WORLD TRADE
ORGANIZATIONWT/WGTCP/W/159
13 March 2001
(01-1209)
Working Group on the Interaction
between Trade and Competition PolicyOriginal:  English
COMMUNICATION FROM AUSTRALIA
The following communication, dated 26 February 2001, has been received from the
Permanent Mission of Australia, with the request that it be circulated to Members.
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Australia's Experience in Competition Policy Development
1. This communication describes how Australia has arrived at a comprehensive national
competition policy;  notes the significant long-term benefits to the national economy in terms of GDP
growth and improved microeconomic efficiencies;  explores how Australia's reform may be relevant
to other Members' efforts to implement domestic competition policy; and considers how competition
policy relates to trade liberalization.
Achieving a National Competition Policy
2. Australia's comprehensive competition policy regime may be of particular interest to states
where responsibility for competition matters may lie in more than one jurisdiction.  The basis of
Australia's current competition laws is the Trade Practices Act 1974 .  While it has been amended
since its enactment, its two main objectives have remained intact: first, the prevention ofanticompetitive conduct through competition law; and second, the assurance of fair trade practices,
including consumer protection. Until 1995, the Trade Practices Act did not apply to all sectors of the
economy.  The 1993 Report by the Independent Committee of Inquiry on National Competition
Policy (the 'Hilmer Report') recommended the creation of a genuine national  competition policy
covering all trading entities regardless of ownership.  This was achieved through the Competition
Policy Reform Act 1995,  accompanied by separate legislation by all States and Territories.
3. The Hilmer Report recommendations became the basis of Australia's current competition
policy.  Its terms of reference stipulated that:
• No participant in the market should be able to engage in anticompetitive conduct
against the public interest.
• As far as possible, universal and uniformly applied competitive conduct rules should
apply to all market participants, regardless of the form of business ownership.
• Conduct with anticompetitive potential said to  be in the public interest should be
assessed by an appropriate transparent assessment process, with provision for review,to demonstrate the nature and incidence of the public costs and benefits claimed.WT/WGTCP/W/159
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• Any changes to the coverage or nature of competition policy should be consistent
with and support the general thrust of reforms: first, to develop an open, integrateddomestic market for goods and services by removing unnecessary barriers to trade
and competition; and second, to reduce complexity and eliminate administrative
duplication, in recognition of the increasingly national operation of markets.
4. Following extensive negotiations between the jurisdictions (Federal Government and State
and Territory Governments) and equally extensive public consultations, in April 1995 the
Commonwealth, State and Territory Governments signed three intergovernmental agreements relating
to competition policy reform.  These set out the prin ciples governments are to follow in relation to:
• prices oversight;
• structural reform of government monopolies;
• review of legislation and regulations to remove anticompetitive restrictions which
cannot be demonstrated to be in the public interest;
• access to services provided by essential facilities;
• the elimination of any net competitive advantage enjoyed by government businesses
as a result of their public sector ownership.
To give effect to a number of these commitments, the Australian Parliament passed the Competition
Policy Reform Act 1995 .
5. The commitments embodied in these agreements effectively underpin National Competition
Policy (NCP) in Australia.  Underlying NCP is the notion that a managed competition policy regimecan create incentives for improved economic performance.  The aim of NCP is not only to facilitate
effective competition to promote economic efficiency, but also to accommodate situations where
competition does not have that effect, or where it conflicts with social objectives.  Accordingly, NCP
includes provisions which permit restrictions on competition where such arrangements can be shown
to be in the public interest.
6. In November 2000, the Council affirmed the importance of the NCP in sustaining the
Australian economy's competitiveness and flexibility and in contributing to higher standards of living.
Benefits of Reform
7. The reforms implemented have contributed significantly to Australia's strong economic
performance in recent years.  It is important to recognize, however, that competition policy reform is a
long-term process.  Ongoing commitment to effective reform by all levels of government is necessary
to maximize the benefits.
8. Effective competition in markets for goods and services provides the main impetus for firms
to seek productivity improvements and ensures that a greater proportion of these gains is distributed inthe form of lower prices.  This reduces operating costs and prices to both business and consumers, and
encourages a wider range and improved quality of goods and services.  In seeking productivity gains,
competition also encourages innovation in produ ction processes and management practices.  The
manner in which resources are managed within the workplace, the rate of adoption of innovation, and
the development of associated skills play an important role in productivity growth.WT/WGTCP/W/159
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9. An effective domestic competition policy also fosters the development of a competitive,
flexible economy which allows more rapid and less costly adjustment to changes in the domestic and
international environment, such as the 1997-98 Asian slowdown.  Reducing structural rigidities in the
economy and developing a competitive market environment have enabled Australia to increase
productivity growth.  Increases in productivity grow th are the best means of achieving higher real
incomes and greater employment opportunities.
10. Competition policy involves continuous efforts to reduce barriers to market entry and exit, to
reform anticompetitive regulations and to expo se government-owned businesses to competitive
market forces in a competitively neutral manner.  Competition reforms also offer a further means to
reduce market inefficiencies – principally through a comprehensive regulatory reform programme.
Capacity Enhancement11. Australia's competition policy experience has been one of enhancing capacity and minimizing
the structural impediments to effective market operation and productivity.  Our experience with
developing countries, especially in APEC, high lights that a phased, capacity-building approach to
competition policy development is the most appropriate approach. (See WT/WGTCP/W/148, 139 and
125.)
12. It appears that developing countries in particular are increasingly recognizing the importance
of competition policy as a development tool.  With globalisation, anticompetitive practices of
enterprises are increasingly international in scope .  Consequently, competition policy is necessary to
respond appropriately to these concerns and to establish a climate conducive to investment, trade and
economic growth.
13. An important feature of any possible future multilateral framework in the area of competition
policy must be its adaptability to Members' differing levels of development.  A number of aspects
need to be considered.  First, with regard to the application of the principles to developing countries, it
is important to consider different economic circumstances and degrees of economic development.
This is relevant, for example, to the breadth of exemptions that would be appropriate in particulareconomies.  A further aspect relates to differences in resource endowments in the sense that certain
applications of competition policy require human and material resources.  Again, differences in levels
of development have to be taken into account.  The final aspect concerns Members' different degrees
of institutional development, in particular, that the more than 80 Member countries possessing - or
which are in the process of introducing - competition laws are at many different stages in their
institutional development.
14. Recognizing the development dimension in  any agreement on competition policy should
include, but not be limited to, matters such as transition periods, progressive commitments and
technical cooperation.  This said, based on the Australian experience, the widest possible application
of competition principles across the economy, includi ng to those sectors which are not internationally
traded, is important to maximize the economic benefits of growth.
Competition Policy and Trade Liberalization: Similar Objectives, Complementary Action
15. Changes arising from trade liberalization have impacted upon competition policies and
competition regulation worldwide.  The close and complementary relationship between trade and
competition policies is founded, in part, on the similarity of their objectives: trade policy and
competition policy both aim to enhance welfare through a more efficient allocation of resources,whether it be by lowering governmental barriers to trade or by promoting competition.  It is now
widely recognized that competition law and policy can complement the significant advancements
made by trade policies in achieving open and accessible markets.WT/WGTCP/W/159
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16. Australia's Productivity Commission recently conducted a study on the impacts of
competition reform in Australia.  Modelling undertaken by the Commission estimated that selected
NCP reforms will add an additional 2.5 percentage points to Australia's long-term GDP growth.
Effective competition regimes can help ensure that internal regulatory and/or private business
practices do not undermine the hard-won market access and efficiency gains arising from progressivereductions in border protection.
17. Similarly, effective trade policies reinforce domestic competition policies by reducing barriers
to market entry. Trade liberalization is essential to maximize the welfare gains arising from improved
productivity in domestic markets.  Economic gains from continued trade liberalization are substantial
and add to the benefits that competition policy alone can bring to an economy.  Modelling included in
a study entitled "Global Trade Reform – Maintaining Momentum" (commissioned by Australia and
presented to the OECD in 1999) estimates that halving the present levels of trade barriers wouldgenerate annual global welfare gains of some US$400 billion, including just under US$90 billion
from agriculture, over US$65 billion from manufactur es and US$250 billion from services.  Earlier
and more comprehensive market opening would genera te larger gains than later, less comprehensive
liberalization.  These benefits would exceed those expected from the Uruguay Round when all
agreements are fully implemented and would be spread throughout a wide range of countries, bothdeveloped and developing.  Full liberalization across all sectors could generate annual gains of
US$750 billion.
18. In short, trade liberalization helps deliver a more productive, outward-looking economy with
higher incomes and better job opportunities, more appropriate use of resources, lower prices and
better quality choices.  Multilateral trade reform generates the biggest global welfare gains.
Conclusions
19. Competition policy in Australia has undergone considerable development in recent years.
The benefits of that process include improved economic performance; productivity gains; higher-
quality goods and services; lower prices; and increased technological innovation.  Australian studiesand experience have shown that competition and trade policies must be mutually reinforcing if they
are to deliver maximum benefits.
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