U.S. business interests -- perhaps nowhere more so than in the electronics sector -- moved a step closer to gaining greater access to the globe's largest untapped market yesterday, when the House of Representatives passed a vote to establish permanent normal trade relations with China.
The Senate within weeks is expected to follow suit by conferring China with PNTR status, clearing the way for broad trade concessions that are expected to aid U.S. industry in establishing a firm market base in the world's most populous country.
The House action arose from China's expected admission to the World Trade Organization. While not a condition to China's WTO membership, a full Congressional vote to normalize trade relations with the nation would ensure that U.S. companies receive the same benefits as foreign concerns doing business in China.
Predictably, U.S. high-tech associations were quick to praise the House vote to approve PNTR status. George Scalise, president of the Semiconductor Industry Association (SIA) in San Jose, said final Congressional approval would open the way for foreign suppliers to participate in what his industry group projects to be China's $8 billion annual semiconductor market.
Likewise, the Information Technology Industry Council, SEMI, and Telecommunication Industry Association have all predicted that the technology industry would reap large rewards as a result of trade reform with China.
Without PNTR status, a number of major concessions agreed to by Chinese government officials would be at stake, possible compromising the competitive edge of U.S. high-tech suppliers eager to cash in on what they perceive to be pent-up demand for computers, cell phones, and a range of consumer electronics goods.
The trade agreement included a number of measures that pertain specifically to the electronics sector, major concessions that would fuel China's burgeoning assembly and contract manufacturing industries and open up new opportunities for chip makers and systems OEMs.
Elimination of all Chinese tariffs on semiconductors, data processing, telecommunications equipment, and other information technology products, generally by 2003. The U.S. Semiconductor Industry Association (SIA) has said it will continue to press China to speed up the timetable for lifting chip tariffs.
Clearance for foreign companies to sell directly to Chinese customers which would eliminate the present mandate to use Chinese middlemen or sales agents. Global supply chain vendors hope direct access to customers will increase sales dramatically and speed up distribution and deliveries dramatically.
An end to most rules requiring products manufactured in China to be made primarily using domestic-produced components. The swelling ranks of foreign companies opening plants in China have been hampered by local-content supply regulations and restrictions on sourcing components from abroad.
Permission for foreign telecommunication service providers initially to own up to 49%, and later up to 50%, of Chinese networks. Foreign equipment suppliers believe foreign owners will equate to much larger orders for off-shore products.
The promise of greater protection of intellectual property rights. China has made similar vows in the past, but has a checkered record of cracking down on widespread piracy of software and content.