WASHINGTON-Tensions continued to escalate last week over relations with China and a pending U.S.-Central American trade pact backed by telecom and tech sectors. The developments could lead to disruptions in commercial ties with the world’s largest mobile-phone market and further delay rollout of third-generation wireless systems in the huge Asian nation of 1.3 billion people.
Bipartisan hostility already had been growing in response to the massive U.S. trade deficit with China and the country’s resistance to revaluing its currency. A Chinese oil company’s bid last week to buy a major U.S. energy firm has exacerbated the situation on Capitol Hill, where free traders as well as lawmakers potentially vulnerable on trade in the 2006 election are speaking out. If the Bush administration signs off on a Chinese takeover of a U.S. oil giant, it could become politically palatable in theory for China’s Huawei Technologies Co. Ltd. to gobble up Lucent Technologies Inc. At that point, a trade debate would quickly be transformed into a serious discussion about homeland security.
While U.S.-China trade friction does not center on specific telecom or tech issues-though standard-setting and intellectual-property rights issues remain combustible-any significant souring of trade relations could indirectly hurt American wireless and high-tech companies that have as much to lose as they do to gain in the ever-growing Chinese market.
Motorola Inc., Lucent and Qualcomm Inc. have invested significantly in China, and some have been rewarded with wireless contracts totaling billions of dollars. Already China has nearly 400 million mobile-phone subscribers. But that’s only the start, since most people in China have no wired telephone service.
The Chinese Ministry of Information Industry predicts $30 billion in 3G-infrastructure investments and $10 billion in handset business there by 2006.
Some skeptics suspect China is holding back 3G mobile-phone deployment until its home-grown TD-SCDMA standard is ready for prime-time, even while the two dominant 3G technologies-W-CDMA and CDMA2000-are being deployed in other countries. China has caused its share of heartburn with controversial technical standards on Wi-Fi security, radio frequency identification systems and other technologies.
“For China, the stakes of controlling the standards involve more than liberation from the costly royalty regimes. For a country gathering political and economic momentum, it’s also about being the master of one’s domain and not being beholden to foreign IP,” stated the China Economic Review in its June issue.
Last week, there were reports that tests of China’s TD-SCDMA technology went poorly. That could cause more delay in 3G deployment in China. Worsening U.S.-China trade relations could make the 3G wait in China even longer.
“A trade war would not be in the interest of anyone,” said Jason Leuck, director of international affairs at the Telecommunications Industry Association. “I think what we have from both sides is hyperbole and political noise-making.”
But even if the heated trade rhetoric on Capitol Hill does not portend a major trade conflict, the sentiment could bleed into Congress’ consideration of the U.S.-Central American Free Trade Agreement. Telecom and high-tech companies are aggressively lobbying for congressional approval of the pact, a critical component of President Bush’s trade agenda.
On Tuesday, the Senate Finance Committee will take up CAFTA in an executive session.
