Competition Policy in Trade Agreements
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Why do markets in developing economies often underperform?

  • Due to lack of competition (correct)
  • Due to excessive regulations
  • Due to high consumer demand
  • Due to government support

    • Effective competition policies can mitigate vested interests and facilitate market opening.

    True

    What are the three pillars for achieving an effective competition framework?

    Fostering pro-competition regulations, ensuring competitive neutrality, promoting economy-wide enforcement of competition laws

    Competition policy plays a fundamental role in reducing __________ and promoting trade integration.

    <p>barriers</p> Signup and view all the answers

    Which of the following agreements is not mentioned in the text?

    <p>NAFTA</p> Signup and view all the answers

    Economy-wide obligations in trade agreements include commitments related to competition policy.

    <p>True</p> Signup and view all the answers

    What is the significance of the 2009 study mentioned in the text?

    <p>It expanded the realm of competition provisions in PTAs beyond competition chapters.</p> Signup and view all the answers

    Bilateral agreements primarily focus on the regulation of designated ________________ and SOEs.

    <p>monopolies</p> Signup and view all the answers

    Match the covered sectors with the type of agreement (bilateral or multilateral):

    <p>Investment = Bilateral Intellectual Property = Bilateral Government Procurement = Bilateral Telecommunications = Bilateral Services = Multilateral</p> Signup and view all the answers

    What is a major goal of a surprisingly large number of PTAs, in addition to promoting trade?

    <p>Promoting competition</p> Signup and view all the answers

    Competition policy provisions are often included in PTAs to prevent gains in market access from being eroded by anticompetitive behavior.

    <p>True</p> Signup and view all the answers

    What are some of the horizontal principles critical for promoting competition in PTAs?

    <p>Transparency, non-discrimination, procedural fairness</p> Signup and view all the answers

    Out of the 239 PTAs with competition provisions, 123 require each party to adopt a __________ law.

    <p>competition</p> Signup and view all the answers

    What are some examples of sector-specific obligations outlined in the content?

    <p>Facilitating agreements among competitors</p> Signup and view all the answers

    The level of enforceability of competition provisions in PTAs can range from non-binding to binding with dispute settlement mechanisms.

    <p>True</p> Signup and view all the answers

    What is the purpose of competition commitments in PTAs?

    <p>Further trade objectives</p> Signup and view all the answers

    Match the following regions with their likelihood to form PTAs with competition-related provisions:

    <p>East Asia &amp; Pacific (EAP) = Most likely to form PTAs with partners from other parts of the world Europe &amp; Central Asia (ECA) = Likely to engage in bilateral PTAs with competition-related provisions Latin America &amp; Caribbean (LAC) = Likely to participate in arrangements with middle-income countries Middle East &amp; North Africa (MENA) = Least likely to engage in PTAs with competition-related provisions North America (NA) = Not involved in PTAs with competition-related provisions South Asia (SA) = Engages in PTAs with a mix of income level countries Sub-Saharan Africa (SSA) = Does not have systematic participation in PTAs with competition-related provisions</p> Signup and view all the answers

    What percentage of bilateral agreements require the agreement to be binding but do not have dispute settlement?

    <p>More than 90%</p> Signup and view all the answers

    PTAs that refer to other international agreements often add another level of commitment to the competition-related provisions of the PTA.

    <p>True</p> Signup and view all the answers

    What types of anticompetitive behavior are typically prohibited in PTAs?

    <p>Cartels, abuse of dominance, and anticompetitive mergers</p> Signup and view all the answers

    Effective cooperation between two competition authorities within the framework of an international antitrust investigation would not be possible without minimum standards that ensure similar treatment of ________.

    <p>procedural parties or confidential information</p> Signup and view all the answers

    What are some of the most frequent commitments related to procedural fairness in PTAs?

    <p>The right to defense, transparency, the right counsel, and predictability in proceedings.</p> Signup and view all the answers

    Which commitments are typically found in PTAs that promote enhanced predictability?

    <p>All of the above</p> Signup and view all the answers

    The Trans-Pacific Partnership (TPP) covers all procedural fairness obligations identified in the analysis.

    <p>False</p> Signup and view all the answers

    Among all PTAs reviewed, only the __________ covers all procedural fairness obligations identified in the analysis.

    <p>TPP</p> Signup and view all the answers

    Match the following commitments with their importance in procedural fairness obligations: 1) Protection of confidential information, 2) Right to be represented by counsel, 3) The obligation to publish decisions

    <ol> <li>Protection of confidential information = Critical commitment</li> <li>Right to be represented by counsel = Less importance given</li> <li>The obligation to publish decisions = Less common and tends to be combined with other commitments</li> </ol> Signup and view all the answers

    What are the sectors examined in this research for sector-specific commitments?

    <p>Agriculture, e-commerce, government procurement, intellectual property, and investments</p> Signup and view all the answers

    What do PTAs in the database consider in at least one of the five sectors?

    <p>Competition commitments</p> Signup and view all the answers

    PTAs with sector-specific commitments tend to focus more on rules that facilitate collusive outcomes.

    <p>False</p> Signup and view all the answers

    Rules that reinforce dominance or limit entry can lead to dominant market players setting prices above the competitive level, and reduce the rate of ________.

    <p>innovation</p> Signup and view all the answers

    Match the following categories with the types of provisions: (a) Monopoly rights and absolute bans on entry, (b) Relative bans on entry or expansion of activities, (c) Incumbents' rights regarding entry decisions

    <p>Investment = a Agriculture = b Government procurement = c</p> Signup and view all the answers

    What are the four types of cooperation analyzed among bodies with a competition mandate?

    <p>Coordination</p> Signup and view all the answers

    How many PTAs with competition provisions include at least one form of cooperation?

    <p>131</p> Signup and view all the answers

    All PTAs that include technical assistance provisions also mention cooperation as a general objective.

    <p>False</p> Signup and view all the answers

    The obligation to notify is mostly related to ____, sometimes in combination with the notification of decisions.

    <p>investigations</p> Signup and view all the answers

    Match the following terms with their definitions:

    <p>SOEs = State-Owned Enterprises receiving State assistance PTAs = Preferential Trade Agreements TPP = Trans-Pacific Partnership agreement GATT = General Agreement on Tariffs and Trade</p> Signup and view all the answers

    What do obligations in investment chapters focus on?

    <p>Open and non-discriminatory special formalities and information requirements</p> Signup and view all the answers

    What is the aim of obligations in procurement?

    <p>Ensuring open and equal conditions for participation and qualification</p> Signup and view all the answers

    What do obligations in e-commerce prohibit regarding electronic signature regulations?

    <p>Limiting or impeding the determination of the electronic signature method for a transaction</p> Signup and view all the answers

    What is the focus of provisions regarding IP rights?

    <p>Establishing reasonable and publicly available protection and registration of trademarks</p> Signup and view all the answers

    What do provisions that limit or prohibit impediments to switching providers aim at?

    <p>Removing barriers to competition within a market</p> Signup and view all the answers

    Where are provisions limiting or prohibiting rules that are conducive to collusive outcomes commonly found?

    <p>Telecommunications chapters</p> Signup and view all the answers

    Study Notes

    Introduction to Competition Policy

    • Competition policy is crucial for trade agreements as it promotes competitive markets and efficient allocation of resources.
    • Anticompetitive practices, such as price fixing, can increase prices by 49% on average.

    Role of Competition Policy in Trade Agreements

    • Effective competition policy frameworks can help achieve several objectives, including facilitating market entry, ensuring a level playing field, and discouraging anticompetitive behavior.
    • Three pillars of an effective competition framework:
      • Fostering pro-competition regulations and government interventions
      • Ensuring competitive neutrality in markets
      • Economy-wide enforcement of competition laws
    • Competition policy is being included in an increasing number of trade agreements, with over 200 preferential trade agreements (PTAs) including some reference to competition policy.

    Prior Studies on Competition Commitments in Trade Agreements

    • Studies by ECLAC, UNCTAD, and OECD have analyzed competition commitments in PTAs.
    • These studies have found that competition provisions in PTAs can benefit developing economies and help achieve deeper integration.

    Economy-Wide and Sector-Specific Competition Provisions in PTAs

    • Key provisions covered in a 2009 study include:
      • Overall objectives of the PTA
      • Horizontal principles of non-discrimination, transparency, and procedural fairness
      • Sector-specific competition provisions involving investment, services, government procurement, and intellectual property
      • The competition policy chapter of the agreement
    • Bilateral PTAs are more likely to include economy-wide and sector-specific competition provisions than multilateral agreements.

    Anticompetitive Provisions in PTAs

    • PTAs tend to focus on anticompetitive conduct rather than merger control or state-related market distortions.
    • Concerted practices and abuse of market dominance are the most common anticompetitive issues addressed in PTAs.
    • Bilateral PTAs are primarily concerned with regulating designated monopolies and state-owned enterprises (SOEs).### Multilateral Agreements and Competition Provisions
    • Multilateral agreements include more competition provisions related to services and government procurement sectors (16% and 12%, respectively)
    • Such agreements address market failures that national competition laws cannot, creating an incentive for implementing and locking in national competition policy regimes

    Methodology

    • The study reviews competition provisions in over 200 multilateral, regional, and bilateral trade agreements
    • Provisions are categorized into economy-wide and sector-specific obligations, and their enforceability is assessed

    Economy-Wide Obligations

    • Classified into four categories:
      • General objectives: inclusion of competition as an overall objective of the trade agreement
      • Horizontal principles: transparency, non-discrimination, and procedural fairness
      • Competition policy: objectives of the competition chapter, commitments for coordination, exchange of information, and technical assistance
      • General exceptions: exceptions to the agreement and specific exceptions related to national security and competition commitments

    Sector-Specific Obligations

    • Classified into three categories:
      • Prohibitions against rules that reinforce dominance or limit entry
      • Prohibitions against rules conducive to collusive outcomes or increasing the cost of competing
      • Prohibitions against discrimination or protection of vested interests

    Enforceability of Provisions

    • Levels of enforceability: non-binding, best effort, binding with no dispute settlement mechanism, binding with state-to-state dispute settlement, binding with private-state dispute settlement, and binding with both private-state and state-state dispute settlement
    • Weighted enforceability level (WEL) is calculated for each provision based on the level of enforceability

    The Growing Role of Competition in PTAs

    • Over 80% of PTAs studied have competition-related provisions
    • PTAs with competition-related provisions are not a recent phenomenon, but have increased in proportion to the increase in the number of PTAs over the decades
    • Bilateral PTAs with competition-related provisions are more common (59%) than multilateral agreements (41%)
    • East Asia and the Pacific (EAP), Europe and Central Asia (ECA), and Latin America and the Caribbean (LAC) account for 95% of bilateral PTAs
    • Countries from EAP and LAC are more likely to form PTAs with partners from other regions### Competition Policy in Trade Agreements
    • 239 PTAs include competition provisions, with 90.1% including at least one horizontal principle (transparency, non-discrimination, and procedural fairness) and 30% including all three.
    • Figure 17.7 shows the general objectives and horizontal principles of PTAs with or without competition provisions.

    National Competition Requirements

    • 123 PTAs require each party to adopt a competition law, and 74 require the creation of a competition authority.
    • Examples of PTAs with national competition requirements include:
      • EU-Canada (CETA) agreement, which requires consistent rules tackling anticompetitive conduct.
      • 43.2% of PTAs require the law to apply to all sectors and economic agents.
    • Exclusions from competition law are allowed in some PTAs, such as:
      • Chile-Australia, Canada-Colombia, and Trans-Pacific Strategic Economic Partnership (TPSEP) agreements.

    Institutional Obligations

    • 64% of PTAs that require a competition authority focus on the functionality of the institution rather than its independence or resources.
    • Examples of PTAs with institutional obligations include:
      • PTAs with the East African Community (EAC), which require both functionality and sufficient resources.
      • Association agreements with the EU, which require both independence and functionality.

    Promotion of Competition and Principles

    • Competition policy provisions range from acknowledging the importance of undistorted competition to concrete obligations to promote competition under principles of transparency, enhancement of economic efficiency, and cooperation.
    • Examples of PTAs with competition policy provisions include:
      • EU-Moldova, which acknowledges the importance of undistorted competition.
      • Hong Kong SAR, China-Chile, and Canada-Honduras, which include obligations to promote competition under transparency, enhancement of economic efficiency, and cooperation principles.

    Substantive Provisions Regulating Competition Policies

    • 114 PTAs include substantive commitments, and 44 PTAs refer to other international instruments.
    • Examples of PTAs with substantive provisions include:
      • PTAs with the EU, which regulate anticompetitive behavior, abuse of dominance, and mergers.
      • Agreements with MERCOSUR, which regulate harmonization of competition policy within the region.
      • Economic Community of West African States (ECOWAS), which regulates regional competition rules.

    PTAs Regulating Substantive Antitrust Obligations and Merger Control

    • 113 PTAs cover cartels and abuse of dominance, 28 include only merger control provisions, and 24 PTAs cover all three types of anticompetitive conduct.
    • Examples of PTAs with substantive antitrust obligations and merger control include:
      • EU agreements, which prohibit cartels, abuse of dominance, and anticompetitive mergers.
      • COMESA, which regulates anticompetitive practices and merger control.
      • CETA, which includes mutual recognition of competition definitions and application of competition policy to enterprises.

    Procedural Fairness Commitments

    • 80 PTAs include at least one procedural fairness provision, with 55% being bilateral PTAs.
    • Examples of PTAs with procedural fairness commitments include:
      • The proposed Trans-Pacific Partnership (TPP), which emphasizes procedural fairness.
      • KORUS and the EU proposal for TTIP, which also prioritize procedural fairness.

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