[Federal Register Volume 61, Number 242 (Monday, December 16, 1996)]
[Notices]
[Pages 66068-66070]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31762]


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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE


Trade Policy Staff Committee (TPSC); Request for Comments 
Concerning Compliance With Telecommunications Trade Agreements

AGENCY: Office of the United States Trade Representative.

ACTION: Notice of request for public comments.

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SUMMARY: This notice seeks advice on the operation and effectiveness of 
the telecommunications trade agreements with Japan, Korea, Taiwan, 
Mexico, and Canada through written submissions due January 24, 1997. 
The review will conclude March 31, 1997. The review, conducted pursuant 
to Section 1377 of the Omnibus Trade and Competitiveness Act of 1988, 
must determine whether the above countries are not in compliance with 
the terms of such agreements or otherwise deny ``mutually advantageous 
market opportunities'' to U.S. products and services within the context 
of those agreements.
    Specifically, USTR seeks information on:
    Whether Japan, Korea, Taiwan, Canada, and Mexico have carried out 
their commitments under telecommunications agreements with the United 
States;
    Whether levels of trade conform with the levels that would be 
expected based on these agreements; and
    The underlying competitiveness of U.S. providers of telecom 
products or services.

DATES: Submissions must be received on or before January 24, 1997.

ADDRESSES: Comments must be submitted to the Executive Secretary, Trade 
Policy Staff Committee, Office of the United States Trade 
Representative, 600 17th Street, N.W., Washington, D.C. 20506.

FOR FURTHER INFORMATION CONTACT: Jim McGlinchey (202-395-5656), Office 
of Industry or Laura Sherman (202-395-3150), Office of the General 
Counsel, Office of the U.S. Trade Representative, 600 17th Street, NW, 
Washington, D.C. 20508.

SUPPLEMENTARY INFORMATION: Section 1377 of the Omnibus Trade and 
Competitiveness Act of 1988 requires the USTR to review annually the 
operation and effectiveness of all U.S. trade agreements regarding 
telecommunications products and services. The United States has 
telecommunications agreements with Japan, Canada, Mexico, Korea and 
Taiwan.

Japan

    The United States has two telecommunications procurement agreements 
with the Government of Japan. The first, the Nippon Telegraph and 
Telephone (NTT) agreement, is designed to ensure that the government-
owned, major telecommunications provider in Japan employs open, non-
discriminatory and transparent procedures in procuring 
telecommunications products. In 1994, as part of the Framework 
discussions with Japan, NTT agreed to improve its procurement 
procedures to provide greater transparency and more timely notice to 
foreign suppliers. The improved measures are intended to increase 
reliance on international standards and to improve the impartiality of 
the process by requiring transparent and non-discriminatory selection 
criteria and by reducing single-tender sourcing.
    The second procurement agreement is the 1994 U.S.-Japan Public 
Sector Procurement Agreement on Telecommunications Products and 
Services. Under this agreement, Japan introduced procedures addressing: 
enhanced participation by foreign suppliers in pre-solicitation 
development and specification-drafting for large-scale 
telecommunications procurements; transparent and non-discriminatory 
award criteria that include greatest overall value for procurement 
decisions; decreased sole sourcing; and the establishing of an 
effective bid protest mechanism.
    The U.S. recently met with Japan to review implementation of the 
two procurement agreements. Under both agreements, foreign share 
increased slightly, but in both cases there may have been an evasion or 
disregard of the

[[Page 66069]]

procurement procedures and a consequent lack of bidding opportunities 
for U.S. suppliers in the Japanese telecom market. In both segments of 
the Japanese public sector (NTT and non-NTT), market share of foreign 
suppliers continues to be lower than expected, given the 
competitiveness of the U.S. telecommunications industry in the global 
market. NTT and the Government of Japan do not appear to be procuring 
telecom equipment and services with the degree of openness and non-
discrimination contemplated in the improved measures.
    Specifically, NTT may be applying a non-transparent and 
discriminatory selection criteria for its procurement; not covering the 
more lucrative contracts under the open procedures but instead treating 
such equipment as follow-on procurement to prior contracts; and not 
relying on de facto international standards as envisioned in the 
agreement.
    With respect to the non-NTT public sector procurement agreement, 
the U.S. Trade Representative is concerned that Ministries in Japan and 
other covered entities may not be following the procedures. Data 
supplied by the Government of Japan for the recent implementation 
review show that only 16 Ministries, or 14% of covered entities, 
reported any telecom purchases for Japan's fiscal year 1995. Only 4 
entities from the whole Japanese central and provincial government 
reported purchasing telecom products or services from foreign 
suppliers. In addition, the Ministry of Post and Telecommunications, 
the largest public purchaser of telecom equipment other than NTT, 
actually increased its reliance on single-tendering.
    The above facts raise concerns about the operation and 
effectiveness of these procurement agreements. Accordingly, the U.S. 
Trade Representative seeks information regarding any concrete 
difficulties that U.S. telecommunications product suppliers and service 
providers are encountering in Japan generally and specifically under 
the terms of the two Framework telecom procurement agreements. 
Specifically, we seek any evidence of problems with purchasing 
procedures of NTT and the Government of Japan, sales efforts firms 
would undertake if such problems were removed, and any other relevant 
information.
    Additional U.S.-Japan Telecommunications Trade Agreements: The 
United States has a number of additional telecommunications trade 
agreements with Japan, including a series of agreements on: 
international value-added network services (IVANS) (1990-91); open 
procurement of all satellites, except for government research and 
development (R&D) satellites (1990); network channel terminating 
equipment (NCTE) (1990); cellular and third-party radio systems (1989) 
and cellular radio systems (1995).

Mexico and Canada

    Several chapters of the North American Free Trade Agreement (NAFTA) 
contain market liberalization commitments on telecommunications. In 
addition to general principles in the services and investment chapters, 
Chapter 13 on telecommunications contains provisions applicable to 
equipment approval processes and associated telecommunications 
standards issues as well as private networks and enhanced or value-
added telecommunications services. NAFTA also requires tariff 
reductions for telecommunications equipment.
    As a result of the March 31, 1996 review, the U.S. Trade 
Representative determined that Mexico was not in compliance with its 
NAFTA telecom obligations, due to Mexico's delay in implementing 
procedures for acceptance of test data for product safety requirements 
for telecom terminals. Through the Telecommunications Standards 
Subcommittee, Canada and the United State obtained Mexican agreement on 
the procedures Mexico would adopt to conform to its NAFTA obligations. 
But these procedures are not yet in effect.

Korea

    The United States has agreements with Korea to address barriers to 
U.S. telecom goods and services suppliers in the areas of protection of 
intellectual property rights (IPR), type approval of telecom equipment, 
transparent standard-setting processes and non-discriminatory access to 
the government-owned Korea Telecom's procurement of telecom network and 
commodity products.
    In 1990, Korea agreed to an MOU on the liberalization of government 
procurement practices for telecommunications. In 1991, Korea committed 
to permit value-added services to be provided by international value-
added network service operators. In February 1992 as a result of 
market-opening trade negotiations with the United States initiated 
under the 1988 Trade Act, Korea broadened these commitments to include 
non-discriminatory access to the telecom procurement of the government-
owned Korea Telecom; open and transparent standards-setting processes 
and mutual recognition of test data for equipment attached to the 
public network; equipment approval based on the minimal network harm 
standard; accelerated tariff reductions on imported telecommunications 
equipment; commitments to liberalize the provision of value-added 
services between the U.S. and Korea; and reduced and streamlined 
regulation of intracorporate communications.
    As a result of the 1993 and 1995 reviews, the United States reached 
agreement with Korea on improved access to the procurement by the 
government-owned Korea Telecom (KT), particularly with respect to its 
procurements of network and commodity products. The 1995 agreement also 
contained commitments limiting type approval of telecom equipment to 
the network harm standard. In April of 1996, Korea agreed to elaborate 
on the 1992 provisions on non-discriminatory access to KT's procurement 
and non-discriminatory equipment approval, particularly with respect to 
enhanced intellectual property protection and non-discriminatory 
technical specifications.
    The 1996 review revealed, however, a number of additional market 
access barriers in Korea. Due to restrictive Korean Government policies 
and practices, the U.S. Trade Representative determined that there was 
a lack of mutually advantageous market opportunities for foreign 
suppliers of telecom products and services to Korea. Market access 
barriers include Korean Government interference with procurement by 
private telecommunications services suppliers, lack of liberalization 
of foreign investment in telecom service providers, discriminatory and 
non-transparent licensing and regulation of telecom service providers, 
ineffective competition policies for service providers, high tariffs on 
telecommunications and information technology products and 
discriminatory customs procedures for such products.
    As a result, in July 1996, the U.S. Trade Representative identified 
Korea as a ``Priority Foreign Country'' under Section 1374 of the 
Omnibus Trade and Competitiveness Act of 1988. The U.S. Trade 
Representative announced at that time that she did not intend to use 
the maximum one-year period provided under the statute to address U.S. 
concerns. Under the statute, the U.S. Trade Representative is 
authorized to take appropriate steps, including trade action, if U.S. 
concerns are not addressed within the statutory time frame.

[[Page 66070]]

Taiwan

    In July 1996, the Office of the U.S. Trade Representative and the 
American Institute in Taiwan concluded with their Taiwanese 
counterparts an agreement on the licensing and provision of wireless 
services through the establishment of a competitive, transparent and 
fair wireless market in Taiwan.
    Specifically, the Directorate General of Telecommunications (DGT) 
and the Taipei Economic and Cultural Representative Office confirmed 
that: the telecommunication regulatory function and telecommunications 
service provider function have been entirely separated; DGT would 
initiate procures to remove the profit cap and draft a new formula for 
tariff schedules; interconnection agreements between wireless operators 
and Chunghwa Telecom Co. (``CHT'') would be cost-based, transparent, 
unbundled and non-discriminatory and the terms of such agreements 
publicly available; DGT would not permit cross-subsidization between 
CHT's fixed-line and wireless operations; DGT would relax the debt/
equity ratio for wireless bidders and not restrict a bidder from 
obtaining all three regional licenses, subject to the policy that an 
island-wide licensee is not eligible for a regional license; and DGT 
would remove unauthorized spectrum users. DGT also agreed to review 
foreign ownership limitations.

Public Comment: Requirements for Submissions

    Interested persons are invited to submit written comments on the 
operation and effectiveness of the telecommunications trade agreements 
with Japan, Korea, Taiwan, Mexico, and Canada.
    Comments must be filed on or before January 24, 1997. Comments must 
be in English and provided in 15 copies to: Gloria Blue, Executive 
Secretary, Trade Policy Staff Committee, Office of the U.S. Trade 
Representative, 600 17th Street, NW, Washington, D.C. 20508.
    Comments will be open to public inspection, except confidential 
business information exempt from public inspection. Confidential 
business information must be clearly marked ``BUSINESS CONFIDENTIAL'' 
in a contrasting color ink at the top of each page on each of 15 
copies, and must be accompanied by a nonconfidential summary of the 
confidential information. The nonconfidential summary shall be placed 
in the file that is open to public inspection.
Federick L. Montgomery,
Chairman, Trade Policy Staff Committee.
[FR Doc. 96-31762 Filed 12-13-96; 8:45 am]
BILLING CODE 3910-01-M