Telecommunications: Primacy of Power and Regulatory Battles for Promoting National Standards - Part 4

What characterizes this model is the proactive role played by a strong state and export-driven economic policy based on a strategy of technology imitation. Government agencies in these two countries made extensive efforts to identify critical technologies, bargained hard over the terms on which these technologies would be transferred to domestic firms, and created conditions to protect and nurture new industries using these technologies once they were established (Samuels, 1994). China has adopted all these measures. However, dominant firms in today's global competition are increasingly the firms that establish standards. The most obvious examples are Microsoft and Intel, the so-called “Wintelism” (Borrus & Zysman, 1997). Standards are not the same as critical technologies — companies do not transfer standards, they only charge royalties. In other words, the Asian development model was able to work because technology could be easily imitated or transferred from leading markets to emerging markets through trade and investments. The same, however, is not true of standards.

Second, trade barriers and protected market are more difficult to maintain under economic globalization and the commitments China made in order to join the WTO. Traditional mercantilist policies fostering domestic capabilities and protecting infant industries are measures that restrict or discourage direct foreign investment and impose tariff and nontariff barriers to trade. However, these policy initiatives are no longer feasible in today's environment of economic interdependence. Long before China's WTO accession in 2001, China had liberalized its trade regime and welcomed foreign investment. Partly to facilitate its WTO accession negotiation, China significantly lowered its tariff levels and removed nontariff barriers. For example, Branstetter and Lardy argue that in a narrow growth accounting sense, it is simply not true that net exports have been a consistently important driver of China's economic growth in the 1990s. Growth in imports has broadly kept pace with growth in exports. (Branstetter & Lardy, 2006). During the 1990s, China was the largest recipient of FDI among developing countries. China has taken in a total of US $650 billion in FDI since 1978, ten times the total stock of FDI that Japan accumulated between 1945 and 2000, and far more than any other emerging market economy (Gilboy, 2004, p. 33). The trend of trade liberalization and FDI openness has strengthened even more since 2001, when China formally joined the WTO.

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