When Leviathan Comes to Market: Emerging Multilateral Disciples on State Owned Enterprises and What Existing Rules on State Trading Enterprises and Sovereign Wealth Funds Can and Cannot Teach Us

Abstract

With the rise of China as a global economic power, only subscribing in part to the model of market capitalism, and with the rise ‐ before China ‐ of the so‐called Asian tigers, all of which pursued state‐led economic growth strategies, one needs to question whether the free‐market consensus was even much of a consensus to start with. In fact, one does not have to go as far as Asia to see the statist model practiced in various degrees of intensity: Much of Europe, including of course Russia, never really lost its appetite for a big public sector, with varying degrees of direct and indirect interventions across a range of economic sectors (aerospace and energy to name just two). More than anything else, it was arguably the Global Financial Crisis of 2008 which did the most to put the nail in the coffin of any notion that the state must keep a healthy distance from the market, as governments all over the world leaped to the aid of various sectors of their economies in order to preserve jobs, maintain industrial bases, and in many cases, just keep the lights on. One set of rules, adopted more than 60 years ago, to try and impose disciplines on governments when they intervene in markets as commercial actors, was those on state trading enterprises negotiated under the auspices of the International Trade Organization and which eventually came into force under the General Agreement on Trade and Tariffs (GATT). Another set of disciplines which have emerged more recently, are the Generally Accepted Principles and Practices of the International Working Group on Sovereign Wealth Funds, under the auspices of the International Monetary Fund, otherwise known as the Santiago Principles. The latest efforts to subject governments to some kind of discipline when they intervene as market actors are those currently being formulated at the OECD under the mantra of competitive neutrality. Underlying all these frameworks are some key concepts of how governments should comport themselves when they take their place alongside private‐sector actors to contest markets as economic operators rather than overseers or regulators. This paper attempts to distill what these principles are, and to measure them against what can realistically be achieved in terms of policing the actions of sovereign countries under the inherently soft rules that characterize public international law.