Dr David Robinson of National Economic Research Associates concludes his discussion – the first part appeared in CI No 760 – on how the Uruguay Round of the General Agreement on Tariffs & Trade will affect telecoms services as well as equipment in future. The developing countries may be worried about opening their telecoms services […]
Dr David Robinson of National Economic Research Associates concludes his discussion – the first part appeared in CI No 760 – on how the Uruguay Round of the General Agreement on Tariffs & Trade will affect telecoms services as well as equipment in future. The developing countries may be worried about opening their telecoms services markets for fear of attracting undesirable effects on national economic policies and trade structures. The public telephone operators, however, will want the opportunity to provide value added services in foreign countries, in return for the relatively free access to UK and US markets. They may also want the right to be involved in running telecommunications systems in other countries. Examples include the right to hold mobile telecommunications franchises, and to operate new telecommunications systems, like Cable and Wireless in Japan, in other countries. On the other hand, most public telephone operators will lobby hard to avoid resale of underused capacity of their own network. Most governments, with the exception of the US, have refused to allow resale on the grounds that it would undermine the financial viability of the public telephone operators. Definition Many large users and entrepreneurs will of course press for resale, or at least for deregulation along the lines of the UK’s Branch System General Licence. Support for freer trade in tel-ecommunications services will also come from: suppliers and users of val-ue added data services, particularly from the media and other information industries, represented in the UK by the Confederation of Information Communication Industries, the CICE; larger equipment suppliers; and service providers in industries such as finance, tourism, transport and consultancy, particularly those which are intensive users of telecommunications; in the UK these are represented by the British Invisible Exports, BIE, Council. However, small users, sometimes in co-peration with certain equipment suppliers will argue for restrictions on competition because the PTT monopolies often favoured these users and suppliers. The negotiators will have to grapple with at least four types of problem: the definition of telecommunications services; national treatment; the protection of the public telephone operator monopoly in basic services; and competition between regulatory systems. First, the definition of what is and is not a service poses problems because of the continual emergence of new services, and the extent to which infrastructures are themselves becoming software and information intensive. Telecommunications is recognised as a service by the GATT, but perhaps a better concept would be of information transfer services, which would include what we might today consider equipment. Satellites are a good example. As equipment and services become difficult to distinguish from one another, the need for an agreement which covers what we call services becomes that much greater and that much harder. Second, the national treatment issue is a major sticking point. Freer trade in services ususally implies investment/establishment in each of the trading countries. The implies that the GATT will have to broach the issue of foreign investment which it has hitherto not done and which many, especially developing, countries do not want it to do. Moreover, it would involve a consideration of whether foreign telecommunications companies investing in a country were able to compete fairly with the existing domestic companies. Competition policy would therefore be one aspect of ensuring effective market access for providers of telecommunications services. Third, whether publicly or privately owned, a public telephone operator usually has a monopoly to provide a range of telecommunications services. In some countries, the monopoly is restricted to local telephony markets; in others it is much wider, and may include all value added and information services. In all countries, Governments justify the monopoly on the grounds of efficiency (due to scale economies) and as a means of ensuring that th
e public telephone operator has sufficient revenue to fulfill its public service obligations. The problem for the GATT and for individual countries is to draw the line between basic services, to which entry could justifiably be restricted, and value added service networks, to which entry should be freer. Just as it is increasingly difficult to distinguish between equipment and services, so it is to draw the line between basic and other services. The EEC recently concluded that the only service which was basic was voice telephony. Others would argue that even this service should be opened to competition. Fourth, regulatory systems pose serious problems for the GATT negotiations, just as they have for the EEC’s attempt to liberalise trade in services. Regulations may be erected as barriers to trade. For instance, adopting certain technological standards may aim to restrict foreign entry. More subtly, the existence of national regulations may be incompatible with trade in services. Stringent regulations in one country increase costs of supply and hinder a company’s ability to complete in a country where regulati-ons are less strict. The implication is competition between regulatory systems. To liberalise trade fairly would require a movement towards more common regulatory systems. Few observers believe that GATT negotiations on services will lead to a major new international legal agreement by 1990. One could hope for a broad agreement of general principles which gains the support of most participants. It might be used as the basis for a later international treaty alone the lines of the Law of the Sea Convention. Tougher agreement Less ambitiously, the talks could lead to a tougher agreement between a small number of participants, probably excluding many of the developing countries. Failure of the talks to achieve some agreement could mean an acceleration of the slide towards protectionism in the telecommunications and related industries. Recent examples of this tendency include the dispute (involving C&W) over the provision of international telecommunications systems for Japan, and the continued protection of PTT monopolies in Europe. In addition, failure to liberalise restrictions on foreign banks and other services (which use information transfers intensively) would act as a barrier to trade in telecommunications services. At best, failure of GATT negotiations on services would lead to bilateral or regional trade negotiations between countries with special relationships. This would probably exclude the majority of countries in the world and enhance the bargaining power of the service providers in the dominant of the international trading system, and the creation of defensive trading blocs. Finally, the success of all negotiations over freer trade depends very much on the legitimacy and enforceability of the agreements. Perhaps the greatest worry is that the private companies do not themselves take part in the negotiations and are therefore influencing the outcome only at a second remove. Without their direct contribution to such talks, the danger is that the ensuing agreements will be impractical and unenforceable. In that event, virtually everyone will lose because the telecommunications industry is becoming a basic infrastructure upon which the future growth of the global economy depends. (C) NERA.