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WTO NEWS: 1995 PRESS RELEASES

3 October 1995
Next great challenge facing WTO Governments is liberalization of Trade in Telecommunications - says Director-General Ruggiero

The following is the full text of a speech delivered by Mr Renato Ruggiero, WTO Director-General, at TELECOM 95 in Geneva today, 3 October:

“I am very pleased to have this opportunity to speak to so many representatives of governments and of the communications industry - particularly at this time, as we approach the critical phase of a major negotiation on international trade in telecommunications.”

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The Uruguay Round of multilateral trade negotiations not only resulted in the creation of the World Trade Organization, it also gave birth to the first multilateral agreement to apply the disciplines of the trading system to services. The Services Agreement extends to all tradeable services the principles of market access, national treatment and non-discrimination which have been the basis of the GATT trading system and of the enormous post-war expansion of trade in goods. I am quite sure that the expansion of services trade, based on the GATS, will be even faster.

In telecommunications the Agreement covers every conceivable service, those existing and those yet to be imagined. During the Uruguay Round more than 60 countries made market access commitments on "value-added" services, which in many countries have been opened up to competitive supply. But it was found that in basic telecommunications the dominant role of public monopolies added a special dimension of political difficulty to the subject, and governments decided to continue negotiating on these services, with a deadline of April 1996 for completion.

The economic interests involved in this negotiation are enormous; I understand that the current world market for telecommunications is estimated at 513 billion dollars, and the worth of the global information industry as at least 1.3 trillion dollars. But the importance of the negotiation goes far beyond the sphere of economics and trade. The construction of a global information society will revolutionize human society itself in ways that we cannot imagine. It will soon be possible to bring high-quality education, health and business services to every village in the world. The potential for job creation and enhancement of human opportunities among people who are now deprived is very great. The job of the negotiators in the WTO is to create the right political environment for this to happen.

Because we are building a global information society, this negotiation is of tremendous relevance to developing countries. I understand concern about the continuation and even exacerbation of a "two-tier" information society of haves and have nots. Many important factors underlie this concern - for example, worries about the goal of universal service, not yet attained in many parts of the world. But liberalization of telecommunications should be seen as a way of promoting universal service, not as an obstacle to it.

Even more important in bridging the information gap is economic development itself. Manufacturing as well as services are now information-hungry industries. As I have said, modern communications hold out hope of generating better and more highly paid jobs for the peoples of developing countries. Employment opportunities are already growing in data processing and software development. On-line access to state-of-the-art services of every kind will upgrade entire economies. For individuals to reap the benefits of expanded employment and for emerging industries to become competitive, they need the best telecommunications systems that modern technology can offer. Inefficient telecommunications are a tax on the whole economy.

The GATS consists of two parts: the framework of obligations and disciplines that apply to all services, and the national schedules of commitments. Examples of the key obligations are non-discrimination among trading partners (or most-favoured-nation treatment) and transparency of national rules and regulations. The 114 national schedules of the GATS specify the services on which governments have guaranteed market access and national treatment, and at what level. The commitments, like the rules of the framework, are legally binding and enforceable under the WTO dispute settlement mechanism.

The objective of the basic telecoms negotiations is to secure market opening commitments from as many countries as possible. The commitments will involve the introduction of competition into the sector by removing restrictions which now prevent or make difficult a supply of services by foreign companies. They may cover every mode of supply - through cross-border trade and foreign direct investment, through resale and through the ownership and operation of networks and infrastructure.

Negotiators are also discussing commitments that concern the telecoms regulatory environment. These include safeguards on interconnection rights and ways to prevent the abuse of market power. It is clear that such commitments will be indispensable to realizing the full benefits of liberalization in this sector. The benefits would be severely constrained if it were to remain possible for dominant operators to dictate prices and control access to the infrastructure that is so critical to effective global communications.

I have heard it said that unrealistically high expectations could pose a threat to the success of the negotiations. I have also heard it suggested that failure to meet such expectations could make a multilateral solution impossible.

For my part, I would never want to characterize high ambition as a problem. It is the attempt to reach for the highest possible objectives that drives these and, for that matter, any negotiations forward. I support those, in industry and government, who are looking for a big step forward in this negotiation. Of course, it must be borne in mind that the participating countries are at different "starting positions" in efforts to reform their national telecom regimes.

But I am convinced that the liberalization of telecommunications must remain a global endeavour within the multilateral system - and this means preserving the principle of most-favoured-nation treatment. Modern telecoms technologies require global approaches because they abolish national boundaries and render national monopolies obsolete. Bilateral or discriminatory solutions to trade problems may seem attractive in the short-term, but their rewards are usually disappointing and their political costs are often very high. Nor can they be enforced under the WTO dispute settlement mechanism. I have said that rules on competition will be an essential element of this negotiation. Such rules can only be global, and only a multilateral system can give them legal security and political legitimacy.

The extended negotiations on basic telecommunications began in May 1994 and are now coming to the crunch. Forty-two governments are participating and more are expected to join. Participants began tabling initial offers at the end of July. On Friday, a high-level meeting of the Negotiating Group will take stock of the situation and give a political impetus for the final stretch.

By next April, many of the participants are likely to be offering market access levels well beyond what is possible under their existing regulatory regimes. A few years ago this would have been unthinkable, but the rate of change taking place in this industry is virtually unknown in any other business today.

What I am asking you, as representatives of the public and private sector, is to help ensure that the promise of an open, multilateral agreement by the end of April 1996 will be kept. The events taking place at TELECOM 95 this week demonstrate to all of us that the Global Information Society is within our reach. The technology is available; we have to build a political environment that makes full exploitation of the technology possible. That is what this negotiation is about.