Regulation of State-owned Enterprises through Trade Agreements: Evolving concept of commercial consideration

Article XVII was included in the General Agreement on Tariffs and Trade (GATT) with a view to prevent state trading enterprises (STEs, which may encompass state-owned enterprises, SOEs), not Members themselves, from transactions that impede international free trade, by requiring those enterprises to act in accordance with "commercial considerations." This provision was contemplated to take a central role in regulating the behavior of STEs/SOEs under GATT and the World Trade Organization (WTO). However, this provision, for a long time, was regarded as insufficient in fulfilling its purpose, and its performance record was also poor.

Against this backdrop, some attempts have emerged in recent WTO accession documents and free trade agreements (FTAs) to introduce WTO-plus provisions, although they do not fundamentally depart from the basic principle of Article XVII GATT. This paper investigates individual WTO accession documents, FTAs mainly concluded by the United States and the European Union, and the Trans-Pacific Partnership (TPP) Agreement in order to reveal the aforementioned trend, and elucidates how SOE-related disciplines are developing. The major advancements form Article XVII GATT are the isolation of commercial consideration from the non-discrimination principle and the expansion of the scope of such concept.