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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