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Speech by Mr. Mario Monti
European Commissioner for Competition
International co-operation and technical assistance: a view from the EU
UNCTAD 3rd IGE Session
Geneva, 4 July 2001
Ladies and Gentlemen, it is both a great honour and a pleasure for me to discuss with you today a number of issues relevant to international cooperation and technical assistance. I want first to acknowledge that UNCTAD has over the years produced work of considerable value for the international antitrust community. To single out just one of UNCTAD's numerous contributions, I will point to the Set of Principles and Rules for the Control of Restrictive Business Practices, which is today the only comprehensive multilateral instrument in the area of competition law and policy.
I am also happy to participate in this 3rd Annual Meeting of the IGE(1). I believe that it is an excellent opportunity for developed and developing countries to meet and exchange views on competition policy issues which are highly relevant for the welfare and the economic and social development of our respective countries and regions.
So I would like to express my sincere gratitude to Mr Ricupero, the Secretary General of UNCTAD, for inviting me to take part in this session. I want also to thank all the Ambassadors, which are present in this room today, for making time in their busy schedules here in Geneva to participate in our discussions (and I know that this month of July is indeed quite a busy time for all of us). Last, but certainly not least, I would like to extend my thanks and appreciation to all my Competition Colleagues who made the, sometimes long, trip from distant capitals to come to this gathering.
In my intervention I would like to address the two topics which are on the agenda of the IGE this morning and which for reasons that we all know well are increasingly the focal point of discussions both here in UNCTAD as well as in other international fora such as the WTO and the OECD:
I. There is a need for enhanced cooperation between antitrust authorities
Let me start by recalling that the Resolution adopted in this room last September by the Fourth UN Conference reviewing the "Set" made a particular reference to the cooperation between antitrust authorities. Paragraph 6 of the Resolution stated that [I quote] "while bilateral competition cooperation efforts are essential, there is need to promote regional as well as multilateral competition initiatives, particularly for smaller and developing countries". The Resolution requested the UNCTAD Secretariat [I quote again] "to study the possibility of formulating a model cooperation agreement on competition law and policy, based on the Set".
This wide recognition of the need for more, closer and deeper cooperation on international antitrust issues, is based on another consensus: namely that competition policy has an important role to play in developing as well as in developed countries, both in promoting a competitive environment and in building and sustaining public support for a general pro-competitive policy stance by governments. It is often argued that liberal trade and investment policies are a key element of a good competition policy, and that priority should be given to the elimination of barriers to trade and foreign direct investment. However, one should not forget that in many sectors of the economy the threat of foreign competition will remain limited, and there is always a need to enforce competition rules to ensure that markets are contestable - especially in non-tradable sectors -, that firms do not behave collusively and that market power is not exploited to the detriment of consumers.
In recent years antitrust enforcers came to realise that the increasingly transnational character of competition cases clashes with the traditionally territorial scope of domestic antitrust rules. In practical terms this means that competition authorities worldwide have to find ways to overcome the jurisdictional barriers inherent in the territorial nature of antitrust enforcement jurisdiction. When we are asked to apply our antitrust rules today, we increasingly observe that consumers whom we are mandated to protect are being adversely affected by anticompetitive behaviour taking place outside our jurisdiction. Often, we have to overcome a number of legal and practical obstacles to discover the necessary evidence and to impose sanctions on global cartels and other restrictive business practices detrimental to the efficient conduct of business and harmful to consumers.
Also, there is here a question of global governance: in essence how competition authorities can ensure that the international integration of markets leads to and maintains competitive outcomes, thus making the globalisation process both economically more efficient and socially more acceptable. In this context, competition policy and specifically international co-operation on competition policy - has an important role to play, if we are to avoid resentment against globalisation and a protectionist backlash.
Finally, developing countries have expressed their interest in becoming active partners in this new area of intergovernmental cooperation. The introduction of competition policy is an essential part of efforts by developing countries and countries in transition to restructure their economies and integrate them fully to the world economy in order to be able to exploit new opportunities to compete. In order to claim their share in the benefits of globalisation, more developing countries adopt economic reform packages, which liberalise entire sectors, privatise state owned enterprises and introduce competition laws and policies. They naturally look to established competition authorities for cooperation, support and technical assistance.
So far, our response to these challenges has essentially been focused on bilateral cooperation. However, bilateral agreements are clearly not enough. In cases with significant overlaps across multiple jurisdictions the limitations of this approach are obvious to everybody. The bilateral framework of cooperation is also quite heavy and its benefits may in some instances appear disproportionate to its costs.
As stated in the UN Resolution, it is now time to look beyond cooperation based on bilateral country-to-country agreements. Involving more competition authorities in the discussion of international competition cases will yield better results both for bilateral as well as for multilateral cooperation. One should keep in mind that, even in the absence of a bilateral agreement, when the pressing interest is there, competition authorities will find a way to cooperate.
I believe that the time is ripe to profit from our experience with bilateral instruments and use their tools to put in place a more open and inclusive cooperation framework. This will enable us to achieve some convergence among competition authorities towards best practices. We need to be creative and find an effective way to open cooperation to more competition authorities dealing with international competition issues and transborder cases.
UNCTAD and this Group of experts are asked "to develop a model cooperation agreement" and to "promote regional and multilateral competition initiatives". This is an important project that lies ahead of us. I would like to assure you that the European Commission will participate enthusiastically in this process and will contribute actively to all efforts deployed towards achieving this goal.
As regards the WTO, the EU is of the opinion that launching negotiations on a realistic competition agreement at Doha is essential to establish a solid basis for international cooperation against anti-competitive practices with an impact on international trade.
What is being proposed is a realistic agenda based on agreement on certain core principles, cooperation modalities and support for the progressive reinforcement of domestic competition institutions. The envisaged WTO agreement would include cooperation modalities that are sufficiently flexible to address the needs of countries at different stages in the development of a domestic competition regime. This should include for instance technical assistance relating to the introduction of a law, the reinforcement of domestic institutions, as well as general exchanges of experiences and case-specific cooperation.
It is worth noting that the cooperation needs of developing countries are all the greater at the early stages of the introduction of a domestic competition law regime. There is therefore, in my view, a very strong case for the establishment of cooperation modalities at this stage, even if some developing countries have not yet introduced a domestic law or are at the early stages in its implementation. The cooperation provisions of a competition agreement in the WTO would apply to all anticompetitive practices of an international dimension. Cooperation would not therefore be limited to hard-core cartels, but would also cover other anticompetitive practices of concern for developing countries, such as multijurisdictional mergers, trans-border abuses of a dominant position or anticompetitive practices with a market foreclosure effect. Cooperation provisions would respond to developing country concerns about the importance of assistance by "home" competition authorities in those cases in which foreign firms may be engaged in anticompetitive practices with an impact on developing country markets.
But this is a debate that will take place elsewhere (soon and nearby! *(2)) so I do not want to say too much on this right now. I would like to speak about a global forum for discussion and reflections for competition authorities in the world.
According to a key recommendation in the ICPAC Report it is necessary to "explore the scope for collaborations among interested governments and international organisations to create a new venue"; a "Global Competition Initiative" in the words of the ICPAC. This venue should provide a forum where government officials [...] and others can "exchange ideas and work toward common solutions of competition law and policy problems".
I have repeatedly stated that we welcome these proposals. We have also contributed to the debate by offering some ideas on what could be an international forum for competition among authorities from all over the world. This initiative has been gathering momentum over the recent months and a number of brainstorming meetings have taken place bringing together senior competition officials from both developing and developed countries as well as other practitioners in this area.
What I retain from these meetings is that there was broad consensus on the need and the timeliness of this initiative in view of the rapid transformation of the world economy. I would like today to invite you to consider carefully a number of suggestions regarding the precise mission of such a forum, its agenda and its methods of work.
For me, the main mission of the forum should be to put in place an inclusive venue where those responsible for the development and management of competition policy worldwide could meet, engage in constructive dialogue and exchange their experiences on enforcement policy and practice.
Competition authorities and other participants in the forum should strive to achieve a maximum of convergence and consensus on fundamental issues such as the substance and economics of competition policy, the enforcement priorities of competition authorities and a common understanding about best approaches or practices in addressing certain types of concerns or specific types of cases.
In this way the forum would foster and develop a common worldwide "competition culture" and be open to deal with issues of importance to developing economies and economies in transition.
Such a forum should be expected to discuss a wide range of antitrust issues:
The main event of the forum would be an annual conference (some sort of "plenary session") which would discuss more general competition matters and issue reports, discussion papers and recommendations. This event would be an opportunity for professional associations and NGOs representing consumers, industry and the legal profession, academics and the legal profession to be involved in the debate.
II. The EU is ready and willing to offer technical assistance
I would now like to address the second topic on today's agenda. The Resolution adopted here last September [I quote from paragraph 14] "invites all member States to assist UNCTAD on a voluntary basis in its technical cooperation by providing experts, training facilities or resources". Further it requests UNCTAD to expand its technical cooperation and invites [I quote again] "the Secretary General of UNCTAD to explore the feasibility of mobilising financial and human resources on a more predictable and regular basis". On behalf of the European Commission I wish to state here that we are ready and willing to contribute.
You will agree with me that the successful establishment of an effective competition law and policy, supported by credible and transparent enforcement institutions, is a challenging project. It is integrally connected to broader private sector development strategies, and as such should be a part of a more coordinated and targeted approach to technical assistance and capacity-building.
The main concerns of developing countries when they are faced with proposals to introduce and implement competition policies and to actively participate in multilateral cooperation initiatives relate mainly to the scarcity of resources and the difficulty to develop and maintain the necessary expertise.
The EU and other donors understand these concerns and are determined to help in organising and financing concrete projects in interested countries and regions. At present there is already a considerable number of initiatives in the area of technical assistance and capacity-building, be it on a bilateral basis or through international organisations. UNCTAD plays a particularly prominent role in this area and I would like to acknowledge here its valuable contribution.
I would like to focus more on the concrete contribution of the EU and its Member States to technical assistance and capacity building efforts in the area of competition law and policy.
Over the recent years, we have organised training activities for officials from candidate countries for EU accession, arranged conferences and provided technical assistance through our various Cooperation or Association Agreements with Latin and Central American, Caribbean, and Mediterranean countries. Some of these countries have already come forward with requests for technical assistance and we have repeatedly indicated our continuing openness towards similar requests from other countries.
To give you a concrete example of what we are doing, I will take some time to present to you our current cooperation with the Common Market for East and Southern Africa (COMESA) on a capacity building project aimed at developing a regional competition policy. This project, which has a budget of about 750.000 EURO, will be financed by the European Development Fund (EDF).
But, let me first say a few words on the EDF and the New Partnership Agreement signed a year ago (23.06.2000) in Cotonu, the capital of Benin, between the EU and a big number of African, Caribbean and Pacific States (ACPs). This new agreement, which is the successor of the Lomé Conventions, has a financial protocol which provides for a substantial amount of resources.
In fact, under Article 45 of the Cotonu Agreement, competition policy is one of the trade-related areas of cooperation between the EU and ACP countries. Technical assistance in this area should help interested ACP countries and their regional organisations to introduce and enforce competition policies.
COMESA will be one of the first beneficiaries of such technical assistance. As you know COMESA was established in 1994 and currently comprises 20 member states. The main objectives of COMESA include a free trade area, a customs union with a common external tariff by the year 2004, free movement of capital and investment supported by common investment practices, the adoption of common visa arrangements and the right of establishment and generally the promotion a regional integration among its member countries. Competition policy is considered by COMESA (and by the EU) a crucial part of its overall integration and welfare enhancing objective.
Recently, COMESA has been involved with national competition authorities and international agencies (particularly UNCTAD, DFID*(3) and the European Commission) in developing a capacity building project which will develop and implement a regional competition policy. A trilateral meeting was held in September 2000 in Brussels between COMESA, UNCTAD and the European Commission in which we have launched this cooperation project. The final funding request was submitted recently to the Commission through the appropriate channels and should be approved before the end of September 2001.
I will not go into the details of the COMESA capacity building project. Not because I do not find it ambitious and well developed but because my allocated speaking time is coming to an end and I am looking forward to our open discussion. However, I would like to add a few words on our expectations from this project. First it should result in providing COMESA with a greater capacity in formulating antitrust legislation. In particular it should develop a transparent and clear competition law, streamlined procedures and institutions, and a highly trained regulatory body. Secondly it should enable COMESA to establish the necessary institutional structure to investigate anti-competitive practices of an international dimension. Thirdly, it should help establish short and long-term benchmarks for legislative developments in member countries.
Beyond this project with COMESA, similar projects could be developed for other interested ACP countries Zambia for instance has submitted a first draft that we need to evaluate -, or regional organisations such as the CARICOM*(4). We welcome of course any request you could be interested in for your own countries and regions.
Before concluding my intervention, let me briefly refer to a couple of further projects which will be of interest to developing countries.
We understand that UNCTAD is currently in the process of preparing a study on the extend to which poor, less-developed countries suffer from anti-competitive practices which hamper their competitiveness and development possibilities. We are interested to participate in this study and are currently looking into practical ways to contribute. The study will focus on a number of factors such as shortages in transport and utility infrastructure, excessive costs of loans and insurance services, the lack of consumer awareness about various unfair and anti-competitive practices and the weak distribution systems. It will tend to highlight ways in which competition policy can help tackle some of the problems and render these economies less vulnerable to monopolistic and other anticompetitive practices which further increase their costs and inefficiencies and decrease their international competitiveness.
Another project that we are studying would involve the organisation of a one week residential training seminar for a group of 20 to 25 officials from developing country competition authorities. The course would aim to bring them in contact with competition practitioners to discuss and get training on the technical aspects of a series of competition issues relevant for daily work at a developing country competition authority or court. This course could be carried out by a number of major European Universities and Institutes specialising in competition law and policy. This kind of training programme could be further developed to cover an appropriate number of competition officials from developing countries.
I will conclude with some remarks on both topics that occupy us this morning.
On the need to enhance cooperation and possibly create a forum for dialogue, I want to say that these ideas are now on the drawing board and I am keen to have your views on the feasibility and the interest of such a forum for developing countries. There is a lot of discussion going on at this stage between interested competition authorities mostly from developed countries. What I find crucial is to open the debate to developing countries and get their ideas on board from the beginning.
I believe that once we have reached a reasonable level of common understanding on the precise mission of the forum and on the things competition people would need the forum to do for them, we could design its organisational structure in a way that it is able to deliver on these expectations with the most efficient manner.
I would like to repeat here that our objective is not to create a heavy bureaucratic structure or, worse, a supranational competition authority. It is also not our aim to duplicate or substitute valuable work that is carried out, and must continue to be carried out, in international organisations such as here in UNCTAD, some meters down the road at the WTO, or further away at the OECD. Our ambition is to provide competition authorities worldwide with a network. A network they need when they enforce their domestic competition rules in an increasingly globalised environment. A network that will help them provide a response to requests for more coherence, more coordination, more governance in international competition policy.
On technical assistance, I wish to remark that, despite the wide range of valuable capacity-building activities that have been undertaken in the competition area to date, we can certainly do more and better. The current fragmentation of technical assistance and capacity building carries with it an inherent danger of a less than optimal use of resources due to absence of coordination and duplication.
An enhanced approach to technical assistance should be developed. This should be based on closer cooperation among competent international organizations - including UNCTAD and the World Bank and in full partnership with developing countries. The mutual goal of donors and recipients should be to promote technical assistance in the competition field, which has not always been regarded as a priority area, and to ensure that the assistance provided is based on commonly agreed objectives adjusted to the specific needs of the country or region in question.
I am looking forward to continuing our cooperation with UNCTAD to formulate and build a new technical assistance approach and go some way towards satisfying the request formulated by UN members in the Resolution adopted here last year.
Ladies and Gentlemen: thank you again for your attention.
(1) Intergovernmental Group of Experts on Competition Law and Policy.
(2)* The WTO Working Group on Trade and Competition will meet in the WTO Building on 5-6 July. Most delegates present at the UNCTAD IGE will also be present in the WTO.
(3)* The UK Department for International Development.
(4)* The Caribbean Community.