State-Owned Enterprises in the TPP Agreement
State-owned enterprises (SOEs) are enterprises owned by states or governments for the purpose of accomplishing some governmental purposes. Chapter 17 of the TPP provides the rules designed to require the Parties of the TPP to subject SOEs in their jurisdictions to disciplines as provided for in Chapter 17 so that behaviors of SOEs would not be harmful to private enterprises in the market of the Parties and would not be unduly disruptive of the operation of free market there. Chapter 17 defines SOEs as enterprises which primarily engage in commercial activities and in which Parties (a) own 50% or more of their stocks, (b) control 50% or more of voting rights through the ownership of share or (c) have the right to appoint more than one half of their governing bodies such as board of directors. Commercial activities are defined as activities oriented toward profit-making. Chapter 17 directs Parties to ensure that SOEs within their respective jurisdiction operate according to commercial activities and that Parties would not provide to SOEs financial assistance on non-commercial basis in their jurisdictions. All of such directives are designed to ensure that SOEs within the TPP act just like private enterprises and, therefore, the level playing field between SOEs and private enterprises is created. However, Chapter 17 provides many exceptions to the general rules. Exceptions consist of those of general nature and country-specific ones. In fact, about 70% of the whole pages (about 100 pages) is devoted to those exceptions. Chapter 17 is subject to review in 5 years after the TPP takes effect including whether to expand its scope or not. Therefore, it is expected that there may be substantial changes in future. Although Article XVII of the GATT stipulates rules of SOEs, its scope is limited to export and import trade. It is worthwhile that Chapter 17 in the TPP is the first international agreement which provides for and elaborates on comprehensive and detailed rules on SOEs and, in this sense, significant.