SICE-WTO- Mexico - WT/DS204/R

WORLD TRADE
ORGANIZATION

WT/DS204/R
2 April 2004

(04-1211)

Original: English

MEXICO � MEASURES AFFECTING
TELECOMMUNICATIONS SERVICES

Report of the Panel

(Continued)

D. WHETHER MEXICO HAS MET ITS OBLIGATION UNDER SECTION 5 OF THE GATS ANNEX ON TELECOMMUNICATIONS

7.270 The United States claims that Mexico has not met its obligations under Section 5 of the GATS Annex on Telecommunications ("the Annex"), that is, to ensure that United States suppliers of basic telecommunications services have access to and use of Mexico's public telecommunications transport networks and services. In particular, the United States argues that Mexico does not permit interconnection of United States suppliers on reasonable terms and conditions, contrary to Section 5(a), and prohibits altogether access to private leased circuits, contrary to Section 5(b).

7.271 The United States claim relates to five distinct situations for which, the United States argues, Mexico has made specific commitments, and for which Mexico must comply with Annex obligations:

� Under Section 5(a) of the Annex, the United States argues that Mexico must ensure that:
(i) suppliers of facilities-based basic telecommunications services from the United States into Mexico (cross-border) are accorded access to and use of "public telecommunications transport networks and services" on "reasonable terms and conditions";
(ii) suppliers of basic telecommunications services on a non-facilities basis from the United States into Mexico (cross-border) are accorded access to and use of public telecommunications transport networks and services on reasonable terms and conditions;

� Under Section 5(b) of the Annex, the United States argues Mexico must ensure that:

(iii) suppliers of facilities-based basic telecommunications services from the United States into Mexico (cross-border) have access to and use of private leased circuits, and must be permitted to interconnect these private leased circuits to public telecommunications transport networks and services in Mexico;
(iv) suppliers of basic telecommunications services on a non-facilities basis from the United States into Mexico (cross-border) have access to and use of private leased circuits, and must be permitted to interconnect these private leased circuits to public telecommunications transport networks and services in Mexico;
(v) suppliers of basic telecommunications services on a non-facilities basis through a commercial presence in Mexico must likewise be afforded access to and use of private leased circuits to supply international telephone services.

7.272 Mexico argues that the Annex does not apply to the access to and use of public telecommunications transport networks and services for the supply of basic telecommunications services. Further, it reiterates that it has not made any commitments on cross-border supply, either for facilities-based suppliers or commercial agencies, and that it therefore has no Annex obligations related to such services. With respect to locally established commercial agencies, Mexico states that it has not committed to issue permits for their establishment prior to issuing the corresponding regulations.

7.273 Before we consider whether Mexico has violated obligations arising from Section 5 of the Annex, we will examine whether the Annex applies to the telecommunications services at issue, which we have described in detail in Part B of these findings as basic telecommunications services.

1. Whether the Annex imposes obligations on Mexico to ensure access to and use of public telecommunications transport networks and services for the supply of the basic telecommunications services scheduled by Mexico
(a) Does the Annex apply to access to and use of public telecommunications transport networks and services for the supply of basic telecommunications services?

7.274 Mexico submits that the Annex applies only to access to and use of public telecommunications transport networks and services as a transport means for other economic activities, and not to the supply of basic telecommunications services per se.¹⁰⁰⁷

7.275 The United States argues that the Annex states in Section 1 that telecommunications has a "dual role as a distinct sector of economic activity and as the underlying transport means for other economic activities". As further context, it points out that Section 2(a) states that the Annex applies to "all measures ... that affect access to and use of public telecommunications transport networks and services", which would include measures regulating telecommunications "as a distinct sector of economic activity". Finally, Section 5(a) imposes obligations "for the supply of a service included in [a Member's] Schedule".¹⁰⁰⁸

7.276 Mexico maintains that the Annex does not cover access for the purpose of supplying basic telecommunication services, but only access for services that require basic telecommunications services as an underlying means of transport, including enhanced telecommunications services. In Mexico's view, the fact that Section 1 (entitled "Objectives") of the Annex refers to a "dual" role of the telecommunications services sector does not imply that the Annex covers both aspects of that "dual" role. Rather, Section 1 simply confirms that the Annex is based on the recognition that, beyond constituting a service sector of their own, telecommunications services and networks are essential tools for other economic activities, such as banking or insurance services. According to Mexico, the fact that these other activities rely heavily on telecommunications services as an underlying means of transport points to the fundamental purpose of the Annex. Section 1 therefore shows that the Annex is aimed at addressing the second aspect of the dual role. Mexico argues that the first aspect � the supply of basic telecommunications services � was dealt with under the basic telecommunications negotiations that led to the Fourth Protocol to the GATS in 1997.

7.277 Our first task is to establish whether the Annex applies to measures affecting access to and use of public telecommunications transport networks and services by suppliers of basic telecommunications services. We start with Section 2 of the Annex, entitled "Scope". It reads:

"2. Scope
(a) This Annex shall apply to all measures of a Member that affect access to and use of public telecommunications transport networks and services.14
(footnote original) 14 This paragraph is understood to mean that each Member shall ensure that the obligations of this Annex are applied with respect to suppliers of public telecommunications transport networks and services by whatever measures are necessary.
(b) This Annex shall not apply to measures affecting the cable or broadcast distribution of radio or television programming.
(c) Nothing in this Annex shall be construed:
(i) to require a Member to authorize a service supplier of any other Member to establish, construct, acquire, lease, operate, or supply telecommunications transport networks or services, other than as provided for in its schedule; or
(ii) to require a Member (or to require a Member to oblige service suppliers under its jurisdiction) to establish, construct, acquire, lease, operate or supply telecommunications transport networks or services not offered to the public generally."

7.278 Section 2(a) provides that the Annex shall apply to "all measures" of a Member that affect access to and use of public telecommunications transport networks and services. We observe that the wording of Section 2(a) does not specify that the provision is limited to measures affecting access to and use of public telecommunications transport networks and services by only certain services or service sectors. The ordinary meaning of the words in Section 2(a) suggests therefore that the scope of the Annex includes all measures that affect access to or use of public telecommunications transport networks and services with regard to all services, including basic telecommunications services.

7.279 In further assessing whether the Annex applies to access to and use of public telecommunications transport networks and services, we next examine the context provided by Section 1 of the Annex, entitled "Objectives":

"Recognizing the specificities of the telecommunications services sector and, in particular, its dual role as a distinct sector of economic activity and as the underlying transport means for other economic activities, the Members have agreed to the following Annex with the objective of elaborating upon the provisions of the Agreement with respect to measures affecting access to and use of public telecommunications transport networks and services. Accordingly, this Annex provides notes and supplementary provisions to the Agreement." (emphasis added)

7.280 We note that Section 1 recognizes the dual role of the telecommunications services sector as "a distinct sector of economic activity and as the underlying transport means for other economic activities". Such recognition is not however conclusive as to whether the Annex contains provisions addressing telecommunications services as a "distinct sector of economic activity", and not only as an "underlying transport means for other economic activities". Section 1 goes on to state, however, that the purpose of the Annex is "elaborating on the provisions of the Agreement with respect to measures affecting access to and use of public telecommunications transport networks and services". As in the case of Section 2(a) on scope, Section 1 on objectives contains no language suggesting that access to and use of public telecommunications transport networks and services for the supply of basic telecommunications services is meant to be excluded from the scope of the Annex. The "notes and supplementary provisions to the Agreement" that the Annex "provides" do not appear in any way to exclude any measures covered by the Agreement, including measures affecting the access to and use of public telecommunications transport networks and services for the supply of basic telecommunications services.

7.281 Similarly, we note that Section 5 (a) of the Annex states that the obligation to ensure access to and use of public telecommunications transport networks and services shall apply for the benefit of "any service supplier of any other Member" for the supply of "a service included in its schedule". This language does not explicitly exclude suppliers of basic telecommunications services. On the contrary, Section 5(a) speaks of "any" service supplier. It also speaks of a "service included" in a Member's schedule which, in the case of any Member, can, and for many Members does, include basic telecommunications services. We consider this to be a further indication that the Annex is not limited in its application to exclude measures ensuring the access to and use of public telecommunications transport networks and services for the supply of any service, including basic telecommunications services.

7.282 Mexico contrasts the scope provision of the Annex with the provisions on "Scope and Definition" contained in Section 1 of the Annex on Financial Services, and argues that the former only applies to access to and use of public telecommunications transport networks and services, whereas the latter applies to "supply". Mexico is of the view that, where the negotiators of the GATS intended that an Annex was to apply to the "supply" of a service, they stated this explicitly. According to Mexico, the Annex distinguishes between access to and use of public telecommunications transport networks and services, which is relevant to telecommunications services as an underlying transport means for other economic activities, and the supply of such services, which is relevant to trade in telecommunications services as a distinct sector of economic activity.¹⁰⁰⁹

7.283 We agree that the Annex addresses measures affecting "access to and use of" public telecommunications transport networks and services, and not the supply of services. However, "access to and use of" public telecommunications transport networks and services are to be granted in order to enable the supply of services. Section 5 explicitly seeks to ensure that access to and use of public telecommunications transport networks and services is granted "for the supply of a service included in [a Member's] Schedule".¹⁰¹⁰ While the Annex is neutral as to the services that can be supplied through access to and use of public telecommunications transport networks and services, the Annex on Financial Services only "applies to measures affecting the supply of financial services".¹⁰¹¹ The fact that Members devoted an annex to measures affecting the supply of services in one specific services sector � financial services � does not provide a basis for interpreting the scope of another annex � on telecommunications networks and services � which differs significantly in structure and objective.

7.284 Mexico further argues that basic telecommunications are excluded from the Annex, since these services "as a distinct economic activity" were dealt with through Members making specific commitments only after the Annex entered into force; therefore, basic telecommunications services were not included in the GATS until 1997, when the Fourth Protocol was agreed.¹⁰¹² The provisions of the GATS, however, do not support this argument. Article I:1 of the GATS provides that the "Agreement applies to measures by Members affecting trade in services". Article I:3 (b) clarifies that the term "services" "includes any service in any sector except services supplied in the exercise of governmental authority" (emphasis added). The sectoral listing used by Members to schedule commitments on trade in services (document "W/120") explicitly lists a set of telecommunications services that includes both basic and value added services. Therefore all telecommunications services, like all other services, were part of the sectoral coverage of the GATS at the time the Annex entered into force. The fact that many Members made substantive specific commitments on basic telecommunications services only in 1997 should not be confused with the question of whether basic telecommunications was a services sector within the scope of the Agreement.

7.285 An interpretation of the Annex to exclude measures ensuring access to and use of public telecommunications transport networks and services for the supply of basic telecommunications services would lead to unreasonable results. Public voice telephone services, for example, can only be supplied properly through access to and use of public telecommunications transport networks and services of other suppliers, except in markets where monopoly supply is maintained. While monopoly supply can and does exist in domestic telecommunications markets, the international market has always involved multiple suppliers. With respect to the supply of public voice telephony, whether on a cross-border basis or through commercial presence, it is essential that suppliers be able to access and use public telecommunications transport networks and services of other suppliers to complete calls placed by their customers to a user on another supplier's network.

7.286 While access to and use of public telecommunications transport networks and services may be important generally for the supply of services, such access is indispensable for the supply of basic telecommunications services. If the Annex did not apply to measures affecting access to and use of public telecommunications transport networks and services for basic telecommunications services, Members could effectively prohibit any supply other than that which originated and terminated within the same suppliers' network, even where commitments were undertaken, thereby rendering most basic telecommunications commitments without economic value.

7.287 Finally, if Members had made such a far-reaching decision, they would surely have stated specifically that basic telecommunications services were excluded from the application of the Annex, in the same way that they specifically stated in Section 2(b) that the Annex "shall not apply to measures affecting the cable or broadcast distribution of radio or television programming".

7.288 It would thus be unreasonable to suppose that the access and use of public telecommunications transport networks and services that is essential to the international supply of basic telecommunications services was not intended to be covered by the Annex. We find therefore that the Annex applies to measures of a Member that affect access to and use of public telecommunications transport networks and services by basic telecommunications suppliers of any other Member.

(b) Does Section 5 of the Annex apply to the basic telecommunications commitments scheduled by Mexico?

7.289 The United States maintains that the "obligations under the Annex trigger only to the extent to which [a Member] has undertaken commitments in its schedule".¹⁰¹³ Mexico expresses a similar view, arguing that the Annex neither overrides a schedule, nor imposes obligations without regard to specific commitments taken.¹⁰¹⁴ We now examine whether, and to what extent, Section 5 applies to the basic telecommunications commitments scheduled by Mexico.

7.290 We recall the wording of Section 2(c)(i) of the Annex, which determines the scope of the Annex. It states, in relevant part:

"Nothing in this Annex shall be construed:
(i) to require a Member to authorize a service supplier of any other Member to establish, construct, acquire, lease, operate, or supply telecommunications transport networks or services, other than as provided for in its Schedule;" (emphasis added)

7.291 This provision is explicit. The Annex does not require a Member to authorize the supply of a basic telecommunications transport service "other than as provided for in its Schedule".

7.292 Paragraph (e)(iii) of Section 5 provides further support for this interpretation, clarifying Members' rights to prevent the supply of services that are not permitted in the Members schedule. It reads:

"(e) Each Member shall ensure that no condition is imposed on access to and use of public telecommunications transport networks and services other than as necessary:
(iii) to ensure that service suppliers of any other Member do not supply services unless permitted pursuant to commitments in the Member's Schedule." (emphasis added)

7.293 We infer, and the parties recognize, that the obligations contained in the Annex, and particularly in Section 5, are aimed at facilitating the exploitation of scheduled commitments, and do not create a right to supply a service where no commitments exist.

7.294 We have earlier examined Mexico's specific commitments with regard to the cross-border supply of telecommunications services supplied on both a facilities and non-facilities basis. We concluded that Mexico, through its description of the services committed, and through the inscription of a routing requirement, prohibits market access for the cross-border supply of the services at issue over capacity leased by the supplier (i.e. on a non-facilities basis) in Mexico.¹⁰¹⁵ Absent a commitment, we find that the Annex cannot trigger any obligations on the part of Mexico to ensure access to and use of private leased circuits with regard to the situations described under (iii) and (iv) of the United States claim, in paragraph 7.271.

7.295 We will therefore examine, under Section 5(a) of the Annex, obligations arising with regard to basic telecommunications services supplied on a facilities-basis in Mexico, for which we have found that Mexico has granted market access through cross-border supply (situations (i) and (ii)).¹⁰¹⁶ We will then examine whether Mexico has an obligation resulting from Section 5(b) with regard to the basic telecommunications services supplied on a non-facilities-basis in Mexico, through commercial presence (situation (v)).¹⁰¹⁷

2. Whether Mexico has fulfilled its obligations under Section 5 of the Annex

7.296 With respect to Section 5 of the Annex, the United States claims that Mexico has violated paragraphs (a) and (b). Paragraph (a) is a general obligation to ensure access to and use of public telecommunications transport networks and services on "reasonable and non-discriminatory terms and conditions". Paragraph (b) is a more specific obligation to ensure access to and use of public telecommunications transport networks and services, including "private leased circuits".

7.297 Mexico, however, claims that a violation of paragraphs (a) or (b) of Section 5 cannot be determined without also examining paragraphs (e) and (f). Paragraph (e) prohibits the imposition of any "condition" on access to and use of public telecommunications transport networks and services "other than as necessary" to achieve any of three stated policy objectives. Paragraph (f) sets out an illustrative list of six types of regulatory conditions through which these objectives may be achieved.

7.298 Our first interpretative task is therefore to examine the structure of Section 5 and determine the relationship between the paragraphs at issue in this dispute.

(a) Structure of Section 5

7.299 In Mexico's view, Section 5 has to be interpreted as a whole, and paragraphs (a) and (b) are qualified by paragraphs (e) and (f). The paragraphs of Section 5 are, for Mexico, part of the same provision and must be read together to determine the meaning of a Member's obligation under that provision. Since the general obligation in Section 5(a) is required, by its language, to be applied through paragraphs (e) and (f), a violation of paragraphs (a) and (b) cannot be demonstrated without also showing that Mexico's measures are not permitted by paragraphs (e) and (f). Mexico maintains that, as the complaining party, the United States has the burden of establishing a case of inconsistency with all four provisions.¹⁰¹⁸

7.300 The United States contests that Sections 5(e) and (f) are elements of a prima facie case under Sections 5 (a) and (b) of the Annex. According to the United States, Sections (e) and (f) relate to these obligations like exceptions, much as Article XX of the GATT relates to GATT obligations. Therefore, for the United States, the burden of proof rests on the party invoking these exceptions.¹⁰¹⁹

7.301 Our first task is to determine whether a claim under paragraph (a) or (b) requires examination of any of the elements contained in other paragraphs of Section 5. Paragraph (a) reads:

"Each Member shall ensure that any service supplier of any other Member is accorded access to and use of public telecommunications transport networks and services on reasonable and non-discriminatory terms and conditions for the supply of a service included in its Schedule. This obligation is applied, inter alia, through paragraphs (b) through (f)." [footnote omitted]

7.302 We note that the obligation in paragraph (a) "shall be applied, inter alia, through paragraphs (b) through (f)". This wording differs from the text of the GATT provisions referred to by the United States. The provision on "General Most-favoured Nation Treatment" in GATT Article I does not include a similar proviso that it shall be applied through the "General Exceptions" provision in GATT Article XX. An obligation cannot be applied "through" another provision if that obligation is read in isolation from that provision. For an obligation in one provision to be applied "through" another provision, it is evident that the two provisions must be interrelated and must inform each other. We read paragraph (a), in other words, as containing an obligation that informs paragraphs (b) through (f), and must be read taking into account paragraphs (b) through (f).

7.303 We now examine paragraph (e), which reads:

"(e) Each Member shall ensure that no condition is imposed on access to and use of public telecommunications transport networks and services other than as necessary:
(i) to safeguard the public service responsibilities of suppliers of public telecommunications transport networks and services, in particular their ability to make their networks or services available to the public generally;
(ii) to protect the technical integrity of public telecommunications transport networks or services; or
(iii) to ensure that service suppliers of any other Member do not supply services unless permitted pursuant to commitments in the Member's Schedule." (emphasis added)

7.304 Paragraph (e) requires Members to ensure that the only conditions that are imposed on access to and use of public telecommunications transport networks and services are those "necessary" to achieve the three policy objectives set out in subparagraphs (i) to (iii).

7.305 Paragraph (f) contains an illustrative list of types of regulatory conditions that may be imposed if "necessary" to achieve a policy goal mentioned in paragraph (e). Paragraph (f) reads:

"(f) Provided that they satisfy the criteria set out in paragraph (e), conditions for access to and use of public telecommunications transport networks and services may include:

(i) restrictions on resale or shared use of such services;
(ii) a requirement to use specified technical interfaces, including interface protocols, for inter-connection with such networks and services;
(iii) requirements, where necessary, for the inter-operability of such services and to encourage the achievement of the goals set out in paragraph 7(a);
(iv) type approval of terminal or other equipment which interfaces with the network and technical requirements relating to the attachment of such equipment to such networks;
(v) restrictions on inter-connection of private leased or owned circuits with such networks or services or with circuits leased or owned by another service supplier; or
(vi) notification, registration and licensing."

7.306 We determined earlier that paragraph (a) should be read together with the other paragraphs of Section 5. We note that paragraph (a) addresses "terms and conditions" for access to public telecommunications transport networks and services, which must be "reasonable and non-discriminatory". Paragraph (e) requires that no condition other than as necessary to achieve any of three policy objectives contained in subparagraphs (e)(i) to (iii) shall be imposed by a Member. We infer that whenever a condition is "necessary" under paragraph (e), it must, in addition, be "reasonable and non-discriminatory" under paragraph (a). Conversely, if a condition is not "necessary" to fulfil at least one of the three policy objectives set out under subparagraphs (i) to (iii), paragraph (e) prohibits the imposition of such a condition, which suggests that there may be no need to analyse in that case whether that condition would otherwise be "reasonable and non-discriminatory".

7.307 We next examine the relationship of paragraph (b) of Section 5 with the other elements of Section 5. This relationship is more straightforward. Paragraph (b) obligates Members to ensure that suppliers of other Members "have access to and use of any public telecommunications transport network or service offered within or across the border of that Member, including private leased circuits". To this end, suppliers must be permitted, "subject to paragraphs (e) and (f)":

"(i) to purchase or lease and attach terminal or other equipment which interfaces with the network and which is necessary to supply a supplier's services;
(ii) to interconnect private leased or owned circuits with public telecommunications transport networks and services or with circuits leased or owned by another service supplier; and
(iii) to use operating protocols of the service supplier's choice in the supply of any service, other than as necessary to ensure the availability of telecommunications transport networks and services to the public generally."

7.308 The obligations in paragraph (b) apply "subject to paragraphs (e) and (f)". We understand this to mean that the obligations in paragraph (b) are subordinated to, and are, therefore, qualified by, paragraphs (e) and (f). The obligations in paragraph (b) are therefore subject to any condition that a Member may impose that is necessary to achieve one of the policy objectives set out in paragraph (e)(i) to (iii).¹⁰²⁰ We recall that paragraph (b) is informed also by paragraph (a), and that the obligation in the latter provision to ensure reasonable and non-discriminatory access also applies to paragraph (b).

7.309 Based on the foregoing, we make the following conclusions with respect to Sections 5(a) and 5(b). We conclude that the obligation contained in Section 5(a) informs the other paragraphs of Section 5, and is likewise informed by elements of these paragraphs. We cannot therefore examine what constitutes "reasonable terms and conditions" for access to and use of public telecommunications transport networks and services in isolation from the question of whether or not a particular condition may be imposed, an issue that is addressed in paragraph (e). We conclude that an obligation arises for a Member under paragraph 5(b) subject to any term or condition that a Member may impose in a manner consistent with the provisions of paragraphs (a) and (e).

(b) Claim under Section 5(a)

7.310 Having established that the analysis of a claim under paragraph (a) requires an examination of whether any conditions that are imposed on access to and use of public telecommunications transport networks and services are "necessary" in the meaning of paragraph (e), we now examine the specifics of the United States claim under Section 5(a).

7.311 The United States claims that Mexico has failed to ensure that cross-border suppliers of facilities-based basic telecommunications services from the United States into Mexico are accorded access to and use of public telecommunications transport networks and services on reasonable terms and conditions. For the United States, the rates that foreign suppliers must pay constitute unreasonable, above-cost rates for access and use to the networks and services provided by Mexico's long-distance operators. Cofetel's approval of the United States � Mexico settlement rate violates Mexico's obligation under Section 5(a) to ensure, by whatever means necessary, that access and use is provided on reasonable terms and conditions. The United States also challenges as "unreasonable" the requirements that it considers responsible for the rates that are charged by Mexican suppliers of public telecommunications transport networks and services. These require that foreign suppliers must negotiate exclusively with Mexico's long-distance licensee with the greatest percentage of outgoing long-distance market share over the preceding six months (ILD Rule 13), and prohibit foreign suppliers from concluding alternative terms and conditions with other Mexican suppliers of such networks and services (ILD Rules 3, 6, 10, 13, 22 and 23).

7.312 We now examine whether the substantive elements for a claim under Section 5 (a) are met. We recall that this provision reads:

"Each Member shall ensure that any service supplier of any other Member is accorded access to and use of public telecommunications transport networks and services on reasonable and non-discriminatory terms and conditions for the supply of a service included in its Schedule. This obligation is applied, inter alia, through paragraphs (b) through (f)." [footnote omitted]

7.313 The "access to and use of" referred to in this provision must be granted: (a) to "any service supplier of any other Member"; (b) with respect to "public telecommunications transport networks and services"; (c) for the supply of a "service included in its schedule"; and (d) on "reasonable� terms and conditions". In order to determine whether Mexico has met the requirements of the Section 5(a), we need to examine each of these elements.

(i) "Any service supplier of any other Member"

7.314 The obligation of Section 5(a) arises only with respect to "any service supplier of any other Member". It is uncontested that facilities-based suppliers (such as AT&T, WorldCom/MCI, and Sprint) as well as commercial agencies supply or are seeking to supply the services at issue, and are suppliers "of any other Member", in this case, the United States.

(ii) With respect to "public telecommunications transport networks and services"

7.315 The United States submits that a United States supplier of basic telecommunications must access and use Mexican public telecommunications transport networks and services to transport its service (such as a phone call originating in the United States) to its final destination in Mexico. This is done through interconnection, which the United States considers the "principal method", by which United States suppliers obtain access to and use of Mexican public telecommunications transport networks and services for the cross-border supply of scheduled telecom services.¹⁰²¹ The United States refers to Section 2.1 of Mexico's Reference Paper, which defines interconnection as the "linking of suppliers � to allow the users of one supplier to communicate with users of another supplier and to access services provided by another supplier".

7.316 We observe that Mexico's market access inscription on cross-border supply requires that international traffic be routed through the facilities of a Mexican concessionaire. The facilities of Mexican concessionaires are clearly "public telecommunications transport networks and services", as this term is defined in the Section 3 of the Annex. Mexico has not argued otherwise. We find therefore that the facilities of the Mexican concessionaires which are relevant to the United States claim with respect to access and use are "public telecommunications transport networks and services".

(iii) "For the supply of a service included in its schedule"

7.317 The obligation in Section 5(a) on a Member to ensure access to and use of public telecommunications transport networks and services arises only "for the supply of a service included in its schedule". This language might suggest that the obligation in paragraph (a) arises as soon as any level of commitment is inscribed in a schedule. However the overall scope of the Annex, as determined in Section 2, limits a Member's obligations under the Annex to those "provided for in its Schedule". Similarly, paragraph (e)(iii) of Section 5 permits the imposition of conditions on access and use "to ensure that service suppliers of any other Member do not supply services unless permitted pursuant to commitments in a Member's schedule". In the present case, we recall our findings that Mexico has made market access commitments, subject to a routing requirement, and full national treatment commitments on the supply of basic telecommunications services. Therefore, even under a restrictive reading of the obligation under paragraph (a), these services are "included" in Mexico's Schedule.

7.318 In Mexico's view, however, the services at issue in this dispute are the transport of customer-supplied information or data between two or more points, which, being themselves public telecommunications transport networks and services, cannot be supplied through access to and use of public telecommunications transport networks and services. Therefore, according to Mexico, its suppliers of "public telecommunications transport networks and services" cannot transport public telecommunications transport services supplied by other suppliers.¹⁰²²

7.319 We have addressed earlier the question of the nature of the services at issue, and have found that the Annex applies to the access to and use of public telecommunications transport networks and services for the supply of all transportation services, including basic telecommunications services. The nature of the basic telecommunications services at issue, as inscribed in Mexico's Schedule and described therein with reference to CPC numbers, includes services which require suppliers to link their networks to those of other suppliers.¹⁰²³ The definition in Section 3(b) of the Annex of "public telecommunications transport networks and services" also speaks of a transmission "between two or more points". We therefore consider that foreign suppliers of basic telecommunications services require access to and use of public telecommunications transport networks and services for the supply of their services.

7.320 We now examine whether access to and use of public telecommunications transport networks and services for the supply of the services at issue is accorded on "reasonable terms and conditions".

(iv) "On reasonable � terms and conditions"

7.321 The United States considers that the access to and use of public telecommunications transport networks and services accorded to its suppliers through interconnection, by routing through the facilities of a concessionaire, is not based on "reasonable terms and conditions". For the United States the exclusive negotiating right of the dominant supplier as mandated by ILD Rule 13, the impossibility of concluding alternative arrangements, and the above-cost rates for access to and use of public telecommunications transport networks and services, are not "reasonable". Footnote 1 to Section 2 of the Annex obliges Members to take "whatever measures necessary" to carry out their obligations under the Annex, including the obligation to ensure that foreign suppliers have access to and use of public telecommunications transport networks and services on reasonable terms and conditions. Therefore, in the United States view, the Annex prevents domestic operators from hindering the expansion of trade in scheduled services, in accordance with the trade-liberalizing goal of the GATS.¹⁰²⁴ The United States argues that the measures taken by Mexico are anti-competitive and contravene the purpose of the Annex, which is to prevent suppliers of basic telecommunications from engaging in unfair, restrictive or anti-competitive conduct. Instead of ensuring access to and use of public telecommunications transport networks and services "by whatever measures necessary," the Mexican rules unreasonably concentrate all power in the hands of a dominant supplier.

7.322 Mexico states that " reasonableness" must be judged only within the context of all of the relevant facts and circumstances. If Section 5 were to apply in this case, it would apply to Mexico's accounting rate regime, and the "reasonableness" of any "terms and conditions" of that accounting rate regime would have to be evaluated in the light of all of the facts and circumstances related to that regime. The terms and conditions which the United States considers unreasonable were widespread in accounting rate regimes around the world, and existed even in the United States' regime. Accordingly, there was no basis for the United States to demonstrate that Mexico's measures were "unreasonable" within the meaning of Section 5(a) of the Annex.

aa) Rates charged for access and use

7.323 In assessing whether Mexico has ensured access to and use of public telecommunications transport networks and services on "reasonable � terms and conditions", we first examine the rates that are charged by Telmex and other Mexican concessionaires. We look at whether the rates constitute "terms" or "conditions" in the sense of Section 5(a), and then whether the rates are "reasonable". We note that the United States does not claim that the rates, or any aspect of the ILD Rules, constitute "discriminatory" terms or conditions.

7.324 Although paragraph (a) speaks of "terms and conditions", paragraph (e) refers only to "conditions". Since we earlier found that paragraphs (a) and (e) inform each other, we now analyse whether "rates" are "terms", or whether they are "conditions". Building on our earlier analysis,¹⁰²⁵ if the rates are terms, they would have to meet the "reasonable" standard in Section (a); if they are "conditions," they would, in addition, have to meet the "necessary" standard in Section (e).

7.325 As discussed in part B of these findings, the words "terms and conditions" may have many meanings. In relation to contracts and agreements, the word "terms" is defined to mean "conditions, obligations, rights, price, etc., as specified in contract or instrument"¹⁰²⁶, while "condition" is defined, inter alia, as "a provision in a will, contract, etc., on which the force or effect of the document depends".¹⁰²⁷ Although the words "terms" and "conditions" are closely related, and are frequently used concurrently, the ordinary meaning of the word "terms" suggests that it would include pricing elements, including rates charged for access to and use of public telecommunications transport networks and services.

7.326 We now examine whether the word "conditions", as used in Section 5 of the Annex, would also include pricing elements such as access rates. Pricing is a fundamental element of any access and use. Moreover, the importance of pricing-related measures for access and use suggests that the word "conditions" would also include pricing elements, such as conditions that relate to or affect the rate or price. However, Section 5 (f), which lists examples of "conditions," does not refer to specific pricing measures. In fact, pricing measures do not appear to be similar to any of the conditions included in paragraph (f), such as restrictions on resale or interconnection, and requirements to use specified technical interfaces. Given the importance of pricing measures for access to and use of public telecommunications transport networks and services, we cannot infer that Section 5 (f) would have omitted pricing from its illustrative list, if the Annex had considered access charges to fall under "conditions". Moreover, if access rates themselves constituted "conditions", a Member would have to ensure that no rates were imposed "other than as necessary" to fulfil one of the policy objectives in subparagraphs (i) to (iii) of Section 5(e). Yet, with respect to access to and use of public telecommunications transport networks and services supplied on a commercial basis, it is evident that some type of charge will be levied. Therefore, whether or not to charge, or the existence of a price, does not appear to fit within the meaning of the language of 5(f) and its subparagraphs.

7.327 We find therefore that rates charged for the access to and use of public telecommunications transport networks and services are "terms" within the meaning of Section 5(a), but not "conditions" within the meaning of Section 5(e).

7.328 We next examine whether the rates that are charged to United States suppliers for access to and use of Mexican public telecommunications transport networks and services constitute "reasonable" terms. The dictionary meaning of the word "reasonable" means "being in accordance with reason", "not extreme or excessive".¹⁰²⁸ The word "reasonable" implies a degree of flexibility that involves consideration of the circumstances of a particular case. What is "reasonable" in one set of circumstances may prove to be less than "reasonable" in different circumstances. The elements of "balance" and "flexibility", as well as the need for a "case-by-case analysis", are inherent in the notion of "reasonable".¹⁰²⁹

7.329 We note that the "terms" in paragraph (a) must be "reasonable and nondiscriminatory". Unlike the word "reasonable", the word "non-discriminatory" is defined in the Annex. Footnote 2 states:

"The term 'non-discriminatory' is understood to refer to most-favoured-nation and national treatment as defined in the Agreement, as well as to reflect sector-specific usage of the term to mean 'terms and conditions no less favourable than those accorded to any other user of like public telecommunications transport networks or services under like circumstances'."

7.330 This footnote clarifies that no discrimination is permitted with respect to other foreign suppliers, to domestic suppliers, or to other users of like public telecommunications transport networks and services under like circumstances. The word "non-discriminatory" therefore addresses the conditions of competition of service suppliers in relation to other suppliers who are users of public telecommunications transport networks and services. The word "reasonable" would, on the other hand, appear to include obligations that go beyond the non-discrimination requirement. This interpretation is supported by an examination of the objectives of the Annex as expressed, for example, by references in Section 1 and Section 5(a) to access to telecommunications transport networks and services.

7.331 We now consider Mexico's argument that the term "reasonable" in Section 5(a) cannot refer to rates for interconnection, because such an interpretation would render a significant part of Section 2.2(b) of Mexico's Reference Paper redundant or inutile.¹⁰³⁰ The Panel noted that, although the obligations in the Annex and the Reference Paper may overlap in certain respects, there are clear differences between the two instruments. First, the Annex sets out general obligations for access to and use of public telecommunications transport networks and services, applicable to all Members and all sectors in which specific commitments have been undertaken. Reference Paper obligations, as additional commitments, are applicable only by Members that have included them in their schedules, and they apply only to basic telecommunications. Second, while the Annex applies to all operators of public telecommunications transport networks and services within a Member, regardless of their competitive situation, the Reference Paper obligations on interconnection apply only with respect to "major suppliers". Third, the Annex broadly deals with "access to and use of" public telecommunications transport networks and services, while the Reference Paper focuses on specific "competitive safeguards" and on "interconnection".

7.332 In spite of these differences, the Annex recognizes that its provisions relate to and build upon the obligations and disciplines contained in the Articles of the GATS � the Annex states expressly that it "provides notes and supplementary provisions to the Agreement".¹⁰³¹ Similarly, many of the provisions of the Reference Paper also draw from and add to existing obligations of the GATS, such as Articles III, VI, VIII and IX and the Annex on Telecommunications. Accordingly, there is a degree of overlap between the obligations of the Annex and the Reference Paper, despite their differences in scope, level of obligations, and specific detail provided. To the extent that the Reference Paper requires cost-oriented interconnection on reasonable terms and conditions, it supplements Annex Section 5, requiring additional obligations as regards "major suppliers". The Reference Paper commitments do not in this sense subtract from the Annex or render it redundant.

7.333 Consequently, we do not accept Mexico's argument that a reading of a pricing element into the analysis of reasonable terms in Section 5(a) would render parts of Section 2.2(b) of Mexico's Reference Paper inutile. We find therefore that access to and use of public telecommunications transport networks and services on "reasonable" terms includes questions of pricing of that access and use.

7.334 We now examine what constitutes access to and use of public telecommunications transport networks and services on "reasonable" terms. We have previously noted that Mexico's Reference Paper contains obligations additional to those in the Annex. We consider therefore that rates charged for access to and use of public telecommunications transport networks and services may still be "reasonable", even if generally higher than rates for interconnection that are cost-oriented in terms of Section 2.2(b) of Mexico's Reference Paper. If this were not the case, it would have been redundant for Members to have made commitments additional to Annex obligations on access, especially on cost-oriented rates for interconnection, one of the most important forms of access. Further, those Members who took Reference Paper commitments did so in order to establish specific disciplines only for major suppliers, and especially for interconnection. This would not have been necessary if Members already had an obligation to ensure that all suppliers, major or not, would have to provide cost-based access and use, including interconnection.

7.335 In order to arrive at a finding in the present case, we do not consider it necessary to determine the exact point at which a rate for access to and use of public telecommunications transport networks and services is no longer "reasonable". We have already determined in part B of these findings that the rates charged to interconnect United States suppliers of the services at issue to public telecommunications transport networks and services in Mexico exceed cost-oriented rates by a substantial margin.¹⁰³² We find that rates which exceed cost-based rates to this extent, and whose uniform nature excludes price competition in the relevant market of the telecommunications services bound under Mexico's Schedule, do not provide access to and use of public telecommunications transport networks and services in Mexico "on reasonable � terms". Consequently, we conclude that Mexico has failed to meet its obligations under Section 5(a) of the GATS Annex on Telecommunications, by failing to ensure that service suppliers of the United States are accorded access to and use of public telecommunications transport networks and services in Mexico on reasonable terms.

7.336 We arrived at this finding based on our determination that rates for access to and use of public telecommunications transport networks and services are "terms" under Section 5(a), but not "conditions" under Section 5(e). We now examine whether our finding would differ if, in the alternative, we considered access rates to be "conditions" within the meaning of Section 5(e). Under this alternative, Section 5(e) would require that no access rate is "imposed" other than "as necessary" to fulfil one of the objectives in subparagraphs (i) through (iii). The question would then arise as to how the words "as necessary" would be interpreted.

7.337 The word "necessary" in its ordinary meaning signifies something "that cannot be dispensed with or done without, requisite, essential, needful".¹⁰³³ A law dictionary notes that the term may vary in meaning, in that it:

"may import absolute physical necessity or inevitability, or it may import that which is only convenient, useful, appropriate, suitable, proper, or conducive to the end sought. It is an adjective expressing degrees, and may express mere convenience or that which is indispensable or an absolute physical necessity."¹⁰³⁴

7.338 The term "necessary" in Section 5(e) describes the relationship between a "condition" of access to and use of a public telecommunications transport networks and services, and one of the three listed policy goals. What may be "necessary" with respect to one policy goal may not be with respect to another. As the Appellate Body has noted under a different provision in a different WTO Agreement, the term "necessary" can refer to a range of degrees of necessity, depending on the context, and the object and purpose of the provision in which it is used. At one end of this continuum, "necessary" can be understood to mean "indispensable" to achieving a policy goal; at the other end, "necessary" can be taken to mean simply "making a contribution to" a policy goal.¹⁰³⁵

7.339 We consider first an interpretation that "necessary" in Section 5(e) is closer in meaning to "indispensable". This interpretation would imply that the rates charged for access and use would be "indispensable" for the attainment of one of the three listed objectives. The relevant objective, with respect to a condition which is an access charge, would most likely be that listed in paragraph (e)(i):

"to safeguard the public service responsibilities of suppliers of public telecommunications transport networks and services, in particular their ability to make their networks or services available to the public generally".

7.340 Under an interpretation that "necessary" means "indispensable", the access rates would have to be set at a level that was no more than the minimum to achieve that objective. Minimum access rates, however, would imply levels that reflected the approximate cost of access and use, because the policy objective listed in paragraph (e)(i) could be fulfilled if public telecommunications transport networks and services were charging this rate, and it would not be "indispensable" to charge more than this rate. Further, it could be argued that the responsibility of operators of public telecommunications transport networks and services to make these public telecommunications transport networks and services available to the public generally would require that no rates be charged in excess of the cost incurred.

7.341 The interpretation of the word "necessary" in Section 5(e) as meaning "indispensable" would however leave no room for an analysis of whether terms were "reasonable". If cost-based rates were "indispensable" to reach the policy objective, then these rates surely could not also be unreasonable. Such an interpretation would empty the "reasonable" standard in Section 5(a) of much of its meaning. It would also mirror the obligation of cost-based interconnection in the Reference Paper, with the important difference that the general Annex obligation would encompass all suppliers of public telecommunications transport networks and services, while the obligation in the Reference Paper only refers to major suppliers. The Annex would in this respect achieve the same depth of obligation as the Reference Paper, but on a broader level, and applicable to all WTO Members, making any particular Reference Paper commitments redundant. We would therefore reject an interpretation of "necessary" in Section 5(e) that would mean that a condition must be "indispensable" to achieve the policy goals listed in subparagraphs (i) to (iii).

7.342 We now examine whether the word "necessary" in Section 5(e) is closer to the meaning of "making a contribution to" one of the objectives listed in subparagraph (e)(i) to (iii). In this case, an access rate would only have to be found to be "making a contribution" to one of these policy goals, in order to satisfy the requirements of paragraph (e). In this case, it would be relatively easy to meet the objectives listed in paragraph (e), especially subparagraph (e)(i), and we consider that an examination of whether the access rates were also "reasonable" under paragraph (a) would still have to be undertaken. Even if a particular level of access rate were considered only to be "making a contribution" to one of the policy goals listed in subparagraph (e)(i), an examination under paragraph (a) of whether that rate was also "reasonable" would still have meaning.

7.343 We conclude that if access rates, in the alternative, were considered to be "conditions" under Section 5(e), then the term "necessary" in that provision would have a meaning that required a determination of whether the access rates were "reasonable" under Section 5(a). We would therefore arrive at the same finding that we have made in paragraph 7.334, that the access rates charged are not "reasonable", and that Mexico has therefore not met its obligations under Section 5(a) to ensure that such access rates are "reasonable".

bb) Underlying ILD Rules

7.344 The United States also claims that Mexico unreasonably conditions access to and use of public telecommunications transport networks and services in violation of Mexico's obligations under Section 5(a) of the GATS Annex on Telecommunications, by granting the exclusive authority to negotiate settlement rates with foreign suppliers to the long-distance licensee with the greatest percentage of outgoing long-distance market share over the preceding six months (ILD Rule 13), and by imposing the rate negotiated by that operator on all other operators of public telecommunications transport networks and services, thereby preventing foreign suppliers from reaching alternative agreements for access to and use of the public telecommunications transport networks and services in Mexico (ILD Rules 3, 6, 10, 13, 22 and 23). In addition, the United States claims that Mexican authorities have rejected petitions by Mexican and foreign operators to be permitted to conclude alternative terms and conditions.

7.345 The United States is of the view that these ILD Rules, and their application by the Mexican authorities, are not reasonable, as they contravene the purpose of the Annex, which is to prevent suppliers of public telecommunications transport networks and services from engaging in unfair, restrictive, or anti-competitive conduct. Far from ensuring this goal "by whatever measures necessary", the Mexican measures concentrate all power and control over access to and use of Mexico's public telecommunications transport networks and services in the hands of the dominant supplier of such networks, thereby impairing the ability of United States and other foreign suppliers of basic telecommunications services to negotiate fair and competitive access to and use of these networks.¹⁰³⁶

7.346 Having already found that Mexico has failed, in violation of Section 5(a) of the Annex, to ensure that the interconnection rates resulting from Mexico's application of its ILD Rules provide access to and use of public telecommunications transport networks and services in Mexico on reasonable terms (see paragraph 7.335 above), the Panel does not consider it necessary to examine whether, and to what extent, the individual ILD Rules themselves are also inconsistent with Mexico's obligations under Section 5(a) of the Annex.

(c) Claim under Section 5(b) of the Annex

7.347 The United States argues that Mexico has failed to ensure that non-facilities-based, commercially present suppliers (commercial agencies) have access to and use of private leased circuits, and are permitted to interconnect these circuits to public telecommunications transport networks and services or with circuits of other service suppliers. According to the United States, Mexico's commitments allow locally established, foreign-owned commercial agencies to provide international basic telecommunications services (for example, from Mexico to United States) over leased capacity.¹⁰³⁷ Contrary to its commitments, however, Mexico prohibits the commercial presence of non-facilities-based foreign telecommunications suppliers. Even if permitted to establish, ILD Rule 3 would prohibit the interconnection of these circuits to any foreign public telecommunications transport networks and service, thereby preventing a foreign non-facilities based supplier from using a private leased circuit from any point in Mexico to any foreign destination.¹⁰³⁸

7.348 According to the United States, five years had elapsed since Mexico finalized its Mode 3 commitment in February 1997 (and four years had elapsed since this commitment had entered into force in February 1998), and Mexico still had not issued � and had indicated no intention to issue � the relevant regulations which provide the basis for the authorization for the establishment of a commercial presence by commercial agencies. Mexico's refusal to issue such regulations raised questions about its intentions ever to implement its scheduled mode 3 commitment for commercial agencies.

7.349 Mexico responds that the commitment in its schedule, and any resulting obligation under Section 5(b) with respect to the non-facilities-based supply of basic telecommunications services through commercial presence, are conditioned on the prior issuance of regulations which has yet to occur. In Mexico's view, the entry in its schedule indicates that, at the time of the inscription, no such permits were being issued, which was consistent with Mexico's intention to make a "standstill" commitment. According to Mexico, the entry establishes a "zero quota" on mode 3 access for commercial agencies, which amounts to a market access limitation under GATS Article XVI:2(a).¹⁰³⁹ Mexico is of the view that nothing in its entry committed Mexico to issuing the corresponding regulations. If Mexico had made commitments to take certain actions in the future, those commitments would have been inscribed in the fourth column of its schedule as "additional commitments" under GATS Article XVIII, similar to the practice other Members had followed in making promises of review or other conditional undertakings.¹⁰⁴⁰

7.350 The United States argues that Mexico's mode 3 limitation, if read as Mexico interpreted it, rendered the commitment without effect or "inutile". The United States points to interpretations of Mexico's commitments by Telmex/Sprint in testimony given to the FCC in 1997, that indicate that Telmex/Sprint believed that Mexico would issue the required regulations shortly.¹⁰⁴¹

7.351 We recall the terms of Section 5(b) of the Annex, which states in relevant part:

"(b) Each Member shall ensure that service suppliers of any other Member have access to and use of any public telecommunications transport network or service offered within or across the border of that Member, including private leased circuits, and to this end shall ensure, subject to paragraphs (e) and (f), that such suppliers are permitted:

�
(ii) to interconnect private leased or owned circuits with public telecommunications transport networks and services or with circuits leased or owned by another service supplier;"

7.352 In examining the United States claim under Section 5(b), we will first examine whether Mexico has a commitment in effect to allow the supply of the services at issue through commercial presence (mode 3) in Mexico by commercial agencies of other Members. We will then examine the extent of any such commitments, in particular whether that commitment extends to international services from Mexico to the United States supplied through commercial agencies commercially present in Mexico. Finally, we will examine whether Mexico has fulfilled its commitment under Section 5(b) with respect to "access to and use of" of private leased circuits, and under Section 5(b)(ii) to "interconnect private leased or owned circuits" with public telecommunications transport networks and services, or with circuits leased or owned by another supplier, taking into account Section 2(c)(ii) and Section 5(e), (f) and (g) of the Annex.

(i) Whether Mexico has a commitment in effect to allow commercial agencies to supply the services at issue through commercial presence (mode 3)

7.353 Mexico has included a commercial presence (mode 3) commitment in its schedule with respect to services supplied by "commercial agencies". It has entered "None" in the column relating to national treatment, and inscribed limitations in the market access column, which read in relevant part:

"A permit issued by the SCT is required. Only enterprises set up in accordance with Mexican law may obtain such a permit.
�
The establishment and operation of commercial agencies is invariably subject to the relevant regulations. The SCT will not issue permits for the establishment of a commercial agency until the corresponding regulations are issued." (emphasis added)

7.354 We consider first Mexico's argument that the entry in its schedule establishes a limitation on market access, under Article XVI:2(a) of the GATS. This provision states that, in sectors where market access commitments are undertaken, the measures, which a Member shall not maintain or adopt, unless otherwise specified in its schedule, are :

"limitations on the number of service suppliers whether in the form of numerical quotas, monopolies, exclusive service suppliers or the requirements of an economic needs test;"¹⁰⁴² (emphasis added)

7.355 According to the first sentence in Mexico's entry, "a permit issued by the SCT is required" for the supply of the service. Such a permit, according to the entry, may only be obtained by "enterprises set up in accordance with Mexican law". This language does not indicate that Mexico maintains a quantitative limitation "on the number of suppliers". On the contrary, it suggests that any supplier who is set up in accordance with Mexican law is eligible for a permit.

7.356 Mexico's entry goes on to state that "the establishment and operation of commercial agencies is invariably subject to the relevant regulations". It further states that "permits for the establishment of a commercial agency [will not be issued] until the corresponding regulations are issued". Mexico argues that at the time when the limitation was inscribed, no permits were issued, and no market access was granted.¹⁰⁴³ Mexico appears to argue that the issuance of regulations is a condition, the fulfilment of which is entirely at the discretion of Mexican authorities. If the meaning of Mexico's entry is that Mexico has full discretion whether or not to issue regulations, then it follows that Mexico has indeed not undertaken any commitment on the number of suppliers � in other words, it has left market access "unbound" with regard to the number of suppliers.

7.357 We now consider whether Mexico's entry is equivalent to an "unbound" entry with respect to market access through the supply, through commercial presence, of the services at issue. The wording of the limitation, that "permits for the establishment of a commercial agency [will not be issued] until the corresponding regulations are issued", does not specify that a numerical quota was to be imposed on the issuance of permits. Rather, the sentence seems to introduce a temporal qualification as to when establishment will be permitted � namely, after the issuance of the regulations.

7.358 The six categories of measures in Article XVI:2 refer to the types of market access limitations that can be imposed on the supply of a service. However, none of the six categories relate to temporal limitations � such as dates for entry into force or for the implementation of commitments. This suggests that temporal limitations cannot constitute limitations on market access under Article XVI:2 of the GATS.

7.359 Article XX:1 of the GATS provides useful context which supports this interpretation. Article XX:1 describes how schedules are to be drawn up. It reads:

"Each Member shall set out in a schedule the specific commitments it undertakes under Part III of this Agreement. With respect to sectors where such commitments are undertaken, each schedule shall specify:

(a) terms, limitations and conditions on market access;
(b) conditions and qualifications on national treatment;
(c) undertakings relating to additional commitments;
(d) where appropriate the time-frame for implementation of such commitments; and
(e) the date of entry into force of such commitments."

7.360 Article XX:1 provides that Members "shall specify" certain elements in their schedules of specific commitments. The need to specify entries with regard to the substantive elements in Articles XVI (market access), Article XVII (national treatment), and Article XVIII (additional commitments) is dealt with in subparagraphs (a) to (c) of Article XX:1 respectively. Article XX:1 reiterates the need to "specify" the limitations for market access to be scheduled under Article XVI. Article XX:1 appears however to add to the requirements for the scheduling of national treatment limitations under Articles XVII (which reads "subject to any conditions and qualifications set out [in the schedule]"), and additional commitments under Article XVIII (which reads "commitments shall be inscribed in a Member's schedule").

7.361 The need for specificity on the temporal aspects of commitments is dealt with in subparagraphs (d) and (e) of Article XX:1. Subparagraph (e) requires that each schedule shall specify the date of entry into force of the commitments undertaken. Subparagraph (d) requires that a schedule "shall specify � where appropriate the time-frame for implementation of such commitments". The separate listing of temporal elements of entry into force and implementation in Article XX:1 confirms, in our view, that temporal elements are not part of the substantive elements that can be market access limitations under Article XVI:2.

7.362 Consequently, we find that Mexico's scheduled requirement that commercial agencies obtain permits, and that these permits be based on regulations, is a temporal limitation that is not a market access limitation within the meaning of Article XVI:2(a).¹⁰⁴⁴

7.363 Since we have found that Mexico's entry in the market access column of its schedule for services supplied by commercial agencies through commercial presence is not a market access limitation, we now need to determine what meaning it does have. We return to Article XX:1, which specifies how Members should inscribe their specific commitments in their schedules. In particular, we examine Mexico's entry under the criteria set out in subparagraphs (d) (time-frame for implementation) and (e) (date of entry into force).

7.364 We note at the outset that Mexico's commitment on commercial agencies, along with Mexico's other commitments on basic telecommunications, was attached to the Fourth Protocol on 15 February 1997, and entered into force on 5 February 1998. Mexico has not included a date in its schedule to indicate that its specific commitment on commercial agencies was to enter into force at a date different from 5 February 1998. We consider therefore that Mexico's entry relates to the time-frame for implementation, and not the entry into force of the commitment.

7.365 We recall that Article XX:1 (d) requires, with respect to sectors where commitments are undertaken, that each schedule shall specify "where appropriate the time-frame for implementation of such commitments".

7.366 A "time-frame" is defined as "a period of time especially with respect to some action or project".¹⁰⁴⁵ The term does not require the setting of a precise date, but it does imply a beginning and an end of a time period. Where not expressed by beginning and end dates, a time-frame may be also expressed in terms of maximum duration (for example: within three years). Unlike a condition which may or may not occur, a time-frame is not open-ended and does not leave the time of the occurrence in doubt.

7.367 We consider that the obligation to specify "where appropriate" a time-frame for implementation of a commitment must be considered in the overall context of Article XX:1. The wording of that Article seeks to ensure a high degree of clarity and specificity as to the exact terms of commitments made by Members. Members must be able to infer from each schedule the precise conditions for market access, national treatment and, where inscribed in the schedule, any additional commitments a Member has undertaken. By the same token, specificity as to when a commitment enters into force and when it has to be implemented is equally important. A market access commitment that leaves in doubt when a commitment takes effect is of little practical value. Unlike for the implementation of GATT tariff reductions which entered into force on 1 January 1995, and for which paragraph 2 of the Marrakesh Protocol provided a time-frame for implementation, the dates of entry into force and implementation of specific commitments under the GATS coincide in principle.

7.368 Article XX:1(d) permits Members who wish to depart from this general rule to specify a "time-frame" within which they implement their commitments. We consider that the words "where appropriate" in that subparagraph must be understood to refer to situations where the date of implementation differs from the date of entry into force of a commitment. The consistent practice of WTO Members in the scheduling of commitments supports this understanding. During the extended negotiations on basic telecommunications alone, twenty-seven Members who attached schedules of commitments to the Fourth Protocol, but wished to implement their commitments at a later time than the entry into force of their schedule, specified a time-frame for implementation � typically by entering dates upon which certain limitations would be removed. We consider that Article XX, the objective of which is to ensure clarity and precision with regard to the scheduling of commitments, cannot be interpreted to allow a window of discretion with regard to temporal aspects of these commitments that could erode the practical value of a commitment.

7.369 Mexico asserts that had it wished to schedule commitments to take future actions, it would have done so as additional commitments under GATS Article XVIII. In its view, this reasoning is "confirmed" by a Secretariat background note which includes a reference to "future undertakings conditional upon the passing of legislation" in its description of measures that Members had inscribed in the additional commitments column of schedules.¹⁰⁴⁶

7.370 In addressing Mexico's argument, we recall first that Article XX:1(d) relates to time-frames for implementation of commitments under either Articles XVI, XVII, or XVIII. We therefore cannot subscribe to Mexico's view that any future actions should be scheduled only as additional commitments; we described earlier how Members have, in fact, consistently inscribed time-frames in the market access column of their schedules. Second, Mexico has inscribed its commitment in the market access column, and not in the column relating to additional commitments. This difference indicates Mexico's intention to make a commitment on market access (that is, to permit the commercial presence of "commercial agencies"), and not an additional commitment "with respect to measures affecting trade in services not subject to scheduling under Articles XVI or XVII". Third, the Secretariat note mentioned by Mexico merely contains "examples of inscriptions found in the additional commitments column", and an examination of such examples in Attachment I to that note shows that only one of a total of fifty-two inscriptions contains a condition similar to the one in Mexico's' schedule.

7.371 We therefore consider that subparagraph (d) of Article XX:1 requires the specification of a time-frame for implementation should a Member wish to implement a commitment after its entry into force. Where a Member does not specify a time-frame, implementation must be deemed to be concurrent with the entry into force of the commitment. We have seen that the entry in Mexico's Schedule does not contain language that expresses a condition "whether" regulations and permits would be issued, but only "when" the permits would be issued. Interpreted in the context of Article XX, this entry implies that regulations were not in place when Mexico finalized its commitments on 15 February 1997, but expresses a commitment that these regulations would be issued. Even if Mexico had needed time to complete the issuance of the regulations beyond the time of entry into force of its commitment on 5 February 1998, Mexico should, at the very minimum, have initiated that process leading to the issuance of the regulations. There is no evidence, however, that Mexico has taken any steps to comply with its commitment. We do not consider it necessary to rule on the length of a time period within which the implementation of Mexico's commitment might reasonably have been concluded, as more than five years have passed since the entry into force of Mexico's commitment, and Mexico still has indicated no date by which it intends to issue the relevant regulations and permits. Therefore, we find that Mexico's refusal to authorize the supply of services by commercial agencies is inconsistent with the market access commitment inscribed in its schedule.

(ii) Whether Mexico's commitments on the supply of the services at issue by commercial agencies through commercial presence include the supply of international telecommunications services (from Mexico to the United States) through mode 3

7.372 The United States argues that the supply of the services at issue through commercial presence under mode 3 includes the supply of such services from Mexico into the United States.

7.373 In assessing this issue, we note that the supply of a service through commercial presence (mode 3) is defined in Article I:2 (c) of the GATS as the supply of a service "by a service supplier of one Member, through commercial presence in the territory of any other Member".

7.374 "Commercial presence" is defined in Article XXVIII (Definitions), as follows:

"(d) 'commercial presence' means any type of business or professional establishment, including through

(i) the constitution, acquisition or maintenance of a juridical person, or
(ii) the creation or maintenance of a branch or a representative office,
within the territory of a Member for the purpose of supplying a service;"

7.375 The definition of services supplied through a commercial presence makes explicit the location of the service supplier. It provides that a service supplier has a commercial presence � any type of business or professional establishment � in the territory of any other Member. The definition is silent with respect to any other territorial requirement (as in cross-border supply under mode 1) or nationality of the service consumer (as in consumption abroad under mode 2). Supply of a service through commercial presence would therefore not exclude a service that originates in the territory in which a commercial presence is established (such as Mexico), but is delivered into the territory of any other Member (such as the United States).

7.376 We observe further that the Chairman's Note for Scheduling Basic Telecommunications Services Commitments, states that:

"Unless otherwise noted in the sector column, any basic telecom service listed in the sector column:
(a) encompasses local, long distance and international services for public and non-public use;"¹⁰⁴⁷

7.377 In our analysis of Mexico's commitments in part B of these findings, we found that the Chairman's Note is an important part of the circumstances of the conclusion of the negotiations, and should be given considerable weight. We note that Mexico did not exclude international services in the sector column, or elsewhere in its schedule, from the scope of services that commercial agencies may supply. We are therefore entitled to assume that Mexico's mode 3 commitment at issue includes supply of basic telecommunications services within Mexico, and from Mexico into any other country.

7.378 Having concluded that Mexico has a commitment in effect to allow the supply through commercial presence (mode 3) of the services at issue by commercial agencies, we now consider whether Mexico has fulfilled its obligations in Section 5(b) to ensure that suppliers of any other Member have access to and use of any public telecommunications transport networks and services offered within or across Mexico's border, including private leased circuits.

(iii) Access to and use of private leased circuits

7.379 Mexico argues that Section 2(c)(ii) of the Annex renders Section 5 inapplicable in this case. Section 2(c)(ii) establishes that nothing in the Annex, including Section 5, "shall be construed ... to require a Member (or to require a Member to oblige service suppliers under its jurisdiction) to establish, construct, acquire, lease, operate or supply telecommunications transport networks or services not offered to the public generally". According to Mexico international simple resale is prohibited in Mexico, and is therefore not offered to the public generally.¹⁰⁴⁸ The United States argues that Mexican suppliers of public telecommunications transport networks and services do in fact offer private leased circuits to the public generally.¹⁰⁴⁹

7.380 The Panel cannot accept Mexico's argument that Section 2(c)(ii) makes Section 5(b) inapplicable in this case. Whether "international simple resale" (international services transmitted over leased capacity) is offered to the public generally is a different issue from whether "private leased circuits" are offered to the public generally in Mexico. Whether a supplier is entitled under Section 5(b) to access to and use of services, such as private leased circuits, that are offered to the public generally is determined by a Member's scheduled commitments on the service to be supplied. In this respect, the fact that a particular service is restricted under domestic law cannot be invoked under Section 2(c)(ii), since the obligations under Section 5 refer not to domestic law but to scheduled GATS commitments.

7.381 The Panel notes that the United States presents evidence that "private leased circuits" are in fact "offered to the public generally" in Mexico. Further, the Panel recalls that it has found that, although Mexico has not committed to allow commercial agencies to use leased capacity for cross border supply, it has committed to allow commercial agencies to use leased capacity for the supply of the services at issue. We also recall that Mexico indicates no restriction on the geographic market (i.e. local, long distance, international) for the services that may be supplied by the commercial agencies established in Mexico. Mexico has inscribed no routing restriction � as it did for cross border supply � for supply through commercial presence. Therefore, the Panel considers Mexico to have undertaken commitments on the supply of the services at issue by commercial agencies through commercial presence, for which access to and use of private leased circuits is not only relevant but , by Mexico's own definition in its schedule, is essential. Therefore, we find that Mexico has failed to ensure access to and use of private leased circuits for the supply of the committed services in a manner consistent with the Section 5(b) of the Annex on Telecommunications.

(iv) Interconnection of private leased circuits

7.382 The United States maintains that according to Section 5(b)(ii), foreign suppliers must be permitted to interconnect private leased circuits to foreign public telecommunications transport networks and services. In its view, ILD Rule 3 would prohibit commercial agencies, even if they were permitted to establish, to interconnect any private leased circuits to foreign public telecommunications transport networks and services.

7.383 We note that ILD Rule 3 reads:

"Only international gateway operators shall be authorized to interconnect directly with the public telecommunications networks of other countries' operators for the purpose of carrying international traffic."

7.384 Under this rule, only international gateway operators may interconnect with foreign public telecommunications transport networks and services to supply international telecom services. The ILD Rules require an international gateway operator to be a facilities-based supplier. ILD Rule 2:VII defines a gateway operator as a supplier with a concession to supply long distance services, and ILD Rule 7:3 requires such an operator to have infrastructure in at least three Mexican states. As discussed in part B, a gateway operator must always be a "concessionaire", and a commercial agency can never be a concessionaire. Therefore, a commercial agency can never be an international gateway operator. Thus, ILD Rule 3 prohibits a commercial agency to interconnect "directly with the public telecommunications networks of other countries' operators for the purpose of carrying international traffic".

(v) Subject to paragraphs (e) and (f)

7.385 We note that the obligation in Section 5(b) is made subject by the terms of the provision to paragraphs (e) and (f). Paragraph (e)(iii) permits Mexico to impose conditions "to ensure that service suppliers of any other Member do not supply services unless permitted pursuant to commitments in the Members' Schedule". ILD Rule 3, as discussed above, would be a restriction on resale in the sense of paragraph (f)(i) of Section 5. We have found that Mexico has undertaken a mode 3 commitment on the supply of the telecommunications services at issue by commercial agencies. This commitment does not exclude supply of non-facilities-based services from Mexico into any other country. Therefore, ILD Rule 3 does not impose a condition necessary to achieve the objective set out in paragraph (e)(iii). Rather, this ILD Rule prevents interconnection to private leased circuits for a service on which a specific commitment has been taken. Therefore, we find that ILD Rule 3 is inconsistent with Mexico's obligations under Section 5(b) of the Annex.

(d) Invocation of Section 5(g)

7.386 Mexico argues that it is necessary to condition access to its networks for the purpose of strengthening its domestic telecommunication infrastructure in accordance with paragraph (g) of Section 5 of the Annex.¹⁰⁵⁰ According to Mexico, this Section gives cover to its measures.

7.387 Section 5(g) reads:

"Notwithstanding the preceding paragraphs of this section, a developing country Member may, consistent with its level of development, place reasonable conditions on access to and use of public telecommunications transport networks and services necessary to strengthen its domestic telecommunications infrastructure and service capacity and to increase its participation in international trade in telecommunications services. Such conditions shall be specified in the Member's schedule."

7.388 Section 5(g) recognizes the right of developing countries to inscribe limitations in their schedules for the objectives recognized in Section 5(g). The Panel notes that Mexico's Schedule of Specific Commitments does not include any limitations referring to Section 5(g) or to the development objectives mentioned therein. Without such limitations in Mexico's Schedule, Section 5(g) does not permit a departure from specific commitments which Mexico has voluntarily and explicitly scheduled. Moreover, even if � contrary to our views � Section 5(g) could be used as a defence for imposing conditions inconsistent with a Member's specific commitments, Mexico has not demonstrated that anti-competitive price-fixing and market sharing arrangements are "reasonable" and "necessary" conditions for enhancing the development objectives referred to in Section 5(g).

7.389 We therefore conclude that Mexico has failed to meet its obligations under Section 5(b) of the GATS Annex on Telecommunications, by failing to ensure that commercially present commercial agencies of the United States have access to and use of private leased circuits and are permitted to interconnect these circuits to public telecommunications transport networks and services or with circuits of other service suppliers.

VIII. CONCLUSIONS AND RECOMMENDATION

8.1 In the light of our findings, we conclude that:

(a) Mexico has not met its GATS commitments under Section 2.2(b) of its Reference Paper since it fails to ensure that a major supplier provides interconnection at cost-oriented rates to United States suppliers for the cross-border supply, on a facilities basis in Mexico, of the basic telecommunications services at issue ;
(b) Mexico has not met its GATS commitments under Section 1.1 of its Reference Paper to maintain "appropriate measures" to prevent anti-competitive practices, since it maintains measures that require anti-competitive practices among competing suppliers which, alone or together, are a major supplier of the services at issue;
(c) Mexico has not met its obligations under Section 5(a) of the GATS Annex on Telecommunications since it fails to ensure access to and use of public telecommunications transport networks and services on reasonable terms to United States service suppliers for the cross-border supply, on a facilities basis in Mexico, of the basic telecommunications services at issue;
(d) Mexico has not met its obligations under Section 5(b) of the GATS Annex on Telecommunications, since it fails to ensure that United States commercial agencies, whose commercial presence Mexico has committed to allow, have access to and use of private leased circuits within or across the border of Mexico, and are permitted to interconnect these circuits to public telecommunications transport networks and services or with circuits of other service suppliers.

8.2 The Panel has found that, contrary to claims of the United States :

(a) Mexico has not violated Section 2.2(b) of its Reference Paper, with respect to cross-border supply, on a non-facilities basis in Mexico, of the basic telecommunications services at issue;
(b) Mexico has not violated Section 5(a) of the GATS Annex on Telecommunications, with respect to the cross-border supply, on a non-facilities basis in Mexico, of the basic telecommunications services at issue;
(c) Mexico has not violated Section 5(b) of the GATS Annex on Telecommunications, with respect to the cross-border supply, on a non-facilities basis into Mexico, of the basic telecommunications services at issue.

8.3 The Panel notes that, pursuant to Article 12.11 of the DSU, it has taken into account in its findings GATS provisions on differential and more-favourable treatment for developing country Members. In particular, the Panel has examined Mexico's arguments that commitments of such Members have to be interpreted in the light of Article IV of the GATS, paragraph 5 of the preamble to the GATS, and paragraph 5(g) of the Annex on Telecommunications The Panel emphasizes that its findings in no way prevent Mexico from actively pursuing the development objectives referred to in these provisions by extending telecommunications networks and services at affordable prices in a manner consistent with its GATS commitments.

8.4 The Panel notes that Article 19 of the DSU provides that "[w]here a panel � concludes that a measure is inconsistent with a covered agreement, it shall recommend that the Member concerned bring the measure into conformity with that agreement."¹⁰⁵¹ Unlike some other covered agreements (e.g. GATT Article XXIII:1 in connection with Article 3.8 of the DSU), the GATS does not require that, in the case of a violation complaint (GATS Article XXIII:1), "nullification or impairment" of treaty benefits has to be claimed by the complaining WTO Member and examined by a Panel. Whereas Article XXIII:1 of the GATT specifically conditions access to WTO dispute settlement procedures on an allegation that a "benefit" or the "attainment of an objective" under that agreement are being "nullified or impaired", the corresponding provision in the GATS (Article XXIII:1) permits access to dispute settlement procedures if a Member "fails to carry out its obligations or specific commitments" under the GATS. In this respect, we note that the Appellate Body in EC � Bananas III stated that the panel in that case "erred in extending the scope of the presumption in Article 3.8 of the DSU to claims made under the GATS".¹⁰⁵² Having found that Mexico has violated certain provisions of the GATS, we are therefore bound by Article 19 of the DSU to proceed directly to the recommendation set out in that provision.

8.5 We therefore recommend that the Dispute Settlement Body request Mexico to bring its measures into conformity with its obligations under the GATS.

IX. ANNEXES

A. ABBREVIATIONS USED FOR DISPUTE SETTLEMENT CASES REFERRED TO IN THE REPORT

Short title	Full Title
*Canada � Autos*	Panel Report, Canada � Certain Measures Affecting the Automotive Industry, WT/DS139/R, WT/DS142/R, adopted 19 June 2000, as modified by the Appellate Body Report, WT/DS139/AB/R, WT/DS142/AB/R, DSR 2000:VII, 3043.
Canada � Dairy	Appellate Body Report, Canada � Measures Affecting the Importation of Milk and the Exportation of Dairy Products, WT/DS103/AB/R, WT/DS113/AB/R and Corr.1, adopted 27 October 1999, DSR 1999:V, 2057.
EC � Computer Equipment	Appellate Body Report, European Communities � Customs Classification of Certain Computer Equipment, WT/DS62/AB/R, WT/DS67/AB/R, WT/DS68/AB/R, adopted 22 June 1998.
EC � Hormones	Appellate Body Report, EC Measures Concerning Meat and Meat Products (Hormones) ("EC � Hormones "), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, DSR 1998:I, 135.
India � Quantitative Restrictions	Appellate Body Report, India � Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, WT/DS90/AB/R, adopted 22 September 1999, DSR 1999:IV, 1763.
Japan � Alcoholic Beverages II	Appellate Body Report, Japan � Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996, DSR 1996:I, 97.
*Korea � Various Measures on Beef*	Appellate Body Report, Korea � Measures Affecting Imports of Fresh, Chilled and Frozen Beef, WT/DS161/AB/R, WT/DS169/AB/R, adopted 10 January 2001.
US � Carbon Steel	Appellate Body Report, United States � Countervailing Duties on Certain Corrosion-Resistant Carbon Steel Flat Products from Germany ("US � Carbon Steel "), WT/DS213/AB/R and Corr.1, adopted 19 December 2002.
US � Gasoline	Appellate Body Report, United States � Standards for Reformulated and Conventional Gasoline, WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, 3.
US � Hot-Rolled Steel	Appellate Body Report, United States � Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/AB/R, adopted 23 August 2001.
US � Stainless Steel	Panel Report, United States � Anti-Dumping Measures on Stainless Steel Plate in Coils and Stainless Steel Sheet and Strip from Korea, WT/DS179/R, adopted 1 February 2001.
US � Wheat Gluten	Appellate Body Report, United States � Definitive Safeguard Measures on Imports of Wheat Gluten from the European Communities ("US � Wheat Gluten "), WT/DS166/AB/R, adopted 19 January 2001, DSR 2001:II, 717.

To continue with: B. Mexico: Schedule of specific commitments, supplement 2

Return to: Table of Contents

1007 See Mexico's answer to question No. 21 of the Panel of 19 December 2002, paragraph 303. For question No. 21, see footnote 589 of this Report.

1008 See the United States' first oral statement, paragraph 45. See also the United States' second written submission, paragraphs 99-100. See also the United States' answer to question No. 21 of the Panel of 19 December 2002. For question No. 21, see footnote 589 of this Report.

1009 See Mexico's answer to question No. 21 of the Panel of 19 December 2002, paragraphs 301-302. For question No. 21, see footnote 589 of this Report.

1010 (emphasis added)

1011 See Annex on Financial Services, Section 1 (a) (Scope and Definition): "This Annex applies to measures affecting the supply of financial services. Reference to the supply of a financial service in this Annex shall mean the supply of a service as defined in paragraph 2 of Article I of the Agreement."

1012 See Mexico's first written submission, paragraph 214.

1013 See the United States' first written submission, paragraph 219.

1014 See Mexico's first written submission, paragraphs 229-231.

1015 See paragraph 7.91.

1016 See, paragraph 7.271: claim by the United States that Mexico must ensure that: (i) suppliers of facilities-based basic telecommunications services from the United States into Mexico (cross-border) are accorded access to and use of public telecommunications transport networks and services ("public networks") on "reasonable terms and conditions"; and (ii) suppliers of basic telecommunications services on a non-facilities basis from the United States into Mexico (cross-border) are accorded access to and use of public telecommunications transport networks and services ("public networks") on reasonable terms and conditions.

1017 See paragraph 7.271: claim by the United States that Mexico must ensure that suppliers of basic telecommunications services on a non-facilities basis through a commercial presence in Mexico must likewise be afforded access to and use of private leased circuits to supply international telephone services.

1018 See Mexico's first written submission, paragraphs 253-256.

1019 See the United States' second written submission, paragraph 107. See also the United States' answer to question No. 26 of the Panel of 19 December 2002. For question No. 26, see footnote 694 of this Report.

1020 For an interpretation of the words subject to, see also: Appellate Body Report, Canada � Dairy, paragraph 134.

1021 See the United States' first written submission, paragraph 223.

1022 See Mexico's answer to question No. 21 of the Panel meeting of 19 December 2002, paragraph 306. For question No. 21, see footnote 589 of this Report.

1023 See paragraphs 7.40-7.45 of this Report.

1024 See the United States' first written submission, paragraph 233.

1025 See paragraph 7.309 of this Report.

1026 Black's Law Dictionary, 6th edition, 1990.

1027 See Panel Report, US � Stainless Steel, paragraph 6.75.

1028 Merriam Webster Online Dictionary; http://www.webster.com/cgi-bin/dictionary.

1029 The Appellate Body in US � Hot-Rolled Steel, paragraphs 84-85, stated that "[i]n sum, a "reasonable period" must be interpreted consistently with the notions of flexibility and balance that are inherent in the concept of "reasonableness", and in a manner that allows for account to be taken of the particular circumstances of each case". Although the Appellate Body was interpreting a "reasonable" period of time in the context of a different WTO Agreement, we consider that the same basic elements of the word "reasonable" also apply in the present context.

1030 See Mexico's answer to questions No. 22 (If Section 5(a) and (b) of the Annex already ensure interconnection at reasonable rates, what is the value-added of Section 2.2 of the Reference Paper?) and No. 23 of the Panel of 19 December 2002, paragraphs 309-311, 313-317. For question No. 23, see footnote 621 of this Report.

1031 For example, footnote 2 of the Annex expressly refers to most favoured nation treatment (Article II) and national treatment (Article XVII). Section 4 (Transparency) builds upon Article III (Transparency). The Annex further elaborates on concepts contained in Articles VI (Domestic Regulation), VIII (Monopolies and exclusive service suppliers), and IX (Business Practices).

1032 See paragraph 7.216.

1033 The New Shorter Oxford English Dictionary, (Clarendon Press, 1993), Vol. II, page 1895.

1034 Black's Law Dictionary, (West Publishing, 1995), page 1029. Cited in the Report of the Appellate Body, Korea � Various Measures on Beef, paragraph 160.

1035 See Appellate Body Report, Korea � Various Measures on Beef, paragraph 161.

1036 See the United States' first written submission, paragraphs 237-241.

1037 See the United States' first written submission, paragraph 291.

1038 See the United States' first written submission, paragraph 295.

1039 See Mexico's answer to question No. 2(a) of the Panel of 19 December 2002, paragraph 39. For question No. 2(a), see footnote 225 of this Report. See also Mexico's answer to question No. 6(a) of the Panel of 19 December 2002, paragraphs 89-91. For question No. 6(a), see footnote 282 of this Report. See also Mexico's answer to question No. 6(c) of the Panel of 19 December 2002, paragraph 108; II 135. For question No. 6(c), see footnote 653 of this Report.

1040 See Mexico's answer to question No. 6(c) of the Panel of 19 December 2002, paragraph 108. For question No. 6(c), see footnote 653 of this Report.

1041 See the United States' answer to question No. 6(c) of the Panel of 19 December 2002. For question No. 6(c), see footnote 653 of this Report. See also the United States' first oral statement, paragraph 17.

1042 GATS Article XVI:2 reads in full:

"In sectors where market-access commitments are undertaken, the measures which a Member shall not maintain or adopt either on the basis of a regional subdivision or on the basis of its entire territory, unless otherwise specified in its Schedule, are defined as:
(a) limitations on the number of service suppliers whether in the form of numerical quotas, monopolies, exclusive service suppliers or the requirements of an economic needs test;
(b) limitations on the total value of service transactions or assets in the form of numerical quotas or the requirement of an economic needs test;
(c) limitations on the total number of service operations or on the total quantity of service output expressed in terms of designated numerical units in the form of quotas or the requirement of an economic needs test;
(d) limitations on the total number of natural persons that may be employed in a particular service sector or that a service supplier may employ and who are necessary for, and directly related to, the supply of a specific service in the form of numerical quotas or the requirement of an economic needs test;
(e) measures which restrict or require specific types of legal entity or joint venture through which a service supplier may supply a service; and
(f) limitations on the participation of foreign capital in terms of maximum percentage limit on foreign shareholding or the total value of individual or aggregate foreign investment."

1043 See Mexico's answer to question No. 6(a) of the Panel of 19 December 2002, paragraph 90. For question No. 6(a), see footnote 282 of this Report.

1044 The Addendum to the Explanatory Note on Scheduling of initial commitments on Trade in Services (MTN.GNS/W/164/Add.1 , 30 November 1993, corroborates this finding: "The requirement to obtain an approval or a licence is not in itself a trade restriction and therefore does not need to be scheduled. However, if the criteria for granting licenses or approval contain a market access restriction (e.g. economic needs test) or discriminatory treatment, the relevant measures would need to be scheduled if a Member wishes to maintain them as limitations under Article XVI or XVII. It has been pointed out that in some offers the granting of licences is subject to review, meaning they are granted on a discretionary basis. In such a case the right to supply the service is unbound."

1045 Merriam Webster Dictionary, Merriam Webster Online, 2003; http://www.webster.com/.

1046 See, Additional Commitments Under Article XVIII of the GATS: Note by the Secretaria t, S/CSC/W/34, 16 July 2002, paragraph 8.

1047 Notes for the Scheduling Basic Telecommunications Services Commitments; Note by the Chairman. S/GBT/W/2/Rev.1.

1048 See Mexico's second written submission, paragraphs 147-151.

1049 See the United States' first written submission, paragraph 264, footnote 230, in which the United States states that COFETEL's website lists Telmex private line tariffs.

1050 See Mexico's second written submission, paragraphs 265-266.

1051 Footnotes in the original omitted.

1052 See Appellate Body Report, European Communities � Regime for the Importation, Sale and Distribution of Bananas ("EC � Bananas III "), WT/DS27/AB/R, adopted 25 September 1997, DSR 1997:II, 591, at paragraph 250.

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