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Direct Line: USOECD Paris Advocating Competitive Neutrality

Bureau of Economic and Business Affairs
December 11, 2012


Topic: USOECD Paris Advocating Competitive Neutrality

Hosts: Dr. Jeri Guthrie-Corn, Charge d’Affaires, a.i.; Acting ECON Counselor, Nicholle Manz

Date, time, time zone for call: Tuesday, December 11, 2012; 10:00 a.m. EST (4:00 p.m. CET)

Brief description of call: The U.S. business community has voiced the strong concern that they face stiff competition not just from private-sector actors, but from foreign government departments, sub-national governments, so-called "national champions," state-owned enterprises (SOE's), and other state-supported entities that are active in national and international marketplaces (collectively, SOEs, state-supported enterprises (SSEs), "national champions," and government departments that act commercially all fall under the label "state businesses"). The United States Mission to the Organization for Economic Cooperation and Development (USOECD) is responding to these strong concerns about competitive neutrality with an agenda that aims to level the playing field by ensuring that firms do not receive preferential treatment solely by virtue of government ownership. A variety of government practices can distort the marketplace in favor of state businesses to the detriment of their U.S. private competitors. The following list illustrates some of the practices that may unfairly distort competition:

  • Government authorities require that certain types of payments must be processed domestically, only by a central bank, or by a domestic firm.
  • Government authorities issue regulations that exclude foreign competitors to the benefit of a state business. Similarly, government authorities may also issue standards that effectively prevent competition from foreign firms.
  • State businesses enjoy immunity from anti-trust regulation or criminal prosecution.
  • Government authorities provide preferential access for domestic firms to distribution channels by government sanction or licensing, or they might implement certain technology transfer requirements.
  • Government authorities provide financing at non-market rates, or provide government-backed guarantees to state businesses in a way that props up domestic firms at the expense of foreign competitors. Such a practice may also prompt higher levels of risk taking by firms.
  • State businesses enjoy certain tax exemptions or advantages not available to competitors.
  • Government authorities do not ensure the adequate rule of law in such a way that foreign firms are unable, or wary, to invest.

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