Talk is cheap - liberalizing the telecommunications industry

Reason, August-Sept, 1996 by Cynthia Beltz

In this chaotic world of converging markets and rapidly changing technologies, government should do what it can to promote a uniform, stable framework of rules. The United States failed at this task last April in Geneva. According to the U.S. Trade Representative, 33 governments "have indicated that they are prepared to commit to fair rules of competition. This is an unprecedented development in a global market that is still dominated by inefficient state-owned monopolies." But instead of seizing the opportunity to anchor these commitments to a multilateral system of rules that would have improved the access of U.S. telecommunications firms, the United States walked away from the negotiations.

In doing so, the Clinton administration also lost a strategic opportunity to strengthen the WTO and put to rest nagging questions about America's commitment to the multilateral liberalization process. Congress was already skeptical about what the United States would gain from the WTO. Senate Majority Leader Bob Dole further encouraged distrust with his proposed "three strikes and you're out" commission, which would review WTO rulings and recommend that the United States pull out after it finds three it doesn't like. Other countries are also responsible for the WTO's setbacks - Malaysia and Indonesia did not even make liberalization offers in the telecommunication talks - but their decisions do not carry the same weight as those of the United States.

The success of international agreements like the Uruguay Round, which created the WTO, depends largely on the level of support from their most powerful members. The U.S. government spent seven years convincing the international trading community it needed a global free trade watchdog. It also seems to think that the WTO can serve American interests: Twelve of the 18 disputes pending before the WTO were initiated by the United States. But if the United States wants a credible WTO around to handle its complaints against offensive trade practices and to shape the global framework for the marketplace being created by converging technologies, it needs to stop playing around with reciprocity games. Countries that choose not to open their markets do so at their own expense. If the U.S. government cannot demonstrate its faith in the benefits of competition based on its own experience, especially when current trends so overwhelmingly favor U.S. interests, what other government will? Periods of momentous change and opportunity reward those who not only talk about what needs to be done but who lead by example.

Cynthia Beltz (cbeltz@aei.org) is a research fellow at the American Enterprise Institute in Washington, D.C.