RESTRICTED
WORLD TRADE WT/WGTCP/W/43
31October 1997
ORGANIZATION(97-4564)
Original: French Working Group ontheInteraction
between Trade andCompetition Policy
COMMUNICATION FROM MOROCCO
Thefollowing submission hasbeenreceived from thePermanent Mission ofMorocco with
therequest thatitbecirculated toMembers.
_______________
I. INTRODUCTION
Ourconsideration ofthisissuebegins withitscontext, which iscontinuously being generated
bytheprocess ofworldwide globalization, andtheneedforeconomies toevolve andadapt tothis
constantly changing environment.
Westartfrom theprinciple thattheliberalization oftrade andopening ofmarkets represent
achance andholdgreat opportunities fortheeconomies which equip themselves withthemeans to
takeadvantage ofthem, andalsothatthecompetitive process isthebestmechanism fortheworldwide
regulation ofmarkets, underpinned bytwomajor pillars: openness ofmarkets allowing freeaccess,
andfairness andtransparency oftransactions.
Weshallthengoontolookatthefundamental concepts ofcompetition policy: beyond the
notion ofpureandperfect competition, there istheconcept of"workable" competition, taking into
account thereal-world barriers tomarket access which areoften hardtodefine, stemming astheydo
fromthebehaviour ofthevarious economic agents andtheinterference ofother, particularly political,
actors, andalsotaking intoaccount thecontestability oftherelevant markets interms ofvirtual or
potential competition.
Weshallalsoexamine thepractical scope ofcompetition principles andconcepts inrelation
totheoften contradictory aimsandinterests ofmarket operators seenfromthestandpoint ofthevast
diversity andcomplexity ofbusiness community behaviour andofgovernment policies.
Inthelightoftheseconsiderations, weshallgoontothemechanisms ofregulation, monitoring
andsurveillance, withaview toabenchmark model ofcompetition thatshould bemore andmore
international, ifnotuniversal. Thiswould involve thecreation andstrengthening ofsuitable instruments
andstructures fordealing appropriately withtrade andcompetition issues bothwithin countries and
regional groups, andalsoatthebilateral andmultilateral level. Italsoimplies greater cooperation
among competition authorities forthedecentralized application oftherules ofcompetition andthe
progressive development ofminimum common rules attheglobal level.WT/WGTCP/W/43
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II. CONTEXT
Theglobalization oftrade andofeconomic processes isforcing alleconomies toadapt ina
headlong raceforcompetitiveness.
Since theendofthebipolar world, weareincreasingly living under asingle regime ofborderless
liberal capitalism, amarket model inwhich economic rulesarebeing standardized under theconstant
pressure ofcompetition andperformance.
Thisenvironment ischaracterized by:
- Everfaster technical progress;
- population growth indeveloping countries;
- increased production ofgoods andservices;
- intensification ofthemovement ofgoods andcapital.
Thisallamounts tonewopportunities fordevelopment andprosperity.
From thisstandpoint, liberalization, theopening upoftradeandthepromotion ofcompetition
areasource ofeconomic growth forthebenefit ofeconomies, enterprises andconsumers.
Inthisconnection, competition policy isamajor factor forgetting economies toadapt tothis
newcompetitive setting ofglobalization. Itencourages thedevelopment ofcompetitive andefficient
economic structures thatproduce results byachieving better cost-efficiency, providing better quality
services, andoffering consumers goods thatrepresent better value formoney.
Nevertheless, inviewoftheinequalities ofdevelopment andopportunity among thedifferent
countries anddifferent economic andsocial groups, itisimportant thatthemechanisms ofsolidarity
andequity bestrengthened through awell-designed andbalanced liberalization policy aimed atachieving
theinternational community 'sagreed objectives.
III. OBJECTIVES
Beyond principles andbasic concepts, whatwearebasically discussing isthebroader vision
andconception ofhowsocieties areorganized.
Since theLeague ofNations, thenotion ofaninternational order hasgained headway. Since
1990, theconcept ofaninternational economic order iscommonplace. Thisisreally adebate about
theoverriding values thatdetermine andguide theeconomic andpolitical decisions made bythedifferent
members ofthisinternational order: relations among economic agents, alliances setwithin bilateral
ormultilateral relationships, andtheroleofthemarketplace inrelation tothese actions anddecisions.
Intheglobalized economic context fromwhich thenotion offrontiers isincreasingly absent,
itiscrucial tohaveaclear ideaoftheviews andobjectives ofthedecision-making centres, andthis
isparticularly trueinthefields oftrade andcompetition.WT/WGTCP/W/43
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Admittedly, theopening upofforeign trade andthepromotion ofcompetition policies arein
principle thebestinstruments forrestructuring economies withaviewtomaking themmore efficient
andcompetitive, butdoing soinanaive andmechanical manner canbecounterproductive ineconomies
thathavenotyetmanaged todevelop amature stage ofcapitalism.
Among thefundamental objectives wetherefore include theempirical andpragmatic analysis
ofthevarious cases depending onthestages ofdevelopment achieved andthedegrees ofreform carried
out,theultimate objective being toestablish action plans toboost thedeveloping economies witha
viewtogenuinely integrating them intotheglobalization process. Thiswillrequire boldness aswell
asadashofgenerosity.
IV. PRINCIPLES AND CONCEPTS
Westartfrom theprinciple thatliberalization oftrade andpromotion ofcompetition are
fundamental instruments inimplementing market principles, inwhich regulation based onthefreeplay
ofmarket forces, without hindrances orobstacles created byregulatory policies, ensures abetter
allocation ofresources andoptimum economic efficiency.
Thecompetitive process isthebestfactor forregulating markets worldwide. However, pure
andperfect competition isatheoretical concept, ashuman societies arenotbeehives guided byan
"invisible hand".
Beside theutopian concept ofperfect competition, there istheconcept ofpossible, tangible
competition, inother words workable competition.
Workable competition implies anumber ofconditions:
- Amarket-economyframeworkandstructures,inotherwordsacertainlevelofeconomic
development andaculture ofquality andcompetition: thisissometimes referred to
asmature capitalism;
- regulatory mechanisms: forcompetition toremain workable, thegovernment must
create andconstantly improve thebasic conditions formarket structures inthelight
ofwidespread usage andpractice;
- freedom ofprices andprice formation through thefreeplayofcompetition, inother
words thecompetitive mechanism ofsupply anddemand; thisimplies thepresence
ofmultiple economic actors;
- surveillance ofmarket structures andofthebehaviour ofeconomic agents: cartels,
collusion, exclusive arrangements, abuse ofdominant position, ordependency oneither
thesupply orthedemand side.
- transparency andfairness oftransactions toensure acertain degree offluidity;
- freedom toenter andleave markets;
- neutrality oftheState initsdealings witheconomic agents.
These conditions imply theexistence ofcriteria thatrelate bothtobehaviour andtoperformance:WT/WGTCP/W/43
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(a) Behaviour criteria:
- Competition among enterprises (nocartels);
- fairtactics: noexclusion, nopredatory behaviour, nodiscrimination;
- noprotection oraidforinefficiency;
- nomisleading advertising.
(b) Performance criteria:
- Efficiency ofproduction anddistribution systems;
- reliability ofproducts andservices thatmeetconsumer expectations;
- profits proportionate toinvestment, performance andinnovation;
- economic equilibrium prices thatrationalize consumer choice, hence no
speculation;
- openness tonewopportunities andinnovations;
- reasonable promotional spending thatshould notbecome abarrier toentry.
Market contestability
Inaddition tothenotion ofworkable competition thereisthatofcontestability ofagiven market,
defined interms ofmobility inentering andleaving it.
Thisinvolves various conditions:
- Lowentry andexitcosts, encouraging potential competition. Thethreat ofentry of
newcompetitors hasapro-competitive effect encouraging better performance interms
ofsustainable quality/price ratios, without excluding newentrants forreasons other
thanefficiency andperformance;
- access tothesame production technology;
- perfect price information andtransparency.
Theabove willestablish clear entry andexitconditions.
Infact,likeperfect competition, perfect contestability islargely afiction, andifitdidexist,
would notrequire regulation, i.e.rules ofcompetition.
Thisbrings ustothescope ofthese principles andconcepts.WT/WGTCP/W/43
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V. SCOPE
Tradeandcompetitionareformsofbehaviourbygroups-producers,distributorsandconsumers-
inthecontext ofeconomic choices andstrategies inwhich theyareequipped withunequal weapons
andhavestrategies andalliances based more oneconomic realities thanontheoretical ideas. Over
andabove rules andprinciples, there isthevastdiversity ofrealsituations andpractices.
Thatiswhywecannot forego acareful analysis ofthepractical scope ofconcepts andprinciples
andtheirlimits.
Theanalysis ofmarkets andpositions should beempirical, asinfactmany markets orsectors
arecompartmentalized, withmajor industrial, banking orcommercial groups thatestablish contractual
restrictions andcapitalistic barriers thatmake itdifficult fornewcompetitors toenter them.
There arealsomarkets thatareclosed tocompetition fromforeign operators owing topolitical
factors orconsumer behaviour. Inothers, concentration issuchthatentry isproblematical, where
sheer economic scalelimits access tofirms having acritical massattheinternational level, especially
inhigh-tech sectors: aeronautics, motor vehicles, computers, telecommunication andsoforth.
Inaddition toeconomic andtechnological aspects, there aregovernment strategies aimed at
preserving apredominant international position.
Thus, intheglobalized marketplace, intherealworld ofhowenterprises andStates behave,
barriers toentry donotencourage competition, quite theopposite.
Asforthedevelopingcountries,theireconomiesremainfragmented,andtheirlaginestablishing
regulatory systems andattaining thismature stage ofcapitalism islikely toleadtocomparative
disadvantages:ultimately,thefundamentalconceptremainsthatofpossibilityofaccesstoanincreasingly
globalized market andtherealworld ofdoing business (ifnotwheeling anddealing) interms offluidity,
price-cutting andelimination ofrents stemming from barriers linked totechnological advantage,
leadership positions, absolute costadvantages from economies ofscale, all-out standardization, and
theculture ofbrand names andimages. Thistrendtowards efficiency andinnovation should becounter-
balanced bymechanisms ofsolidarity andequity.
VI. INSTRUMENTS
Theinstruments formonitoring, surveillance andassessment ofcompetition andtrade should
becapable ofcoping withtheheightened needs interms ofmarket analysis andofhandling competition
issues. Thestakes, andtheoperations, involved callforexpertise anddiligence matching theneed
forappropriate andrapid decisions inkeeping withtheobjectives andprinciples onwhich the
international community willhaveagreed:
- Creation ofappropriate instruments andstructures bothwithin countries andatthe
multilateral andinternational level.
- Enhanced cooperation among thevarious competition andtrade authorities forbetter
compliance withcompetition rules.
- Strengthening ofcooperative efforts forthequick andconcerted detection ofanti-
competitive practices andunfair business practices;WT/WGTCP/W/43
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- Stepping upwork onharmonization andconvergence ofregulations andlegislations
inorder todevelop common minimum rules worldwide;
- Adaptation tochange andevolution intherealmarketplace inorder tobeabletocontrol
tendencies towards concentration andcartelization.