PECC COMMENTS ON COMPETITION POLICY AREA OF MAPA
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Presented at APEC Workshop on Competition Policy and Deregulation
Quebec City 18-19 May 1997
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Review of Individual Action Plans
PECC has been invited by the Chair of the APEC Workshop to make some overall observations on the Competition Policy area of the IAPs, based on the work which PECC's Trade Policy Forum has conducted on competition policy and on the themes and conclusions which are beginning to emerge from that work. These observations are grouped under four headings:
The fact that the 18 IAPs show wide variation in the Competition Policy area is no surprise. The Individual Action Plan process is designed to reveal such variation arising from differences in level of economic development; in degree of openness and market orientation; and in other circumstances which characterize member economies.
But where variation reflects a lack of consensus over the objectives and scope of competition policy, and the role which competition policy can play in promoting APEC's overall objectives of trade and investment liberalization, this is more problematic. The present lack of consensus that exists in this regard greatly complicates the task of suggesting improvements to the Individual Action Plans.
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Objectives of Competition Policy
There are references in several of the Individual Action Plans to the ultimate goal of more efficient markets. But there are more frequent references to free and fair competition and trade, as well as unethical trade; and there are several references to market concentration as such.
Among the strongest guidelines emerging from PECC's work to date, is that the appropriate objective of competition policy is the promotion of increased efficiency and economic welfare (i.e. not just producer welfare). The basis of competition policy is that competition, and the operation of competitive markets, is the preferred means for pursuing this efficiency and welfare objective; and, as PECC has said, it is the competitive process rather than the position of individual competitors (large or small) that is the appropriate focus. Objectives other than efficiency and economic welfare should therefore be pursued through policies other than competition policy, i.e. through policies that are better targeted to those non-efficiency objectives.
The IAPs show that APEC economies are a considerable distance from reaching a consensus around this position.
This point is particularly important when considering the contribution which competition policy can make to furthering APEC's overall goals of trade and investment liberalization. Emphasis on fairness, and protection to producers, has generally not been helpful to the cause of trade liberalization.
PECC has suggested that a major step forward would be wider acceptance in the region that enhancement of efficiency and economic welfare �� through the promotion of effective competition �� is the common goal of competition policy and trade policy as well as investment policy.
The present lack of consensus around the objectives of competition policy underlines the importance of the CAP suggestion that the APEC economies should consider developing non-binding principles on competition policies and laws in APEC.
Acceptance of a set of principles for guiding the development of competition policy in an international context would greatly assist progress through the Individual Action Plans. PECC has undertaken to make an early contribution in this area by formulating such a set of guiding principles. These will become available for consideration by APEC governments.
One matter which could be considered for immediate inclusion in the IAPs is an advocacy and monitoring role for national competition agencies in relation to all government policy initiatives with significant implications for competition.
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The Role of Competition Law
One approach found in the IAPs is to define competition policy exclusively in terms of antitrust. On the other hand, several APEC economies do not presently have competition laws; and, in some of those cases, there are no present plans to introduce such laws.
Among APEC economies without competition laws, Hong Kong and Singapore predominantly rely on free trade and generally open markets to ensure competition �� albeit with the support of some industry �� specific regulation of natural monopolies. However, PECC believes that free trade does not necessarily eliminate the possibility of wider private (or government) actions which interfere with the competitive process.
For some other APEC economies, there is a sequencing issue: what priority should be given to introducing competition law relative to other measures aimed at liberalization and deregulation?
For those economies with competition laws at present, some common elements emerge from the IAPs:
Again, reaching consensus on principles for guiding competition policy development in the region may show the way for significant progress towards a common understanding of the place of competition law within a competition policy framework.
In the meantime, it may be possible to progress agreement in a few areas of competition law such as:
Where agreement can be reached on such matters it could be useful if each economy were to provide detail in subsequent IAPs on how such issues are being handled.
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Transparency
Transparency in competition and regulatory regimes plays an important part in creating stability and predictability in the legal and policy environment within which business operates. It also assists business and others to understand processes that affect them; and helps build confidence that regulations are not being misused or under or over-enforced.
The IAPs indicate considerable variation in the degree of transparency within the Competition Policy area. Scope exists for immediate improvement.
Consistent with transparency objectives, the IAPs could usefully include in the areas of both Competition Policy and Deregulation:
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The Competition Dimension of the IAPs
APEC's Competition Policy Workshops have emphasized the important links between competition policy and deregulation. Put another way, they have been focusing on a competition �� based approach to regulation and an entry barrier approach to competition. However, the IAPs themselves tend to place more emphasis on linkages between deregulation and trade/market access. This approach in the IAPs reinforces concerns that traditional views on trade and market access, which give insufficient weight to competition and efficiency considerations, are being given undue prominence.
The issue is linked to questions of both the objectives and the scope of competition policy. PECC tends to favour a broad interpretation of competition policy, embracing all government policies which impact on competition (and efficiency) in markets. This includes competition law, together with aspects not only of deregulation and trade liberalization, but also of other policies such as those affecting Government Procurement and Intellectual Property. In effect therefore, competition becomes a unifying theme for the IAPs. The IAPs could therefore become a vehicle for fostering the notion of a "culture of competition".
Consideration could perhaps be given to finding ways in which this unifying role of competition �� let us call it "the competition dimension" �� could be reflected throughout the IAPs.