WORLD TRADE
ORGANIZATIONWT/WGTCP/W/124
31 May 1999
(99-2173)
Working Group on the Interaction
between Trade and Competition PolicyOriginal:  English
COMMUNICATION FROM THE REPUBLIC OF KOREA
The following communication, dated 16 April 1999, has been received from the Permanent
Mission of the Republic of Korea with the request that it be circulated to Members.
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International Cooperation on Competition Policy:
Bilateral, Regional and Multilateral Approaches
I. INTRODUCTION
1. As a corollary to the on-going process of globalization and the significant lowering of tariff
and non-tariff barriers since the UR negotiations, competition policy is taking a greater importance inthe realm of international trade, particularly because differences in the way countries have
implemented their own competition laws and policies have created an increasing number of new trade
conflicts.  These conflicts often erupt over market access.  To remedy the tensions that are likely to
arise between trading countries and to deal with the jurisdictional conflicts that result, harmonization
and coordination of different domestic competition laws and policies are necessary.  To this end,
various approaches have been taken thus far:  bilateral, regional and multilateral approaches.
2. This paper will address the benefits and constraints of all three approaches and, in so doing,
argue that the multilateral approach is the preferable option.  But the paper does not suggest that
multilateral cooperation should absorb or replace all bilateral and regional cooperation schemes.
Rather, all three can develop in a mutually complementary and reinforcing way.
II. BILATERAL APPROACH
3. Bilateral cooperation between competition authorities is one way to deal with competition-
related problems in international trade.  Formal or informal consultative mechanisms as well as
exchanges of experts and information between the competition authorities are examples of bilateral
cooperation.  Such a cooperation is easier to de velop between countries economically interdependent
and sharing a similar level of enforcement of competition laws and policies.  Korea, for one, has been
engaging in regular policy dialogues with competition authorities of major trading countries,including the US, France and Japan, with a view to strengthening bilateral cooperation on competition
issues.
4. Concluding a bilateral agreement is another way to facilitate competition-related international
cooperation.  Such an agreement allows for greater coordination and exchanges of information
between the two countries, thereby reducing un certainty and potential sources of contention.WT/WGTCP/W/124
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5. One problem with these bilateral agreements, however, is that they open the door for abuse.  
A country can use bilateral agreements to obtain evidence and information from foreign firms and
governments for the sole purpose of better enforcin g its competition law, including its extraterritorial
application.  Past cases have illustrated how extraterritorial application of competition law leads to
serious jurisdictional conflicts.  Jurisdictional "out -reaching" has been severely criticized by targeted
countries.  Several countries have even resorted to "clawback" laws and blocking statutes to shield
themselves from extraterritoriality.
6. Recently, a rather new concept of cooperation in competition law enforcement has emerged:
positive comity.  In 1991, the US and the EC concluded a cooperation agreement introducing the
concept of positive comity, which was later supplemented in 1998.  The US and Canada also
concluded a positive comity agreement in 1995.  Basically, the concept implies that if a country
believes that one or more of its firms are adversely affected by foreign anti-competitive practices, itcan appeal to the country in which these practices occur to enforce that country's own competition law
with a view to remedying what th e complaining country sees as harmful measures.  However, as the
requested country is free to decide whether to initiate antitrust investigations, it can hardly be
expected to enforce its competition law at the expense of its own domestic industry and only for the
benefit of the complaining country.  As such, the positive comity agreement has inherent limits insecuring effective regulation of anti-competitive practices.  Differences in the coverage and
application of the parties' respective competition laws and policies further limit the desired effects of
such an agreement.
7. Notwithstanding these inherent flaws, however, the concept of positive comity has the
potential to facilitate international cooperation in  competition law enforcement.  Therefore, the
Korean government believes that further studies should be conducted to explore ways in which
positive comity can be utilized to accelerate international cooperation in the area of competition
policy.
III. REGIONAL APPROACH
8. Regional cooperation can also contribute to creating a more competitive international trade
environment, either through the seminars and training programs it engenders, or by encouraging
technical assistance between countries in the regi on in their formulation of competition laws and
policies.  In recent years, Korea has accumulated experience with this kind of regional cooperation.
Since 1996, Korea has been offering the "International Training Program on Competition Policy" on
an annual basis for developing countries, most of which are APEC members.
9. In various regions, such cooperative activities have been developing into collective efforts to
introduce competition laws and policies in their intra-regional trade frameworks.  The APECmembers have recently undertaken studies on competition laws and policies in keeping with the
Collective Action Plan.  They are now working on a comprehensive set of competition principles.
Many regional trade agreements such as the European Union, the Australia-New Zealand Closer
Economic Relations Trade Agreem ent (ANZCERTA) and the North American Free Trade Agreement
(NAFTA) also deal with harmonization of competition policies.
10. The degree of harmonization, however, differs widely depending on the degree of economic
integration.  For example, the EU has established a supranational body to enforce relevant
competition provisions under the Treaty of Rome while the NAFTA does not clarify substantive laws
related to competition policy but simply states that parties shall adopt or maintain measures to
proscribe anti-competitive business practices and take appropriate action with respect thereto.  A highdegree of economic integration has also allowed the EU and the ANZCERTA to no longer enforce
anti-dumping laws within the region.  The NAFTA, whose economic integration is of a lesser level,
still maintains anti-dumping laws.WT/WGTCP/W/124
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11. Therefore, the degree of economic integration is a key element in evaluating the merits of the
regional approach.  One should keep in mind, however, that a higher degree of harmonization of
competition laws and policies within regional trade agreements does not necessarily enhance the
economic welfare of non-participants.  A pro-competitive environment within the region may put
firms outside the region at a disadvantage in their relation to regional competitors.
IV. MULTILATERAL APPROACH
12. Although the discussion surrounding a multilateral agreement on competition policy was
initiated several decades ago with Chapter V of the 1948 Havana Charter, efforts to agree on an
effective international competition code have not been successful.
13. Several international fora, including the OECD and the UNCTAD, have endeavoured to
explore ways to effectively address anti-competitive practices beyond the border.  The OECD has
produced many recommendations on international cooperation for effective enforcement ofcompetition law.  Most notably, the OECD issued in 1998 a recommendation on Hardcore Cartels.
Although legally non-binding, the recommendation has symbolic significance as it signals that the
OECD member countries will not tolerate egregious anti-competitive practices, such as price-fixing,
output limitation, market division, and bid-riggi ng.  The UNCTAD, too, has produced an important
international instrument, the 1980 SET rule.  While it contains relatively strict legal principles, it isnot legally binding and does little to curb anti-competitive practices, similarly to the OECD
recommendation.
14. As noted above, the UNCTAD and the OECD  mostly operate by adopting non-binding
guidelines and recommendations to which member nations voluntarily adhere.  Neither body has
much experience with multilateral negotiations.  The WTO, however, is equipped with legally bindingrules and an effective dispute settlement system, as well as a long experience with multilateral
negotiations through which a balance of interests between developed and developing countries can be
achieved.  Therefore, the WTO is the forum best suited for discussions on multilateral rules on
competition.
15. Yet, the existing competition-related provisions contained in the WTO agreements are still
inadequate for dealing with competition-related issues including private anti-competitive practices.
The Kodak-Fuji case has well illustrated the lack of tools at the WTO's disposal.
16. Consequently, the WTO regime needs to be reinforced by the incorporation of competition-
related norms.  Among the wide array of models suggested by scholars, the ideal model for an
international competition code would contain provisions on supranational competition authority as
well as unified substantive and procedural norms.  One model close to this ideal form is the 1993
Munich Code which was proposed by the International Antitrust Code Working Group (IACWG)during the UR negotiations as a possible basis for a WTO plurilateral agreement.  But deemed
unfeasible, the ambitious Code was never adopted.
17. One of the difficulties in designing the right model pertains to the different interpretations
given by countries to the same legal terms.  Interpretations vary depending on the country's legal
culture and industrial development.  Therefore, in order to ensure effective international cooperation,harmonization of competition laws is not enough; cl ear enforcement guidelines must be established to
which all countries can refer.
18. The Munich Code proposed to establish an international antitrust authority entitled to request
domestic competition authorities and courts to initiate antitrust investigations.  This proposal,
however, is not politically viable in the short or medium term, as the EC Expert Group Report onCompetition Policy in the New Trade Order pointed out in 1995.WT/WGTCP/W/124
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19. A TRIPS-type agreement, which is familiar to WTO Members, could be considered as one
possible option.  Such an agreement would require every Member to incorporate substantive norms of
competition into its domestic law and establish an independent administrative and judicial body to
oversee implementation and guarantee greater uniformity in interpretation of the agreement.  The
WTO dispute settlement procedures could be us ed as the appropriate mechanism for addressing
violations of substantive norms.
20. The fact that many WTO Members have yet to formulate their own competition laws does not
make such type of agreement impracticable; incorporation into national legislations of provisions
relating to competition would not make already existing domestic competition-related laws a
prerequisite.  In fact, the absence of such laws in national legislations may render easier this
incorporation.
21. In sum, a multilateral approach to competition policy within the WTO framework allows to
better address conflicts arising from the interface of trade and competition policy, by way of
incorporating competition principles in the WTO rules.  It also provides WTO Members with an
opportunity to improve the existing WTO rules in a more competition-oriented manner.
V. CONCLUSION
22. Bilateral and regional approaches do contribute to enhancing international cooperation in the
area of competition policy.  However, their inhe rent flaws prevent them from optimizing cooperation;
the very fact that they are limited to certain countries and areas limits the range of their applicability
and hence the overall level of efficiency.  As argued above, the multilateral approach is more
desirable, particularly as it can give birth to trade-related competition rules that go beyond simply
harmonizing substantive norms in the short term and beget an international enforcement mechanism.
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