Fresh trade row with US looms over mobile phones

Date: 08/10/1998

By Peter Chapman

US TRADE Representative Charlene Barshefsky is threatening the EU with action in the World Trade Organisation if Europe tries to cut American firms out of Europe's mobile phone market.

The dispute threatens to sour the atmosphere when Barshefsky visits Brussels later this month for the first time since taking office three years ago, for meetings with senior European Commissioners.

The controversy centres on draft Union rules for the new wave of phone technology known as UMTS, which were approved by EU governments late last month.

The rules, which call on member states to move quickly to put in place a licensing procedure for services by 1 January 2000 to ensure that they will be ready by 2002, would allow governments to limit the number of licences they grant on the grounds that there may not be enough space available in the airwaves.

They also call for services to be based on a commonly agreed standard which can be used across Europe. In practice, this is likely to be the UMTS norm agreed by EU firms in the Nice-based European Telecommunications Standards Institute (ETSI).

But Barshefsky fears the new licensing regime could be used by EU governments to favour the European firms at the expense of some US rivals.

"This office is reviewing the consistency of the European Community's measures with its WTO obligations," she said in a recent letter to a US senator.

"Let me assure you that this administration stands by previous assurances that the United States will use the WTO to open foreign markets to US telecoms equipment and services."

Washington officials claim the EU could fall foul of its obligations under two separate WTO accords on technical barriers to trade and trade in services "if it arbitrarily restricts the technology" for UMTS.

They add that while the Union has ensured the rules technically comply with its WTO obligations, the most important question is whether they amount to a "de facto failure to meet its obligations".

Washington says the EU has been open about its plans to win the battle over the third generation mobile standard, which will replace existing systems such as the popular GSM digital norm pioneered in Europe.

"It appears that the Commission and member states want to rush a European third generation standard to the market to garner the same first-to-market advantages," said one official.

However, a senior political aide to Telecoms Commissioner Martin Bangeman categorically rejected claims that the EU's mobile phone regime amounted to protectionism.

"The EU licensing system does not talk about specific technology. We have never said which technology should be used," he said, adding that any services based on one of the systems ratified by the International Tele-communications Union (ITU) next year would be allowed to bid for licences.

He stressed that the EU's draft rules ensured that any system which offered the basic list of UMTS-type services should be eligible for licences, even if they did not match the full ETSI norm.

But the Bangemann aide admitted that rival systems might struggle to win licences if one standard, such as the ETSI norm, secured an early foothold in the market. "Everybody is interested in a single world standard for UMTS. Industry in Europe has agreed what it thinks this should be," he explained.

When Barshefsky visits Brussels on 19 October, she will hold discussions with Trade Commissioner Sir Leon Brittan on the next round of global trade talks under the auspices of the WTO and respond in detail to his latest proposals for liberalising trade as outlined in the Transatlantic Economic Partnership.