RESTRICTED
WORLD TRADE WT/WGTCP/W/50
27November 1997
ORGANIZATION(97-5225)
Original: English Working Group ontheInteraction
between Trade andCompetition Policy
SUBMISSION FROM HONG KONG, CHINA
Thefollowingcommunication,dated25November1997,hasbeenreceivedfromtheHongKong
Economic andTrade Office withtherequest thatitbecirculated toMembers.
_______________
Introduction
1. ItemIIoftheChairman 'sChecklist ofIssues envisages astocktaking andanalysis of,interalia,
existing WTO provisions. Thissubmission presents Hong Kong, China 'sviewontheWorking Group 's
approach totheexamination ofcompetition-related WTO provisions incarrying outitsmandate "to
studyissuesraisedbyMembersrelatingtotheinteractionbetweentradeandcompetitionpolicy,including
anti-competitive practices".
2. Thispaper should notbereadasimplying anyobjection totherights ofusing governmental
competition-related provisions inexisting WTO agreements strictly inaccordance withtheparameters
laiddown inthose agreements. WTO Members havesuchrights. TheWorking Group, however,
offers aunique opportunity todiscuss, inanon-negotiating format, therelationship ofsuchprovisions
withcompetition andliberalization ofinternational trade, andtomake asystemic comparison with
theeffects ofdomestic regulation ontrade. Hong Kong, China doesnothaveanypreconceptions as
totheoutcome orduration ofsuchadiscussion, butconsiders thattheopportunity should notbe
foregone.
Non-discriminatory conditions ofcompetition
3. Ithasbeenthelongpractice, accepted byallGATT CONTRACTING PARTIES andWTO
Members innumerous GATT andWTO decisions, tointerpret GATT/WTO rules asprotecting
non-discriminatory conditions ofcompetition. Inthecontext oftheWorking Group 'sdeliberations,
ithasbeenpointed outthatawiderange ofWTO agreements ispotentially relevant totheinteraction
between trade andcompetition policy.1Ithasalsobeennoted thatmost WTO agreements maybe
regarded asrelated tocompetition, inthattheylimittheability ofgovernments toimpose trademeasures
thatwould havetheeffect ofconstraining ordistorting competition fromforeign sources, inmarkets
forgoods andservices.2
1WT/WGTCP/M/2, paragraph 31
2Informal noteonCompetition-Related Provisions inExisting WTO Agreements (Job3347), paragraph 2WT/WGTCP/W/50
Page2
4. Itisimportant thatthisWorking Group, operating under theWTO, remains committed tothe
traditional broad approach oftheGATT andtheWTO asregards protection ofnon-discriminatory
conditions ofcompetition from anti-competitive government trade measures.
Abroad approach infavour oftrade liberalization
5. Inexamining competition-related WTO provisions, itmaybeargued thatwork should focus
exclusively orprimarily onWTO provisions concerning practices ofenterprises thatmaydistort trade.
However, suchanarrow approach hasmajor drawbacks forthefollowing reasons:
(a) Thepast50years have seentheactivities oftheGATT/WTO asapersistent and
coherentprocessofpursuingtheobjectiveofnon-discriminatoryinternationalconditions
ofcompetition, focusing ontheliberalization ofgovernmental market access barriers
andmarket distortions. Thisobjective hasyettoberealised. Government trade
measures continue tobemuch more serious impediments totrade thanpurely private
restrictive practices. They often discriminate against competitive suppliers especially
from lessdeveloped economies, asinthefield oftextiles, clothing andcertain
agricultural products; andagainst competitive low-cost imports especially fromnewly
industrializing economies, asinthecaseofcertain anti-dumping measures. They may
come inmany discriminatory forms, e.g.under GATT Articles VI,XVI, XVII,
voluntary export restraints, theAgreement onTextiles andClothing, etc.
(b) Inthecontext ofregional trade arrangements, theexperience hasbeenanintegration
ofcompetition ruleswithtradeliberalization. Cooperation incompetition policy often
requires concurrent, ifnotprior, agreement toeliminate trade restrictions. National
competition laws(e.g.within federal states) andinternational competition rules(e.g.
infreetrade areas andcustoms unions) tendtoreflect aconscious policy topursue
trade liberalization through mutually consistent trade andcompetition rules. For
instance, the"common rulesoncompetition" intheECTreaty include notonly"rules
applying toundertakings" (e.g. Articles 85-90 EC), butalsoaprohibition of
anti-dumping measures afterthetransitional period (Article 91EC). Similarly, the
Australia-New Zealand FreeTrade Agreement provides forthereplacement, within
thisfreetrade area,ofanti-dumping rulesbycompetition rules. Asimilar integrated
approach toaddress thebroad systemic inconsistencies between tradeandcompetition
polices, therefore, should serve theWorking Group wellinthepursuit ofitsstudy.
(c) Furthermore, anarrow focus onenterprise practices willneglect theimportance of
competition concepts forpromoting liberal trade. Economists haverightly criticized
theprotection biasofcertain GATT/WTO instruments (e.g.GATT Articles VIand
XIX, Agreement onTextiles andClothing, Agreement onAgriculture andAgreement
onSubsidies andCountervailing Measures), which provide one-sidedly fortherights
toprotection ofimport-competing producers, without adequate regard totheconsumer
rights tothebenefits ofliberal trade, andaneconomically efficient determination of
public interest. Theyruncontrary tothecompetition concepts which aimforeconomic
efficiency, consumer welfare, consumer rights, andjudicial protection oftraders and
consumers against abuses ofbothprivate market power andpolitical protectionism.WT/WGTCP/W/50
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Conclusions
6. Thehistory oftheGATT/WTO, including thesuccessive trade rounds, hasdemonstrated the
primary importance oftradeliberalization relative totheapplication ofcompetition rulesagainst private
anti-competitive practices. However, theWorking Group mustnotoverlook thattradeandcompetition
rulesshould bemutually consistent. Themultilateral trading system, including itslegalframework,
willbenefit significantly from incorporating additional competition concepts intotheWTO system,
ashasbeenenvisaged invarious existing WTO provisions.
7. National andinternational experiences havesuggested thatsuccessful trade liberalization may
notbepossible without complementary competition ruleslimiting bothgovernmental aswellasprivate
market access barriers anddistortions. ThisWorking Group offers aunique chance forMembers to
carefullyexaminehowwecanbetterpromotenon-discriminatoryconditionsofcompetitionforeconomic
efficiency. Accordingly, thisnoteissubmitted byHong Kong, China asacontribution toassist the
Working Group tobetter meetthechallenges ofanti-competitive trade protectionism andtheneedfor
mutually consistent trade andcompetition policies.