cartel operating freight routes between the ports of 12
West African countries and the EC.  The cartel meant higher freight rates whereby African exporters
suffered.  The Commission encountered difficulties in gathering the evidence needed for successful
action to be taken against the cartel as much of this evidence was located in the West African
countries in question and no cooperation agreements existed.  Clearly, in this case access to
international cooperation would have benefited all countries affected by the cartel activities.5  Several
other cases have also illustrated the importance of cooperation for the effective application of
competition law by developing countries, particularly in cases with an international dimension,
including those relating to the activities of multinational corporations.
A WTO agreement could establish flexible modalities for cooperation whereby all WTO
Members – regardless of their level of experience with investigation of competition matters – could beallowed to take part in and benefit from such cooperation.  Needless to say, the experience of some
competition authorities would be greater than that of a country which has only now adopted a
competition law and established a competition authority, but that is not to say that less experienced
countries should be precluded from the benefits of cooperation.  On the contrary, they would be likely
to gain the most from access to international cooperation.
In our earlier contributions (WT/WGTCP/W/140 and 152) we have explained how we foresee
the cooperation under a WTO framework agreement, namely cooperation that would range from
exchanges of experiences and discussions on areas of common interest to case-specific cooperation.
We believe a WTO framework agreement is necessary to sustain such cooperation as nothing similar
exists and most developing countries are not parties to existing bilateral cooperation agreements.  Oursuggestion would also meet the frequent and justified calls made by developing countries for access to
international cooperation such as during the recent UNCTAD 4
th Review Conference of the Set.6
The exchange of information under a WTO fram ework agreement would cover both factual
and legal information that is not deemed confidential as well as confidential information where a
waiver has been granted regarding its transmission to other competition authorities.  Clearly, as
regards both types of information, this is not the kind of information that is readily available. As
regards case-specific cooperation where important interests of a WTO Member are affected, thiswould extend to three types of anti-competitive practices with an international dimension, namely
practices that affect international markets (including international cartels); practices that affect market
                                                     
5 For a more detailed summary of the case, see the Annex attached submission WT/WGTCP/W/140
from the European Community and its member States.
6 See document TD/RBP/CONF.5/L.2, para. 5-6:
"5. Calls upon State to increase cooperation at all levels between their competition authorities and
Governments in order to strengthen effective action in the field of merger control and against cartels as covered
by the Set, especially when these occur at the international level;
6. Notes that, while bilateral competition cooperation efforts are essential, there is need to promote
regional as well as multilateral competition initiatives, particularly for smaller and developing economies, and
requests the UNCTAD secretariat to study the possi bility of formulating a model cooperation agreement on
competition law and policy, based on the UN Set of Principles and Rules on Competition;".WT/WGTCP/W/160
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access (including exclusionary abuse of a dominant position and import cartels), and; practices with
an effect on a different market than where they originate (including export cartels and abuse of
dominance by a foreign corporation).
In more concrete terms, WTO Members should  stand ready to enter into consultations to
address anti-competitive practices with an international dimension.  To facilitate such consultations, aWTO Member may inform other Members whose important interests may be affected by an ongoing
investigation and proceeding under its competition laws.  Similarly, a WTO Member could draw the
attention of another WTO Member to evidence of anti-competitive practices, which adversely affect
its trade or investment and seek information about any possible competition investigation regarding
such practices.  This could have been used in the French/West African Shipowners Conference case ,
where the European Commission could have brought the anti-competitive practices to the attention of
the competition authorities of the 12 West African countries, just as these authorities could haverequested information about the ongoing investigation conducted by the European Commission.  As
pointed out, African exporters suffered as a direct result of the anti-competitive practices by way of
higher freight rates.  Furthermore, the Commission could have made a request to the West African
competition authorities for assistance in obtain ing the physical evidence relating to the anti-
competitive practices, which was located within the jurisdictions of these countries.  Cooperation may
also be particular useful in situations in which a developing country seeks assistance from the
corporate home country of a foreign multinational in  relation to an ongoing competition investigation
or seek information which could be of value for enforcement activities in relation to international or
export cartels.  Consultations would also provid e an opportunity to exchange views about market
analysis or possible remedies.  Where anti-competitive practices adversely affect several markets andare subject to parallel investigations by competition authorities, WTO Members should endeavour to
co-ordinate their actions.
The above modalities of case-specific cooperation would be "voluntary" in the sense that
countries would not be required to provide enfo rcement assistance.  WTO Members would, however,
have a commitment to enter into consultations and consider sympathetically such requests.  Thecircumstances under which consultations can be envisaged would be provided in the framework
agreement.  It can be expected that this would create particular incentives to develop such
cooperation, including when requests are made by developing country competition authorities.
Participation in the framework agreement would also  contribute to remedy information asymmetries
and to develop a network of contacts between competition authorities at different levels of
development.  While cooperation can also be established on an ad hoc basis, it is unlikely to be
sustained in the absence of a solid institutional framework.
It should be noted that under the proposed flexible modalities for cooperation the
independence of national competition authorities would remain wholly untouched.  In fact, national
competition authorities along with domestic competition laws will be the backbone for the effective
operation and implementation of a WTO framework agreement as we envisage it.  As already noted,
binding commitments would relate to a WTO Member's domestic legislation and not to individualdecisions taken by national competition authorities in order to implement it.  Participation in an
international organization, such as the WTO, would indeed reinforce the domestic standing of national
competition authorities.
3. Is the WTO the best international organization for a framework agreement
Is the WTO an appropriate forum in which to take action on competition policy at a
multilateral level?  What might be the adva ntages or disadvantages of unilateral action or
cooperation in bilateral and/or regional contexts or in other multilateral fora, as compared to
action in the WTO, to address the perceived de trimental impact of anti-competitive practices on
international trade and/or development?WT/WGTCP/W/160
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Given the clear and undisputed link between trade and competition as well as the near global
membership of the WTO with its 140 plus Members, we remain convinced that the WTO is the right
and proper forum for multilateral action regarding rule making on competition policy.
Unilateral action, when faced with international anti-competitive practices, has limited
effectiveness and can result in jurisdictional conflicts.  Bilateral cooperation arrangements haveworked well in the past and offered substantial benefits for all parties involved.  However, they suffer
from a number of shortcomings, most notably that they are (predominantly) concluded between
developed countries only.  In a globalised economy, international anti-competitive practices affect a
number of jurisdictions and are often directed at developing countries, which have limited
investigative capabilities and hence a lower risk of detection.  In light of the increasing number of
jurisdictions with a domestic competition law regime, a network of bilateral agreements would,
moreover, be extremely costly to administer.
By our proposal for a WTO framework agreemen t on competition we are not suggesting that
the WTO should be the only forum competent to deal  with these issues.  Rather than "either or" we
see it as a question of all relevant organizations working together towards the attainment of a common
goal, namely the adoption and implementation of sound competition laws and policies that would
contribute to equitable growth and development.  Other organizations, including but not limited to
UNCTAD and the World Bank, should continue doing their valuable work in the area, but the WTO
would be the forum for international rule making in the area and provide an overall framework to
promote international cooperation in relation to anti-competitive practices of an international
dimension and to support enhanced capacity building efforts.
Similarly, we are not suggesting that international cooperation should replace regional
cooperation.  Such arrangements are also likely to prove beneficial to developing countries and
smaller economies.  The countries of the Caribbean region (CARICOM) and those of Eastern and
Southern Africa (COMESA) will now be addressing anti-competitive practices through a regional
arrangement, thereby allowing them together to t ackle anti-competitive practices that affect several
jurisdictions.  Indeed, the European Union strongly supports efforts of developing countries toreinforce regional cooperation on competition policy matters.  It is clear, however, that - in view of
the global nature of anti-competitive practices – the parties to regional cooperation arrangements
would also benefit from cooperation with countries outside the region, both developed and
developing.
In conclusion, the adoption of a WTO framework agreement on competition would not in any
way replace existing organizations and the work they undertake in the competition field.  Multilateral,
regional and bilateral cooperation arrangements are mutually supportive and would continue to be so.
4. The development perspective and technical assistance
What is the most appropriate phasing-in of competition law from a development
perspective, taking into account relevant resource limitations?  In particular, should developing
economies attempt to deal with anti-competitive mergers early in the process of applying
competition policy, or should this be postponed until a later stage?
Could the proposed elements of a multilateral framework dealing with technical assistance
be more expeditiously pursued outside the context of the WTO?
7
                                                     
7  This question subsumes the following question which was incorporated in the previous checklist of
questions (Job 5696, 21 September 2000):  "What might be the advantages or disadvantages of action on the
various possible new modalities in the WTO, as compared to unilateral, bilateral and regional action or action inWT/WGTCP/W/160
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Just as the EC has continuously stressed that a WTO framework agreement on competition
would not imply a harmonisation of competition law, it must be stressed that domestic competition
laws are not based on a "one-size-fits-all" model.  On the contrary, such laws and policies need to be
carefully designed and adapted to adequately reflect the stage of economic development of a givencountry as well as its overall policy priorities.
On the question of the most appropriate phasing-in, this again would depend entirely upon the
particular situation of the country in question, including its available resources for competition
enforcement as well as the anti-competitive practices – be it domestic or international – that the
country is facing.  Empirical evidence clearly supports that competition laws and policies ideally
should be implemented in tandem with trade liberalisation and other regulatory reform to avoid thatprivate barriers to trade will shoot up where governmental barriers have been removed as well as have
private monopolies replace government monopolies.  This of course should all be seen in the light of
the developmental stage of the country in question.
Just as EC competition law has continued to de velop and be refined over the last decades in
light of the changing business environment and practices, so it may reasonably be expected that it will
be the case with developing countries.  One might easily imagine a situation where a country in the
early stages of the implementation of competition law and policy would choose to focus on certain
core substantive areas such as cartels and abuse of a dominant position.  Following the successful
introduction and ensuing enforcement of disciplines on these practices and the attainment ofinstitutional experience, the country might then choose to move on to address certain vertical
restraints and mergers and other concentrations.  It should be noted in this context that the EC
proposal on substantive issues to be included in  a framework agreement only suggests to focus on
hard-core cartels (i.e. price fixing, bid rigging, mark et allocation, and output restrictions), which are
the most serious and universally recognised breaches of competition laws.
On the issue of merger control, obviously it will be for each country for itself to assess the
extent to which they are affected by merger activity and whether they wish to adopt merger control
rules in this regard.  Discussions in the Working Group have shown differing opinions on this issue,
and some Members – especially smaller economies - have expressed doubts as to the desirability for
them of merger control.  Again, drawing upon ou r own experience in the EC, it was not until 1990
that the Merger Control Regulation was adopted and this Regulation only applies when theconcentrations in question are over a certain threshold.  For concentrations falling below this
threshold, the competition authorities of individual EC member States are at liberty to act.
As regards technical assistance in the competition field, such assistance is presently provided
by a number of international organizations such as UNCTAD and the World Bank, just as the EC anda number of bilateral donors are also providing assistance.  However, there is no structure or
framework within which such activities can be discussed and coordinated to provide the most optimal
results for the recipients.  Consequently, there is a real risk that there could be unnecessary
duplication of work.
A WTO framework agreement on competition policy could have an important catalytic role
and facilitate the design of more coherent and multi-year technical assistance programmes which
could cover issues ranging from initial economic analysis and the drafting of competition laws to
training and exchange of staff in order to further the expertise and enforcement capabilities of all
WTO Members and their competition authorities.  The assistance provided should be demand-drivenand should help developing countries to take an active part in the WTO agreement and reap the
                                                                                                                                                                    
other multilateral fora, in particular for addressing th e problems of anti-competitive practices that are most
relevant to trade and/or development?"WT/WGTCP/W/160
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benefits from access to international cooperation from as early a stage as possible well while bearing
in mind the particular situation of a country.
We are not suggesting, however, that efforts to develop a more coherent and enhanced
approach to technical assistance should wait until such time as a WTO agreement has been concluded.Already now, the EC is engaged in an effort to integrate competition policy with its bilateral
cooperation programmes and we would favour enha nced cooperation and coordination with other
donors within the overall framework of national development strategies.  These efforts should
continue and be intensified in parallel to the negotiation of a WTO agreement.  Indeed, our
expectation would be that an integrated approach to technical assistance in the competition field be
established no later – and preferably before – the conclusion of such a WTO agreement on
competition.
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