Nov 29, 1990

GLOBAL COMPETITION NEEDS "RULES OF THE GAME" – UNCTAD.

GENEVA, NOVEMBER 27 (TWN) – If the full potential of the fundamental changes taking place in the world economy, whose common denominator is fostering competitiveness of enterprises on a global scale is to be realised, it requires well-defined and applied "rules of the game" to ensure that in fact firms do compete, the Secretary General of UNCTAD, Kenneth Dadzie declared Monday.

Dadzie was addressing the opening session of the Second UN conference to review the Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices (RBPs).

The Conference is chaired by Henry Emden of the UK and is to review all aspects of the Set or the RBP code as it is more popularly known, formulated at the UN conference under UNCTAD auspices and adopted by the UN General Assembly as a set of non-binding guidelines. The Set came into effect in 1980.

The first Review Conference was held in 1985.

The major aim of the code has been to ensure that RBPs on the part of enterprises, including TNCS, do not impede or negate the realisation of benefits that should arise from the liberalisation of tariff and non-tariff barriers to world trade in goods and services, particularly the affecting the Trade and Development of Third World countries. From the outset the Third World countries have sought to put some teeth into the code and make it more binding, and in particular get the cooperation of the "home countries" of the TNCs in combating the RBPs in international trade, particularly trade and development of the Third world countries.

However, they have had no success but have met with considerable resistance from the major Industrialised Economies with their neo-mercantilist approaches to international trade.

While these countries have active competition policies and try to attack RBPs in their domestic markets or in imports, they take a largely lax attitude to such activities of their enterprises on the export sector, sometimes even actively encouraging them.

Dadzie placed the present conference against the background of developments under way in the world to speed up the pace of liberalisation of markets. This trend initiated in the major ICs in the 80’s, he pointed out, had broadened the scope for play of competitive forces. A similar trend was emerging in a number of Third World countries as a result of the adoption of far-reaching reform programmes. A similar process was also under war in Central and Eastern Europe where countries have moved from centrally planned to market economies.

In International Trade too, efforts were under way in the Uruguay Round for liberalisation of trade in goods and services and for agreements in "competition-related" issues such as TRIMs and TRIPs, Dadzie suggested.

In these areas, he noted, Third World countries were pressing for results to preserve their freedom of action to deal with RBPs and establish international mechanisms to facilitate the elimination of anti-competitive practices.

The approaching deadline of 1992 for completion of the EC Single Market had begun to have far-reaching impact on competitivity of enterprises throughout the world. Within the EC there was also restructuring of enterprises including through mergers and acquisitions for better "positioning" firms in the market.

There was also concern that the EC Single Market might benefit only its member-states while the rest of the world would face an exclusive trading bloc, generating a desire in neighbouring countries to become full EC members.

Also other trading blocs like the U.S.-Canada Free Trade Area were coming into being. Enterprises from other ICs like Japan, Switzerland and Sweden had been seeking to cross borders and integrate or extend their activities into the emerging blocs.

The common denominator of all these developments was that they sought to faster and look towards increasing the competitiveness of enterprises on a global scale. Such competition had the potential to act as powerful incentive to enterprises to achieve maximum price/quality ratios, help accelerate technological progress and generally work in the interests of consumer welfare.

But for all this potential to be realised it was crucial to have a policy environment designed to ensure that firms actually-, did compete and that they did so within the framework of appropriate "rules of the game" that are well-defined and applied.

For infant industries in the Third World a measure of protection from competition might be needed for a certain period of time to allow new firms to realise economies of scale and improve their position on the learning curve. However, such protection or aid should be clearly limited in time and in scope.

Rapidly evolving technology and conditions attached to licensing arrangements might result in anti-competitive action hampering development of smaller firms, particularly in Third World countries, Dadzie noted.

"Moreover, an excessively stringent interpretation of intellectual property rights might result in crippling the development of industries in those countries".

Also, competition in global markets involving a few giant corporations might result in a situation where natural barriers for new comers - enterprises from the Third World - might be so high as to marginalise or eliminate such enterprises.

For all these reasons, Dadzie said, it was necessary to take urgent actions both at national and international levels, in a mutually reinforcing manner, to promote and protect competition.

In this regard urgent actions were needed on three fundamental elements to improve the effectiveness of the Set - areas where he felt there had been a certain convergence of views at the preparatory meeting for the Conference held last April.

The first, he said, was adoption and implementation of competition legislation in countries that did not have one. In this regard, he said, UNCTAD faced an unprecedented number of requests for technical assistance from Third World countries and those in Eastern Europe.

The Review Conference could enhance support for these through provision of finance and expertise.

The second element for action he saw in improving transparency in area of RBPs through better exchange of information between RBP control authorities.

An UNCTAD secretariat document before the Conference suggests that procedures be envisaged for notification exchange of information and coordination of action along the lines of a recommendation existing within the OECD. The report suggests that for the time being an agreed standard form should be prepared for governments to make requests seeking information on RBPS.

The third element suggested by Dadzie, and one covered in the Report is for the Review Conference to agree upon a standard form of consultations among States.

The Conference has also before it proposals made by the Group of 77 and the Group B countries at the preparatory meeting.

The Group of 77 have called for specific major amendments to the Set while the Group is against any changes in the Set but merely call for its better implementation.