Dr. Malawer .... 2004. 1

Trade Law & Global Technology [ New Developments in WTO & U.S. Law ]

Dr. Stuart S. Malawer

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OUTLINE

• WTO Agreements.

– “ Information Technology Agreement” (1997)

• ITA2

• Note--”EU Tariff Case”

– “Basic Telecommunications Agreement” (1998)

• “Domain Names” (1999)

• Arbitration.

• U.S. Law Developments.

– Section 1377 (telecom)

– Export / Re-export

• Computer exports

• Encryption software

• Trade Sanctions

– IPR.

• Special 301 (IPR)

• Sections 337 (Patent)

• Electronic Commerce

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1. INFORMATION TECHNOLOGY AGREEMENT (1997).

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Information Technology Agreement.

• Negotiated & concluded under the auspices of the WTO at first Ministerial Conference in Singapore on December 13, 1996 (after the Uruguay Round).

• Was a product primarily of private sector lobbying.

• Agreement effective on July 1, 1997.

• Concerns primarily reduced import duties.

• Tariff reductions commenced on that date and reduced to “0” by year 2000.

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ITA -- Con’t

• Opened markets in 43 countries and covers over 93% of world trade in information technology.

• Global information technology sales market is $500 billion.

• U.S. exports account for 1/4 of global technology trade.

• Represents 1.8 million U.S. technology jobs.

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ITA -- Con’t

• ITA intended to improve U.S. market access and to be subject to continued negotiations.

• The ITA covered U.S. exports of computers, semiconductors & telecommunications products.

• ITA didn’t cover personal electronics.

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ITA – II:

•Completed December 1998.•Expanded coverage of products.

• Scientific & analytical equipment• Global positioning systems• Printed circuit boards

ITA -- Con’t

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ITA -- Con’t

• ITA - II accelerated tariff reductions for products covered by ITA-I.

• Note -- U.S. won a panel decision in the EU Tariff Reclassification Case before the WTO (March 1998), but was reversed (in June 1998) by the AB (first time ever).

• Concerns prior tariff reductions.

• Largest case ever brought at that time by the U.S. in terms of total value of trade involved ($5 billion in total European sales annually).

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2. BASIC TELECOMMUNICATIONS AGREEMENT (1998).

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Basic Telecommunications Services Agreement.

• Agreement concluded under the WTO on Feb. 1997 and became effective Feb. 1998.

• Was part of Uruguay Round negotiations on services, but was not concluded until subsequently.

• Concerns primarily “national treatment” for services and direct investment.

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Basic Telecom -- Con’t

• Note -- International trade in telecommunications is defined as the sale of equipment or services that cross national borders.

• This agreement involves the trade of services and is a part of the GATS.

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Basic Telecom -- Con’t• Most importantly, a new paradigm is emerging because

of global competition: from bilateral relations (usually involving state monopolies) to a multilateral trade framework (between private companies).

• Telecom is important not only because of the amount of telecom trade or the size of the industry, but because it is a driver of change in other industries.

• Impacts on both globalization & regional integration.

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Basic Telecom -- Con’t

• Most OECD country commitments came into effect immediately. Others are phased in 1998 - 2003.

• Note -- All WTO members must provide MFN treatment immediately.

• Agreement represents a change of profound importance.

• Monopolies and closed markets are replaced by open markets, deregulation & competition.

• Agreement complements the previous ITA.

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Basic Telecom -- Con’t

• Commitments were from countries accounting for 95% of global telecommunications revenues.

• Countries making market access offers represent 99% of the global market.

• Countries permitting foreign investment represent 97% of the global market.

• Countries adopting the regulatory principles represent 94% of the global market.

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Basic Telecom -- Con’t

• Three types of commitments:

– Market Access (into local, long-distance & int’l service via any means of network technology either through facilities basis or resale)

– National Treatment (direct investment in companies)

– Procompetitive regulatory principles (based upon 1996 U.S. Telecommunications Act & requires establishment of independent regulatory bodies)

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Basic Telecom -- Con’t

• In 1998, telecommunications is a $1Trillion global industry. (ITU estimate)

• In 1996, $100 billion cross-border trade in communications (equipment & services).

• Industry will double or triple over next ten years.

• U.S. companies are most competitive.

Dr. Malawer .... 2004. 17Source: ITU 1997

Global Telecommunications Trade(Services & Equipment)

1990-1996

50 5258 60

80

95100

0

20

40

60

80

100

120

1990 1991 1992 1993 1994 1995 1996

Bil

lio

ns o

f $ U

.S.

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Global Telecom Industry Revenue1990 - 1997

500570 590 600 650

780 830

980

0

200

400

600

800

1000

1200

Year1990

Year1991

Year1992

Year1993

Year1994

Year1995

Year1996

Year1997

U.S

. B

illi

on

$

Source: ITU 1997

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Basic Telecom -- Con’t

• FCC has adopted new rules to implement WTO obligations.

• Note -- International Telecommunications Union (ITU)is interested in seeing how it can facilitate the success of the WTO’s agreement and actions.

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3. U.S. LAW DEVELOPMENTS.

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U.S. LAW DEVELOPMENTS

• Section 1377 of the Telecommunications Trade Act of 1988 (Omnibus Act).

• Requires annual review of market access restrictions and identification of ‘priority countries’ that could lead to ‘retaliation’ by USTR. (Form of “Special 301.”)

• Violations of agreements or other practices

• USTR has identified Mexico, Japan, Korea & Taiwan.

• Dispute with Mexico on connection charges.

– Telecom issues are often now trade disputes.

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U.S. LAW -- Con’t

• Export & Reexport Controls:

• Basic Law -- Export Administration Act of 1979 (foreign policy & national security controls). Applies to both goods & technology.

• Note -- This law reaches foreign technology sold by U.S. subsidiaries abroad. (Extraterritoriality)

• Computer Exports -- Continued review of controls concerning supercomputers. For example, investigations concerning IBM European exports to Russian companies.

• Encryption software -- Current proposal of allowing export of encryption software up to a 56-bit key length is not satisfactory to the ITAA since it is too easily broken.

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U.S. LAW -- Con’t

• Trade Sanctions (general legislation):

• International Emergency Economic Powers Act (IEEPA)

• Trading with the Enemy Act

• Iran & Libya Sanctions Act 1996 (D’Amato Sanctions)

• Helms-Burton Legislation (Cuba)

• Iraq Sanctions Act 1990

• Nuclear Proliferation (1994) (India / Pakistan).

• Syrian Sanctions (2003).

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• Intellectual Property Rights.• Special 301 (lack of IPR protection abroad viewed as a trade

barrier). Added by 1988 trade legislation to 1974 Trade Act. Requires a “priority watch list.”

• Section 337 of Tariff Act of 1930. Declares unlawful “unfair acts of importation.”

– Specific language applies to class of intellectual property rights (patent, trademark, registered mask work of semiconductor chip product) as to imports. No injury standard for this group (compared to non-IPR imports).

– Different (lower) standard as to violation than patent laws generally in the U.S.

– GATT panel in 1988 found this to violate “national treatment principle.” Art. III (4)

U.S. LAW -- Con’t

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General Research Sources.

• World Telecommunications Development Report (2002) (annual report by the International Telecommunications Union).

• Overview and Compilation of U.S. Trade Statutes (Committee of Ways & Means, 2001). Summary and copies of trade laws.

• 2004 Trade Policy Agenda & 2003 Annual Report (2002) (annual report by the USTR). Contains summary of U.S. trade enforcement activities.

• National Trade Estimate Report of Foreign Trade Barriers (annual report by USTR concerning foreign trade barriers).