THE BUSH ADMINISTRATION’S DECISION TO PRESS TRADE COMPLAINTS AGAINST CHINA COULD COMPLICATE ALREADY-FRAGILE U.S.-SINO BILATERAL RELATIONS ON KEY TELECOM ISSUES, INCLUDING THE ASIAN GIANT’S PURSUIT OF ITS HOMEGROWN TD-SCDMA TECHNOLOGY, EVEN AS BEIJING SAYS IT IS COMMITTED TO TECHNOLOGY NEUTRALITY IN THE ROLLOUT OF THIRD-GENERATION MOBILE NETWORKS.
China warned U.S. trade actions against it over intellectual property right theft could mean an end to the business-as-usual dance between the two global economic powers.
“Such a move would seriously damage the cooperative relations established in the fields, and would have negative impact on bilateral trade,” said Wang Xinpei, a spokesman for China’s Ministry of Commerce.
Agitation in Congress and the business community (particularly Hollywood) with China over piracy, currency and trade deficit issues have been festering for many months. “Piracy and counterfeiting levels in China remain unacceptably high,” said U.S. Trade Representative Susan Schwab. “Inadequate protection of intellectual property rights in China costs U.S. firms and workers billions of dollars each year, and in the case of many products, it also poses a serious risk of harm to consumers in China, the United States and around the world.”
Wireless impact
Both the nature of the WTO complaints and the country at the receiving end of them are potentially significant for the wireless industry. China is the world’s largest cellphone market and has plenty of room for growth in the land of 1.3 billion people. One estimate has China reaching 600 million subscribers by 2010. Operator China Mobile now has as many cellular subscribers as there are people in the United States.
As such, U.S. wireless vendors like Motorola Inc., Qualcomm Inc. and (before its acquisition by France’s Alcatel S.A.,) Lucent Technologies Inc. have benefited from lucrative contracts totaling billions of dollars. Meantime, content is increasingly seen as a wireless growth engine.
Making headway in China’s wireless service sector has been more troublesome for the U.S. and others, as USTR outlined in a telecom trade report released the day after announcing the filing of WTO complaints against China. China joined the WTO in November 2001.
“China’s high registered capital and joint-venture requirements continue to pose significant barriers to market entry. . Given the de facto duopoly China currently maintains in every telecommunications sub-sector, this policy reduces joint-venture partners to a commercially untenable number,” the USTR report stated. “USTR urges China to clarify that any generally qualified Chinese company is eligible to be a joint-venture partner in the telecommunications sector. Recent reports in the official Chinese press documenting collusive agreements between the two largest wireline operators in China underscore the difficulty any new entrant will have in finding a competition-friendly joint-venture partner among incumbent operators.”
The USTR also blasted China over its failure to adhere to WTO commitments on regulatory independence. “The Chinese government still owns and controls all major operators in the telecommunications industry and the Ministry of Information Industry still regulates the sector,” the trade report said. “Without a more independent regulator, it will be difficult to address broad concerns such as ensuring fair and equal treatment of foreign-based telecommunications operators, and transparent policymaking, licensing and terms of operation.”
But the marquee issue that cuts across China’s massive wireless service and vendor markets is 3G deployments. Billions of dollars are up for grabs in the selection of equipment suppliers and the future revenues from 3G service in a historically underserved country where wireless has showcased the dramatic leapfrogging of communications technology.
China has delayed awarding 3G permits as it shores up testing and development of its native, globally approved TD-SCDMA standard. China wants to have 3G services on display for the 2008 Beijing Olympics.
