MAKIGUCHI

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Info Communication Policy Workshop Eiji MAKIGUCHI Director Multilateral Economic Affairs Office Telecommunications Bureau Ministry of Public Management, Home Affairs, Posts and Telecommunications (MPHPT), JAPAN 8 August, 2003 WTO Doha Development Agenda

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I. Framework of the WTO

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The World Trade Organization (WTO) is the international organization dealing with the rules of international trade. In order to maintain and enforce world free trading system, the WTO addresses multilateral trading negotiations for further liberalization and enforcement of rules regarding goods and services. The WTO was established on 1 January 1995, succeeding the General Agreement on Tariffs and Trade (GATT) with some enhancement. 　 Location ： Geneva, Switzerland Membership： 146 (as of 1 August 2003) What is the WTO ? Enhanced Point Compared to GATT Covering New Areas, e.g. Trade in Services, Intellectual Property Rights Addressing Non-Tariff Measures Effective Dispute Settlement System 3

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WTO Organization Chart 4

WTO Agreements: 

WTO Agreements MARRAKESH AGREEMENT ESTABLISHING THE WORLD TRADE ORGANIZATION Annex 1 Annex 1A: Multilateral Agreements on Trade in Goods General Agreement on Tariffs and Trade 1994 (GATT) Agreement on Agriculture Agreement on the Application of Sanitary and Phytosanitary Measures Agreement on Textiles and Clothing Agreement on Technical Barriers to Trade (TBT) Agreement on Trade-Related Investment Measures (TRIMs) Agreement on Implementation of Article Ⅵ of the General Agreement on Tariffs and Trade 　(Anti-ｄumping) Agreement on Implementation of Article Ⅶ of the General Agreement on Tariffs and Trade Agreement on Preshipment Inspection Agreement on Rules of Origin Agreement on Import Licensing Procedures Agreement on Subsidies and Countervailing Measures Agreement on Safeguards Annex 1B: General Agreement on Trade in Services (GATS) Annex 1C: Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) Annex 2: Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) Annex 3: Trade Policy Review Mechanism Annex 4: Plurilateral Trade Agreements Agreement on Trade in Air Civilcraft Agreement on Government Procurement 5

Road to Doha : 

Road to Doha Seattle Ministerial Conference Dec. 1999 Mar. 2000 End of 2000 Nov. 2001 Start Negotiation on Trade in Services Submit Negotiating Proposal on Trade in Services Doha Ministerial Conference Failure to launch New Round Success to launch New Round （Built-in Agenda） 6

4th (Doha) Ministerial Conference: 

4th (Doha) Ministerial Conference 　　　　　　　　　　　　 9-14 November 2001 　　　　　　　　　　　　　　　　　Doha（QATAR） Ministerial Declaration New Round (“Doha Development Agenda”) Kicks Off LDCs, Implementation, TRIPs & Health, Agriculture, 　Singapore Issues, E-Commerce･･･ Accession: Taiwan and China 7

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Doha Ministerial Declaration (Services) 8

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II. Framework of GATS

GATS and Telecommunications: 

GATS and Telecommunications GATS provides basic principles necessary to achieve high-level liberalization of trade in services (MFN, market access, national treatment), covering all kinds of services including telecommunications. WTO members would bind themselves under GATS with what they have committed in the Schedule of Specific Commitments. A member must make reservations if it wishes to maintain measures inconsistent with GATS principles, such as limitation on foreign ownership of radio station. “Annex on Telecommunications” (Telecom Annex), an integral part of GATS, deals with specific points pertaining to trade in telecom services, such as access to public networks. Since Telecom Annex consists of GATS, all members must meet obligations stipulated therein. 10

Sectors Covered by GATS: 

Sectors Covered by GATS 1. Business Services 2. Communication Services (including Telecommunications Services) 3. Construction Services 4. Distribution Services 5. Educational Services 6. Environmental Services 7. Financial Services 8. Health Related and Social Services 9. Tourism and Travel Related Services 10. Recreational, Cultural and Sporting Services 11. Transport Services 12. Other 11

Specific Commitment: 

Specific Commitment Sectors / Subsectors Modes of Supply 1) Cross-Border Supply 2) Consumption Abroad 3) Commercial Presence 4) Presence of Natural Persons Limitation on Market Access and National Treatment Additional Commitment 12

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III. Japan’s Experiences

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Basic Telecom Agreement: Japan’s Case Japan abolished the limitation on foreign participation in Type I telecommunications Carriers excluding NTT and KDD Basic Telecommunications Agreement (1997) As of 1 January 2003, among 407 Type I telecommunications carriers, 40 are foreign-owned. Japan opened the International Simple Resale market 14

Effect of Liberalization (1): 

Effect of Liberalization (1) Market Size of the Information and Communications Industry Source: MPHPT “Information and Communication in Japan 2003” 15

Effect of Liberalization (2): 

Effect of Liberalization (2) Source: MPHPT “Information and Communication in Japan 2003” Foreign Direct Investment in the Information and Communications Industry 16

Promotion of Competition Based on the Reference Paper: 

Promotion of Competition Based on the Reference Paper Asymmetric Regulation on NTT Specification of Prohibited Activities Obligation to File Interconnection Tariff Network Unbundling Obligation Regulation on Interconnection Charges Separation of Account between Infrastructure Sector and Service Sector New Services Exploiting the NTT’s Network have Emerged 17

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ＤＳＬ ○Subscribers： 8,257,118 (End-Jun.2003) ○Operators： 44 (End-Jun. 2003) Cable Internet 　　○Subscribers：2,224,000 　　○Operators： 301 (End-Jun. 2003) 2,224,000 8,257,118 458,293 Broadband Subscribers in Japan 18

DSL Broadband Divides1. Japan – excludes Fibre at 100 Mbps & Korea excludes VDSL at 20 Mbps.2. Iceland and USA highest capacity aimed at business users (e.g. Verizon: 7.1 Mbps = $204) .: 

DSL Broadband Divides 1. Japan – excludes Fibre at 100 Mbps & Korea excludes VDSL at 20 Mbps. 2. Iceland and USA highest capacity aimed at business users (e.g. Verizon: 7.1 Mbps = $204) . 19

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International Telecommunication Union Source: ITU Research 20

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IV. Doha Development Agenda

Outlook of DDA: 

Outlook of DDA End of January 2002 September 2003 1 January 2005 First Trade Negotiations Committee (TNC) Meeting Investment and Competition Agriculture Market Access for Non-Agricultural Goods Environment Conclusion of Negotiations Recommendations on desirability of the negotiations on labeling Initiate negotiations by explicit consensus Submission of Initial Offer Decision on Modalities Submission of Schedule of Concession End of March 2003 5th Ministerial Conference Rules (AD, etc.) Services 22

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Several Key Factors in DDA Factor 1. Difficulty in Some Key Negotiating Areas Factor 2. Abolishment of MFN-Exemption Factor 3. Expansion of MA & NT Commitments Factor 4. Adoption of the Reference Paper Factor 5. Classification Issues Factor 6. Beyond the Reference Paper? 23

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Not bad so far, given that almost 30 members have submitted their initial offers --- Can services be tractional force to the whole DDA negotiation? Agriculture Non-Agricultural Market Access Failed in establishment of modalities no later than 31 May 2003 Failed in establishment of modalities no later than 31 March 2003 Services Factor 1. Difficulty in Some Key Negotiating Areas 24

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MFN (Most Favored Nation) The principle of not discriminating between trading partners Some members maintain the reservations of MFN-Exemption regarding DTH/DBS or audiovisual services MFN is the most basic and fundamental principle in WTO Request for Abolishment of MFN-Exemption Factor 2. Abolishment of MFN-Exemption 25

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Market Access Restrictions on foreign capital participation Restrictions on the number of licenses Restrictions on the types of commercial presence National Treatment Nationality or residency requirement on executives, managers and other employees Typical Reservations on Market Access and National Treatment Factor 3. Expansion of MA & NT Commitments 26

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Major members incl. Japan and Taiwan have already adopted the Reference Paper. However, there are still members which have no commitment or partial commitment of the Reference Paper. Factor 4. Adoption of the Reference Paper Items of the Reference Paper Competitive Safeguards Interconnection Universal Service Public availability of licensing criteria　 Independent regulators Allocation and use of scare resources 27

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Computer/Telecom Difficult to draw line between these two services in the light of business reality Liberalization in tandem could be the best approach Where to classify newly emerged services, e.g. Internet-based services Factor 5. Classification Issues II. Basic Telecom/Value-Added No authentic definitions The real issue is, “To what services do you need to apply the Reference Paper?” Two Dimensions 28

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Some members might view that the Reference Paper is not clear enough to implement effectively “Re-open” of the Reference Paper is not a good idea “Reference Paper +” or more additional commitments? To what services should the Reference Paper be applied? Should the Reference Paper be supplemented or strengthen? Traditionally, only to the “basic telecommunications” services Need to apply to “value-added” services? How about the Internet services? How to deal with mobile services? Factor 6. Beyond the Reference Paper? 29

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Taiwan Relaxation of the limitation on the total direct foreign shareholding in a telecommunications service supplier from 20% to 49% Abolishment of the nationality requirement on a majority of the board of directors European Communities Deletion of the reservations relating to limitations on foreign participation in Portugal and on the number of licenses in Spain Attachment of “Understanding on the scope of coverage of CPC84” United States Introduction of an original classification: “Basic Telecommunications Services” “Information Services” “Other Communications Services” Supplementing the Reference Paper with new additional commitments Overview of Initial Offers Japan Relaxation of the limitation on foreign capital participation in NTT from 1/5 to 1/3 Deletion of the reservations relating to KDD 30

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Road Ahead of Cancun More Offers from Developing Country Members are needed New Modalities for Services Negotiations? 31

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Thank you! Eiji MAKIGUCHI e.makiguchi@soumu.go.jp Info Communication Policy Workshop WTO Doha Development Agenda