Comparing EU free trade agreements: Competition Policy and State Aid

The aim of this InBrief series is to provide a synthesis of various chapters of the ten free trade agreements (FTAs) recently concluded by the European Union with developing countries, as well as other relevant trade agreements when appropriate. Each InBrief offers a detailed and schematic overview of a specific set of trade and trade-related provisions in these agreements. 

Competition policy is a relatively new feature in international trade agreements. It has arisen in response to the recognition that international trade can provide both the rationale and the opportunities for firms to engage in anti-competitive behaviour. In the absence of effective competition policy, domestic firms can collude to keep foreign competitors out of their markets, de facto barring the benefits of market opening. Similarly, exporting firms can abuse their dominant position in different foreign markets by dividing those markets amongst themselves. Collusion and mergers and acquisitions (including those between foreign and domestic firms) can also reduce competition in the international marketplace. Another issue is that of public (state) aid or special treatment targeted to improve the performance of either domestic import-competing firms or the position of domestic exporting firms. Such subsidies can be seen as competition-distorting and therefore be included in the competition provisions of trade agreements.