WORLD TRADE
ORGANIZATIONWT/WGTCP/W/149
18 September 2000
(00-3655)
Working Group on the Interaction
between Trade and Competition PolicyOriginal:  English
COMMUNICATION FROM INDIA
Reproduced hereunder is a statement delivered by the representative of the Permanent
Mission of India at the meeting of the Working Group on the Interaction between Trade and
Competition Policy which took place on 15-16 June 2000.
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It was agreed that during 1999 the Working Group would benefit from a focussed discussion
on: (i) the relevance of fundamental WTO principles of national treatment, transparency and most-
favoured nation treatment to competition policy and vice versa; (ii) approaches to promoting
cooperation and communication among Members, including in the field of technical cooperation; and(iii) the contribution of competition policy to achieving the objectives of the WTO, including the
promotion of international trade.  It was also ag reed that the Working Group "will continue to ensure
that the development dimension and the relationship with investment are fully taken into account".
The mandate set for this Working Group by the Singapore Ministerial Conference was to
"study issues raised by Members relating to the interaction between trade and competition policy,
including anti-competitive practices, in order to  identify any areas that may merit further
consideration in the WTO framework".  Subsequently, the General Council decided in December
1998 that the Working Group on the Interaction between Trade and Competition Policy should
continue the educative work that it has been undertaking pursuant to paragraph 20 of the Singapore
Ministerial Declaration.  India is of the view that much work remains to be done in terms of
broadening and deepening the understanding of the issues involved in the interaction between trade
and competition policy within the same mandate referred to above.
The principles of non-discrimination and transparency are fundamental to the multilateral
trading system. Competition policy, however, covers a much larger canvass than trade policy, and
submissions so far have related it to investment policy and industrial policy, among other areas.National treatment in the context of competition polic y in that sense is more complex.  Besides, there
is the question of the development dimension.  How are the developmental concerns of developing
countries going to be met?  The proposal in the previous meetings included sectoral exemptions and
transition periods.  Some delegations have stated that transparency is the most essential element and
that once transparency is ensured it would not be easy for Members to discriminate.  Whiletransparency could be the essential first step, concerns related to the different stages of development
of developing countries, and differences in their endowments, need to be taken care of.  We have
received some interesting submissions looking at developmental aspects of competition policy from
delegations such as the European Community and its member States and Trinidad and Tobago .  These
would need to be carefully looked at by us before we can make definitive comments on these
submissions.WT/WGTCP/W/149
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It has been stated by many delegations that the objective of competition policy is to obtain
efficiency enhancement.  What some of them may have in mind may be "allocative efficiency".
Liberalized trade certainly could lead to better allocation of domestic resources in the trading
countries.  However, gains from allocative efficiency enhancement are once and for all involving theoutward shift of the "production frontier".  What the developing countries are looking for is dynamic
efficiency gains or gains in productivity over and above that due to increases in the factors of
production.  This is the concept of total factor productivity (TFP) growth. TFP enhancement is
possible only through increased knowledge, technology upgradation, better organizational and
management techniques in production and through general enhancement of education and skill levels.
Trade could aid economic development only to the extent that it helps transfer knowledge, embodied
and other, aid absorption of technology and enhance technical and skills development, and therebyenhance TFP, in the trading developing countries.
International trade in itself is not a "zero sum" game.  Trade could benefit both the players.
However, anti-competitive behaviour by either of the two trading entities could help it corner the
gains from trade.  Much of the benefits of international trade over the last century have been madepossible through the very same "beggar-thy-neighbour" policies pursued by countries in the absence
of any binding rules restraining such practices.  Such practices are generally promoted by making
"competition policy" subservient to "industrial" policies.
The essential focus of competition policy in advanced countries is the promotion of allocative
efficiency and reduced price for consumers.  This static perspective may not aid economic
development. The debate related to "consumer welfare", "producer interests" and "public interest" in
the context of development is still alive.  The Japanese experience for the period 1950-1973 indicates
that the very high growth of the Japanese economy was facilitated by "subordination" of competition
policy to "industrial policy".  Various scholars have brought out how MITI encouraged a variety ofcartel arrangements in a wide range of industries - exports and import cartels, arrangements to combat
depression or excessive competition, rationalization cartels, etc.  Similarly, believing that large scale
enterprises were required for promotion of technical change and for Japanese firms to compete
effectively with their western counterparts, MITI encouraged mergers between leading firms in "key
industries".
Discussions on competition policy in the contex t of development cannot end without touching
the concerns of developing countries related to the provisions of the TRIMs Agreement.   Some
TRIMs have been seen to be  useful  tools to control horizontal as well as vertical restrictive business
practices of multinational corporations.  A need to remove the prohibition of such measures under the
TRIMs Agreement has been suggested on the basis that this withholds from developing countries
important instruments to counteract anti-competitive practices.  Similarly, well-known tradeauthorities have separately shown that TRIMs could be used by host countries in bargaining with
multinational companies.  Their argument goes as follows:  FDI would take place only in case there is
a benefit (rent).  The MNCs tend to utilize their market power to appropriate most of the gains (rents)
to themselves.  Hosts respond with TRIMs and performance requirements to capture rent for
themselves.  TRIMs are characterized as implicit bargaining over the allocation of rents from FDI.  Ithas been demonstrated how potential RBPs could nullify the benefits arising out of FDI and how
TRIMs could counter such RBPs like import from parent, market allocation, transfer pricing, etc.  In
this context, it has been suggested that the purs uit of a market access agenda may result in outcomes
that are detrimental from a welfare point of view.  This is a key reason why some competition
authorities are leery of putting anti-trust on the WTO agenda and why doubts have been expressedabout the ability of a WTO-based process to play as constructive a role in the area of competition law
as it does in the area of trade law.  The same argument could be used to indicate that TRIMs could be
used to enhance the gains from trade by developing countries.WT/WGTCP/W/149
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During the discussions, the available options before Members in the area of competition
policy such as unilateral, bilateral, regional and international or multilateral routes have been
mentioned.  The feasibility and enforceability of any agreement on international competition policy
that goes beyond general procedural cooperation and the introduction of transparency mechanisms has
been questioned by many Members.  Bilateral agreements, regional agreements or plurilateralagreements have found support from some Members.  The absence of competition law in half the
WTO Member countries, the difficulties in harmonization of competition policy principles, the
enforceability of the principle of "positive comity" in an effective manner especially from the point of
view of developing countries and the general lack of confidence in the ability of the system to build in
the development dimension in an effective and operational way into any competition policy
agreement on a multilateral level results in a situation wherein my delegation does not, at least at the
current stage of the educational process, see any great advantage in having a WTO Agreement onCompetition Policy.  The practicability of enforcing the principle of positive comity or information
sharing among competition authorities is doubtful especially because the ability of developing
countries to make any effective use of such positive  comity arrangements  is anybody's guess.
Therefore, the practicability and effectiveness of principles like that of "positive comity" among all
the Members of WTO is doubtful at this stage.  The international instruments like the UN Set and the
various OECD guidelines, based on which the elements of a multilateral arrangement are being
worked out by some of the Members, are non-binding.   The extent to which the elements identified in
such instruments could be replicated in WTO may be limited.
This does not mean that enterprise practices having cross border effects and having
significant impact on distribution of gains of international trade among developed and developing
countries should be left unbridled.  The Working Group process has contributed enormously to the
understanding of the subject by the Members.  However, substantial work remains to be done.
During the discussion in the Working Group some delegations have dwelt on the need to
address governmental measures in a multilateral competition policy framework.  Trade policy's
concern is with governmental measures.  The very rationale of talking about competition policy in the
context of WTO has in fact been the apprehension that once the (government) policy-induced
restrictions are removed through the implementation of Uruguay Round commitments by Members,
the vacated space might be occupied by private enterprise practices of an anti-competitive nature.
As Jacquemin and others (1998) have brought out "... the role of competition policy is to
curtail the misbehaviour of firms, in contrast to that of (international) trade policy which is to prevent
misbehaviour of governments in the trade area.  Nevertheless, the two do overlap as, for example, in
disputes with respect to non-border trade barriers.  Further, the international aspects of competition
policy interface not only with trade policy, but also with other important questions such as cross
border mergers and acquisitions, industrial policies of national governments, strategic businessalliances, etc.".  After outlining an international competition organization outside WTO, but in
cooperation with it, these authors have concluded that "... at present the WTO remains a system which
deals almost exclusively with the actions of nati onal governments, while competition policy deals
primarily with the actions of private agents.  Both are meant to increase welfare but each achieves this
in its own way.  Competition policy considerations which are broader in scope and more complex interms of contents than trade questions, are being in danger of being submerged by trade policy
considerations".  We need to guard against this.
We look forward to very useful contributions from Members on all aspects of competition
policy, especially those related to the developmental needs of countries.  As we have pointed outduring our earlier interventions, it may be too early to rush to conclusions on issues like this that are
complex and for which the social and institutional systems in many countries are not yet well
developed.
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