Office of the United States Trade Representative


USTR Issues 2004 Review of Telecom Trade Agreements

Highlighting Market Access Barriers Around the World

WASHINGTON - The Office of the United States Trade Representative announced today the results of its 2004 annual review of foreign compliance with telecommunications trade agreements (the "Section 1377 Review"). The report identifies global barriers facing U.S. consumers and businesses in the estimated $1.3 trillion
telecommunications services and equipment market.

"A modern, innovative telecommunications system is a critical foundation for the 21st Century global economy, expanding consumer choice, and promoting economic growth, investment and development," said U.S. Trade Representative Robert B. Zoellick. "The report identifies barriers that hurt American businesses and workers and undercut economic reform efforts around the world."

"Our recent free trade agreements have expanded consumer choice and opportunity, spurred innovation, and will support our dynamic telecom companies as they develop new consumer products and services," Zoellick added. "The United States remains vigilant in enforcing our trade rights and expanding trade opportunities, and today’s report highlights areas that we’ll be focusing on this year. Opening markets and enforcing agreements are two sides of the same coin - we pursue both with vigor."

USTR uses a variety of tools to press for the elimination of market access barriers in the telecom sector: negotiations, consultations, and, where warranted, litigation. Recently, the United States won a major victory in the first-ever telecommunications dispute in the WTO, prevailing in a case against Mexico involving overcharges to U.S. companies and consumers for phone calls to Mexico of over $1 billion dollars since the year 2000.

Three key barriers identified this year that impede access to foreign telecommunications markets include: (1) proposed exclusionary standards for equipment and services in China and Korea; (2) high interconnection rates for mobile and wireline networks in Europe and Asia; and (3) restrictions on accessing wholesale transmission capacity in Germany, India, Switzerland, and Singapore. In addition, at least two countries (Mexico and South Africa) have been slow in implementing their commitment to permit U.S. suppliers to resell basic telecommunications services in their markets. And, as in past years, the lack of fully independent regulators continues to weaken the competitive landscape in numerous countries.
USTR will continue to address these issues vigorously through a range of actions: bilateral engagement with our trade partners to hold them accountable to fully implementing their existing commitments; negotiating and adopting strong disciplines in Free Trade Agreements and the WTO to eliminate or prevent the emergence of such trade distorting barriers; and where warranted, initiating dispute settlement action.
New FTAs now in force with Chile and Singapore, and recently completed ones with six countries in Central America, Australia, and Morocco, offer disciplines to address these issues in a growing list of markets. All recent FTAs concluded by the United States contain specific prohibitions against the use of exclusionary standards in the telecommunications sector, ensure reasonable and non-discriminatory access and interconnection among network operators, and provide strong provisions on independent regulators, including powers to enforce rules in a transparent and meaningful way. Consistent with the FTAs, Singapore has proposed instituting sharp reductions in leased line rates to spur competition in business services, and Australia has announced steps to address mobile interconnection rates that are among the highest in the region.
Separately, India's regulator intervened to help ensure that access to submarine cable capacity was provided by the dominant operator, VSNL. This intervention was a short-term solution to a chronic problem of reasonable and non-discriminatory access to such capacity; without a long-term solution, service suppliers may experience further constraints on their ability to access such capacity to provide their services.

Other telecom issues remain unresolved. USTR has stepped up direct engagement with governments to address potential barriers — in particular, measures are scheduled to come into force in June in both China and Korea that would have the effect of excluding U.S. technology from those markets. If those countries proceed with implementing rules that are exclusionary and inconsistent with their trade commitments, USTR will consider all possible options to address these barriers. Resolution of standards issues with China will be one of the topics for discussion at the meeting of the U.S.-China Joint Commission on Commerce and Trade (JCCT) scheduled for the end of April.

Other countries that will require continued attention this year include Germany, which has yet to implement a number of pro-competitive regulatory rules, and which will be adopting a new telecommunications law; Japan, whose policies on regulating interconnection and licensing mobile wireless services have been unsatisfactory; and Mexico and South Africa, which have been slow to implement WTO-mandated commitments to permit resale of telecommunications services. In addition, despite positive action by some regulators, there have been troubling reports of mobile wireless operators in several countries seeking to unilaterally raise interconnection rates without adequate justification, a trend that would negatively impact U.S. consumers and businesses. Where developments in these countries raise potential problems, USTR will actively engage to ensure that new trade barriers do not emerge.

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