The weather in Paris on Thursday, June 19, was just about perfect, sunny and in the 70s.  As for the temperature inside at 2, rue André Pascal, the headquarters of the OECD, we cannot say.  We doubt it was too heated at the 2nd OECD Workshop on Trade and Investment by State-Owned and State-Controlled Enterprises.  Yet there must have been some controversy, for the topic is inherently a contentious one.  The reasons for that contentiousness, that conflict of interests, are well laid out in the paper Alan Wolff submitted to the OECD for the occasion, The State and Its Enterprises:  Competition from State-Owned Enterprises and the Role of International Trade Agreements. 

Mr. Wolff is Senior Counsel at McKenna, Long, and Aldridge and Chairman of the National Foreign Trade Council.  His June 19 paper for the OECD workshop is the source for today's quote.  Here are a few more fragments, along with some other notes on the issue. 

Different Actors, Different Mindsets. The first thing one notices in a discussion of SOEs is the difference in attitudes towards them.  In announcing the June 19 workshop, for example, the OECD took note of the core issue from the perspective of private businesses, namely "the potential for distortions in international markets."
  
Mr. Wolff approaches the issue of commercially competitive SOEs somewhat differently.  He writes:

Different Kinds of SOEs.  There are different kinds of SOEs, with different histories and different political rationales for their continuation. One example Wolff cites is the Indian railway system with its 1.4 million employees.  It's the world 9th largest employer.  As Wolff explains, the Indian railway started out as a development measure but, politically, the employment it provides may be its most salient feature.  Competing with foreign rivals is not an important part of that picture.

For the Japan Display Corporation, however, competing with foreign rivals like Samsung is its "publicly reported purpose."  Created in 2011, the firm is a hybrid, as it is 70 percent owned by the Japanese government - or more accurately by a Japanese government owned corporation - and 30 percent by three private companies.  For Wolff, the Japan Display Corporation is an instrument of industrial policy.  "When industrial policy is the primary motivation of state intervention in the form of state ownership," he writes, "the intent is often to affect international competitive outcomes."

SOEs in Three Geographies.  Alan Wolff is one of America's best known trade lawyers.  So, it was not surprising that he highlighted the effects of SOEs in the same three markets one might consider in subsidies cases: the markets of third countries, the market of the private sector rival, and the SOE's home market.  Briefly, there is not much a private company can do to defend itself in third countries.  In its own market, the private firm can fight unfair competition from SOEs with antidumping and/or countervailing duty cases.  In the home market of the SOE it is up against Goliath and without a slingshot.  And when the SOE is Chinese, that's important because the Chinese market is, for almost everything, enormous.   Wolff demonstrates the power of the SOE at home with the example of foreign producers of wind turbines in China.  He writes:

Deciding on the right adjective is always difficult.  When one considers the enormous stake that so many countries have in not living by strict disciplines for SOEs, and further, when one considers how much of the SOE discussion is aimed at China, a country that is not part of either the TPP or T-TIP negotiation, the first adjective that comes to mind is "quixotic."  But quixotic to us means impossible, and the pursuit of SOE disciplines is not impossible.  It will take a long time, and it is very important, but it is not impossible.  "Visionary" might be a better word.  

The best way to get a proper sense of the challenge is to read the Wolff paper backwards.  At the end of his paper Wolff writes:

As for where Wolff would like that code of conduct to end up, that was in the beginning of the paper when he wrote:

In time, and with lots of effort, all of those things can happen, but not without some evolution in how the major actors see their national interests.

Finally, perhaps because the Fourth of July is just a couple of days away, we thought of the Declaration of Independence when we read that one U.S. objective in TPP is "Rules that will provide transparency with respect to the nature of government control and support for SOE."

That resurrected the prideful thought that one of America's better exports was the copyright-free phrase "a decent Respect to the Opinions of Mankind... ."