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OUSTR Releases 2014 Report on Compliance with Telecommunications Trade Agreements

April 4, 2014. The Office of the U.S. Trade Representative (OUSTR) released a report titled "2014 Section 1377 Review On Compliance with Telecommunications Trade Agreements". Much of the report focuses on the People's Republic of China (PRC).

The OUSTR prepares this report annually, relying heavily upon the public comments that it receives. See, 2013 report, and story titled "OUSTR Releases Report on Compliance with Telecommunications Trade Agreements" in TLJ Daily E-Mail Alert No. 2,547, April 8, 2013. See also, 2012 report.

These reports address foreign governments' non-compliance with telecommunications trade agreements, and their barriers to trade. It does not address US non-compliance and barriers.

USTR Michael Froman stated in a release that "Barriers to trade in telecommunications-related goods and services disproportionately affect U.S. suppliers, given our strong competitive position in these sectors. We have made important progress this year in advancing market liberalization in this sector, though we continue to see the emergence of new barriers data flows and other localization requirements".

This report faults the PRC for barriers to VOIP services, protectionist actions by its regulatory agency, restrictions on foreign investment, barriers to providing satellite services, and barriers to information security technology providers. This report also again raises concerns that the PRC might impose an encryption standard for 4G LTE telecommunications equipment.

The report states that "The Chinese government imposes unreasonably strict limitations on companies that wish to offer VoIP services in China. China requires a supplier to have a value-added service (VAS) license to provide VoIP service. Foreign companies may obtain a VAS license only through a joint-venture company. Since such suppliers cannot connect to the PSTN without obtaining a basic telecommunications license, the scope of VoIP service is unreasonably limited (China’s requirements for a basic service license (e.g. capitalization levels exceeding one hundred million U.S. Dollars) make little sense for a service that requires no investment in or control of transmission facilities). Currently, only a few small pilot VoIP projects -- involving the incumbent state-owned operators -- are allowed to offer PSTN-interconnected VoIP services to Chinese consumers." (Parentheses in original.)

Next, the report states that the PRC's Ministry of Industry and Information Technology (MIIT) "has actively worked to consolidate market participants and has often shielded China’s state-owned operators from competition, both domestic and foreign. Assignment of spectrum for new mobile services (e.g. LTE) lacks basic transparency, and has resulted in assignments exclusively to state-owned incumbents."

The report also states that "China’s equity restrictions on foreign participation constitute a major impediment to market access in China."

The report also addresses actions of other nations. For example, it states that "Impediments to cross-border data flows remain a serious and growing concern. The dramatic expansion of data flows and the increasing integration of such data into myriad forms of economic activity make addressing barriers to data flows a key trade priority."

The report cites "a new law that in Turkey that has resulted in a massive blocking of websites and Turkey’s new privacy laws that severely restricts data exports involving personal information; and the European Union (EU), where a variety of voices, including a leading German telecommunications supplier, are openly advocating for trade-distortive restrictions on data flows, purportedly justified on privacy grounds."

(Published in TLJ Daily E-Mail Alert No. 2,640, April 8, 2014.)