Lecture to be delivered by Guillermo Valles, director of international trade in Goods and services and commodities of UNCTAD at the Competition Policy Research Center of

JFTC, Tokyo - Japan:

Topic: "Development and Interaction of Trade Policy and Competition Policy in

UNCTAD "

Mr Chairman

Excelencies

Ladies and Gentlemen;

In this important event organized by JFTC I would like to address the interface between

trade and competition policies and its linkage with development.

I will like to structure my lecture around three topics.

1 The theoretical relationship between trade policy and competition policy.

2. A brief historical perspective of the multilateral system and how it treated these two

policy areas.

3. Some reflections on the role of UNCTAD and international cooperation in the

interaction of these two policy areas.

Let me start pointing to the fact that both policy areas have the same basic objectives:

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the attainment of economic efficiency in resource utilization and the advancement of

overall economic welfare.

On the other hand, though trade and competition policies have these same basic

objectives, the instruments to achieve those purposes are quite different in several

ways.

Trade policy makers and administrators try to obtain cooperative solutions through

international negotiations, to reduce the adverse effects on international trade of

unilaterally imposed trade restraints by individual countries or groups of countries. On

the other hand competition policy enforcers try to prevent firms under their own national

jurisdictions from behaving collectively or collusively, if such behaviour is likely to

jeopardize the economic efficiency goal.

Depending on their domestic legislations, competition policy makers may have quite

powerful policy instruments at their disposal, in the form of per se prohibitions or

interventions on a rule of reason basis, against market behaviour and practices which

can be considered detrimental to economic welfare. The trade policy enforcers find

themselves in a quite different situation in this respect, with much weaker policy

instruments and typically based on some form of international consensus. In a

phrase trade policy has administrators, competition policy has enforcers. Trade policy

require some degree of cooperation from their counter-parts. Needless to say that, in

this respect, for developing countries and smaller economies the asymmetry of power

counts and counts a lot, to be able to engage bigger partners.

But not only the subjects and policy instruments are different, but also the performance

criteria for evaluating the outcome of the use of policy instruments are also somewhat

different. Competition policy in general emphasizes consumer interests over producer

interests, to the effect that efficiency gains should be passed on to consumers in the

form of lower prices, better quality, improved accessibility to products and services etc.

In fact, many countries have for this reason, competition and consumer policies

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integrated under the same legal and/or institutional umbrella.

On the contrary, producer interests tend to be considered more favourably under trade

policy than competition policy in most countries. As an example we can remember that

in fact, national interest (or consumers interests) tests are not mandatory in all anti-

dumping regimes and in some countries the interest of the competing national

producers is what counts for the application of anti-dumping measures. Injury to

domestic industry prevails over eventual benefits for consumers and intermediate users.

So in concluding. both regimes have similarities and interlinkages, but also differences.

That been said, let´s now turn into what is the relationship between both policy areas. In

this sense allow me to start by using a phrase I frequently quote to illustrate my point;

“there is no efficient trade policy if it is not accompanied by equally efficient competition policy”. My point is that, trade and competition policies although

necessary, they are insufficient conditions to bring about economic development and

growth. They need each other, and dialogue and cooperation between policy makers in

these two areas is crucial. This often does not happen in many countries, due to

different reasons. In hindsight, after over decades of trade liberalization, many

developing countries were negated the benefits of open trade and improvement in

competitiveness just because their lack of competition policy. The wrong sequencing of

opening up first and having strong competition policies only decades after, has not work

in their favour. Moreover, many of the criticism now being brought to international trade

and trade opening is due to the fact of lack of good competition policies.

Now, coming from the area of trade policy, I can tell you with certainty that there is

some arrogance in certain quarters that led people to think that trade opening can be a

substitute for competition policy.

In my view, there are at least three good reasons why trade liberalization cannot

substitute competition policy.

First, a large number of markets (e.g., non-tradeables or tradeables with high

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transportation costs) remain local in nature, and are, therefore, not subject to effective

disciplines from imports.

Secondly, even with regards to tradeable goods, and where tariffs have been removed

or greatly reduced, competition can be affected by a number of government or other

measures including regulations, standards and licensing requirements. Indeed, in

UNCTAD we are the focal point in the UN for the classification and data collection of

Non-Tariff-Measures and we have seen these only growing and diversifying in number

and impact over the last decade. The number of NTM by tariff line, the frequency or

trade coverage and the trade restrictiveness of NTMs. is only increasing in the last

decade. A similar thing we could say about private standards.

Finally, even in the absence of the latter type of measures, the ability of imports to

discipline the exercise of market power, can be affected by a wide range of anti-

competitive practices of firms. For example, firms (including incumbent domestic

suppliers and/or foreign-based suppliers) may divide up markets through price-fixing or

geographic market-sharing cartel agreements, or vertical market restraints may be

employed by incumbents as a device for deterring imports.

So in concluding this point, Neither trade nor competition policy is likely to be fully successful in the absence of the other.

Ladies and gentlemen, Let me stress a point I personally believe is crucial in these historical times we are

living.

Although current political rhetoric is having a very critical view of trade as an instrument

of economic welfare, we should exercise extreme caution with reactionary views against

the benefits of international trade. We have seen this picture in 1930 and we know the

extremely negative consequences it could bring. By actions and reactions. Raising

tariffs and obstacles to trade, will only call for others to react and work in the same

destructive direction.

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Indeed, there are compelling reasons behind the assumption that openness to trade

and sound competition policies are good for economic growth and development:

(1) Openness to imports increases efficiency and reduces costs for industry.

Exposure to foreign competition forces domestic industries to become more

efficient and competitive. It also aids this process by reducing the cost of key

foreign inputs and enabling access to cost saving and quality enhancing new

technologies. Of course policy makers should be aware and able to support the

necessary industrial (and therefore social) readjustment processes, but we can

not negate the cumulative welfare benefits of specialization and comparative

advantages. That´s what brought millions of people out of poverty in the last

decades.

(2) Openness to imports reduces costs for consumers. In the end it is always

consumers who pay the price of protectionism through less choice, lower quality

goods and services and higher prices. Reducing trade barriers brings greater

variety of products and quality, but also lower prices. This welfare effect for

consumers is often the strongest element in the impact of liberalization,

particularly for highly protected industries, like agriculture, food production and

clothing.

(3) Openness to imports and active competition policies allows regional integration schemes to flourish and to create more resilient economies. One of the reasons for which the link between trade and competition policies is

important, from an economic integration point of view, is that within a regional

economic integration convergence and cooperation between competition

authorities allows the fighting against transnational Infringements, which could be

difficult otherwise. This is even more important in certain industries that due to

their market characteristics, and specific regulations, are likely to be more

exposed to antitrust practices. For instance, in young competition regimes,

attention must be drawn to industries such as the cement, aeronautic, energy,

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and telecommunications, pharmaceutical, financial, that often have transitioned

from “local monopolies” to regional and even "global oligopolies”. This makes

them more likely to engage into anti-competitive practices at a regional level.

(4) Given that most flows of direct foreign investment occur through international

mergers, it is important to analyze such phenomenon from a competition and a

trade policy perspective. The increase of these mergers is directly related to

competition policy. International mergers may pose a significant threat to

competition in developing and emerging markets. In a globalized economy,

countries in the region must be able to protect competition through measures

compatible with their long-term development strategy Given that economic

liberalization contributes to increase the degree of competition by allowing the

entrance of foreign firms to compete with local producers, trade policy may be

considered as a complement to competition policy.

Let me turn to my second point the historical perspective.

Although it´s little known or recognized this common view of trade and competition

policy working together, has been historically at the heart of the United Nations work. In

1946 in the aftermath of the Second World War and as our founding fathers were

negotiating the blueprint of the new world economic order, not only an agreement on the

reduction of tariffs and NTMs was foreseen but also a specific chapter dedicated to

competition policy. Both had to be together from the outset.

Indeed if we look at our history, Restrictive Business Practices (or what we now refer to

as Competition Law and Policy) have been at the core business of the UN Economic

and Social Council (ECOSOC). After the Bretton Woods institutions were founded (i.e.

the World Bank and the International Monetary Fund) there was a call for a UN

Conference on Trade and Employment, that was meant to establish the charter of an

International Trade Organization. The founding fathers considered essential that, and I

quote “…cooperative economic measures be supplemented by further international

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measures dealing directly with trade barriers and discriminations which stood in the

ways of an extension of multilateral trade… 1“ [end of quote].

As the rules for the reduction of tariffs and non-tariff matters were taking place, another

parallel committee specialized on RBP was established in October 1946. (It was

committee III and by the way it was chaired by Julio Lacarte Muró, who just recently

passed away and to which I have the honor of remembering since he was the architect,

many years after, of the Dispute Settlement mechanism of WTO and the first president

of the Appellate Body of the WTO, and also my ambassador here in Tokyo in 1980,

when I was a young diplomat in this great country).

Based on the second competition act in the world, the so named Sherman Act of 1890,

the US delegation prepared the initial chapter on Restrictive Business Practices

highlighting the reasons as to why a chapter on RBPs should be included in a World

Trade Charter of 1946. They said and I quote: “…goods can move from one country into

another, surmounting the tariff wall, if they pay the duty, but when you have a cartel

agreement between enterprises in two countries whereby each of them agrees as to the

part of the world’s territory that he is so to share and the part that the other one is to

have, there you have a clear agreement of division of markets, the goods do not move

at all. You have not a moderate tariff or a high tariff, you have an absolute embargo...”.2

What happened afterwards with the (non) ratification of Havana Charter is well known,

the international trade organization had to wait until 1995 to be established and for

almost 50 years we had just the GATT with rules on tariffs and non tariffs measures.

With rules on trade remedies, like anti-dumpin and safeguards, but no rules on

competition policy, nor any rules on labor and employment, as originally envisaged.

1 Report of the 1st session of the Preparatory Committee of the UN Conference on Trade and Employment (London 15 Oct to 26 Nov 1946) E/PC/T/33. London, October 19462 The US Delegation was represented by Mr. Wilcox. His opening statement was recorded by the Verbatim Report of the Second Meeting of Committee III - Held in Committee Room 4, Church House, Westminster, S.W.1 on Wednesday, October 23 1946 1946-10-23. at 3 p.m. E/PC/T/C.III/PV/2 https://www.wto.org/gatt_docs/English/SULPDF/90220057.pdf

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So historically this is where the fracture between these two policy areas, at the

multilateral level, started.

But chapter V of that draft Charter gave the mandate to ECOSOC for the establishment

of an Ad-hoc UN Committee on RBPs. This committee issued a number of reports over

the period between 1950 -1960 and after the establishment of UNCTAD in 1964, the

work on RBPs continued and reinvigorated due to UNCTAD Ministerial Conferences, in

particular in Chile (1972) and in Nairobi (1976).

In 1980, UN members adopted the Set of Multilaterally Agreed Equitable Principles and

Rules for the Control of Restrictive Business Practices (resolution 35/63 of the General

Assembly of 5 December 1980), usually referred to as the "UNITED NATIONS SET OF

PRINCIPLES AND RULES ON COMPETITION".

Let me emphasize that until today this is the only multilateral instrument on competition

policy which still remains valid and has been an inspiration to many developing

countries and countries in transition, to adopt competition law and policies.

Let me recall to all of you its main objectives: (and I quote)

i) to ensure that restrictive business practices do not impede or negate the

realization of benefits that should arise from the liberalization of tariff and non-tariff

barriers affecting world trade, ….;

ii) To attain greater efficiency in international trade and development,…, and

iii) To protect and promote (…) the interests of consumers in both developed and

developing countries.

[end of quote]

Since we have an important representation of developing countries in this room I would

like to stress that the UN Set on Competition recognizes the development dimension of

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competition law and policy as it has in its provisions a "preferential or differential

treatment" to countries that need special treatment such as the following one.

(and I quote)

" In order to ensure the equitable application of the Set of Principles and Rules,

States, particularly developed countries, should take into account in their control

of restrictive business practices the development, financial and trade needs of

developing countries, in particular of the least developed countries, for the

purposes especially of developing countries in:

(a) Promoting the establishment or development of domestic industries and the

economic development of other sectors of the economy, and

(b) Encouraging their economic development through regional or global

arrangements among developing countries.

(end of quote)

The UN SET also provides a framework for international cooperation and exchange of

best practices. The content of the Set is divided as follows:

A. Objectives

B. Definitions and scope and application

C. Multilaterally agreed equitable principles for the control of restrictive

business practices

D. Principles and rules for enterprises, including transnational corporations

E. Principles and rules for States at national, regional and subregional levels

F. International measures G. International institutional machinery

From the contents, I would like to highlight the particular section on "international

measures" regarding voluntary consultations. A clear mandate to implement Section F

of the UN Set emerged in 2008 and has been again revived at the latest

Intergovernmental Group of Experts meeting on Competition law and policy in 2016.

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Let me quote the provision at stake:

"4. Consultations:

(a) Where a State, particularly of a developing country, believes that a

consultation with another State or States is appropriate in regard to an issue

concerning control of restrictive business practices, it may request a consultation

with those States with a view to finding a mutually acceptable solution. When a

consultation is to be held, the States involved may request the Secretary-General

of UNCTAD to provide mutually agreed conference facilities for such a

consultation;

(b) States should accord full consideration to requests for consultations and, up

on agreement as to the subject of and the procedures for such a consultation, the

consultation should take place at an appropriate time;

(c) If the States involved so agree, a joint report on the consultations and their

results should be prepared by the States involved and, if they so wish, with the

assistance of the UNCTAD secretariat, and be made available to the Secretary-

General of UNCTAD for inclusion in the annual report on restrictive business

practices

(end of quote)

As you can see, this section F is critical to the development of international or regional

schemes whereby two competition authorities wish to cooperate fully when it comes to

cross-border investigation against international cartelization.

Currently, the UNCTAD Secretariat is working on a research that will address this issue

to tackle anti-competitive practices at the international level that will be discussed in the

2017 IGE meeting as it was agreed last year. (Comment on Russia´s proposal and the

BRICS interest)

Finally, the UN Set has served the international development of competition rules since

1980 as it recommends countries to adopt and fully implement competition legislation,

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being a non-binding voluntary code and soft-law UN instrument. This UN Set

framework has also provided vital technical assistance and capacity-building for

interested member States so that they are better equipped to use competition law and

policy for development. And the UN Set has given life to the annual competition

meetings (the so-called Intergovernmental Group of Experts (IGE) on Competition Law

and Policy) that meets to monitor the application and implementation of the UN set.

It is for these reasons that last year 2016 marked the 70 th anniversary of continuous UN

work on Competition and an exhibition was launched at the UNCTAD 14 Ministerial

Conference on July in Nairobi, which was also presented at the 15th. UNCTAD

Intergovernmental Group of Experts meeting on Competition Law and Policy on October

2016 in Geneva.

Hence, one can hardly understand why Competition policy was considered a "new

topic" within the World Trade Organization discussions since 1996, as not only

Competition policy has been an important subject of continuous work under the UN

framework, as it has also been intertwined with Trade policy since the Havana Charter

discussions.

But international organizations sometimes work with lack of coherence, and that might

be a reflection of lack of internal coherence at national level.

Let me drill a bit on what was started and later interrupted in the WTO regarding

competition policy.

In the World Trade Organization, competition policy was one of the issues that started

to be discussed in 1996, just one year after the creation of the WTO. It was one of the

so called Singapore issues, together with government procurement, investment policy,

and trade facilitation.

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As you may recall, 5 years later, in 2001, the Doha Declaration pursuant to the WTO

Ministerial Conference specifically recognized the case for a multilateral framework to

enhance the contribution of competition policy to international trade and development.

For the first time, since 1947, the GATT-WTO multilateral trading system was trying to

reconnect trade and competition policies, but no specific mentioning of UNCTAD´s UN

Set was made.

Paragraph 25 of the Doha Declaration mandated the Working Group on the Interaction

between Trade and Competition policy (the “WTO Working Group”) to focus on the

clarification of:

- core principles, including transparency, non-discrimination and procedural

fairness;

- provisions on hard-core cartels;

- modalities for voluntary co-operation; and

- support for progressive reinforcement of competition institutions in developing

countries through capacity building.

At that time, a possible WTO framework for rules was supposed to be based on core

principles rather than specific provisions.

The core principles of the proposed framework contained minimum standards but

comprised basic concepts upon which there could be broad agreement on for example

the following:

- a commitment to adopt domestically a competition law containing at minimum,

provisions on the prohibition of hard-core cartels and to the extent necessary other

certain general types of practices on which there is underlying consensus;

- the creation of effective enforcement institutions; and

- agreement on acceptable forms of co-operation.

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An approach based on core principles meant a harmonisation of domestic competition

laws but with the necessary flexibility to accommodate differences in national legal

systems and institutional capacities.

Any WTO multilateral agreement should have had the necessary flexibility with regard

to exemptions from the application of competition law and provided for transitional

periods where this is required for the introduction of domestic legislation or the

strengthening of domestic institutions.

Now, as you know, the WTO members decided to withdraw from the negotiations of

such agreement by 2003 at the Cancun Ministerial Conference. Only 7 years after

starting its work and only 3 years after formally starting the negotiations. One should

itself why. Why did this happen? What are the lessons? One of the reasons why WTO

member States decided to stop the negotiations for a multilateral agreement on

Competition was the need first to individually and voluntarily enact and enforce

competition laws at the national level.

Was it all lost? No not at all. On the contrary as we will see in a minute, although the

negotiations were stopped in WTO, the UNCTAD continued its work to support

countries improving their legislation, its policies, its enforcement, and competition

advocacy.

Instead of the formal and hard-rule making process of WTO, we in UNCTAD continue to

undertake the development of soft, bottom-up cooperation. In a minute I will specifically

refer to it and to our methodology, but what I want to point out is two things: a) The

great improvement in the number of countries having policies and legislation on

competition and the great number of preferential trade agreements, with competition

policy clauses. These are what I believe good examples of a bottom-up, soft approach,

as potential roads for a multilateral agreement one day.

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a) The adoption of competition law throughout the world has been quite impressive

since the 1970s, where only 9 jurisdictions had enacted competition legislation.

In the 1990s 23 jurisdictions had a competition law, but by 2015 the figure had

reached over 150 jurisdictions. This confirms, along with trade liberalization,

competition policy is consensually recognized to promote economic growth and

to contribute to economic development and consumer welfare.

b) Let´s see what has been happening with the Regional Trade Agreements. As of

1st July 2016, some 635 notifications of RTAs (counting goods, services and

accessions separately) were received by the GATT/WTO. Of these 635 RTAs,

423 are in force. A WTO study in 2011 showed, that beyond the reduction or

elimination of tariffs, those agreements include disciplines in 52 different policy

areas, including competition policy. These cover areas already existing in WTO,

such as Tariffs and NTM, and new areas where WTO has no rules, such as

taxation, investments, anti-corruption,etc. And the main policy areas frequently

covered by these agreements are competition policy, intellectual property rights,

investment and movement of capital. Competition policy was included in most, if

not all these RTAs, and they included enforceable rules in 70% of the cases.

These two facts (i.e. the great number of developing countries now having competition

policies and laws and the great number of RTAs including competition rules) again

illustrates the recognized importance of this issue and the link between trade policy and

competition policy. In UNCTAD we believe this was the effort of many and from different

organizations, but indeed one important contribution comes from the UN, who has

helped to prepare the field, to till the ground, for enhanced international cooperation. So

allow me to move to the next chapter, what and how this has been done.

Ladies and Gentlemen, With that purpose in mind, let us briefly review UNCTAD work to use and promote the

UN Set with our member countries.

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As I mentioned, UNCTAD is the focal point within the United Nations system for

competition law and policy, and consumer protection issues, with special focus on the

needs of developing countries and economies in transition in this area.

The objective of UNCTAD's work on competition and consumer policies is to ensure that

partner countries enjoy the benefits of increased competition, open and contestable

markets, private sector investment in key sectors and ultimately that consumers achieve

improved welfare.

The Competition and Consumer Policies Programme services the Intergovernmental

Group of Experts (IGE) on Competition Law and Policy and the Intergovernmental

Group of Experts (IGE) on Consumer protection law and policy annually, undertakes

competition policy peer reviews, publishes the UNCTAD Model law on competition and

the Handbook on competition legislation and implements sector specific and economy-

wide competition and consumer policies reforms that create a level playing field

amongst companies and consumers, increasing the effectiveness of antitrust and

consumer protection policies.

Our work is essentially organized in 3 pillars: Consensus Building, Research and

Analysis, and Technical Assistance.

(1) Consensus building is carried out through the organization of an

Intergovernmental Group of Experts (IGE) on Competition Law and Policy that

meets every year to discuss ways of improving worldwide cooperation on

competition policy implementation and enhancing convergence through dialogue.

Rather than exercising any rule-making function, the IGE conducts its work

through: Interactive debates; Voluntary Peer Reviews of Competition Law and

Policy; Round tables on specialized competition topics; and Reviews of technical

assistance and capacity-building activities.

When a consensus on recommendations is reached, individual member

countries decide whether and how to implement the recommendations (i.e.

through unilateral, bilateral or multilateral arrangements, as appropriate).

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(2) Research and Analysis, recently enhanced thanks to the contribution of the

Research Partnership Platform (RPP) established in 2010. UNCTAD RPP is an

initiative that aims at contributing to the development of best practices in the

formulation and effective enforcement of competition and consumer protection

laws and policies so as to promote development.

The RPP brings together research institutions, universities, competition

authorities, business and civil society.

It provides a platform where they can undertake joint research and other

activities with UNCTAD; disseminate the results of their own work; and exchange

ideas on the issues and challenges in the area of competition and consumer

protection, particularly those faced by developing countries and economies in

transition. The role of UNCTAD is to facilitate and provide guidance on the

research and analysis, as well as other activities, to be undertaken by members

of the RPP. UNCTAD will benefit from the research findings when responding to

the challenges faced by developing countries through its technical assistance

and capacity building activities. Currently, UNCTAD RPP hosts over sixty-five

institutions consisting of research institutes, universities, non-governmental

organizations, corporate affiliates and competition agencies.

(3) Technical Assistance and Capacity building to developing countries and

economies in transition are there to seek to formulate and implement competition

law and policy. The objective of our capacity-building and technical cooperation

activities is to assist developing countries and economies in transition in the

following areas:

a. Formulating new or strengthening existing competition legislation, which

fits their specific legal and economic structure and can best address their

development needs

b. Establishing new or strengthening existing competition institutions

c. Capacity-building for better enforcement of competition law

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d. Promoting a competition culture through competition advocacy activities

e. Conducting Voluntary Peer Reviews of Competition Law and Policy.

f.

To achieve these objectives, UNCTAD works closely with competition authorities in

developed countries, development partners, the Organization for Economic Co-

operation and Development (OECD), the International Competition Network (ICN) and

competition experts. And the UNCTAD Secretariat is most willing to cooperate

bilaterally and regionally with other interested parties, such as with the ASEAN

Secretariat in providing capacity building and technical assistance to developing

countries.

Ladies and gentlemen Let us now review the impact of our work in the different regions worldwide to illustrate

the competition law enforcement potential but also to draw your attention to the

challenge of international cooperation.

The experiences in Latin America and the Caribbean, Africa, the Middle East and North

Africa MENA countires and the CIS regions are examples where UNCTAD has been

actively assisting the respective young national competition agencies that are part of

these regional groupings.

First, through COMPAL (UN Competition and Consumer Policies for All), UNCTAD has

assisted Latin America and the Caribbean; regional groupings such as MERCOSUR,

Andean Community of Nations, CARICOM and the so-called “Central American Group

of Competition” have attempted to implement regional competition laws to fight against

cross-border anticompetitive practices.

In some cases, such as the Andean Community and CARICOM, there is a

supranational competition authority that could deal with cross-border cartels and abuse

of dominant position at the regional level. Unfortunately, the enforcement of these two

regional competition laws has not been optimal.

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Up to date, regional cartels in the airline sector and the construction and liquid oxygen

markets still remain untouched by regional supranational authorities. For instance,

during a period of 10 years (2001-2010) seven national competition authorities in Latin

America investigated and took enforcement action in respect of bid rigging cases in the

regional liquid oxygen market. No action was taken at the regional level, not even

coordination between the national competition authorities.

Another example was the airline companies' LAN-TAM merger that had clearly regional

implications in the South American markets but was only assessed, separately, by the

national authorities of Brazil and Chile.

Second, in Africa, notably the cases of the West African Economic and Monetary Union

(WAEMU) as a sub-region of the Economic Community of West African States

(ECOWAS); and the Common Market for Eastern and Southern Africa (COMESA), the

largest economic integration group in Africa. Both are important regional economic

integrations whereby regional competition policy is currently in place, but with very

limited enforcement due to different reasons related to the design of the competition

policy only at the regional level (WAEMU) and other endogenous factors (COMESA).

In the latter, there are cross-border conducts that affected the structure of the regional

market and therefore justified a robust enforcement of regional competition rules, such

as the Coca-Cola Company/Cadbury-Schweppes Merger, the Global Rothmans of Pall

Mall/British American Tobacco merger and the takeover by Pretoria Portland Cement of

South Africa and Lafarge of France of various cement companies in the COMESA

region. No action was taken at the regional level.

These examples show that if the enactment of competition laws is important, the

effective enforcement of the competition rules is of the utmost relevance at national and

regional levels as the experience of cooperation between competition authorities.

UNCTAD long-standing research on the issue of Trade and Competition relates to the

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work on Competition Related-Provisions (CRPs) in Regional Trade Agreements and the

lack of implementation of these provisions.

In this regard, UNCTAD has argued that the reasons for which those agreements were

not implemented so far in some regional groupings are as follows:

• CRPs in RTAs were objected as part of market access and liberalization;

• An agreement takes long time to negotiate (3-5 years), but the content may

be limited to technical assistance rather than substantive cooperation in case-

specifics (ACP agreements);

• Asymmetry in the level of institutions, enforcement and capacity to enforce

the law;

• Lack of coherence between North and South due to different legal systems,

and governance issues.

Concerning South-South RTAs, although there are official intergovernmental groups

launched under treaties/agreements such as COMESA; SADC, West Africa (WAEMU),

ECOWAS (Central Africa), CEMAC, EAC (East-African Community), Euro Asia (Russia,

Belarus and Kazakhstan), CIS (Armenia, Ukraine, etc.); ASEAN working Group on

Competition, MERCOSUR, Andean Community of Nations, CARICOM, SIECA, these

agreements have not been implemented for fundamental reasons as the following:

• Lack of capacity (staff and resources);

• Lack of independent agencies and relationship with other government bodies

(lack of clarity on the roles and functions);

• Albeit convergence on substantive laws, procedural laws are different,

divergent and incompatible (i.e. lack of inter-operability);

• Lack of mutual trust in the legal system and governance issues;

• Lack of coordination between competition authorities on the one hand and

trade negotiators on the other. However, in the Mexican case there is a

detailed competition chapter which is as comprehensive as an Agency-to-

Agency Agreement (ATA);

• Most competition issues were marginal in integration agreements;

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• Problems of coherence between industrial, trade, investment policies and

concern between benefit and costs (e.g. case of UEMOA), compounded by

the existence of LDCs within certain groups - uneven level of development

within RTA partners and bilateral agreements - make it impossible to

implement competition policies in objective criteria. The reason for this, is that

the costs are immediate and the benefits are long term (SADC - South Africa

next to Lesotho, Swaziland).

The conclusion is that countries do indeed need to enact, review and improve their

national competition laws to fully reap the benefits of trade liberalization and of market

openness and should not rely exclusively on regional integration frameworks to develop

competition law and policy, notwithstanding the fact that cooperation between

competition authorities, especially in the competition provisions enforcement, is greatly

facilitated within regional trade agreements. Also, the existing convergence of

competition laws across the world coexists with considerable differences between

jurisdictions, thereby not interfering with the need for closer cooperation between

competition authorities in order to allow them to effectively tackle cross-border anti-

competitive practices and to deal with international mergers effects.

The link between trade and competition policies is again obvious as the role of

UNCTAD in providing a setting for intergovernmental consultations and promoting

international cooperation in the competition field, working closely with other international

and regional organizations.

Ladies and Gentlemen, Having addressed our work in the area of competition policy let me now to

UNCTAD's most important current work on trade AND competition at the regional level:

the WORKING GROUP on Trade and Competition for the Latin American and the

Caribbean Region (WGTC), in association with the Latin American Integration System

(SELA).

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Since 2009, we have seen a number of great achievements of the Working Group on

Trade and Competition, the only regional setting in the world that deals with the issue of

trade and competition after the 2004 drop of WTO negotiations on the interface between

trade and competition and deactivation of the WTO Working Group on Trade and

Competition during that year as mentioned earlier.

Indeed, on 19 October 2010, SELA’s Council endorsed the proposal and created the

WGTC. Up to date, seven Regional Seminars on Trade and Competition have been

held in Venezuela (2009), Brazil (2010), Colombia (2011), Peru (2012), Argentina

(2013), Dominican Republic (2014) and Ecuador (2015). An eighth meeting took place

in November 2016 in Honduras.

These events have been organized jointly by SELA Permanent Secretariat and

UNCTAD, and with the support of the host countries in each year at the Ministerial level.

Two Secretary Generals of UNCTAD also attended the annual meetings of the Working

Group, Dr. Supachai Panitchpadki (Former WTO Director General) in April 2009 and the

current Secretary General of UNCTAD, Dr. Mukhisa Kituyi (Former Trade Minister of

Kenya) in November 2014.

The mandate of the WGTC3 has been to establish contact and dialogue between trade

and competition officials of SELA countries (among which, COMPAL countries) so as to

first, to agree on collective actions needed to fight cross-border anti-competitive

business practices; second, to promote studies at regional level on issues of interest to

trade and competition authorities; and third, to share information and experiences as

regards these two policy areas.

3 [Only for reference: the WGTC operates through its sub-working groups so as to engage member countries into the substantive work. In this regard, the WGTC has the following sub-working groups: (1) Sub-working No. 1: Enforcement of trade and competition rules, capacity building and advocacy (coordinated by México); (2) Sub-working No.2: Legal instruments involving competition and bilateral, regional and multilateral trade (Coordinated by Chile); Sub-working No.3: Consultations on competition and trade policies (Coordinated by Jamaica); Sub-working No. 4: Research and sector studies (Coordinated by Panama). Some of the outputs prepared by the Subgroups are: "Coherence between Trade and Competition Policies"; and "Competition and Trade issues in the Health Sector]

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Members of the WGTC have ratified continuously the importance of coordinating trade

and competition policies by strengthening cooperation, improving mutual understanding

and communication among authorities, thus increasing the exchange of best practices.

In addition, cooperation should also focus on conducting joint studies as well as

undertaking joint action to determine the impact of non-tariff regulations, such as the

additional burdens on imports, the technical and sanitary barriers and the quantitative

restrictions affecting free competition.

In the recent meetings in the Dominican Republic and Ecuador, the trade and

competition authorities of Latin America and the Caribbean highlighted the trend

towards concentration in the energy and telecommunications markets, which poses a

challenge to trade and competition authorities in responding to this new reality for the

benefit of economic efficiency, ensuring the guiding principles of competition, and

enforcing economic regulations and consumer protection.

In the Dominican Republic (2014), members discussed WTO cases with competition-

related matters as well as trade and competition in the food market, air transport, mass

media to promote competition and trade, and, of course, competition policy and trade

facilitation measures as a result of the WTO Agreement concluded in Bali back in

December 2013.

UNCTAD is fully confident that the future of this Working Group is promising because

the topics are of crucial importance for the Latin American and Caribbean region, being

an excellent example of the fruitful trade and competition policies joint work.

Ladies and Gentlemen,

You will agree that the process of regional integration of markets in different regions

throughout the world is still an unfinished business.

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We have seen the proliferation of all sorts of trade remedies that in certain cases are

remedies for their own sake, not remedies for others, to remedy their own economic ill.

However, trade remedies are not only always compliant with the competition rules,

because some of countries' domestic industries may be asking for remedies because

they would need them to reform themselves, so they lobby their own government to

impose remedies. Trade authorities should be careful in allowing involved parties to

exploit the concerns and interests or some entities which could be anti-competitive.

Therefore, there is an underlying need to have a common understanding between the

trade and competition approaches where authorities should be able to make use of

competition rules to the utmost capacity. It is the right time to be using competition rules

in a way to serve a fairer and a more inclusive trading system and it is the right time to

be coordinating the enforcement of competition rules, because this is not in an isolated

field.

UNCTAD therefore has supported the need for further regional integration in different

regional groupings. By regional integration, we are not only referring to trade, but also to

regulatory convergence in terms of standard setting of rules and regulations. For

instance, Latin American and Caribbean countries have managed to harmonize as

much as possible these policies to prevent predatory practices but without

unnecessarily penalizing other conducts.

Ladies and Gentlemen, To conclude this conference I would like to make some personal remarks which I

believe of crucial importance as, at a global level, we might be entering a phase of

turbulence.

One, there are strong theoretical reasons and empirical evidence that international trade

is the most formidable engine for growth and means for development. International

Trade is not enough for development, but without it, development can only be delayed

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or negated to the most needed. We should not allow demagoguery and populism to

stand in the way.

Two, historical experience shows that, to make growth and development, inclusive and

sustainable, we need more than just trade. We need fair trade. And fair trade can only

come with active competition and consumer policies working together.

Three, globalization is a process brought about by scientific and technological

development that shortens time and space. Communications and transportation

improvement is unstoppable, so as such, globalization is unstoppable. Global Value

Chains, can be longer or shortened. Some industries can be in-shore again. But

globalization will continue, the matter is how to make it more inclusive, not to stand in its

way.

Four, there has been a great improvement in the number of developing countries using

competition policy for development purposes. But in a globalized world in which we see

a very strong trend to economic concentration, we have to quickly move in the direction

of two vectors; a) enhance the domestic coherence and coordination of trade,

competition and consumer protection authorities and policies and b) enhance effective

international cooperation of competition authorities, particularly in the field of horizontal

cartels.

Five, the reasons to move quickly into that two directions do not only lye in the evidence

that globalization is un-avoidable and that economic concentration is increasing. With

the fast digitalization of the economy, big data and pricing algorithms could certainly

benefit the consumer, but it could also help new ways of digitalized collusion and price

discrimination against consumers. The digital hand might not be as beneficial as the

invisible hand, for consumers.

We therefore need strong competition regimes in place, sound domestic policies and

good governance, so that the positive effect of markets openness and of the removal of

trade barriers is fully exploited in developing and in developed markets for the benefit of

consumers and societies.

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UNCTAD remains highly committed to this important topic and will be supporting all

developing countries' efforts to further foster their trade and competition policies for the

development of their markets and the welfare of its people.

Ladies and Gentlemen, I would like to pay tribute and dedicate this lecture to the Japan Fair Trade Commission,

its present and past authorities and I do so for three main reasons. First in recognition of

the historical role the anti-monopoly law had in the development of this great country.

Indeed this Act being one of the oldest in the world has contributed greatly to the

welfare of the Japanese Economy and its consumers. Second for its generous support

in the transfer of knowledge and capacity enhancement to many developing countries,

starting with the ASEAN region, but including as well training and institutional building in

many Least Developed countries of Africa. Thirdly for its open and

openhanded support to UNCTAD, by offering, among other things the secondment of a

very talented young staff member of JFTC to UNCTAD.

To enhance international cooperation we need institutions like JFTC who are able to

share its knowledge and provide leadership. You are doing both Mr Chairman and you

can be proud of your institution.

I thank you very much for your attention.

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