International Trade and Investment by State Enterprises

The recent surge in competition between state and private firms in global markets calls for a reflection on how to minimise any potentially distortionary effects on international trade and investment created by state enterprises while at the same time restraining any undue protectionist policy responses directed at them. This paper provides an assessment of the extent and nature of existing and potential problems as well as a stocktaking of regulatory approaches that can be used to alleviate them. The new empirical evidence on the extent and nature of existing problems presented in this paper comes from the OECD Business Survey on State Influence on Competition in International Markets conducted on 157 firms in 2014. The characterisation of the regulatory landscape draws on the information contained in the OECD Database on National Practices and Regulations with Respect to State Enterprises which comprises 41 indicators covering relevant practices and regulations across 43 countries. In conclusion, cross-border effects of state enterprises remain an important policy issue but views on how to obtain a more level international playing field differ across countries. Further consideration of the definition of entities which should be the focus of guidance of potential international disciplines would be an important area for future exploration and, crucially, would require greater transparency both from the governments and the entities under their influence. These discussions should not be limited only to state-owned entities, but should be extended to a broader spectrum of state firms. In the meantime, it is important that governments neither use state enterprises to influence competition in international markets, nor unduly discriminate against foreign state enterprises that trade and invest according to market principles.