Tariffs Would ‘Handicap’ US Chances in 5G ‘Contest’ Against China, Says TIA
The proposed third tranche of 25 percent Trade Act Section 301 tariffs on Chinese imports targets equipment “critical for the build-out” of 5G, IoT and “big data,” says K.C. Swanson, Telecommunications Industry Association director-global policy, in prehearing testimony posted Monday in docket USTR-2018-0026.
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Though the Office of U.S. Trade Representative hasn’t released a schedule of witnesses to testify at four days of public hearings on the tariffs beginning Aug. 20, Swanson is scheduled to testify Aug. 21, says her testimony. Requests to testify were due Monday under the deadline USTR Robert Lighthizer extended from July 27 when he announced Aug. 1 he will “consider,” under President Donald Trump’s direction, raising the third tranche of proposed duties to 25 percent from 10 percent (see 1808010018). Swanson had asked July 27 to testify (see 1808060007).
The “network-based technologies” in which U.S. companies lead the world “depend on underlying hardware,” says Swanson. “Taxing that hardware,” as tariffs on network servers, gateways and modems would do, will raise costs for consumers and “act as a burden on innovators,” she says. “Such a move stands to discourage U.S. adoption of advanced technologies in a period of growing global competition over technological leadership.”
Consider the American manufacturer that installed IoT sensors in its plants to improve factory efficiency by tracking equipment temperature or power usage, says Swanson. Others “have started adding sensors onto the products they sell to provide better after-market service,” she says. “These are all sophisticated, innovative ways American companies are leveraging technology to stay competitive. But it’s about to get a lot more expensive to do this, since tariffs will hit so many of the telecom products essential to the operation of the internet.”
Tariffs on “core networking products” also risk “weakening America’s technological strength and economic competitiveness relative to China,” says Swanson. The Chinese government “has issued multiple strategic, long-term plans to actively fund and promote the growth” of the industrial internet, 5G and artificial intelligence inside China, she says. “Against that backdrop, it is all the more important that U.S. policymakers refrain from actions that would needlessly raise the costs of network infrastructure and make such products less accessible to American innovators.”
The U.S. has led the world in 4G's development and deployment, “and has reaped the economic and innovation benefits associated with that,” says Swanson. “But it has all depended on networking hardware to function. There is now a global race underway for 5G, with 5G products expected to begin shipping in 2019. If tariffs remain in place they will hike the costs of 5G equipment and handicap the United States in this 5G contest.”
Imposing 25 percent tariffs on the green silicon carbide (SiC) materials Sumco imports from China under HTS 2849.20.20 to manufacture semiconductor wafers in Phoenix and Albuquerque would “make us less competitive in the global semiconductor marketplace,” it commented, not asking to testify. China “dominates the world supply of green SiC,” said Sumco, whose wafers are used in the production of microchips for a wide range of consumer tech devices and medical equipment. There's “no viable alternative to Chinese green SiC, and Sumco "will be forced to pay the tariff, and absorb the tariff in its wafer costs, without increasing its export sales price of wafers,” it said.
More than 10 million Americans use the computer networking products Zyxel Communications sources from China under HTS 8517.62.00 and 8517.69.00 for home internet access and for “network computers in the workplace,” said the company. Its largest customers include CenturyLink, Cincinnati Bell, D&H Distributing, Hawaiian Telecom and Synnex, it said. “A significant price increase in the supply chain to these U. S. internet serve providers and technology wholesalers” from the imposition of tariffs “would be detrimental to the income that they can generate from their services,” it said.
Zyxel’s router products “are used to proliferate broadband throughout the U.S.,” it said “Since 34 million Americans lack an affordable and reliable broadband connection,” the FCC “has endeavored to expand the presence of internet as a broadband lifeline to underserved areas that are unable to take advantage of economic, health and educational opportunities,” it said. Tariffs would run counter to those initiatives. it said.