How preferential trade agreements address market distortions from state enterprises

6. How do PTAs deal with the issue of preferential treatment and regulatory privileges benefitting state enterprises?

As noted earlier in this report, the application of different, more favourable, set of laws or regulations with respect to SEs, whether in the area of bankruptcy, procurement, competition, or elsewhere, may affect the level playing field. In this respect, a few PTAs include an express obligation on Parties to enforce laws and regulations in a consistent and non-discriminatory manner, including with regard to SEs. These same agreements also require Parties to guarantee the independence and impartiality of bodies regulating SEs, as well as to ensure that SEs comply with the OECD SOE Guidelines.1 Similarly, one PTA requires a Party to ensure, “including through its policy of competitive neutrality” that its central and sub-central governments do not provide any competitive advantage to any SEs simply because they are government-owned.2 These broadly worded obligations would enable Parties to be constrained from granting any kind of more favourable treatment or regulatory privileges to an SE. Interestingly, although non-compliance with such obligations may be enforced through the dispute settlement mechanism of the PTA concerned, some countries may also have enforcement mechanisms in place at the national level and allow the government of the other Party or a person of that Party access to that system.3

While the presence of such general obligations is relatively limited across the different PTAs containing disciplines on SEs, more specific obligations on Parties to treat all enterprises equally under their competition laws are more commonly incorporated into PTAs.4 In this report, it is considered that the mere presence within PTAs of provisions laying down an obligation of equal treatment under competition laws is not sufficient for the agreements to be counted as having disciplines on SEs. That, said, information on these provisions has been collected with a view to offering a better understanding of their prevalence among PTAs. This data collection effort has permitted to capture those PTAs, which, while not necessarily containing comprehensive disciplines on SEs, still include provisions implementing the principle of competitive neutrality. In this respect, the number of such agreements is higher than the number of PTAs with rules on SEs (Figure 7).5 Importantly, while China has not ratified any PTAs with SE disciplines, all the PTAs that China has signed or upgraded6 since 2014 contain general competition provisions and, in some cases, an obligation to comply with the principle of non-discrimination when applying competition laws (Annex F). By contrast, none of the agreements concluded by the GCC or any of the countries of the GCC individually include an obligation of equal treatment of firms under the domestic competition laws.7

Notes

← 1.  See, for instance, Article 169 EU-Kazakhstan Enhanced Partnership and Cooperation Agreement, which requires Parties to the agreement to ensure that SEs “observe high standards of transparency and corporate governance in accordance with the 2005 OECD Guidelines on Corporate Governance of State-Owned Enterprises.” In total, the OECD found eleven agreements with a reference to international standards, including inter alia the OECD SOE Guidelines.

← 2.  See Article 14.4(3) United States-Australia FTA imposing such an obligation on Australia only.

← 3.  Australia has, for example, established the Australian Government Competitive Neutrality Complaints Office, which deals with complaints by any individual, organisation, or government body concerning competitive advantages enjoyed by SEs by virtue of their government ownership, inconsistent with their competitive neutrality obligations. See https://www.pc.gov.au/about/core-functions/competitive-neutrality (accessed on 4 March 2026). In this respect, it is notable that the United States-Australia FTA requires the Competitive Neutrality Complaints Office to accord treatment no less favourable to complaints lodged by either the United States or persons of the United States than complaints lodged by persons or governmental authorities of Australia (Article 14.4(3)).

← 4.  The OECD has identified three different types of provisions imposing an equal treatment obligation: (i) a broadly formulated provision requesting Parties to comply with the principle of non-discrimination when applying their competition laws; (ii) a more specific provision requiring Parties to apply their competition legislation without distinction between enterprises on the basis of ownership; and (iii) a provision expressly referring to SEs, as defined under the PTA concerned.

← 5.  Note that among the PTAs containing an equal treatment obligation under competition laws, a subset has introduced discipline on SEs.

← 6.  In 2017 and 2018, China signed two Protocols with, respectively, Chile and Singapore to deepen the FTAs it had signed with these two countries in 2005 and 2008, notably by extending the scope of the agreements to new policy areas, including inter alia electronic commerce, competition, or environment, so as to better regulate measures enacted behind the borders.

← 7.  This may in part be due to the fact that countries of the GCC have long maintained or continue to maintain some forms of exemptions under their national competition legal frameworks by excluding companies owned or controlled by the state from the reach of their competition laws (OECD, 2024[1]).