WASHINGTON-The Bush administration hit the trifecta on wireless trade last week, winning concessions from China and South Korea on Wi-Fi, third-generation wireless and mobile Internet services that advance U.S. business opportunities in the booming Asian region.
The wireless trade disputes with China and South Korea steadily escalated in recent months, with White House public rhetoric growing more hostile by the day, even as quiet diplomatic efforts progressed behind the scenes.
In March, the United States filed the first complaint against China-which joined the World Trade Organization in 2001-over its tax policy for semiconductors. U.S. policy-makers and industry claim Chinese tax laws favor domestic firms and discriminate against American high-tech vendors.
The stakes were rising for both sides, partly owing to election-year tensions here over the U.S. trade deficit with China, China’s fixed currency and outsourcing of American jobs to China and elsewhere. China has its own challenges at home.
Something had to give.
In the end, China and South Korea blinked. But it is only a cease-fire of sorts, with other tech trade differences-such as evolving 2.3 GHz portable Internet guidelines in South Korea-remaining unresolved, or worse, out of reach. And ensuring China lives up to its WTO commitments has become a full-time job for the White House and Congress.
More than anything, the wireless trade rows with China and South Korea underscore how technical standards have become the new battleground in the global trade arena. Standards represent a form of trade barrier far more subtle than other market obstacles but just as damaging to U.S. exporters.
“This week marks a number of key trade successes for the United States high-tech industry,” said Robert Zoellick, U.S. trade representative. “China took a significant step in embracing technology neutrality in its telecom policy. Based on the deal we reached with Korea, American telecommunications companies can now be assured of unimpeded access to this important market. American businesses and workers will continue to provide cutting-edge products and services to the growing Asian market.”
Indeed, it was an extraordinary week for Zoellick and his team at USTR. Last Thursday, with Chinese Vice Premier Wu Yi here for the Joint Commission on Commerce and Trade meeting, the Bush administration persuaded China to abandon its Wi-Fi security standard known as the WLAN Authentication and Privacy Infrastructure, or WAPI.
“This is a landmark day and a very fruitful day in terms of the developing relationship between the United States and China,” said Commerce Secretary Donald Evans.
The agreements enabled top U.S. and Chinese officials to avoid a major embarrassment at the meeting.
“Economic and trade relations are the important foundation of the China-U.S. relationship. An economic and trade relationship that is equal and mutually beneficial is of great significance for the comprehensive and sound development of the China-U.S relationship in the new century,” said Wu.
China planned to implement WAPI June 1. Intel Corp., the world’s biggest chipmaker, said it would boycott China’s Wi-Fi standard. Now, with Beijing reversing course, Intel said it is ready to do business again in the world’s most populous nation and biggest wireless market on earth.
“This is a very positive outcome for our trade relationship with China,” said Rhett Dawson, president of the Information Technology Industry Council. “The decision by the Chinese to continue to develop the WAPI standard through the international standards process will benefit the Chinese and global industry and consumers everywhere. Being able to use the Internet anytime, anywhere is key to future productivity and Wi-Fi is one of the key wedge technologies that allow us to link not just people to people, or people to machine, but machine to machine.”
The U.S.-Sino pact did more than just resolve the WAPI war. It pre-empted a future trade spat over 3G technology. As such, China agreed to technology neutrality. That is code for saying it will not force its mobile-phone carriers to deploy wireless systems based on China’s TD-SCDMA standard for 3G services.
In addition, according to USTR, China said it will not be involved in negotiating royalty payments with relevant intellectual property-rights holders.
Last Friday, less than 24 hours after striking a deal with China, the Bush administration said it settled a disagreement with South Korea that could have locked Qualcomm Inc.’s BREW technology out of a key Asian market that ironically embraces the San Diego company’s CDMA technology to a degree unmatched anywhere in the world.
For that reason, it was a particularly difficult trade issue for Qualcomm to navigate.
South Korea wanted to mandate its Wireless Internet Platform for Interoperability standard. WIPI competes with BREW and other download software applications.
“We believe freedom for each operator to select a preferred wireless Internet platform to meet its customers’ needs will maintain a high level of competition and creativity in the South Korean wireless market,” said Qualcomm Chairman Irwin Jacobs.
