The China Question

Tech fears new tensions could set back key gains

Just months after celebrating a hard-fought congressional vote to expand trade with China, technology and Internet companies now fear they could be the next victims of the political fallout from increasing tensions over the spy plane collision and President George W. Bushs offer to sell Taiwan a huge arms package.

Lawmakers next month must decide whether or not to continue Chinas preferential trade status. Many computer, electronic commerce, software and telecommunications companies see China as a key and largely untapped market. And, as anti-China sentiment grows, they worry that gains they have made in recent years could be set back.

"Were very nervous going into June," said Grant Seiffert, vice president for government relations at the Telecommunications Industry Association.

A worst-case scenario would be an all-out trade war that impacts technology companies ability to compete in the huge and growing Chinese market, and inflates the costs of Chinese-made information technology (IT) and electronics products.

"Our sales would evaporate immediately and there would be significant costs, not just in terms of lost exports, but on the import side as well," said one technology company lobbyist who would comment on the tenuous situation only on condition of anonymity.

Although such a turn of events is still considered unlikely, anti-China forces may take aim at legislation dealing with export controls over encryption, powerful computers and other technology.

And the increased rhetoric in Washington alone could make it more difficult for American companies doing business in a country already rife with poorly defined rules and regulations on everything from telecommunications to advertising to content.