The Office of the United States Trade Representative

USTR Issues 2005 “1377” Review of Telecommunications Trade Agreements
Renewed Focus on Identifying, Dismantling Telecommunications Trade Barriers Around the World 03/31/2005

- The Office of the United States Trade Representative announced today the results of its 2005 annual review of foreign compliance with telecommunications trade agreements, the “Section 1377 Review.”  The report both identifies barriers facing U.S. telecommunications services and equipment providers, and lays out the specific telecommunications-related issues on which the office of the USTR will focus its efforts this year.

“Ensuring the benefits of competitive telecommunications markets is a critical element of our global efforts to open markets and expand trade opportunities for all U.S. businesses,” said Acting U.S. Trade Representative Peter F. Allgeier.  “The 1377 Review identifies practices that interfere with these goals, and that have the potential to damage American companies, workers and consumers—practices which we will work vigorously over the coming year to modify or eliminate.”

“We are deeply concerned by the tepid commitment some of our trade partners have shown to competition in the telecommunications sector.  This is especially true in countries such as China, India and Japan where national operators are already competing on a global level, but remain protected at home by relatively closed markets.  It is very hard to see a legitimate reason why these markets should not be open to full and effective competition,” said Allgeier.  “The United States will work vigorously to strengthen and enforce our trade rights in these countries and elsewhere.

“Another issue that is particularly troubling to us is the extremely high wholesale rates that we are seeing in some countries for calls to mobile networks,” added Allgeier.  “These mobile termination charges involve tens of millions of dollars in charges U.S. companies and consumers pay for international calls.  Protecting U.S. consumers and companies from being gouged will remain a USTR priority.”

The main issues identified in this year’s review include existing practices or prospective concerns relating to: 1) excessive interconnection rates for mobile networks in Germany, Japan, Mexico, Peru and Switzerland; (2) restrictions on access to and use of leased lines in Germany and submarine cable capacity in India; (3) excessive regulatory requirements in China, Colombia and India; (4) burdensome testing and certification requirements in Mexico and Korea; and, (5) limitations on suppliers’ choice of technology in China and Korea.

Countries requiring particular attention this year include China, which has imposed a number of severe regulatory requirements, notably related to capitalization levels and joint venture partners; Japan, which has limited entry to its wireless markets by failing to make new spectrum available; Peru, which has consistently delayed addressing some of the world’s highest mobile termination rates; and India, which has failed to address restrictions on access to submarine cable capacity and undermined positive, liberalizing steps in its market by imposing excessive licensing requirements on new entrants.  While the situations in these countries have raised specific concerns, they are representative of trends in a number of other markets, as detailed in this year’s report.

In several key areas, trade partners are expected to be soon taking decisions that could address problems U.S. companies identified in the 1377 Review.  USTR will follow such developments very closely, including:

  • Peru’s determination in June implementing its requirement for cost-oriented mobile interconnection rates;
  • Germany’s decision, by mid-year, addressing mobile interconnection rates;
  • Mexico’s decision, expected by late summer, on a new mobile interconnection system;
  • Japan’s allocation and assignment, by year end, of new spectrum for mobile operators; and
  • China’s completion of a new telecommunications law, and its assignment of spectrum for new mobile services, both expected by year end. 

USTR will continue its efforts to open markets and expand trade opportunities in telecommunications through a range of activities including: bilateral and multilateral engagement with trade partners to hold them accountable to fully implementing their existing commitments; negotiating and adopting strong disciplines to eliminate or prevent the emergence of trade distorting barriers; and where warranted, initiating dispute settlement action. 

WTO rules provide pro-competitive guidelines for regulators to follow in ensuring reasonable access to networks and impartiality of regulatory processes.  To bolster WTO disciplines in these areas, USTR has negotiated strong provisions in U.S. Free Trade Agreements (FTAs).  All recent FTAs concluded by the United States, including with Singapore, Chile, Australia, Bahrain, Morocco and several Central American countries, contain specific prohibitions against the use of exclusionary standards in the telecommunications sector, ensure reasonable and non-discriminatory access to public networks, and interconnection among public network operators, and provide strong provisions on independent regulators, including powers to enforce rules in a transparent and meaningful way.  To the extent that these agreements are in force, USTR will continue to use them to assist in opening markets to give U.S. companies the ability to supply new and innovative services abroad.