EU WANTS COMPETITION IN WTO, STALLS UNCTAD WORK

12:45 AM Jul 25, 1996

EU WANTS COMPETITION IN WTO, STALLS UNCTAD WORK
Geneva, 24 July (Chakravarthi Raghavan) -- The European Union's Executive Commission brought Tuesday to Geneva a high-power delegation to present its ideas on WTO talks over competition policy, and persuade WTO members to take up at the Singapore Ministerial Conference (SMC) this issue set up a working group to study the issue of multilateral rules on national competition policies.

The EU's drive to put competition into the WTO, and the high-profile campaign it has launched, is in contrast to its attempts to stall the on-going work at the UN Conference on Trade and Development (UNCTAD), by blocking at the UN General Assembly action arising out of the Third Review Conference on the UNCTAD code on Restrictive Business Practices which only in November 1995 got full endorsement, including by the EU.

The EU has tabled a non-paper on 'competition rules' and establishing a work programme at WTO Singapore meeting, at the informal Heads of Delegation (HOD) process chaired by the WTO Director-General, Renato Ruggiero, and so has Japan.

Both were given a preliminary reading at the HOD meeting on 9-11 July and the competition rules issue is among issues that Ruggiero wants to take up further when he resumes the consultations on 16 September.

The EU non-paper wants WTO work to be launched at Singapore along 'four tracks':

* commitment by all WTO members to adopt effective domestic competition rules and enforcement structures, with technical assistance provided at the request of a WTO member.

* identification of core common competition rules or principles and procedures, and work towards their adoption at international levels (for example, the negative effects on competition of horizontal practices such as market-sharing or price-fixing cartels or bid-rigging); formulating provisions at an early stage on how signatories will combat these, with more difficult issues to be tackled later, and initial efforts to be devoted to procedural issues, including transparency, national treatment and deadlines.

* establishment of an instrument of cooperation between competition authorities -- which may, in the first stage, include a limited number of countries only, and provide for the exchange of (non-confidential) information, consultations on cases of common interest, coordination procedures, and the application of negative and positive comity procedures. These are to be developed step by step over time, and the membership of the instrument expanded in parallel, since "not all WTO Members may be willing or able to shoulder the rights and obligations from the beginning, and would therefore choose not to participate in the early stages.

* dispute settlement - identification of procedural and material elements that could be made subject to the dispute settlement mechanism of the WTO, and the examination of the question whether any special provisions might be required to take into account the specificities of competition law.

The EU also says the WTO should take account of the significant work that has already been accomplished in both the OECD and UNCTAD, build on this, as well as integrate the further of further work in both organizations.

The Japanese non-paper wants both competition restricting policies of private operators (such as cartels, boycott and vertical restrictions) as well as trade policy measures such anti-dumping duties, safeguard measures, subsidies and countervailing measures with competition-restraining effects to be tackled.

The Japanese 'non-paper', while making the point that the WTO rules have provisions covering the implementation of these trade policy measures, it is still necessary to discuss them further from the perspective of competition policy and necessary disciplines in this regard. It also makes a reference to the review of the TRIMs agreement, to be taken up in 1999, when consideration is to be given for inclusion of provisions on investment and competition.

The EU Commission's Director-General for competition policy, Mr. Alexander Schaub, and a top EC official (under Commissioner Leon Brittan) in the external relations division, Dr. H.F. Beseler, convened a meeting with WTO members at the WTO and gave a presentation of the EU's move, and later followed it up at a press briefing.

But while the EU non-paper, and the two presentations (texts of which were made available to the media), acknowledges and praises the work done in UNCTAD, none of them provide any satisfactory answer to why the EU wants to start afresh and proceed with a 'working group' at the WTO, when there is already a 16-year UN instrument -- the Set of Multilaterally Agreed Equitable Principles and rules for the Control of Restrictive Business Practices (the UN RBP code or the Set) -- and why it is trying to block its intergovernmental process at the UN General Assembly.

At the Third Review Conference that ended in November last, the resolutions and decisions adopted unanimously praised the work being done in UNCTAD, called for its continuance, for converting and renaming the IGE on Restrictive Business Practices to that of IGE on Competition Law and Policy, and for convening the fourth Review Conference in year 2000.

The UNCTAD Trade and Development took note of this and recommended it to the UN General Assembly for action. At the UN General Assembly, the EU stalled action, and in June this year took the position that it was not sure whether this was in line with the Midrand mandate of UNCTAD-IX, and appears to be still doing that even after the July executive session of the TDB where it was made clear that the General Assembly decision on the Third Review conference of the Set is in line with the Midrand mandate.

Beyond telling WTO members that the EU was aiming for a 'modest' action at the WTO, and the UNCTAD code was "too ambitious", the EC officials had no explanations nor why when the EU has a strong competition policy rules, it is discouraging developing countries from being "too ambitious".

However other trade officials said that though voluntary, the UNCTAD Set is more comprehensive and seeks to tackle both horizontal and vertical RBPs. The vertical RBPs (often involving operations of TNCs that a have dominant market power, and thus tending to abuse of such power against consumer interests or competition from smaller producers, in specific markets), affects the developing countries more. The industrial countries either encourage or authorize such export cartels or turn a blind eye to their operations.

At UNCTAD, the industrial countries have been resisting efforts to put some teeth into the Set, and in particular provisions for exchange of information and help by a country, at the instance of another, of anti-competitive practices originating in their territory and affecting the other.

And under the theories of 'intra-industry trade' and 'oligopolistic competition' subserving consumer interest, the US and EU are seeking to ensure that their own ability to shield their domestic producers against foreign competition through use (or rather misuse) of anti-dumping and other instruments are preserved, while using competition law to break open markets elsewhere.

The US with its large domestic market, is able to exercise extra-territorial power to attack not only anti-competitive practices originating abroad affecting its domestic market, but by use of or threat to use such instruments as S.301 force others to open up markets to the US exporters.

This is the crux of the US dispute with Japan in the automobile and autoparts sector, as also the current one raised by the US on behalf of Kodak against Japan's Fuji films. In this last, the US is even seeking to use a 1960 GATT ad hoc decision on notification and consultations which was never invoked.

The EU is less powerful than the US, and has agreed to 'cooperate' with the US in exchange of information etc on anti-competitive practices in their territories affecting the other's market, but does not want this to be extended to other countries. Hence, its talk of confining the WTO instrument, when drafted, to countries that are able to keep information confidential.

The US and EU clearly want to be able to use the anti-dumping and other instruments to safeguard their corporations and producers in the domestic markets, while using competition policy to open other markets.

Among the reasons perhaps for the EU to be blocking the UNCTAD process -- where the Set is administered and monitored by the Intergovernmental Group of Experts (IGE), officials from competition bodies of countries, rather than trade officials -- the reluctance of the EU (and the US) to the UNCTAD processes which are open and transparent, and less amenable to the 'power play' of the WTO, and enable developing countries to be on an equal footing.

Also, the UNCTAD Set asks for all kinds of restrictive practices to be attacked, including the wide spread use of vertical RBPs by TNCs, as well as the misuse of anti-dumping and other such laws.