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The WTO: World Trade Organization
Original course & content comes from Washington State University Extension, Center to Bridge the Digital Divide.
World Trade Organization (WTO)
The World Trade Organization, (herein after referred to as the WTO), was formed in 1993 as a result of the Uruguay Round of negotiations, which included discussions about trade related issues. The WTO recognized telecommunications as an important sector of economic activity, as well as an important channel of information transfer for other key economic activities. In this regard, Deane and Opoku-Mensah (1997:13) state that telecommunications progressed from being regarded as a facilitator of trade to also being seen as an essential component of trade and commerce. This pact allowed foreign operators to supply new connections and break domestic monopolies.
The WTO had around 132 members in 2000 and is responsible for administering WTO trade agreements such as the General Agreement on Trade and Services (GATS) which provides, among other things, schedules on specific commitments such as trade in telecommunications services. It allows trade negotiations and trade disputes to be addressed. It monitors national trade policies and provides technical assistance and training to developing countries (International Telecommunications Union 1998). International deregulation, a component of GATS, is arguably part of the Annex on Telecommunications (3), which is part of GATS. GATS emerged out of discussions that have been held over a number of years in the Uruguay Round. The Uruguay Round established the WTO as the guard of the multilateral trade system with three councils (goods, services and intellectual property rights) and a Dispute Settlement Body (Boeringer 1996).
The United States imposed the inclusion of services in the multilateral trade regime as far as Mahoney (1992:194) argues, that trade negotiations were strongly promoted by the US, and later by the major market economies (for example Western Europe and Japan), as a response to changing economic and political realities. Developing countries had also initially opposed the inclusion of services like telecommunications in the multilateral trade agreements. Primo Braga (1997:1) further states that developing countries "opposed the negotiations either because they believed that they did not enjoy comparative advantage in the relevant industries, or because they feared that these negotiations would intrude into other areas, such as foreign direct investment policies and national regulatory regimes". Mahoney (1997:198) further says that developing countries believed they had the most to lose, and were also concerned about "the preponderant role of TNCs in services". (Mahoney 1997:198). Developing countries believed that their capability to manage their economies would be greatly diminished.
A further concern for developing countries was that the trade framework for services would demand changes in national laws covering such services as banking, insurance and telecommunications (Mahoney 1997). However, in the 2000s, the role of developing countries in the ITU has changed and these countries now play more instrumental roles in the activities of the organization. There is an increase in the number of representatives from developing countries in the ITU at present. Members from developing countries are now more represented in decision-making structures of the ITU, and more ITU conferences are hosted in developing countries more often. Such conferences have been held repeatedly in cities like Midrand, South Africa and Buenos Aires in Latin America.
GATS requires all signatory states to recognize certain general principles such as the Most Favoured Nation (MFN) Principle and the National Transparency Principle. The MFN principle states that all WTO members are bound by the general GATS agreement. It prohibits discrimination against any WTO member, each member country must treat each trade partner as it would treat its most favored trade partner. The National Principle of Transparency requires foreign suppliers to be granted treatment 'no less favorable' than that accorded to domestic service providers. Transparency provisions require member countries to publish all relevant measures of general application affecting trade in services. These principles are new to telecommunications as constituted under the old regime and have a great potential to change national regulatory frameworks. In sum, GATS performs two main functions: it sets up the process of liberalization of telecommunications, and its substructure, the Negotiating Group on Basic Telecommunications (NGBT) supports some of its functions (Joseph & Drahos 1996).
GATS' fundamental principles are that countries need to develop telecommunications policies with the following standards:
The WTO Reference Paper (ITU World Telecommunications Development Report 1998.), commits those members who signed to:
The operations of the WTO like those of the ITU have been criticized by various commentators. For example, Van der Stichelle (1997:3-4) argues that the WTO pact contributes to unequal competition, which leads to marginalization of the least developed countries (LDCs). Van der Stichelle suggests that a highly complex and nontransparent competition has been established involving participation in production and information networks, meeting high product standards, sophisticated marketing, research and development. This, requires technology, communication and information, capital, training, management, know-how (IPR), skilled labor, practices to reduce labor and other costs to a minimum, large consumer markets, adequate support and government infrastructure. Van der Stichelle further states that developing countries are not able to compete in trade, because they do not have the infrastructure owned by developed countries, and that the WTO and the Uruguay Round contributed to unequal competition because:
The WTO, in response, has rejected these criticisms. It views itself as a trading system, which aims to serve as a forum for countries to resolve their trade-related differences. It argues that during dispute settlement procedures, developing countries have successfully challenged some actions taken by the developed countries, and that it increases their bargaining power (http://www.wto.org). Developing countries have participated more actively during the Uruguay Round negotiations. According to Stiles (1996:129), for example, in the area of dispute settlement, "the developing nations were particularly assertive in recommending reforms. Jamaica proposed granting third parties the right to dispute and participate fully in the panel process". Although this suggests that WTO pact addresses concerns of both developing and the developed countries, it can be argued that the bargaining power of the developing countries during negotiations may not necessarily be the same as that of the developed countries, which have more resources.
The WTO also came under attack in November 1999, when demonstrators in the streets of Seattle disrupted the WTO proceedings. "The demonstrators' concerns centred around the domination of poor by rich countries within the WTO decision-making processes (realpolitik). The smaller countries have been bullied by the heavy political pressure" (Vidal and Elliot 1999:30). In 1999 to 2002, we have seen global demonstrations against the WTO meetings in various cities of the world. The marches have been staged in cities like Sydney, Paris, Johannesburg, Cape Town. In its submission to the WTO, South Africa stated that full liberalization would begin in December 2003, effectively ending Telkom's monopoly.
The South African regulator (for telecommunications and broadcasting), the Independent Communications Authority of South Africa (ICASA), approved Cell C's operations in 2001.South Africa also offered to put in safeguards that a healthy competitive environment would exist in the telecommunications sector, and that these measures would protect consumers and competitors against anti-competitive cross-subsidization, use of competitor's information with anti-competitive results, and withholding of relevant technical and commercial information essential to business.Other commitments made were an indication that interconnection between Telkom's network and other public networks would be provided at any technically viable point under nondiscriminatory terms, conditions, price and quality. The terms and conditions would be transparent and reasonable, and products would be sufficiently unbundled to prevent customers paying for services they do not need or for services they have not used. Another commitment of South Africa was that interconnection would be provided on request wherever the customer wants it, subject to the service and on the right to impose obligations in this regard on public network operators. The South African regulator also added that these rights would not be regarded as anti-competitive, provided that they are administered in a way that is transparent, nondiscriminatory, competitively neutral, and not harsher than necessary in the light of the current definition of universal service. Competition has been introduced in the mobile sector. The second national operator (SNO) to compete with Telkom, the fixed line operator, is expected to be in operation by 2004.
World Trade Organization (WTO)
The World Trade Organization, (herein after referred to as the WTO), was formed in 1993 as a result of the Uruguay Round of negotiations, which included discussions about trade related issues. The WTO recognized telecommunications as an important sector of economic activity, as well as an important channel of information transfer for other key economic activities. In this regard, Deane and Opoku-Mensah (1997:13) state that telecommunications progressed from being regarded as a facilitator of trade to also being seen as an essential component of trade and commerce. This pact allowed foreign operators to supply new connections and break domestic monopolies.
The WTO had around 132 members in 2000 and is responsible for administering WTO trade agreements such as the General Agreement on Trade and Services (GATS) which provides, among other things, schedules on specific commitments such as trade in telecommunications services. It allows trade negotiations and trade disputes to be addressed. It monitors national trade policies and provides technical assistance and training to developing countries (International Telecommunications Union 1998). International deregulation, a component of GATS, is arguably part of the Annex on Telecommunications (3), which is part of GATS. GATS emerged out of discussions that have been held over a number of years in the Uruguay Round. The Uruguay Round established the WTO as the guard of the multilateral trade system with three councils (goods, services and intellectual property rights) and a Dispute Settlement Body (Boeringer 1996).
The United States imposed the inclusion of services in the multilateral trade regime as far as Mahoney (1992:194) argues, that trade negotiations were strongly promoted by the US, and later by the major market economies (for example Western Europe and Japan), as a response to changing economic and political realities. Developing countries had also initially opposed the inclusion of services like telecommunications in the multilateral trade agreements. Primo Braga (1997:1) further states that developing countries "opposed the negotiations either because they believed that they did not enjoy comparative advantage in the relevant industries, or because they feared that these negotiations would intrude into other areas, such as foreign direct investment policies and national regulatory regimes". Mahoney (1997:198) further says that developing countries believed they had the most to lose, and were also concerned about "the preponderant role of TNCs in services". (Mahoney 1997:198). Developing countries believed that their capability to manage their economies would be greatly diminished.
A further concern for developing countries was that the trade framework for services would demand changes in national laws covering such services as banking, insurance and telecommunications (Mahoney 1997). However, in the 2000s, the role of developing countries in the ITU has changed and these countries now play more instrumental roles in the activities of the organization. There is an increase in the number of representatives from developing countries in the ITU at present. Members from developing countries are now more represented in decision-making structures of the ITU, and more ITU conferences are hosted in developing countries more often. Such conferences have been held repeatedly in cities like Midrand, South Africa and Buenos Aires in Latin America.
GATS requires all signatory states to recognize certain general principles such as the Most Favoured Nation (MFN) Principle and the National Transparency Principle. The MFN principle states that all WTO members are bound by the general GATS agreement. It prohibits discrimination against any WTO member, each member country must treat each trade partner as it would treat its most favored trade partner. The National Principle of Transparency requires foreign suppliers to be granted treatment 'no less favorable' than that accorded to domestic service providers. Transparency provisions require member countries to publish all relevant measures of general application affecting trade in services. These principles are new to telecommunications as constituted under the old regime and have a great potential to change national regulatory frameworks. In sum, GATS performs two main functions: it sets up the process of liberalization of telecommunications, and its substructure, the Negotiating Group on Basic Telecommunications (NGBT) supports some of its functions (Joseph & Drahos 1996).
GATS' fundamental principles are that countries need to develop telecommunications policies with the following standards:
- Progressive liberalisation through binding commitments in schedules.
- Nondiscrimination and transparency
- Have regulations that are reasonable, objective, impartial, and not more burdensome than necessary.
- Have competition safeguards aimed at the realization of obligations and commitments.
- Flexibility in recognition of national sovereignty and economic development needs. Tuthill (1996) and (1997) also discussed these WTO regulations and their implications for national telecommunications policies in her articles.
The WTO Reference Paper (ITU World Telecommunications Development Report 1998.), commits those members who signed to:
- Establish competitive safeguards to prevent anti-competitive practices
- Provide for interconnection
- Apply universal service obligations in a neutral and transparent way
- Make licensing criteria publicly available
- Establish an independent regulator
- Allocate scarce resources fairly.
The operations of the WTO like those of the ITU have been criticized by various commentators. For example, Van der Stichelle (1997:3-4) argues that the WTO pact contributes to unequal competition, which leads to marginalization of the least developed countries (LDCs). Van der Stichelle suggests that a highly complex and nontransparent competition has been established involving participation in production and information networks, meeting high product standards, sophisticated marketing, research and development. This, requires technology, communication and information, capital, training, management, know-how (IPR), skilled labor, practices to reduce labor and other costs to a minimum, large consumer markets, adequate support and government infrastructure. Van der Stichelle further states that developing countries are not able to compete in trade, because they do not have the infrastructure owned by developed countries, and that the WTO and the Uruguay Round contributed to unequal competition because:
- Developed countries give less market access to products from developing countries (average 4,3 percent) and more to other developed countries (average 3,8 percent), and they tend to impose high tariffs on those products most valuable to least developed countries (for example clothing, leather, fish, agriculture)
- The phasing out of quantitative restrictions for textiles and clothing exports to the North is very slow and may make it difficult for small and poor producers to compete
- Safeguard and anti-dumping rules still have loopholes and are frequently used to stop competition from labor-intensive products
- The enforcement of intellectual property rights (TRIPS) is likely to make technological and essential goods (for example medicines and seeds) too expensive; it is unlikely to stop piracy by foreign companies.
The WTO, in response, has rejected these criticisms. It views itself as a trading system, which aims to serve as a forum for countries to resolve their trade-related differences. It argues that during dispute settlement procedures, developing countries have successfully challenged some actions taken by the developed countries, and that it increases their bargaining power (http://www.wto.org). Developing countries have participated more actively during the Uruguay Round negotiations. According to Stiles (1996:129), for example, in the area of dispute settlement, "the developing nations were particularly assertive in recommending reforms. Jamaica proposed granting third parties the right to dispute and participate fully in the panel process". Although this suggests that WTO pact addresses concerns of both developing and the developed countries, it can be argued that the bargaining power of the developing countries during negotiations may not necessarily be the same as that of the developed countries, which have more resources.
The WTO also came under attack in November 1999, when demonstrators in the streets of Seattle disrupted the WTO proceedings. "The demonstrators' concerns centred around the domination of poor by rich countries within the WTO decision-making processes (realpolitik). The smaller countries have been bullied by the heavy political pressure" (Vidal and Elliot 1999:30). In 1999 to 2002, we have seen global demonstrations against the WTO meetings in various cities of the world. The marches have been staged in cities like Sydney, Paris, Johannesburg, Cape Town. In its submission to the WTO, South Africa stated that full liberalization would begin in December 2003, effectively ending Telkom's monopoly.
The South African regulator (for telecommunications and broadcasting), the Independent Communications Authority of South Africa (ICASA), approved Cell C's operations in 2001.South Africa also offered to put in safeguards that a healthy competitive environment would exist in the telecommunications sector, and that these measures would protect consumers and competitors against anti-competitive cross-subsidization, use of competitor's information with anti-competitive results, and withholding of relevant technical and commercial information essential to business.Other commitments made were an indication that interconnection between Telkom's network and other public networks would be provided at any technically viable point under nondiscriminatory terms, conditions, price and quality. The terms and conditions would be transparent and reasonable, and products would be sufficiently unbundled to prevent customers paying for services they do not need or for services they have not used. Another commitment of South Africa was that interconnection would be provided on request wherever the customer wants it, subject to the service and on the right to impose obligations in this regard on public network operators. The South African regulator also added that these rights would not be regarded as anti-competitive, provided that they are administered in a way that is transparent, nondiscriminatory, competitively neutral, and not harsher than necessary in the light of the current definition of universal service. Competition has been introduced in the mobile sector. The second national operator (SNO) to compete with Telkom, the fixed line operator, is expected to be in operation by 2004.
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