China agrees to drop WAPI standard

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The government of China has agreed to suspend indefinitely its proposed proprietary national standard for wireless LANs after objections from the U.S. government and IT vendors, U.S. and Chinese officials announced Wednesday.

The standard, called WAPI (Wireless LAN Authentication and Privacy Infrastructure), was scheduled to be adopted as a mandatory security measure in China on June 1, but Chinese officials agreed to work with international standards bodies instead after meeting with U.S. trade officials Wednesday.

China will work to revise the WAPI standard, taking into accounts comments received from Chinese and foreign IT firms, said U.S. Trade Representative Robert Zoellick. China now has no deadline on implementing WAPI, Zoellick said at a joint press conference with China Vice Premier Wu Yi.

Zoellick and Wu did not comment further on the WAPI agreement, which was one of several trade agreements the two countries signed Wednesday.

"Between our two countries, trade needs to be a two-way street," Zoellick said.

The mandated Chinese standard has caused concern at international electronics companies because details of the standard have only been shared with a handful of Chinese equipment makers, leaving foreign companies the option of either licensing the technology though agreements with Chinese vendors, or staying out of the Chinese market. Electronics vendors worried that WAPI could have fractured the WLAN equipment market.

Intel Corp. praised the WAPI agreement. China's decision on WAPI "demonstrates its commitment to leadership in the IT industry," said Intel spokesman Chuck Mulloy. "Intel commends the governments of the People's Republic of China and the United States for their patience, persistence and flexibility in working through this very important and complex issue."

The two countries did not resolve a continuing dispute over Chinese taxes on semiconductor chips during the 2004 meeting of the U.S.-China Joint Commission on Commerce and Trade. A value-added tax of 17 percent is levied on sales of all semiconductors in China. The Chinese government gives most of the tax back in a rebate for certain chips manufactured in China. The resulting effect is a 17 percent tax on imported semiconductors and a 3 percent tax on domestically made chips.

In March, the U.S. government filed a complaint with the World Trade Organization over the chip tax. Dispute settlement consultations will continue in Geneva, Switzerland, the week of April 26, Zoellick said.

"As always, we prefer to solve problems without litigation if possible," he said.

During Wednesday's talks, Chinese officials agreed to step up their enforcement activities to fight intellectual property piracy, and they said they support technology neutrality in the adoption of third-generation (3G) standards for mobile phones.

The Chinese government will enact stiffer penalties for intellectual property piracy, including online piracy, by the end of 2004, Wu said. Her country also will step up customs enforcement on pirated products, and it will extend an existing ban on the use of pirated software in the central government to include local governments.

Enforcement of antipiracy laws is important to help the Chinese technology industry grow, Wu said. "The Chinese government attaches great importance to the protection of IPR (intellectual property rights)," she said through an interpreter. "We never shy away from (admitting) that we do have some problems with IPR protection."

The Recording Industry Association of America (RIAA) praised the agreement on piracy. "China has committed to tangible, specific steps to address the rampant piracy of copyrighted works," Mitch Bainwol, chairman and chief executive officer of the RIAA, said in a statement. "This announcement is an important first step, but we look to the Chinese government to ensure that future deeds match present words and commitments. Immediate action by the Chinese authorities to address these problems is critical."