Apr 26, 1990


GENEVA, APRIL 24 (BY CHAKRAVARTHI RAGHAVAN) -- The Industrial Countries were "closing their eyes or even encouraging" use of certain Restrictive Business Practices (RBPS) by their national firms, while trying to counter and condemn actions of Third World governments seeking to counteract the RBPs of foreign investors in their countries, the Group of 77 has charged.

The charge has been made at the ninth session of the Intergovernmental Group of Experts (IGE) on RBPS.

The IGE is preparing for the second UN Review Conference on the Set of Multilaterally Agreed Equitable Principles and Rules for the control of RBPs (the Set) due to be held November-December 1990.

Speaking for the Group of 77, Sirous Nasseri of Iran agreed with the report of the secretariat that the main objectives of the Set had not be achieved.

"Not only have RBPs continued to be used by enterprises, detrimental to the trade and development of developing countries, but as tariff and non-tariff barriers to world trade are gradually dismantled, the States have also relied on the freedom of action of their ‘champion’ enterprises to defend and even improve their positions on the international gaming board", the Iranian delegate said.

"In many cases the Set is not being implemented and, on the contrary, States are closing their eyes to or even encouraging the use of certain RBPs by their national firms".

National legislations in many countries either contained an authorisation for export agreements, or did not mention them, simply because such laws had no effect beyond national frontiers.

But paradoxically in other cases, such as taxation of businesses or protection of so-called "sensitive secrets" and transfer of technology "national laws are applied without any problems to the branches of transnational corporations".

Governments tacitly accepted voluntary export restraints, which in effect were simply international cartel agreements at enterprise level to apply quotas to trade.

However, in the Uruguay Round multilateral negotiations in Services, TRIPs and TRIMs - through their "maximalist proposals", the ICs have tried in every possible way to condemn the action of governments aimed at counteracting certain RBPs of firms they authorise to invest in their countries.

Investment measures, particularly requirements for local content, export performance, etc, are the only means that host country governments have to make sure that the foreign investors avoid using RBPs - such as refusal to export, exclusion of suppliers, carving-up markets, setting of abusive or discriminatory prices.

"What the developed countries seem to be asking for is the condemnation of measures by States so that their enterprises will be given absolute freedom in their activities".

RBPS, the G77 spokesman pointed out, were not only detrimental to the trade of Third World countries but also harmful to the interests of the ICs too.

The international media was full recently of examples of collusive practices, predatory agreements and prices used by companies determined to prevent at any cost international competition from penetrating their internal construction market.

"If such infringements of the Set can occur to the detriment of the main trading partners in the world, it is hard to imagine that small countries or economically weaker trade partners would receive any better treatment".

The proposals of the G77 for amendments to improve the Set were aimed at strengthening its application.

The first sets of proposals were for improvements to the Set and for formulating its provisions in more precise language to preclude any "major escape clauses".

Hence the proposal for repeal of the exemption on enterprises that were part of the same economic entity. Also, the exemption in the Set to certain practices should apply only to formal inter-governmental agreements and not just to tacit agreements or other discretionary arrangements.

Also, the importance of the issue should merit discussion in a Committee of UNCTAD, on the same footing as other subjects debated in UNCTAD (rather than as now in an IGE).

The importance of the RBP issue could no longer be minimised, particularly when deregulation, privatisation and opening up of markets point continually to the growing need for control of RBPs nationally and multilaterally.

The second component of the G77 proposals related to the issue of transparency.

With liberalisation of international trade and reduction or elimination of government regulations, transparency on trade barriers would diminish, since regulations, laws and other traditional obstacles to trade are notified to appropriate organisations like the GATT.

But obstacles deriving from RBPs of enterprises by their very nature were secret or not registered and did not form part of a central registration system.

Hence the G77 proposal to place all States and enterprises on an equal footing on transparency requirements.

The third part of the G77 proposal was designed to improve and develop the consultation procedures provided for in the Set, and derived directly from the Final Act of UNCTAD-VII.

The fourth component of the proposals related to strengthening the capacity of UNCTAD to provide technical assistance to Third World countries.

"The present trend of liberalisation and opening up of markets, and of ‘price realism’ shed a new light on need to promote competition and consequently control RBPs adversely affecting the Third World countries".

"The gradual moving away from State monopolies, subsidised sectors and price regulations, made it imperative that rules of competition should be adopted in an ever-increasing number of developing countries. For this, the developing countries need immediate technical assistance, advice, experts and jurists".

Finally, the G77 proposal also envisaged the convening of the Third UN Review Conference in 1995.

Speaking for the Group B countries, Netherlands said that after careful consideration the group had come to the conclusion that the Set as a whole did not need any textual changes. The aim of competition policy - protecting consumers and other participants in the market from anti-competitive conduct of enterprises - was embodied in the Set and States and regional groupings had honoured their commitments to the Set.

Since the trend towards market-oriented policies was definitely going to continue, the Group B countries agreed on the need to increase and improve technical assistance to Third World countries to implement the Set. The Group was willing to examine at the Review conference appropriate ways to respond to the growing demands for technical assistance, "but bearing in mind budgetary constraints that all governments face".

As for the suggestions of the UNCTAD secretariat on information and consultation procedures, it was the view of the Group B countries that, since the rules and principles on information and consultation had not been fully utilised and existing procedures had not been shown to be defective, there was no justification for any new information and consultation procedures.

The delegate for the GDR, speaking for the group of East European countries, referred to the "revolutionary changes" taking place in East Europe and efforts of Group D countries to introduce market economy which was based on competition and hence risked being subject to RBPS. It was hence necessary for their countries to introduce or improve laws for protection of competition. The administrative measures used before had lost their importance and were no longer suitable or acceptable.

Group D countries would adopt and implement legislation against monopolies and were in the process of preparing and improving their legislation and would welcome any experience and possible assistance in this regard.