Mar 2, 1989


GENEVA, FEBRUARY 28 (IFDA/CHAKRAVARTHI RAGHAVAN)ó The increasing resort to Restrictive Business Practices (RBPS) in international trade, and tendencies towards concentration of market power and monopolisation in industrialised countries to the detriment of the third world countries have been highlighted in the discussions at the Intergovernmental Group of Experts (IGE) on RBPS.

The group which conducts under UNCTAD auspices an annual review of the implementation of the set of multilaterally agreed equitable principles and rules for the control of RBPS (or the set) adopted in 1979 is holding a weeklong meeting.

In the discussions while the UNCTAD Secretariat, as well as the Group of 77 and China have underscored the need for effective international actions to control the RBPS, the OECD group of countries flatly rejected such an approach.

"It is up to the countries affected by the RBPS, whether originating in their own territory or abroad, to challenge such conduct through appropriate domestic legislation", the spokesman for the OECD group declared.

In opening the meeting, the Director of UNCTADís International Trade Programmes, Mr. B. L. Das, said that there had been "a gradual change in prevailing attitudes and policies" regarding control of RBPS.

The trend in many industrialised countries towards deregulation of previously regulated economic sectors had meant those services like transportation, telecommunications, banking and finance, insurance and related services had gradually entered "a new area of competition".

As a result of a combination of factors, including deregulation, internationalisation of markets, and the prospects of a single European market in 1922, as well as negotiations in the Uruguay round, efforts in many countries were directed towards strengthening domestic enterprises.

This had sometimes been reflected in a more lenient attitude towards large domestic or international mergers and take-overs as well as in authorisation of agreements or arrangements among firms to strengthen their positions in export trade or to protect domestic industry from imports.

"There is the danger", Das warned, "that the thrust towards freer competition in international trade transactions may in time lead to excessive concentration of market power and monopolisation the antithesis of competition."

The UNCTAD official added: "there is therefore need for a new approach towards multilateral control of RBPS affecting international trade, particularly the trade and development of developing countries, with a view to effectively controlling such practices, to enable the positive aspect of trade liberalisation to flourish. The forthcoming 1990 review conference is a very timely event in this respect".

Another matter of concern, Das said, was the linkage between control of RBPS and government actions.

"There is a strong need to ensure that government actions are conducive to and compatible with the objective of controlling and eliminating RBPS. Any government action, which directly or indirectly facilitates RBPS, will have to be given up. Otherwise the progress towards controlling and eliminating RBPS can, at best, be very slow".

Speaking for the Group of 77, Hani Chalk of Egypt noted that only Norway and Sweden had so far specifically incorporated the set into their legislation - a situation related to the degree of political will of governments on the interpretation, application and implementation of the set.

At present, the G77 spokesman said, the rapid changes in international trading conditions had resulted in increasing resort to RBPS by enterprises, especially TNCS, often with the blessing of governments.

Also, the increasing complexity, subtlety and diversity of RBPS, which sometimes assumed new characteristics, made them more and more difficult to detect.

There was also continued incapability of most third world countries in detecting, controlling and remedying RBPS originating in the industrialised countries.

The increasing reliance on free play of market forces and of enterprises to govern international trade, the creation of important trading blocs, such as the single European market and the U.S.-Canada free trade area, were significant factors accelerating the trend towards RBPS inside these markets and greater enterprise-level distortions in trade with other countries.

As a result governments had changed the protectionist means used by them. Instead of customs tariffs or other measures as in the past, they were now favouring their national enterprises through mergers and take-overs leading to creation of dominant positions of market power for national enterprises.

At the same the industrialised governments were interfering and facilitating the creation of arrangements for fixing prices and allocating markets, including collusive tendering for exports.

There was also intervention, directly or indirectly, in agreements such as Voluntary Export Restraints (VERS) which were essentially international price fixing and market allocation arrangements seeking to reduce imports of competitive products as a way of protecting domestic markets.

Khalaf noted that the increasing resort to RBPS was taking place at a crucial time - when important multilateral trade negotiations were being conducted for liberalising trade and creating a more favourable climate for trade, as well cooperative actions at national and international levels to strengthen inter-relationships between trade policies and other policies affecting growth and development.

The first objective of the set was to ensure RBPS did not impede or negate realisation of benefits arising from liberalisation of tariff and non-tariff barriers in world trade.

But this objective was not being met by states "as they tend to consider that whenever an RBP results from a government decision or by government guidance, it is automatically exempt from the rules of the set, even when this is clearly contrary to the basic objective of the set".

The G77 spokesman also complained that the "consultation process" among states envisaged in the set had been completely neglected or only partially implemented.

Collaboration between governments at bilateral and multilateral levels to improve and facilitate RBPS had been carried out only among the industrialised countries within the framework of the OECD.

There had hardly been any collaboration between the industrialised and third world countries.

The G77 spokesman suggested that as a way of increasing "transparency", states which had not done so should establish a public registration system of all RBPS originating in their country and which could adversely affect international trade, particularly the trade and development of third world countries.

Also, those industrialised states, which already collected such information "on a discrete basis", should agree to open their registries to foreign trade partners wishing to deal with domestic enterprises in question.

Li Zhimin of China agreed that the real situation about the implementation of the set was a far cry from the objectives and requirements.

Enterprises in industrialised states, particularly TNCS, Li complained, were increasingly resorting to RBPS.

The protectionist policies of the industrialised states had also tended "to instigate" their enterprises to use RBPS.

Third world countries, as the vulnerable trade partners, had become the first victims of such practices.

Such RBPS had offset the benefits of reductions in tariff and non-tariff barriers to exports of third world countries.

Some industrialised countries had loosened the rational control over mergers and take-overs in order to strengthen their competitiveness in foreign trade.

This had led to greater concentration of market power, providing an incentive to adoption of RBPS in international trade.

But such practices, Li warned, would not only undermine the trade and development of the third world "but eventually bring about an unfavourable impact on the economic activities of the industrialised countries".

Speaking for the group B countries, Alard D. Ham of Netherlands however said it was up to the countries affected by RBPS, whether originating in their own territory or abroad, to challenge such conduct through appropriate domestic legislation, both in line with the set, based on their own systems of law, and according to their own social and economic needs.

"It is normal," the Dutsch delegate blandly declared, "that competition law focuses on preventing anti-competitive effects in the domestic market. It seems contradictory to criticise use of international RBPS without measures to protect the domestic market".

The Dutch delegate also argued that the alleged trend towards further increases of international RBPS was not supported by facts.

The examples of protective government trade policy measures cited by the G77 related to questions outside the framework of the set, which covered only private business conduct.

The issues raised by the G77, he added, were dealt within other international fora in particular in GATT.

This viewpoint on behalf of the OECD group, put forward in UNCTAD by the Dutch delegate, appeared at variance with the positions of the U.S. and EEC delegates, in the current Uruguay round discussions relating to the safeguard agreement, where both have taken the position that "grey area" measures (Voluntary Export Restraints, etc.) could not be proscribed by any safeguards agreement.