Levelling the Playing Field: The Role of Competitive Neutrality in Trade Agreements

In purely capitalist countries, governments rarely operate businesses, whereas in several developing and socialist economies, both public and private sector participants regularly engage in commercial activities. While governments can participate in various industrial, commercial, or investment activities, such activities can distort the marketplace and tilt the level playing field. While the issues surrounding government-run state trading enterprises that are involved in export and import activities have been a subject of disciplines since GATT 1947, recent free trade agreements take a more holistic approach in regulating the role of the State. Newer trade agreements explicitly incorporate competitive neutrality through enhanced disciplines on state-owned enterprises, subsidies, and competition. The goal is to ensure that no business gains an advantage on account of its relationship with the State. The article identifies the core tenets of the competitive neutrality principle and outlines how it is administered across comprehensive free trade agreements.