This presentation by WORLD BANK, was made during the discussion “Competition provisions in trade agreements” held at the 18th meeting of the OECD Global Forum on Competition on 5 December 2019. More papers and presentations on the topic can be found at oe.cd/cpta.

1. Competition-related Provisions
in Preferential Trade Agreements
(Authors: Martha Martinez Licetti, Graciela Miralles Murciego and Robert Teh)
Graciela Miralles
Senior Economist,
Markets and Competition Policy Team at
the World Bank Group

2. An effective competition policy framework can help accomplish
several objectives
2 Source: WBG-OECD (2016). Adapted from Kitzmuller M. and M. Licetti (2012).
• It facilitates entry to
markets (Kee and
Hoekman, 2007)
• It ensures that all
businesses interact on
a level playing field
• It discourages and
penalizes
anticompetitive
behavior
Elements of a comprehensive competition policy framework

3. Trade agreements and competition policy
• Effective competition policies offer a tool to complement and support
governments’ efforts to reduce barriers to trade and foster market contestability
behind the border.
• Traditional “shallow” PTAs tend to tackle competition-related issues through
trade-related obligations (e.g. general reduction of non-tariff barriers).
• Deeper PTAs recognize the need to account for competition promotion as a key
tool to achieve the benefits of opening markets through trade.
3

4. Rules on competition are a prominent feature of the architecture
of PTAs
• There is a clear upward trend in the number of PTAs with competition provisions, which are
largely comprised of bilateral agreements.
• Competition-related provisions are found in four out of every five PTAs currently in force.
• Many PTAs also include the promotion of conditions of competition as a main objective of the
agreement.
4
Evolution of in-force PTAs with competition-related provisions,
by type of PTA
Evolution of in-force PTAs with competition-related provisions,
1958-2016
Source: WBG dataset on competition policy provisions in RTA; WTO - Regional Trade Agreements Information System.

5. Low-income countries show a lack of systematic participation in PTAs
with competition-related provisions
• The near absence of low-income countries
in PTAs with strong competition provisions
may be an important missed opportunity for
making trade liberalization more effective
and beneficial.
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• The bulk of bilateral PTAs with
competition-related provisions
come from East Asia & the
Pacific (EAP), Europe &
Central Asia (ECA) and Latin
America and the Caribbean
(LAC).
Bilateral RTAs with competition-related provisions, by
income level
Source: WBG dataset on competition policy provisions in RTA; WTO - Regional Trade Agreements
Information System.
Bilateral RTAs with competition-related provisions, by geographical region

6. At the economy-wide level, PTAs regulating substantive antitrust focus
on the rules applied to abuse of dominance and cartels
• 138 PTAs (58% of PTA with CP)
account for at least one core
antitrust provision.
• 113 cover cartels and abuse of
dominance. Only 24 PTAs (10%
of PTA with CP) account for all
three core practices.
• M&A alone are only covered in
28 PTAs. Almost all PTA involve
a multilateral party.
6
Source: WBG dataset on competition policy provisions in RTA; WTO - Regional Trade Agreements Information System.
Regulated anticompetitive behavior in PTAs, by type of PTA
• Multilateral PTAs tend to put higher enforceability level on merger control, while
bilateral PTAs, on cartelization practices and abuse of dominance practices.

7. Although less systematized, several PTAs include provisions to leveling
the playing field and foster competitive neutrality
• PTAs include provisions on SOEs to
ensure non-discriminatory treatment,
applicability of competition law to
SOEs, and obligations to restrain
parties from granting competitive
advantages to SOEs.
• PTAs with provisions to foster
competitive neutrality tend to involve
a multilateral party, but statutory
monopolies remain more prominent
in bilateral agreements.
7
Source: WBG dataset on competition policy provisions in RTA; WTO - Regional Trade Agreements Information System.
Competitive neutrality provisions in PTAs, by type of PTA
• The regulation of SOEs is often coupled with the regulation of statutory monopolies
and/or firms with exclusive rights.
• Competitive neutrality also covers state aid provisions, typically included in EU
association agreements.

8. At the sectoral level, all PTAs have sectoral commitments in at least
one of the five analyzed sectors
• 96% of all 206 PTAs that account for
commitments in all the sectors
include also economy-wide
competition policy provisions.
• Bilateral agreements include more
sectoral-specific commitments than
do multilateral PTAs
• Agriculture and investment provisions
typically target the elimination of
domestic rules that reinforce
dominance and/or discriminate or
protect vested interests.
8 Source: WBG dataset on competition policy provisions in RTA; WTO - Regional Trade Agreements Information System.
Agriculture is
covered in all PTAs
PTAs and coverage of sector-specific competition provisions by type of PTA
PTA distribution according to provisions against anticompetitive behavior identified by
the Market Competition Policy Assessment Toolkit (MCPAT)

9. Provisions specific to agriculture and investment has been steadily taken
into account by many PTAs
• Prohibitions against rules that are conducive to collusive outcomes are less common
across sectors.
9
Evolution of PTAs in force with sector-specific
provisions against rules that reinforce
dominance or limit entry, by sector
MCPAT 1 MCPAT 2 MCPAT 3
Source: WBG dataset on competition policy provisions in PTA; WTO - Regional Trade Agreements Information System.
Note: Information displayed for in-force PTAs
Evolution of PTAs with sector-specific provisions
against rules that are conducive to collusion
or increase the cost of competing in the market, by
sector
Evolution of PTAs with sector-specific provisions
against rules that discriminate or protect
vested interests, by sector
These sectoral prohibitions mainly
tackle “relative bans” for entry.
These prohibitions mainly tackle price
controls (in agriculture), and other
rules that facilitate collusion in the
other sectors.
These sectoral prohibitions typically
tackle potential discrimination
concerns.

10. High enforceability level for the substantive competition commitments in
economy-wide competition provisions and in sectoral commitments
• Binding commitments are observed in
many PTAs regarding monopoly regulation,
antitrust, and anticompetitive behavior of
SOEs.
• The degree of enforceability of sectoral
commitments is also very high, with more
than 95 percent of the PTAs in the sample
using binding language for the five sectors
surveyed.
• High enforceability levels apply not only to
the PTAs with economy-wide competition
commitments but even to those
agreements that do not have such
obligations.
• Enforceability does not seem to increase
with direct applicability (mostly included in
multilateral PTAs).
10
Enforceability of sector-specific provisions
Source: WBG dataset on competition policy provisions in RTA; WTO - Regional Trade Agreements
Information System.

11. Main takeaways
• This research confirms the prominence of competition rules in PTAs as recognition that
effective implementation of trade related commitments requires a pro-competitive
environment that fosters open markets and penalizes anticompetitive behavior.
• The near absence of low-income countries in PTAs with strong competition provisions
may be an important missed opportunity for making trade liberalization more effective
and beneficial.
• The findings underline the importance of going beyond economy-wide competition
obligations and examining competition-related commitments in the sectoral chapters of
the agreement as a major source of the competition discipline in trade agreements.
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12. Annex
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13. This study
• Analyzes the competition related-provisions, both economy wide and sector-specific, in
285 trade agreements to better understand their potential market impact.
• Prior studies:
• Competition provisions enable developing economies to benefit more from trade agreements (Silva, 2004;
UNCTAD, 2005).
• Sector-specific provisions and horizontal principles are crucial, but absent from competition-related
provisions (Anderson & Evenett, 2006).
• Competition principles are embedded in trade agreements but not necessarily subordinated to trade
objectives. Agreements tackling specific anticompetitive behavior tend to focus on anticompetitive conducts
rather than merger control or state-related market-distortions (Teh, 2009)
• Competition laws are unlikely to have any significant trade-diverting effects. The implementation is likely to
be more successful in North-South agreements than in South-South agreements (Dawar & Holmes, 2011).
• With a more comprehensive and larger dataset, this study builds on Teh (2009)
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14. Data and Methodology
• Reviews the competition related-provisions in 285 multilateral, regional and bilateral
trade agreements notified to the WTO.
• The dataset maps diverse characteristics of competition provisions into economy wide
and sector specific obligations, which allows for capturing new dimensions of analysis. It
gives emphasis on enforceability of these provisions, and the use of general or specific
exceptions.
• The economy-wide obligations are classified around four analytical blocks: general
objectives, horizontal principles, competition policy and general exceptions.
• The sector-specific obligations – in investment, agriculture, electronic commerce,
government procurement and intellectual property – follow the classification of the WBG
Competition Policy Assessment Tool (MCPAT) to identify prohibitions against
• (a) rules that reinforce dominance or limit entry;
• (b) rules that are conducive to collusive outcomes or increase the costs to compete in the market; and
• (c) rules that discriminate or protect vested interests.
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15. Definitions for PTA analysis
PTAs with competition provisions (CP)
• PTAs that have at least one of the
following characteristics:
• (i) include any national competition
requirements, or
• (ii) regulate at least one of the listed competitive
behaviors, or
• (iii) establish any form of cooperation with a
competition mandate, or
• (iv) require an institutional arrangement.
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Enforceability level of provisions
• Based on Horn, Mavroidis and Sapir (2010) and
Hofmann, Osnago and Ruta (2017), provisions’
enforceability are classified according to whether
they are
• 0=non-binding;
• 1=on a best-endeavor basis;
• 2=binding but not subject to dispute settlement (DS) under the
PTA;
• 3=binding, state-to-state, under the DS mechanism of the PTA;
• 4=binding, private, the DS mechanism of the PTA;
• 5=binding under the DS mechanism of the PTA and state-
private DS.
• The assigned numbers indicate none (0) to high (5)
enforceability level. The weighted enforceability
level (WEL) is the weighted average of these
scores.