From: Council on Foreign Relations

by Adam Segal

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U.S. companies like Intel and Broadcom announced they would not adhere to the standard and would stop selling their wireless chips in the Chinese market. In March 2004, the Bush administration sent China a letter about WAPI, signed by Secretary of State Colin Powell, Commerce Secretary Don Evans, and U.S. Trade Representative Robert Zoellick. Arguing that regulations compelling technology transfer were incompatible with China’s trade commitments, the letter implicitly threatened to pursue the case at the World Trade Organization. The Chinese government backed down, agreeing to revise the standard after input from foreign companies.

The WAPI incident suggests three components of a successful strategy that altered China’s approach. First, it was public. It was not the behind-closed-doors effort, sensitive to issues of “face” approach that is so often suggested in negotiations with Beijing. Second, the strategy was unified. There were no defections from companies involved in the Chinese market, and the private sector and the U.S. government applied pressure in tandem. The EU and Japan did the same. Third, the strategy threatened real consequences—a boycott of the Chinese market and a WTO case.

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