US vs Europe wireless trade war looms

A couple of months back US Federal Communications Commission chairman William Kennard said he welcomed an EU decision not to discriminate against US cellular standards. We said he was actually issuing a coded warning.

Which now seems to have been the case, as US trade representative Charlene Barshefsky yesterday told reporters that the US was "very, very concerned" about European moves to shut US mobile phone manufacturers out of Europe.

In what constituted the most bellicose statement on the subject yet Barshefsky said the US was looking at a variety of WTO (World Trade Organisation) issues connected with the adoption of third generation cellular standards. She also set out the US government's stall on the matter. The US government wants the EU "not to adopt exclusionary standards and instead let the ITU (International Telecommunications Union) and other international forums look at this issue."

By threatening the EU with the WTO, Barshefsky could be on the brink of unleashing a full-scale trade war. The WTO is the international club set up to promote free trade and the abolition of barriers, and regularly hears claims from the US, Europe and Japan that one or more of the other two are unfairly restricting trade via tariff barriers, regulations and so on. But if the US decides to go the distance it will be taking matters a notch further, because it will have to argue that a general European standards definition process is an unfair restriction of trade.

This isn't entirely breaking fresh ground - the standards set by many countries in many areas (electrical, automotive, food being obvious examples) have been attacked in the past for being restrictive. These however tend to be standards which at least ostensibly are aimed at protecting consumers, whereas the standard the US will now be taking a pop at is one designed to benefit consumers and to stimulate the adoption of new technology.

Barshefsky's claim that it's designed to shut US manufacturers out is therefore fighting talk. That will be helpful collateral damage for the likes of Nokia, Ericsson, Siemens and Alcatel, but it's not a primary objective. The key difference between the US and Europe on wireless systems is that the US favours letting the market decide on standards, whereas Europe drives them via ETSI (European Telecommunications Standards Institute). ETSI fulfils some of the functions of the US FCC, but it defines things much more, and more broadly, and doesn't regulate as the FCC does. By calling for the third generation standard to be 'looked at' (note that she doesn't say 'defined') internationally Barshefsky is effectively demanding that ETSI throw away much of the work it's done on the European G3 standard, UMTS, and ultimately is calling for ETSI to stop defining standards at all.

But she can't be calling for the ITU to define a single standard, because if we're going to let the market decide, a single standard globally will also be restrictive. This will be a deeply unattractive prospect to the European industry, which is poised to start rolling out UMTS services. The Europeans will talk, certainly, but they'll be looking to use the cards they already hold to better their position at the ITU, and they'll also use other bodies to fight their corner.

Nobody in Europe is going to be willing to capitulate entirely to the US, and they'll point to the success of GSM in Europe and the disastrously slow deployment of digital technology in the US as proof of their point. Hilariously, the US will no doubt point to this as evidence of the opposite - Europe's strong position in digital wireless, they'll say, has been unfairly won via the imposition of restrictive standards which damage US manufacturers. So it looks like it could be war. ®