I. The Multilateral Institutional Framework for International Trade in Telecommunications Services
The GBT deal on basic telecommunications is not a new, freestanding international treaty with its own elaborate text. It is instead a series of market opening measures embodied in fifty-five national schedules (representing sixty nine governments, because the European Commission negotiates on behalf of European Union member states). The national schedules are an integral part of a larger treaty, the General Agreement on Trade in Services (GATS), and states' market opening measures---known as Specific Commitments in WTO-speak---are subject to the disciplines of GATS principles know as General Obligations and Disciplines. Hence, in order to understand the GBT deal, we must understand the form and operation of the larger GATS system of treaty texts and national schedules, of which it is simply a modification.
The establishment of the GATS regime was one of the key results of the multilateral trade negotiation known as the Uruguay Round. Launch at Punta del Este in September 1986 and concluded at Marrakesh in April 1994, the Uruguay Round in fact comprised a series of interrelated negotiations among the 125 member governments of the General Agreement on Tariffs and Trade (GATT). These negotiations produced four major outcomes: First, the GATT institution was replaced with by the WTO, which among other things has a broadened mandate and a strengthened dispute resolution system. Second, the GATT regime for trade in goods created in 1947 was updated and expanded to address issues like trade-related investment measures and agricultural products. Third, a new regime on trade-related aspects of intellectual property rights (TRIPs) was established. And fourth, the GATS regime was created. The new organizational structure of the WTO reflects these outcomes; the three regimes are administered by corresponding bodies---the Council for TRIPs, the Council for Trade in Goods, and the Council for Trade in Services---each of which is broken down into a series of subsidiary groups focusing on specific issues or sectors.1
From the 1970s when analysts began to think about international transactions in services as a trade issue that might be brought under the GATT, telecommunications has always been recognized to be central to any sort of future multilateral regime.2 This is because telecommunications services play a dual role in the larger realm of international transactions in the services sector. First, it is a dynamic and lucrative industry in its own right that attracted the attention of policy makers, analysts, and private sector proponents of services liberalization. Today, the global telecommunications services market has been estimated to be worth about US $600 billion per year, $100 billion of which involves cross-border trade.3
Second, telecommunications services are also a key means of moving other types of "disembodied" (that is, temporally and spatially separated from the producer) information-intensive services---e.g. financial, management consulting, audio-visual, and advertising services---across national borders. Hence, in this capacity as an infrastructure for other forms of services delivery, telecommunications networks and services were designated by Uruguay Round participants to be a crucial form of the cross-border mode of supply for services generally. Cross-border delivery is one of four designated "modes of supply" for services under the GATS regime, the others being movement of the consumer to the producer's country, movement of a natural person producer to the consumer's country, and "commercial presence" of producer entities in consumer countries via temporary establishment, corporate alliances, and direct foreign investment (FDI).
Telecommunications services' status as a form of cross-border supply has two consequences worth noting here. First, any agreement to liberalize international trade in other service industries would necessarily have to involve establishing a mechanism to ensure that providers of such services would have access to and use of public telecommunications, just as providers of good need access to and use of roads, waterways, ports, and so on. That meant that the GATS regime would have to contain special provisions dealing with the unique status of telecommunications. Secondly, when it came to establishing trade disciplines for services industries, WTO members would have to make concessions for the delivery of any given service on each of the four modes of delivery, including cross-border, where applicable. We will show how the GATS regime dealt with these two issues below.
The GATS regime established by the Uruguay Round is made up of three major components. The first is a Framework Agreement embodying overarching principles---the General Obligations and Disciplines, hereafter referred to as the GODs---as well as Specific Commitments and procedural rules. Some of these principles were transferred from the traditional GATT regime for trade in goods, albeit with necessary modifications to take into account the differences between goods and services trade. Others were created new to address specific issues and non-tariff barriers (NTBs) involved in services industries that do not arise for trade in goods.
There are fifteen GODs: most-favored-nation treatment (MFN), or nondiscrimination; transparency; disclosure of confidential information; increasing participation of developing countries; economic integration; labor markets integration agreements; domestic regulation; [mutual] recognition; monopolies and exclusive service providers; business practices; emergency safeguard measures; payments and transfers; restrictions to safeguard the balance of payments; government procurement; general exceptions; [national] security exceptions; and subsidies. Some of the GODs are binding on states either across-the-board, i.e. for all measures affecting international trade in services in the absence of provisions to the contrary, while others apply only to cases in which states make liberalizing concessions. Either way, all of them can apply to the basic telecommunications concessions, save where a government has taken narrowly defined exceptions for a particular sub-sector or invokes an across-the-board waiver for a sector (see Section II, below).
The Framework Agreement also includes three kinds of Specific Commitments. Since these are precisely what the GBT deal entailed, let us describe what these mean. GATS Article XVI pertains to Market Access, a term that is defined by example as the removal of certain kinds of NTBs on each of the four modes of delivery. The NTBs described in the provision include a) limitations on the number of service suppliers, whether in the form of numerical quotas, monopolies, exclusive service suppliers or economic needs tests; b) limitations on the total value of service transactions or assets in the form of numerical quotas or needs tests; c) limitations on the number of service operators or the quantity of service outputs; d) limitations on the total number of natural persons that may be employed in a particular service sector; e) measures that restrict or require specific types of legal entity or joint venture through which a supplier may provide a service; and f) limitations on the participation of foreign capital in terms of maximum percentage of foreign share holdings or the total value of investment.4 As is evident, market access commitment involve reducing or eliminating quantitative restrictions on foreign participation in a given market.
GATS Article XVII concerns National Treatment, or the obligation to accord to services and service suppliers of foreign countries treatment no less favorable than what a country affords to its own services and suppliers. This is important in telecommunications, but in truth most governments have not historically had explicit and extensive restrictions on national treatment that had to be made subject to concessions. Finally, GATS Article XVIII allows members to undertake Additional Commitments with regard to services measures not covered by Market Access and National Treatment, including on issues of qualifications, standards, and licensing.
Unlike the GODs, which may always apply unless exemptions or waivers are taken by governments, the Specific Commitments are negotiated undertakings by governments to liberalize a particular services sector or sub-sector according to each of the four modes of supply. That is, a given type of services transactions are opened to competitive supply only insofar as governments agree to do so; they can pick and choose what to liberalize and what not to liberalize. Thus, for example, governments can choose to allow networked-based supply of a particular service while not allowing supply via commercial presence, or vice versa.
The second major component of the GATS is the Annexes. These address issues specific to particular services sectors, modes of supply, and future negotiations that could not be adequately addressed under the broad aegis of the GODs. There are eight annexes dealing with Article II MFN exemptions, the movement of natural persons supplying services, air transportation services, financial services (two annexes), negotiations on maritime transport services, telecommunications, and negotiations on basic telecommunications. These last two are of particular interest here.
The Annex on Telecommunications establishes obligations for governments to ensure access to and use of public telecommunications transport networks and services. In other words, public telecommunications systems must be accessible as a mode of cross-border supply to foreign suppliers of various kinds of services, be it financial services, professional services, or whatever. The annex lays down principles requiring governments to allow foreign service suppliers access to and use of public networks on a reasonable and nondiscriminatory basis. Moreover, governments must ensure that foreign suppliers have access to and use of private leased circuits, and that they can: a) purchase or lease and attach terminal or other equipment interfacing with public networks; b) interconnect private leased or owned circuits with public networks, or with circuits leased or owned by another service supplier; and c) use operating protocols of the service supplier's choice, other than as necessary to ensure the availability of telecommunications transport networks and services to the public generally. In addition, governments must ensure that foreign service suppliers can use such networks and circuits to transfer information without undue impediments within and across national borders, and that they can access information contained in data bases held in any member country.
The Telecommunications Annex requires that governments apply no condition on access and use other than is necessary to safeguard the public service responsibilities of public telecommunications operators (PTOs), protect the technical integrity of public networks, or ensure that foreign service suppliers only provide services designated as open to competition by such governments. However, provided they meet these criteria, governments may adopt policies that: a) restrict resale and shared use of public services, b) require the use of specific technical interfaces and protocols for interconnection, c) require the interoperability of services, d) require type approval of terminal or other equipment interfacing with public networks, e) restrict the interconnection of private leased or own circuits with either public networks or the circuits of other service suppliers, and f) require notification, registration, and licensing for foreign service suppliers.5
The other annex of direct relevance here is the Annex on Negotiations on Basic Telecommunications. During the Uruguay Round, governments undertook Specific Commitments on telecommunications as a trade sector in its own right (as opposed to as a mode of supply, which is covered by the annex discussed above). The process of agreeing to such commitments, under the umbrella responsibilities of the GODs, was an intellectually difficult task that consumed a great deal of energy and bargaining time. In the end, fifty-five governments offered forty-four sets of commitments (the European Commission negotiated on behalf of European Union members, hence the numerical discrepancy) to liberalize particular kinds of value-added service provision according to the four modes of delivery, but only twenty-two were prepared to make any commitments on basic telecommunications. Moreover, the latter commitments tended to be quite narrowly drawn, i.e. liberalizing the provision of a specific sub-sector like mobile paging via select modes of supply.
By the end of the Round, there was widespread recognition that cutting a broader deal on basic telecommunications would require additional negotiations because of the complexities and sensitivity of the issues involved. Hence, this additional annex provided a legal basis upon which to launch such negotiations with a view toward subsequently incorporating basic telecommunications concessions into the GATS framework. The annex provided that Article II MFN treatment and exemptions would apply to any basic telecommunications commitments only upon the final results of these negotiations or, should these fail, when negotiators issue their final report. After that time, any commitments must be offered on a nondiscriminatory basis unless a government has listed an exemption or taken a waiver.
Finally, the third major component of the GATS is the National Schedules in which governments inscribe their Specific Commitments on market access, national treatment, and additional commitments for each services sector or sub-sector according to the four modes of supply. These schedules run to two thousand pages, and cover a very wide range of market opening measures in different services sectors, including telecommunications. The recent deal on basic telecommunications, then, simply involved folding new commitments into these schedules under the legal framework of the GATS, rather than establishing a new treaty.
In accordance with the annex, a Negotiating Group on Basic Telecommunications (NGBT) was launched in April 1994. Participation was entirely voluntary, and at the outset there were thirty-three member governments and another twenty-four governments involved as observers. Pending conclusion of the negotiations, participants agreed not to apply any measures affecting trade in basic services that would affect their bargaining positions and leverage, and set April 1996 as a date by which the negotiations would conclude. Beginning in May 1994, fifteen meetings were held at the WTO headquarters in Geneva wherein members attempted to clarify the current situation with respect to national regulatory regimes, explore the complex issues involved, and move toward consensus on what kinds of services should be included in the schedules in what format. In addition, many so-called "rump groups" were informally created to discuss matters outside the formal institutional structures of the WTO, and intensive bilateral negotiations were held among participating governments in an effort to secure from each other concessions of particular interest to their service suppliers.
The NGBT confronted some difficult conceptual issues. For example, Australia proposed that international accounting rates should be treated as market access limitations by separating out from international correspondence and scheduling "termination services. " This idea was not endorsed by other governments, who concluded that enhanced competition brought by the agreement would reduce such rates over time. There were also questions about whether to schedule nondiscriminatory limitations on the number of services suppliers in situations where these were limited for strictly technical reasons like spectrum scarcity; how to regard universal service and public interest obligations that might have trade restricting effects, even though this is not their intent; how to treat new services like call back and calling card services under the modes of delivery; and how to deal with video services, particularly in regards to their provision over the Internet.
The biggest conceptual and policy breakthrough in the process was the agreement to include an American-authored Reference Paper on regulatory reform as a framework that governments could endorse in the Additional Commitments portions of their schedules. The paper laid out six key principles for the redesign of national regulatory rules and institutions for compatibility with trade disciplines. These consisted of: a) Competitive Safeguards. Governments are required to ensure that major suppliers, especially the national PTOs, do not engage in anti-competitive cross-subsidization, use information gathered from competitors with trade-restricting results, or fail to make available on timely basis technical information about their facilities and operations needed by competitors to enter the market. b) Interconnection. PTOs are to provide market entrants with interconnection at any technically feasible point in the network. Such interconnection is to be provided under nondiscriminatory terms, conditions and rates, and should be of a quality no less favorable that the provider gives its own services. Moreover, interconnection rates are to be cost-oriented, transparent, and where economically feasible, unbundled. A dispute mechanism administered by an independent body is also called for.
c) Universal Service. Such obligations are to be administered in a transparent, nondiscriminatory, and competitively neutral manner that is not more burdensome than is required. d) Public Availability of Licensing Criteria. Where licenses are needed, information and decision-making procedures concerning them are to be transparent. e) Independent Regulators. Regulatory bodies are to be separated from and not accountable to any service provider. And f) Allocation and Use of Scarce Resources. Any procedures for allocating and using frequencies, numbers, and rights of way are to be carried out in an objective, timely, transparent, and nondiscriminatory manner.
As the NGBT progressed, a number of countries shifted their status from observer to full participant, and through bilateral consultation the offers were enriched. By the designated end point of April 1996, there were thirty-four offers from forty-eight governments, many of whom were endorsing the Reference Paper. Nevertheless, the United States delegation was not satisfied that sufficient enough concessions had been made by important countries, and some American-based firms were balking at particular aspects of the deal. As such, the negotiations concluded without a final agreement, and the parties decided to extend the process, with somewhat different procedures, after some cooling off.
Hence, the new Group on Basic Telecommunications (GBT) was launched. Between July 1996 and February 1997, nine meetings were held to clarify the outstanding issues and build consensus, again accompanied by informal rump group sessions and intensive bilateral negotiations over the schedules. New countries joined the process, and the offers recorded in the schedules grew in significance. To overcome last minute obstacles in February, high-level interventions by President Clinton and other national leaders helped smooth over the discontent of certain governments with aspects of the deal, and on February 15, the GBT concluded its work successfully.
How significant is the GBT deal? Next we will turn to arguments for its positive contributions to the global market and policy environment, and then to arguments against the same.
II.
Positive Aspects of the GBT Deal
1. Services Covered
Negotiators wisely did not want to "lock in" a defined set of services that would be deemed basic and made subject to trade disciplines, which would implicitly leave other services off the table. Moreover, negotiators sought to establish a technologically neutral agreement that did not equate the services in question with a defined set of delivery options, i.e. particular types of wired, wireless, and satellite-based networks. In such a dynamic environment, where rapid innovation is quickly generating new systems and services that were not envisioned just a short time ago---e.g. Low Earth Orbital Satellites, Internet access, and so on---adopting this approach left GBT participants the flexibility to expand the scope of negotiations and national schedules later on.
Accordingly, the GBT did not attempt to agree on a singular and potentially exclusionary definition of basic telecommunications services. Instead, they gave examples of the sorts of services considered to be basic, recognizing that others could be thus labeled in the future. Among the services included in this inductive definition by example were network-based and resale provision of international and domestic voice telephony, data transmission and Internet services, telex, telegraph, facsimile, private leased circuits, satellite services, mobile services, and video transport.
However, while in principle anything was on the table, in practice the European Commission and other players balked at defining video content services as basic and refused to list these in their schedules. At the same time, the United States ultimately decided to take MFN exemptions on one-way direct-to-the-home and direct broadcasting satellite services, as well as digital audio services.
By explicitly including networked service provision as well as resale, the group opened the door to scheduling market access commitments on both the commercial presence and cross-border delivery modes of supply. In effect, this acknowledges the reality that trade and investment in basic telecommunications are often indistinguishable, and should both be subject to multilateral rules. This investment agreement is unique to the GATS: there are no corresponding multilateral commitments on direct foreign investment (DFI) in goods and agriculture, although there is much talk of moving toward a comprehensive international regime in the future.
2. Market Access Commitments
The GBT deal is significant not only because of the scope of services covered, but also because of the broad domain of parties that have committed to substantially relax restrictions on market access (since national treatment restrictions are fairly unusual in telecommunications, less explicit action was required in this part of the national schedules). While the initial offers floated early in the negotiations tended to reflect government's existing domestic regimes, over time they were enriched to cut deeper into domestic limitations. In this sense, there is something of an asymmetry between the schedules produced during the Uruguay Round and the changes made to them by the GBT.
During the Round, governments generally offered "stand still" concessions: the liberalization programs already undertaken by governments at the national level---most frequently, on value-added services, but also in twenty two cases on a few basic services---were simply translated into WTO commitments. During the GBT negotiations, in contrast, many governments ended up offering "roll back" concessions that committed them under binding international law to cut more deeply into market limitations than their existing domestic liberalization programs had done. This is somewhat ironic in that competition in basic telecommunications has always been seen as more sensitive and politically difficult than it is in value-added services, but the shift is a reflection of how far governments have come in their thinking since the end of the Round.
What concessions were made? A review of the fifty-five national schedules and of informal, not-for-attribution summaries generated by the WTO and the U.S. government provides a basis for a brief overview according to the types of service and the types of commitments involved. This is provided for in the Appendix.
3. Regulatory Principles
A surprising sixty-three of the sixty nine governments submitting schedules committed themselves to new domestic regulatory principles that are subject to international monitoring, bargaining, and dispute resolution. A full fifty-seven countries committed themselves in whole or with a few exceptions to the Reference Paper's language on competitive safeguards, interconnection, universal service, public availability of licensing criteria, independent regulators, and allocation and use of scarce resources. This was one of the most dramatic examples of progress as the GBT negotiations unfolded. In April 1996, when the NGBT ended unsuccessfully, forty-four governments had included regulatory commitments, and only thirty-one had signed on to the Reference Paper.
To advocates of the GBT deal, the incorporation of regulatory principles into a trade policy framework is a remarkable and significant achievement. After all, the entire history of global telecommunications has involved states' jealously preserving sovereign prerogatives to regulate their national systems as they saw fit. The instruments of the international regime negotiated in the International Telecommunication Union (ITU) positioned sovereignty as an overarching principle, and governments sought to insulate their markets from foreign influence while reaping the benefits of international correspondence, e.g. by interconnecting monopoly systems at designated gateways and jointly providing services on a non-competitive basis.
With the shift to a trade framework of global governance, the new forms of international service delivery require what have been called "beyond the border" and "deep integration" measures. Accordingly, GBT members have bound themselves to make their domestic regulatory institutions and rules consistent with multilateral trade disciplines and transnational market forces. It is easy to imagine that much of the agreement=s thrust might have been frustrated in practice without these regulatory obligations. For example, offering market access via commercial presence or cross-border delivery might mean little without an internationally recognized right to interconnect with other public telecommunications transport networks and services, or without mandatory access to licensing criteria.
4. Application of GATS General Obligations to Basic Telecommunications
The deal is significant not only because of the breadth and depth of the liberalization commitments listed in the national schedules, but also because the general obligations of the GATS framework agreement apply to these Specific Commitments. As such, much of the telecommunications industry has been brought fully under the trade mechanisms of the WTO; indeed, telecommunications is clearly one of the most well covered service sector in the GATS. This is fitting, since from the beginning of the movement to bring services under the GATT, telecommunications was regarded as a key to any multilateral deal.
The mechanisms for application of GATS rules to telecommunications are a bit complex. While some of the framework agreement's General Obligations apply across the board to all measures affecting trade in services regardless of whether specific commitments have been made, others apply only where such commitments have been listed in the national schedules. Probably the key success here concerns Article II MFN treatment. This applies across the board to all measures, which is a big shift toward nondiscrimination and away from the reciprocity requirements that have caused friction between, in particular, the United States and its trade partners. For many companies seeking entry into markets like the United States, the fact that an opening to some is an opening to all (save where specific exemptions are scheduled) represents a substantial change from the status quo ante.
While Article III's transparency requirements concerning the publication of measures of general application and the need for prompt replies to requests for information on such measures apply across the board to all measures affecting trade in services, its notification requirements concerning new measures and changes to existing measures applies only to scheduled sectors. Similarly, Article VI's language on domestic regulation that requires members to maintain or establish tribunals or procedures for prompt and impartial reviews of complaints always applies. In contrast, the article=s language requiring members to ensure that all measures are administered in an impartial manner, that any decisions on authorization must be notified to service suppliers in a reasonable time frame, and that members must not institute new practices that are inconsistent with the work program apply only to scheduled sectors.
Article VIII on monopolies and exclusive service suppliers mostly applies as scheduled; members are bound to ensure that such carriers do not, in the supply of reserved services, act in a manner inconsistent with MFN and their Specific Commitments. The same is true for abuse of dominant positions, e.g. cross-subsidization of competitive services from reserved services, and for the negotiation of compensatory adjustments when monopoly rights are granted. Finally, Article IX applies across the board, and states that in the case of business practices that restrain competition and trade, members must, upon request by another member, enter into consultations with a view to eliminating such practices.
We mention these distinctions in application because they are important to understanding how the GATS applies to any given industry. But in practice, all of the provisions listed above will apply equally to the commitments scheduled by GBT participants. The incorporation of basic telecommunications into the GATS= General Obligations could signal a major shift in the dynamics of market entry and scope of competition. For example, a government cannot with unchallenged impunity schedule the removal of quantitative limitations on commercial presence in packet switching but then layer on a set of procedural hurdles and information restrictions that make access impossible in practice. This sort of openness in name only has often been a hallmark of nominally liberalizing reforms, and it has allowed the accumulation of significant cross-national asymmetries in the actual (as opposed to announced) level of competition possible in any given market. Any practices that derogate from the applicable General Obligations can now be challenged in bilateral consultations, and cases that cannot be resolved may move to a hopefully impartial dispute resolution mechanism.
This last observation leads us to a broader conclusion that frames points made below: in a sense, the real significance of the GBT deal does rest on how deeply countries have liberalized any given sector or sub-sector in the short-term. To advocates of the agreement, it would be a mistake to measure its success solely in terms of the degree of change in national regimes and markets between January and February 1997. What matters more is that the deal signals the beginning of an evolutionary process of mutual adjustment that will unfold according to a clearly defined set of principles, baselines, and mechanisms. Hence, in their view, the GBT deal is indeed a big bang, but one that will build up slowly over the years to come, rather than being a one-off cataclysmic explosion of liberalization.
5. Multilateral Surveillance and Bargaining Framework
The GBT deal is significant because it institutionalizes for the first time a system of multilateral mutual surveillance, and a framework for bilateral bargaining over market entry. Regarding mutual surveillance, the agreement establishes a variety of information-sharing procedures through which everyone can see what everyone else is doing and whether it conforms to their shared principles. Through ongoing consultations in the telecommunications group of the Council on Services, reports on country conditions, and bilateral interactions, the ability of member governments to hide their transgressions under a shell should progressively evaporate.
Regarding the bargaining framework, clear and coherent rules and mechanisms are established according to which bilateral consultations must be conducted and measured. A country whose service supplier is seeking entry abroad is no longer left to argue and plead with its trade partner because it can now claim a right based on a binding and explicit set of multilateral rules. The net effect of this institutionalization of surveillance and bargaining guidelines should be to subject disparate national liberalization programs to a measure of harmonization in terms of pace and content. That could be very significant for the difficult implementation work that lies ahead.
6. Dispute Resolution and Sanctions
The GBT deal brings basic telecommunications---and hence, most of the global market---under an internationally legitimate enforcement mechanism. For any country that wishes to fend off bilateral pressure tactics, this is an important break with the past. The institutional mechanisms and multilateral consultations involved may be especially important for small and developing countries that would otherwise find themselves on their own and at a substantial disadvantage in dealing more powerful countries. The process begins with bilateral consultations, in which the Director General of the WTO may offer his or her "good offices" in an effort to mediate. If these efforts fail, the Dispute Settlement Body (DSB) establishes a panel with clear terms of reference and an agreed composition; an expert review group may also be consulted. The panel then examines the issues in meetings with the parties and any relevant third parties over a period not to exceed six months, three months in urgent cases. The panel then submits its report to the parties and then to the DSB for an interim review. The DSB must decide on the report within sixty days unless it is appealed, and an appellate review not to exceed ninety days may be launched. The DSB monitors the implementation of the adopted panel report or appellate body recommendation, and parties may then negotiate compensation pending full implementation.
If all else fails, the DSB can authorize retaliatory measures against the infringing party that in principle would have full legitimacy under the rules. This could provide parties, especially smaller ones, with a degree of safety from undue pressure tactics and unilateral bullying. In fact, trade policy makers hope, the threat of such legitimate sanctioning may often preclude conflicts by giving members strong incentives to settle their differences before they reach the boiling point. Never before have telecommunications services been subject to such a clear and forceful multilateral framework for preventing and resolving bilateral conflicts; the instruments of the ITU, for example, lack provisions for resolving disputes over competition.
There are, however, some potentially significant problems with this mechanism. One is whether in practice the composition and conduct of the DSB and its panels will be sufficiently open and democratic to enjoy the necessary legitimacy in the first place. Another is whether the involvement of the DSB, and indeed of the telecommunications group of the Council on Services, in the intricacies of domestic regulatory issues like interconnection will not prove unwieldy and ineffective. We will return to these questions below in recounting some of the arguments that can be made against the agreement.
7. Institutionalized Dialogue and Conceptual Convergence
The GBT agreement also institutionalizes dialogue among parties and collective examinations of problems, thereby promoting conceptual progress and convergence. All social actors---individuals, business, governments, etc.---behave on the basis cognitive constructs, interpretations, and understandings of their interests and the larger environments in which they operate, and these "mental images" help to define what is (in)appropriate and (in)advisable in any given decision situation. As many social scientists now recognize, the development of cognition generally is not something that happens in an atomistic, entirely individualized manner, since most of us do not live in a cave. Instead, it is to a significant degree a collective experience, one that plays out through complex processes of ongoing interaction and communication. The collective development and internalization of shared information and beliefs in an essential underpinning of all international institutions and patterns of world order. Indeed, the very institutionalization of trade in services discourse in the 1980s signaled a major shift in how international telecommunications relationships were collectively understood, and in how policy problems were defined, bargained over, and resolved.
The GBT deal expands and extends this process of conceptual development and convergence. Even if GBT members did not decide to agree on a singular and limiting definition of basic services, their inductive definition via examples went a long way toward promoting convergence and clarifying what sorts of services should be scheduled, and that dialogue will now continue in a structured form over time. Questions of statistical measurement and national accounting of basic services will be continuously addressed in a manner that promotes shared understandings and negotiations. Further, national regulatory schemes and institutional arrangements will be reexamined on an ongoing basis in light of newly shared criteria. This is especially important for developing and newly emerging countries, many of whom will need a great deal of assistance in the years ahead in redefining their internal arrangements to achieve conformity with international standards and notions of best practice.
8. Facilitating Organizational Efficiencies and Strategic Choice for New Entrants
By changing the rules to remove market distortions, the GBT deal will give service providers greater latitude to optimize their organizational structures and strategies and thus enhance their performance and ability to raise capital. Prior to the agreement, the absence of a stable, predictable, and coherent regulatory environment across countries forced companies to undergo contortions if they wanted to participate in various markets. For example, globalization efforts often required finding domestic counterparts with whom to form joint ventures or other kinds of strategic alliances, since full-blown direct foreign investment in public networks and services was limited or precluded. This kind of adjustment is akin to what has happened historically in goods industries, where tariffs and NTBs forced companies to make local investments in markets they wished to serve.
With the commercial presence concessions of the GBT deal, companies can often choose more freely, on the basis of economic rather than political considerations, what sorts of internal organizational structures, external relationships with suppliers and customers, and service offerings are best suited to their overall strategies. Of course, some countries have preserved equity limitations in their national schedules, but over time these may be bargained away or unilaterally removed in the context of WTO governance. This is, after all, what has happened to tariffs over successive GATT rounds. Once equity limitations and other restrictions are formally specified and on the table, they are subject to pressures to be taken off it. As that process unfolds in the years ahead, the argument goes, private firms and entrepreneurial public PTOs alike will have greater and greater latitude to improve their efficiency and their ability to innovate to the benefit of their customers and the world economy more generally.
9. Consolidating Pro-Liberalization and Free Trade Coalitions in Member Countries
The GBT deal helps to consolidate pro-liberalization and trade coalitions. In the public sector, the institutionalization of trade in services over the past decade has been an important factor in altering national decision-making processes. In the past, telecommunications policy was largely the proprietary preserve of ministries of posts and telecommunications or regulatory bodies like the U.S. Federal Communications Commission (FCC) and the state public utility commissions. Where national carriers were closely aligned with or part of the ministries, government policy unsurprisingly acted to preserve their monopolies or at least slow down competitive entry by alternative providers. Similarly, many observers argue that nominally independent regulatory agencies like the FCC were subject to "capture" or strong influence by the major carriers they were supposed to regulate, although the evidence suggests that this has not been consistently the case over time.
Either way, absorbing telecommunications into the trade policy environment has clearly altered the inter-ministerial or inter-agency mix by making the organizational objectives and intellectual frameworks of trade, industry, and finance ministries or agencies a vital part of decision making. In Europe, it also has strengthened in parallel the position of the Commission relative to national telecommunications ministries. Further, it has often pushed awareness and involvement in telecommunications policy matters out of obscurity and up the political ladder to the desks of top-level elected officials. In consequence, permanent bureaucratic coalitions have been established that have stakes in promoting liberalization to the benefit of the economy as a whole, rather than in protecting the prerogatives of traditional national carriers, and elected leaders have come to see telecommunications as part of their "high-politics" national strategies.
The same sort of coalition building has been happening in the private sector. Pro-liberalization and trade firms that are looking to international markets for their futures have been emboldened to press the case for more openness at home as a price for gaining access abroad. Users, too, have been emboldened to push for freer trade, since this allows them to procure the best services without regard to the nominal nationality of their providers. Like the telecommunications ministries, national carriers whose first preference might otherwise be for protectionism are no longer in a position to unilaterally define problems and push for preferential solutions.
The GBT deal deepens these trends. It does this most directly by requiring, in line with the Reference Paper and the GATS General Obligations, that carriers and ministries be separated, and that transparent and fair procedures be employed in dealing with foreign firms' pursuit of market access, authorization, and so on. But it does it indirectly as well, by simply strengthening the overall trend of making trade ministries and objectives and pro-trade firms a stronger part of the policy mix. And this is true not just in matters of value-added services and private networks, as before, but now also in the biggest portion of the market---basic telecommunications.
10. Redefining Multilateral Governance
There is a multilateral concomitant to this domestic shift in the balance of influence. That is, the institutionalization of telecommunications as a part of the WTO's ongoing work programs has very significant implications for global governance. Since the late 1980s---and especially since the 1988 World Administrative Telegraph and Telephone Conference---the ITU has moved quite strongly to change its spots. Gone are the days when the Place des Nations complex served as the exclusive clubhouse of national monopolies that designed international agreements to buttress their market power and preclude competition.
Many of the key instruments of the international telecommunications regime---e.g. the accounting and settlements system, the technical standardization process, the regulations on private leased circuits and networks, and so on---have been changed to allow governments and firms to develop competitive market arrangements, so much so that one could argue that the regime has undergone a fundamental transformation over the past decade.[1] Moreover, many of the ITU's institutional procedures have been adjusted to actively solicit the participation of a wide variety of the private firms in its work and decision-making. The entry of the GATT, and now the WTO, into the global mix---which has been called "the ultimate bypass"---was an important part of this story, because it essentially removed the ITU's 130-year old monopoly on multilateral rule-making, and it forced ITU members to adapt their agreements in anticipation of a contested policy market.
The GBT deal quite obviously deepens these trends. As the Council on Services' work program on telecommunications takes off and the DSB begins to involve itself in any bilateral conflicts, much of the most interesting and important action in multilateral telecommunications policy making will shift down the street from Place des Nations to the WTO’s location at Place Albert-Thomas. The ITU will continue to play important roles on many key issues---e.g. technical standardization, frequency spectrum management, technical assistance to developing countries, information dissemination and so on---but the economic aspects of telecommunications will increasingly shift to the WTO. . This is significant because none of the ITU's instruments actively promotes competition and market entry; they simply allow it, if members wish to go this route. Moreover, the growing influence of the could even make it easier for other international institutions, such as the World Intellectual Property Organization or plurilateral bodies like the Group of Seven, the OECD, and the Asia Pacific Economic Cooperation to cut market-enhancing deals.
In sum, then, there are a number of arguments one could make for why the GBT deal is both profoundly significant---a big bang of sorts, albeit a slowly building one---and beneficial for the global telecommunications market and policy environment. But clearly, the ultimate importance of the deal will depend in part on the hard work that lies ahead in the ongoing implementation phase. It will also depend to a significant extent on not just the trade lawyers and policy makers, but on whether or not the private sector is able to take advantage of the market openings it makes possible in order to generate substantially greater international competition and innovation.
But at the same time, there are also grounds upon which one could maintain that there is less to the deal than meets the eye, and in fact that in some respects it has significant shortcomings and flaws. In this view, the deal may be more of a "little bang," or even no bang at all. Let us turn now to these arguments.
III. Potential Problems with the GBT Deal
Politics is the art of the possible. By that standard, the WTO countries deserve a pat on the back for passing the GBT Agreement, after ten years of trying. The agreement is a step in the right direction. But it is quite another matter to declare it, as the credit-grabbing victory bulletins emanating from WTO negotiators did, a revolution, and a breakthrough, a telecommunications D-Day. Much of that view is steeped in the belief that reality in the information sector is shaped by WTO regulation, rather than the other way around.
Of course, the people directly involved in the drafting, lobbying, analyzing, and implementing of the Agreement have contributed a vast effort, and therefore it is natural for them to believe that the object of their attention is a monumental change rather than simply a monumental effort. But the question must be asked: Does the WTO's GBT Agreement make a difference? Certainly much less than claimed. In some areas, it made no difference. In others the Agreement modestly accelerated processes that had started already. And in other cases it will slow down future change. This will be discussed in the next section.