on the proposal for a Council decision on concluding the Agreement between the Government of the Republic of Korea and the European Community concerning cooperation on anti-competitive activities

(SEC(2007)1731 - C6‑0398/2008 – 2008/0004(CNS))

(Consultation procedure)

The European Parliament,

–   having regard to the proposal for a Council decision (SEC(2007)1731),

–   having regard to the Agreement between the Government of the Republic of Korea and the European Community concerning cooperation on anti-competitive activities,

–   having regard to Articles 83 and 308 of the EC Treaty,

–   having regard to Article 300(3), first subparagraph, of the EC Treaty, pursuant to which the Council consulted Parliament (C6‑0398/2008),

–   having regard to Rules 51 and 83(7) of its Rules of Procedure,

–   having regard to the report of the Committee on International Trade and the opinion of the Committee on Economic and Monetary Affairs (A6‑0452/2008),

1.  Approves the proposal for a Council decision as amended and approves conclusion of the agreement;

2.  Instructs its President to forward its position to the Council and Commission, and the governments and parliaments of the Member States and the Republic of Korea.

Amendment  1 Proposal for a Council decision – amending act Recital 2 a (new) Text proposed by the Commission Amendment   (2a.) As mutual recognition of competition law between the European Community and South Korea is the most efficient way to tackle anti-competitive behaviour, the use of trade defence instruments (TDIs) between the two parties should be minimised; Justification The EU and South Korea have decided to mutually recognise each others' competition laws which provide an efficient means to tackle anti-competitive behaviour. Since TDIs are used to tackle anti-competitive behaviour when competition laws are lacking or are not mutually recognised, the coming into effect of the cooperation agreement should mean that EU and South Korea recognise each others' laws and authorities so TDIs will become obsolete in the relation between the two parties. Amendment  2 Proposal for a Council decision – amending act Recital 4 a (new) Text proposed by the Commission Amendment   (4a) This Agreement should be considered in the context of the overall framework of existing agreements between the European Community and the Republic of Korea and those currently under negotiation, in particular the negotiations concerning a potential free trade agreement. Justification As the Parliament noted in its resolution of 13 December 2007(1) on trade and economic relations with Korea, a wide ranging, ambitious and well balanced agreement could produce significant benefits for each side. At the same time, it is important that this Agreement, which seeks to combat anti-competitive practices, should form part of broad, balanced package of agreements between the EU and Korea, that would also cover cooperation on issues such as the promotion of social and environmental standards.

(1) P6_TA(2007)0629.

The Korea-EC Competition Agreement

The European Commission’s DG Competition and the Korean Fair Trade Commission (KFTC) signed a Memorandum of Understanding in October 2004, establishing a structured dialogue. Exploratory talks concerning a formal cooperation agreement between the EU and the Republic of Korea began in June 2006. The Agreement was concluded in early 2008 and declassified on 18 February although the text has continued to be subject to amendments. Similar agreements are already in place with the United States (1991), Canada (1999) and Japan (2003).

The Agreement seeks to contribute to the effective enforcement of competition laws by promoting cooperation between competition authorities and reducing the likelihood of conflicts. It provides for notification of enforcement activities by one of the competition authorities that may affect important interests of the other party, mutual assistance, including the possibility for one side to ask the other to undertake enforcement action, and coordination of enforcement activities as well as exchanges of information. There are also measures concerning confidentiality.

Competition Agreements

Given that, for decades, international trade has been growing significantly faster than national incomes, and that Foreign Direct Investment has also been expanding rapidly, it follows that the world’s economies are becoming increasingly interlinked.

Whilst welcome, these strengthening links carry with them an increased likelihood that anti-competitive practices may affect more than one market and that the action of one competition authority may have implications for others. Ensuring effective flows of information between the authorities, whilst maintaining the required degree of confidentiality, is therefore highly desirable.

With cartels frequently involving companies that are operating internationally and the international dimension of mergers growing with increased globalisation and foreign investment, competition authorities need to cooperate so as to ensure that the public interest is protected and to enable national authorities to combat anti-competitive activities that are geographically widespread. Clearer international standards should also be of benefit to those firms operating in several companies and provide reassurance to those fearing that their competitive position is being unfairly undermined.

Korea is the EU’s fourth largest non-European trading partner and the EU is Korea’s largest foreign investor. Given the growing importance of this partnership it seems appropriate that Korea should be added to the three other partners with which the EC has agreements concerning cooperation on anti-competitive activities.

Of course, an Agreement of this type merely provides the framework for effective cooperation. Much will depend on how the various provisions are implemented in practice. But it is reasonable to expect that more frequent contacts and exchanges of information will be up the confidence required to ensure a high level of mutual assistance.

In view of the growing importance of trade and economic relations with Asia, consideration should be given to enhancing links with other significant, fast growing economies such as that of India as well as EU neighbours such as Switzerland. In this context it is worth noting that the US has competition agreements with Australia, Brazil, Canada, Israel, Japan and Mexico as well as the EC.

Other Agreements with Korea

The Parliament has already given broad support to a free trade agreement with Korea whilst calling for such an agreement to be ambitious, high quality and going well beyond tariff reductions. During the seventh negotiating round, which took place between 12 and 15 May 2008, it was agreed that the next round of negotiations would be the final one.

Whilst the prospect of a conclusion to these negotiations is welcome, particularly given the problems that have been encountered by other bilateral and interregional trade negotiations, the Parliament should continue to insist that the substance of the agreement is more important than any artificial deadline.

The competition clauses in the wider agreement should be consistent with and support those of the specific competition agreement. More generally, in order to secure political and public acceptance of the agreement in both Korea and the EU, it will be important that the level of ambition with regard to increased market access is balanced by an equally ambitious approach to sustainable development.

It must also be remembered that the ultimate objective is the enforcement of agreed social and environmental standards. This means that the sustainable development chapter should be subject to effective enforcement mechanisms. A trade and sustainable development forum, made up of representatives from workers’ and employers’ organisations and from NGOs, would play a valuable role in ensuring that greater market opening is accompanied by rising social and environmental standards. However, to ensure that such a forum is more than a talking shop, a mechanism should be established whereby recognised EU or Korean worker or employer associations were able to submit requests for action. Such requests should be investigated and responded to within a specified time period, with the possibility of ongoing follow-up and review, so as to maintain pressure on those who violate workers’ rights or environmental standards.

In press releases about the negotiations, DG Trade has highlighted industrial tariff liberalisation, behind the border issues such as standards and certification in industries such as electronics and automotive and liberalisation in different service sectors in Korea. Whilst these are certainly important and can have significant implications for European firms and workers, market access is only one element of a successful agreement. What is needed is for the Commission to show equal vigour in promoting non-trade concerns that directly affect European and Korean citizens’ working and physical environments.

Whilst these points may seem somewhat removed from an agreement dealing with cooperation to prevent anti-competitive practices, they become relevant when this Agreement is seen as part of a framework of cooperation between the European Union and the Republic of Korea designed to ensure the effective promotion of public policy goals. In this context, it is perfectly reasonable to welcome the conclusion of the Competition Agreement whilst calling on the Commission to invest equal effort in promoting agreements to address social and environmental issues that are of direct concern to citizens in the EU and Korea.

SHORT JUSTIFICATION

In mid-January the European Commission presented a proposal for a Council decision on the EC-Korea cooperation agreement. In accordance with article 83 of the Treaty, Parliament has to be consulted on the proposal.

The agreement is part of a series of Council decisions in the field of international cooperation on anti-competitive activities. So far formal intergovernmental agreements exist with the United States (signed in 1991), Canada (1999) and Japan (2003). The EC has also concluded so-called inter-agency arrangements which allow the parties to establish closer and more regular contacts. The Memorandum of Understanding concluded between DG Competition and the Korean Fair Trade Commission (2004) is a good example of this type of agreement.

CONTEXT:

The current proposal for an agreement between the Government of the Republic of Korea and the European Community concerning cooperation on anti-competitive activities expresses the view of both parties: that world economies are moving ever closer together and are becoming more interdependent. On a microeconomic level, companies increasingly operate across borders. Trade volumes between Asian countries and EU member states have multiplied during recent years. In this light, both parties, the EC and the Korean Government, share the view that competition law is vital to the efficient operation of their respective markets, as well as to the economic welfare of European and Korean consumers.

The proposed agreement aims at enforcing the respective competition laws by promoting cooperation and coordination between the EC and Korean competition authorities and to avoid, or at least to reduce, the probability of potential conflicts.

To summarise, the key provisions of the agreement are as follows:

- Notification (Art 2)

- Enforcement cooperation (Art 3)

- Coordination of enforcement activities (Art 4)

- Conflict avoidance/Negative Comity (Art 5)

- Positive Comity (Art 6)

- Confidentiality (Art 7)

- Meetings (Art 8)

RAPPORTEUR'S ASSESSMENT:

Globalisation and competitive pressure will undoubtedly increase over the coming years. The importance of efficient cooperation between competition enforcers will therefore increase at an even more rapid pace.

Hence, your rapporteur welcomes the proposal for an agreement between the Government of the Republic of Korea and the European Community wholeheartedly. It is in line with the wish of the European Parliament, expressed in various resolutions, to include the third country dimension in the application of European competition law.

In fact, a solely national or even regional approach to competition policy would not reflect today's business reality. If, for example, companies create international cartels and operate them across borders, it becomes vital for competition authorities to respond in an appropriate manner. In order to do so, they will need to communicate with each other at an early stage in the investigation in order to coordinate their enforcement activities and exchange information.

If cross-border competition authorities cooperate fully, it is possible to create an important and efficient deterrent for anti-competitive cross-border alliances.

It must also be the aim that the same companies and the same questions regarding competition legislation are treated in the most consistent manner possible in both parties, reducing the risks of companies making use of legislative differences and reducing the risks of actions intending to undermine competition on national as well as international level.

However, the obstacles to international cooperation are manifold: there are differences in the way legal systems operate, some focusing on civil law, others on criminal law; we are confronted with different enforcement cultures, where the focus may rather be on public rather than on private enforcement and finally, there are different policy approaches, for example strict merger rules as opposed to ex post abuse control.

These structural difficulties cannot be avoided or overcome through the cooperation of competition authorities. Therefore, one has to be realistic about the possible positive effects of such cooperation agreements. Competition agencies can certainly try to minimise their adverse impact through international cooperation, but will face restrictions doing so.

This agreement should therefore be followed up by further trade agreements taking away unnecessary hindrances for trade and investments, thereby increasing competition based upon political agreements and common rules. Both parties should aim for the making of such political agreements into multilateral solutions, involving more countries and increasing the credibility of equal treatment of different companies. In a wider perspective your rapporteur underlines the importance of multilateral trade and competition rules for achieving free and open cross-border markets.

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The Committee on Economic and Monetary Affairs calls on the Committee on International Trade, as the committee responsible, to propose approval of the Commission proposal.

PROCEDURE