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On The Horizon: Joining WTO Means Playing By Global Rules

China is trying to use its market size to leverage control of wireless.

If China participated in the international standards-setting process relating to the wireless sector, it could sell more of its wireless products globally. It also could buy more wireless products from its trading partners at competitive prices.

Technology products can't be developed, manufactured, and refined without broadly accepted technical standards. As a result, manufacturers most often seek broad industry consensus on those standards. In the wireless arena, IEEE 802.11 is essentially a global standard. More than 1,000 products have supported this standard since 1999, and many wireless networks in homes and businesses use products based on it, according to the Wi-Fi Alliance.

China, however, has its own idea when it comes to wireless. As noted in the "2002 China Science and Technology Indicators," published by the Scientific and Technical Documents Publishing House in Beijing, China has "deployed and implemented a technical-standards strategy" that aims "to break up [the] technical-standards monopoly imposed by developed countries in international trade."

That may be one reason China has created a wireless LAN encryption standard that's incompatible with the 802.11 and the 802.11i security standards used in most wireless products. China is trying to use the size of its market and a proprietary standard to leverage control of the wireless sector. To that end, it appears that China is requiring foreign companies that want to manufacture WLAN products in the country or export them there to partner with Chinese companies designated by the government as production partners.

To put this in perspective, IDC says that 26% of U.S. exports to China are high-tech goods. In 2002, that reached $125 billion. That's a lot of PDAs and laptops.

There are many reasons this is the wrong move for China. Products based on a proprietary standard won't be attractive in a global marketplace. A proprietary standard will drive development costs of existing products up as companies try to adapt them to the Chinese standard. It's inefficient for everyone but Chinese companies. The Chinese will lose and so will everyone else in the wireless space.

The Chinese lobbied hard to be part of the World Trade Organization, yet many feared they weren't interested in a level playing field but just wanted more trade leverage and global credibility. The Bush administration, in a letter to His Excellency Zeng Peiyan, the vice premier of the People's Republic of China, that was signed by Secretary of State Colin Powell, Commerce Secretary Don Evans, and U.S Trade Representative Robert Zoellick, recently reminded the Chinese of their WTO commitments.

If China wants to be part of the international standards process, it should work with the IEEE in an open setting, arguing it out like everyone else. Instead, it has walled itself off and created a wireless standard for its own market.

China has entered the WTO, but culturally it still doesn't embrace free trade. The rest of the world hopes it will.

Bradford C. Brown is chairman of the National Center for Technology and Law at the George Mason University School of Law. Reach him at bbrown2@gmu.edu. (Any opinions expressed in this article are solely those of the author and do not necessarily represent those of the George Mason University School of Law.)

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