WASHINGTON-Congress and the Bush administration are on a collision course on China trade policy, a gathering storm with political and economic implications that could spin out of control and hurt American wireless firms that have invested considerable resources to gain a foothold in what has become the world’s top mobile-phone market.
While the GOP-controlled Congress and White House agree the U.S.’ $103 billion trade imbalance with China is problematic, they do not see eye to eye on how to deal with it. Overall, the United States had a global trade deficit of nearly $420 billion in 2002.
Some signs of trade unrest are obvious. Other indications are tucked into legislation. They all add up to a sense of urgency on the issue.
Treasury Secretary John Snow this week travels to Asia where he will meet with officials in Beijing. Snow is expected to raise trade issues with his Chinese counterparts.
In July, the House passed an appropriations bill that directly addressed the China trade issue. The committee report cites serious trade problems-especially regarding China-facing the Bush administration. Most significantly, the committee report calls for a reorganization of the International Trade Administration. ITA is a unit of the Commerce Department.
“The United States government has an obligation to ensure American companies are not forced to compete with foreign companies that are engaged in unfair trading practices,” the committee report stated.
The appropriators said its recommended ITA overhaul “clarifies the mission of each assistant secretary and realigns resources to strengthen new priorities in manufacturing and services to improve customer service, to create a better analytic basis for U.S. trade policies and negotiations, and to address the root causes of unfair trade practices.”
Ron Bonjean, the spokesman for Commerce Secretary Donald Evans, did not return calls for comment. Separately, Evans is pushing for reorganization in his department that would merge telecom and high-technology policy functions currently housed in different agencies. But it appears the plan lacks the support of key Senate members.
While the administration’s position on the House-proposed ITA reorganization is unclear, the White House has criticized other trade provisions in the House Commerce appropriations measure. On July 22, the administration objected to additional $5 million in funds approved for the U.S. Trade Representative in fiscal 2004.
“The unrequested earmark of $2 million for enforcement and monitoring of China’s trade commitments is unnecessary,” the White House said. Some critics argue that is precisely what is required to ensure the United States can compete in China on a level playing field.
Unlike past years, when industry’s challenge was to gain entry into a massive Chinese land of 3 billion inhabitants, this trade controversy appears to be fueled by U.S. companies that lack a major presence in China and that have been hurt by cheap Chinese imports. Some policy-makers and manufacturers complain currency manipulation by Chinese officials has made U.S. goods and services prohibitively expensive-adding 40 percent to cost-in China. Meanwhile, they say, China is flooding America with products priced below anything U.S. companies can offer.
The result: layoffs and growing anger around the country heading into the 2004 election year.
Nearly 3 million U.S. jobs have been lost in the past few years. While China is not the sole cause of job loss in the states, it has become a huge target of politicians-Republicans and Democrats alike.
Top wireless suppliers-here and overseas-tend to be multinational corporations. Many vendors have operations in China, and they have partnered with home-grown Chinese wireless firms. It is a fragile relationship, one buoyed by a 1999 landmark free-trade agreement and China’s entry into the World Trade Organization in 2001.
The risk for U.S. wireless companies is getting caught up in a major trade dispute at a time when they are banking on increased sales in China and other emerging markets to offset lackluster consumer demand in the U.S. and other countries where wireless technology has penetrated the masses. Several major wireless vendors contacted by RCR Wireless News said they could not comment on China trade.
Billions of dollars in wireless infrastructure and phone contracts are on the line in China.
Despite making significant inroads in China, doing business in a country with no tradition of rule of law and plenty of combustible political baggage remains a challenge for wireless firms. Indeed, the United States and others are watching closely Chinese’s plans to roll out a proprietary standard for third-generation mobile phone service.
Some caution that change in China-whose old guard is giving way to a new generation of leaders-will be slow and that China should be credited with progress it has made so far.
“China is the architypical aircraft carrier. You do not turn it around overnight,” said Scot Montrey, a spokesman for the National Association of Manufacturers.
“Like any market, there are unique challenges. The fact is China is a particularly important one and those challenges will be met,” said William Plummer, vice president of government and industry affairs for Nokia Corp.
Nokia, based in Finland with operations in the U.S. and around the globe, is the world’s top cell-phone maker.
“While some players are seeing progress in China since it became a WTO member, others have not and they are vocal about it,” said Jason Leuck, director of international affairs at the Telecommunications Industry Association. TIA represents U.S. telecom manufacturers.
