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Competition Policy Summary Papers Links

Competition Policy Summary

In carrying out its objective of eliminating barriers to international trade, the WTO has dealt almost exclusively with ridding its member countries of government-created phenomena that impede free trade, such as tariffs. It was not until the 1996 Ministerial Conference in Singapore that member countries identified businesses as a source of distortion in international free trade. The majority of WTO Member countries (both developed and undeveloped) already had competition laws, such as antitrust or anti-monopoly laws that regulated or prohibited such things as price fixing, mergers, and vertical agreements. However, others did not have such regulatory policies, and no body existed to oversee competition standards internationally.

The twentieth article of the 1996 Singapore Ministerial Declaration called for the establishment of a working group to formally examine the relationship between trade and competition policies. As a result, the WTO Working Group on the Interaction between Trade and Competition Policy (WGTCP) was created, and began meeting in the summer of 1997. The group's mission is to simply explore and analyze the link between competition and trade, without venturing into policy proposals about how to curb anti-competitive behavior in order to increase trade.

Although most members have accepted that there is a strong relationship between trade and competition, there is a great deal of controversy on whether or not measures should be taken to create a multilateral set of rules governing competition regulation. This issue is particularly complex because the absence of antitrust or other competition policies can affect markets not just in the home country, but also in other countries as well.

The major players, as usual have divergent views. The EU would like to see international standards of competition policy developed, but which would allow developing countries to opt out of them in the sectors they desire.[1] Developing countries are actually divided on the issue, with some Latin American countries favoring such a policy, while several Asian countries are less enthusiastic.[2]

Some developing countries fear that large, multinational corporations, which tend to be headquartered in developed nations, will expand into their domestic markets and threaten the young and growing domestic firms. Many developing countries also disagree with multilateral competition measures because they view them as too intrusive; they believe that competition policy is something that a government should create at its own discretion because such policy depends on a country's unique market conditions. Finally, some developing countries are reluctant to add more issues to the agenda of the WTO before existing ones can be resolved.

On the other hand, the U.S. and the E.U. both vigorously support the creation of international competition policy, arguing that unfair competition distorts trade as much as tariffs do, and therefore should be regulated by the WTO rather than left up to individual country governments. The EU and U.S., however, disagree over exactly how this should be done.[3]

In light of such disagreements it is unlikely that we will see any significant progress on competition policy in the near future. Some countries neither vigorously oppose nor endorse the establishment of multilateral competition rules, arguing that more research needs to be done to further illuminate the relationship between trade and competition. Perhaps as more information on the topic is available, countries will find more common ground in their opinions about the proper role of the WTO in competition policy.



[1] Holmes, Peter, "Trade, Competition and the WTO," in in English, Philip, Bernard M. Hoekman, and Aaditya Matto (Eds.), Development, Trade and the WTO, Geneva: World Trade Organization, 2002, p. p. 453. [online: web] URL: http://publications.worldbank.org/ecommerce/catalog/product-detail?product_id=1525978&

[2] Holmes, Peter, "Trade, Competition and the WTO," p. 454 http://publications.worldbank.org/ecommerce/catalog/product-detail?product_id=1525978&

[3] Much of this disagreement stems different approaches of the EU and United States towards trade negotiations, as described in our Market Access page (http://www.cid.harvard.edu/cidtrade/issues/marketaccess.html).


Last updated February 2003