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Ambassador Kirk Announces Results of Annual 1377 Review

Washington, D.C. - United States Trade Representative Ron Kirk today announced the results of the 2010 annual review of the operation and effectiveness of telecommunications trade agreements under Section 1377 of the Omnibus Trade and Competitiveness Act of 1988 ("1377 Review"). The results of the review, concluded on March 31, 2010, are detailed in a public Report released today. The Report of the 1377 Review identifies barriers facing U.S. telecommunications service and equipment suppliers, evaluates progress toward resolving ongoing problems, and identifies specific telecommunications-related issues on which USTR will focus its monitoring and enforcement efforts this year.

"Few sectors are more global than telecommunications. Telecommunications technology, services, and equipment are a major driver of trade, growth, and innovation," said Ambassador Kirk. "U.S. service and equipment suppliers excel in the sector, and they need global access in order to ensure their competitiveness, both domestically and abroad. We are vigilant in identifying barriers, market by market, and focused on working with our trading partners to remove them."

This year's Report of the 1377 Review focuses on a broad range of concerns, including:

Fixed and Mobile Call Termination Rates: The Report highlights the high rates or surcharges foreign operators in El Salvador, Jamaica, Japan, Peru, and Tonga charge U.S. telecommunications operators to deliver long-distance calls into the foreign operators' countries (the "termination rate"), resulting in higher costs for U.S. carriers and higher prices for U.S. consumers. Regulators in several countries, including Japan and Tonga, have begun to take necessary measures to address these issues (Japan is implementing rate reductions and Tonga is taking steps to remove a government-mandated rate that precluded competition).

Issues with Major Suppliers: The Report highlights problems that competitive telecommunications carriers encounter in Australia, China, Germany, India, Mexico, and Singapore when trying to lease parts of an incumbent operator's network, or compete against the dominant satellite services company. In Australia and Singapore, the governments, cognizant of the role incumbents have long played in thwarting competition, have taken dramatic steps to try to address the problem.

Issues Affecting Telecommunications Equipment Trade: The Report discusses the equipment standards and conformity assessment procedures (including testing requirements) imposed by Brazil, China, the European Union, India, Indonesia, Malaysia, Mexico, South Korea, and Thailand that may act as barriers to entry for U.S. telecommunications equipment. In several of these markets (Mexico, Chile, Brazil and China), USTR has taken steps to initiate negotiations to provide a framework to streamline equipment approval processes and promote greater transparency. The United States is also working with the European Union to ensure that EU-wide adoption of a certain standard does not prevent the deployment of innovative technologies applicable to the "smart" energy sector.

Other issues: The Report also discusses China's lack of transparency with respect to development and adoption of standards and regulation, Costa Rica's delays in awarding spectrum to mobile operators seeking to compete with Costa Rica's incumbent telecommunications supplier, and an initiative by certain members of the International Telecommunication Union to promote discriminatory international termination rates.

Follow-up action: In the review, the Office of the United States Trade Representative (USTR) identifies the most effective bilateral or multilateral fora through which to monitor, engage, and seek to resolve these issues, and describes the discussions that in many cases are already underway.

BACKGROUND

Section 1377 of the Omnibus Trade and Competitiveness Act of 1988 requires USTR to review compliance by trade partners with trade agreements regarding telecommunications products and services (mainly, World Trade Organization and Free Trade Agreement (FTA) commitments) by March 31 of each year. International trade agreements, including the WTO's General Agreement on Trade in Services (GATS) and U.S. FTAs, provide rules designed to ensure that companies have reasonable access to telecommunications networks, that competitive conditions are maintained, and that regulators act in a transparent and effective manner. These agreements also address conditions affecting the competitive supply of telecommunications equipment in foreign markets. USTR will continue to use these tools to assist in opening markets to give U.S. companies the ability to supply new and innovative products and services abroad.

The full report is available here.