Telecoms talks "looking good", says GBT chairman


GENEVA 10 FEBRUARY: The chances of concluding a services sectoral agreement for liberalizing basic telecommunications at the WTO, is "looking quite good" and "much more positive", Mr Neil McMillan, the British official chairing the Group on Basic Telecommunications (GBT) said on 10 February, citing "new" offers from nine countries and "revisions" of earlier offers from 16 others.

While the ever-optimistic McMillan used some new words of assessment, the WTO Director-General Mr Renato Ruggiero, gave a pep talk to the GBT on the benefits of liberalization, and of the talks having come "a long way" (since its suspension in April 1996), of the negative impact to the WTO and its credibility, if the negotiations do not end in an agreement, and the need of "further improvements" and the hope of some further new offers.

More objective observers said that while an agreement would be a positive element for the trading system, its benefits need not be "oversold" - with the actual outcome tested against these claims to be found wanting. Any loss of credibility for the WTO would be a self-created one. Among the nine who have tabled new "offers" are Malaysia, Indonesia and South Africa. Others in this category are Bolivia, Bulgaria, Ghana and Grenada. The talks, ending on 15 February, has some 53 participants (53 governments, counting the 15-member EC as one), which the WTO says, account for 91% of the $600-billion "global market" for telecommunications revenues. The $600 billion represents 2.1% of world GDP.

McMillan who has been chairing these talks (and its predecessor, the plurilateral talks, that were "suspended" last April when the US declined to join), and WTO officials, at every news briefing (after a GBT meet) have been throwing at the media, the numbers of "offers" and "revisions" in a way that it is difficult to make any assessments, without looking at the detailed country schedules.

Last April, Millan and officials also spoke of the "offers" on the table accounting for 90% of the market coverage.

The four Quad members (Canada, EC, Japan, and the US) plus Australia together account for 77% of the market. While developing countries individually account for lower shares of global telecom activity, some of them are still key players, ranking in the top ten - Korea, Brazil, Mexico, Argentina (in terms of global telecom revenues), Hong Kong, Singapore and Mexico (in terms of international telephone traffic), and Argentina, Korea and India in terms of investment.

But all these figures and rankings that the WTO has been spewing, for the unwary, could be quite misleading.

To put these figures in perspective, the $600 billion "market" (or 2.1% of world GDP) in 1995 (WTO computations based on ITU data) is not really "traded", as trade officials admit.

The (traded) international services account for $63 billion or 10% of the total revenue. Mobile services account for about $82 billion or nearly 14%.

In terms of telephone lines, average annual growth rate in the industrial world has been 3.5% between 1990-1995, that in the developing world at 13.8%. In terms of revenues, average annual growth in the industrial world over the same period has been 4.2%, and that in the developing world about 9.7%.

But the mere percentage comparisons could be misleading, since developing countries start from a low base, and have a long way to go to provide such basic services to their people. And the liberalization focus is on the services catering to their rich and upper middle classes.

And if one is not careful, the percentage growths could also be as misleading as those that used to be provided by the centrally planned economies in the old days.

And, however the "market" and its share by those who have put "offers" (new and/or revised) are computed, it would not mean that the $600 billion market is now "liberalized" - not even among the majors who have put forward their revised offers.

Even if the US market is in fact fully liberalized, without huge investments, no developing country can hope to participate, compete and benefit from the trade in that market. They won't be exporting telecom services to the US market. Their gains will be in terms of `welfare gains' of their own liberalisation - a trade theory that is becoming a dogma.

And any benefits the developing countries are getting through the international system of accounting on international calls - revenues which in theory, they could use for expanding and cross-subsidizing domestic services, but which many telecom administrations don't do or are unable to do, their earnings being grabbed to meet the budget deficits - is now going to be eroded by separate independent action by the US Federal Communications Commission. And when developing countries make "offers" opening their markets to foreign investors, the foreign investors want to get the high-value added end of the market (mobile phones and other such services), and have no interest in the provision of expanding the reach in the developing world, of the basic telephone and telegraphy services to the rural areas and remote regions.

Question of majority ownership

US officials have been critical, and privately pressuring, many of the participants with offers, over their limitations against majority ownership of their telecom companies.

Canada, with the EC, wants an investment agreement in the WTO, providing full establishment and national treatment and other rights (save for security exceptions) for foreign capital under a multilateral investment agreement.

But, in the telecom services talks, it has been saying that politically, it is not feasible for Canada to allow majority foreign ownership in its telecom sector and companies!

Mexico, which like Canada, is a NAFTA partner of the US, has also set limitations in its offer on majority ownership in its telecom enterprises.

Several developing countries in their offers have also set limitations on majority ownership.

The Canadian restrictions is said to be critical for the US.

Trade officials said that bilateral talks are continuing between the US and Canada, as also the US and other partners.

The US so far has been publicly reticent in assessing the offers now on the table, and whether these would provide the "critical mass" that it claims it needs to join an agreement.

Without the US, the attempt at a WTO agreement would fail, and as McMillan has been repeatedly stressing, a new opportunity may not come until the next round of services talks.

But the view that without an accord, there will be "disaster", may be as exaggerated as other claims in terms of the industry, and the world economy, though it will be for WTO and national trade officials who have "invested" so much of their time and energy on this. (CR/SUNS3921)




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