WASHINGTON-As the Clinton administration scrambles to strike a deal on China membership in the World Trade Organization before the start of a global trade conference later this month in Seattle, it appears that major telecom concessions made here in April by Chinese Prime Minister Zhu Rongji are off the table.
“I do think all the concessions Prime Minister Zhu made in April are in doubt, especially the telecom provisions,” said Greg Mastel, director of the Global Economic Policy Project at the New America Foundation here.
Not only is China backing away from allowing up to 51-percent foreign ownership in telecommunications carriers, but Beijing-pressured at home by anti-reform factions that fear a massive economic fallout from a WTO deal-is gradually tightening restrictions on importing mobile phones.
Both developments have huge economic implications for the wireless industry. Indeed, the apparent reversal in fortune could end up costing U.S. wireless firms billions of dollars in a lost global commerce opportunity.
China, with its 2.2 billion people and antiquated telecom infrastructure, represents an unprecedented export opportunity for American wireless equipment suppliers like Motorola Inc., Lucent Technologies Inc. and Qualcomm Inc. The same goes for U.S. carriers and investors that can export the technical and financial expertise necessary to build and operate successful wireless systems abroad.
Clinton, himself caught between warring factions in the administration, rejected Zhu’s offer in April. That and a series of subsequent events (NATO bombing of the Chinese Embassy in Yugoslavia, nuclear spying charges and technology trade allegations against China) sent U.S.-Sino relations into a tailspin from which it has never completely recovered.
On Oct. 1, China negated foreign telecom investments in China Unicom-called China-China-Foreign-once agreed to by government leaders. Much of the $1.4 billion invested by U.S. firms on wireless and wireline ventures affiliated with China Unicom likely will be lost.
A spokeswoman for the U.S. trade representative declined to characterize the status of U.S.-Sino trade relations.
Clinton, who quietly tried to jump-start trade talks with China at a September trade meeting in New Zealand, reportedly called Chinese President Jiang Zemin Oct. 16 to again break the deadlock. That gambit was followed, according to The New York Times, by a trip to China by Treasury Secretary Lawrence Summers.
The circumstances and forces at work surrounding U.S.-Sino trade talks are so complex as to make the question of China WTO membership nearly impossible to predict, according to experts. They include a mix of domestic and foreign political factors that carry different weight at varying times.
Mastel gives an agreement this year on China WTO membership only a 30-percent chance. He said Li Peng, second in command to Chinese President Jiang Zemin, is gaining influence among factions in China opposed to the WTO.
The anti-WTO factions in China no doubt realize the convulsions Russia has experienced in trying to make the transition from a state-run economy to a global commerce system that emphasizes free trade.
That Clinton appears to want a China WTO deal more than China now is attributed by Mastel to the president’s fixation on his legacy.
If it is true the White House is willing to settle for less than what Zhu offered six months ago, it would call into question whether the administration oversold to industry and public its tough posture on Chinese trade-one that repeatedly demanded a deal only on “commercially acceptable terms.”
Eric Nelson, vice president of international affairs for the Telecommunications Industry Association, is leery of press reports last week that suggested the administration might be willing to negotiate away telecom trade concessions. TIA represents U.S. telecom equipment manufacturers.
Nelson pointed out the European Union, which is working strategically with the United States on a China WTO deal, wants China to agree to an even higher foreign-ownership level (67 percent) in telecom service providers than that sought by this nation. The American telecom industry likely would even settle for less than the 51 percent proposed by Clinton.
“There’s been an impressive solidarity between the U.S. and EU on these negotiations, so I don’t think the U.S. would undermine the EU,” said Nelson.
China, according to Nelson, sets 67-percent ownership as the benchmark for controlling interest in its telecom service providers.
Nelson said the crackdown on mobile phone imports is not new, but rather part of an ongoing effort by Beijing’s Communist leaders to protect the country’s own phone vendors.
“If China joined the WTO they wouldn’t be allowed to do this,” said Nelson.
China, according to Nelson and Mastel, have a lot to lose by resisting WTO membership. The meeting of trade ministers in Seattle is a prelude to a new round of global trade talks.
Without WTO status, China will be unable to influence negotiations that will shape trade for years to come.
Moreover, if a deal does not happen in 1999, it is not likely Congress would agree to a China WTO deal in an election year because of the controversy it could spark among voters, labor, environmentalists, human-rights advocates and others.
“Now is the time to do this,” said Nelson.
