Global Policy Forum

The Clinton administration asked the World Trade Organization yesterday to hold a formal hearing on its complaints that Mexico has not adequately opened its telecommunications markets to competition, escalating a simmering battle between the United States and one of its most important trading partners. "We have repeatedly urged the government of Mexico to comply with its WTO commitments," U.S. Trade Representative Charlene Barshefsky said in a written statement. "While some progress has been made, Mexico's failure to take additional actions has left us no choice but to request a WTO panel."

The Mexican government has maintained that its telecommunications market is open. Officials in Mexico City have accused the Clinton administration of using the disagreement to give U.S. companies a competitive advantage. The dispute now goes to a formal settlement panel in Geneva, which is expected to hear testimony and consider briefs over the next several months. If the panel rules against Mexico, it could order the government to take steps to comply with its WTO obligations. Mexico could appeal such a ruling. If Mexico refused to heed a WTO judgment, the U.S. would claim the right to take retaliatory action. The stakes are substantial: Mexico's telecommunications market remains relatively small--worth about $12 billion a year--but analysts expect dramatic growth.

The U.S. request for a hearing before the global trade organization follows the failure of a series of bilateral negotiations aimed at resolving differences. At the center of the dispute is Mexico's treatment of its national telephone monopoly, Telefonos de Mexico SA de CV, better known as Telmex. Major U.S. telecommunications companies led by WorldCom Inc. and AT&T Corp., which have been erecting telephone and Internet networks in Mexico, have long charged that federal authorities in the country cushion Telmex from competition by refusing to force it to slash the rates it charges long-distance competitors to connect to its vast local network.

In September, the Mexican government announced new rules in a bid to settle the dispute. The new measures limit the fees Telmex may charge competitors to connect to its network to the actual costs of providing such service, Mexican officials said. But U.S. authorities rejected the new rules as insufficient. Last month, Mexican and U.S. officials met in Guadalajara to discuss their differences. But that session ended with no settlement. On Oct. 20, U.S. officials sent a letter to Mexican authorities highlighting remaining issues of disagreement and suggesting continued negotiation, but Mexican officials responded by declaring that the talks were over, the Office of the U.S. Trade Representative said.

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