The Telmex Dispute at the WTO: Competition Makes a Backdoor Entry by Sonali Singh(CUTS C-CIER)

In February 2002, the US requested a WTO panel to address restrictions imposed by Mexico on international telecommunications services between the two countries. The US alleged that Mexico had failed to open its cross border telecommunications market as mandated by the General Agreement on Trade in Services (GATS) on the grounds that Mexico has: • Not ensured that US carriers connect their calls to Mexico at reasonable rates, terms and conditions; • Not ensured that US firms have reasonable and nondiscriminatory access to and use of Mexico’s telecom network; • Not provided uniform treatment to US-owned commercial agencies; • Not prevented Mexico’s dominant carrier from engaging in anti-competitive practices; • The access rates were not cost oriented. The US alleged that Mexico (Cofetel) has provided a single, dominant company with a government mandate to setexcessive rates for international calls; • Effectively set up a cartel of telecoms operators with Telmex as the ring leader; • Overcharging US rivals; and • Inhibiting foreign entry. The US alleged that this was a state-authorised cartel benefiting Sprint and Telmex and harming their American rivals. The panel did not deny the US its complaint. Instead, it found a way of creating a WTO cartel ban using the principles in the Reference Paper on telecoms. For more details, go to: http://www.cuts-international.org/pdf/Telmex-1-2006.pdf

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Contributor: Shambhu Ghatak
Published Date: May 8, 2008