Double edge to Asia's trade barriers: the desire to pry open tech markets puts U.S. interests under microscope

America's Network, June 1, 2004 by Robert Clark

China policies on semiconductor tariffs and WLAN standards have caught the brunt of U.S. ire recently. But a report by the U.S. Trade Representative (USTR) shows they aren't the only high-tech trade barriers in Asia.

The annual USTR review of telecom trade agreements published recently highlights the constraints placed by Asian governments through manipulation of standards, secretive regulation and high termination fees.

In particular, the report served notice that it would closely monitor the development and application of standards in the key markets of China, Korea and Japan.

NOT NEUTRAL

In China, it singles out three issues: WAPI, CDMA450 and 3G licensing. WAPI is China's new mandatory Wi-Fi encryption standard, which differs from the existing 802.11 global standard, and which Intel has said its Centrino chip can't support.

China won't open up the 450-MHz band for commercial services because it is currently set aside for military use, while the 3G licensing process is attacked as not being technology-neutral.

In Korea, the problem is WIPI, which like WAPI is due to take effect on June 1. It's a Java-friendly mobile applications development platform, thus effectively marginalizing Qualcomm's BREW (although it is supported by another U.S. company, Sun Microsystems).

The USTR also complains that potential U.S. suppliers are excluded from the opening of the new Korean 2.3-GHz band. A similar charge is made against Japan's proposal to issue licenses in the 2010-MHz range.

Related to this, the report singles out the lack of transparence and independence of regulators and standards-setting procedures. Japan's MPHPT, for example, has made no rationale for its licensing policies. Both the MPHPT and China's MII are criticized for decisions which frequently favor government-controlled carriers.

The MII also comes under fire for its interference in IPR negotiations with U.S. suppliers, its inability to pass its much-awaited telecom law, and its arbitrary reclassification of VAS into basic (and hence off-limits to foreign firms) services.

FCC INVESTIGATES

Elsewhere, the report targets high mobile termination rates in calling-party-pays markets in the EU, Australia, Japan and New Zealand, and notes that the FCC is about to conduct an inquiry into the impact on U.S. consumers and business.

The report further identifies slow provisioning of leased-line services, and correspondingly high prices, in breach of GATS rules, by Australia, China, Singapore, New Zealand, as well as France and Germany.

It is worthwhile to note that the barriers don't just hurt American companies. The USTR reporting and lobbying process plays a critical role in breaking down barriers between markets.

Ironically, the U.S. has clearly erected barriers of its own. The rejection of Hutchison Whampoa's investment in Global Crossing on national security grounds is a case in point. The barrier was set quite low: Hutchison even offered to separate out its investment from day-to-day management of the international operator, which carries some traffic from the U.S. Defense Department. However, this too was rejected.

Critics argue that while U.S. activism on behalf of global free trade is welcome, too often the effect is to champion a particular U.S. interest without regard for costs or sheer commercial logic.

Clearly, the U.S. has played a powerful role in cracking open Asia's telecom markets. Millions of mobile and long-distance customers are evidence of the progress. The USTR report is the best rundown available on government efforts to rig telecom markets. Yet, critics complain that the message is weakened by a perceived double standard.