WASHINGTON-Beijing appears to be thumbing its nose at wireless provisions of the landmark U.S.-China trade agreement, posing potential problems for American mobile-phone firms and the next administration.
The move comes as a group of U.S. wireless executives prepare to meet with their counterparts in China later this month. The trip is being organized by the Cellular Telecommunications and Internet Association.
The South China Morning Post, citing official government comments in The Workers Daily, reported Nov. 4 that China will curb further foreign investment in mobile-phone production as part of a government strategy to protect Chinese wireless manufacturers.
As such, new joint ventures and wholly owned foreign firms would be locked out of a Chinese market potentially worth billions of dollars.
In addition, according to the South China Morning Post, China has set quotas on domestic content and export levels for foreign manufacturers currently doing business in China.
“This seems counter to their accession into the WTO, and it would be difficult for them to keep investment restrictions once they do enter the WTO,” said Eric Nelson, vice president of international affairs at the Telecommunications Industry Association.
The Chinese embassy here did not return calls for comment.
China is in the final stages of negotiations to gain entry into the Geneva-based World Trade Organization. China is not expected to become a WTO member until next year, though continued trade spats with the United States, European Union and others could delay that action.
The latest flare-up in U.S.-Sino trade follows President Clinton’s signing last month of legislation giving China permanent normal trade relations status. Around the time of the Oct. 10 bill signing ceremony at the White House, the United States accused China of reneging on its trade commitments. China denied the charge, saying the Clinton administration was trying to squeeze out more trade concessions from Beijing.
Wang Jianzhang, deputy chief of the General Planning Bureau of the Ministry of Information Industry, reportedly told a group of domestic mobile-phone suppliers that the Chinese government will prohibit new foreign investment in phone manufacturers.
China has hand picked 10 firms to build mobile phones. Most of the 70 million mobile phones in operation in China are built by Nokia Corp., L.M. Ericsson and Motorola Inc. Beijing wants to change that.
Beijing makes no secret of its desire to further the interests of domestic mobile-phone manufacturers at the expense of foreign vendors.
Ma Xiuhong, an assistant vice minister of Foreign Trade and Economic Cooperation, is said to have told Chinese mobile-phone manufacturers that economic reforms would intentionally exclude wireless business.
For the mobile-phone sector, Ma said the government would exercise a planned economy.
Of the 28 million mobile phones sold in China this year, according to the South China Morning Post, domestic mobile phones have accounted for 10 percent. Beijing wants that figure increased to 15 percent by year’s end. The beneficiaries of government support include major Chinese wireless manufacturers, such as Datang, Huawei and Zhongxing.
Xie Linzhen, an MII official, previously said domestically manufactured handsets and base stations could capture half the market by the end of 2003 and homemade switching systems could gain a 70-percent market share by that time.
Ericsson said it was unclear whether the Swedish mobile-phone manufacturer was aware of the latest turn of events in China. “Business is often unusual in China,” said Kathy Egan, an Ericsson spokeswoman.
Communist China, whose 1.3 billion people and spotty telecom infrastructure represent an unprecedented trade opportunity for U.S. wireless companies, has a history of making conflicting statements on mobile-phone digital standards and trade policy generally.
Some Chinese experts predict rough times ahead for U.S. firms-including wireless investors and manufacturers-because China lacks a tradition of rule of law.
Such problems in a WTO environment could trigger global trade disputes that could end up being costly-both in financial and political terms-for wireless firms and the U.S. government.
America’s telecom trade problems are not just with China, though. The United States is struggling to enforce trade agreements with Japan and lots of other countries, many of whom are trying to transition from state-owned monopolies to privatized telecom firms.
Last week, the USTR requested the creation of a WTO dispute settlement panel to arbitrate an interconnection dispute between the United States and Mexico.
In addition to ensuring that China keeps its promise to open wireless equipment and services markets, the Clinton administration also continues to fight with Beijing over intellectual property protection.
Last week, Assistant U.S. Trade Representative Joe Papovich warned China that failure to curb counterfeiting of products could jeopardize China’s WTO membership campaign.
Global Wireless correspondent Michel Lens in Beijing contributed to this report.
