Case against Mexico on hold

The U.S. Trade Representative office recently passed—at least temporarily—on its first opportunity to pursue its World Trade Organization regulatory case against Mexico and dominant carrier Telefonos de Mexico, or Telmex.

Rather than drop the complaint outright, a USTR spokeswoman said the U.S. would give the Mexican government and its telecommunications regulatory body, Cofetel, time to evaluate how it plans to regulate Telmex and its control over international interconnection fees.

Although the USTR said it reserves the right to ask for a future WTO ruling, analysts say the transfer of power to the Bush administration could ease negotiations between the U.S. and Mexican governments.

“They're going to do everything they can to help the Mexican government—a government with which Bush has dealt personally before,” said Rudy Baca, global strategist with Precursor Group. “You're going to see very strong and continuous efforts by the Bush administration to assist regulators south of the border.”

Although USTR did not pursue its complaint with a WTO dispute settlement body, the U.S. threat strengthens Cofetel's ability to enforce the country's WTO commitments, according to Baca.

“Often, when you're dealing with regulators in another country, what they really need is an international focus,” Baca said. “Then, as regulators, they can say, ‘Look, as a country, we have signed these international commitments, but, as regulators, we do not have sufficient power to enforce them.’”

The USTR held consultations with Mexico last month to review the country's telecom laws regarding international interconnection fees, or settlement rates. A U.S. trade official said the primary U.S. concern was a Mexican law that specifies all international calls coming into Mexico are subject to a uniform settlement rate, which is currently an inflated 19¢.

In August, the U.S. asked the WTO to review Mexico's telecom laws that stipulate Telmex, as Mexico's dominant carrier, is legally the only party permitted to negotiate settlement rates. Without a competitive alternative to the current fee, Telmex has no incentive to reduce it, the trade official said.

In December, Telmex reached an agreement with Mexican long-distance rivals Alestra and Avantel—companies owned in part by AT&T (Alestra) and WorldCom (Avantel)—to lower domestic interconnection fees. The deal was designed to open the Telmex-dominated $12 billion Mexican telecommunications market to competition.

President Bush's USTR nominee Robert Zoellick was confirmed last week, completing the new cabinet. The next opportunity for the USTR to take formal WTO action against Mexico is in March.