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State-Owned Enterprises as Global Competitors

A Challenge or an Opportunity?

image of State-Owned Enterprises as Global Competitors

An estimated 22% of the world’s largest firms are now effectively under state control, this is the highest percentage in decades. These firms are likely to remain a prominent feature of the global marketplace in the near future. The upsurge of state-owned enterprises (SOEs) as global competitors has given rise to concerns related to a level playing field.  Some business competitors and observers claim that preferential treatment granted by governments to SOEs in return for public policy obligations carried out at home can give SOEs a competitive edge in their foreign expansion. The OECD has taken a multidisciplinary approach, looking at the issue from the competition, investment, corporate governance and trade policy perspectives.  The report aims to sort fact from fiction, and develop a stronger understanding, based on empirical evidence, on how to address growing policy concerns with regard to SOE internationalisation. The report concludes that although there is no clear evidence of systematic abusive behaviour by SOE investors, frictions need to be addressed, in view of keeping the global economy open to trade and investment.

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State-owned enterprises as actors in international trade

SOEs are growing actors in international trade and global value chains. This chapter explores the extent to which the international trading system, under the rules of the WTO and other international agreements, are equipped to cover market distortions caused by financial and regulatory support granted to (and by) SOEs. The chapter points out that trade rules are ownership neutral, but it remains debated whether a specific set of rules are need to cover SOEs. The chapter explores regulatory frameworks and practices at the domestic level which can safeguard a level playing field. It covers existing binding international agreements and treaty practice, and explores potential gaps in their coverage. It points to the need for sounder incentives for states and SOEs to abide by market and transparency principles, including the consideration of rules on subsidies granted to SOEs as a priority for further deliberations in the international trade context.

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