Chinese Protectionism, U.S. Passivity Raise Spector of Tech Trade War

NEWS ANALYSIS: Chinese restrictions on U.S. technology products raises the chances of an all out trade war even as the Obama administration maintains a passive stance.

China Trade B

The Chinese government is turning up the pressure on American technology companies and restricting their ability to compete with Chinese companies within the enormous Chinese domestic market.

I don’t want to form a nationalist pitchfork-carrying mob to denounce them evil feriners.

But any reasonable person would have to admit that there’s a point at which the national policies of a foreign government create an unfair playing field that demands a response of some kind.

The question is: Are we there yet?

For the past year, the Chinese government has instituted rules and policies that all have the same effect—reduce sales and availability of American technology products and services and reduce them as competitors to Chinese alternatives.

In recent months, the Chinese government has been banning U.S. products from the list of allowable purchases by any Chinese government agency. The list includes Symantec’s anti-malware, Microsoft Windows 8 and others.

Speaking of Microsoft, the company was raided twice in the last few weeks by Chinese antitrust authorities as part of the launch of an investigation into yet un-specified antitrust violations.

An attack on Microsoft for abusing its monopoly position is laughable—its dominant market share in China is based almost entirely on stolen and pirated copies—even within the Chinese government. An estimated 77 percent of all software used in China is pirated, for example.

When Microsoft ended support for the 13-year-old Windows XP operating system (which means that in order to get support the Chinese government would actually have to pay for Windows for the first time) the secretary-general of the Beijing Competition and Anti Monopoly Law Commission, Wei Shilin, said “This move just goes to show how dominating Microsoft is in the Chinese market,” adding that “The fact that most of Microsoft’s software is pirated is unrelated to this monopoly case.”

The Chinese government has also gone after Qualcomm, the American chip maker, branding it a monopoly and threatening to fine the company $1 billion.

China’s state-owned CCTV said that the iPhone’s ldquo;Frequent Locations” feature constituted a threat to Chinese national security because Apple could collect the location of every iPhone user and thereby divine state secrets somehow.

The Chinese government in May launched a formal review about whether IBM computers should be banned from all Chinese banks, citing fears about U.S. National Security Agency spying.

The Chinese state-owned and Communist Party-owned media have also engaged in a constant drum-beat of FUD (fear uncertainty and doubt) about the safety, security and reliability of U.S. technology products. The media have also repeatedly have claimed that Apple has singled out Chinese consumers for discrimination and abuse.

So What’s the Right Response?

The reality is that American technology companies have endured abuses, threats, bans, lawsuits, unfair press, biased judges, piracy, counterfeiting, hacking and worse in order to play ball with the Chinese government.

And the reason is that most companies believe someday the market will be opened and fairer to foreign companies operating in China. For decades, the conventional wisdom has been obsessed with the massive population of China, believing that even a small percentage of business there would be worth a fortune. So they’ll endure anything to stay in the good graces of the authorities there.