Competition and Commercial (Trade) Policy By Amelia Burhan Sogang GSIS

Competition Policy EU as the Single Market needs competition policy… Competition law and competition policy are intertwined. Competition policy is important as a mechanism for correcting market distortions and also helps promote a better allocation of resources and strengthen the competitiveness of European industry to the benefit of the citizens.

EU competition policy is driven by the EEC Treaty Provisions.  Article 3(f) of the Treaty sets the objective of ensuring that competition in a common market is not distorted.

The core of policy is to be found in: article 85 = covering agreements between firms and other concerted practices which might affect trade or by aim or effect distort competition article 86 = covering abuses of dominant position within markets article 92 = covering government aids to firms

Directorate General for Competition (DG COMP)! The mission of the DG COMP is  to enforce the competition rules of the Community Treaties, in order to ensure that competition in the EU market is not distorted and that markets operate as efficiently as possible  thereby contributing to the welfare to consumers and to the competitiveness of the European economy.

Sector: agriculture consumer goods energy financial services motor vehicles professional services sports

Policy areas: 1. antitrust 2. mergers 3. cartels 4. liberalisation 5. state aid 6. international

Antitrust The antitrust area covers two prohibition rules set out in the EC Treaty: First, agreements between two or more firms which restrict competition are prohibited by Article 81 of the Treaty, subject to some limited exceptions. This provision covers a wide variety of behaviors. The most obvious example of illegal conduct infringing Article 81 is a cartel between competitors (which may involve price-fixing or market sharing). Article 81 of the Treaty Second, firms in a dominant position may not abuse that position (Article 82 of the EC Treaty). This is for example the case for predatory pricing aiming at eliminating competitors from the market.Article 82 of the EC Treaty

Mergers One of the most significant omissions from the EC’s competition rules was an explicit control on mergers. The objective of examining proposed mergers is to prevent harmful effects on competition. Mergers going beyond the national borders of any one Member State are examined at European level. This allows companies trading in different EU Member States to obtain clearance for their mergers in one go. The main legislative texts for merger decisions are the EC Merger Regulation and the Implementing Regulation.

Cartels Article 81 of the Treaty establishing the European Community prohibits agreements and concerted practices between firms that distort competition within the Single Market. Fines of up to 10% of their worldwide turnover may be imposed on the guilty parties. All cartel decisions by the Commission may be appealed against before the Court of First Instance (CFI) and then before the Court of Justice of the European Communities in Luxembourg. These two courts are empowered to annul decisions in whole or in part and to reduce or increase fines, where this is deemed appropriate.

Liberalisation Services such as transport, energy, postal services and telecommunications have not always been as open to competition as they are today. The European Commission has been instrumental in opening up these markets to competition (also known as liberalisation). In the EU Member States, services like these have previously been provided by national organisations with exclusive rights to provide a given service. By opening up these markets to international competition, consumers can now choose from a number of alternative service providers and products.

State aid The objective of State aid control is, as laid down in the founding Treaties of the European Communities, to ensure that government interventions do not distort competition and intra-community trade. In this respect, State aid is defined as an advantage in any form whatsoever conferred on a selective basis to undertakings by national public authorities.

International With increasing globalisation, more and more companies, mergers and cartels are international. As a result, the activities of companies based outside the EU may affect competition within the EU. This has made international cooperation on competition policy essential. The EU has established bilateral agreements on competition, in particular with its main trading partners. It has also been at the forefront of multilateral cooperation efforts.

Commercial (Trade) Policy EU external trade policy is built on two girders: 1.The Common External Tariff (CET)  a common tax applied to all foreign products entering the EU’s market 2. The Common Commercial Policy (CCP)  which obliges Member States to negotiate and sign deals as one with non-EU states.

CET It involves applying uniform customs duties to products imported from third countries, irrespective of the Member State of destination. Originally, the CET was the arithmetic mean of the tariffs applied in 1957 by the Member States. Based on the Article 28 of the Treaty The creation of the common external tariff has resulted in Member States' protection vis-à-vis third countries being standardised and in the de facto creation of a Community preference (as imports from another Member State are not subject to customs duties, by definition they are given more favourable treatment than imports from a third country).

CCP  The EU has a common trade policy ("Common Commercial Policy").  In other words, where trade, including WTO matters, are concerned, the EU acts as one single actor, where the European Commission negotiates trade agreements and represents the European interests on behalf of the Union's 27 Member States.

The key provisions of the CCP are contained in Articles of the Treaty of Rome. The cornerstone of the CCP is Article 113. It sets out the important rule that: “The CCP shall be based on uniform principles, particularly in regard to changes in tariff rates, the conclusion of tariff and trade arrangements, the achievement of uniformity in measures towards the liberalization of export policy and in measures to protect trade such as those to be taken in the case of dumping or subsidies.”

The EU's strategy for sustainable development: Trade and development The European Union is committed to supporting developing countries' efforts to integrate into the trading system to help them reap the benefits of market opening.Trade and development Generalised System of Preference (GSP) The Generalised System of Preferences allows industrialised countries to grant non-reciprocal tariff reductions to developing countries.Generalised System of Preference (GSP) Access to essential medicines The EU is deeply committed to insure access to cheap medicines in poor countries.Access to essential medicines Trade and environment The respect of the environment is a vital condition for a sustainable trade growth and long-term development.Trade and environment

The EU's strategy (Cont.): Sustainability Impact Assessment (SIA) The European Commission has commissioned an independent assessment of the impact that trade negotiations may have on sustainable development.Sustainability Impact Assessment (SIA) Trade and social In an integrated global economy, the impact of trade on social welfare and rights has to be carefully managed.Trade and social Corporate Social Responsibility Corporate social responsibility (CSR) is a concept whereby companies integrate social and environmental concerns in their business activities.Corporate Social Responsibility Civil Society Dialogue We hold regular meetings on trade issues in Brussels with civil society stakeholders.Civil Society Dialogue

Issues that relevance with trade policy: Trade in agriculture and fishery Trade in services Trade in industrial goods Trade and competitiveness Intellectual property Market Access Strategy Trade and Competition Trade facilitation Trade and investment Government procurement Export credits Technical barriers to trade Trade and environment Trade and labor standards