Research On The Liberalization Process Of China's Trade In Telecommunications Services

The General Agreement on Trade in Services (GATS) was designed to increase international trade liberalization and to establish a multilateral framework of principles and rules for trade in services with a view to the expansion of such trade under conditions of transparency and progressive liberalization. "Telecommunications" is included in GATS as a service sector. With the acceleration of the economic globalization process, the step of liberalization of trade in international service is also fastened. The material foundation of the economic globalization is the information industry that is enhanced by the telecommunications service industry. China's telecommunications industry witnessed great changes after nearly 20 years'reformation and development. The introduction of open-market policy and the competition system is moving forward step by step. This paper is to study China's level of liberalization of trade in telecommunications services and the international competitiveness of this industry from an international perspective. It analyzes China's liberalization process of telecommunications services, China's commitments to telecommunications in specific schedule, and China's international competitiveness compared with other countries.This paper contains seven chapters. The first chapter mainly interprets research objective, research background, literature review, the paper's innovations and weaknesses. The research objective of this paper is the liberalization process of China's trade in telecommunications services. The problems in China's telecommunications are revealed and suggestions are proposed by the research. As a result, a more healthy and effective market mechanism will be established. During the "Post-Industry" era, the trade in services developed quickly. However, there still is a big gap between developing countries and developed ones. The trade barriers impede the development of trade in services, especially in such a special sector as telecommunications services whose market access is too limited. Therefore, it is urgent and indispensible for China, a developing country, to study this subject. Many foreign and domestic scholars have made some studies on China's reformation on telecommunications services and its international competitiveness. On this basis, the liberalization level of trade in telecommunications services in China and the US are achieved by quantitative research. However, because some data cannot be obtained on the comparative study of China and India as well as China and the EU, only two indexes are counted. Therefore, the research outcome may be unilateral.The second chapter explains the concept of telecommunications services, the four modes of supply and the relevant theories. According to the classification of telecommunications by the WTO, telecommunications services include basic telecommunications and value-added telecommunications. The basic telecommunications include public services and private services involving end-to-end transmission, which are mainly supported by cross-border payment and branches of foreign telecommunications suppliers. Telegram, telephone, facsimile, mobile phone and paging services are all basic telecommunications. Value-added telecommunications services refers to the services that the services suppliers provide telecommunications or storage services with more types and contents, for example, online data processing, e-mail and voice mail. The trade in telecommunications services occurs when the services cross districts or borders. This chapter also reviews David Ricardo's theory of Comparative Advantages and the theory of Porter's "Diamond Model", which provide a theoretical support for this paper. China's telecommunications services started late, and domestic monopoly made it develop slowly. The government and enterprise foundation in China Telecom was separated in 1994. As a result, China Telecom became the first telecommunication firm in China. In 2001, China jointed the WTO, in order to respond to the shocks brought by foreign telecommunications firms, it was indispensible to reform the telecommunications industry for China and the plan of reorganizing China Telecom was published. A structure of "5+1" was formed after the reorganization. As a result, there were six telecommunications enterprises in China and the competitive mechanism in China's telecommunications market was established. In 2008, the fourth reform in China's telecommunications industry was launched in order to promote the full-services competitive structure and realize differentiation competition in telecom market through granting 3G license and integrating telecom technology and services. Consequently, a "tripod" in telecommunication market was formed.The third chapter analyzes the process of world telecommunications negotiation and the international rules of trade in telecommunications services. The negotiations have experienced about 30 years since the Uruguay Round, which resulted in the telecommunications sector including 48 schedules of commitments (counting the EC and its member states as one), most of which were limited to value-added telecommunications. During the negotiation of Post-Uruguay Round, the Agreement on the Basic Telecommunications was reached, which was the landmark of the long negotiation. Although many state members had made commitments to open their telecommunications market, there were a lot of reserved articles such as market access restrictions, limiting the foreign capital percentage and services kinds, etc.The fourth chapter studies China's commitments in its schedule. With respect to the market restrictions, China allowed foreign services suppliers to invest in the services of value-added, paging and voice & data in Beijing, Shanghai and Guangzhou in the WTO accession year, but there were restrictions on the proportion of foreign capital. With the reform and development of China's telecommunications, the number of opening cities and the proportion of foreign capital have been both increased since 2002. China has permitted foreign services suppliers to invest in domestic and international services with foreign capital percentage no more than 25%. China opened the whole nation and increased the proportion of foreign capital in all services. The liberalization of China's telecommunications services was increased since its WTO accession. The fifth chapter has several innovations and it is the key chapter. This chapter studies the level of liberalization of telecommunications in China and the US and it compares the international competitiveness of China, the US, India and the EU with the quantitative method. American schedule indicates that it will make full commitments for its all basic and value-added telecommunications services from 1 Jan.2014. That is to say the US will implement full liberalization in telecommunications market. In addition, the US promised to open 46.7% of its businesses supplied by the mode of cross-border and to open 53.3% of its businesses supplied by the mode of commercial presence. America's proportion of fully opened sectors is higher than that of China. With respect to the international competitiveness, China's average level of TC was -0.02 from 2005 to 2008. This index was lower than India, the US and the EU. Obviously, China mainly had a deficit in trade in telecommunications services from 2005 to 2008. During that period, China's average level of international market share was only 1.29% that was also lower than India, the US and the EU. To sum up, China's position in international telecommunications services market is far behind the developed countries. With the development of China's reform in telecommunications industry, the competition mechanism is established gradually. The demand for telecommunications, especially the mobile demand, increases year by year. However, the shortcomings of China's telecommunications impede its further developments. The administrative monopoly, the absence of telecommunication law, weak international competitiveness and restrictive market access system all become a bottleneck that impedes the further development of telecommunications services. The administrative monopoly is a phenomenon with Chinese characteristics. Although China has gradually introduced foreign capitals to its telecommunications market, the government is still in a position of absolute control. In addition, the corruption happens one after another, which impedes the development of telecommunications enterprises and the improvements of international competitiveness. The sixth chapter puts forward some suggestions according to the problems existing in China's telecommunications services industry. The government, on one hand should promulgate a telecommunication law abiding by fair competition rule so as to make some restrictions for telecommunications enterprises on market access, use of telecommunications and service quality, to protect customers'interests and to establish a fair telecommunications market. On another, the government should fight for special treatments for developing countries. The telecommunications operators should take international strategies and learn management experiences from international multinationals in order to improve their abilities of capital operation, to improve their technology and service qualities as well as to improve their strength and international competitiveness.The seventh chapter is the conclusion.