State-Owned Enterprises Research Papers - Academia.edu (original) (raw)

Over the past few decades, the global trading community has seen
the rising impact of state capitalism as more state-oriented
economies have become increasingly enmeshed in the global
trading system. State-owned Enterprises (SOEs) have become
major players in the global market. This was not the case when the
World Trade Organization (WTO) agreement was negotiated. At
that time, the WTO presented a somewhat balanced approach to the
conflicting needs of providing a stable, regulated global trade
environment and maintaining the sovereign right of states to govern
their economies and public policy goals in their own manner. The
growth of state-involved economies, such as China, and the
development of SOEs in traditional economies has led to increasing
concern over the impact of SOEs and countries􀂶 abilities to
circumvent agreed trade disciplines through their use. Meanwhile,
the WTO has proven to be an inadequate source of regulation to
address the impact of this rise in state capitalism. As attempts to
revise the WTO to address contemporary issues ended without
success, countries have increasingly turned to bilateral and
regional preferential trade agreements (PTAs) to address their
concerns and ensure that the rise of the economic power of SOEs
does not harm the established conditions of competition in
international markets.
In this article, we analyze the implications of the various
approaches taken by the PTAs in addressing SOEs and whether they
have sufficiently established a regime that will achieve the balance
sought. The article places those disciplines in the context of the
current trade regimes, while considering that establishing trade
rules concerning SOEs raise fundamental questions about the
nature and degree of government involvement in commercial affairs
and the right of other governments to inquire into such involvement.
The key is to recognize that there are two simultaneous goals atto create the conditions for internationally contestable markets; on
the other hand, negotiators seek to permit domestic constituencies
to maintain sufficient policy space for using SOEs to contribute to
important public goals.
The emerging approaches to trade regulation of SOEs are thus
tested against such dual purposes, as well as whether they address
the tensions existing at the WTO level. Particularly, the present
study is the first to offer a comprehensive horizontal evaluation of
the trade regulation of SOEs designed by contemporary PTAs
adopted by the US, the EU, and other major trading partners. We
conclude through this analysis that, contrary to what is maintained
by other scholars, the current rules have not achieved balance.
There are weaknesses in the trade disciplines established by
contemporary PTAs that will lead to continued conflict among the
various aims and to continued stresses in the global trading system.
The article first discusses the objectives behind trade disciplines to
ensure the international contestability of markets, tempered by the
need to allow individual countries to use SOEs to achieve important
public policy goals. In the following part, we examine the traditional
rules governing trade as interpreted by the WTO dispute settlement
bodies and how they have addressed SOEs􀂶 commercial and
financial activities over time. Next, having established the relevant
context, we provide a critical evaluation of the PTA rules on SOEs,
considering whether they have achieved the goals the negotiators
had in mind. Finally, the article concludes that developing a
regulation that balances the competing needs of international
contestability with individual countries􀂶 ability to achieve their
public policy goals is a work in progress. Overall, we find that,
while the most advanced PTAs address SOEs􀂶 commercial and
financial activities more extensively than the WTO, the result has
not achieved a regime that fully balances all the competing goals.