EU defends WTO threat against Tokyo over telecoms

Date: 01/03/01

By Simon Taylor

THE European Commission is dismissing claims that its threat to take Japan to the World Trade Organisation over its telecommunications regime will lead Tokyo to oppose launching a new round of trade talks this year.

Senior trade officials say Japan still strongly favours a round and sees the warning about WTO action as a pressure tactic to force liberalisation of its lucrative telecoms sector. They say such external pressure helps Tokyo overcome internal resistance to industrial and economic reform.

"Japan needs a lot of peer pressure to reform their system," one official said.

Trade Commissioner Pascal Lamy made it clear on a recent visit to Japan that the EU would challenge Tokyo if it does not take additional market-opening action soon. Officials confirm that the warning was designed to encourage the government to revise legislation on telecoms regulation due to be debated by the Japanese Parliament next month.

"We thought we had better make our point clear ahead of launching the [WTO] process so that it's not a surprise," one official said.

The new rules must be agreed by June and the Commission is worried that if the draft law does not go far enough it will be

too difficult to secure further liberalisation at a later stage. The EU and Japan have discussed the subject for the past three years and the Union is believed to be losing its patience over the lack of progress.

Currently, the country's largest telecommunications firm, NTT, controls more than 95% of the business. In March the government is scheduled to propose new rules which will open Japan's market to foreign firms. But the EU has been pushing Tokyo to go further, in particular by lowering the rates charged by telecoms operators to other companies that use their networks, known as interconnector rates.

The Commission also believes that NTT should be forced to sell its stake in some firms to break its stranglehold on the sector, and is pushing for an independent telecoms regulator to help ensure fair access to the market for new entrants.

But Japanese diplomats reject some of the criticisms made by the Union. Arguing that Tokyo already fully complied with its WTO commitments to ensure fair competition in the telecoms sector, senior economics ministry officials say interconnection rates were only higher in two cases, neither of which was related to competition issues.

The European Commission is dismissing claims that its threat to take Japan to the World Trade Organisation over its telcommunications regime will lead Tokyo to oppose launching a new round of trade talks in 2001.