Competition policy in PTAs

Here’s a surprise…or is it? Accord­ing to the WTO’s 2011 annu­al report, the most com­mon WTO-exten­sion (WTO-X) pro­vi­sion of pref­er­en­tial trade agree­ments (PTAs) is in a domain that the WTO dropped from its nego­ti­at­ing agen­da in 2003: com­pe­ti­tion pol­i­cy.

Research for the WTO’s 2011 Annu­al Report shows that 90 of the 96 PTAs exam­ined have “com­pe­ti­tion pol­i­cy pro­vi­sions” and that these are legal­ly enforce­able among the mem­bers of the PTA in about 70 cas­es.

Number of PTAs by WTO-X provisions from WTO 2011 Annual Report

Num­ber of PTAs by WTO-X pro­vi­sions from WTO 2011 Annu­al Report

The expla­na­tion for this very high pro­por­tion seems to lie in the def­i­n­i­tion of a “com­pe­ti­tion pol­i­cy” pro­vi­sion. The report fol­lows the def­i­n­i­tions used by Ander­son and Evenett here Ander­son, R. D. and Evenett, S. (2006), “Incor­po­rat­ing com­pe­ti­tion ele­ments in region­al trade agree­ments: char­ac­ter­i­za­tion and empir­i­cal analy­sis”. Avail­able here.

Those authors define as a “com­pe­ti­tion pol­i­cy” mea­sure any under­tak­ing that is like­ly to have an impact on com­pe­ti­tion because it requires non-dis­crim­i­na­tion, adds to trans­paren­cy or to pro­ce­dur­al fair­ness in admin­is­tra­tion. But that’s too wide a gamut. Although it is obvi­ous­ly true that com­pe­ti­tion tends to suf­fer where these prac­tices are not adopt­ed, includ­ing them among the oblig­a­tions in the PTA them does not in fact improve the terms of com­pe­ti­tion in any sec­tor except to the extent that the for­eign entrants have access to that sec­tor.

Con­sid­er, for a moment, an under­tak­ing by Aus­tralia to make its inter­na­tion­al avi­a­tion pas­sen­ger ser­vices sec­tor sub­ject to such “com­pe­ti­tion pol­i­cy” under­tak­ings. Do the oblig­a­tions of trans­paren­cy or pro­ce­dur­al fair­ness in this sec­tor actu­al­ly improve com­pet­i­tive offers of seats across the Pacif­ic for Aus­tralian pas­sen­gers or make any dif­fer­ence what­ev­er to, say, our Sin­ga­pore trade part­ners?

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