A Alvarez Sussex RTA Conference

“Competition Provisions in RTAs”Presentation by Ana María AlvarezCompetition and Consumer Policies BranchUNCTAD: 

CARIS and SEI University of Sussex Developing Countries and the Challenge of Regionalism: Assessing the Options Conference Centre, University of Sussex 28/29/30 September 2006 “Competition Provisions in RTAs” Presentation by Ana María Alvarez Competition and Consumer Policies Branch UNCTAD

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Competition Provisions in Regional Trade Agreements (RTAs): Reasons prompting the signature of agreements: not sufficiently explored What are burdens involved in implementing those agreements? What are the development implications of those agreements? ⇒ Low degree of implementation Need to review these agreements and provisions bearing in mind their effective economic and development impact and the needs of developing countries? Economic welfare: what are the gains for consumers? Can bilateral and RTAs contribute to enhance productive capacities and contribute to poverty alleviation? Dissemination phase: propose new modalities of support to developing countries in negotiating agreements Publication prepared with the support of IDRC, Canada and launched at the Fifth Conference to Review all Aspects of the UN Set on Competition (Antalya, Turkey, November 2005) Seminars organized in: Switzerland, Turkey, Korea, South Africa and Brazil

Outline : 

Outline Competition Related Provisions (CRPs) and Regional Trade Agreements Promoting Co-operation in enforcement between agencies Way Forward: development Issues concerning bilateral and RTAs with CRPs

Some facts: 

Some facts From 1990: proliferation of Bilateral and RTAs; various agreements contain provisions on Competition law and policy (CLP) Approx. 100 agreements out of more than 300 RTAs contain provisions on CLP. 56 include developing countries (DCs) Broad RTAs are more likely to include CLP (second generation type of agreements): ensure greater coherence between trade and competition. ‘Deep Integration’ Slow implementation of RTAs, rapid growth of bilateral and informal agreements (less burdensome) Overlapping obligations: increased burden for developing countries? Do the agreements require implementation of the same or different provisions?

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Africa Asia Latin America and the Caribbean Agreements with the EU - CEMAC, UEMOA/WAEMU - COMESA, EAC SACU, SADC - ASEAN - SAARC - APEC - MERCOSUR Andean Community CARICOM NAFTA (+ US & Canada) Latin American FTAs (US-Peru, US- Colombia, US- Chile, CAFTA-DR-US) Which Regional Trade Agreements containing CRPs are we referring to? - EFTA -Pre-accession agreements -Euromed, EU-SA TDCA, EU-Mexico, EU-Chile - EPAs?

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Agency-to-agency - ATAs or agreements of mutual legal assistance – MLATs Informal co-operation e.g. through the ICN Seemingly more efficient and less burdensome than RTAs Value added over spontaneous cooperation between agencies Likely to assist the evolution of cooperation (including follow-on agreements) Technical cooperation without commitments (non-enforcement related cooperation) Non-reciprocal facility Provisions on Special and Differential Treatment Which agreements containing CRPs are we referring to? (Cont’d) Proliferation of cooperation agreements other than formal integration agreements

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*Source: Silva & Alvarez: Cooperación en políticas de competencia y acuerdos comerciales de América Latina y el Caribe: desarrollo y perspectivas. ECLAC, 2006

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RTAs and Competition Policy Agreements including the US and Canada and Latin American partners Agreements (FTAs) with the US NAFTA (1994) US-Chile (2003) CAFTA-DR-US (2006 reference to competition in Telecoms) US-Peru (2006) (…) US-Colombia (2006) Agreements with Canada Canada-Chile (1996) Canada-Costa Rica (2001) Agency to Agency agreements Canada-Chile MOU (2001) MLATs (US-Brazil 1999)

Japan: Cooperation with less experienced countries: 

Japan: Cooperation with less experienced countries Enforcement cooperation should be more flexible and start from more elementary levels Nevertheless it is desirable to establish a certain degree of common understandings, such as: Commitments to control anticompetitive activities; Commitments to ensure consistency with the core principles of non-discrimination, transparency and procedural fairness; Commitments to cooperate in controlling anticompetitive activities in accordance with developmental level of each country. Technical assistance Source: Japan Fair Trade Commission (JFTC)

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Agreements signed with pre-accession countries (Turkey, Croatia, Macedonia) Agreements with non accession countries: European Neighbourhood Policy (ENP)/Euro-Med countries (1995). Other countries, e.g. South Africa TDCA (1999), Mexico (2000), Chile (2002) Economic Partnership Agreements with between the EU and ACP countries Dedicated cooperation agreements (inter-agency): MoU (Korea) (2004), Enforcement cooperation agreements (United States(1991) , Canada, Japan) European Competition Network (ECN) RTAs and Competition Policy including the EU

Competition rules in non pre-accession RTAs: 

Competition rules in non pre-accession RTAs Content of the Agreements: Main aim: to challenge anti-competitive practices and distortionary state aids that would be illegal under EU law EU-South Africa(SA) TDCA (1999): Opportunities for securing market access in both directions. In merger cases in SA, informal cooperation has taken place, even though not covered by the TDCA. EU-Mexico Large number of notification provisions, used predominantly by Mexico (31 as opposed to 1) Euro-Med: More harmonization than EU-SA or EU-Mexico. Promise of end to use of countervailing duties if EU State aid rules applied

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    Szepesi, S. (2004) «Comparing EU free trade agreements, Competition Policy and State Aid » European Center for Development Policy Managment (ECDPM) Evolving characteristics of competition provisions in EU FTA’s

Competition Provisions in RTAsIssues that merit further discussion(dissemination phase): 

Competition Provisions in RTAs Issues that merit further discussion (dissemination phase) RTAs have proliferated and sometimes, commitments overlap Burden and benefits of agreements: not always balanced If there is a lack of implementation of CRPs in RTAs, benefits are insufficiently clear and costs are high Need to examine cross-cutting and specific experiences, national and international implementation problems If stronger markets and inclusive growth are the key for economic development, need to examine: Economic and development impact of CLP and regional competition law and policies What formulations of CLP are most friendly to poverty alleviation and efficient development?

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Implementing Competition Provisions in bilateral and RTAs

Competition Provisions in RTAsIssues that merit further discussion(dissemination phase) cont’d: 

Competition Provisions in RTAs Issues that merit further discussion (dissemination phase) cont’d Questions related to the ‘international’ implications of competition provisions in RTAs include: In what ways, have competition provisions fostered cooperation between agencies on actual enforcement cases? What are the Pros and Cons of binding competition enforcement issues? What disputes have arisen on CLP between signatories of agreements? How were they solved? What is the relationship between cross-border mergers and acquisitions and implementation of CRPs in bilateral and RTAs?

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Questions related to the ‘National’ implications of the implementation (or not) of agreements: To what extent have RTAs been used to bring forward the date of enactment of a competition law? How did the RTA existence or negotiation affect the political economy of competition law enactment and enforcement? In what ways, if at all, have competition provisions strengthened the deterrent effect of national laws? How can bilateral and RTAs contribute to strengthen the powers, budget and resources of competition agencies? Competition Provisions in RTAs Issues that merit further discussion (dissemination phase) cont’d

Competition Provisions in RTAsIssues that merit further discussion(dissemination phase) cont’d: 

Competition Provisions in RTAs Issues that merit further discussion (dissemination phase) cont’d However, we should not only consider competition chapters of regional trade agreements but also recognize that there may be competition principles in other chapters of the agreement.* For example, in sector specific chapters such as telecom services, transportation or financial services. Competition principles may also be found in provisions dealing with government procurement, IP and investment. *Anderson & Evenett 2006 forthcoming

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How can cooperation strategies be deepened and widened? Cooperation instruments NOTIFICATION CONSULTATIONS COOPERATION FOR ENFORCEMENT THROUGH INFORMATION EXCHANGE OF INFORMATION NEGATIVE COMITY (RESPECT FOR INTEREST OF THE COUNTERPARTY) POSITIVE COMITY (REQUESTS FOR ENFORCEMENT ACTIONS OF THE COUNTERPARTY) TECHNICAL ASSISTANCE Can developing countries adopt this type of instrument?

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Cooperation initiated by an FTA and reinforced by an ATA (although not necessarily one precedes the other) Notifications provide: early warnings channels of communication send a clear signal to undertakings that agencies take antitrust enforcement seriously Consultations and exchanges of information: opportunity for agencies to offer support, advice and experience Key elements in promoting cooperation*: *Marsden (2005)

Key elements in promoting cooperation cont’d.: 

Distinction between « soft law » and « hard law » Hard laws are legally binding, relatively precise and delegate legal authority to interpret and implement their scope and substance. But most agreements exempt competition provisions from dispute settlement Can cooperation replace binding rules? New cooperation Instruments* Assistive notification (burden would fall on the more developed partner) Positive comity and recourse (mainly borne by the developing country or the less developed partner) Key elements in promoting cooperation cont’d. *(Mathis, 2006)

Some limitations of cooperation agreements*: 

Some limitations of cooperation agreements* Soft law obligations: provisions have been described as `vague and imprecise´ each party effectively interprets the extent of its obligations unenforceable in law between the parties no dispute settlement procedures Restrictions on exchange of confidential business information: the arrangements do not require or permit any information exchange that would otherwise not be permissible this appears to be the chief limitation on cooperation The definition of confidential information, as well as its potential use were identified as areas which need further study *(Marsden, 2006)

Questions for further research: 

Questions for further research How much co-operation is going on under formal provisions and how much informally? Are there examples of cases where cooperation, if it had been provided, might also have made a difference? What were the impediments to co-operation in those instances?

Important areas for further research: 

Important areas for further research International Cooperation Prepare an Model competition co-operation agreement Develop a toolkit for the implementation of co-operation and to study the costs and benefits of RTAs containing competition-related provisions as against direct ATAs. Develop a specific case enforcement procedural framework: big trading powers should not just ignore the concerns of smaller trading partners.

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CRPs in bilateral and RTAs: impact on economic development and social impact Is there a possible positive social impact? Contribution to economic welfare, increase of productive capacities and poverty alleviation What formulations of CLP are most friendly to poverty alleviation and efficient development? Role of a regional or national competition body in directly targeting issues of social concern: a quest for a long-lasting competition culture. The link between competition provisions and other aspects of bilateral and RTAs: implications for trade diversion and trade creation CLP uses exceptions and exemptions to yield to other policies (SMEs, affirmative action, culture preservation)

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Linking CLP provisions to the other regulation mandated by the RTA and to existing domestic regulation. For example: How to relate CLP, intellectual property laws, investment protections and consumer protection? What is the optimal mix as well as the most appropriate sequencing of reforms? How is balancing of national/regional CLP objectives actually performed when they conflict? CRPs in RTAs: impact on economic development and social impact cont’d

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Tackling poverty alleviation with CLP and consumer protection: - CLP and privatised schooling, schooling support services, competition in schooling CLP in Public Health: pricing and availability of pharmaceuticals Impact of FDI, competition, cross-border anti-competitive practices on food distribution and prices Consumers and Competition Policies: food security and income generation Consumer protection and financial services for the poor: new approaches to regulation-Competition Law for sustainable development, and consumer protection for sustainable consumption. Specific topics that merit further research

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Specific Challenges for implementing CLP and Consumer Protection in a developing country setting - Addressing the legacy of pervasive state intervention, rushed privatization and deregulation, highly concentrated industries and co-operative relationships between producers. - What is the impact of inequality and a large informal sector on appropriate developing country CLP and consumer protection? - The Public Interest, Exceptions and Exemptions and Regulatory Capture: How are efficiency and other factors weighed up in practice? - Applying CLP and consumer protection in a developing country setting Local history, data shortages, human resource constraints and other considerations - Regional strategies for improved knowledge sharing and competition and consumer protection advocacy Specific topics that merit further research

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Competition and Consumer Protection work in UNCTAD: Ensuring consistency among the three pillars UNCTAD’s interactive and mutually reinforcing pillars of work consist of international consensus-building, research and policy analysis, and technical cooperation. The dissemination phase aims at ensuring the interconnexion between these three pillars Consensus building Research Technical cooperation

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UNCTAD mandates on Competition Law and Policies - Promoting regional competition law and policies - Fifth UN Conference to Review all Aspects of the UN Set on Competition (Antalya, Turkey, november 2006) launching of the publication Intergovernmental Group on Experts on Competition Law and Policies – 31 October-2 November 2006 International cooperation in investigating and prosecuting hard-core cartels affecting developing countries; Cooperation and dispute settlement mechanisms relating to competition policy in regional free trade agreements, taking into account issues of particular concern to small and developing countries

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Many thanks For further information ana.maria.alvarez@unctad.org UNCTAD outreach and dissemination team regionalcomp@unctad.org