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An FTA first
CPTPP is the first Agreement in which New Zealand has negotiated disciplines extending beyond goods trade which relate specifically to SOEs and monopolies. This was in response to the trend internationally for SOEs to evolve from government-granted monopolies operating mainly in national markets to state-owned corporations trading and investing in global markets.
SOEs from all over the world increasingly compete internationally with private firms, through exports of goods and services, through investment in other markets, and in competition with private companies in their domestic markets.
Levelling the playing field
New Zealand's state-owned commercial companies are already set up to operate on a level playing field with privately owned companies and are subject to competition laws so New Zealand's current approach meets CPTPP obligations and is in line with international best practice.
In some countries, however, SOEs and monopolies may be exempted from rules around anti-competitive conduct and have government-guaranteed advantages, such as preferential financing or preferential regulatory treatment, which can give them a competitive edge.
There may be little transparency about how these state-owned companies operate. Where these SOEs and monopolies are engaged in international trade and investment, this can have a distortive effect.
Addressing trade-distortive effects of SOEs
The trade-distorting activities of SOEs and monopolies are already addressed to some extent through existing international trade rules and through provisions in New Zealand’s existing free trade agreements. This is mainly through rules that do not distinguish between state-owned and private entities, such as the requirements not to discriminate against overseas imports and traders, and to regulate impartially.
The CP-TPP provisions build on these existing rules and focus more specifically on SOEs and monopolies. The obligations reflect the principles of New Zealand’s State-Owned Enterprises Act 1986 and New Zealand’s existing international obligations in the World Trade Organization.
These include:
- ensuring that SOEs act in accordance with commercial considerations including factors such as price, quality and availability and does not discriminate on the basis of nationality, except when it is making a public service available pursuant to a government mandate and in a non-discriminatory manner.
- ensuring that governments refrain from providing non-commercial assistance such as debt forgiveness or loan guarantees to its SOEs which may result in adverse effects or injury to the interests of another Party. Government support provided to an SOE for services that the SOE supplies within its own territory is excluded.
- ensuring that monopolies do not use their monopoly position to engage in anti-competitive practices (practices which restrict or distort competition, for example anti-competitive agreements and abuse of dominant position), in markets where the monopoly has not been granted monopoly rights, and that negatively affect trade and investment.
- transparency requirements for SOEs and monopolies while protecting confidential and commercially sensitive information.