RESTRICTEDWORLD TRADE
ORGANIZATIONWT/WGTCP/M/4
24 June 1998
(98-2547)
Working Group on the Interaction
between Trade and Competition Policy
REPORT ON THE MEETING OF 11-13 MARCH 1998
Note by the Secretariat
1. The Working Group on the Interaction between Trade and Competition Policy held its fourth
meeting on 11-13 March under the Chairmanship of Professor Frédéric Jenny.
2. The substantive agenda for the meeting comprised the following items:  the interaction
between trade and competition policy in general (chapeau to item III of the Checklist of Issues
Suggested for Study); the impact of anti-competitive practices of enterprises and associations on
international trade (first tiret under item III of the Checklist); stocktaking and analysis of existing
instruments, standards and activities regarding trade and competition policy, including of experiencewith their application (item II of the Checklist);  and the relationship of trade and competition policy
to development and economic growth (sub-topic unde r item I of the Checklist).  In addition, two
requests for observer status from intergovernmental organizations were considered.  Under the
heading of other business, the Group discussed three matters:  a proposal for derestriction of
Members' contributions to the Group;  the Group's report to the 1998 Ministerial Conference to beheld in May 1998;  and the organization of work for its next meeting.
I. THE INTERACTION BETWEEN TRADE AND COMPETITION POLICY IN
GENERAL
3. Hong Kong, China; Japan
; and the United States  introduced written communications in
relation to this item (documents WT/WGTCP/W/64, 68 and 66, respectively).  In addition,
representatives of Mexico, Brazil , Korea , Canada , New Zealand , Norway , Australia , the European
Community and its member States, Pakistan , Malaysia , Switzerland , Nigeria , Argentina  and the
Dominican Republic made oral statements regarding this item.
4. With regard to general analytical approaches to the interaction between trade and competition
policy, and the appropriate focus of the work of the Working Group, the representative of Hong Kong,
China, introducing document WT/WGTCP/W/64, outlined what he referred to as a "WTO approach"
to the issues.  Under this approach, the Group would focus on issues regarding the interaction between
trade and competition policy.  Priority would be accorded to the fundamental problem of
governmental restraints and distortions, which continued to be the main threat to the attainment of
competition as well as trade policy objectives.  In addressing these measures, the Group would seek to
draw upon, and enhance the role of, fundamental WTO principles and basic objectives of competition
policy, including non-discrimination, economic efficien cy and consumer welfare.  Duplication of the
work of other WTO bodies would be avoided by appropriate emphasis on the interaction between
trade and competition policy, rather than on trade or competition policies per se .  The WTO approach
would also encompass the study of private anti-competitive practices that affected trade.  In his view,
the proposed approach was supported by legal, economic and political considerations.  Specifically,
from a legal perspective, he said that WTO agreements had traditionally focused on governmentalmeasures to protect legitimate expectations regarding conditions of competition.  Although this did
not require that concerns regarding purely private anti-competitive practices be left aside, a sense of
priorities was necessary.  He noted that work on enterprise practices might usefully be pursued, forWT/WGTCP/M/4
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example in future negotiations on transportation services, which could examine the role of cartels and
monopolies in this sector.  From an economic standpoint, he suggested that competition would be
more enhanced by trade liberalization, and by competition-oriented reforms of WTO rules, than by
the introduction of new WTO rules and standards relating to national competition laws and
international cooperation.  Trade and competition were particularly vulnerable to discriminationarising from governmental actions relating to matters such as rules of origin, government
procurement, anti-dumping and state trading.  He also said that the decentralized, flexible approach
which was incorporated in the limited existing WT O provisions relating to anti-competitive practices
of enterprises, in the GATS and the TRIPS and TRIMs Agreements, reflected the lack of an
international consensus on optimal competition rules.  Politically, the time did not appear to be ripe
for detailed discussions in the WTO on harmonization of competition laws and practices.  This did
not, however, preclude the possibility that work in the Group could contribute to the eventualdevelopment of a consensus on this matter.  In conclusion, he said that, under the proposed approach,
inconsistencies between trade and competition policies would be removed over time, and a
competition-oriented reform of existing WTO provisions would be a main instrument in the process.
5. The representatives of Mexico and Korea
 expressed broad agreement with Hong Kong,
China's proposed approach.   The representative of Mexico emphasized that the important point was
to focus on the interaction between trade and competition policy, and not on either in isolation.
Efforts to include competition policy as a fourth pi llar of the WTO would be a serious error.  They
would go against the mandate given in the Singapor e Ministerial Declaration and, therefore, would be
unacceptable to Mexico.  The representative of Korea said that his delegation shared Hong Kong,
China's vision concerning the promotion of international competition through trade liberalization.
The matter of trade measures, such as anti-dumping, should not be excluded a priori from the purview
of the Group.
6. The representatives of the United States, the European Community and its member States ,
Argentina and Nigeria  said that the Group should focus primarily on anti-competitive practices of
enterprises that affected intern ational trade, in addition, possibly, to government measures that
tolerated or facilitated such practices.   Introducing document WT/WGTCP/W/66, the representative
of the United States said that the prevalence of enterprise practices that distorted or restrained
international trade had become more evident as mult ilateral rules to address governmental barriers had
been extended and elaborated.  The benefits of trade liberalization would not be fully realized unless
such practices were effectively addressed.  There was no doubt that private anti-competitive practices
could be as effective as government measures in distorting and impeding international trade, in
particular cases.  Moreover, such private anti-competitive conduct could exist even in marketscharacterized by liberal trade policies, if there were no competition laws.  For this reason, her
delegation could not accept the suggestion by Hong Kong, China that priority should be accorded by
the Working Group to its work on governmental ba rriers and distortions.  Other WTO organs were
available to study government measures of the sort  that had traditionally been recognized as being
within the purview of the WTO.  The focus of th e Working Group should be on the impact on trade of
private anti-competitive practices and on government measures that tolerated such practices or failed
to effectively maintain a competitive environmen t.  In this regard, her delegation's written
contribution (document WT/WGTCP/W/66) set out an  analytical framework that would assist in
understanding the relationships between trade and competition policy and the nature of remedies to be
applied vis-à-vis the problems identified.  The framework recognized that neither trade policy norcompetition policy was individually sufficient to ensure market contestability and global economic
efficiency.  It was based on two parameters:  (i) whether a restriction affected all competitors, or just
foreign competitors;  and (ii) whether the restriction fell within the category of measures that was
traditionally subject to competition law disciplines.  Some implications of this framework were that:
(i) real-world barriers to competition could result from situations in which government or private
sector activity distorted trade;  (ii) private anti-competitive conduct could deny or impede market
access to foreign competitors (in addition to affect ing competition domestically);  (iii) some anti-
competitive arrangements, for example discriminatory standard-setting practices or licensingWT/WGTCP/M/4
Page 3
requirements, principally affected foreign firms;  and (iv) government-sponsored measures such as
state monopolies and state-trading enterprises, in addition to government industrial policies and
domestic regulations, all of which traditionally were outside the scope of competition law, could
restrict competition domestically while impeding market access to foreigners.  With regard to possible
remedies for such restrictions on competition and trade, the framework suggested that an effectivelyfunctioning competition law would normally be adequate to address anti-competitive practices of
enterprises, whether they affected both foreign and domestic or principally foreign firms.
Nonetheless, there could be situations where restrictions were deemed not to warrant action under
competition law, and yet a trade problem persisted, reflecting the "rule of reason" approach that
competition authorities take to many practices.  With regard to practices that fell outside the
traditional domain of competition law enforcement, remedying these would generally require policy
changes.  In many cases, there might be a natural convergence of interests between trade andcompetition policy officials in advocating for the removal of barriers affecting trade and competition.
7. The representative of the European Community and its member States said that he believed
that WTO Members were already in agreement that trade liberalization and competition policy were
mutually reinforcing, and that the impact of governmental measures on trade and competition was an
important part of the work programme of the Group.  Indeed, such measures were to be the subject ofthe next meeting of the Group.  Nonetheless, he di d not think that the subject of government measures
that affected trade and competition should be the main focus of the Group's work.  Rather, the focus
should be on how existing WTO disciplines that dealt with governmental measures could be
complemented by new ones that dealt with private anti-competitive practices that affected trade and
investment.  This was the special area of advantage for the Group.  He hoped that the approachoutlined by Hong Kong, China did not reflect a belief that private anti-competitive practices were
unimportant.  The evidence was compelling that such practices were important, and that competition
law was the only instrument that was adequate to deal with them.  Nonetheless, he agreed with the
representative of Hong Kong, China that the Group should not focus on competition policy in
isolation, but rather as a factor that affected trade.  The importance of competition policy for tradeconcerns and the traditional mandate of the WTO was reflected in the fact that private anti-
competitive practices affected directly the extent to which foreign firms enjoyed an equality of
competitive opportunities.  In this context, the Eu ropean Community and its member States had three
principal objectives relating to the interaction of trade and competition policy and the ongoing
discussions in the Group:  (i) the securing of a basic commitment by Members to adopt and enforce a
competition law, as the appropriate means of addressing anti-competitive practices of enterprises that
affected international trade;  (ii) agreement on measures to address those anti-competitive practiceswhich were particularly harmful to trade;  and (iii) the adoption of measures to strengthen
international cooperation in this area.
8. The representative of Nigeria agreed that the overall focus of the Group should be on private
anti-competitive practices that affected international trade.  He referred to a particular concern relating
to circumstances where firms with influence on trade policy engage in anti-competitive practices.Ideally, there should be a clear distinction between trade and competition policy.  Moreover,
governments should play an impartial role, monito ring compliance with rules and preventing abuses.
He foresaw a more prominent role for the Dispute Settlement Body and the Trade Policy Review
Mechanism in addressing anti-competitive practices and policies that tolerated such practices in
Members' economies.  The representative of Argentina said that competition policy depended on a
host of other government policies, including industrial, trade and regulatory policies.  Given the
limited time at the Group's disposal, his delegation felt that it should concentrate on competition
policy as such.  Other relevant policies could be discussed in other fora.
9. The representatives of Japan, New Zealand , Norway , Australia , Pakistan , Malaysia  and
Switzerland expressed support for elements of the approach suggested by Hong Kong, China, while
also saying that a balanced approach was important, and therefore that consideration of the effects of
anti-competitive practices of enterprises on trade was an important aspect of the Group's work.WT/WGTCP/M/4
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Introducing a relevant section of his country's written contribution to the meeting (document
WT/WGTCP/W/68), the representative of Japan said that, while the overall objectives of trade and
competition policy were the same, case studies submitted by his delegation to the previous meeting ofthe Group showed that the two policies had both complementary and contradictory effects.  It was
important to improve the consistency of the two policies, in the interests of their common coreobjectives.  To do this, the Group should study the interaction between the two policies in a balanced
manner, addressing any aspects of either policy that affected the other.
10. The representative of New Zealand said that his delegation agreed with a number of points in
the contribution submitted by Hong Kong, China.  In particular, it agreed that there should be a
continued and detailed focus in the Group on the impact of government measures that affected
competition and international trade.  Consideration of the effects of government regulation and the
need for domestic reforms would be an important pa rt of this discussion.  Nonetheless, private anti-
competitive practices that affected international trade were also an important subject for discussion in
the Group.  The importance of such practices was likely to grow in a globalizing economy.
Therefore, the Group should take a broad approach to its work.  There was a particular need to
examine the appropriateness of existing WTO dispute settlement provisions and machinery vis-à-vis
the application of competition law.
11. The representative of Norway expressed agreement with Hong Kong, China's view that the
Working Group had a unique advantage in analysin g inconsistencies between trade and competition
laws.  In addition, she said that effective trade and competition policies were means to achieve wider
goals.  A need to improve the interaction of trade and competition policy and enhance international
cooperation in this area was evident in light of:  (i) globalization;  (ii) the importance of effectivemarkets in protecting consumers and fostering efficiency;  and (iii) the observed increase in the
number of competition law cases affecting more than one country.
12. The representative of Australia said that issues regarding the interaction between trade and
competition policy were receiving increased attention, for a variety of reasons.  In addition to factors
noted in the Special Study on Trade and Competit ion Policy in the Annual Report of the WTO for
1997, she referred to the increased awareness of the impact of domestic regulatory frameworks as a
factor that could impede trade and competition.  She agreed that the types of government measures
discussed in the contribution by Hong Kong, Chin a, principally measures implemented pursuant to
existing WTO agreements, were important and merited attention from the Group.  In addition, the
impact of domestic regulatory structures on trade and competition merited careful consideration.
Many goods and services, including agriculture and the professions, were subject to regulatory
regimes that sheltered them from the rigours of foreign competition.  Extensive efforts at tradeliberalization had not made domestic competition laws redundant.
13. The representative of Pakistan agreed with the importance of studying governmental
measures that affected trade and competition, as suggested by Hong Kong, China.  He said, however,
that this would not preclude the Group's also considering the impact of private anti-competitive
practices.  He also noted one caveat with respect to the study of governmental measures as proposedby Hong Kong, China:  in the area of government procurement, discriminatory purchasing policies
engaged in by developing countries should be assessed with due regard for their developmental needs
and priorities.  The representative of Malaysia agreed with the latter point.  In addition, he said that
the scope of the Group's work should be as broad as possible, encompassing both governmentalmeasures and private anti-competitive practices that affected international trade.  Within the area ofgovernmental measures, it was particularly important to consider trade defence mechanisms,
including anti-dumping.  With respect to private anti-competitive practices, he said that a decision to
tackle these would not necessarily mean that countries had to adopt a domestic competition law.  This
should be left to the wisdom of national authorities.  The representative of Switzerland agreed that the
Group's focus should be as broad as possible.  It was premature to focus either on private or on
governmental measures, to the exclusion of the other.WT/WGTCP/M/4
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14. In addition to Hong Kong, China, the representatives of Brazil , Canada , Australia ,
Switzerland and  Nigeria  emphasized the importance of basic WTO disciplines for the application of
competition policy.  The representative of Brazil stressed the importance of two principles:
(i) transparency;  and (ii) national treatment.  He said that the proper application of competition policy
by national authorities, consistent with these principles, would stimulate trade.  This was why it wasimportant to spread the culture of competition at the WTO.  A properly-constituted competition
policy, implemented in a manner with the principles of transparency and national treatment, could
also stimulate foreign investment.  This was another matter that merited consideration in the Group.
He also said that the degree of consensus that already existed regarding the core principles of
competition policy, and on best practices with regard to their implementation, should not be
underestimated.  The representative of Canada emphasized the principle of non-discrimination,
particularly national treatment, which had already been mentioned in a previous Canadian
contribution to the Group (document WT/WGTCP/W/57).  He said further that, as was pointed out in
the paper by Hong Kong, China, competition elements were already present in various WTO
agreements.  An important example was the agreement resulting from the WTO Negotiations on Basic
Telecom Services.  More generally, he said that trade agreements that removed tariff and non-tariff
barriers would promote competition, while competition policy was important to ensure that thebenefits of trade liberalization were not eroded by private anti-competitive practices.  Examples of
such practices were mergers that affected competition in international markets and vertical market
restraints that affected market access.  An effective domestic competition law was the best means of
addressing such practices.  However, enforcement standards with regard to such practices varied
across countries, and the application of laws could yield different results in particular cases - raisingpossible concerns for trade policy.  The representative of Switzerland said that her delegation would
submit a paper dealing with the relationship between WTO principles and competition policy to afuture meeting of the Group.
15. The representative of Hong Kong, China said th at, in thinking about factors affecting market
access, it was helpful to consider the sequence in which possible barriers would be likely to arise.
Firms seeking to penetrate new markets would face a series or sequence of obstacles:  first, border
measures;  second, regulatory barriers and product standards;  and, only third, anti-competitive
practices.  This sequence suggested that it was appropriate for the Group to focus first on government
measures that affected trade and competition.  Another factor supporting the desirability of a focus on
government measures was the importance of such measures, relative to private anti-competitive
practices, as a factor impacting on international trade and competition.  In regard to the former point,
representatives of some countries, including the European Community and its member States, the
United States and Brazil , said that obstacles to market access would not necessarily arise in the
sequence proposed by the representative of Hong K ong, China.  Rather, the conclusion to be drawn
was that neither policy could be fully effective in the absence of the other.  In response to the second
point made by Hong Kong, China, regarding the relative importance of private anti-competitive
practices and government measures, the representative of Brazil said that this was an empiricalquestion, the answer to which could differ from country to country and, indeed, from economic sector
to sector.  Therefore, it should not be used as a basis for excluding work on either aspect.  The
representatives of Brazil, the European Community and its member States, the United States
 and
Switzerland said further that private anti-competitive practices and government measures were closely
linked.  Indeed, private anti-competitive practices were often facilitated by government actions orinactions.  The representative of Brazil also said that a recognition that government measures affected
competition should lead the Group to emphasize the importance of the advocacy role of competitionauthorities.  There should be a continual dialogue between trade and competition authorities within
countries.
16. With regard to additional specific proposals for further work by the Group,  the representative
of Japan reiterated a previous suggestion by his delegation that, as a first step, the Group should
undertake work on a common vocabulary of concepts of trade and competition policy.  Therepresentative of Canada said that the Group should undertake work on minimum standards forWT/WGTCP/M/4
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competition law and policy and on promoting international cooperation and consultation in
competition law enforcement.  Consideration could be given to a proposed Recommendation on Hard
Core Cartels that had recently been developed in the OECD Committee on Competition Law and
Policy.  Issues regarding the scope and coverage of competition law and policy, particularly the extent
of exemptions and the impact of economic regulation, and the treatment of export cartels, also meritedconsideration.
17. The representative of Japan, referring to a statement in the paper by Hong Kong, China
(document WT/WGTCP/W/64), regarding the value of independent economic research, suggested
that the Group make greater use of expert studies that had been prepared by other intergovernmental
organizations such as UNCTAD and the OECD.  As an example, he referred to an OECD publication
entitled "Competition and Trade Policies:  Their Interaction", which appeared to be relevant.  The
representatives of Korea and Pakistan  supported this suggestion.  The representative of Korea  also
said that the perspective of business organizations would be useful in improving the dialogue in the
Group.  The representative of the United States said that, while studies prepared by other
intergovernmental organizations could certainly be made available to the Group, in her view, it wouldbe more useful for the Group to attempt to evaluate empirically the extent to which actions taken by
Member countries' competition authorities impacted adversely on their trading partners.  In thisconnection, she referred to a statement in the WTO Annual Report Special Study on Trade and
Competition Policy that there was a lack of systematic empirical information on the extent to which
conflicts arising from the application of national competition laws could not be addressed through
existing cooperative mechanisms, although there appeared to be a widespread view that enhanced
cooperation was desirable.
18. The representative of the Dominican Republic said that the Group should discuss the need for
the Secretariat to prepare a rolling compilation of  points of consensus and non-consensus in the
discussions thus far.  The Chairman said that this suggestion would be taken up in the discussion of
the organization of work for the next meeting.
19. With regard to the various suggestions that consideration be given to materials prepared by
other intergovernmental organizations, the Chairman noted that, in the first meeting of the Group,
presentations had been made on behalf of several such organizations, specifically UNCTAD, APEC,the OECD and the World Bank, regarding their activities relevant to the work of the Group (see
documents WT/WGTCP/W/17-18 and 21-22, respectively).  These organizations were encouraged to
update these submissions.  With regard to Japan's suggestion regarding work on a common
vocabulary, the Chairman noted that a similar su ggestion had been put forward previously by the
United States, and that the Group's discussions had already addressed this question, to a considerableextent.  However, further efforts to address the matter of terminology in Members' submissions were
welcome.
20. The Chairman offered the following personal reflections on this item of the agenda.  The
basic question that had been addressed was how th e Group should look at the relationship between
trade and competition.  The answer appeared to be that it should do this in a balanced way, and thishad been the answer which had consistently been given in the Group.  But beyond this, there was the
issue of whether the primary focus for the Group should be on governmental practices or on private
practices which restrain trade and competition.  Some delegates had felt that the primary focus should
be on governmental practices and had suggested several supporting reasons for this idea.  First, it had
been suggested that governmental practices were possibly a more important problem, empirically, for
the interface between trade and competition.  Anot her reason which had been put forward by some
delegates was that governmental measures were the primary domain of WTO agreements and,
therefore, of particular relevance to this Group.  Another idea was that when one looked at
international trade there was a sequence of events:  first a firm had to have a product that it wanted to
export;  second, it had  to pass the border;  third, it might have to pass regulatory barriers;  and fourth,eventually to confront anti-competitive practices.  Other delegates had said that there were alreadyWT/WGTCP/M/4
Page 7
other WTO bodies that were looking at governmental  practices and that perhaps, therefore, private
anti-competitive practices should be the primary focus of the Group.  It had also been suggested that
the extent to which private restrictions constituted a serious impairment of trade and competition was
under-appreciated by certain other Members, and that the relative importance of governmental
restrictions and private practice restrictions was an empirical question, the answer to which dependedon the countries that were being talked about, their level of development, their size, etc.  It could be
the case that for some countries governmental restrictions were more important and for other
countries private restrictions more important.  The idea had also been put forward that it could
occasionally be difficult to distinguish between private practices and governmental practices, because
sometimes the private practices were allowed or tolerated by governmental action.  It had been
suggested that there were a number of practices which were of such a mixed nature.  In this context,
competition advocacy could serve the purpose of reducing the governmental encouragement to anti-competitive private practices.  But the issue of what was meant to be the primary focus of the Group's
work was not only about sequence;  it was also, and perhaps most importantly, about the way the
group could contribute, add its value, to what was being done and discussed elsewhere.  It was
underlined by some delegates that the Group operated in the context of the WTO and that therefore it
should consider competition-oriented reforms of the WTO, keeping in mind that the focus of itsattention was neither trade policy per se  nor competition policy per se  but the interaction between the
two.  Some delegates had emphasized that core WTO principles such as transparency and non-
discrimination were useful and could be applied to competition law enforcement, and that there was a
link between the underlying principles of trade and competition policy.  One delegate had said that
non-discrimination was perhaps more important than transparency, and still other delegatesemphasized that there were already competition principles inside some of the WTO agreements, and
that those elements could be mentioned and reflected upon.  Finally, some delegates suggested that
the Group also look at the WTO machinery, notably th e dispute settlement mechanism, to evaluate the
extent to which it could address the issues raised by the interaction between trade and competition.
II. THE IMPACT OF ANTI-COMPETITIVE PRACTICES OF ENTERPRISES AND
ASSOCIATIONS ON INTERNATIONAL TRADE
21. The European Community and its member States, Japan
, Norway , Argentina , the United
States and Canada  introduced written submissions relating to this agenda item (documents
WT/WGTCP/W/62, 68, 65, 63, 66 and 70, respectively).  In addition, Turkey introduced a non-paper
(to be issued as WT/WGTCP/W/77), and the Dominican Republic;  Poland ;  Egypt ;  Korea ;  Hong
Kong, China and Pakistan  made oral statements or posed questions regarding this item.  Observers
from UNCTAD, the OECD  and the World Bank  provided background information on relevant
activities and studies of their organizations.  At the Chairman's suggestion, the observer from the
OECD also submitted an update to the previous submission of his organization regarding relevant
studies and reports (document WT/WGTCP/W/21/Add.1).
22. With regard to analytical categories of anti-competitive practices of enterprises and
associations that had an impact on international trade, and the discussion of empirical examples ofsuch practices, the representatives of some Members, including the United States and the European
Community and its member States, said that the examples discussed by Members and observers in the
meeting could be grouped in three broad categories:  (i) practices affecting market access for imports;
(ii) practices affecting international markets, where different countries were affected in largely the
same way;  and (iii) practices having a differential impact on the national markets of countries.  Theobserver from the World Bank said that this was a useful analytical framework, while noting that
other distinctions could also be relevant.  For example, he suggested that it could be useful todistinguish between anti-competitive agreements invo lving only foreign (exporting) firms, and those
which involved both foreign and domestic firms.
23. With regard to the first category of practices, namely those affecting market access for
imports, representatives of the European Community and its member States, Japan
, Norway ,WT/WGTCP/M/4
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Argentina, the United States , Turkey , Canada  and Korea  referred to actual or hypothetical examples
of such practices.  The examples cited included cases of domestic import cartels, international cartels
that allocated national markets among participating firms, exclusionary abuses of a dominant position,
the unreasonable obstruction of parallel imports, control over importation facilities, vertical market
restraints that foreclosed markets to competitors, certain private standard-setting activities and otheranti-competitive practices of industry associations.  More specifically, the representative of the
European Community and its member States, introducing document WT/WGTCP/W/62, referred to
actual and hypothetical examples of abuses of a dominant position and vertical market restraints thathad an impact on market access.  For example, in a situation where several manufacturers together
controlled a large proportion of a market, and distribution outlets were linked with these
manufacturers through exclusive dealing contracts, this could clearly have an adverse impact on
competition and market access.  The representative of Japan, introducing a relevant section of
document WT/WGTCP/W/68, discussed an import cartel that had been in force in the soda ash
industry, several examples of the unreasonable obstruction of parallel imports and (on a hypothetical
basis) the forcing of import boycotts by internati onal manufacturers.  The representative of Norway,
introducing document WT/WGTCP/W/65, described an example in which a manufacturer employed a
loyalty discount system to deter wholesalers from buying competing products, including from foreignsuppliers.  The representative of Argentina, introducing document WT/WGTCP/W/63, discussed
several examples of situations in which cartel arrangements,  control exercised by dominant firmsover importation facilities, or related exclusionary practices had impeded competitive entry into the
Argentine market.  Industries where this had occurred included petroleum, liquified gas and
petrochemical products.  The representative of the United States, introducing the relevant section of
document WT/WGTCP/W/66, referred to several examples of international cartels that had allocated
national markets among participating firms.  A recurring pattern in these cases involved United States
firms committing themselves not to supply European  markets, and European firms undertaking to stay
out of the United States' market.  A prominent example was the American Tobacco case, in which
United States and British firms had allocated markets amongst themselves.  This had had an obvious,direct effect in limiting trade as well as competition.  Another representative of the United States
referred to situations in which private standard-setting activities which had exclusionary effects hadbeen addressed under United States antitrust law.  The representative of Turkey, introducing a non-
paper submitted by her delegation (to be issued as WT/WGTCP/W/77), referred to vertical marketrestraints and exclusionary abuses of a dominant position as practices that could impede access to
markets.  The representative of Canada, introducing document WT/WGTCP/W/70, discussed two
examples - one involving a horizontal agreement in the market for ductile iron pipe which had
provided for the withdrawal of a United States firm from the Canadian market, and a second case (the
A.C. Nielsen case) involving vertical market restraints that had had exclusionary effects on a foreign
competitor.  These cases showed the clear importance of competition law, notwithstanding the
significant trade liberalization which had taken place between Canada and the United States.  On the
other hand, she said that there could be situations in which foreign firms were excluded from a marketby a vertical restraint or other practice, and yet competition law might not provide a remedy, since the
level of competition provided by domestic competitors might be considered sufficient. The
representative of Korea elaborated on the role of anti-competitive practices by industry associations as
a factor that could impede market access.  He highlighted the dangers of industry associations thatexercised regulatory authority delegated by government, and observed that a close relationshipbetween government and industry could impede market access for foreign firms.  Reflecting this, the
Fair Trade Commission of Korea had made efforts to counter anti-competitive practices by industry
associations.
24. The observers from UNCTAD, the OECD
 and the World Bank  referred to additional
examples of practices affecting access to markets.  Specifically, the observer from UNCTAD referred
to import cartels, vertical market restraints and exclusionary abuses of a dominant position as
examples of practices that could have such effects in developing countries.  These practices were also
mentioned by the observer from the OECD.  The observer from the World Bank  mentioned vertical
integration by local manufacturers into distribution; contractual arrangements that mimicked theWT/WGTCP/M/4
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effects of vertical integration, such as exclusive dealing and sole distribution rights;  cartels involving
local producers;  anti-competitive agreements involving both local and offshore producers;  possible
instances of predatory pricing;  and private standard-setting activities as examples of such practices.
25. The point was made by several Members and observers that the nature and severity of anti-
competitive effects on market access would vary depending on the type of practice, the market powerof incumbent firms and other circumstances.  For example, the representative of the European
Community and its member States said that, although vertical market restraints could be employed for
market foreclosure purposes, they could also enhance efficiency and competition in many
circumstances.  Accordingly, their effects would have to be evaluated on a case-by-case basis.  The
observer from the World Bank agreed with this point, saying that the evaluation of trade-offs between
market power and efficiency effects could be particularly important in small, developing countries,but that this involved significant subtleties.  For example, the negative effects of vertical contractualarrangements could be particularly strong in small markets, given the low level of interbrand
competition that often characterizes such markets, a nd the high fixed costs of entry relative to the size
of the market.  On the other hand, vertical arrangements could facilitate beneficial investments in
distribution services, in markets where such services were conspicuously lacking.  The representative
of the United States emphasized that, in his country's experience, the cases that had had the most
substantial impact on market access were cases involving international cartels.  In these cases,
efficiency justifications were not relevant.
26. The representative of Argentina, referring to a number of case studies set out in his country's
contribution to the meeting (document WT/WGTCP/W/63), discussed various factors that could
facilitate anti-competitive practices of enterprises that would negate the potential benefits of tradeliberalization, by impeding access to domestic markets, with reference to 18 case studies conducted
by his agency over the past year and a half, some of which were still ongoing.  The presumption
underlying these studies was that, in general, when a country implements far-reaching trade
liberalization, there is an expectation that domestic prices will tend toward import parity levels
(subsequently, the observer from the World Bank agreed that this was a useful point of reference for
investigation of industries).  The competition agency of Argentina had identified several situations
where this response had not been forthcoming, due to the existence of anti-competitive practices of
enterprises.  Factors that tended to facilitate or underlie such anti-competitive practices included high
market concentration levels, inelastic demand (reflecting a lack of substitutes), the prior existence of a
cartel, and control by a dominant enterprise of scarce facilities that were necessary for imports to
occur.  He concluded that, within an appropriate legislative and policy framework, market opening
fostered beneficial price adjustments.  However, an effective national competition policy was vital toensure that the adjustment process was not circumvented by anti-competitive practices.  This was
particularly true where former state enterprises that had exercised self-regulatory power were
privatized without steps being taken to limit their market power.
27. The representative of Canada also emphasized the importance of competition law, and rules
relating to essential facilities, in the context of deregulation.  The importance of this was reflected in
the WTO Agreement on Basic Telecommunications Services, which had been mentioned in the
contribution from Hong Kong, China.  Canada's experience, including in the recent Interac matter
which dealt with electronic funds transfer, highlighted the benefits of a robust competition law in
addressing competition and access issues in network industries.
28. Reflecting on the latter remarks by the representative of Canada, the representative of Hong
Kong, China said that the paper by his delegation (document WT/WGTCP/W/64) had identified the
development of general WTO rules on competition policy as one possible alternative that could be
considered in the Group.  This would not necessarily entail a commitment by Members to adopt
generic domestic legislation relating to anti-competitive practices of enterprises.WT/WGTCP/M/4
Page 10
29. With regard to the second overall category of practices, namely those affecting international
markets where different countries were affected in largely the same way, representatives of the
European Community and its member States, Argentina , the United States , Turkey  and Canada
provided examples of such practices.  They referred principally to the problem of international cartelsthat affected price and output across multiple country markets.  For example, the representative of theEuropean Community and its member States discussed the Heavy Electrical Equipment Cartel, which
had fixed prices at higher-than-competitive levels in many countries' national markets over a period ofseveral decades.  This example showed the impact that cartel arrangements could have not only on
international trade, but also on economic development, in that heavy electrical equipment was an
important input to energy production.  He also referred  to mergers and abuses of a dominant position
as examples of practices which could, depending on the circumstances, have similar effects in
multiple jurisdictions.  The representative of the United States referred to the Citric Acid Conspiracy,
an international price-fixing conspiracy that in volved firms from various countries and lasted from
1991-95, imposing heavy costs on consumers in his country and elsewhere.  Fines imposed by the
United States in this case totalled more than US$140 million.  This was only one example of a number
of recent cases in which the United States antitrust authorities had uncovered international cartels that
had raised the price of intermediate and other goods in the United States and elsewhere.  Therepresentative of Canada discussed the Fax Paper case, a cartel that had affected the price of thermal
fax paper in Canadian and United States markets and had involved firms headquartered in variouscountries.  She said that cooperation between the Canadian and United States competition authorities
had been instrumental in the successful investigation of this case.
30. The observer from UNCTAD made two related points.  First, it was important to take account
of the inducement to cartelization which was provided by industry associations, where they threatened
the exporters of other countries with anti-dumping actions if those exporters did not agree to some
form of voluntary export restraint.  Second, cartels operating in certain service sectors such as
international maritime shipping or financial services  could be particularly harmful to trade, since they
not only restrained trade within the relevant serv ice but also raised the price of that service to
exporters, introducing another level of distortion.  Anti-competitive arrangements involving rating
agencies could distort the way in which particular countries received credit.
31. With regard to the third category of practices, namely those involving practices which
(potentially) had a differential impact on the affected countries, the representatives of the European
Community and its member States, Japan , Norway , the United States  and Canada  referred to export
cartels as an example of such a practice.  The representative of Japan said that his country had had
particular experience with export cartels in the textile industry.  The observer from UNCTAD said
that the extent of export cartels was probably greater than was widely known, since most countries didnot insist on registration of such cartels;  they simply turned a blind eye to them.  The victims of
export cartels would often include developing countries which were importing machinery or
consumer products.
32. In addition, the representatives of the European Community and its member States and
Norway referred to situations in which mergers were judged to be benign or even beneficial in one
market, but were not necessarily so in other markets.  They said that such situations illustrated the
need for an enhanced framework of international coope ration, to ensure that all countries affected by a
particular merger or other arrangement were in a position to take appropriate enforcement actions.
The representative of the United States agreed that an appropriate framework for inter-agency
notification and consultation could be helpful in such cases, to the extent that it better enabled the
competition agencies of different countries to understand each other's concerns, and to seek
harmonious remedies, where this was feasible.  Noneth eless, it had to be recognized that there would
be cases in which national agencies would take different stands regarding the acceptability of mergers
or similar arrangements.  She said further that the incidence of such cases might well be less frequentwhere countries employed a consumer welfare standard, rather than a total welfare standard, to
evaluate mergers.  The reason was that, under the latter approach, mergers that yielded significantWT/WGTCP/M/4
Page 11
efficiency gains in the home market might be deemed acceptable even where they entailed substantial
anti-competitive effects, including effects which might be felt in foreign markets.
33. With reference to the problem of anti-competitive practices of enterprises generally, the
representative of Poland said that, in some sectors of the Polish economy, competition from foreign
firms was very strong.  Nonetheless, the competition agency of her country believed that the incidence
of such practices, perhaps particularly cartels and other arrangements involving foreign and local
firms acting together to restrict competition, was greater than was generally known.  New approaches
were needed to better address the extent of these practices.  An additional concern of her delegation
that would require careful attention in the Group was the matter of anti-competitive practices
associated with intellectual property rights.
34. The representative of Turkey said that, if a country's domestic market lacked effective
competition rules, this would inhibit access to the market.  Accordingly, trade liberalization was a
necessary but not a sufficient condition for market access.  The presence of anti-competitive practices
in the home market could be due to:  (i) the non-existence of a well-designed competition law;
(ii) statutory exemptions or protective regulatory regimes covering the conduct in question;  or (iii) a
failure to adequately enforce the law.  Moreover, the existence of anti-competitive practices in the
home market could further distort international trade by providing firms with excess profits whichwould give them an unfair competitive advantage abroad.  Currently, the international trading system
potentially even encouraged the proliferation of anti-competitive practices, including export cartels,
international cartels and anti-competitive practices of transnational corporations, since it lacked the
necessary rules, standards and disciplines to regulate them.  The remedies available even under a well-
constituted domestic competition law would not solve these problems globally.
35. With regard to the economic effects of particular types of enterprise practices, the observer
from the OECD said that cartels were unambiguously harmful.  On the other hand, the effects of
vertical market restraints, mergers or alleged abuses of a dominant position were ambiguous and
therefore needed to be evaluated on a case-by-case basis.  He emphasized that, in evaluating such
cases, it was important to look beyond the alleged abusive practices to determine the extent andunderlying source of market power exercised by the firms.  In many cases, the ultimate source of
market power would turn out to be a government-im posed barrier of one kind or another.  Until this
was addressed, it would be difficult to ensure the efficient functioning of the market.
36. The observer from the World Bank said that it would be useful to have more information on
the question of whether the incidence of anti-compe titive practices affecting international trade was
greater:  (i) among developed countries; (ii) between developed and developing countries;  or
(iii) among developing countries.  Although system atic empirical evidence was lacking, the Bank's
experience tended to confirm the third possibility (i.e., that such practices were most prevalent
between developing countries).
37. A number of representatives discussed the limitations of existing competition laws in
addressing anti-competitive practices, at least in some circumstances.  The representative of Japan
said that, under the existing Anti-Monopoly Act, the Fair Trade Commission of Japan (JFTC) had no
jurisdiction over anti-competitive mergers that took place abroad.  Currently, however, the JFTC was
preparing a bill for consideration by the Diet which would provide it with jurisdiction over such
mergers, where they had effects on the Japanese market.  The representative of Norway said that there
was a growing realization, reflected in the contributions of various Members, that competitionauthorities often lacked jurisdiction to effectively deter anti-competitive conduct originating abroad.As an example, he referred to the written contribution of Mexico to the previous meeting of the Group
(document WT/WGTCP/W/54).  In addition, the representatives of the European Community and its
member States, Japan , Norway , Argentina , the United States , Turkey , Canada , Korea  and the
Dominican Republic, in addition to the observers from the OECD  and the World Bank , referred to
statutory exceptions and exemptions from competition laws as a factor that facilitated anti-WT/WGTCP/M/4
Page 12
competitive practices by enterprises.  The representative of the Dominican Republic discussed the role
of ocean shipping conferences as a factor affecting that country's trading opportunities.  An economic
study had found that the conferences, which were essentially cartels that fixed rates and conditions of
service in international maritime trade, had increased transportation costs above competitive levels,
particularly where there was a lack of competition from non-conference shipping lines.  Theconferences, however, enjoyed statutory exemptions from the competition laws of most countries
having such laws.  In these circumstances, standard cooperation and positive comity arrangements
would not provide a sufficient remedy for anti-competitive arrangements that were clearly having an
adverse effect on trade.
38. The representative of Pakistan posed a question regarding the implications for trade and
competition of non-conventional horizontal arrangements, such as strategic alliances, joint ventures
and R&D consortia.  The effects of these were not necessarily the same as more conventionalarrangements such as mergers and cartels.  The representative of the European Community and its
member States agreed that this merited consid eration in the Group.  The Community was in the
process of carrying out a major review on this subject.  He hoped that a discussion paper on this
subject would be available in the summer and, if so, would be pleased to make it available to the
Group.  The representative of the United States said that her country was also looking at its policy on
joint ventures and related arrangements, and considering whether to issue guidelines.   It was worth
noting that joint ventures and strategic alliances often tended to be very fact-specific and unique, and
therefore it was difficult to make generalizations regarding their effects.
39. With regard to the appropriate policy response by the international community to the above-
outlined anti-competitive practices of enterprises and associations that could affect international trade,the representative of the European Community and its member States said that work was needed to
address gaps in the remedies available to the intern ational community in all three of the categories of
anti-competitive practices of enterprises and associations that had been discussed in the Group:
(i) practices affecting market access for imports;  (ii) practices affecting international markets, where
different countries were affected in largely the same way;  and (iii) practices having a differentialimpact on the national markets of countries.  With re gard to the first category, gaps could arise for the
following reasons:  (i) the non-existence of a law;  (ii) statutory exemptions or protective regulatory
regimes covering the conduct in question;  or (iii) a failure to adequately enforce a law which was
applicable.  Regarding the second category, the issue was how to enhance cooperation to provide
appropriate remedies for such practices, while minimizing conflicts of jurisdiction.  With regard to the
third category, the question was what new arrangements for international cooperation were needed to
better address these practices.  He further set out the following proposals for work to be done onspecific anti-competitive practices, based on the degree of consensus which already appeared to exist
with respect to each practice, and their clear importa nce for international trade.   First, regarding hard
core cartels, he believed that there was a strong international consensus against these.  Accordingly,
there was a good prospect for adoption of a common enforcement principle in the Group, and a
framework for cooperative enforcement efforts in this area.  Second, regarding export cartels,
consideration needed to be given to means to strengthen the application of competition law in this
area.  Third, regarding vertical agreements, it was generally recognized that a balancing of pro- and
anti-competitive effects was appropriate in this area.  It would be useful if the Group could identify an
illustrative list of factors that might be considered  by enforcement authorities, in undertaking the
required balancing in particular cases.  Fourth, in the area of abuse of dominant position, the Groupmight usefully develop:  (i) a list of abusive practices that can have the effect of foreclosing markets;
and (ii) a set of criteria to be used in identifying a dominant position in a market.  Fifth, with regard to
mergers, the Group might examine the scope for convergence in procedural requirements, and the
feasibility of enhanced inter-agency cooperation, in  order that different jurisdictions' concerns could
be addressed at minimal costs to the parties.
40. A representative of the United States said that, as was well known in the competition law
community, his delegation had fundamental differences in regard to the proposals for future work inWT/WGTCP/M/4
Page 13
the Group which had been put forward by the European Community and its member States.  Another
representative of the same delegation said that, with regard to the first category of practices mentioned
by the European Community and its member States, most delegations agreed that domestic
competition law should be adequate to handle this.  The conclusion was:  all countries should have,
and enforce, a competition law.  With regard to the second category of practices, it was clear that
inter-agency cooperation could be helpful in addressing practices such as international cartels.  At an
appropriate stage, it was helpful if agencies could deepen cooperation to the extent of sharing
confidential information with each other.  However, a process of mutual confidence-building and, in
some cases, institution-building was needed if this  was to take place.  With regard to the third
category, she felt that all that could reasonably be expected was that countries with overlapping
interests in particular cases would consult with each other.  For a variety of reasons, including
different effects in different national markets as well as differing legal standards, it was inevitablethat, from time to time, different jurisdictions would reach different conclusions regarding the
acceptability of particular arrangements and transactions.
41. The representative of Canada said that measures to remedy price fixing and abuse of
dominant position were important to ensure that the benefits of trade liberalization and market
opening materialized.  In other words, competition law could help to ensure that private barriers didnot replace public barriers. International cooperation was desirable to facilitate the effective
application of competition law in the current economic environment.  However, such cooperation
should be founded on a mutuality of interest, trust and commonality of purpose.  The representatives
of Norway, Argentina
, Turkey , Poland , Egypt , and the Dominican Republic  also referred to the
desirability of enhanced international cooperation as a tool for facilitating competition law
enforcement in cases with an international dime nsion.  The observer from UNCTAD, referring to a
document prepared for a previous meeting of his organization, suggested that there was a greater
prospect of consensus with regard to international cooperation to curb hard core cartels than regarding
any other area of competition policy, that the need for this was clear, and that it would be desirable to
move ahead on this front without undue delay.  Similarly, there was a worldwide consensus thatcollusive tendering should be banned:  no delegation present would defend such a practice.  The area
of vertical restraints was also a candidate for international agreement, but would require further study.
The representative of Korea said that it was im portant to consider the relevance of WTO dispute
settlement procedures in the area of competition policy.  The Boeing case appeared to be an example
of a situation in which disputes arising out of overlapping jurisdictions for the application of
competition law could potentially lead to trade retaliation.  Perhaps, the WTO dispute settlement
procedures could be of assistance in such situations.
42. The representative of Egypt, referring to the written contribution of the European Community
and its member States (document WT/WGTCP/W/62), said that his delegation agreed with a point
attributed to that paper regarding the need for exemption of certain small and medium-sized
enterprises from competition law.  In his view, arrangements involving such enterprises normally had
an insignificant impact on competition and trade.  He hoped that other delegations would support anappropriately flexible approach to the application of competition law to such enterprises.
43. The representative of Hong Kong, China posed a question as to the reference to "inaction" by
governments regarding anti-competitive practices in the written submission of the United States
(document WT/WGTCP/W/66).  Did this mean that, by not taking action, a government was not
doing its duty?  How did this viewpoint relate to existing WTO rules?  In response, the representativeof the United States said that the term "inaction" referred to a failure by governments to have, or to
enforce effectively, a competition law.  Her delegation was not proposing a new WTO discipline inthis area.  It seemed likely that anti-competitive conduct which was deliberately sanctioned by
government could be addressed, at least in many circumstances, through the concepts of nullification
and impairment.WT/WGTCP/M/4
Page 14
44. In commenting on remarks made by the representative of the European Community and its
member States, the representative of Hong Kong, China  said that his delegation agreed that practices
such as horizontal and vertical agreements, abuse of a dominant position and mergers could createbarriers to entry or otherwise upset the equality of competitive opportunities for Members.  He also
agreed it was appropriate to explore the interaction between such practices and trade.  However, hequestioned the assertion that a national competition law was strictly necessary to address such
practices.  This viewpoint seemed debatable in the light of:  (i) the fact that an agreed set of standards
for national competition laws had yet to emerge;  (ii) the limitations of such laws as reflected in the
problems of extensive exceptions, exemptions and non-enforcement, which were before the Group;
and (iii) evidence that foreign suppliers could experience discrimination, even given the existence of a
competition law.  Furthermore, in his view the delegation of the European Community and its
member States had not yet made a case that economies with a liberal trade policy required genericcompetition legislation.  He asked the delegation to comment on this, particularly in the light of the
flexible and decentralized approach to competition issues that was reflected in various Uruguay
Round agreements, including the TRIPS and TRIMs Agreements and the GATS.  In response, the
representative of the European Community and its member States said that a growing body of
evidence supported the need for a competition law to address anti-competitive practices, both by
enterprises and by governments.  For example, ev en within the Community itself, with its strong
policies relating to competition and freedom of movement at the Community level, individual states
found it important to have their own national competition laws.  These were necessary both to address
anti-competitive practices within their own borders, which were not reached by the Community-level
competition policy, and to act as an interlocutor with the Community and other national authorities onmatters of common interest.  From an economic standpoint, there was no doubt that competition law
was an important tool to advance consumer welfare.  While imports could certainly be a useful source
of competitive discipline in many markets, this would not be the case across the economy.  With
regard to Hong Kong, China's point about the curren t, somewhat fragmented treatment of competition
policy concerns in the WTO agreements, a more coherent approach was desirable. Similarly, therewere important advantages to having a comprehensive competition law, as opposed to sectoral
regulations.  Finally, he said that the fact that there was, at present, no widely agreed set of standards
for national competition law did not mean that it was pointless to discuss this possibility;  in fact,
seeking a consensus on this matter was an important purpose that could be served by the Group.  He
believed that such a consensus was already emerging.
45. With regard to the overall role of competition policy, the representative of Korea said that the
new government of his country had moved away fr om previous industry-oriented policies and had
given a central role to competition policy in its economic policy.  This would involve strengthening
the role of the national competition authority, the Fair Trade Commission of Korea, and a new effort
to eliminate barriers to market access, including anti-competitive practices of conglomerates.
46. The Chairman offered the following personal reflections on this agenda item.  A useful aspect
of the discussion had been that extensive evidence had been set out about the existence of anti-
competitive practices and their impact on trade, in a number of sectors.  The written contributions to
the discussion went into even more sectors.  As suggested by one delegate, in thinking about the
various practices, it seemed useful to group them into categories.  Although not everyone had used the
same categories in their original submissions, it appeared that most of the examples submitted could
be placed within one of the following three categories:  (i) practices affecting market access forimports;  (ii) practices affecting international markets, where different countries were affected in
largely the same way;  and (iii) practices having a differential impact on the national markets of
countries.  Examples of practices falling within the first category included import cartels, vertical
agreements, sole distributors arrangements, etc.  Several delegates had emphasised the fact that
vertical restrictions were more difficult to handle because they could have diverse effects dependingon the context in which they were observed.  For the delegates who had discussed practices in this
category, it seemed that they raised three types of problems.  First, there would be a problem if the
importing country did not have a competition law; s econd, a problem if it had a competition law butWT/WGTCP/M/4
Page 15
the sector in which the practice was observed was exempted from the application of the law; and
third, a problem if the country had a competition la w and the sector was not excluded, but the law was
not enforced vigorously.  With regard to the second  category, the main examples referred to, although
there were others, were international cartels that restricted competition in multiple jurisdictions.
Some abuses of dominant position also appeared to fall in this category.  It had been suggested byseveral delegates that this second category of practices required a deepening of cooperation among
competition authorities, and the question had been raised of how to best promote such cooperation.
With regard to practices falling in the third catego ry, the primary examples in this area seemed to be
international mergers, where two firms merged in one country and this had an effect in another
country.  There had been some discussion as to whether cooperation could help in the solution of
these problems, at least by enabling the countries that had jurisdiction over such cases to better
understand each other's positions.  Beyond these practices, which had been the principal focus ofdiscussion in the Group, questions had also been raised by some delegates regarding unconventional
practices such as strategic alliances.  The answer appeared to be that those practices were quite
complex, but that, at least in some cases, they could be placed in the second or third categories of
practices which had effects in several jurisdictions.  Responding to the discussion of specific anti-
competitive practices, one delegate indicated that there was still some scepticism on the part of hisauthorities as to whether a competition law was appropriate or always necessary in a country which
was a small open economy.  In response, another delegate had given, as an example, the fact that even
a small European country which was in the middle of a unified market had felt the need to adopt a
domestic competition law.  In addition, he had said that one of the uses of having competition law and
competition authorities was that the authority coul d act as an interlocutor of foreign competition
authorities and that this could foster cooperation which had been said by some delegates to be useful
at least in certain transnational cases.  He had also observed that, in his opinion, competition law
should be universal and questioned whether it was satisfactory, at the multilateral level, to have
competition provisions in some sectoral agreements, but not in others.  In a broader context, several
delegates had said that, in their opinion, trade liberalization was necessary but not always sufficient tobring about competition in all cases.  The impact of anti-competitive practices restraining trade on
economic development had also been considered at various times in the Group's discussion.  One
delegate had given the example of an anti-competitive practice in the shipping industry, noting that
the effect of this practice compared to the value of the export of his country was quite significant.  She
had raised the question of whether this practice could be addressed under competition law, in the light
of exemptions that exist in some countries.  An observer had said that export cartels, which might not
seem important when one looked at countries which had compulsory registration of such cartels,might in fact be more important because in many countries there was no such register.  Another
delegate had mentioned that cooperation agreements could be useful and feasible when it came to a
hard core cartel such as price fixing or bid rigging because there was a certain amount of unanimity
about the effects of such a practice, but that there was less of a consensus on the effects of other
practices which might create market access problems.
III. STOCKTAKING AND ANALYSIS OF EXISTING INSTRUMENTS, STANDARDS
AND ACTIVITIES REGARDING TRADE AND COMPETITION POLICY,
INCLUDING OF EXPERIENCE WITH THEIR APPLICATION
(a) Existing WTO provisions
47. The representative of Hong Kong, China said that discussions should focus on the WTO
provisions where the impact of trade and competition on each other was most strongly felt.  This
might involve areas where trade and competition were mutually reinforcing, such as GATS Article X
and TRIPS Article 40, but also areas of apparent conflict between trade and competition, for example
where existing WTO provisions threatened to undermine competition objectives.  In examining these
issues, three concepts underlying the "WTO approach" outlined in the paper submitted by hisdelegation (WT/WGTCP/W/64) should apply:  non- discrimination, economic efficiency and general
consumer welfare.  The WTO provisions relevant to the study of state monopolies (the second tiretWT/WGTCP/M/4
Page 16
under item III of the Checklist of Issues) included Articles I and III, as well as Article XVII, of the
GATT.  The dynamics of the relation between Article I and XVII were likely to be of particular
interest. With regard to the study of the impact of trade policy on competition (the fifth tiret under
item III of the Checklist), the WTO provisions likely to be raised included, inter alia , Article VI of the
GATT and the Anti-Dumping Agreement, particularly those provisions dealing with the treatment ofprice discrimination, the concept of injury and the public interest.  In this respect, another question
that could be looked into was the viability of introducing antitrust criteria in a possible reform of
WTO anti-dumping rules.  Countervailing duty provisions were another area that Members might
wish to examine.  Countervailing duty cases were often brought by industries which themselves had
received massive subsidies which could distort competition.  Therefore, Article XVI of the GATT and
the Agreement on Subsidies and Countervailing Measures were candidates for close study as well.
He also reiterated the view that the "WTO approach" emphasized the importance of dealing withrestraints and distortions of competition that were mainly governmental in origin but could also derive
from private firms' behaviour.  Stocktaking and analytical work in relation to existing WTO
provisions should be given due importance.
48. The representative of Korea, introducing document WT/WGTCP/W/73, said that his
delegation shared Hong Kong, China's views in so me respects.  He focused on two specific points:
first, the limitation of some WTO rules viewed from a competition perspective and, second, problems
needing consideration in regard to the implementation of an internationally comprehensive
competition policy.  With respect to the first point, he observed that, from a competition perspective,
dumping practices could be divided into two categories: monopolistic and non-monopolistic.  The
former reduced the welfare of importing countries whereas the latter had the opposite effect, since inthis case consumer surplus increased by more than producer surplus decreased.  However, the WTO
Anti-Dumping Agreement did not make the foregoing distinction and comprehensively regulated all
forms of international price discrimination.  With regard to the second point, he observed that,
although international cartels posed barriers to market access, WTO rules had no mechanisms in place
to deal with this kind of anti-competitive practice.  As there were no multilateral rules for resolving
competition-related disputes, at present there was no alternative but to rely on the so-called non-
violation complaints clause, that is, Article 26 of the WTO procedures on dispute resolution, which
could be applied to specific policies of trading partners even if such policies did not violate WTO
rules.  Apart from this, it was not clear how the interests of Members could be protected against
restrictive business practices by private firms.  Discussions at the WTO level should proceed by
answering the following questions:  can the efficiency  of the international trading system be enhanced
by applying competition rules and principles, and how can such rules be implemented multilaterally?With respect to the first question, it might be useful to take account of the ongoing discussions at the
OECD's Joint Group on Trade and Competition.
49. The representative of Japan said that his delegation had insisted consistently that the Working
Group examine not only the complementarities but also the contradictory aspects of the relation
between trade and competition policy.  In this regard, there seemed to be a limited number of WTOprovisions of interest.  Basically, they were all related to governmental regulation of international
trade by means of measures intended to secure "fair trade".  Such provisions included GATT Article
VI, the Anti-Dumping Agreement, GATT Article XVI, the Agreement on Subsidies and
Countervailing Measures, GATT Article XIX, a nd the Agreement on Safeguards.  The Japanese
delegation would like to revisit these issues at a later point.
50. The representative of the United States said that, while his delegation accepted the idea of a
full discussion of trade and competition issues, and that such discussion would be diverse and
reflective of the balance of important interests arising in the area, his delegation did not believe that
the Group was in a position to interpret any WTO provisions in terms of the "correctness" of their
application.  In looking at specific WTO provisions, it was important not to see them strictly from theperspective of whether or not they enhanced economic efficiency or competition, but also in terms of
their effect in promoting trade liberalization and th eir role in the careful balance underlying the WTO.WT/WGTCP/M/4
Page 17
51. The representative of the European Community and its member States recalled the view of his
delegation that the key issue to be assessed by the Working Group was the relationship between
current WTO rules and anti-competitive practices.
(b) Bilateral, regional, plurilateral and multilateral agreements and initiatives
52. The representatives of Australia, New Zealand  and Argentina  commented on the treatment of
competition law and its relation to anti-dumping in the context of regional trade agreements.  The
representative of Australia made a number of remarks reflecting on relevant sections of the most
recent contribution by New Zealand (WT/WGTCP/ W/47), discussing the rationale for dispensing
with anti-dumping provisions in the context of the Trans-Tasman Agreement (paragraphs 12
through 14).  Noting that this was an experience that was not necessarily transferable to other trade
agreements, she said that Australia and New Zealand had moved away from treating each other as a
separate market and had come to perceive both markets as integral parts of a single domestic market.This philosophy had been aptly summarized in paragraph 14 of the paper by New Zealand: "It was not
intended that competition laws should replace anti-dumping law in the sense that one was an
alternative for the other.  Rather, the move to a full free-trade area meant that the trans-Tasman
market had reached a stage where anti-dumping la w was no longer appropriate and competition law
had become the appropriate legislation to provide protection to the competitive process."  Thisconclusion was important and ought to be taken into account in future discussions.  The approach
taken by Australia and New Zealand on this issue was facilitated by the fact that both countries had
similar legal and economic systems, a similar level of development and a common culture.  The
representative of New Zealand concurred with the remarks made by Australia concerning the specific
circumstances surrounding the elimination of anti-dumping in trans-Tasman commerce, adding that
not all of these circumstances had to be in place for other countries or groups of countries to adopt
such a course, and that not all of them were pre-conditions for the model to work.  While the path
taken by New Zealand and Australia might be a specialized approach that might not have a universal
application, his delegation would certainly want to encourage others to emulate it to the extent
possible and to create anti-dumping free zones.  As the Australian delegate had pointed out, it hadnever been intended that competition law replace anti-dumping law;  rather, this had happened as a
result of the process New Zealand and Australia went through.  The representative of Argentina said
that, under MERCOSUR's Protocol for the Defense of  Competition, signatories were to discuss the
treatment of anti-dumping within this trade agreement beginning in the year 2000.
53. The representatives of the United States, Brazil  and the European Community and its member
States commented on the subject of cooperative arrangements regarding competition law, focusing on
two aspects:  how such agreements were built up on a gradual basis, and the treatment of confidential
information.  The representative of Argentina said that several agreements between the competition
agencies of the MERCOSUR members had been set up, establishing procedures for reciprocalconsultations and reciprocal technical assistance.  These agreements had generated a number of
linkages between the Argentine and the Brazilian competition agencies.  This had helped to unify the
criteria used by the two agencies as they were both heading in the same direction.  They both hadbeen re-engineered to give them more weight and reputation and had taken on a strong role in
reforming the economic system in their respective countries.
54. The representative of the United States said that her country placed high priority on
cooperation with foreign antitrust authorities.  In many cases such cooperation was crucial for the
effective application of competition law.  Two themes underlay all cooperation agreements:cooperation in the implementation of the law and the avoidance or management of disputes.  The first
aspect was, perhaps, most easily recognized in me rger cases.  When merging firms were subject to
notification requirements in countries which we re parties to an agreement, cooperation between
competition agencies enabled them to ensure that  any remedies imposed did not conflict with one
another.  In the case of criminal antitrust matters, an agreement between the United States and Canadapermitted the exchange of confidential information regarding parties under investigation.  A similarWT/WGTCP/M/4
Page 18
approach was foreseen for an upcoming cooperation agreement with Australia.  This kind of
cooperation required very similar antitrust laws and laws protecting confidential information.  The
avoidance or management of conflict was seen increasingly in areas like "positive comity".  For
instance, cases involving anti-competitive practices conducted in the European Community, affecting
the United States but mostly the European Community itself, were to be referred to the Europeancompetition agency and vice versa.  Cooperative relationships very often were iterative processes.
That had been true of the cooperative work of the United States with the European Community,
Canada, Australia and the OECD.  One started out with a relatively simple agreement and, as
confidence was built, the level of obligation, indeed, of mutual benefit, was likely to increase.
Progress could be made to the point where businesses agreed to waive their confidentiality protection;
in the experience of the United States, this had happened already in a few cases.
55. The representative of Brazil said that successful cooperative agreements required a degree of
commonality in approach to competition law enforcement and a tradition of cooperation.  The
approach should be gradual, envisioning different types of cooperation agreements, starting with
simple ones and proceeding to others of a more complex nature, involving exchange of confidential
information.  Developing common standards was important and a balance between transparency and
the protection of confidential information had to be found.  An international consensus on the lattermatter would facilitate countries entering into agreements featuring deep cooperation between
enforcement authorities.
56. The representative of the European Community and its member States said that cooperation
was essential to finding a solution to certain anti-competitive practices.  It could take place at different
levels. Cooperation in enforcement required close links at the bilateral level.  But there was also aneed for further discussion of the types of cooperation that would be helpful at the multilateral level.
57. The observer from the OECD introduced a draft Recommendation on Hard Core Cartels that
had been developed in the OECD Committee on Competition Law and Policy.  The
Recommendation1 called on OECD member countries to adopt measures to address such
arrangements and, to the extent consistent with national legislation, to cooperate with each other in theinvestigation and prosecution of such cases.
2  He emphasized two points.  First, the draft
Recommendation was a strong statement as to the pernicious nature of "hard core" cartels and
concluded that such cartels were "the most egregious violations of competition laws".  Effective
action against such cartels was important from an international perspective, because their distorting
effects on world trade created market power, waste and inefficiency in markets that would otherwise
be competitive.  Second, the draft Recommendation urged countries to ensure that their respective
laws provided sanctions that would deter firms from participating in cartels, and had enforcementprocedures and institutions with the powers necessary to detect and remedy such anti-competitive
practices, including the power to obtain information and impose penalties for non-compliance.  With
respect to the subject of exemptions from comp etition law, such as the exemption applying to
shipping conferences, the draft Recommendation stated that exclusions and authorizations of what
would otherwise be "hard core" cartels should be tr ansparent and reviewed periodically to ensure that
such measures were necessary and not broader than necessary to achieve their overriding policy
objectives.  Further, the draft Recommendation encouraged countries to enter into cooperative
agreements, with the understanding that this may be declined for a variety of reasons or indeed for no
reason at all.  He said that OECD recommendations were not binding instruments, but experience had
shown that they were effective in changing the way countries interacted.  Finally, the draftrecommendation was open to non-OECD member countries and several such countries had indicated
an interest in associating themselves with it.
                                                     
1Which subsequently was approved by the OECD Council of Ministers on 25 March 1998
2 See Recommendation of the Council Concerning Effective Action Against Hard Core Cartels, OECD
document C(98)35/FINAL.WT/WGTCP/M/4
Page 19
(c) National competition policies, laws and instruments as they relate to trade
58. The representative of Australia introduced a paper describing the Australian competition
regime (document WT/WGTCP/W/60).  The  paper presented an overview of the reforms of
competition law and policy undertaken in recent years.  It made a distinction between narrow
competition policy and wider competition policy, the former referring to antitrust and the latter towider competition policy issues.  Narrow competition policy remained the primary instrument for
dealing with the bulk of anti-competitive practices.  However, this might not be sufficient to bring
about a thorough change in the competitive environment of an economy.  To achieve this objective, it
often was necessary to address the anti-competitive impact of governmental actions, including those
taken by regulatory authorities.  The paper also explained some of the constitutional realities that, in
the past, had impeded the emergence of a national competition law.  These had contributed to the
proliferation of a range of separate regulatory bodies with sectoral responsibilities.  Beginning in the1970s, however, there had been a gradual movement towards a more coherent approach.  The basis of
Australia's competition laws was the Trade Practices Act 1994.  Although this Act had been amended
and supplemented many times, its two main objectives had remained unchanged:  first, the prevention
of anti-competitive conduct and, second, the assurance of fair trading practices, including consumer
protection. More recently, the Hilmer report had espoused a national approach to competition policy.According to the report, the imperative for develo ping a national competition policy rested on three
factors:  Australia had become for all practical purposes a single integrated market;  trade policy
reforms had increased competition in internationally traded sectors but sectors not subject to the
forces of international trade (public utilities and the professions, for instance) had been left sheltered
from competition;  and, although domestic pro-competitive reforms had been undertaken on a sector-by-sector basis, this had not been done with the benefit of a broader competition framework.  Based
upon the recommendations of the Hilmer report, the Competition Policy Reform Act had been passed.
The next stage in Australia's competition policy was to address factors that impacted the structural
variables at play in the economy and could not be affected by applying narrow competition policy.
Finally, the paper commented on the question of general versus specific industry regulation.  From theviewpoint of both experience and analysis, Austra lia favoured a national competition authority over
sector-specific regulators.
59. The representative of Jamaica asked whether the experience of Australia suggested that, in
dealing with competition matters, both from a narr ow and a wider perspective, anti-dumping measures
ought not to be a legitimate area of concern of regulatory authorities or competition authorities.  He
also said that, in his view, the Australian paper made a distinction between industry regulators and
competition regulators:  could a competition body be seen as a regulator?  The representative ofAustralia said that her delegation did not see an inconsistency between Australia's current competition
policy regime and its utilization of the Anti-Dumping Agreement.  The issue could be furtherdiscussed in the upcoming meeting of the Working Group.  She also clarified that, although Australia
favoured an overarching competition authority, the Australian competition regime still envisioned
specialized regulators managed by expert authorities in particular sectors.  The overall responsibilityfor competition policy, however, now resided in the overarching  body itself.
60. The representative of Egypt asked what were the difficulties or problems that might be
encountered during the process of transformation from a narrow competition regime to a wider one.
Was there an institutional framework that could facilitate such a transformation?  The representative
of Pakistan asked whether any concrete measures had been taken in the context of the agreement
between Australia and New Zealand relating to the free movement of persons.  With respect to the
latter question, the delegate of Australia said that there was already relatively free movement of
persons between the two countries.  She also said  that her delegation would provide further responses
to these questions at the next meeting.
61. With respect to the question posed regarding the difference between industry regulators and
competition policy, the representative of Canada said that the competition agency in her country didWT/WGTCP/M/4
Page 20
not perceive itself as a regulator.  Competition policy was based on the belief that markets generally
worked, and that there was a need for intervention only in a minority of situations where there were
clear market failures.  In contrast, regulation generally reflected a view that there was a need for
continuing government oversight either because the government wished to pursue some specific
social objective, or because a natural monopoly existed.  Industry regulation dictated the day-to-daydecisions of regulated firms.  In contrast, competition policy aimed at defending the overall
competitive process, leaving the vast majority of operational decisions to the firms involved.
62. The representative of Japan spoke on the enforcement of competition law. Under Japan's
Anti-Monopoly Act (AMA), the Japan Fair Trade Co mmission (JFTC) was the principal enforcement
organization.  At the same time, public prosecutors, private parties and judicial courts also played
limited but important roles.  The JFTC was an independent agency responsible for investigating
violations of the AMA.  It was empowered to issue orders to businesses or trade associations to ceaseand desist from illegal activities, as well as to order cartel participants to pay surcharges.  In addition
to these administrative sanctions, the JFTC could fi le criminal accusations with the public prosecutor.
Also, individuals affected by a viol ation of the AMA could file civil suits against alleged violators.  In
these cases, since it was difficult for any private person to prove causation and estimate the amount of
damages involved, the JFTC could submit opinions on the amount of damages involved.
63. The representative from the Dominican Republic, discussing the relationship between
privatization and the application of competition policies, said that replacing a public monopoly with a
private monopoly was not helpful to the consumer.  The privatization of public utilities such as
telecommunications and electricity should bear this very much in mind.  Even if in a public utility
situation, competition could not be introduced in some areas given structural constraints, it wasessential to create competition in the area of distribution.  For this reason, it was important for
competition policy to guarantee unimpeded access to distribution facilities and look into issues such
as interconnection.  With regard to limitations of positive comity in the context of exclusions and
exceptions from competition law, he observed that positive comity was not practicable when the
sector concerned remained a public monopoly or otherwise was excluded or exempted from the scopeof competition law.  There were sectoral exceptions to competition law which had existed for a
century or more.  It remained to be seen where this situation could be changed and whether
competition policy and law could be implemented on a general basis.
64. The representatives of Peru, Korea
, the European Community and its member States , Japan
and Canada commented on the subject of mergers.  The representative of Peru  introduced a
contribution submitted by his delegation (WT/WGTCP/W/59), analysing the advantages and
disadvantages that the adoption of merger provisions could represent for developing countries with anopen economy.  According to the inventory of natio nal competition laws developed in the context of
discussions regarding a possible Free Trade Area of the Americas (FTAA), provisions regulating
mergers were relatively common;  out of the 13 countries in the Western Hemisphere with
competition regimes, only Peru and Argentina lacked them.  Nevertheless, concentrations taking place
in the context of economic liberalization were not likely to be linked to anti-competitive practices, butrather to the adaptation of the domestic econom y to the changes resulting from the new economic
environment.  Specifically, these changes created incentives for firms to merge in order to gain
economies of scale.  The regulation of mergers could be an obstacle for firms undergoing this
transition.  Two questions merited further discussion:  was it warranted to introduce merger provisions
into competition legislation, and what was the potential effect on competition of introducing suchprovisions?
65. The representative of Korea said that concentrations may help firms attain critical mass to
confront foreign competition, generating synergies and resulting in the creation of "national
champions".  He asked whether there was a choice to be made between the efficiencies accruing from
economies of scale and the benefits of competition.  The representative of the European Community
and its member States said that, according to Community practice, firms were free to merge as theyWT/WGTCP/M/4
Page 21
wished up to achieving a dominant position in the Common Market.  Once a dominant position was
attained, however, mergers were prohibited.  In any competition analysis, one started out by defining
the relevant market.  Was there a world market for the investigated good or service?  If the market
concerned was truly international, it followed that competition within that market was international as
well.  This meant that, in cases involving internat ional markets, the weight of the concentration was
assessed against that defined market.  Mergers that were big in terms of domestic markets would not
necessarily create or strengthen a dominant position in a global market.  The concept of "national
champions" was controversial:  champions that were insulated from competitive pressures ended up
losing any competitive advantages.
66. The representative of Japan observed that the Japanese legislation on mergers assessed
concentrations purely in terms of their effects on competition, thus excluding any other criterion from
consideration.  He also said that, for the purposes of merger analysis, the market concerned wasinterpreted as the market in Japan.
67. The representative of Canada said that Canadian competition law made explicit reference to
how efficiency gains were to be incorporated into the analysis of mergers.  In the experience of the
Canadian competition agency, efficiency gains were frequently raised by parties, but such gains were
rarely found to be sufficiently compelling to warrant mergers that would otherwise appear to haveanti-competitive effects.  It was important not to overstate them.
68. The representatives of Argentina, Brazil
, Canada  and the European Community and its
member States, and the observer from the OECD , commented on competition advocacy.  The
representative of Argentina said that whether a competition agency should be involved in competition
advocacy was not the relevant question.  Rather, one should ask whether a competition agency
engaged in many tasks and endowed with limited resources could also undertake heavy advocacy
activities.  The answer depended on the circumstances involved.  In the experience of the Argentine
competition agency, competition advocacy had been best promoted by opening cases of great
importance in terms of resource allocation and by solving such cases as quickly as possible.  By
moving rapidly on significant issues, especially during the recent past, the Argentine competitionagency had become very relevant to economic life.  Once a competition agency had earned credibility,
it could get involved in disseminating a culture of competition to other areas of government.  In
certain cases, competition advocacy had be pushed in non-traditional ways.  For instance, the
Argentine competition agency was empowered to investigate collusion in tenders, but could not
review the general conditions stipulated for tenders by other government agencies, irrespective of the
implications of such conditions for competition.  In  these cases, the competition agency had to follow
the route of approaching the agencies concerned so as to educate them with respect to the costsinvolved in setting out conditions for tenders that permitted anti-competitive behaviour.
69. The representative of Brazil said that competition agencies in general had three roles to play,
and that these roles had to be played simultaneously.  There was a repressive role, a preventive role
and an educational role.  It was wrong to give too much emphasis to one role to the detriment of the
others.  However, since there was an educational aspect to both the repressive and the preventiveroles, the educational role seemed to be the mo st important of the three.  This enhanced the
importance of competition advocacy.  There was a question as to whether getting the competition
agency involved in sensitive areas could get it tangled up in political compromise.  This could be a
problem but, if it was, it derived from policy design and did not arise from competition advocacy.
One of the most important ingredients of competition advocacy was independence on the part of thecompetition agency.  This was to be defended at all times.  One had to bear in mind also that, if the
role of competition policy was exaggerated, there was a risk that the competition agency would
become overactive.  Thus, competition policy had to be exercised cautiously when trying to make an
impact upon liberalization policies.WT/WGTCP/M/4
Page 22
70. The representative of Canada said that an agen cy's ability to engage in effective competition
advocacy work depended, very much, on its overall reputation for sound analysis and policy advice.
Certainly, this was a slow process, where credibility was gained step by step.  The competition agency
had to assist other parts of government, offer advice, and provide expert analysis of particular
situations.  The representative of the European Community and its member States said that
competition advocacy was very important and that for this reason the competition authorities of the
Community played an active role in the design of other Community policies and in advocating pro-
market solutions when legislation was being formulated or implemented.
71. The observer from the OECD noted that several meetings on competition advocacy had taken
place recently under the auspices of his organization.  Two reports had resulted from this work:  the
"OECD Report on Regulatory Reform", and "The Role of the Competition Agency in Regulatory
Reform".  The former contained descriptive information about the levels and types of advocacyactivities undertaken by competition agencies in different OECD countries.  The latter derived from a
joint workshop undertaken with the Japan Fair Trade Commission, with the participation of
competition officials from several other countries.
72. The representatives of the European Community and its member States, the United States
 and
Canada introduced written answers to questions on their enforcement practices that had been posed in
earlier meetings of the Group.  The complete texts of their answers are to be found in documents
WT/WGTCP/W/61, WT/WGTCP/W/67 and WT/WGTCP/72, respectively.
73. A number of additional questions were posed to the delegations of the United States and the
European Community and its member States.  On whether the competition agency could develop
allies in other areas of government when some of them were unwilling to embrace the objectives of
competition policy, the representative of the United States said that getting allies in government was a
complex process calling for a variety of activities.  Indeed, competition advocacy required action atdifferent levels. Developing personal contacts in and institutional ties with other areas of government
was a good beginning.  Speaking out in other fora was also very important.  This was essential for
disseminating the views of the competition agency among the general public.  For this purpose, it wasalso very useful to maintain good contacts with journalists, and brief them about the benefits of
competition policy.  Further, the occasions when the competition agency acted as an enforcer could be
taken advantage of to explain to consumers the benefits in terms of dollars saved that would result
from having the competition agency restrain anti-competitive actions.
74. On whether transparency and consultation procedures between government, legislative bodies
and judicial authorities were sufficient to promote a culture of competition, and whether aggressive
enforcement was needed as well, the representative from the European Community and its member
States said that there were many things that could be done to spread a culture of competition.
Aggressive enforcement certainly was one of them.  The repressive side of competition policy alsohad a preventive and educational impact. Indeed, imposing fines had a salutary effect both on the
companies investigated and on other companies in the sector concerned.  On whether the policy
outlined in reply number 16 in the submission by the European Community and its member States(WT/WGTCP/W/61) amounted to an extraterritorial application of competition law, he said that he
did not think that the jurisdictional reach of Community competition law was extraterritorial.
Community law applied to matters having a tangible impact on the Common Market.  However, for
the purpose of defining the relevant market, one could go beyond the Common Market, and this was
obvious because some markets were in fact worldwide.  It was not reasonable to ignore marketrealities simply because they extended beyond the Community's own domestic market.  The key
questions to be addressed in determining jurisdiction were:  was the practice concerned implemented
within the Community and was trade among member States significantly affected?  The nationality of
enterprises and their place of origin were immaterial.  What was of importance was what enterprises
did.  If what they did was anti-competitive and had effects within the Common Market, thenCommunity competition law applied.WT/WGTCP/M/4
Page 23
IV. THE RELATIONSHIP OF TRADE AND COMPETITION POLICY TO
DEVELOPMENT AND ECONOMIC GROWTH
75. At the outset of the discussion, the Chairman reminded delegates that there had been an
extensive discussion of this item at the previous meeting of the Group, in November 1997.  It had
been placed on the agenda for the current meeting principally for the purpose of determining whether
the Secretariat should be asked to prepare a study on the matter.
76. The representative of Egypt said that a study of the relationship of trade and competition
policy to development and economic growth would enrich the discussion in the Group, particularly
regarding the issues which were of importance to developing countries.  Accordingly, he proposed
that the Secretariat be asked to undertake such a study.  The representatives of the United States;
Hong Kong, China; Pakistan ; the European Community and its member States  and India  supported
this proposal.  They emphasized that it should draw together work on this matter that had beencompleted in UNCTAD and other intergovernmental organizations, in addition to the discussions to
date in the Working Group.
77. In speaking on the proposal, the representative of India stated that his country had had a
competition law since 1969, and had found it to be helpful in promoting development in various
sectors.  He also referred to questions that had arisen regarding practices associated with licensing
requirements in the caustic soda industry, and with  foreign investment in the automobile industry of
India.
78. In light of the above, the Group decided that the Secretariat would be asked prepare a paper
bringing together the issues raised and points made on the relationship of trade and competition policy
to development and economic growth, based on the oral and written contributions to the Grouprelevant to this topic, including the work done in UNCTAD and other intergovernmental
organizations that had been brought to the attention of the Group.
V. REQUESTS FOR OBSERVER STATUS
79. The Working Group agreed to revert to requests made by SELA and the Organization of the
Islamic Conference at its next meeting, having re gard to the ongoing consultations in the framework
of the General Council.
VI. OTHER BUSINESS
(a) Derestriction of Members' contributions to the Group
80. The representative of the United States said that, at the most recent meeting of the General
Council, his country's delegation had reminded Members of the desirability of making as many as
possible of their contributions to WTO bodies available to the public, and of opportunities available
for early derestriction of documents.  He said that Members' submissions to the Working Groupwould be of interest to a large number of persons  outside the WTO who were following the work of
the Group.  Ideally, his delegation would like all submissions to the Group to be derestricted.
Alternatively, he proposed that the Secretariat get in touch with individual Members, to ask whether
their previous submissions to the Group could be derestricted.  The representative of Mexico said that
he had no difficulty with the United States propos al that documents be derestricted, where individual
Members so instructed the Secretariat.  He said further that the minutes of the Group could also be
issued in unrestricted form.
81. The Working Group agreed that the Secretariat would contact Members to inquire as to
whether their contributions to date could be derestricted, and that this would be done on the basis of
instructions to be received from individual Members.WT/WGTCP/M/4
Page 24
(b) Report to the Ministerial Conference
82. The Chairman informed the Group that, at its meeting on 10 December 1997, the General
Council had decided that its report to the 1998 Ministerial Conference would consist of the 1997
Annual Reports of WTO bodies to the General Council, together with a brief update concerning
developments in 1998.  Chairpersons of subsidiary bodies would be invited to make oral reportsconcerning work completed since December 1997, at the final meeting of the General Council before
the Ministerial Conference.  The Working Group took note of the oral report that the Chair planned to
make on his own responsibility to the General Council.
3
(c) Organization of future work
83. The Working Group discussed the organization of work for its next meeting, which will take
place on 27-28 July, back-to-back with the next meeting of the UNCTAD Intergovernmental Group of
Experts on Competition Policy.  The Chair noted that, as previously agreed (see documentWT/WGTCP/1), the main items to be considered at  the meeting would be the second and fifth tirets
under item III of the Checklist of I ssues Suggested for Study, namely:
- the impact of state monopolies, exclusive rights and regulatory policies on
competition policy and international trade;  and
- the impact of trade policy on competition.
84. The Chairman encouraged delegations to prepare written submissions in relation to both these
items.  In addition, Members were invited to make further written submissions relating to the first tiret
under item III, namely the impact of anti-competitiv e practices of enterprises on international trade,
with the understanding that any discussion of this it em at the meeting would take place after the other
substantive agenda items had received adequate attention.  He suggested that the Working Groupagree to a target date for the submission of contributions, so as to provide an opportunity for such
contributions to be translated and studied prior to the meeting.  He suggested a deadline of no later
than 29 June 1998, to provide sufficient time for translation and distribution in advance of the
meeting.  The Working Group agreed to proceed as proposed by the Chair.
85. The Chairman offered the following additiona l thoughts regarding possible approaches that
could be used by delegations in preparing their contributions to the next meeting.  The point had
already been made in the course of the Group's discussions to date that government regulatory
measures could have an adverse effect on trade and competition.  Measures having such effects could
include those relating to distribution outlets, the professions, product testing and certification,
standards, registration schemes and rules for public procurement.  Practices of state-owned enterprises
and various trade measures could have similar effects.  The Group was already familiar with many
such practices because many WTO agreements aimed precisely at limiting the impact on trade oftrade measures or of government interventions in general or of regulations.  As the Group had done in
regard to its analysis of the anti-competitive practices  of enterprises, it could be helpful if, in focusing
on the subject of government measures, there was a stocktaking aspect and a more conceptual aspect
to Members' contributions.  In this regard, it would be helpful to reflect on the question of whether
such measures were justified, whether, in some circumstances, they could be in violation of existingWTO obligations, or whether they violated competition principles.  This would assist in identifying
whether there was a gap in how such measures were viewed under trade and competition policy, even
where they did not violate specific provisions of trade or competition law.  Still another question that
merited consideration was how far government meas ures that affected trade and competition policy
could be addressed through the instrument of comp etition advocacy, or other possible instruments.  In
                                                     
3Subsequently, the report was presented orally to the General Council at its meeting on 24 April 1998
(see document WT/GC/M/28).WT/WGTCP/M/4
Page 25
this regard, it was important to consider not only the advantages and strengths of advocacy, but also
its limitations.  It would be relevant to consider what lessons could be learned from the results of the
WTO negotiations on basic telecom services, which included commitments relating to abuses of a
dominant position and access to essential facilities.  The Chairman emphasized that these were merely
his personal thoughts and were in no way binding on Members.
__________