In carrying out its objective of eliminating barriers to international trade, the WTO has dealt almost exclusively with ridding its member countries of government-created phenomena that obstruct free trade, such as tariffs. It was not until the 1996 Ministerial Conference in Singapore that member countries identified businesses as a source of distortion in international free trade. It reflected the increasing perception of policymakers that private anticompetitive behaviors may continue to constrain “market access,” even when official barriers created by border measures have come down.

The main thrust behind the WTO initiative was based on the belief of some participants that, despite trade liberalization achieved through GATT/WTO; domestic policies such as competition policy could act as non-tariff barriers to trade. A particular business behavior is anticompetitive domestically if it reduces the domestic supply of an industry. Similarly, a particular business behavior is anticompetitive internationally if it reduces the global supply of that industry.

It was laid down that strengthening of domestic anti-trust policies and developing mutual trust through some common understanding of competition issues would promote greater world trade through the resolution of trade conflicts, the curbing of anti-competitive practices by large multinational corporations (MNCs) and international cartels, with which it is difficult for a single country to deal, the enhancement of and enhancing development as well as the long-term competitiveness of firms

Working Group on Interaction Between Trade And Competition Policy

Competition policy was one of the four “Singapore Issues”, or new issues that were introduced at the first WTO Ministerial Conference held in Singapore in 1996. The twentieth article of the 1996 Singapore Ministerial Declaration called for the establishment of a working group to formally examine the relationship between trade and competition policies in order to identify possible areas that may be the subject of a multilateral framework agreement. Pursuant to the Doha mandate, in 1997, the WTO General Council established a Working Group on the Interaction between Trade and Competition Policy (WGTCP).

Singapore Conference, 1996

The First WTO Ministerial Conference was held in Singapore between 9 and 13 December 1996. Trade, foreign, finance and agriculture Ministers from more than 120 World Trade Organization Member governments and from those in the process of acceding to the WTO participated in a Ministerial Conference in Singapore. In this conference the competition aspect of market was recognized as an issue in the compliance with the Uruguay Agreement and establishment of a working group regarding the same was called for.

The ministerial concluded in the mandate of formation of a working group for framing international competition policy which in 1997 led to the formation of WGTCP for dealing specifically with competition policy.

Doha Declaration

At the fourth Ministerial Conference at Doha in November 2001, primary issues were framed for WGTCP to work on till further international competition policy was framed. These issues, which are spelled out in paragraphs 23 to 25 of the Doha Ministerial Declaration are:

(a) Technical assistance and capacity-building for developing countries;

(b) Provisions dealing with hard-core cartels;

(d) Core principles in the enforcement of competition law, which refers to

· Non-Discrimination,

· Amongst countries and products

· Transparency

· Of functioning of firms and making available all related documents

· Procedural Fairness.

· Of implementation of law

In addition to the three main core principles mentioned above, two more principles were proposed and discussed by WGTCP, i.e., special and differential treatment and comprehensiveness. Special and differential treatment refers to special rights and more favorable treatment for developing countries in meeting their WTO obligations.

Special and differential treatment provisions may include preferential market access (such as the generalized system of preferences), flexibility of commitments (such as the ability to impose quantitative restrictions for the purpose of establishing a domestic industry), and transitional periods in complying with WTO obligations. Several developing members believe that since the Doha Ministerial Declaration states explicitly that “full account shall be taken of the needs of developing and least-developed country participants”, special and differential treatment should constitute one of the core principles of a competition regime.

Since most of the countries which were member were developing countries, there was a clear WGTCP consensus that technical assistance and capacity-building would be necessary in order to strengthen institutional capacities in developing countries. It was agreed that such assistance should be long-term and tailored to the specific needs of member countries.

Paragraph 25 of The Doha Ministerial Declaration laid down issues for WGTCP to focus on till Fifth session. It laid down the core principles and asked the working group to clarify it. It also identified that needs and interest of developing country should be taken care of.

Cancún Ministerial Conference, 2003

The fifth ministerial conference was held in Cancún, Mexico from 10th to 14th September 2003.

The Cancún meeting’s special task was to “take stock of progress in the [Doha Development Agenda] negotiations, provide any necessary political guidance and take decisions as necessary.”

Hence, the work of the working group was discussed and attempts were made to reach to a conclusion for framing an international competition policy.

The agreement on International Competition Policy resulted in a deadlock. The developed countries wanted to imply competition policy to safe guard their firms in smaller countries while the developed and least developed countries did not favour the policy as the terms of policy were not clear and it was likely to adversely affect their domestic economy. Hence, it ended with no consensus.

July Decision, 2004

In the “July 2004 package” adopted on 1 August 2004, the WTO General Council decided that the issue of competition policy “will not form part of the Work Programmed set out in that Declaration and therefore no work towards negotiations on any of these issues will take place within the WTO during the Doha Round” It was reasoned that the WTO's reluctance to explicitly address competition policy could be explained by various constitutional and procedural constraints. For example, it is difficult to harmonize existing national regimes into a single standard, especially since national competition policies not only entail different standards but also require complex factual determinations of changed performance in specific markets as a result of designated actions.

The Working Group is currently inactive and competition policy was dropped from WTO’s agenda for Doha Conference.

Hence no result could be achieved for a competition regime by the World Trade Ogranisation, thoug forums Like UNCTAD are still working on negotiation for a uniform competition policy and these international forums are helping the developing and least developed nations to formulation their own domestic competition laws.

Need And Consequences Of International Competition Regime Proposed By WTO

Although most members have accepted that there is a strong relationship between trade and competition, there is a great deal of controversy on whether or not measures should be taken to create a multilateral set of rules governing competition regulation. This issue is particularly complex because the absence of antitrust or other competition policies can affect markets not just in the home country, but also in other countries as well.

Developing countries are concerned about the possible adverse consequences of an international competition rule on domestic industrial policies. Many members remain skeptical about the benefits of a possible competition agreement and are afraid that it may simply be used as a market-opening tool by developed countries. More importantly, developing countries are very rarely the source of cross-border anti-competitive practices since the size of their firms is often too small to dominate the global market and hence the developing and least developed countries will be pressurized to open their market by accepting whatever policies are imposed by developed countries.

Such discriminatory application of competition policy has two major problems. First, it may undermine domestic standards. The historical evolution of the principle of competition policy from protecting competitors to protecting competition can be negatively affected. Second, when a foreign country adopts a similar policy, the national welfare of both countries can decline; just as optimal tariff policy is in fact not optimal given similar foreign behavior. The use of competition policy as a rent-shifting policy is self-destructive in these senses

But, on the other hand, competition policy would be necessary to monitor the anti-competitive activities of multinationals which currently would have greater access to developing country markets under the WTO investment regime.

Prohibition of restrictive licensing and other anti-competitive abuse of intellectual property rights provided for in the TRIPS Agreement would not be sufficient unless backed by strong anti-trust policies.

The proponents of the proposal argue that the WTO framework agreement would be flexible enough to incorporate specific needs of a member, including considerations for development policy. They argue that such an agreement could facilitate mutual trust, enabling international cooperation not only at the multilateral level, but also at the bilateral and regional levels. The agreement would also help to coordinate international cooperation and technical assistance.

The agreement would also benefit small developing countries, enabling them to combat the anti-competitive activities of powerful multinationals or international cartels, which adversely affect their economies.

Therefore, a WTO agreement on competition policy has some apparent advantages for developing countries, as well as for developed countries. The concerns of developing countries may be further alleviated through more concrete special and differential treatment than just offering transitional periods and technical assistance and making the terms more clear and favorable to them.

CONCLUSION:

WTO in its effort to remove trade barriers recognized private trade barriers as a potential threat to market access. It wanted to introduce a uniform Competition Policy for safe guard of interest of foreign firms against the domestic cartels. This was, widely regarded as in favour of developed countries and as it proposed entering of multinational firms into the market of developing and least developed countries, it was likely to hamper the domestic market of these countries. To date, capacity building for developing countries has been insufficient. The whole area of competition policy and law is highly technical and specialised with its own terminology, competing philosophies and principles. Many developing and least developed countries have not yet developed their awareness of all the issues involved to an extent that would enable them to negotiate from a sound base of understanding

A formal and more structured effort within the WTO began when members agreed to launch the Working Group on the Interaction between Trade and Competition Policy (WGTCP) at the WTO Ministerial Conference in Singapore in 1996. At the 2001 WTO Ministerial Conference in Doha, Qatar, members put the competition question on the agenda, and defined a focus of future work for the WGTCP in paragraph 25 of the Doha Ministerial Declaration. At subsequent WTO meetings, however, members failed to reach a consensus on the content of possible rules, mostly due to the objections of developing countries. As mentioned, after the September 2003 Cancún Ministerial Conference ended in deadlock, the General Council of the WTO dropped competition policy from the Doha agenda in 2004.

Hence, despite seven years of negotiating effort, the Doha Round of multilateral trade negotiations, launched in November 2001 under the auspices of the World Trade Organization (WTO), remains stalled. The agenda spelled out in the Doha Declaration was quite ambitious. In hopes of expediting talks, the General Council of the WTO subsequently dropped several controversial issues, among them competition policy, but the Doha talks are still deadlocked. Even though competition policy was deleted from the Doha agenda, anticompetitive practices continue to attract attention.

REFERENCES:

World Trade Organisation, which replaced GATT in Uruguay Conference, 1995

Received on 10.02.2014 Modified on 11.03.2014

Int. J. Rev. & Res. Social Sci. 2(1): Jan. – Mar. 2014; Page 55-57

World Trade Organisation and Competition Law