RESTRICTEDWORLD TRADE
ORGANIZATIONWT/WGTCP/W/76
25 June 1998
(98-2563)
Working Group on the Interaction
between Trade and Competition PolicyOriginal:  English
COMMUNICATION FROM TURKEY
The following communication, dated 8 May 1998, has been received from the Permanent
Mission of Turkey with the request that it be circulated to Members.
_______________
The Relationship between the Objectives, Principles, Concepts, Scope
and Instruments of Trade and Competition Policy
National competition policy can be defined as the set of rules and disciplines maintained by
governments relating either to agreements between fi rms that restrict competition or to abuse of a
dominant position.  The underlying objective of competition policy in most countries tends to be the
efficient allocation of resources, and thereby the maximization of national welfare by means ofsecuring an open and competitive environment.  Most competition laws attempt to attain this objective
and to maintain and protect competition by prohibiting the abuse of dominant positions, competition-
restricting agreements between companies, and restraints on trade.
Liberal trade policy and competition policy tend towards the same economic targets.
Competition policy aims at proper working of the market conditions by controlling or removing
restrictive business practices in the market.  Similarly, liberal trade policy, aiming to remove
restrictions in foreign trade, realizes this function by decreasing  tariff rates and restricting the effectsof non-tariff barriers.  One of the basic principles of liberal trade policy is that competition is the
guarantor of economic efficiency and economic welfare.  In this respect, both trade and competition
policies basically target to protect the competition environment at the market.
The traditional structure of trade has changed with globalization.  The developments in
communication technology, transportation and other related areas have created favourable conditionstowards the internationalization of firms in the production and sales chain and have provided a basis
for a new competition structure.  The globalization of the world economy has also increased attention
on domestic policy instruments that have an impact on the conditions of competition between
domestic and foreign sources of supply.
In light of this information, activities of comp anies that are not subject to competition rules
may harm, from time to time, the competition environment at the export market.  On the other hand,
the implementations of some countries stemming from their trade policies may increase the problems
in the implementation of competition laws in other countries.  In cases where the laws on the
prevention of unfair competition practices are not enforced properly they may even constitute
impediments to trade.
A wide variety of economic measures give way to liberal trade policies. These are:
disengagement of the state from production of goods and services, establishment of the institutions
and legal framework appropriate to the well functioning of the market economy;  privatization of stateWT/WGTCP/W/76
Page 2
enterprises and extensive reduction in government regulations guiding private sector activity, etc.  On
the other hand, four trends which to a large extent shape new trade policies in a globalized world
economy are:
- export dependence of firms;
- activities of multinational firms;
- intra-industry trade relations;  and- regional integration.
These trends show us that most of the countries decide to adopt more liberal trade policies
and to eliminate trade barriers to give a more competitive environment to their firms in foreign
markets by reaching economies of scale and also to reduce the risk of retaliation.  Within the context
of the work programme of this Group, we should examine these relations in detail.
Chapter V of the Havana Charter provided that member states should take appropriate
measures to prevent business practices affecting international trade which restrained competition,limited access to markets or fostered monopolistic control, whenever such practices had harmful
effects on the expansion of production and trade or impaired any of the purposes of the ITO.  A list of
such practices was provided.  However, this part of the Charter was not adopted.
Later on, a draft Convention on Restrictive Business Practices (RBPs) was prepared by a
Committee under the aegis of the UN Economic and Social Council, but no agreement could bereached on this text.  Then the issue was explored several times by various international fora including
GATT.
The Uruguay Round agreements do not attempt to deal with such competition issues or
exemptions from competition laws notably for export cartels;  market exclusion, and interrelationship
between RBPs and governmental rules and restric tions such as government rules restricting
competition in the distribution sector.  But in a broad sense all the provisions of the Uruguay Round
agreements have an influence on competition since the promotion of international competition is the
basic rationale of liberalization and the multilateral trading system.  However, some of the Uruguay
Round agreements contain provisions on or directly related to competition policy and RBPs.  These
are:  TRIMs, TRIPS and the GATS.
- The TRIMs Agreement is limited to call to consider the need for possible disciplines
in this area in the future.  The Agreement provides for a review, to be conducted
within five years of its entry into force, which would consider whether the Agreement
should be complemented with the provisions of competition policy.
- The TRIPS Agreement allows governments to take measures to control
anti-competitive practices in contractual licences that adversely affect trade and may
impede the transfer of and dissemination of technology.  It recognizes the rights ofcountries to regulate such practices through their domestic laws and also provides for
consultations and exchange of information between governments where there is
reason to believe that licensing practices or conditions constitute an abuse and have
an adverse effect on competition in the relevant market.
- The GATS contains provisions on consultation and exchange of information similar
to those in the TRIPS Agreement.  It recogn izes that the business practices of service
suppliers may restrain competition and thus trade in services, but no obligations are
imposed on Members regarding either the scope or the enforcement of competition
policy.WT/WGTCP/W/76
Page 3
In the context of discussions on competition-trade linkages, there are some loopholes in the
multilateral trading system.  These are:
- Private business practices restricting access to markets that are supported by private
companies cannot be attacked under GATT or GATS.
- There is no requirement that WTO Members have a competition policy, that it meet
minimum standards.  Many Members may have a competition law.  But the problemis that there may be significant differences in national laws and in their enforcement.
- Some firms may be so large as to have global market power.  In such cases,
competition rules should in principle also be global, as no single government may be
able to control possible anti-competitive behaviour.
- The reach of the WTO is currently restricted to measures by governments that affect
the conditions of competition in their territory.  Practices by firms on export markets
or tolerance by governments of anti-competitive behaviour in export markets by firmsheadquartered in their territory cannot be addressed in this group.
Regarding the work programme of this Group, we want to point out that the scope of
provisions of those agreements and the above-mentioned loopholes could also be taken into account
within the context of a discussion regarding trade and competition policy linkages.  However, we
believe that consideration of all Uruguay Round issues and principles which have an impact oncompetition does not seem to be reasonable.
Conclusion
A competition law, by creating and maintaining a more competitive and predictable
environment, is in the interest of most enterprises and all consumers.  A well-prepared competition
law helps to create certainty for the benefit of most enterprises.
The overall strength of competition policy is determined not only by the rules but also by the
effectiveness of their enforcement.  The standards of competition rules may give rise to friction.
However, differences between countries in standards could also have the same effect, even where the
interests of different competition authorities coincide.
There are some situations where competition policies may have effects similar to those of
protectionist trade policies:  they may reduce market access for foreign suppliers and thereby also
induce welfare losses for domestic consumers.  We believe that a well-prepared competition policy is
one that facilitates international and internal trade.
The implementation of market-oriented economic reforms, including deregulation, price
liberalization, privatization and liberalization of trade and foreign direct investment have led to an
emerging consensus on the importance of the role of competition policy in increasing efficiency in
resource allocation.  As a result, there has been a process of convergence in the objectives andapplication of national competition policies, even though there are significant differences among such
policies.
Finally, there is growing recognition that, in an increasingly globalized world economy,
national competition policies need to be complemented by action at the international level to protect
and promote the utility of competition in the global market.  The specific objectives of suchinternational action would be to strengthen consultations and cooperation among competition
authorities to encourage better and mutual understanding and possible convergence of national
competition policies to ensure that trade obligations and concessions are not frustrated by private
anti-competitive practices and to bring trade rule s more into line with competition principles.WT/WGTCP/W/76
Page 4
The Relationship of Trade and Competition Policy to Development and Economic Growth
Competition policy and its relevance for economic development
In stable societies, where special interest groups can organize and tend to accumulate over
time, the costs to society can be far greater than th e simple static inefficiencies one would expect to
result from monopoly pricing.  Oligopolies can also greatly retard growth and welfare, above and
beyond the static costs of inefficient resource allocation that can be expected to result frommonopolistic behaviour.
Competition policy, and the need to promote vigorous domestic competition as part of the
foundation on which to build international competitiveness, is important for developing countries
today, but not as much as for developed ones.
Nor is competition policy in developing countries merely a matter of reducing or overcoming
the costs of monopolistic inefficiencies, important as it is to reduce those inefficiencies.  It is above all
a matter of promoting long-term growth and development.  This is not a matter for developingcountries alone but surely no country can be more concerned to achieve it than a developing country.
In broad terms, some countries tend to see competition policy as an anti-trust policy, because
of its view of the role of competition policy, set in a framework of comparative statics, as seeking to
maximize consumer welfare.  But many developing countries are also greatly concerned about how to
develop firms within their borders that will be large enough, that will have the critical mass to be ableto compete in global markets.  Therefore, the role of competition policy, as distinct from static
consumer welfare maximization and pure anti-trust, would be an auxiliary component for economic
development in developing countries.
Developing countries should be adapting competition policy as part of their economic
framework policies to enhance economic development.  An issue which is of particular concern tonewly industrializing countries is whether competition policy should try to maximize consumer
welfare or total (i.e. consumer plus producer) economic welfare.  The answer to this question can
affect the implementation of competition law.
Competition policy should not only be designed to prevent artificial constraints or private
restraints on the market by business but also to foster the mobility of business from lower to highervalue uses.  This is not a matter of ideology but one of efficiency.
What is being advocated is therefore not simply a reactive approach to specific anti-
competitive situations but also a pro-active approa ch.  This would involve competition authorities in
an advocacy role to ensure that the competitive pro cess is properly taken into consideration in broader
economic policy-making.  This implies the upgrading of the competition enforcement authority to an
active economic policy oriented agency, well placed to argue for reduced barriers to entry and
enhanced mobility of resources.  This role is vital since many of the restraints on competition lie notonly in the hands of private enterprise but also w ithin the competence of government institutions and
as a result of government regulation.  The goal is to ensure that the types of policies which are
adopted give the maximum play to market forces.
Increases in foreign investment and international trade enhance the possibility of friction
between competition policies in different jurisdictions which has recently led to calls for thedevelopment of an international law to resolve pr oblems between different countries.  Taking into
consideration the difficulty of developing an international law in this area, as an alternative, the
development of competition policy codes within regional blocks would be suggested.WT/WGTCP/W/76
Page 5
Interactions between trade and competition policies
The importance of the linkage between trade and competition policy has been well
recognized. The linkage becomes more important when trade and investment among nations become
more liberalized. While competition is a dynamic force of change it may also be a force of
concentration.  Winners will expand and are likely to use whatever means at their disposal to
consolidate their turfs.  Trade liberalization without safeguards for fair competition could be in dangerof causing increasing concentration in some industries and less competition at the end.  Should this be
the case, world trade could eventually be eroded for these industries, running contrary to the original
intention of GATT negotiations for freer trade.  Consequently, the maintenance of competition is not
only a supplement to a  new world trade order, it should be part of the core, as it is a key to the
healthy survival of that new order.
The current trade issues are in general concerned more with the interests of national producers
than with those of consumers.  By ensuring a competitive environment where producers interactaccording to fair rules and where the interests of consumers are adequately taken care of, the new
world trade order will be more balanced.  Many allegations against abuses by transnational enterprises
can meanwhile be resolved or clarified;  as a result, the lack of confidence, justifiable or not, in these
enterprises is more likely to be replaced by other more positive sentiments.
The mere shift of focus from trade to competition policy represents a healthy movement
towards the enhancement of national interests as part of the enhancement of global or collective
interests.  The removal of tariff and other barriers is one step;  the redefinition of trade as transactions
subject to competition rules would be another giant step forward.
It is worthwhile to look carefully into the linkage between trade and competition policies and
initiate discussion among government officials and experts so that international cooperation on tradeand competition policy can facilitate trade and investment.  The optimal policy is to let the trade talks,
both bilateral or multilateral, continue, and to let the barriers to entry be further reduced.  The result
would be freer and fairer trade and investment and a better environment for competition at the same
time.  Therefore, this will facilitate the growth of trade and investment in the negotiating countries
and in the world market as well.
Of the restrictive business practices that are currently regulated, some are regulated
differently across countries, possibly leading to high uncertainty and cost borne by business.  Mergers
are a good example.  Usually cross-country mergers of a size above some minimum standards have to
seek approval from all the authorities involved, each of which has a de facto veto power. This can
create confusion and uncertainty.  International cooperation is needed to reduce the transaction costs.
Competition laws may also be a source of “unfair competition” when the laws and their
enforcement are different across countries, or when they are completely absent in others.  Countries
that have a stringent set of laws and a record of vigorous enforcement may argue that their businesses
are subject to more regulation domestically than their counterparts in other countries, and may
describe the situation as “unfair”.  How serious the situation really is can be hard to assess.
It is important to understand the interaction between trade and competition policies, their
relations with development and economic growth and how the global market can be made more openor less as a result of negotiation with respect to competition policies.  The nature of competition laws
and their enforcement in different countries should not be a source of unfair competition in the
international market.WT/WGTCP/W/76
Page 6
Conclusion
Economic development is concerned with raising standards of living, ensuring full
employment, gradually increasing real income and expanding production and trade, while allowing
for the optimal use of resources.  Trade and competition policies are primary instruments to reach the
objectives of economic development.
As can be seen, a great deal of work needs to be done immediately to assess this subject in
terms of competition policy.
In the direction of covering trade and competition policies, we need to distil basic principles
from existing international trade rules and from nati onal competition policies, taking into account the
universal trend towards liberalization.  Once these basic principles are elaborated, and consensus is
reached, they could be adopted to become a part of the multilateral trading system.
During the work of this Working Group, technical assistance, as well as advisory and training
services to all developing countries and others in the process of transition to a market economy,should be provided by the WTO and other relevant organizations.
National Competition Policies, Laws and Instruments as they Relate to Trade
Recent developments in the field of competition law and policy in Turkey
The economic transition of Turkey was initiated in the first part of the 1980s.  The import
substitution policy which had been in place for a couple of decades was repealed.  The legalframework for privatization and foreign investment implications was adopted.  Since then, the
export-oriented and liberalized development strategy has been pursued.
In spite of the fact that the legislative framework which is necessary for such an economic
transformation has not been completed yet, substantial progress has been made.  In this respect, the
most recent developments have taken place in two areas;  the protection of free competition and theprotection of intellectual property rights.  In the year 1994, the Turkish Competition Authority and the
Turkish Patent Institute were founded.  The establishment of these two bodies ought to be considered
as a governing factor which mirrors Turkey's persistence in taking its place in a new world-order.
Conscious of the fact that maintaining a suitable environment to improve competition and to
enhance the protection of intellectual property rights have a great impact on development of thecountry, Turkey strives to implant the rules which are in conformity with international standards.
The "competition law and policies" issue has been one of the focal points of development
plan consideration since the VIIth Five Year De velopment Plan was initiated in 1996.  The Plan
emphasized the structural transformation projects to let the country boost and catch up with the latest
developments which had been taking place in the world’s socio-economic conditions, primarily
globalization and economic liberalization.  The "Competition Law and Policies" issue is a part of the
"Project On Developing the Regulatory and Supervisory Functions of the State", which is one of  the20 projects that took place in the VIIth Five Year Development Plan.  On the other hand, the
"intellectual property rights" issue takes place in the very same project of the VIIth Plan as a
complementary topic.
The Project aims primarily at putting forth the regulatory and supervisory functions of the
state which represent the completion of legislative, administrative and operational infrastructuresnecessary for free competition, and reaching the ul timate objective, namely increasing the social
welfare by the year 2000, the end of the VIIth Five Year Development Plan.WT/WGTCP/W/76
Page 7
Efforts on legislation of competition law in Turkey go back to the 1970s.  Despite the early
efforts, Turkey did not have its competition law until December 1994.  Turkey, as entering into the
Customs Union with the European Community by virtue of the Decision No. 1/95, had its very first
competition law entitled "The  Law on the Protection of Competition" No. 4054, (hereinafter called
"Competition Law"), dated 7 December 1994 (Turkish Official Journal No. 22140, 13.12.1994)
However, the Constitution of the Republic of Turkey which was adopted in 1982, had
already, by virtue of its Article 167/1, put the state authorities under the obligation to take measures to
ensure and promote the sound, orderly functioning of markets and to prevent the formation, in
practice or by agreement of monopolies and cartels.
The purpose of Turkish Competition Law is to regulate the markets for goods and services in
order to maintain "workable competition" through which free trading, free access to markets and
effective competition would be ensured.  This Law regulates all agreements, decisions and concerted
practices which have as their object or effect the prevention, distortion or restriction of competitionamongst any undertakings which either operate in or may affect markets for goods and services within
the territory of Turkey, the prevention of abuse of a dominant position by undertakings and conduct
which is deemed to create a dominant position by a merger or acquisition by which competition in the
market is significantly impeded.  In other words, by addressing all agreements, decisions and
concerted practices which actually or potentially affect competition, this law not only covers actualdistortions but also the effects on competition.
The main argument for instituting a competition law in Turkey does not only rest on the
Customs Union relationship with the EU, but also on the economic benefits to society at large from
greater competition and a more predictable environment in the home market.
The major elements of the Competition Law include;- clearly stated objectives;
- general prohibition of competition-restricting practices;
- explicit use of competition law as an instrument of overall government policy;
- provisions on cartel agreements;
- provisions on abuse of dominant position and mergers;  and- provision for an independent administrative structure.
The role of promoting competition in governme nt policy-making is articulated explicitly in
this Law.
Budget independence and very high qualification standards for personnel are important
characteristics of the Turkish national competition authority.
The substantive provisions of the Law can be summarized under three headings:
- Prohibition of practices (agreements, concerted practices and decisions) which
prevent, restrict or distort competition (Article 4)
- Prohibition of abuse of dominant position (Article 6)
- Control of mergers and acquisitions (Article 7).WT/WGTCP/W/76
Page 8
The Turkish Competition Board which is comprised of eleven members including the
President and the Vice-President is responsible for the enforcement of the Competition Law.  The
members of the Competition Board were appointed in February 1997 and the Competition Authority
began its operation on 5 November 1997.
The Competition Board has published five substantive communiqués so far.  Communiqué
No 1997/1 indicates the categories of mergers and acquisitions which, to be considered as legallyvalid, require a prior notification to the Competition Board.  Communiqué No.1997/2 regulates the
procedures and principles of notification of agreements, concerted practices and decisions of the
associations of undertakings, in accordance with Article 10 of the Law.
Communiqué No 1997/3 lays out the conditions of block exemption for exclusive distribution
agreements while Communiqué No 1997/4 regulates the conditions of block exemption for exclusive
purchasing agreements.
Communiqué No. 1997/5, which was published on 5 November 1997, regulates the
organizational establishment of the Competition Authority.  After the completion of the foundation
process with this Communiqué, the Competition Authority has started to carry out its duties from that
time onwards.
The administrative pecuniary fines which will be imposed by the Competition Board are also
adopted.
The Competition Board has been granted significant power ranging from certifying negative
clearance to imposing administrative penalties upon those who are found liable for engaging in a
prohibited practice.  Even though the Board has been designed as a semi-judiciary body regarding its
autonomous structure and eligibility of membership, it is obviously an administrative body and this
requires the judicial review of its decisions.  To this end, the Law provides that decisions, injunctions
(interim measures), fines and periodic penalty paymen ts shall be subject to the review of the Council
of State.
According to the Law, one can sue someone in the civil courts for the recovery of damages
and indeed for triple damages by claiming that he breached the Competition Law, or defend oneself at
the civil courts by claiming that the agreement in question is void by virtue of the relevant provisionsof the Law.
Furthermore, in accordance with Article 16 of the Privatization Law, in order to prevent the
distortion of competition in the relevant markets, necessary measures shall be taken by the
Competition Board.
Conclusion
We believe that national competition policy is a cornerstone of government economic
framework policies, along with monetary, fiscal and trade policies.
The important point in the implementation of Competition Law is consistency in government
decision-making and reductions of business uncertainty.  There should be full conformity between the
promotion of competition policy objectives and other public policy objectives.
We believe that the national competition authorities should ensure that all state administrative
authorities do not unduly restrict competition and that they should be completely independent fromother governmental authorities.
__________