There is widespread agreement that competition impacts on international trade, and that anti-competitive practices (by the government and the private sector) adversely affect the growth of international trade.  It is argued that the benefits of trade liberalisation can be substantially negated by anti-competitive business practices, thereby greatly reducing the efforts that are being put into the liberalisation process.  Further, the advantages of globalisation and the multilateral trading system cannot be experienced unless there is a more competitive economic environment.  It is in this context that there have been arguments that the competition policy be taken up at the World Trade Organisation (WTO).

The primary difficulty with formulating an adequate competition policy lies in the tension that accompanies domestic competition policies and laws being suited to national needs developmental goals.  Not only is there no convergence in thinking on competition, but, domestic competition laws are subject to national judicial processes and norms.  This is compounded by the absence of competition authorities and laws in many developing countries.  The fundamental problem of discussing and formulating decisions on essentially domestic institutions (competition policy and law) at a multilateral level raises complications of its own.  Nevertheless this is perhaps a key constraint that should inform negotiations and influence subsequent policy formulations.

The first key issue that needs to be considered are the objectives of competition policy.  Competition policy should ensure the unity of the internal market, and in doing so it must allow firms to compete on a level playing field.  The question of a level playing field is contentious, yet it must be addressed.  A possible suggestion as to how it can be adequately handled will be mentioned below.  In any case, the argument runs that all the Member states should have equal access to markets, and that the interests of consumers should be protected. This can be secured by putting in place policies and mechanisms so as to prevent companies and national authorities from disrupting the practice of competition in the conduct of transactions. 

In order to achieve a level playing field, it is necessary that action be taken to avoid markets from being shared and monopolised through restrictive agreements.   More specifically, restrictive agreements relate to agreements, between firms, which prevent competition, or restrict competition, or in some way distort competition within a market.  Obviously, the agreement involves at least two firms, possibly more than two firms.  Another feature relating to these agreements is the nature of the firms involved, in terms of their relationship vis-vis the stage of production.  The agreements include horizontal agreements, that is, agreements between firms that deal with the same stage of production or nature of output.  They concern different firms producing the same output.  Vertical agreements are another aspect of restrictive agreements. Vertical agreements involve firms that are operating at different stages of production or process.  These agreements result in one or more firms gaining an unfair advantage in the market by virtue of a collusion that spans different stages in the production of a particular output.

Anti-competitive business practices can be classified under four categories, viz, monopolies and dominant firms; horizontal restrictive business practices; vertical business practices; and mergers and acquisitions.  By instituting policies and laws that sanction restrictive agreements, competition policy becomes adequately armed to limit a big class of activities that constitute anti-competitive practices.  It must be noted that very often firms do not execute restrictive agreements.  Rather than engage in an agreement, firms may coordinate their behaviour so as to achieve outcomes that impact on the market in very much the same ways as outcomes would be affected if there were to be restrictive agreements.  When the conduct of two or more firms causes the market to be shared among them, but without the benefit of an agreement such behaviour is more difficult for competition authorities to monitor and act against.  Nevertheless, there must be sanctions against these practices. 

Notwithstanding these comments, certain forms of cooperation must be permitted.  Cooperative behaviour among firms that contributes to technological improvement in the economy or improves the distribution of goods and services are some agreements that should be exempt from the principle of disallowing collusion among firms.  Exemptions should be permitted which are seen to be positive and to add to economic progress.

A second crucial element that a competition policy framework must include, so as to make a level playing field possible, is to provide for disincentives against abuse of a dominant position.  A firm can be in a position to exert substantial influence over a market.  But if a firm does attempt to manipulate industry structure to its sole advantage, then the firm is said to abuse its dominant position.  A framework for competition policy must include measures that do not permit abuse of dominant position, because otherwise firms can hinder the functioning of competition in a market by imposing unfair prices or limiting supply when not compelled by market conditions to do so.

Thirdly, competition policy must incorporate legislation against mergers.  A merger arises when a firm acquires control over another firm such as to be in a position to acquire significant influence over the decision-making process in the acquired firm.  The act of acquiring an interest in a second firm can be done independently by one firm or in cooperation with more than one firm.  Regardless of the number of firms that act together to gain control over the decision-making process of a firm, what occurs is an increase in market concentration and the dilution of competition in the market.  There are definitional problems that are involved in legislating against mergers.  These include the definition of the product market and deciding on the relevant geographical boundaries for the market.  Mergers are permissible if inspite of a merger a specific industry will not suffer from a diminished state of competition or if unless there is a merger an industry will suffer in efficiency and jeopardise national economic growth and consumer interests.  This principle of exemption cannot be granted when mergers offer to improve better technical production capabilities, but at the same time threaten to foreclose emerging markets and erect boundaries against future entrants into the market.

A fourth element of consideration in any competition framework relates to state aid.  State aid refers to any allocation of resources or advantage extended by a Member state.  The issue becomes a matter of interest to competition authorities when state aid is provided selectively to certain firms and not to others.  Similarly, it is problematic if state aid is provided for the production of certain goods or services and not others.  Central to the controversy is whether state aid contributes to concentration and, hence, besides impeding competition in an economy also adversely affects trade between Member states.  The form in which aid and advantage is dispersed has to be carefully noted: it could be in the form of a local or regional body or through a company either owned directly by the government or over which the government has much influence.

Certain exemptions would need to be exercised over the dispersion of state aid.  A blanket ban against all forms of state aid would have deleterious effects on an economy, particularly in developing countries.  Some forms of aid must be permitted, particularly if the withholding of such aid will result in a loss of human security (social and economic) or be cause for the deprivation of fundamental human rights.   State aid to the least-advantaged sections of society and to those sections subject to social exclusion must be encouraged especially in the least developed countries.  Aid should not be a matter of deliberation in the case of areas affected by strife, war, or natural disaster.  In the interests of the development of the least developed nations, these countries should be permitted to provide aid for targetted regions, industries and activities.  The purpose of this exemption is to assist such economies to develop sections of the economy that are crucial to employment, and economic growth.  Clearly, in the case of the developing countries special provisions will have to be made, perhaps for specified time periods or targets, so as to permanently disadvantage these countries.  It is equally important to give these countries the possibility of catching-up with the developed countries.

In mentioning the exemptions that have to be made for developing countries, one necessarily is lead to the importance of special and differential treatment.  Developed countries recognise that special provisions and exceptions have to be allowed for developing countries, taking into account their respective stages of development.  Modes of competition standards that are acceptable to developed countries are definitely not applicable to developing countries which are in greater need of state support.  The presence of anti-competitive practices in developing countries is due to the conduct of: a) private domestic firms, b) multinational corporations, and c) state-owned firms.  There is evidence that private domestic firms in developing countries engage in rent-seeking behaviour, and that such behaviour, directly or otherwise, encourages anti-competitive practices. 

While there is a need for industrial policy in developing countries, and together with it for state aid, competition policy has to be introduced in these countries gradually.  Developing countries have a natural inclination to develop national capabilities and domestic industries.  Competition policy is thus seen as a way for multinational corporations to pry open domestic markets.  In the interest of developing competition across borders, the fears of competition policy being used as an instrument for gaining market access can be allayed by ensuring that the multilateral framework will be effective in sanctioning the anti-competitive practices of multinational corporations.  The trust of developing countries has to be cultivated.  Concurrently, time frameworks have to be set so as to allow domestic industries in developing countries to come of their own, to be given a chance to grow out of their infant industry status.

The importance of a timetable for the introduction of competition policies and agreements within a multilateral framework cannot be overstressed.  For this purpose it must be recognised that two time dimensions have to be delineated: the short-term and the long-term.  Accordingly, the scope of competition policy must be formulated so as to coincide with the pre-designated time dimensions (i.e. the short and long term periods).  Competition agreements should focus on a more narrowly defined scope in the short-term; and a more broadly defined scope in the long-term. 

The immediate goal of a competition framework is to attend to the issues that lie within the ambit of competition policy that takes a narrow scope.  It is quite clear that hard-core cartels constitute a serious breach of domestic competition law.  Hard-core cartels are, typically, groups of powerful multinational corporations that engage in agreements involving price-fixing, bid rigging, artificial supply restrictions, and market sharing.  The first step of a competition framework will be to rectify problems associated with hard-core cartel activity, since hard-core cartels are the principle set of problems within competition policy in its narrow sense.  Multinational corporations operate in a manner where information and evidence of their activities are tightly guarded and often unavailable.  Exposing these illegal and, perhaps, criminal activities will build the confidence and trust of developing countries.  Successfully implementing competition law against multinational corporations will show that powerful multinational corporations are not beyond competition law, and that with international cooperation and cooperation on the sharing of information it is possible to regulate the behaviour of multinational corporations.

Subsequently, competition in its broad sense can be examined.  This will be done progressively, attending to issues such as countervailing measures and dumping, and then extending the scope of competition policy to focus on a diminished role for the government in industry.  This implies confronting issues such as government subsidies, indirect export subsidies, and the protection of state-owned enterprises.  Privatisation and deregulation would be important components within the broad scope of competition policy.  At this juncture, as far as government participation in business is concerned, the government would have to compete with the private sector on equal grounds.  The government would, then, not be able to enjoy any special advantages; and any access to resources or advantages, in policy terms, that state-owned enterprises have access to should be equally available to private firms.  An even broader scope of competition policy would attempt to include within its ambit a more democratic and liberal approach to the functioning of markets.  This view would place government participation in business on the same footing as private participation.  But, in addition, competition policy would seek to encourage the free movement of resources (goods, services, labour, capital), both internally and across borders.  All firms would have unrestricted access to essential facilities.  Competition, broadly defined, it must also be added, would, be concerned with the promotion of a culture of competition and competition advocacy.  There is no doubt that a long view of competition policy must be considered, and in so doing, one must not lose sight of the sensitivities and economic stability of developing countries.