REPORT on the proposal for a Council Decision concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the results of the WTO negotiations on basic telecommunications services (COM(97)0368 - C4-0420/97 - 97/0204(CNS))

9 October 1997

Committee on External Economic Relations
Rapporteur: Mrs Luciana Castellina

By letter of 7 August 1997 the Council consulted Parliament, pursuant to Articles 57, 66, 90, 99, 100, 100a and 113, in conjunction with Articles 228(2) and 228(3), first subparagraph, of the EC Treaty, on the proposal for a Council Decision on the conclusion on behalf of the European Community, as regards matters within its competence, of the results of the WTO negotiations on basic telecommunications services.

At the sitting of 15 September 1997 the President of Parliament announced that he had referred these proposals to the Committee on External Economic Relations as the committee responsible and the Committee on Economic and Monetary Affairs and Industrial Policy and the Committee on Development and Cooperation for their opinions.

At its meeting of 25 February 1997 the Committee on External Economic Relations had appointed Mrs Luciana Castellina rapporteur.

It considered the draft report at its meetings of 25 September and 7 October 1997.

At the latter meeting it adopted the draft legislative resolution unanimously and decided to request the procedure without debate (Rule 99).

The following took part in the vote: Castellina, chairman and rapporteur; Sainjon, vice-chairman; Habsburg-Lothringen, Plooij-van Gorsel, Sonneveld (for Porto), Van Dam (for Souchet) and Wiersma (for Smith).

The opinions of the Committee on Economic and Monetary Affairs and Industrial Policy and the Committee on Development and Cooperation are attached.

The report was tabled on 9 October 1997.

A DRAFT LEGISLATIVE RESOLUTION

Legislative resolution embodying Parliament's opinion on the proposal for a Council Decision concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the results of the WTO negotiations on basic telecommunications services (COM(97)0368 - C4-0420/97 - 97/0204(CNS))

(Consultation procedure)

The European Parliament,

- having regard to the Commission proposal to the Council, COM(97)0368 - 97/0204(CNS),

- having regard to the draft agreement concerning the WTO negotiations on basic telecommunications services initialled by the Commission, COM(97)0368[1],

- having regard to Articles 57, 66, 90, 99, 100, 100a, 113 and 228(2) of the EC Treaty,

- having been consulted by the Council pursuant to Article 228(3), first subparagraph of the EC Treaty (C4-0420/97),

- having regard to Rule 90(7) of its Rules of Procedure,

- having regard to the report of the Committee on External Economic Relations and the opinions of the Committee on Economic and Monetary Affairs and Industrial Policy and the Committee on Development and Cooperation (A4-0305/97),

1. Approves conclusion of the agreement;

2. Instructs its President to forward this opinion to the Council and Commission and the governments and parliaments of the Member States.

  • [1] OJ C 267, 3.9.1997, p. 80.

B EXPLANATORY STATEMENT

1. On 15 July 1997 the Commission adopted the proposal for a European Union decision on the agreement on basic telecommunications services, containing the text of the fourth GATS protocol (in addition to a number of annexes setting out the relevant commitments and exceptions and the limits to its application) adopted in Geneva on 15 February 1997. Given that Parliament did not receive an official consultation request until 7 August 1997, there is now extremely little time remaining, since the agreement must be ratified by 30 November 1997 so that it may come into force before the deadline already set for full liberalization of this sector in the internal market. The Union has been preparing for this deadline for many years by adopting a series of directives (all those required bar a few) in compliance with Articles 90 and 100a of the Treaty, which make provision for a fully liberalized and harmonized internal market.

For the Union, ratification of the GATS agreement will mean that liberalization of the internal market will be subject to the rules laid down by the WTO, which, however, as indicated in the annexes, has accepted the same form of gradual implementation provided for in the Union's liberalization arrangements. This involves a right of deferral for countries with networks which are not fully developed or are too small, namely Ireland, Luxembourg and Portugal, and, to a lesser degree, Greece and Spain.

2. Before going into the substance of the matter I should like to make a few remarks on the institutional aspects of the negotiations which led to the agreement, which is the first agreement on services concluded within the new framework afforded by the World Trade Organization. Others are to follow shortly, with the first being that on financial services.

Negotiations on foreign trade matters are conducted by the Commission on the basis of a mandate from the Council, pursuant to Article 113 of the Treaty. However, such matters become particularly complicated whenever services are involved, given that they are partly the responsibility of the Member States (tourism, culture and education) and partly that of the Community, as is the case, for example, with broadcasting services (which are deemed 'services' on the basis of a definition laid down by the Court of Justice). However, even within the broadcasting field itself, some aspects - for example origination and production - remain the responsibility of the Member States.

This explains the complex web of responsibilities in respect of the agreement before us, which contains four different levels: (1) that of cross-border supplies (services originating on the territory of one of the parties for transmission to the territory of others), for which the Community has sole responsibility; (2) that of foreign consumption (services provided on the territory of one party to consumers from all the parties - e.g. tourist services); (3) that of commercial presence (services provided owing to the presence of suppliers of one of the parties on the territory of all the other parties - e.g. services provided by a bank in other countries); (4) and that of the presence of natural persons (services provided by natural persons from one of the parties on the territory of all the other parties - e.g. consultancy services). In respect of levels 2, 3 and 4, national competence has been preserved to the extent that responsibility is shared between the Union and the Member States, given that the Union has not fully harmonized national legislation in the sectors concerned .

Responsibility for the GATS negotiations was thus shared between the Union and the Member States. Commissioner Brittan therefore acted with full Community powers, pursuant to Article 113, in respect of level 1 and on a mandate from the Council and the Member States in respect of levels 2, 3 and 4, responsibility for which is shared between the Union and the Member States. As a result, the European Union conducted parallel negotiations, on the one hand with all the member countries of the WTO, and on the other between the 15 Member States in order to reach a common position. The former discussions were held in Geneva, the latter in Brussels. Furthermore, there were even differences of opinion between the 15 Member States themselves, in that, with regard to certain issues, the Twelve had adopted negotiating positions within the GATS which were rejected by the three countries which joined the Union at a later date (Sweden, Finland and Austria), on the grounds that they did not consider them part of the 'acquis communautaire'. One such issue was the cultural exception, which restricted the offer made by the Twelve in 1993.

I have given a detailed account of the shape which the negotiations took because I feel it necessary to highlight once again the excessive degree of complexity deriving from the lack of proper institutional integration at European level, the difficulties which this causes for those obliged to negotiate at international level and the lesser degree of transparency to which it inevitably gives rise.

The agreement should not have any impact on the Community directives. As was mentioned above, almost all the necessary directives have already been adopted with a view to the liberalization of the internal market for basic telecommunications services, which is to enter into force on 1 January 1998. However, given the number of annexes containing exemptions and limitations, transposition into the law of the Member States will inevitably be a long and complex process. The Commission should be asked to look into the matter and to provide us with estimates.

3. GATS agreements are governed by three general principles: (1) any concession granted to a third country must be granted to all WTO members, pursuant to the principle of generalization of the MFN (most-favoured-nation) clause. Such concessions must also be granted to countries which have not signed the agreement (i.e. even in the absence of reciprocity). This is the basic import of the multilateral approach on which the system is based; (2) this general principle is qualified by a series of specific commitments establishing limitations and exemptions (set out in the annexes to the agreement); (3) the principle of transparency, based on the commitment by each of the parties to publish the rules and regulations governing its own services, so as to enable all operators, whatever their country of origin, to know what to expect in the country in which they wish to do business.

It is interesting to note that the agreement on basic telecommunication services establishes for the first time at world level general principles on which to base national legislation on service provision. It is also the first multilateral agreement to lay down rules governing competition and ensuring pluralism. It covers inter alia: the provision of a universal service; guaranteed interconnection of networks; the sharing of essential facilities; access to resources, e.g. frequencies; and a clause protecting against the abuse of dominant positions, and one protecting against the abuse or misuse of news in the information sector.

It is difficult to say to what extent these principles and guarantees will actually be implemented at WTO level. From experience, it will once again be a question of who carries the most weight. The European Union should insist on their implementation and should make its own arrangements to monitor implementation.

4. The agreement was signed by 69 of the 130 WTO member countries. However, those countries share between them 95% of the world market in this sector, which is worth approximately $ 600 billion and accounts for 2.1% of gross world production (a percentage which is rising rapidly).

Most telecommunications activities take place within the OECD, particularly between its most advanced member countries: 77% of the market is shared between only five countries. However, statistics show that four southern countries - Korea, Brazil, Mexico and Argentina

- are among the top ten in terms of telecoms income. It is also significant that tiny Hong Kong ranks fifth in terms of external traffic.

No solution has yet been found to the huge problem of developing countries, which may well be severely damaged by the total opening up of their markets without any quid pro quo in such a sensitive/strategic sector. The same applies in other sectors, which is why the WTO itself has sketched out the broad lines (as yet extremely vague) of a programme to be drawn up in the future.

As for the European Union, it is difficult to foresee the impact of the agreement, not least because very few data and analyses are available. Will prices fall? Will business grow? Will competition grow stiffer or will there be a rapid process of concentration? The Commission should give its views on the matter.

5. Article II of the GATS agreement provides for the generalization of the most-favourednation (MFN) clause, stating that: 'each Member shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favourable than it accords to like services and service suppliers of any other country'. When the GATS agreement was concluded, the contracting parties qualified this general commitment by means of a large number of exemptions (61 lists of 'Article II exemptions'), which, however, will be reviewed within no more than five years and may not exceed a period of ten years.

Lists of specific concessions regarding individual sectors and arrangements for the provision of telecommunications services, setting out the relevant limitations on market access and national treatment, were added when the agreement on basic telecommunications services was signed. At the same time, nine countries (but not the Union) filed further Article II exemptions (MFN clause).

The negotiations were, in fact, more complicated than expected, whence the large number of limitations on market access and national treatment. The main sticking point was the liberalization of investments, with many parties expressing concern at the possibility of losing national control over strategic sectors. A prime example was the United States, which asked for foreign direct investments in the radiocommunications sector to be restricted to 20%. The European Union did not follow suit, with the exception of Portugal (25% limit) and France, which, looking for reciprocity vis-à-vis the US, imposed the same limit of 20%. Outside Europe a number of other industrialized nations asked for restrictions: Canada (46% with regard to facilities granted to foreign operators); Japan (20% for KDD and NTT); Australia (no restrictions on investment in new carriers, while for existing carriers the majority of the capital must be Australian); and New Zealand (which has made screening arrangements). Lastly, restrictions were also requested by a number of less industrialized countries: India, Hungary, Poland, Israel, Singapore, and many Latin-American countries (with the exception of Chile, Venezuela, Colombia and Argentina).

Difficulties also arose in connection with access to certain markets. Here again, the United States imposed less than full reciprocity, giving the authorities at the Federal Communication Commission the right to authorize the issue of licences to foreign operators, together with 'benchmarking' (ceilings for accounting rates), namely the right to apply different accounting rates to international telecoms traffic according to the ratings of foreign operators.

Here again, the European Union does not seem to have felt it necessary to request any restrictions or quid pro quo for the lack of reciprocity viz-a-viz its own offer. It will be necessary to obtain further clarifications regarding these arrangements and, above all, to check whether they have any discriminatory effect. A monitoring committee could possibly be set up to this end.

6. Broadcasting proved to be the thorniest issue in the negotiations. The US insisted that broadcasting services - in particular new services, such as video-on-demand, pay-TV and DHT (direct-to-home transmission), which were excluded from the telecommunications sector during the 1993 GATS negotiations, be included in the new agreement, on the basis of the 'convergence' theory (namely that, since television programmes were now carried on telephone lines, there was no longer any reason to make a distinction between, for example, a fax and a drama programme). In its turn, the Union (both the Commission and the Member States) maintained that the distinction between the two sectors should be retained, i.e. that the transmission medium and the content being transmitted should be kept separate, given that the former came within the telecoms sector and the latter was subject to the rules laid down in other GATS agreements on broadcasting services and, indeed, financial services.

The latter approach was finally adopted. The agreement therefore states that 'telecommunications services are the transport of electro-magnetic signals - sound, data image and any combinations thereof, excluding broadcasting', whether point-to-point or point-tomultipoint. The agreement does not cover 'the economic activity consisting of content provision which require telecommunications services for its transport'.

Broadcasting is then defined as 'the uninterrupted chain of transmission required for the distribution of TV and radio programme signals to the general public' (links between operators are not covered). This definition is slightly different from that given in the recently adopted 'television without frontiers' directive, since it does not cover links between operators prior to transmission to the public, whence the joint declaration by the Commission and the Council to the effect that the definition of the term 'broadcasting' given in the Geneva agreement is valid only within the framework of the WTO and not for the internal purposes of the EU (i.e. it must not set a legal precedent).

The broadcasting sector was excluded from the agreement on basic telecommunications services so as to ensure that EU Member States were not obliged to grant access to all programmes supplied by other countries. Without this limitation - which is based on the same spirit as the cultural exception established in the 1993 GATS agreement - the already limited number of European products on the European audiovisual market (80% of which is currently accounted for by US products) would have been likely to shrink still further, seriously undermining cultural pluralism and efforts to safeguard different identities and languages. This risk is all the greater for small countries.

Finally, in the closing stages of the negotiations, to everyone's surprise the US (followed by Brazil) suddenly withdrew from their offer the liberalization of satellite transmissions to the public (DHT - direct-to-home transmission, DSB - digital satellite broadcasting, and digital audio transmission). Such a move was, in fact, contrary to WTO rules, which state that no party may reduce its initial offer. However, was this a genuine reduction, or something quite different? In some respects, this negotiating move on the part of the US appeared redundant in that there was no need specifically to exclude satellite transmissions, given that they were already excluded from the agreement, which did not cover broadcasting services. So why withdraw them from the offer? The US's reply was that they had specified them because they considered them to come within the telecoms sector. Fearing that the aim of the withdrawal was to reopen discussions on the general exemption on broadcasting services, the EU made a declaration taking note of the US position and stating that it should not be allowed to set a precedent. The remaining negotiations were taken up by an extremely confused discussion of the issue of how to define 'broadcasting' and 'telecommunications'; a debate heavy with political and cultural implications which is sure to be a prominent feature of the coming years.

7. In conclusion, attention should be drawn to the following issues:

(1) the confused institutional arrangements in the foreign trade sphere, and the urgent need to amend the relevant legislation;

(2) the need to monitor implementation of the general principles laid down by the WTO;

(3) the need to assess the impact of the GATS agreements on developing countries (in some respects positive, but in others extremely dangerous) and the need, therefore, to adopt special measures to ensure that they are not placed in an excessively difficult position;

(4) consideration of the possible repercussions of the restrictions attached to the offers put forward by many countries (particularly the US) in a wide range of sectors, which have led to a blatant lack of reciprocity vis-à-vis the European Union, whose offer appears extremely open;

(5) the need to clarify various aspects of the negotiations which remain rather unclear as far as broadcasting services are concerned.

OPINION

(Rule 147)

for the Committee on External Economic Relations

on the proposal for a Council Decision concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the results of the WTO negotiations on basic telecommunications services (COM(97)0368 - C4-0420/97 - 97/0204 CNS); report by Mrs Castellina

Committee on Economic and Monetary Affairs and Industrial Policy

Letter from the committee chairman to Mrs Luciana Castellina, chairman of the Committee on External Economic Relations

Brussels, 29 September 1997

Dear Mrs Castellina,

The Committee on Economic and Monetary Affairs and Industrial Policy considered the above subject at its meeting of 25 September 1997.

At that meeting it adopted the following conclusions:[1]

The recent WTO Basic Telecoms Agreement was widely heralded as a triumph by governments and industry alike.

The agreement is potentially far-reaching in scope and will affect all participants in the telecoms sector. The Basic Telecoms Agreement builds on the general trading principles set out in the General Agreement on Trade in Services, which includes the traditional international trading concepts of nondiscrimination and most-favoured nation status and is subject to the WTO dispute settlement procedures.

In an increasingly global information economy, any international agreement affecting trade in telecoms services would be important.

An agreement between the world's major trading nations incorporating market opening commitments and regulatory principles will be crucial in moving to a truly global information economy.

The economic committee notes that the main points of the agreement cover the same kind of concepts that are dealt with at EU internal level in the process of opening the telecoms market to competition as from 1.1.1998, be they the prevention of anti-competitive practices, the asymmetrical treatment to favour new entrants against dominant suppliers, the focus on a transparent and fair-priced interconnection or the preservation of universal service.

The rules governing the granting of licences and foreign participation in the capital of operators are designed so as to facilitate free trade and investment. However, in such a competitive and fast-moving market as telecommunications, there is a strong risk that mere delays are used in some countries to bring about the failure of a new enterprise, especially a foreign one.

Close monitoring of this agreement will therefore be necessary, particularly as it applies to market access in the United States and Japan. The 'Notice of Proposed Rule-Making on Foreign Participation' that the US Federal Communications Commission issued on 4th June is of particular concern to our committee.

Monitoring means however not only monitoring the Union's foreign partners, but also preventing dubious behaviour by some Member States from provoking foreign partners into introducing legal action or even retaliation against the Union as a whole.

Finally, the agreement will have direct consequences for the international telecommunications settlement under the ITU-T system based on the so-called 'international accounting rates', which is not suitable any more for a competitive environment where settlements are to be part of interconnection agreements.

The Commission should be required to engage in active preparation of the dismantling of the international accounting rates and the implications thereof for the Union's internal and external policies.

Yours sincerely,

(sgd) Karl von Wogau

  • [1] The following were present for the vote: von Wogau, chairman; Areitio Toledo, Arroni, Barton (for Donnelly), Billingham, Camison Asensio (for Hoppenstedt), Carlsson, Caudron, Christodoulou, Cox, de Brémond d'Ars, de Rose, Ettl (for Paasilinna), Falconer (for Imbeni), Fourçans, Friedrich, García Arias, García-Margallo, Gasoliba i Böhm, Glante, Harrison, Hautala, Hendrick, Herman, Ilaskivi, Kestelijn-Sierens, Konrad, Kuckelkorn, Langen, Metten, Miller, Murphy, Pérez Royo, Porto (for Mather), Rapkay, Read, Rübig, Schlüter (for Peijs), Siso Cruellas (for Lulling), Soltwedel-Schäfer, Thyssen, van Velzen (for Secchi), Watson, Wibe and Willockx (for Torres Marques).

OPINION

(Rule 147 of the Rules of Procedure)

for the Committee on External Economic Relations

on the proposal for a Council Decision concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the results of the WTO negotiations on basic telecommunications services (COM(97)0368, 97/0204 (CNS)); report by Mrs Castellina

Committee on Development and Cooperation

Letter from the committee chairman to Mrs Castellina, chairman of the Committee on External Economic Relations

Brussels, 8 October 1997

Dear Mrs Castellina,

The Committee on Development and Cooperation considered the above subject at its meetings of 25 September 1997.

At its meeting of 8 October 1997 it adopted the following conclusions[1]:

The Committee on Development and Cooperation has taken very careful note of the proposal for a decision referred to above. It notes that these negotiations, which concern the liberalization of trade in basic telecommunications networks and services, stem from commitments previously entered into under the Final Act embodying the results of the Uruguay Round of multilateral trade negotiations and the agreements annexed thereto, especially the General Agreement on Trade in Services and the Ministerial Decision on Negotiations on Basic Telecommunications.

The Committee on Development and Cooperation notes that this proposal for a decision covers commitments entered into on behalf of the European Community and is therefore binding only on the Community and its Member States. According to the Commission, the agreement should enable the European Union's telecommunications industries to benefit from greater legal certainty and predictability than before. It should be to the advantage of the European industries and of European consumers.

In this respect, the Committee on Development and Cooperation has no objections to voice.

However, it would like to take this opportunity - noting in particular that various developing countries have also confirmed their commitments in this sphere - to emphasize that greater liberalization in this sector should take full account of the specific situation of the developing countries and especially of the poorest among them. The committee stresses its constant concern to prevent them from becoming increasingly marginalized in a sector that is particularly important for future economic and social development.

The committee recalls the commitment at the WTO Ministerial Conference (Singapore, December 1996) to convene in 1997 a high-level meeting of the WTO, UNCED and the International Trade Centre, with multilateral aid agencies in attendance, with a view to defining the means of helping the least advanced countries to take full advantage of any liberalization of trade. The committee calls for this meeting to be held as soon as possible, with the active participation of the European Union, and for it to take due account of all the problems associated with this telecommunications sector.

The Committee on Development and Cooperation also wishes to point out that almost all the African countries belong to a common organization known as RASCOM (Regional African Satellite Communication System), their intention being to make access to the telephone generally available in rural Africa with the aid of satellites. The rural population in Africa does not have the purchasing power for a system of this kind to be completely financed by the market. The Committee on Development and Cooperation requests the Committee on External Economic Relations to ensure that a project of this kind can rely on pricing commensurate with a public service for rural areas and that partial subsidization of the infrastructure is compatible with the proposal for a Council decision.

Yours sincerely,

(sgd) Michel Rocard

  • [1] The following took part in the vote: Wurtz (vice-chairman), acting chairman; Fassa, vice-chairman; Aldo, Cunningham, Fernández Martín, Glase (for Liese), Günther, Howitt (for David), Junker, Kinnock, Lööw, Martens, McGowan, Paasio, Pons Grau, Robles Piquer, Salafranca (for Verwaerde), Sauquillo Pérez del Arco and Vecchi.