RESTRICTED
WORLD TRADE WT/WGTCP/W/2
17June1997
ORGANIZATION(97-2485)
Original: English Working Group ontheInteraction
between Trade andCompetition Policy
COMMUNICATION FROM SWITZERLAND
Thefollowing communication hasbeenreceived fromthePermanent Mission ofSwitzerland
withtherequest thatitbecirculated toMembers.
_______________
I. INTRODUCTION
During thefirstWTO Ministerial Conference inSingapore, Ministers decided toestablish a
working group ontheinteraction between tradeandcompetition policy. Considering thatthemandate
ofthisWorking Group intheMinisterial Declaration remains verygeneral andthatitisuptothe
Members toraisetheissues tobediscussed, thefollowing communication aimstopropose aconcrete
work planforthisWorking Group.
II. IMPORTANCE AND INCREASED INTERACTION OFCOMPETITION AND TRADE
POLICIES: THE ECONOMIC PERSPECTIVE
1. Thepromotion ofcompetition hasbeenasubject ofgrowing government attention since the
early1970s. Competition lawsandpolicies werereinforced mostly inorder toprotect small business
andconsumersfromprivateabusesofeconomicpower(horizontalrestraints,abusesofdominantposition,
vertical restraints). Themain purposes ofthose policies havebeentopromote onanational level
efficiency, equal opportunities, consumer welfare andtheproper functioning ofmarket prices. By
contrast, trade lawsandpolicies havefocused onliberalizing governmental measures thatrestrict or
distort international trade.
2. Asaresult ofbothworldwide trade liberalization andglobalization ofcompanies 'activities,
trade andcompetition policies tend tooverlap increasingly. Ontheonehand, increasing
internationalization ofeconomic activity hasmade business global; theworld, orpartofit,isthemarket
inwhich more andmore companies compete. Thus, competition problems tendtotranscend national
borders.Ontheotherhand,thesuccessfultradeliberalizationprocesshasdismantledmanygovernmental
trade barriers. Thisdevelopment should notbeundermined byprivate anti-competitive practices.
3. Insomecases, tradeandcompetition policies arecomplementary; inothercasesthetwopolicies
mayconflict witheachother. Market opening andremoval ofstatutory barriers toentry aretypical
examples ofcomplementarities between trade andcompetition policies. Conflicts maybefound inWT/WGTCP/W/2
Page2
several situations, e.g.inthecaseofinternational cartels which maybeallowed under thenational
competition lawofacountry because theanti-competitive effect ofsuchacartel isnotfeltinthiscountry.
However, suchacartel mayhavetheeffect ofreducing international trade. Furthermore, specific
measuresforeseeninmultilateraltradeagreementsmay,incertainsituations,havetheeffectofrestraining
competition (liketheuseofsubsidies toprovide protection toimport-competing domestic producers).
4. Theprocessesofliberalizationandglobalizationcallfortheremovalofanti-competitiverestraints
thatblock access tomarkets andtheavoidance oftradepolicies which restrain international competition.
However, evenifthese processes suggest thatinthelastthree decades theinteraction between trade
andcompetition policies hasstrongly increased, itremains difficult toidentify which specific anti-
competitive measures aredirectly restraining international trade andwhich trade policies aredirectly
affecting international competition.
III. PROPOSAL: WORK PLAN INTHREE STAGES
Inorder todiscuss those issues andthequestion whether there isaneedforfuture work in
theWTO, wepropose thefollowing plan:
Stage I: Identificationofanti-competitivepracticesaffectinginternationaltradeandtradepolicies
affecting international competition
First,theWorkingGroupshouldidentifythoseprivatepracticesthatadverselyaffectinternational
trade(e.g.horizontal andvertical restraints andabuses ofdominant position). Secondly, theWorking
Group should identify government action thatfacilitates private restraints (e.g.safeguard measures,
subsidies oranti-dumping measures). Themainpurpose ofthisidentification process istosettheground
forthework under Stage IIoftheproposed work plan.
Stage II: Analysis ofthecoverage byWTO provisions ofpractices identified inStage I
Once thedifferent private practices adversely affecting international tradeandthegovernment
action facilitating private restraints havebeenidentified, wepropose toanalyse allthese situations in
order todetermine whether theyarecovered bytheexisting WTO provisions which aredirectly or
indirectly related tocompetition. Thisanalysis would alsoinclude anassessment ofhowthemain
principles oftheGeneral Agreement (e.g.national treatment andMFN) affect suchsituations. The
WTO provisions which aredirectly related tocompetition include theGATT 1994 agreements
(particularly theAgreements onSubsidies andCountervailing Measures, Safeguards, Implementation
ofArticle VIoftheGeneral Agreement onTariffs andTrade 1994, Technical Barriers toTrade), the
TRIPS Agreement (particularly Articles 39and40)andtheGATS (particularly Articles VIIIandIX
GATS, aswellasparagraph 5oftheAnnex onTelecommunications andcertain provisions contained
intheregulatory framework agreed onduring thenegotiations onBasic Telecommunications). Some
otherWTO agreements, asforinstance theAgreements onImplementation ofArticle VIIoftheGeneral
Agreement onTariffs andTrade 1994, Preshipment Inspection, Rules ofOrigin andImport Licensing
Procedures, would alsobeincluded intheexamination astheycontain provisions which areindirectly
related toanti-competitive measures.
Stage III: Determination offuture work inWTO
Theresults oftheexamination mentioned under Stage IIshould enable theWorking Group
topropose where future work isneeded andwhether thisworkshould focus onimprovement ofexistingWT/WGTCP/W/2
Page3
WTO provisions orontheelaboration ofnewmultilateral rules. TheWorking Group 'sproposal would
bereported totheGeneral Council fordecision before theendof1998.