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Five
years after they first entered into the WTO (World Trade Organisation)
arena, members have finally agreed to launch negotiations on competition
and investment after the Fifth Ministerial. A multilateral approach to
competition and investment is not a new idea; both have been on the agenda
since the aborted Havana Charter. Although the issue of trade and
competition policy is very much present in many of the existing WTO
agreements, it has not, as yet, been systematically addressed. Similarly,
while several agreements under the WTO relate to investment issues, there
is no multilateral accord.
A
number of countries, including the EU, Korea and Japan are supporting
multilateral agreements in these areas, and others, including India,
Malaysia and Egypt are vigorously opposing them. US sits on the fence.
Developing country resistance to such moves is partly the result of their
past experiences at the WTO. However, many of these implementation
problems could have been avoided if developing countries had actively
engaged in negotiations. In the past this has been difficult due to the
limited awareness on competition and investment issues in these countries,
not only in civil society, but also amongst policy makers and trade
negotiators. Research and dialogue has thus far been limited to a
developed country setting, and there is an urgent need to promote
understanding on a broader plane.
In the light of this need, CUTS
Centre for International Trade, Economics & Environment (CUTS-CITEE)
proposes a programme involving leading international experts,
practitioners and other stakeholders in the areas of competition and
investment policy at the WTO. A number of short papers on various aspects
and elements of the potential competition and investment agreements will
be produced for debate and discussion by a larger group of individuals,
with the main aims of the project as follows:
·
To develop a knowledge base and
understanding on the principles, provisions, modalities and implications
of potential agreements on competition and investment.
·
To assist countries, especially
developing ones, to evolve appropriate negotiating positions on
competition and investment at the WTO.
·
To build the capacity of negotiators and
other stakeholders on competition and investment issues.
·
To feed WTO Working Groups with the views
of experts, practitioners and other stakeholders on the issues of
competition and investment.
·
To sensitise developed countries in
general, and the protagonists of competition and investment agreements in
particular, on the concerns and feelings of developing countries.
·
To assist countries with doubts about the
utility of multilateral agreements on investment and competition to
present well argued fears, rather than relying upon rhetoric and hearsay.
There
is no evidence that an international investment agreement would increase
the flow of investment to developing countries. Since the existing
multilateral framework under the WTO includes many provisions, such as in
TRIPs, TRIMs and GATS, that were put forward by capital exporters,
developing countries had expected to see a resulting increase in FDI
inflows. However, investment flows to developing countries have actually
gone down as a proportion of total FDI since the establishment of the WTO.
The
situation as regards a multilateral competition framework is quite
different. As a consequence of greater global concentration of ownership,
consumers and small businesses world-wide have become increasingly
vulnerable to anti-competitive practices by international corporations.
The existing global situation highlights the need for concerted action in
this area:
·
Over the last 20 years the structure of
many global industries has become increasingly concentrated; the top 200
corporations now account for over a quarter of the world’s economic
activity.
·
Global cartels, such as those in the
vitamins, food additives and steel industries, are increasing. Only a
handful of countries have penalised transgressing companies.
·
A World Bank study has shown that in
1997, developing countries imported $81.1bn of goods from industries in
which price-fixing conspiracies have been uncovered. These cartels were
mostly made up of producers from industrialised countries.
·
National competition laws have a limited
capacity to deal with cross-border cases. Developing and least developed
countries are vulnerable to anti-competitive and unfair practices due to
their weak enforcement mechanisms and small market sizes.
As
mentioned above, many developing countries remain sceptical about the
benefits of any multilateral agreement on competition or investment. There
are fears that an agreement on investment would exacerbate the existing
limitations imposed by TRIMs, which is perceived to have reduced the scope
for governments to regulate transnational corporations, and has prevented
them from channelling investment flows according to their specific
developmental needs and strategies. In the case of investment, developing
countries are not just resisting an agreement out of ignorance, or a
‘just say no’ attitude, in fact many of their concerns are shared by
rich countries too. Divisions amongst these countries were also
responsible for the failure of an agreement at the OECD.
Enthusiasm
for a binding multilateral competition policy has also waned. Though
developing countries once supported the idea of converting the UNCTAD Set
to a binding instrument, their unsatisfactory experience with the WTO
system to date have resulted in widespread disillusionment. While
concessions from previous rounds were binding, the special and
differential treatment received in return was not, and has failed to
materialise. The EU and Japanese approaches to competition policy are
perceived as a ‘market access’ push, which will allow huge
trans-national corporations to swallow up local companies, and even in
many developed countries the US position is regarded as an attempt to
facilitate cross-border mergers of large US-based corporations.
The
experience with TRIPs, which involved costly and time-consuming legal and
institutional reforms, has made developing countries reluctant to bear the
burden of any further multilateral agreements. Furthermore, it is believed
that any future arrangements will not have sufficient coverage. For
example, export cartels have been deliberately kept out of past
agreements, to the detriment of developing countries which import more
than they export.
Like
economic activity, policy responses are cyclical in nature. Therefore
despite the current lack of enthusiasm amongst developing countries, it is
vital to lay the groundwork for any future ‘assenting spree’. With a
view to this, certain groundwork needs to be done:
·
The South must engage actively in any
discussions on competition agreements, whether multilateral or
plurilateral. This would help them to ensure a more balanced agreement,
rather than cry over spilt milk.
·
The South could use participation in an
accord on competition as a trade-off in order to gain concessions in other
areas.
·
Developing countries should build the
capacity of their negotiators. It is likely that a properly negotiated
competition agreement would greatly improve their positions.
·
Protagonists of the agreements,
particularly the EU, should be more sensitive to the concerns of
developing countries.
·
Alongwith governments, academia and civil
society have an important role to play.
A
research agenda will be drawn up for comments from a group of experts,
identifying 12-14 elements, principles, provisions and implications of
potential international agreements. This will then be finalised and the
researchers for each assignment will be selected from the pool. The
activities will then proceed as follows:
Ø
The core experts will develop draft
papers, keeping regular contact, including through web-based discussion,
during the entire process.
Ø
Comments of the larger group of experts
will be incorporated into the drafts.
Ø
The draft papers will be discussed at an
interactive brainstorming meeting at a location such as Geneva where the
trade community can actively engage.
Ø
The final papers will be published in a
single volume to be widely distributed to a targeted audience.
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