International Accounting rates, Developing countries and the World Trade Organization: The Dilemma and a Possible Solution
by Boutheina Guermazi	Reference: IJCLP Web-Doc 1-3-1999 View Article in PDF-Format (37 pages, 145 kb)

Abstract

In the last few years international accounting rates, the century-old revenue sharing mechanism for the joint provision of international switched telecommunications services, has come under tremendous pressure. Long considered as the cornerstone of international telecommunications and praised for providing a predictable, uniform and easy to manage system for revenue sharing, the international accounting rates regime is at odds with the new telecommunications environment brought about by the liberalization of international trade in telecommunications services under the WTO. 

International accounting rates were discussed during the Uruguay Round and more specifically during the negotiations of the agreement on basic telecommunications. The debate revealed a disagreement on the need and feasibility to include the issue of accounting rates in a new agreement. The contentiousness of the issue revolved mainly around a North/South controversy. On the one hand developed countries suffering from deficit payments are eager to reform the accounting rates regime and align it with cost. For example, the United States alone paid out 5.6 billion dollars more than it received in international settlement (almost 5% of its trade deficit). On the other hand developing countries (which largely benefit from the current regime) are reluctant to consider any change to the current regime. Developing countries received 70% of all net US payment. The total amount of settlement payments from developed countries is around $10 billion per annum. According to ITU Secretary General, the revenue generated by the settlement payment in developing countries for one year exceeds by far the cumulative sum of the lending programs in telecommunications of all development banks around the world for the first half of the 1990s. 

The conflict in attitudes was resolved during the basic telecommunications negotiations by an agreement to defer the debate over accounting rates until the new round on negotiations on trade in services is due to start in 2000. The contracting parties concluded a gentleman's agreement waiving their rights to recourse to dispute settlement procedures under WTO. However, the compromise is very fragile as it conceals a critical discrepancy and anomaly in the new liberalized regime for international telecommunication services under the WTO.

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