Center for Strategic and International Studies
Forum on "Global Telecommunications Liberalization: Who Will Benefit?"
December 17, 1996
"EVERYONE'S A WINNER"
As prepared for delivery
In recent weeks, the world has made significant progress toward making President Ramos vision a reality. At the APEC summit, President Ramos, along with President Clinton, led the effort to build support for a global Information Technology Agreement. And, as you have seen by the news out of Singapore in the last few days, the ITA negotiated by our United States Trade Representative, Charlene Barshefsky, has now been brought to fruition.
This is no small matter. The products covered by the ITA are the cars and trucks that ride on the information highway and they include a broad range of goods -- computers, TV sets, the whole gamut of information appliances. The global trade in these goods is now $500 Billion a year. Now that tariffs on these goods are to be eliminated, who can say how much that trade will grow?
This is an accomplishment of which President Clinton, President Ramos, and Ambassador. Barshefsky should be justly proud. But there is a second, equally important initiative underway that will determine whether our children and our generals can expect to live in a peaceful, prosperous age. And that is the effort to build the highway itself. This highway will consist of the networks and the software that will allow the goods covered by the ITA to travel much faster and farther, as our interstate highway network did for the passenger vehicle.
The highway, of course, will be built by private investment -- massive private investment all over the world. But the capital for this needed investment will not flow if investors do not have the right to invest, or if they are unsure whether their investment will be secure.
As you know, the WTO negotiations on basic telecommunications have been going on for over 2 1/2 years now. We are officially in the home stretch to the February 15 deadline.
This is significant, because this negotiation is not about the markets and technologies of the past. It is about nothing less than building the Global Information Highway. The next two months will determine how quickly and how completely the highway will be built.
But let me give you a little history of these talks, in case you haven't been following their progress closely.
Almost three years ago in Buenos Aires Vice President Gore called on the nations of the world to join us in building the GII. The Vice President stressed at that time that private investment was essential to the construction of the Global Information Highway.
You will recall that President Clinton talked during his reelection campaign about building a bridge to the 21st Century. There can be no question that the Global Information Highway will be an important part of our efforts to prepare for the next millennium.
The United States, together with all our major trading partners, has been in comprehensive discussions in Geneva about how we can all open and reform our markets to make the GII a reality.
Last April, the United States refused to sign a bad deal. In my view, the negotiation fell short then because too few governments were ready to embrace the inevitable future of this industry. But my trip to Asia and to the Singapore ministerial confirms that the worldwide trend is in favor of competition.
I believe there is one fundamental reason why this is so. Competitive telecommunications services are crucial to economic development. For years, the World Bank took the view that a telecommunications network was essentially a luxury that only developed economies could afford. Today, even the World Bank recognizes that telecom is not a luxury, but a necessary tool for building a developed economy.
Indeed, one of the things that distinguishes developed economies from developing economies is that the services sector accounts for more than half of developed economies, and more than 60% of the U.S. economy. Telecom is a crucial input for both goods and services industries. Of course, the world's financial institutions are among the heaviest users of telecommunications services. Their industry now depends on the rapid and seamless transmission of reams of information.
But, as I learned in Manila, even the Filipino asparagus farmer needs reliable and affordable telecommunications to run his business efficiently.
The world today is divided between a relative handful of competitive telecom markets, and the vast majority of nations that are still in the thrall of monopoly.
What are the consequences of this dichotomy? Well, the principal consequence of free and fair competition is economic growth. For example,
It's obvious that jobs in the 21st Century are going to be more information intensive than today's jobs. The global economy is going to need high-quality, low cost telecom services in order to thrive.
The legacy of monopoly, on the other hand, has been inadequate supply and high prices. And nowhere is this more true than in the developing world.
Fortunately, all this is going to change, because it has to change. Gradually, governments around the world are recognizing that in order to be competitive in the global economy, they will need modern, reliable telecom networks and services. And a number of developing countries are already taking unilateral action to make it so.
Today, the list may seem short, but already Chile, the Philippines, and Mexico have embraced competition. More developing countries and emerging markets, including Indonesia, Malaysia, and Singapore have taken limited steps to open their markets to competition and foreign investment.
It would seem that all of these developments around the world dovetail nicely with the U.S. Government's objectives in the WTO basic telecom negotiations. After all, we have made clear for more than two years now, that what we are seeking to do is to open markets -- especially our own -- to foreign investment and increased competition.
As Vice President Gore said in Brussels almost two years ago, we are willing to eliminate barriers to foreign investment for all countries that are willing to do the same. At the same time, it has been widely recognized that simply declaring competition is not enough to make effective competition happen. Rather, governments will have to take action to make competition possible.
So, where does this negotiation stand, with less than two months to go?
The negotiation failed to conclude successfully back in April because not enough countries made high quality offers of market access. Asian countries were particularly under-represented. And, of course, it is precisely the booming economies of Asia that will be among the largest growth markets for telecommunications services in the years ahead.
In the intervening months, our negotiators have made considerable progress in resolving remaining substantive issues concerning international services and satellites. And, just a few weeks ago, the European Union joined the United States, and improved its offer.
More recently, during my tour of Southeast Asia, I am pleased to announce, some additional progress was made in getting high quality offers from our trading partners. Several countries announced that they will improve their offers, including countries that account for more than a third of our international telecom traffic. We haven't seen the details of this, but this gives us reason to hope that there will be significant progress before February 15.
Informally, we have had indications that other countries will improve their offers when the negotiations resume in January.
Will all of this be enough to bring these talks, at long last, to a successful conclusion? While it is still too early to say for sure, I believe, today, that there is reason for hope.
Second, quite a few countries have already agreed to match our offer of unlimited rights for foreign investors. These countries, largely in the developed world, have recognized that foreign investment is no threat to national security or to their own domestic enterprises. Rather, foreign investment is essential to the building of truly world-class telecom infrastructures.
It is not enough to simply declare competition and stand aside. Entrenched monopolists in every market, including our own, continue to wield enormous market power. For this reason, our negotiators in Geneva have worked out with their counterparts from 31 countries a sort of "gold standard" of regulation. The procompetitive regulatory principles that this group has agreed upon will make it possible for firms entering any of these markets to have a true opportunity to compete on a free and fair basis. The fact that 31 countries have agreed to basic rules for competition in telecommunications is in itself a historic achievement. It would be a shame to forfeit this progress.
Having said all this, the path to a successful conclusion of these negotiations will not be simple. If, in the end, all that can be agreed upon is an opening of markets that were already open, then we will have missed a great opportunity to bring most of the developing world along with us. Likewise, if these talks degenerate into limited commitments to allow provision of yesterday's services -- but not tomorrow's -- then we will have missed a great opportunity to bring advanced telecom services to every corner of the globe. And, finally, if too few countries guarantee investment rights, then the opportunity to build the global information highway may, itself, be lost.