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WTO NEWS: 1995 PRESS RELEASES

PRESS/30
20 November 1995

Economic globalization increases impact of national competition policies on International Trade- says Renato Ruggiero

“An urgent need for analysis of links between competition policy and trade policy. The globalization of the world economy means that there is an increasing international impact of differences in competition policy norms and degree of enforcement," said Mr. Renato Ruggiero, WTO Director-General, today (20 November) at the Conference on Antitrust in Rome.”

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"As successive rounds of trade negotiations have increasingly limited the scope for governmental measures that restrict or distort the conditions of international competition, attention inevitably is more focused on private sector measures which have a similar effect but are not subject to international rules. "The WTO has become more involved in internal government policies that affect trade. In particular, it is concerned not just with the treatment of goods originating in the territories of its Members but with the treatment of foreign companies operating within its Members. If the international community seeks to negotiate rules that require countries to give rights to foreign companies, it is almost inevitable that the issue of international cooperation to deal with possible abuses of those rights will also arise. Indeed, Article 9 of the WTO Agreement on Trade-Related Investment Measures explicitly makes this link when it foresees before the end of the century consideration of the negotiation of provisions on investment policy and competition policy.

"In fact the link between trade and competition policy is already under discussion by WTO member governments in the basic telecommunications negotiations. How to ensure that dominant suppliers do not restrict access or distort conditions of competition is a key element in these negotiations. The issues relate to access for suppliers to physical networks, including the cost of such access and the provision of information necessary to ensure technical compatibility; and also competition safeguards in respect of the risk of cross-subsidization by dominant suppliers and their tying access to other requirements. These matters are already actively under negotiation. One of the issues in this connection is whether the best approach to dealing with these matters is through international rules on regulatory requirements specific to the telecommunications sector or through the applicability of more general competition law principles relevant to positions of market dominance."

Mr. Ruggiero highlighted examples of the possible impact of competition policy on trade, such as the treatment of export cartels, which are generally exempted from the scope of competition legislation in most countries. "It is often suggested that nations should agree to fully apply their competition laws to export cartels in order to avoid adverse effects of such cartels on trading interests of other nations. Another example of possible use of competition policy for industrial policy reasons is the area of merger control policies. From a trade policy perspective, concerns may arise especially where merger control is used as an instrument to strengthen the competitive position of domestic or transnational firms in international markets at the expense of trading partners. Finally, there may also be an industrial policy dimension of the application of competition policy to cooperative research and development ventures, in particular where ventures involving only domestic firms are treated more leniently than ventures involving foreign-owned or controlled firms."

Mr. Ruggiero cautioned that in the absence of a process for an overall examination of the links between trade policy and competition policy, there was a risk that these issues would be handled case by case in an ad hoc, pragmatic way, without necessarily forming part of a coherent vision of how trade policy and competition policy should be mutually supportive.

"There is thus an urgent need for a dispassionate analysis at the multilateral level of the overall links between competition policy and trade policy, notably to identify the problems that may require action and the options for such action."

In conclusion, Mr. Ruggiero said that it was both timely and appropriate to address competition policy in the framework of the multilateral system. "But it is equally clear that there is a great deal of preparatory work that must be done, both in order to clarify the issues and to build the necessary consensus for taking them up in the WTO."