Introduction

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 the cornerstone of international telecommunications, the international accounting rates regime is at odds with the new telecommunications environment brought about by the liberalisation 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 reformthe accounting rates regime and align it with cost. For example, the United States alone paid out US$5 billion more than it received in international settlement (almost 5 per cent of its trade deficit). On the other hand, developing countries are reluctant to consider any change to the current regime. The total amount of settlement payments received from developed countries is around US$10 billion per annum. According to the Secretary General of the International Telecommunications Union (ITU), the revenue generated by the settlement payment in developing countries for one year exceeds by far the cumulative sum of the lending programmes 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 next round of negotiations on trade in services.