Competition Provisions in Regional Trade Agreements Workshop, 4 October 2006
On 4 October 2006, tralac, along with the United Nations Conference on Trade and Development (UNCTAD) and the Canadian International Development Research Centre (IDRC), jointly convened a workshop with the objective of furthering discussion and research around the competition provisions found in different types of RTAs in order to support and guide policy makers on the negotiation and implementation of RTAs with respect to competition policies, with particular reference to the RTAs of southern and east Africa.
During the last decade, national, regional and international initiatives aimed at promoting competition policy have proliferated. In particular, of the around 300 bilateral and regional trade agreements (RTAs) in force or in negotiation, over 100 include competition provisions. About 80% of the over 100 RTAs have been negotiated in the last decade. These are part of a trend for ‘deeper’ RTAs that often include provisions for liberalising trade in services, investment, labour and other trade-related provisions. Interestingly, developing countries negotiate about as many RTAs among themselves as with developed countries. About 65% of these “South-South” RTAs completed since 1995 contain competition provisions.
These developments lead to a number of important questions. What are the reasons for including competition provisions in RTAs? What are the main types of such provisions? Do countries receive special and differential treatment from trading partners that are more developed? Can developing countries reasonably expect to benefit from effective provisions in sensitive sectors? How costly is it to implement RTA competition provisions? What has been the experience of competition agencies of developing countries with RTAs?
These questions and others are addressed in the book Competition Provisions in Regional Trade Agreements: How to Assure Development Gains, which was published in October 2005 by the United Nations Conference on Trade and Development (UNCTAD) with the support of the Canadian International Development Research Centre (IDRC). The chapters of this book have been written by competition practitioners and academics focusing on developing country concerns. These chapters particularly aim to shed light on the competition provisions found in different types of RTAs in order to support and guide policy makers on the negotiation and implementation of RTAs with respect to competition policies. The book also makes a number of policy recommendations and identifies institutional arrangements needed to promote synergies between trade and competition at a regional level.
A fundamental message to be derived from the empirical findings and policy experiences presented in the book is that competition provisions at a regional level can act as a major complement to the current efforts to develop an open, rules-based, predictable, non-discriminatory trading system, with a fair distribution of benefits for all developing countries. However, as many of the authors have argued, it may be too soon to draw conclusions on what might be useful for a particular developing country, given their diverse development objectives. This growing phenomenon thus offers many more potential avenues for further research.
There are for instance economic questions. The estimation of economic benefits from competition provisions in RTAs is particularly complex. The private-sector benefits of regional competition rules are hard to assess. Clearer rules not only reduce the costs of compliance but may improve economic efficiencies through greater regional merger activity, but estimates are difficult and guidance may be appropriate. Yet at the same time, the limitations on sovereignty and the loss of flexibility for a small developing country is also a cost hard to estimate. The costs can also be compounded by the potential of smaller developing countries devoting a large part of their resources to information requests stemming from RTA competition provisions that require them to cooperate with other more established competition authorities.
There are also questions with regard to competition provision effectiveness to address anti-competitive practices as they differ between goods and services. Anti-competitive practices in the infrastructure services (e.g. telecommunications) may have negative spill-over effects on market access opportunities for developing countries in other sectors, including trade in goods. They may also have implications for universal access to essential services such as water and electricity. These are important issues to tackle, which explains why many RTAs contain sector specific competition provisions. However when signing such RTAs, developing countries must surely strive for a fair balance between foreign market access and domestic interests.
There are also many legal questions. What is the legal practicality of using regional trade rules instead of domestic legislation? This may differ by type of law and even by country. Furthermore, as the evidence in the book suggests, it would be interesting to assess why the more informal arrangements (bilateral or otherwise) are possibly more effective than the textual obligations of RTA competition provisions? Some questionnaire respondents seemed to have been expecting more from RTA competition provisions than they experienced in effectiveness. Was this justified? What measures could be envisaged to redress this gap and improve the implementation record of regional competition provisions? These are a few of the many questions still of interest.