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U.S. Telecom Cos. Seek China Market

May 22, 2000

LOS ANGELES (AP) _ The first time Sam Endy tried to do business in China, potential American backers recoiled at the Byzantine regulations that govern foreign investment in the world’s most populous nation.

``You had to persuade the investors it was solid. Even though you had blessings from the law firm in Hong Kong, some of them were skeptical,″ he said.

Ultimately, investors’ fears and the Asian economic crisis killed Endy’s China hopes, as well as International Wireless Communications, the California telecommunications company where he worked.

Endy believes selling the deal would have been easier had China been in the World Trade Organization. Rules on investment would have been clearer, and the WTO would have been available to mediate disputes, said Endy, now a vice president at wireless technology developer Arraycomm Inc.

``Even in the U.S., at times there are intellectual property issues with very major companies, but here we have legal recourse. There we don’t,″ he said. ``I think what the WTO would do is start the framework.″

The lack of clear rules is a crucial issue for companies that are urging Congress to approve permanent normal trade relations for China. That would help ensure implementation of a U.S.-Chinese deal to open China’s market for U.S. companies and provide greater protections for their investments, executives say.

For telecommunications companies, the House vote this week on China’s trade status may be especially important.

Foreign telecommunications companies now can sell equipment to Chinese companies, but they are banned from providing service. Under the trade agreement, they would be able to sell services and own up to 49 percent of Chinese telecommunications companies.

Moreover, by joining the WTO, China would become a part of the Information Technology Agreement to eliminate tariffs on high-tech products by 2005. Thirty-nine countries have signed the agreement so far.

China likely will be admitted to the WTO regardless of how Congress votes. But a no vote would mean China could deny U.S. companies WTO protections it might give their European competitors, experts say.

``If you have the benefit of the WTO, you have a right to minimal fair treatment,″ said Peter Cowhey, former chief of the Federal Communications Commission’s international division. ``You have no such rights if you don’t have WTO protection. Others would have them. We wouldn’t.″

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