9:43 AM Jan 14, 1997

TELECOM TALKS RESUME THIS WEEK

Geneva 14 Jan (Chakravarthi Raghavan) -- Negotiations for an accord to liberalise basic telecommunication services are due to resume Wednesday, with the Europeans and the United States joining hands to pressure some of the newly emerging economies, particularly the ASEAN and some other Asian countries, to improve on their offers, and enable an accord to be finalised.

A formal meeting for the Group on Basic Telecommunications (GBT) is set for 15 January, with a month-long review and re-examination of offers on the table, and efforts to get participants to improve on them.

The telecom talks (among interested parties), which were continued after Marrakesh, failed to clinch an agreement in April 1996 -- when the US decided that market opening offers on the table did not provide the critical mass it needed to join an agreement on an MFN basis.

As a result, offers on the table (by some 34 participants, with the EC treated as one) were frozen, and the talks were reopened (and open to all WTO members), with efforts focusing on persuading members to improve on their offers, and persuading the US to change its stance.

Consultations were renewed from July, and have been continuing since then. The last meeting was held in November 1996, just before Singapore - when the EC put forward what was described as 'substantially improved' offers from its members, with several of them including France and Spain announcing a time-table for opening up their domestic monopolies for competition.

All the offers are to be examined in a four-week period (15 January to 15 February) -- and finalised, and drawn up as a protocol.

The protocol will be open for acceptance till 30 November 1997, and is to enter into force from 1 January 1998.

At Singapore, a number of developing countries and the east Europeans indicated that they would be either tabling offers or revising their offers when the GBT begins the final stretch of negotiations.

But as of last week, no new offers or revisions had been tabled.

However, trade officials did not expect any until the final stages.

At the last meetings here in Geneva in November, the EU had put forward improved offers, conditionally, while the United States indicated it may not seek any MFN derogation, but may be able to conclude an agreement -- holding out through for an undefined 'critical mass'.

The earlier US position had been that given the situation in other markets - where there were either state monopolies or privatized former state sector enterprises in a dominant position - the US would be better off by using bilateral reciprocity deals to open up markets abroad for its enterprises.

While in April last year, US satellite service suppliers had been behind the moves to scuttle US participation in any accord, they had changed their stance late last year, encouraging trade officials to believe an agreement could be struck.

In November talks, the US had indicated it would be able to find a way to deal with the problem of "unfair competition" by a monopoly or a dominant supplier at the other end of the market for an international service, and that it would be able to do through licensing conditions applicable to all licence, and thus on an MFN basis.

The US also indicated that it would take measures to deal with the accounting system and transfers and payments between operators on either side (now governed by ITU rules and bilateral agreements), under which the US felt its enterprises had to pay more money to countries which maintained high charges. The US had indicated that it would set "benchmark settlement" payments for its outward traffic and expected its operators to bring their effective international settlement rates in line with the bench-market levels over a given period of time.

Since then the US Federal Communications Commission has published proposals in this regard.

The EC in the meanwhile has indicated it would take measures to compel operators providing 'call-back services' (that provide cheaper communication costs) to collect from their customers and pay the VAT to various EU member-states.

In a call-back service, a customer anywhere in the world dials the number of the callback service based in the US. A computer monitoring the line disconnects the line and automatically returns the call, giving the customer a dial tone. The customer then dials his party (anywhere in the world) and pays the US rate which is often about 50% less than from the country where the customer is originating the call.

It is difficult technologically to control this, but callback services collect the charges from their customers through credit-card billings, and clearly the EC members are hoping to collect the VAT due to them for the service provided to consumers in their countries through these credit card billings.

It remains to be seen whether this is feasible, and what effect it will have on the US benchmark settlement efforts.

The US assurances that it would deal with 'unfair competition' through 'licensing conditions' applicable to all, and setting benchmark settlement rates for outward traffic were tentatively accepted by the EC, which reserved though its judgement on seeing the US moves and conditions on paper.

At the November meeting, Slovakia had put forward a revised offer, while revised offers were indicated by Singapore, South Korea, Mexico, Poland,India, Canada and Brazil. South Africa had said it would make an offer.

There has so far been no indication that some of the other targets of US -- like Malaysia -- were ready to oblige.

While joining the US in trying to pressure others to liberalise and improve their offers -- opening up their markets (through liberalising investments) to foreign suppliers of profitable value-added services -- the EC has also indicated in November that it did not expect the target countries to go very much beyond what they had done so far.

This is in the view that the US threat of licensing and closing off US markets for foreign suppliers would not deter many of the developing countries -- since none of them have the ambition or capacity to compete in the markets of advanced countries, and see any liberalisation of their own markets in terms of what they need.

Though the talks resume this week, some trade officials said they did not expect the US to indicate its hand, or for negotiations to be finalised, until after the US Senate acts and confirms, expected later this month, of Ms. Charlene Barshefsky as US Trade Representative.