India is considering incorporating ?competition clauses? in its future bilateral trade pacts to prevent global ?hard-core cartels? from entering the country, and also to punish them for any wrongdoing.
The move gains urgency with the country in advanced talks with Japan, the European Union and South Korea. The commerce ministry recently discussed the issue with the Competition Commission of India (CCI). According to government officials, these would ensure that liberalisation of trade with partner countries?by reducing tariff and removing non-tariff barriers?does not result in any anti-competitive practices by cartels, predatory pricing (pricing below costs to drive out rivals) and abuse of dominant position by an existing player.
The commerce ministry is aware that if these pacts get finalised without the necessary competition clauses, it will result in duplication of such efforts. Further, such clauses can also lead to reforms in domestic economic policies.
When contacted, Vinod Dhall, member, CCI, said, ?According to the ?effects doctrine?, if anti-competitive practices have an effect on the domestic market and if it affects our consumers and economy, an effective competition law would ensure that the wrongdoers are punished whether they are based inside or outside the country.?
Dhall said ?competition clauses? in bilateral trade pacts would result in CCI being able to cooperate with its counterparts in other countries and help in obtaining evidence, in the form of documents, data and other relevant information, from partner countries as well as in punishing the violators.
CCI has also asked Indian Council for Research on International Economic Relations to study the impact of having ?competition provisions? in Free Trade Agreements (FTA) by analysing JVs, mergers and acquisitions, international and export cartels and their effect on employment, export and import.
Pradeep S Mehta, secretary general, CUTS International, said, ?Having competition clauses in trade pact with the EU or other countries could make India examine its rules and procedures, especially the relationship between its competition policy and trade policy. This is important in bilateral trade pacts with emphasis on deep integration?.
Besides, government procurement in EU nations and other countries are also a huge market for Indian companies, and therefore, incorporating competition clauses would ensure a level-playing field for Indian firms in those countries, while bidding for global tenders, he said.
About 141 ?bilateral? trade pacts across the globe have competition clauses. This is apparently due to differences amongst WTO member countries on incorporation of such clauses in the ?multi-lateral? agreement. According to UNCTAD, ?competition provisions in RTAs have been viewed as one way of ensuring that the gains from tariff liberalisation are not eroded by the substitution of private restrictive practices for government trade barriers?.