Move to heal Union rift over US telecoms offer

Date: 21/03/1996

By Fiona McHugh

EUROPEAN trade diplomats are hoping to defuse a row within the Union's ranks over how and when the bloc's phone market should be opened to international competition ahead of a meeting of foreign affairs ministers next week.

Negotiators involved in the World Trade Organisation (WTO) telecommunications talks said that by extracting further concessions from world partners this week, they expected to answer the concerns expressed by southern member states that the Union was being short-changed by more parsimonious WTO members.

The row, which threatens to hamper progress at the negotiations, erupted after Spain and Belgium, supported by France, Greece and Portugal, flatly refused to improve the EU's offer to satisfy US demands for more concessions.

Washington, which lodged a new improved version of its liberalisation package with the trade organisation two weeks ago, wants to see an end to restrictions on foreign ownership of phone companies in the five countries.

It also wants Spain to relinquish its hard-won right to delay liberalisation until 2003 and says Belgium should scrap the 'economic needs' test which applicants for radio communications licences must undergo.

But the five 'protectionists', going against the tide of opinion in the Union as a whole, are refusing to comply with US demands that the EU goes beyond its own plan to open phone markets to competition in 1998, and have accused the Commission of wanting to concede ground before winning assurances about what it will receive in return.

“It is less a question of substance than of timing,” explained one diplomat.

“We are all willing to be flexible on the foreign ownership issue, but we disagree about whether we should be flexible now in the hope of encouraging others to match our generosity, or hold out until we are sure of getting something in return.”

The EU negotiating team, aware that there is little time left to get agreement before the 30 April deadline for a deal set by the WTO expires, now hopes to stake out a middle ground between the two extremes.

“We are now hopeful that by the end of this round of negotiations, we will be in a position to submit an upgraded proposal,” said one member.

WTO officials fear that the Union is setting a bad example to third world countries, which are already reluctant to open their markets because of concern about an onslaught by ruthless foreign phone companies.

They say that by improving its offer, the EU would put itself in a strong position to lever improved offers out of Canada and Japan. This would, in turn, boost the chances of getting new or improved offers from other nations involved in the talks.

The US's latest deal grants unrestricted access to local phone services as well as to long-distance and international traffic.

According to Jeffrey Lang, Washington's chief negotiator, it testifies to America's commitment to roll back existing restrictions on competition at local level, in line with new laws liberalising the domestic telecoms sector signed by President Bill Clinton earlier this month.

But the EU condemned the offer last week for maintaining restrictions on satellite communications and underwater phone wires, thus making access to the US market from abroad difficult.

Union officials reject American claims that EU firms could gain access to its domestic market by connecting up to existing US wires, saying this is not enough and European companies should be allowed to provide their own facilities.

Some 50 nations, which together account for about 90&percent; of the world's telecoms traffic, are taking part in the WTO talks.