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Remarks by Ambassador Sapiro at the Computer & Communications Industry Association 37th Annual Washington Caucus

Remarks by Ambassador Miriam Sapiro
Deputy U.S. Trade Representative 

Computer & Communications Industry Association (CCIA)
“USTR Trade Priorities in the Information and Telecommunications Services Sector”
37th Annual Washington Caucus
Thursday, May 13, 2010 

*As Prepared for Delivery*

"Thank you, Ed, for that kind introduction, and many thanks to CCIA for inviting me here today. I am pleased to join you to discuss a topic important to all of us here: the intersection of information and communication technologies (ICT) and international trade. 

"First I will provide a brief overview of the Administration’s trade priorities. I will then speak to how specific trade goals relate to the ICT services sector and some of the challenges we face. Afterwards I will look forward to hearing your thoughts on addressing these challenges, and what USTR can do to support a robust and innovative ICT sector. 

 

"Earlier this year the Obama Administration released its Trade Policy Agenda, which sets forth many of USTR’s major priorities. Although time constraints do not permit me to discuss each of these, I will highlight a few: 

"First, the Administration is strengthening its efforts to enforce U.S. rights in the rules-based trading system. We are doing that by improving our monitoring and trade enforcement efforts, including bringing new cases at the WTO as necessary. We are also supporting work to complete an ambitious and balanced Doha Round agreement that liberalizes trade in the three core areas of agriculture, goods and services.

"Second, we are working to address non-tariff barriers (NTBs) by seeking transparency and due process in our partners’ trading practices, from government procurement to market regulation. Our commitment to identify and eliminate NTBs can be seen in two new reports that Ambassador Kirk delivered to Congress on March 31. These reports focused for the first time specifically on sanitary and phytosanitary barriers (SPS) and technical barriers to trade (TBT) that harm the ability of America’s agricultural producers and manufacturers to export around the world.

"Third, we continue to work with America’s trading partners to ensure that they provide adequate protections for intellectual property rights (IPR). In particular, USTR continues to press China to address certain troubling “indigenous innovation” policies that could discriminate against or unfairly disadvantage U.S. stakeholders. Working closely with other U.S. government agencies, USTR has raised the issue with Chinese government officials at multiple levels, including at recent bilateral meetings in Beijing and Washington. We will continue to raise the matter at every appropriate opportunity, including the U.S.-China Strategic and Economic Dialogue later this month. Our efforts to negotiate an Anti-Counterfeiting Trade Agreement (ACTA) are another example of our commitment to IPR protection and enforcement.

"Fourth, we are pursuing new regional initiatives, including the negotiation of a Trans-Pacific Partnership (TPP) Agreement. TPP will be a high standard, 21st-century trade agreement that will provide a critical link for trade between the United States and Asia.

"Fifth, we are working to resolve outstanding issues with our pending free-trade agreements (FTAs) and to build upon existing FTAs. We continue to engage actively with Congress, interested stakeholders and the Governments of Panama, Colombia and Korea to address remaining issues. Indeed, Ambassador Kirk and I met on Tuesday with Panamanian Vice President and Minister of Foreign Affairs Juan Carlos Varela during his visit to Washington.

"Sixth, we are intensifying our engagement with the major emerging markets of Brazil, Russia, India and China. In the past few weeks, for example, we have held discussions with Russia regarding its accession to the WTO. And in April I led a team to Brasilia to discuss ways to strengthen our economic and trade relationship, and to identify a path forward on the Cotton dispute. As a result of these talks, Brazil agreed not to impose approximately $800 million in WTO-authorized countermeasures at this time while we continue to engage to seek a long-term solution to this dispute. Brazil had been authorized to retaliate not only against U.S. goods, but also against U.S. intellectual property rights.

"Finally, we are seeking to use trade policy to lower the cost and enhance the effectiveness of our energy and environmental policies. A centerpiece of this effort is our work with willing partners in the WTO to achieve faster progress on liberalizing trade in innovative, climate-friendly goods and services through tariff reductions and other initiatives. 

"Against this backdrop, I want to focus on ICT services in particular. Broadly speaking, the Administration is seeking to ensure that U.S. suppliers can compete, in foreign countries and on a cross-border basis, in the supply of transmission services, computing services, and the applications and content that ride on what is now a globally interconnected, increasingly broadband, network. 

"Since these are areas of significant U.S. competitive advantage, their expansion abroad is an obvious priority. At the same time, our trade goals for this dynamic sector must be able to accommodate new technologies and business models. 

 

"Over the past decade, we have had success in creating a trade framework to support the development of competitive telecommunications markets and greater access for computer and related services. 

"We have done this with respect to individual countries through the original GATS negotiations; subsequent WTO basic telecom negotiations and associated commitments; WTO accession negotiations; and refinement of rules in our FTAs. 

"As a result, U.S. telecom, computer and related suppliers are, with few exceptions, able to fully participate in all FTA markets and to a lesser degree – limited typically by foreign equity restrictions – in most other WTO markets. 

"U.S. suppliers now have a broad global presence in operating the infrastructure that provides the pipes, storage, and processing power driving globally interconnected networks, including the Internet. They are active participants in multiple layers of this global market, including development of submarine cables, data centers, in-country fiber networks, cell phone towers, and switching and routing equipment. 

"Nonetheless, our work is not done. While most countries are relatively open to computer services, telecom remains a concern. Our two neighbors, Canada and Mexico, prohibit foreign control of most facilities-based services. Further away, China and much of Asia remain major challenges, with only a limited facilities-based presence allowed in many of these countries. 

"Given the continuing presence of strong incumbents, and the significant capital investment required to become a facilities-based provider, it is not surprising that U.S. companies are unwilling to invest on a minority-share basis. This makes addressing foreign equity limits a priority for ongoing work. 

"Even with the ability to fully invest, a weak or captive regulator lacking a commitment to competitive market entry can prevent even the most sophisticated network operator from succeeding. In many cases, it is the government that arbitrates conflicting claims over spectrum access, interconnection and rights of way in order to ensure that a competitive market can flourish. Thus, starting with the WTO Basic Telecom Agreement, and refined in our FTAs, we have put a particular emphasis on principles to guide regulators, focusing on transparency, impartiality, and the introduction of pro-competitive policies. 

"A recurring theme over the past decade has been the slow but growing acceptance that most of the technology decisions in the network—particularly in the wireless sector—are best made by supplier and consumer choices in the marketplace. This concept of “technology neutrality” has found an increasingly stronger place in our FTAs, as governments have generally come to view themselves as poor substitutes for a dynamic, global market in evaluating consumer preferences. The dizzying array of new wireless technologies, for example, such as Bluetooth, Wi-Fi, Wimax, RFID and LTE, are testimony to invention, entrepreneurship and competition. 

"The emergence of globally interconnected broadband networks linking a substantial portion of the world has now achieved critical mass, allowing business models to expand into new horizons. The digital language of the Internet stitches together billions of people, devices, applications and content, providing a distribution platform almost impervious to geographic boundaries –linking the world at the speed of light. 

"In the past, governments sought to control infrastructure silos—telephone, computer and broadcast networks—leaving market access for services delivered on those networks subject to that control. Today, however, that is less and less the case. The ability of governments and competitors to deny market access opportunities is dramatically weaker. In most areas, all companies need is a presence on the Web to reach their customers. 

 

"With these fundamental changes, opportunities and challenges for the ICT sector have evolved, and will continue to do so. What does free trade mean in a medium that generally does not respect geography? For one, past models to control products once traded physically, but now liberated from a physical medium, do not necessarily work. Books, magazines, newspapers, software, games, music, video—anything that can be digitized—is now a tradable product that bypasses traditional customs checkpoints. 

"Ten years ago, we spoke of e-books almost as science fiction. Now, we know that they are an important, if not critical, element of publishing. Similarly, voice services, once the most profitable preserve of longstanding monopolies based on control of copper wire, can now be offered through a software application that is free and easy to download. 

"In addition, infrastructure-based services today may “reside” at home, but are nonetheless available globally. Server farms, data centers, interactive gaming systems, video-on-demand and software as a service all underscore the dramatic power of the economies of scale that our companies are poised to benefit from. In short, the opportunity to invest locally and reach globally has never been as great. 

"From the trade perspective, the first priority is for us to identify key elements of this digital ecosystem and work to ensure that our trade rules address them comprehensively. This starts with national treatment and market access, both for investing abroad and supplying digital products and cross-border services. 

"In our FTAs and at the WTO, it will be important to pull together complementary parts of this ecosystem and ensure that the building blocks – processing, storage, transmission, content and applications – have a well-defined home. We are reaching out to key partners in the WTO who might join us in an initiative to identify the policies key to supporting development of ICT networks and services. We aim to do the same with our partners in the TPP process. 

"In the dynamic sector of ICT services, it is inevitable that unforeseen challenges will arise. Let me highlight a few issues in particular, on which I would welcome your insight. Let me also add the caveat that while some of these issues are clearly within traditional trade rules, others may not be. And whether those issues in the first group are ripe for trade disciplines remains to be seen. 

"Intellectual property rights, an important aspect of international trade, have been challenged by new broadband networks as never before. Protection of IPR in this environment, both at home and abroad, will ensure that not just American inventors and creators, but inventors and creators from around the world, have the incentives and legitimate expectations of reward for their efforts. We want them to continue enriching our world with new creative expressions, works of art and literature, and the processes and technologies that can improve our lives. Of course we recognize that there are diverse perspectives on IPR issues. The President’s Trade Policy Agenda reflects a commitment to work with all stakeholders to develop sound policies in this area.

"In addition, it has long been our policy to promote the free flow of information. Such information flows are the lifeblood of ICT networks, and restrictions on them can impact trade. At the same time, most countries feel they have legitimate interests in some oversight, for a range of reasons. Reconciling these views with a medium premised on openness and global interoperability is a key challenge.

"Efforts to block access to services and applications are another set of challenges. Although applications can reach anyone on the Web, it is also not that difficult to block them. While in some cases blocking may be for legitimate purposes, such as to protect copyrights; to protect children; or to avoid spam, blocking may also be anticompetitive. For example, many countries allow their phone companies to block Voice over Internet Protocol (VoIP).

"The location of infrastructure is another issue. The efficiency of global networks depends, increasingly, on the economies of scale in processing and storage. Consequently, such benefits depend on suppliers not being required to install infrastructure in every country.

"Lastly, security is a pervasive concern if networks are going to gain corporate, governmental and consumer trust. But how can we ensure that the need for securing networks does not unduly cut users off from a global medium, and halt legitimate trade? Can the reliance on consensus-based international standards address this issue, when many governments’ first instinct may be to address this through a local fix over which they believe they have more control? 

"Obviously these are difficult questions, and solutions will take time to develop. But since ICT services are so closely connected to America’s productivity, innovation and economic growth, it is important to develop the right framework, for our sake and for that of our trade partners as well. 

"I look forward to working with all of you, and our trading partners, to address these challenges and create new market access opportunities. 

"Thank you."