Union pushes case for global competition rules

Date: 16/09/1999

By Peter Chapman

THE European Commission faces an uphill struggle to persuade fellow World Trade Organisation members to agree to include negotiations on common competition rules within the scope of the forthcoming Millennium Round.

The ranks of the disbelievers are led by the hardline US administration. Washington insists it will oppose any moves which would give the WTO the right to overturn American legislation which has an impact outside the US, such as the Helms Burton Act which bars companies from doing business with Cuba involving assets confiscated by Castro during the revolution.

It also fears that some of the WTO's Asian members will try to link negotiations on competition to talks on relaxing anti-dumping rules.

But Commission officials claim US' opposition to including competition rules in the next round is weakening following the EU's promise that it would not call for the WTO to be given the power to arbitrate in individual competition cases. Moreover, they insist, Latin American countries - most notably Brazil - are showing increasing interest in the idea.

Experts in the Commission's Directorate-General for competition say the Union's willingness to accept a less ambitious agreement has been crucial in winning over sceptics. "Setting up an international competition authority with its own powers of investigation and enforcement is not a feasible option," admitted Deputy Director-General Jean François Pons.

The WTO already acts as the world trade watchdog, interceding in intractable disputes between member countries. But the Commission's proposals fall far short of calling for a similar internationally binding process for settling competition cases.

Instead, it wants a less far-reaching four-point deal covering all 134 members of the WTO. Under the plan, WTO members would agree to adopt domestic competition rules and structures based on a series of agreed "core principles" covering basic rules on restrictive business practices and abuses of dominant positions. These national rules would take a common approach to anti-competitive actions with an international dimension.

The Commission plans also envisage setting up a 'cooperation instrument' to oblige countries to exchange certain data about competition cases. Finally, the Commission has called for "reflection" on ways to uphold these binding principles.

It believes that such a deal would plug a yawning gap between those WTO member countries which already have some form of competition legislation and the 70 which do not - including some major financial players such as Hong Kong and Singapore.

However, officials admit that they still have a long way to go to convince the US that now is the time to bring competition within the scope of WTO rules.

The Commission's proposals have also received a lukewarm response from EU companies. The European employers' organisation UNICE says its members are in favour of measures to dismantle the barriers which keep them out of foreign markets, but warns that introducing new competition rules would not necessarily help European firms.

"UNICE would deplore a situation where companies have to comply with fundamentally different approaches to competition law in a variety of countries," the organisation warned in a recent report.

Nor does UNICE accept the Comm-ission's view that it would be possible to agree common rules on cartels, pointing out that the 29 leading industrial nations failed to find a mutually acceptable definition of a 'hardcore' cartel at a recent meeting of the Organisation for Economic Cooperation and Development (OECD).

Competition is not the only controversial issue which the Commission wants to put on the agenda for the Millennium Round. It is also urging WTO members to negotiate new rules on investment .

The aims of its proposal are similar to those which the OECD set out to achieve when it launched the talks on a Multilateral Investment Agreement which ended in failure last year.

The Commission wants the WTO to provide the negotiating forum for designing an international framework which would offer increased safeguards to international investors. It argues that the accord should also protect the rights of WTO members - particularly poorer members - to regulate foreign capital inflows.

The EU launched its campaign for global competition and investment rules in 1996, and has been fighting to win support ever since. But officials know that without US backing, they have little chance of success.

"Much depends on the Seattle rendez-vous," said Jean François Pons, referring to November ministerial meeting which will launch the Millennium Round.

The European Commission faces an uphill struggle to persuade fellow World Trade Organisation members to agree to include negotiations on common competition rules within the scope of the forthcoming Millennium Round. Article forms part of a survey on world trade, p13-20.