International Journal of Communications Law & Policy

BENCHMARKING A CHINESE OFFER ON TELECOMMUNICATIONS:
CONTEXT AND COMPARISONS

By Richard Janda

Download the Paper in PDF Format: IJCLP Web-Doc 6-2-1999

Abstract

The effort of this paper is to identify the range of issues and options facing China as it seeks to arrive at a satisfactory offer on telecommunications services as part of WTO accession. This subject is very much a moving target inasmuch as the recent U.S.-China Beijing summit has apparently been accompanied by a first-ever proposal from China to open up its telecommunications market. If indeed a proposal has now been made, China appears to have crossed a Rubicon that as recently as last year it was unwilling to cross—very promising news for our discussion here.

The paper is divided into three parts. First, it describes briefly the steps China already has taken to liberalize its telecommunications sector. What emerges from this account is that China could well commit to formalizing and maintaining existing levels of liberalization, with the central question becoming, to what timetable for future and further liberalization could China commit?

Second, the paper outlines possible benchmarks against which a Chinese offer on basic telecommunications could be gauged. After comparing in general terms the schedules filed pursuant to the Fourth Protocol, the Schedule filed by India is singled out for special consideration. This Schedule provides a relevant benchmark for a Chinese offer on the following grounds: (a) China has maintained throughout the negotiations that it ought to be held to the standards applied to developing countries in the WTO framework; (b) despite the size of its telecommunications network and the rapid pace of development, China’s telephone penetration rates are comparable to those of other developing country WTO Members; and (c) China is still at a relatively early stage of the regulatory and institutional transformation of its telecommunications sector and thus cannot make unrealistic commitments to rapid open market access and national treatment. Reference is made as well in passing to the somewhat more ambitious limited liberalization schedules filed by transitional economy WTO Members such as Hungary and Poland and paralleled in some ways by countries such as Indonesia, the Philippines and Brazil. These might provide a relevant benchmark for a Chinese offer on the following grounds: (a) the trajectory of growth for Chinese telecommunications infrastructure exceeds that of restrictively liberalizing developing countries, which makes market access a more relevant and pressing issue; (b) the corporatization of China Telecom and China Unicom as well as the creation of the new Ministry of Information Industry as a precursor to independent regulation of telecommunications suggest the possibility of earlier rather than later independence of regulatory function and opening to other market players; and (c) given that China is in the midst of fashioning its own liberalization timetable for telecommunications, it might well be in its interest to lock in such a timetable through WTO commitments. One way of characterizing realistic outcomes for a Chinese telecommunications offer is: at the end of the day, will the offer be closer to the restrictive developing country schedules or to the limited liberalization transitional economy schedules? However, before we allow debate to polarize around this question, it is worth noting that a number of developing countries, including India, have already met and are on the way to exceeding scheduled commitments under the Fourth Protocol. This is because general pressures to liberalize telecommunications are considerable as economies come to depend more heavily on expanded and improved telecommunications infrastructure. In short, it is a dubious proposition that a failure by China to make an offer as liberal as that of Indonesia, the Philippines or Brazil, opting instead for an offer closer to that of India, ought to be a deal breaker. True, the telecommunications market is lucrative and of considerable economic interest to powerful WTO Members. But it should not be forgotten that China is already a major purchaser of foreign telecommunications equipment and that by 1996-97, two telecommunications equipment firms, Motorola (China) Electronics and Shanghai Bell Telephone Equipment Manufacturing Co. Ltd. were among the top ten foreign-funded enterprises in China. In short, telecommunications investment opportunities are already being exploited successfully and are on a rapid path toward expansion.

Finally, this paper addresses, gingerly, a subject that has arisen whenever liberalization of telecommunications in China is discussed: national security. Clearly, any new willingness on China’s part to make an offer on telecommunications reduces the significance of this topic. However, for the purposes of clarity and completeness this paper notes that since 1993, China has had a legal framework for addressing national security issues that circumscribes the meaning of the term in a manner consistent with the GATS Article XIV(a) general exception relating to public order and Article XIV bis security exception relating to essential security interests. It is argued here that China has all the instruments it needs to address national security concerns at the same time as it liberalizes the telecommunications market.

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