TCS Daily


Qualcomm's China Lesson

By Vic Fazio - April 10, 2000 12:00 AM

It seems that every established high-tech company is looking toward China and its billions of citizens as the motherlode of markets. Unfortunately, doing business in China, as Qualcomm found out, can be fraught with peril. However, where there's peril and uncertainty, there can also be opportunity.

On February 1, Qualcomm executives announced that they had reached an agreement with one of China's state-owned telecommunications companies, China United Telecommunications Corporation. The plan was to launch a mobile network in China based on Qualcomm's code division multiple access (CDMA) technology. However, several weeks later China put the brakes on the deal, at least for now. Why the sudden change of heart? Political insiders speculate that the delay is an indirect, yet crystal clear, signal to the U.S. government to grant China permanent normal trading status.

Normal trading relations (NTR) status is a preferential designation bestowed by the U.S. government on most of our trading partners. Since 1974, the Congress has been voting each year on whether to grant China NTR and every year it has been granted. This year, there's an intense effort to end the yearly voting and to grant China permanent NTR status (PNTR). Specifically, such status would advance China's application to join the WTO - the 135-member group of countries that sets the rules for international trade - which is of critical importance to Chinese Premier Zhu Rongji. Stateside, PNTR status for China is required before U.S. companies can benefit from the US-China trade agreement that was negotiated last fall.

U.S. groups supporting PNTR include tech businesses, manufacturers and agriculture, all of which hope to market aggressively in China. On the other side are organized labor, citing labor and human rights violations in China, environmental groups and protectionist politicians. Faced with strong opposition to PNTR, Chinese officials themselves have reached out to lawmakers to press their case. And they've also reached out to U.S. business executives to encourage them to lobby their representatives.

What's likely to happen this year? The Washington politicking around this issue is intense. The Clinton Administration wants permanent NTR status passed by early summer so it doesn't get caught up in election-year politics. The House is due to take up the measure in May. Today, it's unclear whether there are enough votes to pass the measure. Passing PNTR in the Senate will be much easier.

If your company is looking toward China as a potential market for your product, you may want to heed the Qualcomm experience and perhaps wait until the dust clears on the PNTR debate. On the other hand, there's an opportunity here. If your company sees big upside from China trade, you may be wise to ramp up your support for PNTR. And there's a strong case to be made that more China trade is good for everyone - U.S. workers, who benefit from increased exports, U.S. consumers, who get more choices, and the people of China, who finally will have access to a world of U.S. products.

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Vic Fazio and Vin Weber are former Members of the U.S. Congress, and now managing partners of Clark and Weinstock, a public policy consulting firm with offices in New York and Washington.

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