WASHINGTON-While U.S. companies have made inroads into China’s massive telecom market, they say there are still serious obstacles preventing them from competing for business in next-generation technologies and telecom services.
U.S. Trade Representative Rob Portman, who next month must report to Congress on China’s compliance with World Trade Organization commitments, concedes problems persist four years after the Asian giant was admitted the global trade body.
Lately Portman has been trying to send China explicit signals about the Bush administration’s concerns at a time when the White House is trying to salvage the president’s trade agenda.
“If investment limits were raised there would still be joint ventures and there would still be many Chinese learning from foreign experts. In fact, I believe this would spur even more investment,” said Portman. “Beyond the limits on investment, there are also increasing numbers of technical barriers to trade that interfere with U.S. companies’ access to the China market. Cumbersome, opaque and unequally applied rules in telecommunications, insurance, financial services and other sectors continue to stymie foreign firms.”
Motorola Inc., Lucent Technologies Inc. and Qualcomm Inc. have had early success in the world’s largest mobile-phone market, cumulatively winning billions of dollars in contracts. But in a country with 1.3 billion people-most of whom lack basic communications-the business opportunity has barely been tapped.
A tech group, including the Telecommunications Industry Association, told USTR that China’s progress on trade is offset by many lingering problems.
“Ministry of Information Industry has effectively precluded foreign companies that own essential intellectual property rights for third-generation wireless communications standards from negotiating technology licenses and royalty agreements directly with Chinese companies, which is the customary business practice globally,” the tech and telecom trade groups said. “Rather, at the risk of being denied access to the Chinese market, foreign companies have been pressured to enter into negotiations involving royalty rates and other licensing terms with a committee led by the China Academy of Telecommunications Research, a government institution subordinate to MII.”
In addition to technology licensing, another related hot spot in U.S.-China trade involves the alleged use of technical standards as trade barriers. Here, U.S. telecom and tech firms are unabashed in sizing up a situation in which they assert China is snubbing its nose at accepted international standards.
“China remains focused on developing and maintaining unique Chinese standards that feature Chinese technologies to the exclusion of leading technologies of foreign origin,” stated U.S. telecom and high-tech trade associations. “For example,” they told USTR, “although there is no commercial demand for alternate technologies, China is developing divergent standards for important technologies such as Internet protocols, mobile communications (e.g. TD-SCDMA), audio-video capture and playback, document and data protection and inventory management (e.g. radio frequency identification).”
Last year, industry and political pressure prompted China to abandon a June 1 scheduled implementation of a homegrown Wi-Fi security standard known as the WLAN Authentication and Privacy Infrastructure. Had China gone forward with WAPI, it would have locked out Intel Corp., Cisco Systems Inc. and other U.S. high-tech firms. At that time, China also promised not to force its mobile-phone carriers to deploy wireless systems based on China’s TD-SCDMA standard for 3G services.
The U.S. tech groups said entry into China’s telecom services sector is stymied even as China drafts a telecom law.
“The telecom law has been in closed-door debate in China for too long and should be aired publicly and rapidly implemented,” asserted U.S. telecom and tech representatives. “There is substantial data from other liberalized markets that can enable China to rapidly craft and implement an appropriate regime that meets international norms but also embeds appropriate Chinese characteristics.”
But getting Chinese legal and regulatory processes to emulate those in Western industrialized nations is no small task. China has no tradition of rule of law, a fact that will test China’s grand experiment of growing its economy without embracing fundamental democratic principles.
On top of America’s huge trade deficit with China and a huge piracy problem in China, the U.S.-Sino trade relationship is further complicated by prickly military and human-rights issues.
