Anthony J. Pennings, PhD

WRITINGS ON DIGITAL ECONOMICS, ENERGY STRATEGIES, AND GLOBAL COMMUNICATIONS

The Transformation of Telecom to Global IP, GATT to GATS

Posted on | October 19, 2014 | No Comments

In a previous post I wrote about how the U.S. Clinton-Gore administration used the notion of the Global Information Infrastructure (GII) to push for the adoption of Internet protocols through multilateral trade negotiations and telecom privatization. Below I address how the inclusion of services in trade talks helped facilitate the international spread of the Internet and dramatically reduce the costs of voice and video communications.

International trade negotiations had historically concentrated on physical goods while services were never even seriously considered until the November 1982 GATT ministerial meeting. Subsequent calls by several OECD countries for a new multilateral trade round with services as one of the top agenda items emerged in the mid-1980s. The inclusion of services in the 1987 Uruguay Round of trade negotiations led to the General Agreement on Trade in Services (GATS) as part of the mandate of the World Trade Organization (WTO).

The GATS extended the WTO into unprecedented areas never previously recognized as coming under the scrutiny of trade policy. In the communications services area wtothese included audiovisual services such as radio and television, educational services, entertainment services such as theatre and circus productions, news agencies, and of course telecommunications services such as email, packet-switching transmission services, and voice telephone services. Former WTO Director-General Renato Ruggiero remarked on the inclusion of services into the realm of international trade negotiations, “I suspect that neither governments nor industries have yet appreciated the full scope of these guarantees or the full value of existing commitments.”[1]

Sixty-nine nations party to the WTO, including the U.S., reached an agreement to open up their telecommunications markets as part of the GATS on February 15, 1997. The Agreement on Basic Telecommunications Services codified an accord to “negotiate on all telecommunications services,” particularly new rules for telecommunications deregulation. This included data communications, facsimile services, private leased lines, PCS, cellular telephone, as well as both fixed and mobile satellite services. These countries agreed to privatize and open their own telecommunications infrastructures to foreign penetration and competition by other telcos through either resale or their own facilities. Active in these negotiations was the International Telecommunications Union as well as the United States Trade Representative (USTR) for the Clinton-Gore administration.

The WTO GATS agreement allowed U.S. companies to compete for the estimated $600 billion global market in local, long-distance and international services. Acting US trade commissioner Charlene Barshefsky claimed that the agreement would lead to approximately 1 million new jobs in the US over the following 10 years. “From submarine cables to satellites, from wideband networks to cellular phones, from business intranets to fixed wireless for rural and under-served regions, the market access opportunities cover the entire spectrum of innovative communications technologies pioneered by American industry and workers,” Barshefsky said at a press conference. FCC Commissioner Reed Hundt, who worked closely with Al Gore on developing the overall communications policy, predicted the treaty would reduce the price of international calls by 80% over the following ten years.[2]

As the WTO agreement on basic telecommunication services went into effect in February 1998, the number of countries committing to the agreement on basic telecommunications services had reached 72 with 59 agreeing to more liberalization; including competition, foreign investment, interconnection guarantees, and an independent FCC-type regulator. Most realized the benefits of the agreement as lower international prices for phone calls. By 2001, the number of participating countries reached 75.

The agreements came at a crucial technological time. The World Wide Web (WWW) was a working technology, but it would not have lived up to its namesake if the WTO had not negotiated reduced tariffs for crucial networking and computer equipment and also the liberalization of telecommunications services around the world. As we Skype with friends and relatives in other countries or if we click Like or comment on a Facebook update we can attribute that to aggressive trade negotiations in the 1990s.[3]

Notes

[1] Director-General Renato Ruggiero’s quote from Christoph Strawe’s “GATS – Service to Whom?”
[2] Washington Post, “Telecom Pact Opens Up World Phone Markets” February 16, 1997. A good resource for the time period was Reed Hundt’s (2000) You Say You Want a Revolution? A Story of Information Age Politics.
[3] As a graduate student I participated in the conferences entitled TIDE 2000 (Telecommunications, Information and Interdependent Economies) organized by the Japanese Foreign Affairs Ministry and the East-West Center in Honolulu, Hawaii. It was a major forum for the early debates on trade negotiations on services and telecommunications. It was reported in Jussawalla, M. et al. (eds.) Information Technology and Global Interdependence. New York: Greenwood Press. 1989.

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AnthonybwAnthony J. Pennings, PhD is a professor of global media at Hannam University in South Korea. Previously, he taught at St. Edwards University in Austin, Texas and was on the faculty of New York University from 2002-2012. His first faculty position was at Victoria University in Wellington, New Zealand.

Category: global communications, global e-commerce, telecom policy and net neutrality
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    Professor at State University of New York (SUNY) Korea since 2016. Moved to Austin, Texas in August 2012 to join the Digital Media Management program at St. Edwards University. Spent the previous decade on the faculty at New York University teaching and researching information systems, digital economics, and strategic communications.

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