Test Plan To Bolster Pacific Biz

Test Plan To Bolster Pacific Biz

By Neil Munro
Staff Writer

High-tech industry executives won a partial success at the summit in Canada of the Asia Pacific Economic Cooperation when leaders from 18 countries agreed on a draft plan to ease product testing.

The pending agreement is a step toward industry's favored approach, in which each new product would face only one set of tests before being sold to a variety of countries, said Eric Nelson, vice president for international affairs at the Washington-based Telecommunications Industry Association.

Under current rules, U.S. products including computers must be tested in laboratories based in each nation. These dissimilar testing standards cost up to $2 billion per year in testing bills and lost sales opportunities, said Fred Bergsten, director of the Washington-based Institute for International Economics.

Reuters photo Jim Barksdale

Other companies that stand to gain from the draft plan include Digital Equipment Corp., Electronic Data Systems, IBM and Motorola.

If completed, the deal will help two landmark international deals: the February 1996 telecommunications deregulation treaty that will begin next month to deregulate government-dominated telecommunications markets worldwide and the 1996 Information Technology Agreement, which is intended to wipe out trade-restricting tariffs costing billions of dollars per year on a wide range of computer-related products.

The currency crisis in Asian countries, including Thailand, South Korea, Indonesia and Malaysia, pushed aside other high-tech issues favored by industry at the Nov. 25 APEC conference, held in Vancouver. These include promotion of a global tax-free market in cyberspace as well as lower tariffs on telecommunications gear and high-tech medical equipment.

Instead of dealing with these trade barriers, government leaders at the summit issued a declaration promising continued support for free trade and a strong role for the International Monetary Fund. The fund has offered to bolster regional currencies with infusions of cash, if local governments press ahead with economic deregulatory measures, including the closure of failing banks in South Korea and other countries, said Morris Goldstein, a senior fellow at the Institute for International Economics.

The product testing pact is a multinational diplomacy complemented by a series of private lobbying efforts within each of the countries that circle the Pacific Ocean. For example, 15 high-tech companies, including U.S. and Asian high-tech companies, have formed the Global Internet Project to lobby for deregulatory policies.

The group, which will meet again next April, is preparing a plan to accelerate the growth of online commerce, said James Barksdale, chief executive officer of Netscape Communications Corp., Mountain View, Calif. Other members include the Japanese high-tech companies Fujitsu Ltd. and NEC Corp.

There's much money at stake for U.S. information technology contractors. High-tech trade with Asian governments alone should reach $25 billion by 2001, up from $17.6 billion in 1996, according to an analysis prepared by research firm G2R Inc., Mountain View, Calif.

Much of this money will be spent improving communications networks, and although there is little hard data, analysts believe U.S. companies won only 10 percent of these dollars in 1996, partly because of the various trade barriers.

For industry, two promising steps taken at the APEC summit were the launch of a new study into barriers that hinder the growth of electronic commerce, and of a new Mutual Recognition Agreement, which would allow U.S. companies to test products for adherence to various Asian safety standards.

The APEC MRA will likely yield a variety of bilateral agreements between the United States and other countries, thus easing the testing burden for telecommunications and modem vendors, said John Godfrey, technology policy manager for the Information Technology Industry Council, based in Washington. Better still, the APEC agreement declares that the ultimate goal is an agreement that would allow companies to test their products once for adherence to an international standard, so sharply cutting the time lost due to testing products for adherence to safety and electronic interference standards, he said.

But until the regional economies are stabilized and the currencies restored to their previous value, U.S. high-tech products and services will cost more in Asia, while Asian-built products will cost less in the United States.

The new obstacle created by the currency crisis joins two other existing obstacles to free trade: first, opposition to free-trade policies throughout Asia and the United States, where Congress recently refused to give fast-track negotiating authority to President Bill Clinton, as well as the creation of region-wide, rather than global, trade-promoting proposals, said industry officials.

"Most people look upon this [free-trade effort] with great suspicion. ... There is a great deal of work to be done" before popular support is won, said Cesar Bautista, secretary of trade and industry for the Philippines. Rising "globaphobia in all our countries" will curb progress toward an Asia-Pacific free trade zone, said Tim Fisher, Australia's deputy prime minister. However, "I expect, modest, incremental steps," in the near future, he said.

A second concern is the promotion of an Asia-wide trading group that excludes the United States. For example, the Asia-Pacific Telecommunity, based in Bangkok, Thailand, excludes U.S. officials and executives from discussions on plans for an organization to set telecommunications standards for the region. "Some people don't give it much of a chance for getting off the drawing board ...[but] the Japanese [government is] pushing it very strongly," said Nelson.

If approved, this Asia Pacific Telecommunications Standards Institute, "could be exclusionary, or, if [planning] were open and transparent and U.S. companies could participate, it could be fine," and even provide a useful stepping stone toward a global standard-setting group, said Nelson.

Even if U.S. companies can build public support for free trade and prevent the formation of an Asian trading alliance, they will still have to lobby on myriad issues before international trade is eased. These barriers include the protection of intellectual property, rules restricting investments in foreign countries as well as curbs on Internet content or the use of encryption technology.

One key issue is taxation of electronic commerce, say government officials. An option cited by Ira Magaziner, a senior adviser to President Clinton, would require Internet buyers to pay local taxes, according to local laws and rules. This would be easier than other ideas, such as the collection and payment of taxes by companies, argue industry executives. Without a simple standard approach, electronic sales of high-tech products could be hobbled by a larger variety of possible tax rules and regulations through the Pacific, which "is why we have to harmonize our tax systems," said Norihiko Ishiguro, director of industry research for the government-funded Japan External Trade Organization, New York.