Regulatory Harmonization Through FTAs and BITs: Regulation of State Owned Enterprises (SOEs)

Abstract

State capitalism is reemerging today. Some governments, notably newly emerging economies such as China and Russia and oil producing countries in the Middle East are placing much emphasis on state-led economic development, and they are making much use of state-owned enterprises (SOEs) to achieve that end. In some cases, SOEs enjoy privileges and immunities that may distort market competition between SOEs and foreign private firms. This paper explores this issue by examining the existing rules of international trade and investment law on competitive neutrality between SOEs and foreign private firms, and tracing the recent attempts of regulating SOEs through free trade agreements (FTAs), and, to a much limited extent, through bilateral investment treaties (BITs), so as to fill the gaps of existing rules of international trade and investment law on SOEs. As state capitalism and competitive neutrality are fairly new issues in contemporary international trade and investment law, it is still hard to know which of the recent attempts at regulating SPEs through FTAs and BITs is more effective than the other, etc. Continuous observation and assessment of the treaty practice is needed before we can reach any meaningful conclusion on this and other issues for the regulation of SOEs under international trade and investment law.

Keywords: state capitalism, competitive neutrality, state owned enterprises (SOEs), subsidies, FTAs, BITs

JEL Classification: F02, F10, F20, F30, F40