WTO NEWS: SPEECHES — DG PASCAL LAMY

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Pascal Lamy’s speeches

  

Secretary-General GURRÍA,
Vice-President CANUTO,
Professor JENNY,
Distinguished delegates,

I am pleased to have the opportunity to deliver opening remarks at this Global Forum on Competition. Strong competition policies are an essential element of a dynamic and healthy market economy that yields expanding opportunities and contributes to rising standards of living for all citizens. Such policies play a crucial role in ensuring that the benefits of trade opening are not undermined by collusive behaviour among firms, or by other anti-competitive practices. As the world still struggles to emerge from the economic crisis, it is appropriate that we think together not only about ways to ensure that competition policy makes its contribution to development but also that its role is well reflected and supported in the architecture of the world economy.

The issue of commodity price volatility -- to be the focus of the first substantive session of this Forum - is indeed a good place to start. The volatility of commodity prices has increased in recent times. While to some extent such volatility is undoubtedly a function of evolving climate conditions and changing economic fundamentals including the rapid growth of emerging economies, it is important for the credibility of the system to assess and address the role of anti-competitive practices in this sector. Market forces must be allowed to work, but they should work within the context of an appropriate set of laws, policies and institutions. This is vital to maintain the confidence of the world’s citizens in globalization and the market economy.

The impact of anti-competitive practices in global markets for primary products was the subject of an important Symposium organized by the Indian Consumer Unity and Trust Society International (CUTS) and held at the WTO on 22 September of last year. The papers prepared for the Symposium highlighted a number of concerns in this area. For example, papers on the effects of cartels in primary products markets showed that the incidence of cartel activity in these sectors may have been reduced somewhat by the success of major competition agencies in prosecuting such arrangements over the past decade, But, also, that the level of penalties imposed on cartel participants remains low in relation to the harm caused by these arrangements.

The CUTS Symposium at the WTO also brought out effectively, in my view, the important interaction that exists between private anti-competitive conduct and government measures in the primary products sector. Such measures may include anti-competitive subsidies, international commodity agreements, price regulations or monitoring regimes, and anti-competitive investment measures that unnecessarily limit entry to markets. It seems unlikely that any one set of tools — i.e. the tools of trade or those of competition policy acting alone — can deal effectively with these issues in isolation from the other. Rather, a synergistic approach may well be needed.

Presentations at the CUTS Symposium also suggested that there exist important jurisdictional gaps that limit the effectiveness of competition policy in addressing the full range of practices that potentially impede or distort development and trade. One such practice is that of export cartels. Contrary to the past, this topic has become the subject of particular attention by emerging countries themselves, whose needs in raw materials are increasing as their productive systems are developing.

Looking beyond the primary products sector, and from my vantage as WTO Director-General, it seems timely to recall some of the other ways in which competition policies interact with both development and the international trading system. While these are not necessarily the focus of this year’s Global Forum, they certainly have a bearing and might well be the subject of future Fora or other deliberative work. It is important to stress that these linkages exist and impact on the welfare of citizens and the operation of markets.

Let me mention three examples:

First, very important synergies exist between market-opening trade measures in government procurement markets and the enforcement of competition or antitrust laws. If governments fail to put in place tough measures to address bid rigging, the welfare gains made possible by market-opening measures — facilitated, for example, by the WTO Agreement on Government Procurement (GPA) — will surely be jeopardized. Conversely, opening procurement markets to foreign participants — while certainly not making antitrust enforcement redundant or unnecessary — can undeniably make collusion more difficult, thereby also making good performance more likely. It is for this reason that the WTO Secretariat takes care to reflect the importance of competition law enforcement in this sector. This indeed seems like a fruitful area for collaboration between the relevant international organizations.

Second is the relationship between competition policy and intellectual property rights, already recognized in the WTO Agreement on Trade-Related Intellectual Property Rights but meriting input and reflection from diverse institutional actors. I recognize that this relationship is a delicate and subtle one, and I am not advocating any rash approaches in this area. Nonetheless, the TRIPS Agreement itself refers to the harm that may be caused by anti-competitive practices in this area, and permits governments to take appropriate remedial measures. This begs important questions — for example, what kinds of restrictive licensing practices are genuinely harmful to economic welfare, and what remedies are appropriate for these practices? These questions, it seems to me, cannot be answered by any organization acting in isolation. Rather, they call for joint reflection and deliberation by organizations such as WIPO, the OECD, UNCTAD, the International Competition Network (ICN) and the WTO, in addition to national competition agencies with experience in this field.

A third area of policy interaction brings us back to the subject of international cartels, whether in primary products or other markets. The point here is that, when cartels are permitted to operate, they directly undermine the intended benefits that more open trade can bring, in the form of expanded supply, employment gains, lower prices, and expanded choices for consumers. Instead, supply, and therefore employment, will be restricted; prices will rise and consumer choice will be reduced. For this reason, it seems to me that all participants in the world trading system have a stake in ensuring that cartels, abuses of dominance and other harmful anti-competitive practices are not tolerated.

The foregoing are by no means the only areas of interface that exist between competition policy and the international trading system. Other areas include, for example, the significance of vertical market restraints and monopolistic conduct for market access, for example in the services sector. Some of these areas have been well-plumbed in past discussions in various fora, and others perhaps not. Still another area that certainly has not yet been adequately discussed — as it is a relatively new phenomenon — concerns the implications of competition policy for global supply chains, and vice-versa.

In mentioning these areas of policy interface, I am not advocating premature action or pre-judging the nature of further institutional linkages, if any, that need to be developed between the administration of competition policy and the multilateral trading system. I take that as a genuinely open question. My point is simply to note that the prospects for success of national competition policies and the international trading system are profoundly inter-linked.

It may be timely to examine these linkages in depth, and how they might be optimized. It may be timely to re-start the underlying dialogue on the effects of anti-competitive practices and their relationship to the international trading system.

I sincerely believe that the discussions that went on in the WTO Working Group on Competition Policy which Professor Jenny chaired so ably were instrumental in broadening awareness of the importance and modalities of competition policy globally. And this work is not done: although well over a hundred countries now have competition laws, we still face the significant challenges of implementing these laws, in a coherent, transparent and economically sensible fashion, in an interdependent world. These challenges will not, I suspect, be met without renewed dialogue that spans the respective domains of competition and trade policy.

Of course, the world has changed a great deal since the past discussions on these issues in the WTO. In addition to the proliferation of national competition laws across the developing and emerging world, a huge amount of valuable capacity building work has been done in this area not only by the OECD but also, very much, by UNCTAD and the ICN. The aim of renewed work in the WTO would not be to replicate this work but to consider its linkages with the goals and modalities of the multilateral trading system, building on the work done in all relevant fora and without prejudice to what, if anything, might emerge.

Let me clarify that what I have expressed this morning is my own personal wish, since any decision to relaunch work on this issue in WTO is of a political nature and therefore in the hands of Members. And let me underline that at this stage I do not know of any suggestion by any Member or group of Members that would indicate a political will to go in that direction.

Secretary-General GURRÍA, Professor JENNY: my congratulations to you and all those who have contributed to the organization of this timely forum. I look forward to the reports that I will receive on the discussions to come, which certainly deserve the attention of WTO Members.

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