Conflict and Cooperation in National Competition for High-Technology Industry (1996) / Chapter Skim
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Approaches to Conflict Resolution: Agenda for Action
Approaches to Conflict Resolution: Agenda for Action
Pages 206-236
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From page 206... ...
. What is more, R&D subsidies are directed toward very few high-technology industries -- above all to the electronics and aerospace industries -- and often go along with investment and production subsidies, as the Airbus case demonstrates.37 In the course of the Uruguay Round negotiations, the GATT signatories have made a new attempt to restrict the use of subsidies for industrial policy purposes.
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From page 207... ...
First, countervailing duties imposed by third countries are the only enforcement mechanism of both the WTO Subsidies Agreement and the Tokyo Round Subsidy Code. To initiate a countervailing duty investigation a signatory has to prove that subsidies of an offended trading partner violate existing WTO regulations and that the domestic industry is "experiencing injury" as a result of these subsidies.
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From page 208... ...
After the CSCM has made its decision, any signatory concerned should have the opportunity to initiate a panel procedure against the CSCM ruling in accordance with the WTO Dispute Settlement Mechanism. Given that a signatory grants a subsidy in violation of a final CSCM or WTO panel ruling, the CSCM should be empowered to require a repayment of the subsidy to the respective national government.
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From page 209... ...
44 for R&D subsidies which was agreed upon in the Uruguay Round negotiations rather points in the opposite direction. It is obvious that the current maximum, i.e., a public funding of up to 75 percent of R&D costs, will give a recipient firm a considerable competitive edge and thus might lead to major conflicts in high-technology trade and competition.
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From page 210... ...
.47 Public Procurement: Conflict Resolution by National Courts Public procurement in advanced industrial economies covers a significant part of overall market demand. Non-defense public procurement in the member states of the European Union is estimated to represent about 7 to 46 In an extreme case, this could lead to a free-rider problem in promoting private R&D.
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From page 211... ...
A fourth plurilateral agreement under the umbrella of the WTO, the agreement on Trade in Civil Aircraft, was not changed at the end of the Uruguay Round and remained open to signature only in its already existing form. Parties of the GPA are at present Canada, the fifteen member states of the European Union, Norway, Switzerland, Japan, the United States, Israel, and South Korea.
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From page 212... ...
54 Note that the public procurement regulation of the European Union, which in many instances seems to have served as an example for the WTO procurement regulation, does not contain exemptions by "public entities" or "items" except the general exemption of defense procurement. 55 For instance, in the case of the United States, many of the obligations under this treaty are limited to a rather small number of states.
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From page 213... ...
" Discussion Paper 1112, CEPR, London, 1995. 57 In addition, the WTO dispute settlement procedures are open to such cases and can also be used.
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From page 214... ...
This means in particular that a national government will still be allowed to specify the conditions of a tender, if "there is no sufficiently precise or intelligible way of describing the procurement requirements and provided that words such as "or equivalent" are included in the tender documentation" (Article VI.3 GPA) .59 This provision may give national governments enough leeway to limit international competition whenever they think it to be appropriate.
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From page 215... ...
As the new GPA code is entering into force by 1 January 1996, it remains to be seen how effective this code will prove to be, and whether the problems enumerated above will in fact call into question the overall spirit of the whole venture. MARKET ACCESS AND STRUCTURAL IMPEDIMENTS In addition to subsidies and public procurement practices, international competition in high-technology goods is distorted by a variety of other barriers to market access, including "structural" impediments to trade and investment.
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From page 216... ...
No less significant than border measures are the already mentioned structural impediments inside the borders: government regulatory practices, technical standards, and restrictive business practices. They may be deliberately designed in such a way as to discriminate against imported products: luxury taxes on certain classes of automobiles, the U.S.
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From page 217... ...
S Ostry, "Technology Issues in the International Trading System," in OECD, Market Access after the Uruguay Round: Investment, Competition and Technology Perspectives, Paris, 1996, p.
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From page 218... ...
and open to judicial review.68 Among the issues to be addressed under a GAI should be: access to government technology-support programs; state sanctioned monopolies and other sector-specific reservations; most-favored nation (MFN) treatment; transparency; barriers to foreign takeovers; performance requirements; investment incentives; restrictive business practices and competition policy; investment protection; access to technology; payments and transfers; movement of key personnel and data; and a dispute settlement mechanism for resolving conflicts not only between governments, but between governments and investors.69 65 USIS, "U.S.
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From page 219... ...
In the face of what has been perceived as "inadequate" access to markets due to structural impediments, effective market access has become the catchword for triggering (and/or rationalizing) unilateral trade measures aimed at forcing open foreign markets and securing targeted market shares for imported (technology)
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From page 220... ...
With the dispute settlement procedure greatly improved as a result of the Uruguay Round, there is therefore a strong case for taking resort to multilateral rather than unilateral action. Article XXIII:1(b)
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The Agreement establishes national treatment and MFN status as the guiding principles. It obliges the member countries to ensure that technical regulations as well as conformity assessment procedures are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade.
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From page 222... ...
82 Department of Foreign Affairs and International Trade, Register of United States Barriers to Trade, 1994, Ottawa, 1994, pp. 11f., quoted in S
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From page 223... ...
This poses problems for international competition policy. DUMPING, ANTIDUMPING AND COMPETITION POLICIES Private versus Public Conduct in Trade and Competition Apart from public obstacles to, and distortions of, high-technology trade and competition, trade-related barriers to market entry raised by private companies become increasingly important.
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From page 224... ...
However, the policies applied in response to dumping are no less contentious among trading partners if weak domestic industries are protected against efficient foreign competitors. In the national context, friction arises if antidumping policies work to the detriment of consumers and user industries.
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International Trade Commission counts the net welfare loss for the United States of the 279 antidumping (and countervailing) duties that were in place in 1991 at roughly 1.6 billion dollars.89 Apart from the standard static welfare losses, antidumping measures have important dynamic consequences.
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From page 226... ...
It has also been shown, e.g., in the U.S.-Japan DRAMs case, that antidumping measures originally targeted at a limited number of product variants finally extended into an agreement covering the whole range of the respective product group.90 Dumping and Antidumping in High Technology In high technology, the two basic forms of "dumping," i.e., regional price differentiation and (temporary) pricing below cost, seem to be widespread business practices reflecting central characteristics of the sector such as market segmentation, high fixed costs (especially up-front R&D expenditures)
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From page 227... ...
European imports of Japanese photocopiers have dropped sharply since the introduction of antidumping duties, but the market share of Japanese producers has nonetheless increased, as many of them have moved production inside the European Union.93 Empirical analysis for a number of electronic products (color television sets, compact disc players, and plain paper photocopiers) from Japan on which antidumping duties were imposed by the United States and the European Community reveals a strong tendency of antidumping policies in this sector to protect domestic competitors rather than preserve competition in the long run.94 The case studies investigate certain structural characteristics of the respective markets and industries -- such as entry barriers, relative home-market size, concentration ratios, market shares, and static and dynamic economies of scale -- that are potentially conducive to predatory or strategic dumping.95 Three results of the studies stand out: First, declining government protection by tariff and non-tariff barriers as well as subsidies contrasts with persisting low import penetration of the examined Japanese markets.
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From page 228... ...
In sum, little evidence on the possible existence of predatory or strategic dumping practices has been found in empirical analysis. The Uruguay Round Approach to Antidumping The degeneration of antidumping measures into protective, selective, anticompetitive, and strategic trade policy devices has not been effectively contained in the Uruguay Round.
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dispute settlement mechanism in place, this could possibly change in the future, as panel decisions no longer need the consent of the defending country. However, the specific dispute settlement section of the antidumping agreement gives the national determination of dumping margins the benefit of the doubt.
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From page 230... ...
Amending antidumping procedures has been depicted as an activity with a productivity close to Sisyphus's; new provisions seem to be deviated from their initial purpose at a more rapid pace than they were introduced.98 However, antidumping rules and practices remain far removed from the standards of sound competition policy which they were originally supposed to supplement at the international level. Disciplining antidumping policies should therefore rank high among the market access issues on the post-Uruguay Round trade agenda.
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From page 231... ...
by foreign competitors • "Importing" competition-policy standards into antidumping legislation, and raising the legal standing of consumer and industrial-user interests in the investigations • Developing international competition rules. The first track involves ongoing liberalization of trade on a reciprocal basis, including the removal of remaining tariff, non-tariff, and regulatory barriers to market access raised by governments, as well as the negotiation of an international investment agreement that guarantees foreign companies freedom of establishment and national treatment in host countries.
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From page 232... ...
Mavroidis, Antitrust-Based Remedies and Dumping in International Trade. 100 For example, Tharakan finds most of the EU antidumping impositions to have taken place in favor of industries which have a high degree of concentration in the European Union.
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From page 233... ...
This, again, bears chances as well as risks, since increased competition -- and related adjustment pressures -- inside the "club" might provoke compensatory antidumping action against outsiders. Toward Multilateral Competition Rules International coordination, or harmonization, of competition policies may not only help to contain dumping practices and counter-productive antidumping policies, but also prevent anticompetitive business conduct in international trade in general.
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From page 234... ...
Export cartels may also be conducive to collusive behavior on domestic markets. Devising principles -- and practical guidelines -- for the international cooperation among national agencies responsible for competition policy, in order to resolve conflicts that may arise when private restraints of competition simultaneously affect a number of national markets.
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From page 235... ...
and possibly "spilling over" into other fields of activities such as production and marketing.108 The actual development of international competition rules is still in its infancy. It could be advanced through "case law" built in dispute settlement procedures based on existing GATT provisions.
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From page 236... ...
However, the wording of the clause is too general, and its reach too limited, for it to serve as a solid base for an effective international competition policy. Its "structural" weakness is to be, by definition, not based on explicit provisions concerning anticompetitive business conduct in international trade (with the exception of dumping)
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