WASHINGTON-The United States and China, submitting to a hostile political atmosphere that will delay any decision on Chinese entry into the World Trade Organization until year’s end, still managed last week to reach major agreements to open wireless telecom equipment and service markets in the giant Asian nation of 1.2 billion people.
Telecom market-opening commitments by Chinese Premier Zhu Rongji, while not everything American negotiators sought, represent one of the most significant trade breakthroughs for the U.S. wireless industry in modern times.
The U.S.-Sino pact, among other things, includes China’s vow to remove barriers to American-developed Code Division Multiple Access technology and not to discriminate against any technology as general matter. That will be a major boost for U.S. wireless vendors Qualcomm Inc., Lucent Technologies Inc. and Motorola Inc.
“This agreement will bring tremendous benefits to the U.S. telecommunications industry,” said Matthew Flanigan, president of the Telecommunications Industry Association. “U.S. telecommunications services companies will have new opportunities in a market where only one in 10 households has a telephone.”
China, which until now has severely restricted sales of telecommunications services and barred foreign investment in telecom carriers, agreed not only to relax some of those restrictions but to do so within a pro-competitive regulatory framework in which rules are transparent and accessible to all.
Under the accord, China will allow 49 percent foreign ownership in all telecom services and permit 51 percent foreign ownership for paging and value added services in four years.
In addition, China agreed to phase out geographic restrictions on the provision of telecom services in Beijing, Shanghai and Guangzhou-areas that represent about 75 percent of all domestic traffic in China today.
Paging will be allowed in those regions in four years, mobile phone service in five years.
The concessions will enable China to become a member of the WTO basic telecom services agreement.
In addition, by agreeing to phase out tariffs on telecom equipment, information technology products, semiconductors, computers and other high-tech gear by 2003, China becomes a part of the global Information Technology Agreement.
The U.S.-Sino telecom accords, as ground-breaking as they are, were largely overshadowed by the failure of the two countries to agree on Chinese WTO membership.
“We have made significant progress toward bringing China into the World Trade Organization on fair commercial terms, although we are not quite there yet,” said President Clinton, in a press conference with Zhu last Thursday.
In a joint statement, Clinton and Zhu said they were committed “to work all remaining issues this year.”
In a statement, Motorola, a top U.S. mobile communications exporters to China, said, “It is vital to the expansion and health of international commerce that the most populous nation in the world fully participate in the organization responsible for more open and fair global trade.”
The administration desperately wanted to announce an agreement in support of Chinese WTO membership during Zhu’s visit here. But it was virtually impossible politically, given allegations accusing China of stealing U.S. nuclear secrets, securing sensitive satellite technology from U.S. firms, illegally funneling money into the Clinton-Gore campaign and contributing to the U.S.’ $57 billion trade deficit with the Asian nation.
Senator Majority Leader Trent Lott (R-Miss.) signaled a deal on Chinese WTO entry would not be welcomed. Weeks before Lott spoke out, Senators Jesse Helms (R-N.C.) and Ernest Hollings (D-S.C.) waged a campaign to deny Chinese WTO membership. Other lawmakers weighed in against a deal as well.
Had Clinton and Zhu reached an agreement on Chinese WTO entry it likely would have set up a high-octane political fight this summer over renewal of most-favored-nation trade status for China.
Rep. Chris Cox (R-Calif.), chairman of a select House committee probing U.S.-China high-tech trade, is set to release a 700-page report in the next week or so that is expected to be highly critical of the administration.
“While much hard work remains to complete China’s accession to the WTO, including addressing specific areas which we believe are critical to U.S. interests, these market access terms reflect the administrations commitment to a comprehensive, far-reaching commercially-meaningful agreement,” said Charlene Barshefsky, the U.S. trade representative.
