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USTR Announces Results of Annual 1377 Review of Telecommunications Trade Agreements

Washington, DC – United States Trade Representative Ron Kirk today announced the results of the 2012 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, 2012, are detailed in a public report released today. The Report of the 1377 Review identifies barriers facing U.S. telecommunications service and equipment suppliers as well as specific telecommunications-related issues on which USTR will focus its monitoring and enforcement efforts this year. In the review, USTR also highlights the bilateral or multilateral avenues through which we monitor, engage, and seek to resolve such issues, and describes discussions that in many cases are already underway.

This year’s full Report of the 1377 Review is available here. The report focuses on a broad range of concerns, including:

Issues Affecting Telecommunications Equipment Trade: The report highlights the concern that U.S. equipment manufacturers may be disadvantaged by the growing use of local content requirements in countries such as Brazil, India, and Indonesia. The report also discusses the use of equipment standards and conformity assessment procedures (including testing requirements) that act as barriers to entry for U.S. telecommunications equipment, including policies in the following countries: China (multi-level protection scheme), India (restrictions on use of strong encryption and onerous security requirements for the importation of telecommunications network equipment), and Brazil, China, Costa Rica and India (mandatory certification requirements and requirements for local testing).

Cross-Border Data Flows and Internet Enabled Trade in Services: The report highlights concerns with restrictions on data access and transfers, focusing on issues in China and Vietnam and issues with Voice over Internet Protocol (“VoIP”) services generally.

Independent and Effective Regulator: The report also discusses issues relating to licensing of Internet via satellite services in Costa Rica.

Foreign Investment: Foreign investment limits, typically in the form of limits on the percentage of equity a foreign firm can control, were widely cited by commenters as a trade-distortive barrier. This year’s report focuses on Thailand, Canada and Mexico.

Issues with Access to Major Supplier Networks: The report highlights problems that competitive telecommunications carriers have encountered in Germany and Mexico trying to access an incumbent operator’s network and ongoing efforts to address these issues.

Fixed and Mobile Call Termination Rates: The report again highlights concern that U.S trading partners are seeking ways to increase the rates U.S. telecommunications operators must pay in order 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. This year’s report focuses on problems in El Salvador, Ghana and Jamaica.

Satellite and Submarine Cables: The report highlights problems regarding U.S. operators’ ability to offer satellite capacity to customers in China and India and in obtaining competitive access in a timely fashion to cable landing stations (CLS) located in India.

Today, Ambassador Kirk noted progress in addressing issues outlined in the 2011 report.

“Since the release of last year’s 1377 Report, we have seen progress on key issues in Mexico and Canada,” said Ambassador Kirk. “In Mexico, the through the efforts of USTR and all parties involved, providers have resolved several disputes with a U.S.-affiliated competitor and agreed to work on long-term solutions to pricing and access. In Canada, the government has recently proposed lifting investment limits on companies comprising less than 10 percent of the market. Approval of such a proposal could be a step toward bringing more competition and foreign participation into the Canadian market. In addition, we are monitoring potentially positive action in India, where the regulator is reviewing rules governing access to submarine cable landing stations; and Germany, where the regulator has proposed new rules to ensure fair access to ‘Next-Generation networks’ – for instance, Internet-protocol-based networks.”

In addition, the United States and Mexico successfully concluded a Telecommunication Mutual Recognition Agreement that will permit recognized U.S. laboratories to test telecommunications products for conformity with Mexican technical requirements, and vice versa. This saves manufacturers the time and expense of additional product testing and lowers prices for consumers. The agreement covers equipment subject to telecommunications regulation, including wire and wireless equipment, and terrestrial and satellite equipment.

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, WTO and 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. free trade agreements, 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.