‘Qual­comm fine’ shadow looms over trade talks

China Daily (Canada) - - FRONT PAGE - By PAUL WELITZKIN in New York paulwelitzkin@ chinadailyusa.com

Qual­com­mInc’s de­ci­sion to pay a record fine of $975 mil­lion for an­titrust vi­o­la­tions in China is likely to in­crease trade ten­sions and ham­per ne­go­ti­a­tions on a key trade pact intheAsia-Pa­cific re­gion, ex­perts said on Tues­day.

On Mon­day the United States-based chip maker agreed to pay the largest cor­po­rate fine ever in China for anti-com­pet­i­tive prac­tices, end­ing a 14-month in­ves­ti­ga­tion against it by theNa­tional Devel­op­ment and Re­form Com­mis­sion.

The “un­fair” and “ex­ces­sively high” roy­al­ties Qual­comm­col­lected fromChi­nese smart­phone mak­ers were the key fac­tors that led to the his­toric fine, theNDRC­said.

Tal­ian Chi, pro­fes­sor and Carl A Scu­pin Fac­ulty Fel­low at the Uni­ver­sity of Kansas School Of Busi­ness, said: “The set­tle­ment is likely to add to the trade ten­sion be­tween China and the US and may also com­pli­cate the ne­go­ti­a­tions on the Trans-Pa­cific Part­ner­ship. One of the is­sues that has bogged down the TPP ne­go­ti­a­tions is the ob­jec­tion by some de­vel­op­ing coun­tries to the US in­sis­tence on strin­gent rules for the pro­tec­tion of patents. I sus­pect that theUS ne­go­tia­tors are try­ing to pre­vent any po­ten­tial TPP part­ners from us­ing an­titrust rules in their fu­ture bar­gain­ing with US multi­na­tion­als.”

The Trans-Pa­cific Part­ner­ship is a free-trade deal among the US, Canada, and 10 coun­tries in the Asia-Pa­cific re­gion (not in­clud­ing China) that has been un­der dis­cus­sion.

How­ever, Robert Atkin­son, pres­i­dent of the In­for­ma­tion Tech­nol­ogy and In­no­va­tion Foun­da­tion think tank in Wash­ing­ton, said the Qual­comm case could ac­tu­ally prove ben­e­fi­cial to the TPP.

“If any­thing this and other sim­i­lar ac­tions by theChi­nese gov­ern­ment will in­crease sup­port (for TPP) be­cause it will be seen as away to bet­ter ex­ert pres­sure on China to cur­tail th­ese kinds of prac­tices that dis­crim­i­nate against for­eign firms. As far as US-China bi­lat­eral re­la­tions are con­cerned, this ac­tion will only heighten the con­cerns held by the US gov­ern­ment over Chi­nese eco­nomic poli­cies,” he said.

Chi said: “Any firm pos­sess­ing pro­pri­etary tech­nol­ogy has mo­nop­oly power, but such­monopoly­pow­eris of­ten pro­tected by the gov­ern­ment un­der the patent sys­tem.”

“Given the mo­nop­oly sta­tus of Qual­comm over its tech­nol­ogy, the ne­go­ti­a­tion of the li­cens­ing fees is in­evitably sub­ject to its bar­gain­ing power rel­a­tive to that of its Chi­nese li­censees. The gov­ern­ments of some de­vel­op­ing coun­tries do try to boost the bar­gain­ing power of their do­mes­tic firms by lim­it­ing the max­i­mum roy­alty rate in li­cens­ing con­tracts via do­mes­tic leg­is­la­tion. This type of gov­ern­ment pol­icy is un­likely to work for a small coun­try, but China is the largest cell phone mar­ket in the world and is thus bet­ter able to get con­ces­sions from for­eign firms.”

Qual­comm will also of­fer li­censes to its cur­rent 3G and 4G Chi­nese patents separately from li­censes of its other patents, and it will pro­vide patent lists dur­ing the ne­go­ti­a­tion process.

Qual­comm said it plans to con­tinue to grow its in­vest­ments and ex­pand col­lab­o­ra­tions in China, in­clud­ing with China’s mo­bile op­er­a­tors, hand­set and de­vice sup­pli­ers, and within the Chi­nese semi­con­duc­tor sec­tor.

Chi said the Chi­nese gov­ern­ment may be try­ing to al­ter the bal­ance of bar­gain­ing power be­tween Qual­comm and its Chi­nese li­censees.

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