Essays in Honour of Peter Lloyd, Volume I
Edited by Sisira Jayasuriya
Chapter 8: Reforming trade-distorting state trading enterprises
8. Reforming trade-distorting state trading enterprises* Steve McCorriston and Donald MacLaren 1. INTRODUCTION State trading enterprises (STEs) are an important and controversial feature of several markets for internationally traded goods and services. While state trading enterprises were recognized in GATT 1947 (Article XVII:3) as a possible source of trade distortions because of their potentially anticompetitive eﬀects, it is only relatively recently that state trading has emerged as a substantive issue in the context of the GATT and the World Trade Organization (WTO) (Hoekman and Low, 1998). The principal explanations for this emergence are perhaps three-fold. First, STEs are to be found largely in sectors which, until 1995, lay largely outside the application of the Articles of GATT 1947, namely, those of services and agriculture. Second, there are a number of transition economies where STEs are pervasive and which are becoming members, or which are applying to become members, of the WTO.1 And third, STEs appear anachronistic and contrary to the general trend towards competition policy and reduced government involvement in markets, both domestic and international. During the Uruguay Round negotiations, Article XVII of GATT 1947 was discussed with a view to making it more eﬀective as a constraint on the activities of STEs rather than with a view to re-drafting it.2 The main deﬁciency in that Article was that it had not provided a deﬁnition of an STE and, as a consequence, STEs that should have been notiﬁed to the GATT were not (Davey,...
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