High-Tech Firms Join Push for Trade Ties With China
Few people know more about China’s piracy of U.S. software than the Americans who have lost money from it.
“They not only copied our software,” said John Chen, chief executive of Sybase, a global software firm based in the Bay Area. “They were exporting it to Southeast Asia. You could see pirated copies in Singapore, Hong Kong and Malaysia.”
Chen may sound like a recruit in the army of critics who argue that China has not yet earned the privilege of normal trade ties with the United States--one of the most contentious issues facing Congress.
But quite the contrary. Like a surprisingly large number of his high-tech counterparts, the Sybase executive has journeyed to Congress to argue that trade with China means profits for America. On an issue as closely contested as this one, high tech’s unprecedented push could make the difference.
“It’s an opportunity we can’t miss,” Chen said.
Not long ago, Silicon Valley took great pride in its aloofness from national politics. And the attitude was mutual; politicians in Washington were among the last to recognize the soaring importance of high-tech industries in a changing global economy.
But no more. High-tech firms have taken a highly visible role in pushing for permanent, normal trade ties with China. They are holding news conferences, buttonholing legislators, making speeches and signing letters in quest of a deal that, they proclaim, offers markets too breathtaking to ignore.
For many lawmakers--attracted by the tripling of high tech’s war chest for political donations in just four years--the push has added another layer of pressure on a vote that is already causing anguish.
“The old companies are still there, but the new leadership brought by high tech is having a notable impact” on the China debate, said Greg Mastel, director of the global economic policy project at the New America Foundation. “These companies are seen as the companies of the future, and it gives them a huge cachet.”
Under November’s sweeping trade deal with the United States, China would slash tariffs on an array of high-tech products, allow foreigners to own as much as 50% of a range of telecommunications services, and lift geographic restrictions that keep modern information technologies away from many of its 1.1 billion citizens.
But as advocates of normalized trade are quick to point out, there is a catch: China will not give Americans those benefits unless Congress approves permanent, normal trade ties. It will, however, confer those benefits on America’s rivals.
It is a point made personally in recent weeks by executives from technology-oriented firms including Intel, Motorola, Harris, Cypress Semiconductor, Sun Microsystems, Lucent Technologies, LSI Logic, Micron Technology, United Technologies and Electronic Data Systems during pilgrimages to Washington.
Failure to normalize economic ties would leave “American companies, their workers and positive business practices on the sidelines,” warned Jim Whittaker, Hewlett-Packard’s director of international public policy, during a recent high-tech news conference inside the Capitol.
Take the case of Intel, which assembles computer chips in Pudong, an industrial district of Shanghai. Chinese officials do not let it sell those chips in the country. So Santa Clara, Calif.-based Intel is forced to ship the goods to a trading company in Hong Kong, which ships them right back to the Chinese mainland--and pays tariffs of up to 10% and a 17% value-added tax.
With normal trade ties, said Michael C. Maibach, Intel’s vice president for government affairs, “everybody is going to gain: Chinese consumers. Growth of the Internet. Growth of U.S. companies. Our employees in California. Our employees in Oregon.”
High-tech firms are hardly the first to view China as a market of vast commercial potential. They may be unique, however, in how intimately their business aims interact with an acutely sensitive political matter to China--the free flow of ideas.
They argue that their goal of making money also supports an entirely separate goal of the U.S. government: promoting political reform in China by exposing its people to new ideas that technology, especially the Internet, will deliver.
Fewer than 20 million Chinese have used the Internet, for example. That contrasts with 100 million in the U.S. and Canada, whose combined population is less than 30% of China’s.
For cellular telephones, personal computers, pagers and other technologies, the story is similar: China’s use of these products, already growing rapidly, could reach staggering levels, almost surely transforming its society in the process.
“Imagine the effect of the Internet when you hit the 100-million [user] mark, the 200-million mark,” said U.S. Trade Rep. Charlene Barshefsky.
Given the political sensitivities, Barshefsky added, information technology “was the hardest area to negotiate” in the sweeping trade deal with China, and in the end China made “really very dramatic” concessions.
Of course, not everyone is as enthusiastic as the high-tech crowd about bringing down trade barriers to China. A group of labor-oriented trade critics recently warned that expanded trade with China “will destroy, not create” U.S. jobs, including those in information-related technologies.
The critics cited China’s practice of demanding that U.S. firms transfer technology to China as a condition of trade, a policy that threatens American jobs. China has pledged to refrain from that practice--a promise the group said was unlikely to be kept.
“Our trade with China is a particularly great threat to employment in high-tech industries such as aircraft, computers and telecommunications equipment,” said Robert Scott, an economist with the Economic Policy Institute in Washington.
High-tech executives respond that even if some U.S. workers found their jobs transferred to China, more might gain as a result of increased Chinese purchases of American goods and services.
“Capitalism is not a zero-sum gain,” Intel’s Maibach said.
The issue of whether China will play by the rules is of fundamental importance. To cite one prominent example, 90% or more of the software in China has been copied illegally, by various accounts.
Chen, who estimated that Sybase’s China sales of perhaps $25 million might jump by one-third if illegal copying stopped, argues that China’s expected membership in the World Trade Organization and its growing economic relationship with the United States will create new pressures for it to follow the rules.
“At least it would give us some kind of weapon,” Chen said.
Until now, high-tech lobbyists have focused their political energies on narrower concerns, such as limits on data-scrambling technology, quotas for skilled immigrants and reform of laws related to class-action lawsuits by shareholders.
The China campaign is a major step in what has been a gradual--if not always graceful--adjustment to the political culture of Washington, where hard demands often lurk beneath a veneer of gentility.
A Democratic congressional aide recalled that a high-tech executive last year made a surprisingly bare-knuckled political warning during a meeting about the industry’s wish for protection against lawsuits arising from year 2000 computer snafus.
“I’m sitting in a meeting and a high-tech executive turned to a very senior senator and said, ‘If we don’t get this, then the whole thing’s over,’ ” the aide recalled in what everyone in the room took as an allusion to campaign contributions. “They take no prisoners. . . . Their approach to politics is very different.”
It is also evolving rapidly. Overall, the industry last year gave some $8 million in political contributions, according to the Center for Responsive Politics, which tracks donations.
In perspective, that is not a huge figure. Lawyers donated $52 million during the same period, and the real estate industry gave $27 million.
Nonetheless, the high-tech war chest is drawing enormous interest as it grows. By doling out its cash relatively evenly, the industry has set off a heated contest between the parties.
Technology interests are also brandishing traditional interest-group weapons, such as scorecards of how lawmakers voted on issues of importance to them.
“We’ll be releasing our congressional report cards soon on the high-tech votes,” said Dave McCurdy, president of the Electronic Industries Alliance. “And China is a weighted vote. It’s more important than the others.”
