Mexico & U.S. Continue Longstanding Trade Disputes on Telecommunications, Sweeteners, Trucks & Avocados

SourceMex Economic News & Analysis on Mexico, February 20, 2002 | Go to article overview
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Mexico & U.S. Continue Longstanding Trade Disputes on Telecommunications, Sweeteners, Trucks & Avocados

Mexico and the US continue to be embroiled in trade disputes regarding telecommunications, sweeteners, trucks, and avocados even as President Vicente Fox is seeking to expand the relationship between the two countries under the North American Free Trade Agreement (NAFTA). Fox is pushing to expand the accord to cover immigration issues, including the possibility of amnesty for undocumented immigrants and the creation of a guest-worker program in the US.

Fox and US President George W. Bush are expected to address the immigration question, along with energy integration, infrastructure development, and other US-Mexico border issues at the UN International Conference on Financing for Development in Monterrey in late March.

Fox told reporters he wants to expand the accord into a "NAFTA-plus" that will promote greater integration between the US and Mexican economies, focusing primarily on development in the states along the US-Mexico border.

But expansion of US-Mexico relations remains hampered by several disputes that have dogged the two countries since NAFTA's inception. The two sides are unable to agree on appropriate access for telecommunications, trucks, and agricultural products such as sweeteners and avocados.

US files telephone complaint against Mexico at WTO

In telecommunications, the US government continues to criticize Mexico for unfairly blocking access to US telephone companies, which has resulted in higher long-distance telephone charges for US callers.

In a complaint filed before the World Trade Organization (WTO) in mid-February, US Trade Representative Robert Zoellick said Mexico's telecommunications policy continues to favor the giant telephone company TELMEX, which charges competitors excessive interconnection fees for long-distance calls. TELMEX, one of the largest publicly traded companies in Latin America in the value of its shares, reported US$12 billion in sales in 2001.

"Mexico's international telecommunications market remains dominated by a single company with a government mandate to set high wholesale prices for calls to Mexico and prevent competitive alternatives," said Zoellick, who requested a WTO dispute-resolution panel.

US officials expect the request for the panel to be addressed at the WTO meeting in Geneva in April.

The decision to request the panel resurrects an action threatened by the administration of former US President Bill Clinton. The Clinton administration had taken preliminary steps to seek a WTO panel in 2000 but later withdrew the request after Mexico's telecommunications regulator (Comision Federal de Telecomunicaciones, COFETEL) adopted new rules to boost competition (see SourceMex, 2000-09-20, 2001-01-10).

But TELMEX's chief competitors Avantel and Alestra, affiliates of US companies MCI WorldCom and AT&T, complained that COFETEL's directives were not sufficient to promote competition. At issue is the interconnection rate charged by TELMEX to Avantel, Alestra, and other competitors. TELMEX lowered that rate to US$0.13 per minute this year and plans to cut it to US$0.10 in 2003. The rate was US$0.15 in 2001.

AT&T executives claim that even the lower US$0.10 per minute rate is still above rates charged in other countries for interconnection. AT&T's general counsel Jim Cicconi welcomed the USTR decision to press the case at the WTO. "[Mexico has] been ignoring its WTO telecommunications commitments and hoping its trading partners would go away," said Cicconi.

COFETEL director Jorge Arredondo Martinez said his agency is open to the creation of a WTO dispute-resolution panel. "We could clear up the USTR's concerns once and for all," said Arredondo, appointed to the post in November 2001. The COFETEL director is familiar with the issue because of his previous role as director of regulatory issues for Mexican telephone company Axtel, which also competed with TELMEX for long-distance and domestic customers.

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Mexico & U.S. Continue Longstanding Trade Disputes on Telecommunications, Sweeteners, Trucks & Avocados


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