Relevance of WTO core trade principles and
S&D for developing countries / Principios
básicos del comercio de la OMC y el Trato
Especial y Diferenciado: aspectos
relevantes para los países en desarrollo.
James H. Mathis
Amsterdam Law School
University of Amsterdam, NL
03/04/03
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Overview
– I. Relevance of core principles to
developing countries
– II. Elements of a developmental- friendly
multilateral framework.
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WTO & private conduct
– WTO is between States - not firms
– WTO compels NO domestic regimes
(TRIPS excepted)
– No requirement to have competitive market
for either domestic or foreign firms.
– WTO Members not required to address
cartels or monopolies, except state owned
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Part I: WTO ruleslaw or no law ?
• a) importation / exportation rules apply
whether or not a country has a
competition law:
• b) if a country has a competition law,
then rules on imported apply:
– Importation / exportation rules PLUS
– rules on imported (goods or services)
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GATT treatment of importation as
compared to imported goods
Import Country (imported)
Art. III – National Treatment –
No less favourable treatment:
- like imported/domestic goods
- for laws, regs, requirements
- affecting sale / distribution
- de jure and de facto
MFN applies to
internal laws
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Border
(importation / exportation)
Article XI – no (restrictions)
other than duties –
upon importation
and exportation
Art. II. tariff bindings –
(para. 4) undermining
Art. I (MFN) duties and
formalities upon importation
and exportation
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Importation rules - GATT XI
• No prohibitions or restrictions other than
duties… maintained
• on the importation … or exportation or
sale for export
• on any product destined for the territory
of any other contracting party.
• ??: When is a restriction private and
when is it public?
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Article XI - State responsibility tests
– 1. “but / for” test - otherwise firms would not
form an import / export restriction.
– 2. “inducements” test (Japan - Semi)
– 3. “co-operation test” (administrative
guidance) Kodak / Fuji
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Article XI - cartel interaction - attribution
Argentina - Bovine Hides
• government can implement a measure by
“interaction” with a private cartel.
• Need to prove the existence of the cartel
• ? whether government needed to know of
actual cartel practices or at least,
• established that the actions attributed to the
government by rules of state responsibility
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Importation rules for services
in the GATS.
• Quotas are lawful under GATS until
market access commitment.
• No GATS comparable to GATT article
XI. (no preference for duties)
• On GATS market access all importation
measures eliminated except scheduled.
• ? GATS provision on export restraints?
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Related GATS Provisions
• GATS Article VIII (compare GATT Article XVII
for state monopolies. Titled Monopolies and
Exclusive Service Suppliers. Member shall
ensure that a monopoly supplier of a service
does not act contrary to MFN or commitments
• GATS Article IX. Business Practices Members obliged to consult to eliminate
certain business practices that, “may restrain
competition and restrict trade in services.”
GATT has no comparable
Article.
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WTO Rules regarding imported
Goods/Services
– When a country HAS a
competition law
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GATT National Treatment
Article III
• imposes “equality of competitive
conditions” for all imported goods as
compared to “like” domestic products.
- Applies to any domestic law, regulation or
requirement;
- that affects the sale, offer for sale, distribution
of imported goods
- no less favourable treatment standard (no
protection for like domestic production)
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GATS (services) National Treatment.
Article XVII
• imposes “equality of competitive
conditions” for foreign services and
providers.
• ONLY after a market access
commitment as been made (positive
list)
• subject to reservations (Negative list).
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WTO national treatment rules
de jure / de facto
• National Treatment applies to
competition law and policies, both
de jure and de facto
• De jure: origin difference in the text
• De Facto: facially neutral law has (less
favourable) effect upon “like” imported
goods, services / providers in
application.
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GATS de facto national treatment
• “Formally identical treatment violates
national treatment if it modifies the
conditions of competition in favour of
domestic goods, services or providers.”
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De facto NT
as to exemptions/ exclusions
-Exemption/exclusion stated in national law
is a part of the law -Does the exclusion treat DCS products or
services? (ex: coffee / tea)
•Is the exclusion addressed to a cartel or
monopoly that controls imports or exports ?
•Can foreign provider form similar restrictive
arrangements?
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Compare EC proposal and national
treatment- 1
• First, a broadening of national
treatment to apply to firms on the basis
of nationality - (horizontal MFC)
– not conditioned upon “trade-related”
aspects as to goods, services or providers
– similar to GATS Art. XVII as to foreign
providers, but GATS NT after market
access commitment is made
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EC proposal and national treatment -2
- Second, a narrowing to apply only to
de jure cases – “disparate effects” by individual decisions
would not be actionable
– would eliminate complaints on de facto
discrimination as to exemptions/ exclusions
– scope of de jure to question as to
secondary legislation and notices.
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Relation of MCF national treatment to
existing provisions
GATT III
GATS XVII
-imported
goods
- general
-de facto
-foreign
services /
providers
-specific
- de facto
WTO
Investment
-investor
treatment /
post admit.
-specific
-de facto
MCF national treatment. - nationality of firms in respect of de jure
(facial) competition law. Treatment not as to imported goods or services.
TRIPS national treatment Art. 3, ‘Each member shall accord to nationals
of other Members…’. Treatment not as to imported goods or services.
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Treatment of exemptions/exclusions in the
EC Proposal
• All exclusions are permitted at the
outset with notice and transparency
• this includes developed as well as
developing country exclusions
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EC proposal, prohibition and
co-operation aspects.
• Stated prohibition against certain
international hard core cartels.
– See OECD recommendations
• Appears as a “trade related “ prohibition
as a Member obligation
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Prohibition / co-operation
implications
• prohibition not on monopolies (exports)
• to treat by domestic enforcement of
competition laws. Effects upon local
markets (inbound)
• export restrictions (outbound) treated by
voluntary co-operation. There is no
MFN for positive comity co-operation
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II. Elements of a developmental
friendly multilateral framework
• What is special and differential (S&D)
treatment in the competition policy
context?
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Traditional S&D elements
• longer timelines for implementation
• best efforts provisions (consultation)
• better access by preference (GSP) , i.e.,
non-reciprocity in obligations
• lesser market opening by tariffs for
infant industry purposes (GATT XVIII)
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S&D as to national treatment
• There is no general S&D principle
• and no S&D principle applies to national
treatment, or to exceptions.
• National treatment in competition law
context viewed as restricting industrial/
employment policies, infant industry
development, S&M, affirmative action
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Balance of domestic enforcement
v. co-operation issues
• There is an “import” and an “export”
side to the competition issue
• Co-operation to view as implementing a
“prohibition” on hard core cartels.
• Quid pro quo for domestic enforcement
is binding action on export restrictions.
• S&D could require more than quid pro
quo. (d’ing ctry export cartels)
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Question as to participation...
– Some argue for no participation at all, pending offers agriculture / textiles,
– Some suggest dangers of “laying out”.
Result in a “take it or leave it” framework
without better co-operation, S&D.
– Many new laws or no law. Experience at
national and regional levels first
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Some suggested alternatives
- Code of voluntary conduct and variations
- binding / nonbinding (scheduling?) (HKC)
- Stronger (quid pro quo) on export
treatment, effect for the UN Set (India)
- Trade – related approach, import and
export restrictions unlawful trade practices.
(Thailand)
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Trade-related international
competition provisions
• Sherman Act (US) - Affecting trade and
commerce among the states - M and C
• Havana Charter ITO - Business practices
affecting international trade - M and C
• EC Treaty - ‘which may affect trade” M and C
• UNCTAD Set - Undermining benefits of trade
liberalisation. M and C
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Unfair trade practices approach
• NO requirement for a law - principles apply to
laws in any case.
• Trade commitments affected by RBPs (GATT
II.4 example). state to state, imports and
exports. States may apply unfair trade laws
• Non-bound trade related - consultation no
DSU (see GATS Art. IX)
• non-trade related (anti-competitive) non
binding
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Where national treatment applies:
What is S&D for national treatment?
– The non-efficiency objectives are not all
development oriented. Does a Framework
recognises other objectives ?
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•
•
•
•
•
•
regional integration
small and medium
domestic market participation
cultural/ethnic affirmative action
distressed area development
infant industry context/ industrial policy
responsive consolidation
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National Treatment S&D
three approaches
– All exclusions permitted, developed and
developing.
– Scheduling voluntary national treatment
(as in the GATS), developed and
developing
– negotiated exemption approach. The
framework states the exemption criteria as
to non-efficiency objectives.
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Negotiated Exemption Approach
• Framework pramble- states non-efficiency
objectives
• Negotiated exemption paragraph provides
negotiated criteria to apply non-efficiency
objectives
• Pre-violation. Burden remains on complainant
to show abuse / misapplication
• Article 81(3) example for exemptions
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Conclusion - Doha to Cancun
• For Cancon - meaning of “explicit consensus”
• Institutional provisions for the modality
discussion - When are modalities “negotiated”
• Substantive modalities. How broad is the
Doha text? Is a horizontal framework on
general anti-competitive practices already
committed?
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