Spring 2013 Issue
In Pictures: The Storting, the supreme legislature of Norway, located in Oslo. Norway is one of the OECD countries with prominent incidence of state ownership.
whom are calling for a “levelling of the playing field” in international trade and investment. The discussions of new SOE disciplines in the on-going Trans-Pacific Partnership (TPP) negotiations and the implementation of stricter national investment screening mechanisms for SOEs in some countries are testimony to this. Fair dealing by SOEs has also been identified as one of the priorities for the future multilateral trade agenda [14]. At the same time, it is important to ensure that trade and investment by SOEs that operate according to market principles is not hindered or discriminated against. In addition, views as to how to practically ensure the “level playing field” differ across countries. For example, since SOEs and private firms alike can be favoured by the state, some argue for ownership-neutral rules and advocate disciplining the use of stategranted advantages to influence competitive position of firms engaged in commercial activities rather than ownership per se. Yet, paying specific attention to state ownership may also have substantial and practical merits. It is not unconceivable that the triple role of the government as a regulator, regulation enforcer and owner of assets may increase the likelihood of favourable treatment of SOEs in some cases.
Ownership implies a financial interest, which may constitute an additional incentive for favourable treatment. From such a perspective there might be a case for holding SOEs to higher standards, i.e. adopting a state ownershipspecific approach to regulation. It is not yet clear which will be the dominant approach in future trade and investment agreements. What is the regulatory context and how does it evolve? Several existing regulatory frameworks discipline some forms of anti-competitive behaviour of SOEs at the national, bilateral and multilateral levels [15]. However, most of them offer only partial provisions relating to SOEs and they differ considerably in their ambition and enforcement capacity. For example, national antitrust laws can in principle be used to deal with the abuse of dominant position by SOEs, including in the international context, or to prevent anticompetitive effects associated with M&A activities of SOEs. A precondition though is that SOEs are not exempt from competition law, which is the case in some jurisdictions [16]. Furthermore, traditional antitrust laws aim to discipline profit maximising firms and are not
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aimed at preventing subsidies and artificially low prices—except where these are manifestly motivated by predatory strategies [17]. They also typically apply to situations with “effects in domestic territory”, not foreign markets [18]. Some countries developed more specific competitive neutrality arrangements aimed at mitigating or eliminating competitive advantages of their SOEs in domestic markets, including with respect to taxation, financing costs and regulation. Some of these frameworks refer specifically to state ownership (e.g. in Australia) while others (e.g. in the EU) are ownershipneutral. To assist development of such arrangements, the OECD recently developed a “best practice report”, which indentifies priority areas (e.g. cost transparency, regulatory and tax neutrality, debt neutrality) for policy makers committed to competitive neutrality. Ambitious reforms addressing these priority areas would no doubt go a long way towards establishing level playing field in international markets. Yet, while several countries declare commitment to competitive neutrality[19], countries that fully enforce it or have elements of enforcement in place are still a minority. Learning from peers and the voluntary nature of this process and can be virtuous as it allows countries to pursue
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