WORLD TRADE
ORGANIZATION
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WT/DS204/R
2 April 2004
(04-1211)
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Original: English |
MEXICO � MEASURES AFFECTING
TELECOMMUNICATIONS SERVICES
Report of the Panel
(Continued)
D. WHETHER MEXICO HAS MET ITS OBLIGATION UNDER SECTION 5 OF THE GATS ANNEX ON TELECOMMUNICATIONS
7.270 The United States claims that Mexico has not met its
obligations under Section 5 of the GATS Annex on Telecommunications ("the
Annex"), that is, to ensure that United States suppliers of basic
telecommunications services have access to and use of Mexico's public
telecommunications transport networks and services. In particular, the United
States argues that Mexico does not permit interconnection of United States
suppliers on reasonable terms and conditions, contrary to Section
5(a), and prohibits altogether access to private leased circuits,
contrary to Section 5(b).
7.271 The United States claim relates to five distinct
situations for which, the United States argues, Mexico has made specific
commitments, and for which Mexico must comply with Annex obligations:
� Under Section 5(a) of the Annex, the United States
argues that Mexico must ensure that:
(i) suppliers of facilities-based basic
telecommunications services from the United States into Mexico
(cross-border) are accorded access to and use of "public
telecommunications transport networks and services" on "reasonable
terms and conditions";
(ii) suppliers of basic telecommunications
services on a non-facilities basis from the United States
into Mexico (cross-border) are accorded access to and use of public
telecommunications transport networks and services on reasonable
terms and conditions;
� Under Section 5(b) of the Annex, the United States argues
Mexico must ensure that:
(iii) suppliers of facilities-based basic
telecommunications services from the United States into Mexico
(cross-border) have access to and use of private leased circuits,
and must be permitted to interconnect these private leased circuits
to public telecommunications transport networks and services in
Mexico;
(iv) suppliers of basic telecommunications
services on a non-facilities basis from the United States
into Mexico (cross-border) have access to and use of private leased
circuits, and must be permitted to interconnect these private leased
circuits to public telecommunications transport networks and
services in Mexico;
(v) suppliers of basic telecommunications
services on a non-facilities basis through a commercial
presence in Mexico must likewise be afforded access to and use
of private leased circuits to supply international telephone
services.
7.272 Mexico argues that the Annex does not apply to the
access to and use of public telecommunications transport networks and services
for the supply of basic telecommunications services. Further, it reiterates that
it has not made any commitments on cross-border supply, either for
facilities-based suppliers or commercial agencies, and that it therefore has no
Annex obligations related to such services. With respect to locally established
commercial agencies, Mexico states that it has not committed to issue permits
for their establishment prior to issuing the corresponding regulations.
7.273 Before we consider whether Mexico has violated
obligations arising from Section 5 of the Annex, we will examine whether the
Annex applies to the telecommunications services at issue, which we have
described in detail in Part B of these findings as basic telecommunications
services.
1. Whether the Annex imposes obligations on Mexico to
ensure access to and use of public telecommunications transport networks and
services for the supply of the basic telecommunications services scheduled
by Mexico
(a) Does the Annex apply to access to and use of public
telecommunications transport networks and services for the supply of basic
telecommunications services?
7.274 Mexico submits that the Annex applies only to access to
and use of public telecommunications transport networks and services as a
transport means for other economic activities, and not to the supply of
basic telecommunications services per se.1007
7.275 The United States argues that the Annex states in
Section 1 that telecommunications has a "dual role as a distinct sector of
economic activity and as the underlying transport means for other economic
activities". As further context, it points out that Section 2(a) states that the
Annex applies to "all measures ... that affect access to and use of
public telecommunications transport networks and services", which would include
measures regulating telecommunications "as a distinct sector of economic
activity". Finally, Section 5(a) imposes obligations "for the supply of a
service included in [a Member's] Schedule".1008
7.276 Mexico maintains that the Annex does not cover access
for the purpose of supplying basic telecommunication services, but only access
for services that require basic telecommunications services as an underlying
means of transport, including enhanced telecommunications services. In Mexico's
view, the fact that Section 1 (entitled "Objectives") of the Annex refers to a
"dual" role of the telecommunications services sector does not imply that the
Annex covers both aspects of that "dual" role. Rather, Section 1 simply confirms
that the Annex is based on the recognition that, beyond constituting a service
sector of their own, telecommunications services and networks are essential
tools for other economic activities, such as banking or insurance services.
According to Mexico, the fact that these other activities rely heavily on
telecommunications services as an underlying means of transport points to the
fundamental purpose of the Annex. Section 1 therefore shows that the Annex is
aimed at addressing the second aspect of the dual role. Mexico argues that the
first aspect � the supply of basic telecommunications services � was dealt with
under the basic telecommunications negotiations that led to the Fourth Protocol
to the GATS in 1997.
7.277 Our first task is to establish whether the Annex
applies to measures affecting access to and use of public telecommunications
transport networks and services by suppliers of basic telecommunications
services. We start with Section 2 of the Annex, entitled "Scope". It reads:
"2. Scope
(a) This Annex shall apply to all measures of a
Member that affect access to and use of public telecommunications
transport networks and services.14
(footnote original) 14 This paragraph is
understood to mean that each Member shall ensure that the
obligations of this Annex are applied with respect to suppliers of
public telecommunications transport networks and services by
whatever measures are necessary.
(b) This Annex shall not apply to measures
affecting the cable or broadcast distribution of radio or television
programming.
(c) Nothing in this Annex shall be construed:
(i) to require a Member to authorize a
service supplier of any other Member to establish, construct,
acquire, lease, operate, or supply telecommunications transport
networks or services, other than as provided for in its
schedule; or
(ii) to require a Member (or to require a
Member to oblige service suppliers under its jurisdiction) to
establish, construct, acquire, lease, operate or supply
telecommunications transport networks or services not offered to
the public generally."
7.278 Section 2(a) provides that the Annex shall apply to
"all measures" of a Member that affect access to and use of public
telecommunications transport networks and services. We observe that the wording
of Section 2(a) does not specify that the provision is limited to measures
affecting access to and use of public telecommunications transport networks and
services by only certain services or service sectors. The ordinary
meaning of the words in Section 2(a) suggests therefore that the scope of the
Annex includes all measures that affect access to or use of public
telecommunications transport networks and services with regard to all
services, including basic telecommunications services.
7.279 In further assessing whether the Annex applies to
access to and use of public telecommunications transport networks and services,
we next examine the context provided by Section 1 of the Annex, entitled
"Objectives":
"Recognizing the specificities of the telecommunications
services sector and, in particular, its dual role as a distinct
sector of economic activity and as the underlying transport means for other
economic activities, the Members have agreed to the following Annex with the
objective of elaborating upon the provisions of the Agreement with respect
to measures affecting access to and use of public telecommunications
transport networks and services. Accordingly, this Annex provides notes and
supplementary provisions to the Agreement." (emphasis added)
7.280 We note that Section 1 recognizes the dual role of the
telecommunications services sector as "a distinct sector of economic activity
and as the underlying transport means for other economic activities". Such
recognition is not however conclusive as to whether the Annex contains
provisions addressing telecommunications services as a "distinct sector of
economic activity", and not only as an "underlying transport means for other
economic activities". Section 1 goes on to state, however, that the purpose of
the Annex is "elaborating on the provisions of the Agreement with respect to
measures affecting access to and use of public telecommunications transport
networks and services". As in the case of Section 2(a) on scope, Section 1 on
objectives contains no language suggesting that access to and use of public
telecommunications transport networks and services for the supply of basic
telecommunications services is meant to be excluded from the scope of the Annex.
The "notes and supplementary provisions to the Agreement" that the Annex
"provides" do not appear in any way to exclude any measures covered by the
Agreement, including measures affecting the access to and use of public
telecommunications transport networks and services for the supply of basic
telecommunications services.
7.281 Similarly, we note that Section 5 (a) of the Annex
states that the obligation to ensure access to and use of public
telecommunications transport networks and services shall apply for the benefit
of "any service supplier of any other Member" for the supply of "a service
included in its schedule". This language does not explicitly exclude suppliers
of basic telecommunications services. On the contrary, Section 5(a) speaks of
"any" service supplier. It also speaks of a "service included" in a Member's
schedule which, in the case of any Member, can, and for many Members does,
include basic telecommunications services. We consider this to be a further
indication that the Annex is not limited in its application to exclude measures
ensuring the access to and use of public telecommunications transport networks
and services for the supply of any service, including basic telecommunications
services.
7.282 Mexico contrasts the scope provision of the Annex with
the provisions on "Scope and Definition" contained in Section 1 of the Annex on
Financial Services, and argues that the former only applies to access to and use
of public telecommunications transport networks and services, whereas the latter
applies to "supply". Mexico is of the view that, where the negotiators of the
GATS intended that an Annex was to apply to the "supply" of a service, they
stated this explicitly. According to Mexico, the Annex distinguishes between
access to and use of public telecommunications transport networks and
services, which is relevant to telecommunications services as an underlying
transport means for other economic activities, and the supply of such
services, which is relevant to trade in telecommunications services as a
distinct sector of economic activity.1009
7.283 We agree that the Annex addresses measures affecting
"access to and use of" public telecommunications transport networks and
services, and not the supply of services. However, "access to and
use of" public telecommunications transport networks and services are to be
granted in order to enable the supply of services. Section 5 explicitly seeks to
ensure that access to and use of public telecommunications transport networks
and services is granted "for the supply of a service included in [a
Member's] Schedule".1010 While the Annex is neutral as to the services that can be
supplied through access to and use of public telecommunications transport
networks and services, the Annex on Financial Services only "applies to measures
affecting the supply of financial services".1011 The fact that Members devoted an
annex to measures affecting the supply of services in one specific services
sector � financial services � does not provide a basis for interpreting the
scope of another annex � on telecommunications networks and services � which
differs significantly in structure and objective.
7.284 Mexico further argues that basic telecommunications are
excluded from the Annex, since these services "as a distinct economic activity"
were dealt with through Members making specific commitments only after the Annex
entered into force; therefore, basic telecommunications services were not
included in the GATS until 1997, when the Fourth Protocol was agreed.1012 The
provisions of the GATS, however, do not support this argument. Article I:1 of
the GATS provides that the "Agreement applies to measures by Members affecting
trade in services". Article I:3 (b) clarifies that the term "services" "includes
any service in any sector except services supplied in the exercise
of governmental authority" (emphasis added). The sectoral listing used by
Members to schedule commitments on trade in services (document "W/120")
explicitly lists a set of telecommunications services that includes both basic
and value added services. Therefore all telecommunications services, like all
other services, were part of the sectoral coverage of the GATS at the time the
Annex entered into force. The fact that many Members made substantive specific
commitments on basic telecommunications services only in 1997 should not be
confused with the question of whether basic telecommunications was a services
sector within the scope of the Agreement.
7.285 An interpretation of the Annex to exclude measures
ensuring access to and use of public telecommunications transport networks and
services for the supply of basic telecommunications services would lead to
unreasonable results. Public voice telephone services, for example, can only be
supplied properly through access to and use of public telecommunications
transport networks and services of other suppliers, except in markets where
monopoly supply is maintained. While monopoly supply can and does exist in
domestic telecommunications markets, the international market has always
involved multiple suppliers. With respect to the supply of public voice
telephony, whether on a cross-border basis or through commercial presence, it is
essential that suppliers be able to access and use public telecommunications
transport networks and services of other suppliers to complete calls placed by
their customers to a user on another supplier's network.
7.286 While access to and use of public telecommunications
transport networks and services may be important generally for the supply of
services, such access is indispensable for the supply of basic
telecommunications services. If the Annex did not apply to measures affecting
access to and use of public telecommunications transport networks and services
for basic telecommunications services, Members could effectively prohibit any
supply other than that which originated and terminated within the same
suppliers' network, even where commitments were undertaken, thereby rendering
most basic telecommunications commitments without economic value.
7.287 Finally, if Members had made such a far-reaching
decision, they would surely have stated specifically that basic
telecommunications services were excluded from the application of the Annex, in
the same way that they specifically stated in Section 2(b) that the Annex "shall
not apply to measures affecting the cable or broadcast distribution of radio or
television programming".
7.288 It would thus be unreasonable to suppose that the
access and use of public telecommunications transport networks and services that
is essential to the international supply of basic telecommunications services
was not intended to be covered by the Annex. We find therefore that the Annex
applies to measures of a Member that affect access to and use of public
telecommunications transport networks and services by basic telecommunications
suppliers of any other Member.
(b) Does Section 5 of the Annex apply to the basic
telecommunications commitments scheduled by Mexico?
7.289 The United States maintains that the "obligations under
the Annex trigger only to the extent to which [a Member] has undertaken
commitments in its schedule".1013 Mexico expresses a similar view, arguing that the
Annex neither overrides a schedule, nor imposes obligations without regard to
specific commitments taken.1014 We now examine whether, and to what extent, Section
5 applies to the basic telecommunications commitments scheduled by Mexico.
7.290 We recall the wording of Section 2(c)(i) of the Annex,
which determines the scope of the Annex. It states, in relevant part:
"Nothing in this Annex shall be construed:
(i) to require a Member to authorize a service
supplier of any other Member to establish, construct, acquire, lease,
operate, or supply telecommunications transport networks or services, other than as provided for in its Schedule;" (emphasis added)
7.291 This provision is explicit. The Annex does not require
a Member to authorize the supply of a basic telecommunications transport service
"other than as provided for in its Schedule".
7.292 Paragraph (e)(iii) of Section 5 provides further
support for this interpretation, clarifying Members' rights to prevent the
supply of services that are not permitted in the Members schedule. It reads:
"(e) Each Member shall ensure that no condition is
imposed on access to and use of public telecommunications transport
networks and services other than as necessary:
(iii) to ensure that service suppliers of any
other Member do not supply services unless permitted pursuant to
commitments in the Member's Schedule." (emphasis added)
7.293 We infer, and the parties recognize, that the
obligations contained in the Annex, and particularly in Section 5, are aimed at
facilitating the exploitation of scheduled commitments, and do not create a
right to supply a service where no commitments exist.
7.294 We have earlier examined Mexico's specific commitments
with regard to the cross-border supply of telecommunications services supplied
on both a facilities and non-facilities basis. We concluded that Mexico,
through its description of the services committed, and through the inscription
of a routing requirement, prohibits market access for the cross-border supply of
the services at issue over capacity leased by the supplier (i.e. on a
non-facilities basis) in Mexico.1015 Absent a commitment, we find that the Annex
cannot trigger any obligations on the part of Mexico to ensure access to and use
of private leased circuits with regard to the situations described under (iii)
and (iv) of the United States claim, in paragraph 7.271.
7.295 We will therefore examine, under Section 5(a) of the
Annex, obligations arising with regard to basic telecommunications services
supplied on a facilities-basis in Mexico, for which we have found that Mexico
has granted market access through cross-border supply (situations (i) and (ii)).1016
We will then examine whether Mexico has an obligation resulting from Section
5(b) with regard to the basic telecommunications services supplied on a
non-facilities-basis in Mexico, through commercial presence (situation (v)).1017
2. Whether Mexico has fulfilled its obligations under
Section 5 of the Annex
7.296 With respect to Section 5 of the Annex, the United
States claims that Mexico has violated paragraphs (a) and (b). Paragraph (a) is
a general obligation to ensure access to and use of public telecommunications
transport networks and services on "reasonable and non-discriminatory terms and
conditions". Paragraph (b) is a more specific obligation to ensure access to and
use of public telecommunications transport networks and services, including
"private leased circuits".
7.297 Mexico, however, claims that a violation of paragraphs
(a) or (b) of Section 5 cannot be determined without also examining paragraphs
(e) and (f). Paragraph (e) prohibits the imposition of any "condition" on access
to and use of public telecommunications transport networks and services "other
than as necessary" to achieve any of three stated policy objectives. Paragraph
(f) sets out an illustrative list of six types of regulatory conditions through
which these objectives may be achieved.
7.298 Our first interpretative task is therefore to examine
the structure of Section 5 and determine the relationship between the paragraphs
at issue in this dispute.
(a) Structure of Section 5
7.299 In Mexico's view, Section 5 has to be interpreted as a
whole, and paragraphs (a) and (b) are qualified by paragraphs (e) and (f).
The paragraphs of Section 5
are, for Mexico, part of the same provision and must be read together to
determine the meaning of a Member's obligation under that provision.
Since the general obligation in Section 5(a) is required, by its
language, to be applied through paragraphs (e) and (f), a violation of
paragraphs (a) and (b) cannot be demonstrated without also showing that Mexico's
measures are not permitted by paragraphs (e) and (f). Mexico maintains that, as
the complaining party, the United States has the burden of establishing a case
of inconsistency with all four provisions.1018
7.300 The United States contests that Sections 5(e) and (f)
are elements of a prima facie case under Sections 5 (a) and (b) of the
Annex. According to the United States, Sections (e) and (f) relate to these
obligations like exceptions, much as Article XX of the GATT relates to GATT
obligations. Therefore, for the United States, the burden of proof rests on the
party invoking these exceptions.1019
7.301 Our first task is to determine whether a claim under
paragraph (a) or (b) requires examination of any of the elements contained in
other paragraphs of Section 5. Paragraph (a) reads:
"Each Member shall ensure that any service supplier of
any other Member is accorded access to and use of public telecommunications
transport networks and services on reasonable and non-discriminatory terms
and conditions for the supply of a service included in its Schedule. This
obligation is applied, inter alia, through paragraphs (b) through
(f)." [footnote omitted]
7.302 We note that the obligation in paragraph (a) "shall be
applied, inter alia, through paragraphs (b) through (f)". This wording
differs from the text of the GATT provisions referred to by the United States.
The provision on "General Most-favoured Nation Treatment" in GATT Article I does
not include a similar proviso that it shall be applied through the "General
Exceptions" provision in GATT Article XX. An obligation cannot be applied
"through" another provision if that obligation is read in isolation from that
provision. For an obligation in one provision to be applied "through" another
provision, it is evident that the two provisions must be interrelated and must
inform each other. We read paragraph (a), in other words, as containing an
obligation that informs paragraphs (b) through (f), and must be read
taking into account paragraphs (b) through (f).
7.303 We now examine paragraph (e), which reads:
"(e) Each Member shall ensure that no condition is
imposed on access to and use of public telecommunications transport
networks and services other than as necessary:
(i) to safeguard the public service
responsibilities of suppliers of public telecommunications transport
networks and services, in particular their ability to make their
networks or services available to the public generally;
(ii) to protect the technical integrity of public
telecommunications transport networks or services; or
(iii) to ensure that service suppliers of any
other Member do not supply services unless permitted pursuant to
commitments in the Member's Schedule." (emphasis added)
7.304 Paragraph (e) requires Members to ensure that the only
conditions that are imposed on access to and use of public telecommunications
transport networks and services are those "necessary" to achieve the three
policy objectives set out in subparagraphs (i) to (iii).
7.305 Paragraph (f) contains an illustrative list of types of
regulatory conditions that may be imposed if "necessary" to achieve a policy
goal mentioned in paragraph (e). Paragraph (f) reads:
"(f) Provided that they satisfy the criteria set out
in paragraph (e), conditions for access to and use of public
telecommunications transport networks and services may include:
(i) restrictions on resale or shared use of such
services;
(ii) a requirement to use specified technical
interfaces, including interface protocols, for inter-connection with
such networks and services;
(iii) requirements, where necessary, for the
inter-operability of such services and to encourage the achievement
of the goals set out in paragraph 7(a);
(iv) type approval of terminal or other equipment
which interfaces with the network and technical requirements
relating to the attachment of such equipment to such networks;
(v) restrictions on inter-connection of private
leased or owned circuits with such networks or services or with
circuits leased or owned by another service supplier; or
(vi) notification, registration and licensing."
7.306 We determined earlier that paragraph (a) should be read
together with the other paragraphs of Section 5. We note that paragraph (a)
addresses "terms and conditions" for access to public telecommunications
transport networks and services, which must be "reasonable and
non-discriminatory". Paragraph (e) requires that no condition other than as
necessary to achieve any of three policy objectives contained in subparagraphs
(e)(i) to (iii) shall be imposed by a Member. We infer that whenever a condition
is "necessary" under paragraph (e), it must, in addition, be "reasonable and
non-discriminatory" under paragraph (a). Conversely, if a condition is not
"necessary" to fulfil at least one of the three policy objectives set out under
subparagraphs (i) to (iii), paragraph (e) prohibits the imposition of
such a condition, which suggests that there may be no need to analyse in that
case whether that condition would otherwise be "reasonable and
non-discriminatory".
7.307 We next examine the relationship of paragraph (b) of
Section 5 with the other elements of Section 5. This relationship is more
straightforward. Paragraph (b) obligates Members to ensure that suppliers of
other Members "have access to and use of any public telecommunications transport
network or service offered within or across the border of that Member, including
private leased circuits". To this end, suppliers must be permitted, "subject to
paragraphs (e) and (f)":
"(i) to purchase or lease and attach terminal or
other equipment which interfaces with the network and which is necessary
to supply a supplier's services;
(ii) to interconnect private leased or owned circuits
with public telecommunications transport networks and services or with
circuits leased or owned by another service supplier; and
(iii) to use operating protocols of the service
supplier's choice in the supply of any service, other than as necessary
to ensure the availability of telecommunications transport networks and
services to the public generally."
7.308 The obligations in paragraph (b) apply "subject to
paragraphs (e) and (f)". We understand this to mean that the obligations in
paragraph (b) are subordinated to, and are, therefore,
qualified by, paragraphs (e) and (f). The obligations in paragraph (b) are
therefore subject to any condition that a Member may impose that is
necessary to achieve one of the policy objectives set out in paragraph (e)(i) to
(iii).1020 We recall that paragraph (b) is informed also by paragraph (a), and that
the obligation in the latter provision to ensure reasonable and
non-discriminatory access also applies to paragraph (b).
7.309 Based on the foregoing, we make the following
conclusions with respect to Sections 5(a) and 5(b). We conclude that the
obligation contained in Section 5(a) informs the other paragraphs of Section 5,
and is likewise informed by elements of these paragraphs. We cannot therefore
examine what constitutes "reasonable terms and conditions" for access to and use
of public telecommunications transport networks and services in isolation from
the question of whether or not a particular condition may be imposed, an issue
that is addressed in paragraph (e). We conclude that an obligation arises for a
Member under paragraph 5(b) subject to any term or condition that a Member may
impose in a manner consistent with the provisions of paragraphs (a) and (e).
(b) Claim under Section 5(a)
7.310 Having established that the analysis of a claim under
paragraph (a) requires an examination of whether any conditions that are imposed
on access to and use of public telecommunications transport networks and
services are "necessary" in the meaning of paragraph (e), we now examine the
specifics of the United States claim under Section 5(a).
7.311 The United States claims that Mexico has failed to
ensure that cross-border suppliers of facilities-based basic telecommunications
services from the United States into Mexico are accorded access to and use of
public telecommunications transport networks and services on reasonable terms
and conditions. For the United States, the rates that foreign suppliers must pay
constitute unreasonable, above-cost rates for access and use to the networks and
services provided by Mexico's long-distance operators. Cofetel's approval of the
United States � Mexico settlement rate violates Mexico's obligation under
Section 5(a) to ensure, by whatever means necessary, that access and use is
provided on reasonable terms and conditions. The United States also challenges
as "unreasonable" the requirements that it considers responsible for the rates
that are charged by Mexican suppliers of public telecommunications transport
networks and services. These require that foreign suppliers must negotiate
exclusively with Mexico's long-distance licensee with the greatest percentage of
outgoing long-distance market share over the preceding six months (ILD Rule 13),
and prohibit foreign suppliers from concluding alternative terms and conditions
with other Mexican suppliers of such networks and services (ILD Rules 3, 6, 10,
13, 22 and 23).
7.312 We now examine whether the substantive elements for a
claim under Section 5 (a) are met. We recall that this provision reads:
"Each Member shall ensure that any service supplier of
any other Member is accorded access to and use of public telecommunications
transport networks and services on reasonable and non-discriminatory terms
and conditions for the supply of a service included in its Schedule. This
obligation is applied, inter alia, through paragraphs (b) through
(f)." [footnote omitted]
7.313 The "access to and use of" referred to in this
provision must be granted: (a) to "any service supplier of any other Member";
(b) with respect to "public telecommunications transport networks and services";
(c) for the supply of a "service included in its schedule"; and (d) on
"reasonable� terms and conditions". In order to determine whether Mexico has met
the requirements of the Section 5(a), we need to examine each of these elements.
(i) "Any service supplier of any other Member"
7.314 The obligation of Section 5(a) arises only with respect
to "any service supplier of any other Member". It is uncontested that
facilities-based suppliers (such as AT&T, WorldCom/MCI, and Sprint) as well as
commercial agencies supply or are seeking to supply the services at issue, and
are suppliers "of any other Member", in this case, the United States.
(ii) With respect to "public telecommunications transport
networks and services"
7.315 The United States submits that a United States supplier
of basic telecommunications must access and use Mexican public
telecommunications transport networks and services to transport its service
(such as a phone call originating in the United States) to its final destination
in Mexico. This is done through interconnection, which the United States
considers the "principal method", by which United States suppliers obtain access
to and use of Mexican public telecommunications transport networks and services
for the cross-border supply of scheduled telecom services.1021 The United States
refers to Section 2.1 of Mexico's Reference Paper, which defines interconnection
as the "linking of suppliers � to allow the users of one supplier to communicate
with users of another supplier and to access services provided by another
supplier".
7.316 We observe that Mexico's market access inscription on
cross-border supply requires that international traffic be routed through the
facilities of a Mexican concessionaire. The facilities of Mexican
concessionaires are clearly "public telecommunications transport networks and
services", as this term is defined in the Section 3 of the Annex. Mexico has not
argued otherwise. We find therefore that the facilities of the Mexican
concessionaires which are relevant to the
United States claim with respect to
access and use are "public telecommunications transport
networks and services".
(iii) "For the supply of a service included in its
schedule"
7.317 The obligation in Section 5(a) on a Member to ensure
access to and use of public telecommunications transport networks and services
arises only "for the supply of a service included in its schedule". This
language might suggest that the obligation in paragraph (a) arises as soon as
any level of commitment is inscribed in a schedule. However the overall
scope of the Annex, as determined in Section 2, limits a Member's obligations
under the Annex to those "provided for in its Schedule". Similarly, paragraph
(e)(iii) of Section 5 permits the imposition of conditions on access and use "to
ensure that service suppliers of any other Member do not supply services unless
permitted pursuant to commitments in a Member's schedule". In the present case,
we recall our findings that Mexico has made market access commitments, subject
to a routing requirement, and full national treatment commitments on the supply
of basic telecommunications services. Therefore, even under a restrictive
reading of the obligation under paragraph (a), these services are "included" in
Mexico's Schedule.
7.318 In Mexico's view, however, the services at issue in
this dispute are the transport of customer-supplied information or data
between two or more points, which, being themselves public telecommunications
transport networks and services, cannot be supplied through access to and
use of public telecommunications transport networks and services. Therefore,
according to Mexico, its suppliers of "public telecommunications transport
networks and services" cannot transport public telecommunications transport
services supplied by other suppliers.1022
7.319 We have addressed earlier the question of the nature of
the services at issue, and have found that the Annex applies to the access to
and use of public telecommunications transport networks and services for the
supply of all transportation services, including basic telecommunications
services. The nature of the basic telecommunications services at issue, as
inscribed in Mexico's Schedule and described therein with reference to CPC
numbers, includes services which require suppliers to link their networks to
those of other suppliers.1023 The definition in Section 3(b) of the Annex of "public
telecommunications transport networks and services" also speaks of a
transmission "between two or more points". We therefore consider that foreign
suppliers of basic telecommunications services require access to and use of
public telecommunications transport networks and services for the supply
of their services.
7.320 We now examine whether access to and use of public
telecommunications transport networks and services for the supply of the
services at issue is accorded on "reasonable terms and conditions".
(iv) "On reasonable � terms and conditions"
7.321 The United States considers that the access to and use
of public telecommunications transport networks and services accorded to its
suppliers through interconnection, by routing through the facilities of a
concessionaire, is not based on "reasonable terms and conditions". For
the United States the exclusive negotiating right of the dominant supplier as
mandated by ILD Rule 13, the impossibility of concluding alternative
arrangements, and the above-cost rates for access to and use of public
telecommunications transport networks and services, are not "reasonable".
Footnote 1 to Section 2 of the Annex obliges
Members to take "whatever measures
necessary" to carry out their obligations under the Annex, including the
obligation to ensure that foreign suppliers have access to and use of public
telecommunications transport networks and services
on reasonable terms and conditions. Therefore, in the United States view, the
Annex prevents domestic operators from hindering the expansion of trade in
scheduled services, in accordance with the trade-liberalizing goal of the GATS.1024
The United States argues that the measures taken by Mexico
are anti-competitive and contravene the purpose of the Annex, which is to
prevent suppliers of basic telecommunications from engaging in unfair,
restrictive or anti-competitive conduct. Instead of ensuring access to and use
of public telecommunications transport networks and services "by whatever
measures necessary," the Mexican rules unreasonably concentrate all power in the
hands of a dominant supplier.
7.322 Mexico states that " reasonableness"
must be judged only within the context of all of the relevant facts and
circumstances. If Section 5 were to apply in this case, it would apply to
Mexico's accounting rate regime, and the "reasonableness" of any "terms and
conditions" of that accounting rate regime would have to be evaluated in the
light of all of the facts and circumstances related to
that regime. The terms and conditions which the United
States considers unreasonable were widespread in accounting rate regimes around
the world, and existed even in the United States' regime. Accordingly, there was
no basis for the United States to demonstrate that Mexico's measures were
"unreasonable" within the meaning of Section 5(a) of the Annex.
aa) Rates charged for access and use
7.323 In assessing whether Mexico has ensured access to and
use of public telecommunications transport networks and services on "reasonable
� terms and conditions", we first examine the rates that are charged by
Telmex and other Mexican concessionaires. We look at whether the rates
constitute "terms" or "conditions" in the sense of Section 5(a), and then
whether the rates are "reasonable". We note that the United States does not
claim that the rates, or any aspect of the ILD Rules, constitute
"discriminatory" terms or conditions.
7.324 Although paragraph (a) speaks of "terms and
conditions", paragraph (e) refers only to "conditions". Since we earlier found
that paragraphs (a) and (e) inform each other, we now analyse whether "rates"
are "terms", or whether they are "conditions". Building on our earlier analysis,1025
if the rates are terms, they would have to meet the "reasonable" standard in
Section (a); if they are "conditions," they would, in addition, have to meet the
"necessary" standard in Section (e).
7.325 As discussed in part B of these findings, the words
"terms and conditions" may have many meanings. In relation to contracts and
agreements, the word "terms" is defined to mean "conditions, obligations,
rights, price, etc., as specified in contract or instrument"1026, while "condition"
is defined, inter alia, as "a provision in a will, contract, etc., on
which the force or effect of the document depends".1027 Although the words "terms"
and "conditions" are closely related, and are frequently used concurrently, the
ordinary meaning of the word "terms" suggests that it would include pricing
elements, including rates charged for access to and use of public
telecommunications transport networks and services.
7.326 We now examine whether the word "conditions", as used
in Section 5 of the Annex, would also include pricing elements such as access
rates. Pricing is a fundamental element of any access and use. Moreover, the
importance of pricing-related measures for access and use suggests that the word
"conditions" would also include pricing elements, such as conditions that relate
to or affect the rate or price. However, Section 5 (f), which lists examples of
"conditions," does not refer to specific pricing measures. In fact, pricing
measures do not appear to be similar to any of the conditions included in
paragraph (f), such as restrictions on resale or interconnection, and
requirements to use specified technical interfaces. Given the importance of
pricing measures for access to and use of public telecommunications transport
networks and services, we cannot infer that Section 5 (f) would have omitted
pricing from its illustrative list, if the Annex had considered access charges
to fall under "conditions". Moreover, if access rates themselves constituted
"conditions", a Member would have to ensure that no rates were imposed
"other than as necessary" to fulfil one of the policy objectives in
subparagraphs (i) to (iii) of Section 5(e). Yet, with respect to access to and
use of public telecommunications transport networks and services supplied on a
commercial basis, it is evident that some type of charge will be levied.
Therefore, whether or not to charge, or the existence of a price, does not
appear to fit within the meaning of the language of 5(f) and its subparagraphs.
7.327 We find therefore that rates charged for the access to
and use of public telecommunications transport networks and services are "terms"
within the meaning of Section 5(a), but not "conditions" within the meaning of
Section 5(e).
7.328 We next examine whether the rates that are charged to
United States suppliers for access to and use of Mexican public
telecommunications transport networks and services constitute "reasonable"
terms. The dictionary meaning of the word "reasonable" means "being in
accordance with reason", "not extreme or excessive".1028 The word "reasonable"
implies a degree of flexibility that involves consideration of the circumstances
of a particular case. What is "reasonable" in one set of circumstances may prove
to be less than "reasonable" in different circumstances. The elements of
"balance" and "flexibility", as well as the need for a "case-by-case analysis",
are inherent in the notion of "reasonable".1029
7.329 We note that the "terms" in paragraph (a) must be
"reasonable and nondiscriminatory". Unlike the word "reasonable", the word
"non-discriminatory" is defined in the Annex. Footnote 2 states:
"The term 'non-discriminatory' is understood to refer to
most-favoured-nation and national treatment as defined in the Agreement, as
well as to reflect sector-specific usage of the term to mean 'terms and
conditions no less favourable than those accorded to any other user of like
public telecommunications transport networks or services under like
circumstances'."
7.330 This footnote clarifies that no discrimination is
permitted with respect to other foreign suppliers, to domestic suppliers, or to
other users of like public telecommunications transport networks and services
under like circumstances. The word "non-discriminatory" therefore addresses the
conditions of competition of service suppliers in relation to other suppliers
who are users of public telecommunications transport networks and
services. The word "reasonable" would, on the other hand, appear to include
obligations that go beyond the non-discrimination requirement. This
interpretation is supported by an examination of the objectives of the Annex as
expressed, for example, by references in Section 1 and Section 5(a) to access to
telecommunications transport networks and services.
7.331 We now consider Mexico's argument that the term
"reasonable" in Section 5(a) cannot refer to rates for interconnection, because
such an interpretation would render a significant part of Section 2.2(b) of
Mexico's Reference Paper redundant or inutile.1030 The Panel noted that,
although the obligations in the Annex and the Reference Paper may overlap in
certain respects, there are clear differences between the two instruments.
First, the Annex sets out general obligations for access to and use of public
telecommunications transport networks and services, applicable to all
Members and all sectors in which specific commitments have been
undertaken. Reference Paper obligations, as additional commitments, are
applicable only by Members that have included them in their schedules, and they
apply only to basic telecommunications. Second, while the Annex applies to all
operators of public telecommunications transport networks and services within a
Member, regardless of their competitive situation, the Reference Paper
obligations on interconnection apply only with respect to "major suppliers".
Third, the Annex broadly deals with "access to and use of" public
telecommunications transport networks and services, while the Reference Paper
focuses on specific "competitive safeguards" and on "interconnection".
7.332 In spite of these differences, the Annex recognizes
that its provisions relate to and build upon the obligations and disciplines
contained in the Articles of the GATS � the Annex states expressly that it
"provides notes and supplementary provisions to the Agreement".1031 Similarly, many
of the provisions of the Reference Paper also draw from and add to existing
obligations of the GATS, such as Articles III, VI, VIII and IX and the Annex on
Telecommunications. Accordingly, there is a degree of overlap between the
obligations of the Annex and the Reference Paper, despite their differences in
scope, level of obligations, and specific detail provided. To the extent that
the Reference Paper requires cost-oriented interconnection on reasonable terms
and conditions, it supplements Annex Section 5, requiring additional obligations
as regards "major suppliers". The Reference Paper commitments do not in this
sense subtract from the Annex or render it redundant.
7.333 Consequently, we do not accept Mexico's argument that a
reading of a pricing element into the analysis of reasonable terms in Section
5(a) would render parts of Section 2.2(b) of Mexico's Reference Paper inutile.
We find therefore that access to and use of public telecommunications transport
networks and services on "reasonable" terms includes questions of pricing
of that access and use.
7.334 We now examine what constitutes access to and use of
public telecommunications transport networks and services on "reasonable" terms.
We have previously noted that Mexico's Reference Paper contains obligations
additional to those in the Annex. We consider therefore that rates charged for
access to and use of public telecommunications transport networks and services
may still be "reasonable", even if generally higher than rates for
interconnection that are cost-oriented in terms of Section 2.2(b) of Mexico's
Reference Paper. If this were not the case, it would have been redundant for
Members to have made commitments additional to Annex obligations on access,
especially on cost-oriented rates for interconnection, one of the most important
forms of access. Further, those Members who took Reference Paper commitments did
so in order to establish specific disciplines only for major suppliers,
and especially for interconnection. This would not have been necessary if
Members already had an obligation to ensure that all suppliers, major or
not, would have to provide cost-based access and use, including interconnection.
7.335 In order to arrive at a finding in the present case, we
do not consider it necessary to determine the exact point at which a rate for
access to and use of public telecommunications transport networks and services
is no longer "reasonable". We have already determined in part B of these
findings that the rates charged to interconnect United States suppliers of the
services at issue to public telecommunications transport networks and services
in Mexico exceed cost-oriented rates by a substantial margin.1032 We find that rates
which exceed cost-based rates to this extent, and whose uniform nature excludes
price competition in the relevant market of the telecommunications services
bound under Mexico's Schedule, do not provide access to and use of public
telecommunications transport networks and services in Mexico "on reasonable �
terms". Consequently, we conclude that Mexico has failed to meet its obligations
under Section 5(a) of the GATS Annex on Telecommunications, by failing to ensure
that service suppliers of the United States are accorded access to and use of
public telecommunications transport networks and services in Mexico on
reasonable terms.
7.336 We arrived at this finding based on our determination
that rates for access to and use of public telecommunications transport networks
and services are "terms" under Section 5(a), but not "conditions" under Section
5(e). We now examine whether our finding would differ if, in the alternative, we
considered access rates to be "conditions" within the meaning of Section 5(e).
Under this alternative, Section 5(e) would require that no access rate is
"imposed" other than "as necessary" to fulfil one of the objectives in
subparagraphs (i) through (iii). The question would then arise as to how the
words "as necessary" would be interpreted.
7.337 The word "necessary" in its ordinary meaning signifies
something "that cannot be dispensed with or done without, requisite, essential,
needful".1033 A law dictionary notes
that the term may vary in meaning, in that it:
"may import absolute physical necessity or inevitability,
or it may import that which is only convenient, useful, appropriate,
suitable, proper, or conducive to the end sought. It is an adjective
expressing degrees, and may express mere convenience or that which is
indispensable or an absolute physical necessity."1034 7.338 The term "necessary" in Section 5(e) describes the
relationship between a "condition" of access to and use of a public
telecommunications transport networks and services, and one of the three listed
policy goals. What may be "necessary" with respect to one policy goal may not be
with respect to another. As the Appellate Body has noted under a different
provision in a different WTO Agreement, the term "necessary" can refer to a
range of degrees of necessity, depending on the context, and the object and
purpose of the provision in which it is used. At one end of this continuum,
"necessary" can be understood to mean "indispensable" to achieving a policy
goal; at the other end, "necessary" can be taken to mean simply "making a
contribution to" a policy goal.1035
7.339 We consider first an interpretation that "necessary" in
Section 5(e) is closer in meaning to "indispensable". This interpretation would
imply that the rates charged for access and use would be "indispensable" for the
attainment of one of the three listed objectives. The relevant objective, with
respect to a condition which is an access charge, would most likely be that
listed in paragraph (e)(i):
"to safeguard the public service responsibilities of
suppliers of public telecommunications transport networks and services, in
particular their ability to make their networks or services available to the
public generally".
7.340 Under an interpretation that "necessary" means
"indispensable", the access rates would have to be set at a level that was no
more than the minimum to achieve that objective. Minimum access rates,
however, would imply levels that reflected the approximate cost of access and
use, because the policy objective listed in paragraph (e)(i) could be fulfilled
if public telecommunications transport networks and services were charging this
rate, and it would not be "indispensable" to charge more than this rate.
Further, it could be argued that the responsibility of operators of public
telecommunications transport networks and services to make these public
telecommunications transport networks and services available to the public
generally would require that no rates be charged in excess of the cost incurred.
7.341 The interpretation of the word "necessary" in Section
5(e) as meaning "indispensable" would however leave no room for an analysis of
whether terms were "reasonable". If cost-based rates were "indispensable" to
reach the policy objective, then these rates surely could not also be
unreasonable. Such an interpretation would empty the "reasonable" standard in
Section 5(a) of much of its meaning. It would also mirror the obligation of
cost-based interconnection in the Reference Paper, with the important difference
that the general Annex obligation would encompass all suppliers of public
telecommunications transport networks and services, while the obligation in the
Reference Paper only refers to major suppliers. The Annex would in this
respect achieve the same depth of obligation as the Reference Paper, but on a
broader level, and applicable to all WTO Members, making any particular
Reference Paper commitments redundant. We would therefore reject an
interpretation of "necessary" in Section 5(e) that would mean that a condition
must be "indispensable" to achieve the policy goals listed in subparagraphs (i)
to (iii).
7.342 We now examine whether the word "necessary" in Section
5(e) is closer to the meaning of "making a contribution to" one of the
objectives listed in subparagraph (e)(i) to (iii). In this case, an access rate
would only have to be found to be "making a contribution" to one of these policy
goals, in order to satisfy the requirements of paragraph (e). In this case, it
would be relatively easy to meet the objectives listed in paragraph (e),
especially subparagraph (e)(i), and we consider that an examination of whether
the access rates were also "reasonable" under paragraph (a) would still have to
be undertaken. Even if a particular level of access rate were considered only to
be "making a contribution" to one of the policy goals listed in subparagraph
(e)(i), an examination under paragraph (a) of whether that rate was also
"reasonable" would still have meaning.
7.343 We conclude that if access rates, in the alternative,
were considered to be "conditions" under Section 5(e), then the term "necessary"
in that provision would have a meaning that required a determination of whether
the access rates were "reasonable" under Section 5(a). We would therefore arrive
at the same finding that we have made in paragraph 7.334, that the access rates
charged are not "reasonable", and that Mexico has therefore not met its
obligations under Section 5(a) to ensure that such access rates are
"reasonable".
bb) Underlying ILD Rules
7.344 The United States also claims that Mexico unreasonably
conditions access to and use of public telecommunications transport networks and
services in violation of Mexico's obligations under Section 5(a) of the GATS
Annex on Telecommunications, by granting the exclusive authority to negotiate
settlement rates with foreign suppliers to the long-distance licensee with the
greatest percentage of outgoing long-distance market share over the preceding
six months (ILD Rule 13), and by imposing the rate negotiated by that operator
on all other operators of public telecommunications transport networks and
services, thereby preventing foreign suppliers from reaching alternative
agreements for access to and use of the public telecommunications transport
networks and services in Mexico (ILD Rules 3, 6, 10, 13, 22 and 23). In
addition, the United States claims that Mexican authorities have rejected
petitions by Mexican and foreign operators to be permitted to conclude
alternative terms and conditions.
7.345 The United States is of the view that these ILD Rules,
and their application by the Mexican authorities, are not reasonable, as they
contravene the purpose of the Annex, which is to prevent suppliers of public
telecommunications transport networks and services from engaging in unfair,
restrictive, or anti-competitive conduct. Far from ensuring this goal "by
whatever measures necessary", the Mexican measures concentrate all power and
control over access to and use of Mexico's public telecommunications transport
networks and services in the hands of the dominant supplier of such networks,
thereby impairing the ability of United States and other foreign suppliers of
basic telecommunications services to negotiate fair and competitive access to
and use of these networks.1036
7.346 Having already found that Mexico has failed, in
violation of Section 5(a) of the Annex, to ensure that the interconnection rates
resulting from Mexico's application of its ILD Rules provide access to and use
of public telecommunications transport networks and services in Mexico on
reasonable terms (see paragraph 7.335 above), the Panel does not consider it
necessary to examine whether, and to what extent, the individual ILD Rules
themselves are also inconsistent with Mexico's obligations under Section 5(a) of
the Annex.
(c) Claim under Section 5(b) of the Annex
7.347 The United States argues that Mexico has failed to
ensure that non-facilities-based, commercially present suppliers
(commercial agencies) have access to and use of private leased circuits,
and are permitted to interconnect these circuits to public telecommunications
transport networks and services or with circuits of other service suppliers.
According to the United States, Mexico's commitments allow locally established,
foreign-owned commercial agencies to provide international basic
telecommunications services (for example, from Mexico to United States) over
leased capacity.1037 Contrary to its commitments, however, Mexico prohibits the
commercial presence of non-facilities-based foreign telecommunications
suppliers. Even if permitted to establish, ILD Rule 3 would prohibit the
interconnection of these circuits to any foreign public telecommunications
transport networks and service, thereby preventing a foreign non-facilities
based supplier from using a private leased circuit from any point in Mexico to
any foreign destination.1038
7.348 According to the United States, five years had elapsed
since Mexico finalized its Mode 3 commitment in February 1997 (and four years
had elapsed since this commitment had entered into force in February 1998), and
Mexico still had not issued � and had indicated no intention to issue � the
relevant regulations which provide the basis for the authorization for the
establishment of a commercial presence by commercial agencies. Mexico's refusal
to issue such regulations raised questions about its intentions ever to
implement its scheduled mode 3 commitment for commercial agencies.
7.349 Mexico responds that the commitment in its schedule,
and any resulting obligation under Section 5(b) with respect to the
non-facilities-based supply of basic telecommunications services through
commercial presence, are conditioned on the prior issuance of regulations
which has yet to occur. In Mexico's view, the entry in its schedule indicates
that, at the time of the inscription, no such permits were being issued, which
was consistent with Mexico's intention to make a "standstill" commitment.
According to Mexico, the entry establishes a "zero quota" on mode 3 access for
commercial agencies, which amounts to a market access limitation under GATS
Article XVI:2(a).1039 Mexico is of the view that nothing in its entry committed
Mexico to issuing the corresponding regulations. If Mexico had made commitments
to take certain actions in the future, those commitments would have been
inscribed in the fourth column of its schedule as "additional commitments" under
GATS Article XVIII, similar to the practice other Members had followed in making
promises of review or other conditional undertakings.1040
7.350 The United States argues that Mexico's mode 3
limitation, if read as Mexico interpreted it, rendered the commitment without
effect or "inutile". The United States points to interpretations of Mexico's
commitments by Telmex/Sprint in testimony given to the FCC in 1997, that
indicate that Telmex/Sprint believed that Mexico would issue the required
regulations shortly.1041
7.351 We recall the terms of Section 5(b) of the Annex, which
states in relevant part:
"(b) Each Member shall ensure that service suppliers
of any other Member have access to and use of any public
telecommunications transport network or service offered within or across
the border of that Member, including private leased circuits, and to
this end shall ensure, subject to paragraphs (e) and (f), that such
suppliers are permitted:
�
(ii) to interconnect private leased or owned
circuits with public telecommunications transport networks and
services or with circuits leased or owned by another service
supplier;"
7.352 In examining the United States claim under Section
5(b), we will first examine whether Mexico has a commitment in effect to allow
the supply of the services at issue through commercial presence (mode 3) in
Mexico by commercial agencies of other Members. We will then examine the extent
of any such commitments, in particular whether that commitment extends to
international services from Mexico to the United States supplied through
commercial agencies commercially present in Mexico. Finally, we will examine
whether Mexico has fulfilled its commitment under Section 5(b) with respect to
"access to and use of" of private leased circuits, and under Section 5(b)(ii) to
"interconnect private leased or owned circuits" with public
telecommunications transport networks and services,
or with circuits leased or owned by another supplier, taking into account
Section 2(c)(ii) and Section 5(e), (f) and (g) of the Annex.
(i) Whether Mexico has a commitment in effect to allow
commercial agencies to supply the services at issue through commercial
presence (mode 3)
7.353 Mexico has included a commercial presence (mode 3)
commitment in its schedule with respect to services supplied by "commercial
agencies". It has entered "None" in the column relating to national treatment,
and inscribed limitations in the market access column, which read in relevant
part:
"A permit issued by the SCT is required. Only
enterprises set up in accordance with Mexican law may obtain such a permit.
�
The establishment and operation of commercial agencies is
invariably subject to the relevant regulations. The SCT will not issue
permits for the establishment of a commercial agency until the corresponding
regulations are issued." (emphasis added)
7.354 We consider first Mexico's argument that the entry in
its schedule establishes a limitation on market access, under Article XVI:2(a)
of the GATS. This provision states that, in sectors where market access
commitments are undertaken, the measures, which a Member shall not maintain or
adopt, unless otherwise specified in its schedule, are :
"limitations on the number of service suppliers
whether in the form of numerical quotas, monopolies, exclusive service
suppliers or the requirements of an economic needs test;"1042 (emphasis added) 7.355 According to the first sentence in Mexico's entry, "a
permit issued by the SCT is required" for the supply of the service. Such a
permit, according to the entry, may only be obtained by "enterprises set up in
accordance with Mexican law". This language does not indicate that Mexico
maintains a quantitative limitation "on the number of suppliers". On the
contrary, it suggests that any supplier who is set up in accordance with Mexican
law is eligible for a permit.
7.356 Mexico's entry goes on to state that "the establishment
and operation of commercial agencies is invariably subject to the relevant
regulations". It further states that "permits for the establishment of a
commercial agency [will not be issued] until the corresponding regulations are
issued". Mexico argues that at the time when the limitation was inscribed, no
permits were issued, and no market access was granted.1043 Mexico appears to argue
that the issuance of regulations is a condition, the fulfilment of which is
entirely at the discretion of Mexican authorities. If the meaning of Mexico's
entry is that Mexico has full discretion whether or not to issue regulations,
then it follows that Mexico has indeed not undertaken any commitment on the
number of suppliers � in other words, it has left market access "unbound" with
regard to the number of suppliers.
7.357 We now consider whether Mexico's entry is equivalent to
an "unbound" entry with respect to market access through the supply, through
commercial presence, of the services at issue. The wording of the limitation,
that "permits for the establishment of a commercial agency [will not be issued]
until the corresponding regulations are issued", does not specify that a
numerical quota was to be imposed on the issuance of permits. Rather, the
sentence seems to introduce a temporal qualification as to when
establishment will be permitted � namely, after the issuance of the regulations.
7.358 The six categories of measures in Article XVI:2 refer
to the types of market access limitations that can be imposed on the supply of a
service. However, none of the six categories relate to temporal
limitations � such as dates for entry into force or for the implementation of
commitments. This suggests that temporal limitations cannot constitute
limitations on market access under Article XVI:2 of the GATS.
7.359 Article XX:1 of the GATS provides useful context which
supports this interpretation. Article XX:1 describes how schedules are to be
drawn up. It reads:
"Each Member shall set out in a schedule the specific
commitments it undertakes under Part III of this Agreement. With respect to
sectors where such commitments are undertaken, each schedule shall specify:
(a) terms, limitations and conditions on market
access;
(b) conditions and qualifications on national
treatment;
(c) undertakings relating to additional commitments;
(d) where appropriate the time-frame for
implementation of such commitments; and
(e) the date of entry into force of such commitments ."
7.360 Article XX:1 provides that Members "shall specify"
certain elements in their schedules of specific commitments. The need to specify
entries with regard to the substantive elements in Articles XVI (market
access), Article XVII (national treatment), and Article XVIII (additional
commitments) is dealt with in subparagraphs (a) to (c) of Article XX:1
respectively. Article XX:1 reiterates the need to "specify" the
limitations for market access to be scheduled under Article XVI. Article XX:1
appears however to add to the requirements for the scheduling of national
treatment limitations under Articles XVII (which reads "subject to any
conditions and qualifications set out [in the schedule]"), and additional
commitments under Article XVIII (which reads "commitments shall be inscribed in
a Member's schedule").
7.361 The need for specificity on the temporal aspects
of commitments is dealt with in subparagraphs (d) and (e) of Article XX:1.
Subparagraph (e) requires that each schedule shall specify the date of entry
into force of the commitments undertaken. Subparagraph (d) requires that a
schedule "shall specify � where appropriate the time-frame for implementation of
such commitments". The separate listing of temporal elements of entry into force
and implementation in Article XX:1 confirms, in our view, that temporal elements
are not part of the substantive elements that can be market access limitations
under Article XVI:2.
7.362 Consequently, we find that Mexico's scheduled
requirement that commercial agencies obtain permits, and that these permits be
based on regulations, is a temporal limitation that is not a market access
limitation within the meaning of Article XVI:2(a).1044
7.363 Since we have found that Mexico's entry in the market
access column of its schedule for services supplied by commercial agencies
through commercial presence is not a market access limitation, we now need to
determine what meaning it does have. We return to Article XX:1, which specifies
how Members should inscribe their specific commitments in their schedules. In
particular, we examine Mexico's entry under the criteria set out in
subparagraphs (d) (time-frame for implementation) and (e) (date of entry into
force).
7.364 We note at the outset that Mexico's commitment on
commercial agencies, along with Mexico's other commitments on basic
telecommunications, was attached to the Fourth Protocol on 15 February 1997, and
entered into force on 5 February 1998. Mexico has not included a date in its
schedule to indicate that its specific commitment on commercial agencies was to
enter into force at a date different from 5 February 1998. We consider therefore
that Mexico's entry relates to the time-frame for implementation, and not
the entry into force of the commitment.
7.365 We recall that Article XX:1 (d) requires, with respect
to sectors where commitments are undertaken, that each schedule shall specify
"where appropriate the time-frame for implementation of such commitments".
7.366 A "time-frame" is defined as "a period of time
especially with respect to some action or project".1045 The term does not require
the setting of a precise date, but it does imply a beginning and an end of a
time period. Where not expressed by beginning and end dates, a time-frame may be
also expressed in terms of maximum duration (for example: within three years).
Unlike a condition which may or may not occur, a time-frame is not open-ended
and does not leave the time of the occurrence in doubt.
7.367 We consider that the obligation to specify "where
appropriate" a time-frame for implementation of a commitment must be considered
in the overall context of Article XX:1. The wording of that Article seeks to
ensure a high degree of clarity and specificity as to the exact terms of
commitments made by Members. Members must be able to infer from each schedule
the precise conditions for market access, national treatment and, where
inscribed in the schedule, any additional commitments a Member has undertaken.
By the same token, specificity as to when a commitment enters into force and
when it has to be implemented is equally important. A market access commitment
that leaves in doubt when a commitment takes effect is of little practical
value. Unlike for the implementation of GATT tariff reductions which entered
into force on 1 January 1995, and for which paragraph 2 of the Marrakesh
Protocol provided a time-frame for implementation, the dates of entry into force
and implementation of specific commitments under the GATS coincide in principle.
7.368 Article XX:1(d) permits Members who wish to depart from
this general rule to specify a "time-frame" within which they implement their
commitments. We consider that the words "where appropriate" in that subparagraph
must be understood to refer to situations where the date of implementation
differs from the date of entry into force of a commitment. The consistent
practice of WTO Members in the scheduling of commitments supports this
understanding. During the extended negotiations on basic telecommunications
alone, twenty-seven Members who attached schedules of commitments to the Fourth
Protocol, but wished to implement their commitments at a later time than the
entry into force of their schedule, specified a time-frame for implementation �
typically by entering dates upon which certain limitations would be removed. We
consider that Article XX, the objective of which is to ensure clarity and
precision with regard to the scheduling of commitments, cannot be interpreted to
allow a window of discretion with regard to temporal aspects of these
commitments that could erode the practical value of a commitment.
7.369 Mexico asserts that had it wished to schedule
commitments to take future actions, it would have done so as additional
commitments under GATS Article XVIII. In its view, this reasoning is
"confirmed" by a Secretariat background note which includes a reference to
"future undertakings conditional upon the passing of legislation" in its
description of measures that Members had inscribed in the additional commitments
column of schedules.1046 7.370 In addressing Mexico's argument, we recall first that
Article XX:1(d) relates to time-frames for implementation of commitments under
either Articles XVI, XVII, or XVIII. We therefore cannot subscribe to
Mexico's view that any future actions should be scheduled only as
additional commitments; we described earlier how Members have, in fact,
consistently inscribed time-frames in the market access column of their
schedules. Second, Mexico has inscribed its commitment in the market access
column, and not in the column relating to additional commitments. This
difference indicates Mexico's intention to make a commitment on market access
(that is, to permit the commercial presence of "commercial agencies"), and not
an additional commitment "with respect to measures affecting trade in services
not subject to scheduling under Articles XVI or XVII". Third, the Secretariat
note mentioned by Mexico merely contains "examples of inscriptions found in the
additional commitments column", and an examination of such examples in
Attachment I to that note shows that only one of a total of fifty-two
inscriptions contains a condition similar to the one in Mexico's' schedule.
7.371 We therefore consider that subparagraph (d) of Article
XX:1 requires the specification of a time-frame for implementation should a
Member wish to implement a commitment after its entry into force. Where a
Member does not specify a time-frame, implementation must be deemed to be
concurrent with the entry into force of the commitment. We have seen that the
entry in Mexico's Schedule does not contain language that expresses a condition
"whether" regulations and permits would be issued, but only "when" the permits
would be issued. Interpreted in the context of Article XX, this entry implies
that regulations were not in place when Mexico finalized its commitments on 15
February 1997, but expresses a commitment that these regulations would be
issued. Even if Mexico had needed time to complete the issuance of the
regulations beyond the time of entry into force of its commitment on 5 February
1998, Mexico should, at the very minimum, have initiated that process leading to
the issuance of the regulations. There is no evidence, however, that Mexico has
taken any steps to comply with its commitment. We do not consider it
necessary to rule on the length of a time period within which the implementation
of Mexico's commitment might reasonably have been concluded, as more than five
years have passed since the entry into force of Mexico's commitment, and Mexico
still has indicated no date by which it intends to issue the relevant
regulations and permits. Therefore, we find that Mexico's refusal to authorize
the supply of services by commercial agencies is inconsistent with the market
access commitment inscribed in its schedule.
(ii) Whether Mexico's commitments on the supply of the
services at issue by commercial agencies through commercial presence include
the supply of international telecommunications services (from Mexico to the
United States) through mode 3
7.372 The United States argues that the supply of the
services at issue through commercial presence under mode 3 includes the supply
of such services from Mexico into the United States.
7.373 In assessing this issue, we note that the supply of a
service through commercial presence (mode 3) is defined in Article I:2 (c) of
the GATS as the supply of a service "by a service supplier of one Member,
through commercial presence in the territory of any other Member".
7.374 "Commercial presence" is defined in Article XXVIII
(Definitions), as follows:
"(d) 'commercial presence' means any type of business
or professional establishment, including through
(i) the constitution, acquisition or maintenance of a
juridical person, or
(ii) the creation or maintenance of a branch or a
representative office,
within the territory of a Member for the purpose of
supplying a service;"
7.375 The definition of services supplied through a
commercial presence makes explicit the location of the service supplier. It
provides that a service supplier has a commercial presence � any type of
business or professional establishment � in the territory of any other
Member. The definition is silent with respect to any other territorial
requirement (as in cross-border supply under mode 1) or nationality of the
service consumer (as in consumption abroad under mode 2). Supply of a service
through commercial presence would therefore not exclude a service that
originates in the territory in which a commercial presence is established (such
as Mexico), but is delivered into the territory of any other Member (such as the
United States).
7.376 We observe further that the Chairman's Note for
Scheduling Basic Telecommunications Services Commitments, states that:
"Unless otherwise noted in the sector column, any basic
telecom service listed in the sector column:
(a) encompasses local, long distance and
international services for public and non-public use;"1047 7.377 In our analysis of Mexico's commitments in part B of
these findings, we found that the Chairman's Note is an important part of the
circumstances of the conclusion of the negotiations, and should be given
considerable weight. We note that Mexico did not exclude international services
in the sector column, or elsewhere in its schedule, from the scope of services
that commercial agencies may supply. We are therefore entitled to assume that
Mexico's mode 3 commitment at issue includes supply of basic telecommunications
services within Mexico, and from Mexico into any other country.
7.378 Having concluded that Mexico has a commitment in effect
to allow the supply through commercial presence (mode 3) of the services at
issue by commercial agencies, we now consider whether Mexico has fulfilled its
obligations in Section 5(b) to ensure that suppliers of any other Member have
access to and use of any public telecommunications transport networks and
services offered within or across Mexico's border, including private leased
circuits.
(iii) Access to and use of private leased circuits
7.379 Mexico argues that Section 2(c)(ii) of the Annex
renders Section 5 inapplicable in this case. Section 2(c)(ii) establishes that
nothing in the Annex, including Section 5, "shall be construed ... to require a
Member (or to require a Member to oblige service suppliers under its
jurisdiction) to establish, construct, acquire, lease, operate or supply
telecommunications transport networks or services not offered to the public
generally". According to Mexico international simple resale is prohibited in
Mexico, and is therefore not offered to the public generally.1048 The United States
argues that Mexican suppliers of public telecommunications transport networks
and services do in fact offer private leased circuits to the public generally.1049
7.380 The Panel cannot accept Mexico's argument that Section
2(c)(ii) makes Section 5(b) inapplicable in this case. Whether "international
simple resale" (international services transmitted over leased capacity) is
offered to the public generally is a different issue from whether "private
leased circuits" are offered to the public generally in Mexico. Whether a
supplier is entitled under Section 5(b) to access to and use of services,
such as private leased circuits, that are offered to the public generally is
determined by a Member's scheduled commitments on the service to be supplied. In
this respect, the fact that a particular service is restricted under domestic
law cannot be invoked under Section 2(c)(ii), since the obligations under
Section 5 refer not to domestic law but to scheduled GATS commitments.
7.381 The Panel notes that the United States presents
evidence that "private leased circuits" are in fact "offered to the public
generally" in Mexico. Further, the Panel recalls that it has found that,
although Mexico has not committed to allow commercial agencies to use leased
capacity for cross border supply, it has committed to allow commercial agencies
to use leased capacity for the supply of the services at issue. We also recall
that Mexico indicates no restriction on the geographic market (i.e. local, long
distance, international) for the services that may be supplied by the commercial
agencies established in Mexico. Mexico has inscribed no routing restriction � as
it did for cross border supply � for supply through commercial presence.
Therefore, the Panel considers Mexico to have undertaken commitments on the
supply of the services at issue by commercial agencies through commercial
presence, for which access to and use of private leased circuits is not only
relevant but , by Mexico's own definition in its schedule, is essential.
Therefore, we find that Mexico has failed to ensure access to and use of private
leased circuits for the supply of the committed services in a manner consistent
with the Section 5(b) of the Annex on Telecommunications.
(iv) Interconnection of private leased circuits
7.382 The United States maintains that according to Section
5(b)(ii), foreign suppliers must be permitted to interconnect private leased
circuits to foreign public telecommunications transport networks and services.
In its view, ILD Rule 3 would prohibit commercial agencies, even if they were
permitted to establish, to interconnect any private leased circuits to foreign
public telecommunications transport networks and services.
7.383 We note that ILD Rule 3 reads:
"Only international gateway operators shall be authorized
to interconnect directly with the public telecommunications networks of
other countries' operators for the purpose of carrying international
traffic."
7.384 Under this rule, only international gateway operators
may interconnect with foreign public telecommunications transport networks and
services to supply international telecom services. The ILD Rules require an
international gateway operator to be a facilities-based supplier. ILD Rule 2:VII
defines a gateway operator as a supplier with a concession to supply long
distance services, and ILD Rule 7:3 requires such an operator to have
infrastructure in at least three Mexican states. As discussed in part B, a
gateway operator must always be a "concessionaire", and a commercial agency can
never be a concessionaire. Therefore, a commercial agency can never be an
international gateway operator. Thus, ILD Rule 3 prohibits a commercial agency
to interconnect "directly with the public telecommunications networks of other
countries' operators for the purpose of carrying international traffic".
(v) Subject to paragraphs (e) and (f)
7.385 We note that the obligation in Section 5(b) is made
subject by the terms of the provision to paragraphs (e) and (f). Paragraph
(e)(iii) permits Mexico to impose conditions "to ensure that service suppliers
of any other Member do not supply services unless permitted pursuant to
commitments in the Members' Schedule". ILD Rule 3, as discussed above, would be
a restriction on resale in the sense of paragraph (f)(i) of Section 5. We have
found that Mexico has undertaken a mode 3 commitment on the supply of the
telecommunications services at issue by commercial agencies. This commitment
does not exclude supply of non-facilities-based services from Mexico into any
other country. Therefore, ILD Rule 3 does not impose a condition necessary to
achieve the objective set out in paragraph (e)(iii). Rather, this ILD Rule
prevents interconnection to private leased circuits for a service on which a
specific commitment has been taken. Therefore, we find that ILD Rule 3 is
inconsistent with Mexico's obligations under Section 5(b) of the Annex.
(d) Invocation of Section 5(g)
7.386 Mexico argues that it is necessary to condition access
to its networks for the purpose of strengthening its domestic telecommunication
infrastructure in accordance with paragraph (g) of Section 5 of the Annex.1050
According to Mexico, this Section gives cover to its measures.
7.387 Section 5(g) reads:
"Notwithstanding the preceding paragraphs of this
section, a developing country Member may, consistent with its level of
development, place reasonable conditions on access to and use of public
telecommunications transport networks and services necessary to strengthen
its domestic telecommunications infrastructure and service capacity and to
increase its participation in international trade in telecommunications
services. Such conditions shall be specified in the Member's schedule."
7.388 Section 5(g) recognizes the right of developing
countries to inscribe limitations in their schedules for the objectives
recognized in Section 5(g). The Panel notes that Mexico's Schedule of Specific
Commitments does not include any limitations referring to Section 5(g) or to the
development objectives mentioned therein. Without such limitations in Mexico's
Schedule, Section 5(g) does not permit a departure from specific commitments
which Mexico has voluntarily and explicitly scheduled. Moreover, even if �
contrary to our views � Section 5(g) could be used as a defence for imposing
conditions inconsistent with a Member's specific commitments, Mexico has not
demonstrated that anti-competitive price-fixing and market sharing arrangements
are "reasonable" and "necessary" conditions for enhancing the development
objectives referred to in Section 5(g).
7.389 We therefore conclude that Mexico has failed to meet
its obligations under Section 5(b) of the GATS Annex on Telecommunications, by
failing to ensure that commercially present commercial agencies of the United
States have access to and use of private leased circuits and are permitted to
interconnect these circuits to public telecommunications transport networks and
services or with circuits of other service suppliers .
VIII. CONCLUSIONS AND RECOMMENDATION 8.1 In the light of our findings, we conclude that:
(a) Mexico has not met its GATS commitments under
Section 2.2(b) of its Reference Paper since it fails to ensure that a
major supplier provides interconnection at cost-oriented rates to United
States suppliers for the cross-border supply, on a facilities basis in
Mexico, of the basic telecommunications services at issue ;
(b) Mexico has not met its GATS commitments under
Section 1.1 of its Reference Paper to maintain "appropriate measures" to
prevent anti-competitive practices, since it maintains measures that
require anti-competitive practices among competing suppliers which,
alone or together, are a major supplier of the services at issue;
(c) Mexico has not met its obligations under Section
5(a) of the GATS Annex on Telecommunications since it fails to ensure
access to and use of public telecommunications transport networks and
services on reasonable terms to United States service suppliers for the
cross-border supply, on a facilities basis in Mexico, of the basic
telecommunications services at issue;
(d) Mexico has not met its obligations under Section
5(b) of the GATS Annex on Telecommunications, since it fails to ensure
that United States commercial agencies, whose commercial presence Mexico
has committed to allow, have access to and use of private leased
circuits within or across the border of Mexico, and are permitted to
interconnect these circuits to public telecommunications transport
networks and services or with circuits of other service suppliers .
8.2 The Panel has found that, contrary to claims of the
United States :
(a) Mexico has not violated Section 2.2(b) of its
Reference Paper, with respect to cross-border supply, on a non-facilities basis in Mexico, of the basic telecommunications
services at issue;
(b) Mexico has not violated Section 5(a) of the GATS
Annex on Telecommunications, with respect to the cross-border supply, on
a non-facilities basis in Mexico, of the basic telecommunications
services at issue;
(c) Mexico has not violated Section 5(b) of the GATS
Annex on Telecommunications, with respect to the cross-border supply, on
a non-facilities basis into Mexico, of the basic
telecommunications services at issue.
8.3 The Panel notes that, pursuant to Article 12.11 of the
DSU, it has taken into account in its findings GATS provisions on differential
and more-favourable treatment for developing country Members. In particular, the
Panel has examined Mexico's arguments that commitments of such Members have to
be interpreted in the light of Article IV of the GATS, paragraph 5 of the
preamble to the GATS, and paragraph 5(g) of the Annex on Telecommunications The
Panel emphasizes that its findings in no way prevent Mexico from actively
pursuing the development objectives referred to in these provisions by extending
telecommunications networks and services at affordable prices in a manner
consistent with its GATS commitments.
8.4 The Panel notes that Article 19 of the DSU provides that
"[w]here a panel � concludes that a measure is inconsistent with a covered
agreement, it shall recommend that the Member concerned bring the measure into
conformity with that agreement."1051 Unlike some other covered agreements (e.g. GATT
Article XXIII:1 in connection with Article 3.8 of the DSU), the GATS does not
require that, in the case of a violation complaint (GATS Article XXIII:1),
"nullification or impairment" of treaty benefits has to be claimed by the
complaining WTO Member and examined by a Panel. Whereas Article XXIII:1 of the
GATT specifically conditions access to WTO dispute settlement procedures on an
allegation that a "benefit" or the "attainment of an objective" under that
agreement are being "nullified or impaired", the corresponding provision in the
GATS (Article XXIII:1) permits access to dispute settlement procedures if a
Member "fails to carry out its obligations or specific commitments" under the
GATS. In this respect, we note that the Appellate Body in EC � Bananas III
stated that the panel in that case "erred in extending the scope of the
presumption in Article 3.8 of the DSU to claims made under the GATS".1052 Having
found that Mexico has violated certain provisions of the GATS, we are therefore
bound by Article 19 of the DSU to proceed directly to the recommendation set out
in that provision.
8.5 We therefore recommend that the Dispute Settlement Body
request Mexico to bring its measures into conformity with its obligations under
the GATS.
IX. ANNEXES A. ABBREVIATIONS USED FOR DISPUTE SETTLEMENT CASES REFERRED TO IN THE REPORT
Short title |
Full Title |
Canada � Autos |
Panel Report, Canada � Certain Measures Affecting the
Automotive Industry, WT/DS139/R, WT/DS142/R, adopted 19 June 2000, as
modified by the Appellate Body Report, WT/DS139/AB/R, WT/DS142/AB/R,
DSR 2000:VII, 3043. |
Canada � Dairy
|
Appellate Body Report, Canada � Measures Affecting the
Importation of Milk and the Exportation of Dairy Products,
WT/DS103/AB/R, WT/DS113/AB/R and Corr.1, adopted 27 October 1999, DSR
1999:V, 2057. |
EC � Computer Equipment |
Appellate Body Report, European Communities � Customs
Classification of Certain Computer Equipment, WT/DS62/AB/R,
WT/DS67/AB/R, WT/DS68/AB/R, adopted 22 June 1998. |
EC � Hormones |
Appellate Body Report, EC Measures Concerning Meat and
Meat Products (Hormones) ("EC � Hormones "), WT/DS26/AB/R,
WT/DS48/AB/R, adopted 13 February 1998, DSR 1998:I, 135. |
India � Quantitative Restrictions |
Appellate Body Report, India � Quantitative
Restrictions on Imports of Agricultural, Textile and Industrial Products,
WT/DS90/AB/R, adopted 22 September 1999, DSR 1999:IV, 1763. |
Japan � Alcoholic Beverages II |
Appellate Body Report, Japan � Taxes on Alcoholic
Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted
1 November 1996, DSR 1996:I, 97. |
Korea � Various Measures on Beef |
Appellate Body Report, Korea � Measures Affecting
Imports of Fresh, Chilled and Frozen Beef, WT/DS161/AB/R, WT/DS169/AB/R,
adopted 10 January 2001. |
US � Carbon Steel
|
Appellate Body Report, United States � Countervailing
Duties on Certain Corrosion-Resistant Carbon Steel Flat Products from
Germany ("US � Carbon Steel "), WT/DS213/AB/R and Corr.1, adopted
19 December 2002. |
US � Gasoline |
Appellate Body Report, United States � Standards for
Reformulated and Conventional Gasoline, WT/DS2/AB/R, adopted
20 May 1996, DSR 1996:I, 3. |
US � Hot-Rolled Steel |
Appellate Body Report, United States � Anti-Dumping
Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/AB/R,
adopted 23 August 2001. |
US � Stainless Steel |
Panel Report, United States � Anti-Dumping Measures on
Stainless Steel Plate in Coils and Stainless Steel Sheet and Strip from
Korea, WT/DS179/R, adopted 1 February 2001. |
US � Wheat Gluten
|
Appellate Body Report, United States � Definitive
Safeguard Measures on Imports of Wheat Gluten from the European Communities
("US � Wheat Gluten "), WT/DS166/AB/R, adopted 19 January 2001,
DSR 2001:II, 717. |
1007 See Mexico's answer to question No. 21 of the Panel of 19 December 2002, paragraph 303. For question No. 21, see footnote 589 of this Report.
1008 See the United States' first oral statement, paragraph 45. See also the United States' second written submission, paragraphs 99-100. See also the United
States' answer to question No. 21 of the Panel of 19 December 2002. For question No. 21, see footnote 589 of this Report.
1009 See Mexico's answer to question No. 21 of the Panel of 19 December 2002, paragraphs 301-302. For question No. 21, see footnote 589 of this Report.
1010 (emphasis added)
1011 See Annex on Financial Services, Section 1 (a) (Scope and Definition): "This Annex applies to measures affecting the supply of financial services. Reference to the supply of
a financial service in this Annex shall mean the supply of a service as defined in paragraph 2 of Article I of the Agreement."
1012 See Mexico's first written submission, paragraph 214.
1013 See the United States' first written submission, paragraph 219.
1014 See Mexico's first written submission, paragraphs 229-231.
1015 See paragraph 7.91.
1016 See, paragraph 7.271: claim by the United States that Mexico must ensure that: (i) suppliers of facilities-based basic telecommunications services from the United States into
Mexico (cross-border) are accorded access to and use of public telecommunications transport networks and services ("public networks") on "reasonable terms and conditions"; and (ii) suppliers of basic
telecommunications services on a non-facilities basis from the United States into Mexico (cross-border) are accorded access to and use of public telecommunications transport networks and services
("public networks") on reasonable terms and conditions.
1017 See paragraph 7.271: claim by the United States that Mexico must ensure that suppliers of basic telecommunications services on a non-facilities basis through a commercial
presence in Mexico must likewise be afforded access to and use of private leased circuits to supply international telephone services.
1018 See Mexico's first written submission, paragraphs 253-256.
1019 See the United States' second written submission, paragraph 107. See also the United States' answer to question No. 26 of the Panel of 19 December 2002. For question
No. 26, see footnote 694 of this Report.
1020 For an interpretation of the words subject to, see
also: Appellate Body Report, Canada � Dairy, paragraph 134.
1021 See the United States' first written submission, paragraph 223.
1022 See Mexico's answer to question No. 21 of the Panel meeting of 19 December 2002, paragraph 306. For question No. 21, see
footnote 589 of this Report.
1023 See paragraphs 7.40-7.45 of this Report.
1024 See the United States' first written submission, paragraph 233.
1025 See paragraph 7.309 of this Report.
1026 Black's Law Dictionary, 6th edition, 1990.
1027 See Panel Report, US � Stainless Steel, paragraph 6.75.
1028 Merriam Webster Online Dictionary; http://www.webster.com/cgi-bin/dictionary.
1029 The Appellate Body in US � Hot-Rolled Steel, paragraphs 84-85, stated that "[i]n sum, a "reasonable period" must be interpreted consistently with the notions of
flexibility and balance that are inherent in the concept of "reasonableness", and in a manner that allows for account to be taken of the particular circumstances of each case". Although the Appellate
Body was interpreting a "reasonable" period of time in the context of a different WTO Agreement, we consider that the same basic elements of the word "reasonable" also apply in the present context.
1030 See Mexico's answer to questions No. 22 (If Section 5(a) and (b) of the Annex already ensure interconnection at reasonable rates, what is the value-added of Section 2.2 of
the Reference Paper?) and No. 23 of the Panel of 19 December 2002, paragraphs 309-311, 313-317. For question No. 23,
see footnote 621 of this Report.
1031 For example, footnote 2 of the Annex expressly refers to most favoured nation treatment (Article II) and national treatment (Article XVII). Section 4 (Transparency) builds upon
Article III (Transparency). The Annex further elaborates on concepts contained in Articles VI (Domestic Regulation), VIII (Monopolies and exclusive service suppliers), and IX (Business Practices).
1032 See paragraph 7.216.
1033
The New Shorter Oxford English Dictionary,
(Clarendon Press, 1993), Vol. II, page 1895.
1034
Black's Law Dictionary, (West Publishing, 1995),
page 1029. Cited in the Report of the Appellate Body, Korea � Various Measures on Beef, paragraph 160.
1035 See Appellate Body Report, Korea � Various Measures on Beef, paragraph 161.
1036 See the United States' first written submission, paragraphs 237-241.
1037 See the United States' first written submission, paragraph 291.
1038 See the United States' first written submission, paragraph 295.
1039 See Mexico's answer to question No. 2(a) of the Panel of 19 December 2002, paragraph 39. For question No. 2(a), see footnote 225 of this Report. See also
Mexico's answer to question No. 6(a) of the Panel of 19 December 2002, paragraphs 89-91. For question No. 6(a), see
footnote 282 of this Report. See also Mexico's answer to question No. 6(c) of the Panel of 19 December 2002, paragraph 108; II 135. For question No. 6(c), see footnote 653 of this
Report.
1040 See Mexico's answer to question No. 6(c) of the Panel of 19 December 2002, paragraph 108. For question No. 6(c), see footnote 653 of this Report.
1041 See the United States' answer to question No. 6(c) of the Panel of 19 December 2002. For question No. 6(c), see footnote 653 of this Report. See also the United
States' first oral statement, paragraph 17.
1042 GATS Article XVI:2 reads in full:
"In sectors where market-access commitments are undertaken, the measures which a Member shall not maintain or adopt either on the basis of a regional subdivision or on the basis of its entire territory, unless otherwise specified in its Schedule, are defined as:
(a) limitations on the number of service suppliers whether in the form of numerical quotas, monopolies, exclusive service suppliers or the requirements of an economic
needs test;
(b) limitations on the total value of service transactions or assets in the form of numerical quotas or the requirement of an economic needs test;
(c) limitations on the total number of service operations or on the total quantity of service output expressed in terms of designated numerical units in the form of quotas
or the requirement of an economic needs test;
(d) limitations on the total number of natural persons that may be employed in a particular service sector or that a service supplier may employ and who are necessary for,
and directly related to, the supply of a specific service in the form of numerical quotas or the requirement of an economic needs test;
(e) measures which restrict or require specific types of legal entity or joint venture through which a service supplier may supply a service; and
(f) limitations on the participation of foreign capital in terms of maximum percentage limit on foreign shareholding or the total value of individual or aggregate foreign
investment."
1043 See Mexico's answer to question No. 6(a) of the Panel of 19 December 2002, paragraph 90. For question No. 6(a), see footnote 282 of this Report.
1044 The Addendum to the Explanatory Note on Scheduling of initial commitments on Trade in Services (MTN.GNS/W/164/Add.1 , 30 November 1993, corroborates this finding: "The requirement
to obtain an approval or a licence is not in itself a trade restriction and therefore does not need to be scheduled. However, if the criteria for granting licenses or approval contain a market access
restriction (e.g. economic needs test) or discriminatory treatment, the relevant measures would need to be scheduled if a Member wishes to maintain them as limitations under Article XVI or XVII. It
has been pointed out that in some offers the granting of licences is subject to review, meaning they are granted on a discretionary basis. In such a case the right to supply the service is unbound."
1045 Merriam Webster Dictionary, Merriam Webster Online, 2003; http://www.webster.com/.
1046 See,
Additional Commitments Under Article XVIII of the GATS: Note by the Secretaria t, S/CSC/W/34, 16 July 2002, paragraph 8.
1047 Notes for the Scheduling Basic Telecommunications Services Commitments; Note by the Chairman. S/GBT/W/2/Rev.1.
1048 See Mexico's second written submission, paragraphs 147-151.
1049 See the United States' first written submission, paragraph 264, footnote 230, in which the United States states that COFETEL's website lists Telmex private line tariffs.
1050
See Mexico's second written submission, paragraphs 265-266.
1051 Footnotes in the original omitted.
1052 See Appellate Body Report, European Communities � Regime for the Importation, Sale and Distribution of Bananas ("EC � Bananas III "), WT/DS27/AB/R, adopted
25 September 1997, DSR 1997:II, 591, at paragraph 250.
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