Competition Law and Trade Policy: “Never the Twain Shall Meet”?

This article addresses the complex—and, at least from some perspectives, fraught—interrelationship between trade policy and competition enforcement.

Trade and competition are closely connected: It is not controversial that competition issues affect trade patterns. And trade policy will have an impact on competition: protectionist trade policy (often underwritten by appeals to industrial policy) tends to reduce domestic competition, while liberalizing trade policy instruments complements competition promotion and enforcement.

Yet, efforts to combine the two areas into a coherent framework have faced significant challenges. At the Ministerial Conference of the World Trade Organization (WTO) in Singapore (Singapore Ministerial), Members established a Working Group on the Interaction between Trade and Competition Policy (WGTCP) to study the extent to which competition enforcement should be incorporated in framework agreements governing international trade. That initiative did not, in the end, get far. Multilateral negotiations on “trade and competition” faltered and then disappeared. But the need to address competition issues in trade policy instruments did not go away.

There are also institutional reasons why trade policy considerations have largely been kept separate from competition law and policy. For most states, competition policy—which could also encompass other economic regulation objectives and measures such as state aid regulation—is a necessary instrument of economic development. Yet at least in jurisdictions with active competition enforcement, implementing and enforcing competition rules is the responsibility of discrete agencies. And whatever their exact mandates, these competition agencies tend to operate in highly specialized silos.

Competition decisions prohibiting mergers or breaking up cartels have sometimes run into opposition from advocates of “industrial policy” who seek the promotion of sectoral national champions to compete on the world stage. But thanks to their independence, and also in light of studies that have demonstrated the true competitive costs of an active “industrial policy,” competition authorities have tended to resist the siren call of industrial policy advocates.

At the same time, changing patterns of trade and, in particular, the rise of a new economic model in China, with massive interlocking state-trading enterprises dominating export markets, pose a threat to the integrity of functioning competitive markets targeted by those enterprises. This issue was brought into intense focus by the decision of the Commission of the European Union in Siemens/Alstom, but the debate has long provenance.

Against this background, this article discusses the extent to which trade policy considerations can usefully form an element both in the development of domestic competition policy and in competition enforcement efforts, in particular in merger review.

The global trading framework needs active, healthy, and coherent national competition regimes to function properly. Through trade agreements, trading partners seek to ensure minimal domestic competition governance; through cooperation, training, and convergence, they seek to bring coherence to competition enforcement and, thus, to spur competition not just domestically but internationally. But the texture of the global trading framework is more lumpy than smooth. And its functioning is subject to unusual stresses and challenges. Competition policy functions within this structure and not abstracted from it. This article does not land on a definitive balance between “competition” and “trade policy.” But there is no reason why taking due account of the fuller context of global competition should compromise the attainment of competition objectives.

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