CANCÚN WTO MINISTERIAL 2003: BRIEFING NOTES
TRADE AND COMPETITION POLICY Dealing with cartels and other anti-competitive practices
As government barriers to trade and investment have been reduced, there have been increasing concerns that the gains from this liberalization may be thwarted by private anti-competitive practices. There is also a growing realization that mutually supportive trade and competition policies can contribute to sound economic development, and that effective competition policies help to ensure that the benefits of liberalization and market-based reforms flow through to all citizens.
> Director-General’s letter to journalists
> The Doha Development Agenda
> Market access, non-agricultural products
> Intellectual property (TRIPS)
> Trade and investment
> Trade and competition policy
> Transparency in government procurement
> Trade facilitation
> Rules: anti-dumping, subsidies
> Rules: regional agreements
> Dispute settlement
> Trade and environment
> Electronic commerce
> Small economies
> Trade, debt and finance
> Trade and technology transfer
> Technical cooperation
> Least-developed countries
> Special and differential treatment
> Members and accession
> Some facts and figures
> Jargon buster
Approximately 80 WTO member countries, including some 50 developing and transition countries, have adopted competition laws, also known as “antitrust” or “anti-monopoly” laws. Typically, these laws provide remedies to deal with a range of anti-competitive practices, including price fixing and other cartel arrangements, abuses of a dominant position or monopolization, mergers that limit competition, and agreements between suppliers and distributors (“vertical agreements”) that foreclose markets to new competitors. The concept of competition “policy” includes competition laws in addition to other measures aimed at promoting competition in the national economy, such as regulations within specific economic sectors, and privatization policies.
The WTO Working Group on the Interaction between Trade and Competition Policy was established at the Singapore Ministerial Conference in December 1996 to consider issues raised by members relating to the interaction of these two policy fields. (Because the mandate came from the 1996 Singapore Ministerial Conference, trade and competition policy is sometimes described as one of four “Singapore issues”.)
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The Doha mandate
The 2001 Doha declaration provides that “negotiations will take place after the Fifth Session of the Ministerial Conference on the basis of a decision to be taken, by explicit consensus, at that session on modalities of negotiations [i.e. how the negotiations are to be conducted].” That reference to negotiations was discussed at length and reflects widely different sensitivities among WTO member governments.
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In the period up to the 2003 Cancún Ministerial Conference, as required by the Doha Declaration, the working group has focused on clarifying:
- core principles including transparency, non-discrimination and procedural fairness, and provisions on “hardcore” cartels (i.e. groups of companies that secretly fix prices)
- ways of handling voluntary cooperation on competition policy among WTO member governments
- support for progressive reinforcement of competition institutions in developing countries through capacity building
The declaration says the work must take full account of developmental needs. It includes technical cooperation and capacity building, on such topics as policy analysis and development, so that developing countries are better placed to evaluate the implications of closer multilateral cooperation for various developmental objectives. Cooperation with other organizations such as the UN Conference on Trade and Development (UNCTAD) is also included.
One focus of discussions in the working group is on international hardcore cartels. Price fixing across borders by private companies is estimated to raise costs to consumers (including businesses) in the affected industries by 20-40%. In the 1990s, international cartels were found to be operating in a large number of industries, including graphite electrodes, vitamins, citric acid, seamless steel tubes, lysine and bromine. Developing countries, which imported large amounts of these products, were overcharged by billions of dollars. Since individual countries are hard-pressed to fight these cartels alone, international cooperation is critical in dealing effectively with this phenomenon.
In the run-up to the Cancún conference, developed members and a number of developing countries have pointed to fighting hard-core cartels as one reason for the establishment of a WTO framework in this area, in addition to supporting the implementation of effective national competition policies by members and enhancing the overall contribution of competition policy to the multilateral trading system. On the other hand, a number of developing countries continue to express concern over additional burdens a new WTO agreement might bring, especially for members that do not currently have competition laws.
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In Cancún, ministers have to decide whether there is an “explicit consensus” on modalities that would allow negotiations to go ahead, leading to new WTO rules on trade and competition policy.