MONTREAL 13-14 MAY 1997

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OUTLINE OF PECC REPORT

Introduction
Aims of PECC Conference and Experts Roundtable
Issues and Tensions
Areas of Broad Agreement

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Introduction

PECC is pleased to have this opportunity to report on the aims and outcomes of its Montreal meetings on trade and competition policy.

PECC's work on the new international issue of competition policy and its relationship with trade and deregulation generally, has been developing over several years. The Montreal Conference and Experts Roundtable on Trade and Competition Policy proved to be a significant step in that development.

In my view, this was the PECC process at its best:

• first: there was considerable consultation within our network in the shaping of the programme

• secondly, there was wide representation of PECC member economies and a diverse group of participants covering a very wide range of interests, including business, relevant to the policy and related issues

• thirdly, there was a willingness to engage in frank and open dialogue in order to identify and open up very sensitive issues

• and, fourthly, a general desire to sharpen focus on the issues and tensions and to consider how PECC, in the spirit of cooperation and mutual respect, might make progress in addressing them.

As always, the involvement of officials from PECC member economies and from multilateral agencies was an integral and valued part of the process. But the modus operandi of PECC make it very clear that these officials are acting in their private capacity and that they do not commit their governments or agencies to any broad agreements or recommendations that may emerge from the PECC process.

However, officials - acting in their official capacity - might well support PEC's advocacy of a thoughtful evolutionary approach (gradualism and caution) in this complex area of competition policy.

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Aims of PECC Conference and Experts Roundtable

In planning the Montreal programme, PECC was mindful of APEC's continuing dialogue on Competition Policy and Deregulation and of APEC's encouragement for its members to consider developing non-binding principles for competition policy and laws within APEC.

PECC also assumed that ABAC and other business groups are likely to take a growing interest in international competition issues and in co-operating to address the questions of how and when more competitive markets within APEC might be achieved.

Our overall aim was therefore to make progress in reaching broad areas of agreement within PECC,

• as a contribution to shaping a coherent international competition policy framework for guiding future dialogue, and

• to assists PECC to define its on-going work priorities.

Business involvement will be particularly important in the next stage, as we work to

• define more clearly certain problem areas; and

• improve our understanding of the implications for business of a policy approach aimed at more competitive markets (whatever the mode of international supply of goods and services).

With this background, both of the Montreal meetings were structured around five areas of inquiry:

1. Objectives of Competition Policy

2. Introducing the Competition Policy Dimension to International Trade Negotiations

3. Anti-dumping, Other Trade Remedies and Competition Policy

4. Cross Border Issues in Competition Policy

5. Is competition Policy Ripe for International Rules and Disciplines?

In effect, participants were being invited to focus on the following themes:

• the objectives of competition policy, and the related issue of the scope of competition policy

• the different initiatives to promote competition that might be appropriate at national, bilateral, plurilateral or multilateral levels

• the interrelationship between competition policy and trade policy - in respect of their respective conceptual frameworks, objectives, implementation and effects; and

• sources of apparent tension between what might be termed a trade policy approach and a competition policy approach to the interface between trade and competition.

The Montreal Conference, as I suggested in my opening remarks there, was not about solutions. It was far too early for that. Rather, I suggested the challenges were threefold:

• first, to start shaping a coherent international competition policy framework, and a common understanding of the language of competition policy

• secondly, and obviously related, to define more clearly the main problem areas for business that might be addressed by competition policy, as well as the circumstances in which they are most likely to arise

• thirdly, to improve our understanding of how differences between our economies might impact on cooperation in this complex area. In particular, did we believe that a competition policy framework that is strongly focused on the promotion of competition and efficiency could accommodate the diversity of economic circumstances in the region, as well as the diversity of legal and cultural traditions?

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Issues and Tensions

A number of issues and tensions emerged. There was a particular tension between a competition policy approach and a trade policy approach to the notion of competition. This difference in approach was very evident

• in the debate over whether a perceived market access problem is treated primarily as a distortion to trade or a distortion to competition, i.e. as a trade policy issue or a competition policy issue

• in the related debate over whether a perceived barrier to market access would necessarily equate with an actual barrier to market entry and competition, and

• in the subsequent question of whether or not competition policy should simply be viewed as a tool of trade policy - with the aim of maximizing trade by pursuing traditional market access objectives; or as a complementary policy - with the aim of maximizing opportunities for competitive and efficient markets.

There was considerable support for the view that, where there is a conflict between a competition objective and non-efficiency objectives pursued through trade policy, the efficiency objective of competition policy should predominate.

There was also the underlying issue of whether or not competition policy objectives can help inform the trade policy debate. In particular, there was discussion as to whether or not competition standards are relevant to traditional trade policy instruments, notably anti-dumping.

Underlying this is the issue of whether international pricing, and price discrimination in particular, might more appropriately be treated as a competition issue rather than a trade issue.

It was noteworthy that strong concerns were expressed by many participants and these were not simply academic views ?that anti-dumping rules as typically applied are inconsistent with the promotion of competition in international markets.

The Conference also focused on another important distinction: viz between developed and developing economies. This mainly emerged in debate on the extent to which, and the speed with which, it would be feasible for some developing economies to adopt a competition/efficiency/economic welfare objective for policies affecting both business and government activities.

An issue that generated strong interest was the point at which an economy might consider it appropriate to introduce a competition law. Interestingly, this was debated in the context of both liberalizing developing economies, such as Indonesia, and very open economies such as Hong Kong.

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Areas of Broad Agreement

PECC is tending to characterize competition policy more broadly than anti-trust of competition law alone:

• It recognizes that there are many government policies, policy instruments, and different forms of business and government conduct, that have a profound influence on competition in globalizing markets.

• The Conference gave particular emphasis to the linkage between trade, investment and competition and to the special contribution that competition policy (including competition law) could make to liberalization in services sectors.

• Governments are clearly responsible for most of the existing barriers to market entry and competition. Domestic deregulation is very important in this context. Competition law and effective enforcement are also an important part of competition policy.

In advocating a thoughtful evolutionary approach to the development of competition policy in an international context, PECC recognizes

• the complex nature of the many issues �� in conceptual, policy, analytical, jurisdictional, economic, legal, political and practical terms

• the diverse characteristics of the economies involved and the range of interests and issues to be considered

• the different views at official level of competition policy objectives

• the need to more clearly define certain problem areas before specifying solutions to them, and

• that, currently, there is no consensus on the need for international competition rules.

But PECC also recognizes the desirability of

• continuing discussions on what international actions to promote competition might appropriately be pursued at a national, bilateral, plurilateral or multilateral level, and

• attempting to make progress in the shorter term on those matters where broad agreement appears to have been reached.

In other words, complexity and caution are not intended as a recipe for inaction; but, rather, as a warning that there is a need for

• greater clarity as to problem areas and their significance in the context of competition objectives, and

• greater clarity as to what are appropriate and realistic steps in the context of APEC's BOGOR commitments and in the context of specific circumstances in individual economies.

The more formal formulations of the broad areas of agreement at Montreal were as follows:

PECC broadly agrees that competition/efficiency/economic welfare (i.e. not just producer welfare) is the appropriate focus of competition policy.

While not denying the importance to individual economies of other policy objectives, PECC considers that these should be pursued through policy instruments other than competition policy.

PECC accepts the important distinction between protection of the competitive process and protection of competitors; and that competition policy is concerned with protection of the competitive process.

PECC believes that competition policy can help bring about more competitive and efficient markets in which business can operate. At the same time PECC recognizes that economy-specific issues (including institutional arrangements and capacity) will have an important influence on the extent to which, and the speed with which, effective competition amongst producers will be achieved.

During the discurrion of anti-dumping and competition policy, there was broad agreement that although improvements in the approach to anti-dumping were made in the Uruguay Round, the minimum requirements for anti-dumping laws should be studied to determine whether they effectively prevent such laws from being abused and whether they interface appropriately with free trade and competition objectives.

More particularly, there was broad agreement that such minimum requirements should provide for consideration of competition objectives in the rules of anti-dumping and in any undertakings with respect to compliance with anti-dumping laws.

PECC accepts that there may be a limited number of specific anti-competitive business practices that lend themselves to a common international approach.

There was consensus that, if competition laws are in place, voluntary cooperation and bilateral agreements should be encouraged to more effectively and efficiently pursue anti-competitive activities and diminish the need for unilateral, extra-territorial action.

Further, for those countries with or contemplating pre-merger notification regimes, there was agreement that efforts should be made to harmonize or converge filing forms to the extent possible.

PECC has resolved to work productively together to advance its thinking about what principles ?as distinct from rules and minimum standards - might guide the development of an international competition policy framework (including competition law) in the short, medium and long term; and it has resolved to present a first draft set of principles for discussion at its forthcoming Trade Policy Forum meeting in Santiago.

Finally, I can add with confidence that PECC is committed to continuing to build a coherent competition policy framework. It sees this as a way of reinforcing APEC's and WTO's efforts to liberalize trade and investment. At the same time there is some wariness about placing too much emphasis on defining policy categories; rather, there is a need to focus on the competition, efficiency and economic welfare objective itself, especially since this objective crosses traditional policy boundaries.