Fifth Commentary on " the World Economic Development Declaration"(The Zhuhai Declaration)

By Cheng Wenjing, researcher and Vice-President of the Institute of Trade & Economic Relations with Foreign Countries in the Ministry of Commerce, and by Samuel Rizk, Egyptian Scholar and Secretary General of the Middle-East International Relation Project

The "World Economic Development Declaration"(The Zhuhai Declaration) pointed out that, "Competition is conducive to production, economic growth and efficient use of limited resources. Credibility is the basis of competition. Nations and producers in the world should be encouraged to compete with each other in a fair and proper manner. In order to promote the development of the world economy, monopolies should be opposed as they could impede trade and equal opportunities"

Competition is a basic law for the market economy. Since more than 200 years ago when Adam Smith introduced the concept of competition into economics, "invisible hand" has long been playing an important part in the social economic life. The historical evolving process, from free competition to monopoly, from common monopoly to national monopoly, from breaking the monopoly to seeking a fair competition, has not only revealed the intrinsic law of economic activities and the distinct characteristics of their different developing phases, but reflected social progress and the appeal for civilized behaviors in the market. Nowadays when peace and development are still the main currents, the trend of globalization is continuously developing, and more and more countries and regions are joining in the market economy, market scale is expanding rapidly, trans-border flow of production factors is being expedited, competition in market economy is increasingly intensified. As a result, the sound calling for fairness is gradually getting louder. Therefore, whether in bi-lateral and regional, or in multi-lateral trade, fair competition has become a basic principle observed by economic bodies when they want to reach agreements. Furthermore, competition policy is also a principal yardstick for evaluating market environment even within one country.

In theory, competition is absolute, and fairness is comparative. So-called absoluteness of competition is determined by the nature of capital. The capital was born with lust for expansion and eager impulse to maximize its profit. It is exactly because of these lust and impulse that market competition is operating all the time and never resting. Firstly, in the process of competition, while the weak and the backward are eliminated, the strong and the advanced are growing with corresponding change of their managing notion, organizational structure, system and institution. Secondly, competition promotes technological progress and the development of productivity. Stimuli of competition are indispensable to all forms of economies ranging from manual operation to mechanical operation, from electrification to today's electronic informationalization, from natural economy, industrial economy to intellectual economy. Thirdly, competition renders resources an optimal distribution. The forming of the world market, gradual eradication of trade and investment barriers and freer trans-national flow of production factors in particular, make possible the optimized distribution of resources in broader range for various economic bodies with different factor endowments and comparative advantages, and even make it come true. Certainly, abuse and predaceous use of resources (especially natural resources) driven by optimization of benefits and profits will also ruin the resources (nonrenewable resources in particular) or even jeopardize the sustainable development of human society as a whole. These are the conducts which we should pay serious attention to and regulate. Fourthly, competition promotes the growth of social welfare, while monopoly infringes upon it. Recently, more and more countries in the world have formulated "anti-monopoly law", "anti-unfair competition" and other relevant regulations with an aim to accomplish welfare growth for the whole society by protecting competition and activating market.

The nature selects. Only the fittest can survive. The strong prevails and the weak gets washed out. They are all true with biological evolvement and also apply to human-being without exception. The reasons why people, in our real economic life, appeal for fair competition, lie in the fact that unfair conducts are universally existing in competition, which has led to market failure, cost increase, lowered efficiency and infringement upon whole social welfare. World multilateral trade system --- General Treaty of Tariffs and Trades (GATT) and World Trade Organization (WTO) have strived to apply the fair competition --- an important principle --- to various agreements and treaties, and make it a discipline that all members should promise to observe without exception.

In reality, however, fairness is merely comparative, absolute fairness does not exist at all. We can secure some answers for the so-called absoluteness of fairness at least from differentiation of "superficial fairness and real fairness". In the real life, people's activities and conducts invariably lead to popularly accept certain practices. In other cases, commonly observed rules and regulations are formulated by reaching an agreement.

There are a great number of practices and regulations ubiquitously, from within a sector to among countries. To follow these practices and to abide by these rules and regulations mean fairness, otherwise deviation from fairness and equity, although these equity and fairness are only superficial and in form, or even veil actual unfairness. For instance, GATT/WTO have worked out a series of agreements and treaties binding every member. It should be said that it appears fair. Even this superficial fairness is the result of arduous negotiations of the world multi-lateral trade system for more than half a century. It does not come easily and deserves to be treasured. However, owing to the divergences existing among the members, and differences of economic and technological development level and production competitveness between developed and developing members, the strong will unquestionably have the advantage when they compete with each other on the same platform according to the same rules, which is a de facto unfairness. It is especially evident in agriculture support policies and implementation of "Agreement on Security Measures".

"Agriculture Agreement" reached at "Uruguay Rounds" contains rules and regulations, such as market accessibility, domestic support and export competition, etc.. The regulations of domestic support allow for the total support amount, which developing country members can use from "Yellow Box" measure, to exceed 10 percent of the production of that very product or agriculture general production, while developed country members less than 5 percent. On the face of it, developing country members enjoy a preferential treatment. However, limited by their own economy, they are unable to make best use of it. They end up with enjoying the favorable treatment but without getting benefit, with justice but without fairness. They are finally put into a position that they are presented with a cake which is a merely a picture drawn on paper. On the contrary, the developed country members can make full use of the agreement, granting a great amount of subsidies to their agriculture. Therefore, a de facto unfair competition has emerged. At recent Cotton Production and Export Conference, ministers of agriculture and trade from Western Africa specifically pointed out that, "Some western well-off countries gave subsidies to their agriculture 6 times higher than their aid to underdeveloped countries, which undermined the endeavors of African countries to eliminate poverty." They appealed that western developed countries should observe the fair competition principle of the WTO and give up the subsidies to their agriculture, but current agriculture subsidy policies have actually violated this principle.

In addition, protection measures involve the import of products under the condition of fair trade. Their implementation is bound to affect exporter's well-deserved interests. Therefore, "Agreement on Protection Measures" of WTO has laid down that the concerned members can consult with the other side on the losses of their benefits resulted from the implementation of the protection measures, and put forward their demand for trade compensation; if an agreement can not be reached by the set time, affected exporters can practice retaliatory measures on the importers who have started resorting to the protection measures and terminate the obligation reciprocally. It should be said that competing under the same rules of game is fair. Nevertheless, when the developed countries implement the protection measure on developing countries and both sides fail to reach any agreement on the compensation, then how capable are the latter of retaliating against it? Even if they do it, it is the developing countries that suffer the most. It is unfair to add some stipulations against the Agreement on Protection Measures of WTO to agreements when new members without or with little relevant knowledge about multilateral regulations apply for enrollment. First, the concept of "Market Disturbances" which is no longer used has been put into use again towards export products of developing countries; second, on the one hand, new members' lack of "rich experience" is acknowledged, on the other, at certain key points "serious damage" or "threat of serious damage" are replaced surreptitiously by "substantial damage" or "threat of substantial damage", or even the word "serious" is omitted, which greatly lowers the threshold for developing country members to apply the protection measures; third, the confusion of statements which clearly determine the causal relationship between import and damage or serious damage leads to resorting to the protection measures at will and affects the normal activities of trade. In fact, the Agreement on Protection Measures has a specific stipulation, "Do not attribute to increased export the damages caused by the factors outside increased export, which is at same time harmful to its domestic industry." All these are unfair and unjust, and violate the basic principle of WTO.

Fair competition is no "natural competition", or "full competition". In fair competition, differences are recognized without sacrificing unified regulations, competition protected with pursuit for fair competition. It signifies the handshaking of "invisible hand" and "visible hand", the combination of reality and good wish, and care for both development and stability. This is a social progress. Nevertheless, nowadays when unfair competition still ubiquitously exists, there are still a lot of work for "visible hand", namely, the government to do, including further strengthening multilateral and regional cooperation, formulating and perfecting competition policies, eradicating market accessibility discrimination, granting national treatment to both domestic and foreign enterprises, protecting intellectual property right, realizing sustainable development, which will help create a favorable environment for fair competition and promote continued, stable and healthy development of world economy. At present, people are paying a great attention to new rounds of multilateral negotiations of WTO. Whether it will become a real "development round" or not still depends on the efforts made by both sides, especially by developed country members to reach a comparatively "fair" agreement. Provided that an agreement can be reached at Doha Rounds on any one of the aspects among agriculture subsidy, anti-dumping, strengthening developing country members' capacity to carry out the agreement, then it is a new round of successful negotiation and a new contribution to fair competition environment made by WTO. In a word, regulation is helpful to competition and fairness seeking in competition. This is the inevitable choice for social economic development.

We believe that the issuance of the Declaration will be conducive to eradication of monopoly, promotion of fair competition and the well-being of all people on the basis of credibility by various countries and enterprises in the world.

(China.org.cn November 6, 2003)