Telecommunications: Primacy of Power and Regulatory Battles for Promoting National Standards - Part 10

Government interest and involvement plays a critical role in today's global ICT industry.

MNCs in developed countries increasingly complain about the use by their trading partners of technical standards and other standard-related requirements as barriers to trade. This increases the costs of exporting to the country in question because the companies trying to export must change their product line to meet the special standards requirements of the country in question. Under tremendous pressure from industry, Western governments are actively involved in a “standards war” with the developing countries, particularly China. One well-publicized case is the issue of the Wireless Local Area Network (WLAN) Authentication and Privacy Infrastructure (WAPI) standard. In May 2003, the Chinese government issued compulsory WAPI security standards that were set to become effective on June 1, 2004. The Chinese government said the standard was needed for national security reasons. Moreover, China provided the technology underlying this mandatory technical standard to only 24 domestic producers of wireless equipment, and designated these companies as the obligatory production partners for any foreign manufacturers willing to license the mandated technology and seeking to market their products in China. This policy left Western technology companies two options: either collaborate with a select number of their Chinese competitors to coproduce products for the Chinese market and potentially have to share valuable intellectual property with Chinese competitors, or abandon the profitable Chinese market and its opportunities altogether. U.S. industry raised a loud and strong voice on this issue. Major IT companies such as Intel worked hard to make sure this issue was on the agenda of both the US Administration and Congress. On March 2, 2004, in a joint letter signed by U.S. Secretary of State Colin Powell, U.S. Commerce Secretary Don Evans, and USTR Robert Zoellick to Zeng Peiyan, Vice Premier of the People's Republic of China, the Bush administration urged the Beijing to drop WAPI. After considerable dialog, culminating in the April 2004 meeting of the US-China Joint Commission on Commerce and Trade, the Chinese government agreed to indefinitely suspend implementation of this mandatory standard and participate in international standard bodies (USTR, 2004). By standing firm against WAPI, the U.S. government has ensured that the fast growing wireless market in China remains open to U.S.

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