Never And

you know and love

that no one ever

got very very good friends and one

in my mind trying and
you know very early on

and he called

publish and
it's now been a very big question

part of the only part of it on
the menu will be really a week

but it's a book local government.

You know government really

trying to go forward.

Thank you.

It's wonderful to be here and I want to
thank Professor residence for having me.

He and his colleagues have
been amazing hosts so far.

Can everyone in the back hear me.

All right so
I don't need to stand like this and

I like to walk around and things and

distract you from the information on the
board in case that's there's mistakes but.

I've been familiar with Georgia Tech
actually for a long time.

Because I went to
the University of Virginia.

I'm sorry.

So as an undergraduate at UVA we're
very familiar with Georgia Tech.

And I could say that our sense
about Georgia Tech is much

more positive than our
feelings about Duke.

And the enemy of your enemy
is always your friend.

So in any case it's really
wonderful opportunity for

me to be here and
what I wanted to do today.

Is share with you some of my
recent research related to

China's participation
in global governance.

And do that through the context of Chinese
involvement in the global standard scheme.

So the first part of the talk.

I want to talk to you.

More generally about how we think about
global governance and China's place in it.

And then that will provide the context for
thinking about how the Chinese

are participants in the setting of
information technology standards

which is the area of standard setting that
I focus on so we will go from quite broad.

To very specific and
we will start talking about acronyms and

things which luckily people at
Georgia Tech have heard of before and

to my in my end it's dangerous to me
you actually know what they mean and

you could actually write out
the logarithms and things like that.

Whereas as a political scientist
from a round of the engineer I

can just talk about it and
hopefully by that time.

We'll be done and
we can talk about those things.

Now.
So anyway.

All right.

When we think about China and
global governance and

China's participation in
the international community.

Americans start.

With this picture this picture is
the beginning point of all conversations

because what it shows is that we have
a very unfair relationship with China and

that since the one nine hundred eighty S.

The trade deficit with China has
gone up and up and up and up.

Don't mind that little bend at
the bottom for two thousand and nine.

We'll go back in the other direction
I'm sure hopefully this year but

this is really the starting point for
demonstrating in some people's mind

how unfair China is and
that China is not a pulling its

commitments to the international system
that it made when it joined the W T O.

And even in previous years when it
signed memoranda of understanding or

other types of arrangements
with its trading partners.

This is another wonderful example of
our concern about how the Chinese

are not playing by the rules of the game

that most civilized countries follow and

you can see how the Chinese have
you know manipulated their exchange

rate in order to promote exports at
the expense of the rest of the world.

In information technology.

There is great concerns
that not only years China.

Exploiting all the stuff our kids play
with but they're actually making getting

control of the higher value added sectors.

One of the things the Chinese have
been doing recently has been promoting

trying to obtain technology
related to encryption.

From other countries.

And so this is a story from February
about China's regulatory requirements and

that complaints by the U.S. and the E.U.
and I want to highlight one sentence for.

In the U.S. Trade Representative
Deborah Meza low who said since then

when the US and
started engaging China on this the US

has continued to ask China to
follow global norms in this area.

And we are continuing those discussions.

So not only is she trying
to bring the pressured

of the United States to bear what she
is saying is that China is violating

some internationally accepted
standards of of behavior related to

how international how to
information technology is governed.

The sense that China doesn't play fair.

Is captured in this in a recent book When
China Rules the World in which the author.

It's puts all of these things together and
says that China is inherently incapable

of integrating itself comfortably
in the international system and

he cites Chinese traditional
culture Confucian norms

the way of China seeing itself as a
civilization and not a sovereign state etc

as the source of that and so
when the Chinese rule the world.

They were ruled by very
different standards and

put norms that are now currently the case.

Others have made this argument
before we saw the sin.

It was the reason for our.

The collapse of the Ching and the rise of
the Republican government because they

thought they were simply incapable
under that original system and

then you had the May fourth
movement everything that So

that was you know incapable
they were incapable of it.

Of course there's alternative
argument that in fact

China's in Gage went
with the global economy.

Has helped them become socialized
into the standard order.

Doug Guthrie's book dragon
in a three piece suit

which looks at state owned enterprises.

And how they engage with their foreign
part partners and through this develop

much more rational corporate governance
mechanisms and ways of doing business.

A new book which is going
to be coming out very soon.

Some of you may have heard about this
book and you should know Ed Steinfeld.

Ed's book playing our game argues that.

The Chinese are not only has.

That Chinese companies in order to do well
have been learning the best practices

of their global competitors and that
the Chinese government has been battling

the regulatory mechanisms of other
countries where they are weak in China.

So if you think of the California effect
you apply that broadly where countries

that want to export to California have to
make their emissions standards comply.

Well the Chinese need to do that
on all types of things not just

with pollution but

if companies want to raise capital role
in a list on the New York Stock Exchange.

So you need to hire the right
accountants comply with F.C.C.

guidelines food safety etc And he's got
examples of these different things.

All right so.

He sees a much more positive
story of change brought

about by the role of chief of
the international community in.

Its effect on China.

Now whether you are an alarmist or

a cheerleader like
the people I just mentioned.

They asked think about China and

its interaction with the global
community in the same way.

They all ask is China
meeting its commitments

that is the fundamental
question that all of them have.

They all run and no Ron I is China meeting
or not meeting its commitments and.

And they want to know that if
since if where it's Fallon short.

What can the international
community do to help.

What other types of mechanisms like the
kind Ed pointed out might be helpful and

and connected to this is that big question
is China an anti status quo power

that is you know as as
a new country rises.

Will it displace not only
the the preeminent hedge of man but

also the norms and
values which that have had John rumors.

And which it had no part in creating
itself and so doesn't have an interest in.

Both of these parties ask this question.

They just have different answers right.

Interestingly enough in China Chinese
scholars who talk about China's

role in the international community
also only ask these questions and

they are also they have an answer.

But they are also participate in
the conversation in the structure.

Right.

Whether you're a alarmist or

a cheerleader the Chinese government or
defenders of China.

You have common assumptions which
frame how you think about China's role

in the international community the first
is that the correct yardstick for

China is compliance is China
meeting its obligations

that it has made to others.

It's what I would call a literally way
of thinking about China's participation

in the international community.

You take a list of China's promises and
you line them up against.

China's actual behavior.

Relatedly.

Important sumption of this exercise
is the view that the global

rules that China signed on to
promote liberalism and a fair.

It's.

The move.

Complies the more open
the more liberal it becomes

to the extent then that
China is not open or not.

Libro or doesn't play fairly
the fact then lies with China.

And its domestic institutions
Central Local relations.

And those things are inhibiting
China from observing the norms and

rules of the international system.

To the extent China is not open that also
means that it's an anti status quo power

which poses a danger to the international
system and to the United States.

I think this way of thinking
about China is in gauge went with

the international community.

Whether you're an alarmist or
a cheerleader.

Is an increasingly declining significance
and I would say essentially irrelevant.

And I think we need to think about things.

In a very different way.

To help us think about
things in a different way.

Since I know we have experts on Chinese
language and culture here and many

people from Georgia Tech have to learn
Chinese or even from China and you're

familiar with traditional Chinese culture
and so if you would help your neighbors.

Translate this poem.

For says about about a minute
we'll give you ninety a minute and

a half usually give people just a minute
but I will make it ninety seconds.

So I lie you to cheat.

So group help are right.

So we got it were.

So we have a professor in
Chinese language and culture.

Have you got it.

It's getting it's getting All right so
let me help you with this English poem.

All right so there's an L..

And an I and a T. and a T.
and then L. and E..

Little a little bit of people
has lost her sheep and

cannot tell where to find
them leave them alone and

they will come home and
bring their tails behind.

So if your English is good you should
be able to figure this one out

if you're if you're thinking of it.

The point of this you
look at something and

think that it's that you should
always use runs frame of reference.

Right.
When in fact if you just

switch your frame of reference.

You'll learn something
completely different.

All right.

Sure being who put this together.

Originally use this as a way
to criticize Chinese for

being overly committed to this thinking of
Chinese characters as these magnificent

things that couldn't possibly be changed
in our you know almost and sacred.

I use it for a very different purpose but
I still think the value in escaping.

Patterns of thinking and so
I want to do that with this talk.

So how would I suggest thinking
about China and global governance.

That's different from the way alarmists
and cheerleaders think about the first.

Is forget thinking about.

Chinese compliance and start thinking
about how effective China is in promoting

its interests through participating
in global governance regimes.

The Chinese like everyone else
is a member of the W T O and

other international regimes.

Not to be good citizens but
to promote their interests that.

Wearied remember in them.

That's why we have lawyers and

others who helped create these rules and
the Chinese are no different.

And when they think about
participation they're thinking about

promoting their interests.

And so measurements of compliance are our
perspective our lawyers perspective.

And not really clear measure
of what's actually happening.

In addition global routers
intentionally include both liberal and

mercantile estimates.

If you look at the rules of the W T O
quite carefully you'll recognize that.

Throughout.

All of the different agreements.

You will see clear conditions
under which it is.

Encouraged inappropriate for

governments to intervene to protect
the interests of their domestic industry.

For reasons of health security.

The environment.

In even weak economic.

Situations.

These aren't loopholes.

These are standard parts of the system.

And so therefore.

The extent to which a country
sometimes engages in protection.

You might think of his protectionist
behavior means in fact they are following

the rules as closely as possible because
the rules encourage them to do so.

And therefore if China is
not following the rules.

It may not be because of what's of
some problem in China some local

officials not following central government
policy or the central government pulling

the reserve arise it may just be because
they've learned the rules extremely well.

Those who emphasize the status
quo anti status quo distinction.

Make at least three mistakes.

The first is they see the international
system is having a clear set of rules.

Which are relatively constant and
they've been around and

they will be around in fact the rules
of the international system are ways of

solving long before China got
into the W T O the members have.

And during the GAT negotiated back and

forth on what the rules should
be what should be included.

What shouldn't be included and

that's a constant process the door around
is a continuing debate about that.

And the same for other spheres
of global economic governance.

In many areas though.

Not only are the rules of Robin but
there are no rules and

in fact in most areas of
global economic activity

there are no standardized rules in
which all countries have signed up to.

You sometimes have associations
which issue principles of

norms like with in the case of sovereign
wealth funds the Santiago principles.

But in many the trade
is quite distinctive in

that you have a full apparatus of rules
and regulations an organization and and a.

Adjudication system which is mandatory for
folks to participate in but in and

in many areas of finance and
technology and there.

There are very few rules or
they don't have any teeth.

Lastly those who focus

on China as an anti status quo power
assume that the status quo is really good.

But if you take any time
to look at bunches at these

rules that do exist you find that
a lot of these rules are horrible.

These are really bad rules which
were pushed through by the lobbyists

of smart companies who are just

purely thinking government officials
who really don't understand markets and

what promotes economic development and
a karate and a half and.

I think the more an a stat
more anti status quo you.

The better.

Lots of the sensed them needs to
be changed if you want to achieve

things which are good for
our societies generally and so.

In many ways.

What we need to do is be against those who
are standing who are standing firm were

keeping things.

The way they are without change or.

Given this way of thinking
about global governance.

I have different questions that
I'm asking in this project.

I'm trying to learn how do Chinese
learn the rules of the game.

You know physically what
are they doing to learn.

How do they play once you know the rules.

How effective are you.

Which Chinese are more
effective players than

other Chinese are state owned companies
good at playing in the international

system private companies companies
from Northern China from Shanghai for

is there some regional variation about
companies and how well they play.

What is greater Chinese activism
in international regimes mean for

the rules and
the entire system of global governance.

And given those things then how should
other countries and governments and

companies respond to greater Chinese
participation in global governance.

I think these are much wider real life.

Substantial questions than asking about
is China meeting its commitments.

Again that's raising that
question again and again.

About commitments is I think actually
more about trying to frame the game

in a way which is more conducive
to promoting American interests

than less about the reality of whether or
not.

China is living up to its commitments.

Because certainly the United States.

Violates its commitments all the time.

And I'm not joking about it.

And so that's it's apt part of
the strategy of framing and competing.

Right.

Now I think when I think about
global governance regimes

you could just make a land west of them.

You know in different areas different
organizations different areas of economic

I trying to I tend to divide
regimes into four different groups

you thinking about two
different kinds of variables.

The first is ask what is
the regime designed to serve or

who is it designed to serve there
are a variety of regimes and

governments whose reason for being is
to promote the interests of producers.

In fact in many of these cases they were
written by the producers themselves.

As an example of trade remedies laws
trade them and most trade remedies laws

were written by the the American steel
industry in the one nine hundred sixty S.

at least the current versions of these.

Technical rules on technical standards
intellectual property rights all of these

rules were created as a way to provide
protection for industry as it developed.

Products and needed a legal structure
in which to give them give more

value to what they made and made it more
difficult for others to challenge them.

There is a whole other set of regimes.

Whose impetus is to put constraints
on producers to help consumers.

Or investors investors or
type of consumer.

So you think of
Food Safety Products Safety

corporate governance rules regarding
accounting things those things.

The original intention.

And it doesn't always that is and
I stay that way but

the original intention is to put
constraints on companies to make it so

that they that there's greater
transparency greater fairness in what

they do and there's those so
I divide between producers and consumers.

I also talk to think about systems
in which there are very clear rules.

And potential punishments clear
punishments and rewards for

those who follow those rules
versus much of the international

system in which there
are very weak rules or

the rules don't have much teeth or
there's no clear penalties.

When you violate them.

And what I've done is put
into each of these categories

various regimes that fit with
these different characteristics.

Now I also think about regimes in
terms of the role of industry.

In them.

In some.

Regimes.

The regulator the rule
setter is our governments.

And in other regimes companies and
non-state actors are also

part of the setting the rules and
actually doing the governance.

So the credit rating industry
is an example of that.

But I I will use one to give you some
sense of of at least two different ways.

I try to classify things here even
though I'm actually thinking about of

some other ways.

Now in it when I think
about global governance or

when most people do they
typically focus on.

Meetings of senior officials like the one
incurring today in Washington where

you have thirty seven or thirty eight
heads of state who are negotiating over.

Controlling nuclear materials and
other things.

That's what people think
of the meetings of the G.

twenty or when the W T O gets
together negotiate the door around.

And.

I think that's very important and
I'm interested in that.

And I mean how well
the Chinese play at that game.

But I think that how
the Chinese play at that game.

Is only part of the story.

I'm also interested in how
China uses those rules.

On a regular daily basis.

Now unlike.

The agreements to reduce the number of
nuclear weapons or things like that.

If security regimes which is you sign
it and then there's implementation and

nothing changes in economic governance
regimes you have activity every single day

or is constantly things
going on there is constant.

Behavior that you have some actually
really interested in the daily use

of the rules by Chinese and
not just by Chinese government actors but

by Chinese industry and other stakeholders
who are also vested in these systems

and just are able to participate.

And I also want to look at
what's going on in China.

China is supposed to develop.

Rules and regulatory frameworks that
are at least consistent with if not

of Match of the international system so.

The has rules on and
on dumping that opposed

anti-dumping agreement that China
also has its own anti-dumping

regulations and a process for Judy Kading
disputes when the Chinese think.

Worried that foreigners are dumping
their products in China and so I'm also

interested in that rule setting process
in China and how Chinese use those rules.

And my sense is that not only is their
influence from the international system

into China but the way the Chinese
participate at the international level is

affected by the way these games
are played domestically and

of course even though we're talking about
the domestic use of rules in a country.

I'm also thinking about
the more an industry for an.

It's that also participate in China.

Right.
So the Americans the Europeans the Indians

the Japanese who also
have to go into China.

So it should be now.

So when I say domestic you some are
talking about in this instance the Chinese

right.

Now before I tell you about
the case of standards.

Let me give you some broader conclusions
from this study which looked not

only at standards but

it several of these regimes my book
project also looks at trade remedies.

The credit ratings competition policy.

And commodity trading and
sovereign wealth funds.

So I try to get different
regimes from different areas and

learn how well the Chinese are learning
and playing in these different areas.

So what are some of the conclusions
that I've come up with the first.

Is that the Chinese are learning to be
rather liberal and more protectionist.

The closer they come to following
the rules of these different regimes.

Some people have argued like
in Johnston that the Chinese

will become more liberal the more
they hear to international

norms like the Nonproliferation Treaty or
Chemical Weapons Convention and

in fact the more the Chinese comply
with these the more both liberal and

protectionist they come at the same time
and there's actually genuine learning

going on in these instances because for
example in the case of the N.P.T.

It also it doesn't only promote
the reduction of nuclear weapons.

It also promotes a maintenance of a
nuclear stockpile through are the declared

nuclear countries that seems like
a pretty realist thing to me.

China is more active in effective in those

producer oriented regimes
that I listed for you.

Then in those consumer oriented regimes so
these regimes on the left hand side

the Chinese have been moving up
the learning curve pretty quickly.

And on the right side they are so.

They still have a really long way to go.

And that's a reflection of China's
domestic political economy in which

producer interests are radically advantage
advantaged over consumer interests

in China in the United States
producers are also radically

advantaged relative to consumer interest
but consumers do are able to organize and

have some influence over
the policy process but

in China the scale is tipped way far
in the direction of producer interests.

Internationally way and
the Chinese companies and

actors are better players than
domestically focused Chinese companies.

And they act as a brake on
Chinese protectionism right.

So you have Chinese companies
that source internationally and

produce as part of the global
production networks or

global innovation networks and
as part of that experience.

They learn these rules faster and

better than those Chinese who are less
connected to those international

production innovation networks or who
primarily sell just to the Chinese market.

In international negotiations.

That is the very top tier.

Of global governance
that people look at for

the most part the Chinese
are defenders of the status quo.

And that they aren't
advocates they are and

as status quo power and that there is such
a status quo power that I find it really

Nazia rating when I hear that the Chinese
are going to be anti status quo power and

in fact I would like them to
be I would like them to take

on the causes of the developing world and
of those who were from in the system.

But they don't they basically
are genuinely relatively satisfied

with the rules of the game and

they do precious little far too
little to improve the system.

Fifth China's been moving
up the learning curve.

But its domestic political system.

Is a real constraint on it.

Learning more.

There are.

We know that China has very
good public officials and

I've met lots of Chinese officials
at the national level and

diplomats who are individually
extremely smart and bright and

well trained but
the political system in which they

operate really inhibits them from
being better advocates for China.

Bureaucratic conflicts.

That create problems domestically
also make it hard for

China to be a good negotiator.

Chinese companies on the whole
have inadequate information and

knowledge about the international
rules of the game and

there is inadequate consultation
between government and industry.

And that really slows the Chinese down.

It means that each have Chinese
officials walking into meetings

taking positions that don't reflect
the interests of their government country.

And we know that occurs
sometimes in the United States.

I've talked to the Canadians who always
wondered what to Canadian what's Canadian

industry want but in China.

This is a really big problem.

It means that the Chinese at that level
tend to be very good tacticians but

very poor strategists.

By contrast I have time to go into it but
Brazil does a much better

job of feeding domestic industry
views into government into

international goshi ations on economic
front and they have much more skilled.

Actors and they tend to do
much better in a lot of areas.

The most severe conflicts
between China and

others occur where global
rules are weak or nonexistent.

So.

The places that we're most
concerned about China right now.

What's the big currency issues
in Christian sovereign.

Well fun in the Chinese you know
like buying up path of Atlanta and

then you know breaking it up in pieces and
reselling it or something like that.

You know we're right
call Co Coke any more.

We'll call it Coca-Cola or
something like that and then you know.

It's in those areas is it's
precisely in those areas

where the international
rules are extremely weak.

Or nonexistent.

And that's not China's fault.

That's we chose those
places did not have rules.

We don't want rules on international
finance and currency and

stuff that's what we wanted.

But that's precisely where we
get the most trouble with China.

So so that's again our providing
a larger context for you.

Let me now show you how the standard
story fits into this broader picture.

All right so.

I regionally was thinking about
applying to UVA to study engineering.

But I ended up studying politics.

But my grandfather was an engineer.

And he actually he was president of the I
Tripoli in the one nine hundred eighty S.

And he actually got me interested in
China so low and behold it took twenty

five years before his interest in
my interests merged in my studying.

Information technology standards.

So.

Obviously this is really
of whom vast rewards

of activity and you know many Obviously
standards are extremely important for

anything to get done for commerce
between countries within countries so

that products are compatible
with each other so

that when we drive down the road
we don't run over each other every

day these type of standards
are extremely important.

Just for being able to get along to to for
health and many reasons.

But not as standards are simply
about serving the public's interest

some standards have
a distributional effect in which.

Some do better than others because
a certain standard is adopted.

Now you all may be familiar with the fight
in the one nine hundred seventy S.

and early one nine hundred eighty S.

between two types of video
technology the V.H.S. and Beta.

V.H.S. was a technology standard put
forward by a company called J V C and

beta by Sony and in this conflict that
info that also involved retailers and

movie companies etc
content providers V.H.S.

one even though V.H.S.
is a inferior technology to beta.

V.H.S. had more allies better
lobbying better marketing.

And they won out and Sony lost.

The Chinese in the mid one
nine hundred ninety S..

We're looking at this area and refer
V.H.S. became really prominent in China

the Chinese with help actually from
a California company called C.Q.

a semiconductor company developed
a product called the V. CD player.

All right and they made a lot of money.

And they survived on pirated disks.

Thank God.

You know as Bill Gates would say.

We'll love the Chinese to
see our technology and

one day we'll figure out
a way to get them to pay.

That's Microsoft's strategy.

Well the same for many of these companies.

As if someone here's going to screw
on Microsoft Money I'm sorry.

All right.

The Chinese then thought well we can do
just what the foreigners did elsewhere and

some companies in China put together
a product that was a little bit better

than the V. CD player called the C.B.D.
the China video desk.

Well some other Chinese companies
put together a different

product called the super V.C.
D or the child G V CD.

And they thought well let's
come out with this product.

It'll be a new edition.

We'll own the IP to this technology
we can charge royalties for

others and lo and
behold we're just make a lot of money.

Before the D.V.D. becomes promise.

So they're doing this.

Seeing the D.V.D.
player out there on the horizon.

The Japanese are already working
on that and the French and

others so they have this fight.

That it turned out.

They lobbied they both lobbied the
Ministry of Information Industry to have

a loose standard be the standard in China.

Well.

Before our the government made a decision.

The cut the C.V.T. team which had
not been interested in currying

favor with the government just started
selling their product out the door.

These are selling it and giving away
disks and downloads and everything and

they got enough of these out the door so
that the super V.C. team which had.

Had pretty good connections
with the government and it up.

The government end up being faced with
this market reality that you've got

hundreds of thousands of CD players on
the on the scene and these super V.C.

folks politically connected but
not it's not sales not doing as well.

So the government made a compromise and

said Better standards
are are OK acceptable.

Right.

So.

This was China's first standards work and
as a result of this fiasco.

They realized hey standards
are really important.

We ought to pay attention to this we
ought to promote the development of

intellectual property which we can
then embed in standards and then sell

the products or collect royalties based
on that sounds like a great idea because

they were just about to do that
with the D.V.D. player and we know.

You know after these things collapsed and
didn't do well the Chinese.

Became the World's main assembler D.V.D.
players but for each machine

paid anywhere from five to twenty dollars
in royalties to the jap to the D.V.D.

form which is a collection of
Japanese American European.

Firms.

So the Chinese over time
developed a strategy for

standards that fed into innovation policy.

The goal is to promote indigenous
innovation technology developed an own by

Chinese.

Main business model in this strategy
is to develop distinctive standards in

which Chinese companies own
that intellectual property.

And then sell related products and collect
royalties by licensing the rights to this

IP in that regard the Chinese
basically their model

company that they saw out there is
a company called Qualcomm Qualcomm.

Yes.

OK I'm OK.

OK five minutes OK yeah I got to run
a couple sort stories and then I and so.

Basically lives off of its
control of the C.D.M.A.

IP that it makes from every phone that
sold and put on the rise in that work etc.

The Chinese thought well let's do this and

since we've got one point
three billion customers.

We'll be able to leverage
that into success.

Well and

they thought about this actually in terms
of what I call the standards pyramid

as if they see at the top at the bottom
of the spirit all other standards and

then standards with intellectual property
and as you go up the value goes up and

you can not only produce products with
your IP in them but cross license them

across license and the Chinese official
view is to build this pyramid.

I show.

I actually thought of the idea
this pyramid first and

I showed Chinese officials.

Yeah that's right in front.

That.

But we'd love to do that.

The United States of course has a very
different standard strategy we actually

have one but no one knows about it but
if you go you can go get a copy of it and

it's about using market actors
to set things to set standards.

According to you know
voluntary specifications etc

very different approach than
the Chinese are taking.

Run consequence of China's
interest in standards and is the.

Massive growth of hundreds and
hundreds of new standards from China.

This is just a small list and

this is really just a small list a small
proportion of many of the standards which

the Chinese are developing just in I I T.
in telecom right.

You could go to biotechnology
many other areas and the list.

This is just it's just really unbelievably
long and there's tons of money flowing

from the government local governments
into these things developing a standard

is a great way to help your company
grow even if you never sell a penny.

What are the results of this great effort.

Well.

Pretty abysmal pretty visible.

Most Chinese efforts have
failed commercially sun very

few products making these companies
very little money except for

the money they had from the government to
develop the standard in the first place.

There are though some areas where
the Chinese have been more effective.

In those areas where they have
focused on incremental or

what some call architectural standards
innovations that is they've taken

some existing standards put them together
and put them forth for a new purpose.

Those standards efforts
tend to bear fruit.

Those Chinese companies which have
natural international business ally.

Eyes have been more successful than
those who focus on the Chinese market.

Those companies who focus on
making their money not through

the royalties they collect through
the IP but through just the hardware or

services they provide tend to do better.

And these companies also tend to
have better diplomatic skills.

So when they participate
in standards meetings

they are able to better
to find out lies limit.

Opposition to them and
have some of their ideas.

Adopted into these
international standards.

And they give it to you.

I give two examples.

OK.

I'm sorry.

So I'll Gerber these very briefly but
this is that really the end.

All right so.

And these are two contrasting
stories the first riderless slam.

All right.

We all know about Wi-Fi.

Been around for
about sixteen seventeen years.

The Chinese developed
an alternative called Robbie.

They sad life I have in
a lot of security problems.

But also they thought this was
a great way to leverage their

control of this technology.

Through our both commercial and
security purposes the domestic Chinese

advocates for Robbie's this company
called in were com Sheedy N G at home.

Which is.

In many ways a front company for
the Chinese security apparatus.

Based in she on.

And this company.

Is very focused entirely
on the Chinese market and

they got the Chinese government to say
that this had to be mandatorily adopted by

everybody at in two thousand and four.

China throwing governments lobbied
aggressively against Robbie.

This went to we Chinese Vice Premier and

US Secretary of State and
Secretary of Treasury.

At their J C C team meeting in April
two thousand and four and we caved.

She said OK no mandatory
implementation of Wapping.

You people can still
use why science China.

Standing quietly behind.

We were internationally oriented
Chinese companies that hated wabi that.

Who produced mostly right
five related products.

After this agreement part of the agreement
to suspend Robbie was the willingness and

encouragement of the Chinese.

In will come to take this to the I.S.O.
and

have it become an international standard.

These folks from SHE ON went to
Europe trot went to Florida to

meet all over the world
these standards bodies.

And they said you know her china.

This is great technology your technology
is really weak and you better adopt ours.

And they acted all pompous and

everyone's like well could we
see the algorithm for that.

And they owe no that secret.

Setter and they were very close.

They didn't hang out their
English was horrible.

And lo and behold.

They got nowhere.

They vote they had a vote.

They dotted ry five was
adopted as an international

standard through the work of Intel and
others.

It was not.

But lo and behold people learn.

They figured out that this was that they
had to actually improve their behavior.

And find out lies.

Anyway the advocates of lobby eventually
struck in some private deals with Chinese.

So from companies and they said.

You know eventually.

The makers of Blackberry rim and

others are going to want to have
in their phones a wireless LAN.

Well how do you guys just only allow wabi.

Right.
And.

Originally those companies said yes.

And they were well on their way to
starting to make a lot of money and

then along came Black Berry and the others
and they said you can't do that.

We're really upset but about a year ago
at this time they reach a compromise

that every cell phone that's going to have
wireless LAN in it in China is going to

have both lobby and why five and you can
if you want choose which one you use.

So the Rabi folks have figured out how
to get their product onto the market.

And they've also gone back to the highest
of the ISIS a come on back and so

they resubmitted Robbie and
it hasn't been rejected.

Yet it may be.

At some point but they're learning.

So they're learning curves a little
bit slower but they're improving.

Last story home networking.

This is a much more positive story
from from certain perspective.

Networking makes your fridge
talk to your stereo talk

to your cell phone talk
to air conditioner.

Don't you all have that already.

I'm still research trying to figure out
the how this is that you know the killer

app that everyone's going to want.

But I guess you can make a flush your
toilet too then it's golden In any

case there's these for
a different technologies out there that

help get all this done in different
ways promoted by different

folks deal in A is promoted by Intel and
connect collection of of companies D.N.A.

is Digital Living Network Alliance D.N.A.
is itself actually is made up of a.

Group of standards.

The two most important are called
U P N P which is actually.

Something developed by Microsoft and
then K.N.X.

which is actually a Siemens technology.

But Echo net is in Japan are two
Chinese technologies I G R S

which is developed by a coalition of
Chinese companies centered on Lenovo.

And I top home which is a which is
another technology developed by high are.

As well.

Both the Chinese technologies work
separate as in as national standards in

China a few years ago and then both
wanted to become international standards.

So they went to the relevant
standards body.

The I.S.O. I.E.C. J T C one S E twenty
five Working Group three that is

the that the International Organization
for Standardization is joint technical

committee with the international
lecture technical Commission's joint

technical committee run subcommittee
twenty five Working Group three

US not remembering the CIA was hard
right now I can't I can't tell you what

Working Group one in to do but Working
Group Three deal with home networking.

And hire our brothers they're
the standard there and

they quickly lost the battle
they didn't network right.

They could figure out and
the Siemens team who was promoting K.N.X.

figured out how to quickly sideline.

Top home and brush them off the folks
from Lenovo were much smarter.

They went and they hired this guy who went

to Stanford a Chinese guy who
spoke English really well.

And that and then started using
the business partnership with I.B.M.

and others to

interact more in this to interact better
with the other members of this committee.

And.

I G R S's has six parts but
gradually they've gotten all these parts

adopted by the committee and
they're now just adding it in soon

it'll be an international standard and
this is worked really well.

Minerva though is.

Originally a Chinese company but

now it's really company based
in North Carolina right.

So it's really it's much more
internationally oriented than high

are even is and far more than in World Com
the folks that brought you walk.

That you don't know about so.

Anyway I got other parts of things
I can talk about a different level.

Some things but why don't I stop there.

Let me go on too long you
giving me this chance.

Thank you very much.

OK

We're

very

we're hearing stories one

where

one hundred

one.

I think there's.

Talk talking.

If you says two thousand and
three or two thousand and two.

When the Chinese didn't know
how these committees worked.

That was probably more accurate when
they thought they could just show up and

by the dint of their weight either
physical health of these people or

the economic weight of China to simply
make demands and have others respond.

I think you actually it's
you're really seeing evolution.

And in telecom in particular.

The Chinese do show up in large numbers.

But I think it would be wrong for

the Cisco employees to say that Cisco
doesn't show up in large numbers.

So Cisco has hundreds and

hundreds of people whose only job it is
is to work on standards and to attend

these meetings Cisco is a member of over
one hundred of these standards bodies.

And they both are participants and
have leadership roles.

The Chinese are just doing the same thing
they are simply modeling their behavior on

the behavior of other companies.

And far from being good unaided and
having agreement from

Beijing to the Chinese industry across
the board usually is just utter chaos.

Those rare instances when the Chinese
get their ducks lined up in a row but

that's really rare one of the most
successful Chinese companies international

standards bodies which also sends a lot
of people to meetings is a company called

Huawei which is based in China as you
would know about them quite well.

Huawei.

Doesn't get along with
the central government at all.

They're willing to take
ten billion dollars and

a line of credit in terms of how they
run their business their priority.

Very different from the Chinese official
way of thinking about standard strategy.

There are about incremental
modest changes to existing

standards not about this
is the way technology and

we want to have it displace all
other types of technologies

around the world even and there Cisco's
want to Cisco's main competitor so.

You know I think that's you know if this
if they when well they when they but

they're playing the game the way.

It was taught to them.

Yes.

Very very good Mr Morgan.

Yeah.

I think those companies that tend
to be rubber tech that's probably

you could say as a rough rule
stay don't companies who have

access to credit and a part of the.

Official system.

Might be relative to if you took
a private company relative.

So for example.

Bradway in Z T E Z T S.

Another big Chinese telecom equipment
manufacturer Z.T. standard strategy

is probably closer to the official
strategy than while ways so that.

But I can't I can't say for for certain.

But I tend to think that
it's you know Also company.

He's with relatively mediocre
talent engineering talent.

Business Ach human and maybe that's
more state owned companies but

a great example of that is
a company called dot com.

A company that brought us
the Chinese three G. standard you.

Never know because it totally
thinks this is falling.

No one's violating any rules here.

You know.

There's.

No it.

No it.

Well it's I think.

Room.

We seek protection just as much
as is they do through the rules.

It's a different type of strategy in
which they think government assistance.

By declaring officially
a standard will help them.

That's part of their business ready so
officially setting T.D.'s C.D.M.A.

as China's three G.

standard is beneficial to dot
dot on needs that crutch.

They wouldn't survive without
these type of crutches.

They would collapse the top of
the very elite thin tier of Chinese

industry doesn't need those crutches and
in fact they find those a problem.

So it's their capabilities are quite
different and maybe that's

related to where they're from or the or
their ownership or things like that.

Interesting thing about China's three
G.'s cell phone standard T.V.'s C.D.M.A.

which is the competition with you know
G S M and the C C M A two thousand and

W. C.D.M.A. is Don thought that
they could develop the standard and

then collect and then have the government
say this is the standard and

then they could collect
royalties off of this.

Well dot on the green a couple years.

Ago not to collect the penny and
royalties on the standard.

So in fact they're not they're only making
money by selling hardware and they have

a small percentage of the contracts to
the telephone companies so they thought

they were getting protected this way and
they ended up you know serving socialism.

If you don't

really read where

the company

would be.

You know.

Henri in.

One site or

some of our Company me.

And yeah yeah I mean it doesn't sound
inconsistent with with what I'm saying.

I've I think M.I.I..

And am you know their new incarnation
did see in an international standards

as useful to them in the domestic
political climate having T.V.

be recognized as a legitimate three G.

standard in one thousand nine
hundred ninety two thousand.

Helped.

Domestically if it wasn't
recognized by the I.T. you.

Then it certainly wouldn't have gotten
all the billions of dollars and

the protection that it had now.

So.

In that regard I think that's right.

I think that's you know
if you think of them as

both the business center regulator.

You know so they're trying
to capture Rance off of that

in a different regulatory environment.

Tedy would have gone
the way of the dinosaur.

So yeah yeah.

MIT is not trying to export products.

So you could just change
the sign plate if you wanted you

know I mean their headquarters is
right with the Chinese Academy

of telecom stuff you know I've been in
there and talk to all those people.

So I know it's all it's all interwoven.

Yes.

Yes

sure.
Well I mean they would still

like Motorola phones to sell well right.

Of course.

And Google's now.

Google's not saying they're giving up is
change this one thing which is to reroute

searches to their Hong Kong server.

It rot ride I think they did this strategy
was it's totally for business strategy.

I use Siri gate Brin and

Larry Page have some
strong ideals based on.

The.

The younger lives

are growing up you know originally
being born in the Soviet Union cetera.

And so that may give impetus to some of
the sinking but the reality I think for

Google is that the Chinese regulatory
environment create a problem for

the global business model.

Which is limited regulatory intervention.

Net neutrality.

Other types of tech not products
that they want to sell and

the compromise that they made in China.

Makes it harder for them reduces their
leverage to have other governments reduce

their business their intervention
that effects will businesses and

so since China represents one and
a half percent of Google's total sales.

It's willing they're willing to
see a reduction in those sales in

order to protect the ninety eight and
a half percent and

see that ninety eight and
a half percent grow in addition.

If you can say that if you
can show people you're doing.

No Evil.

Then maybe you get one out of a thousand
more people to use your search engine and

be the eyeballs that help your ad
revenues go up so I think for Google and.

There's a very clear does logic which
they can say which they can show.

Their stockholders that they're
following their fiduciary duty to me.

But again it was a very dangerous with

the what we read

the whole problem was.

If we have seen other

you know that he is partially to

go out of this

that we're happy with
we'll I think you know.

In the.

I think that's that's been very hard for
the Chinese to figure out.

I typically oftentimes I
put up a list of companies.

For people to see and I'll say.

Tell me which one is the Chinese company.

You know how come.

Microsoft can be called Microsoft.

How can you say it's not
a Chinese company when all but

a small handful of their
employees in China are Chinese.

When they do R. and D. in China.

How can you call an overall
a Chinese company when they're

C O isn't Chinese and
they're brought in and stuff like that.

So what is Chinese what
is not isn't very clear.

I think in the in the simple
world of Chinese ministers and

state council premiers.

If you can if you're part of
the if you're part of the central

party hierarchy of the top
Chinese companies.

Then you're a Chinese company.

All right.

And also if you can show that technology.

At least on paper.

You can make a claim for it and

certainly the Chinese can say that yes we
originally got some of these ideas from

Siemens we cooperated with them you know
I've talked to Siemens about this too and

Siemens is is happy to say that they
can treat that they centrally gave this

to the Chinese and then to get from one
thousand nine hundred ninety six ninety

seven of here's some interesting
technology to go it's now a standard.

And that now it's in a product.

That's that is there still of a bit
of amount of distance there so.

I wouldn't say that the Chinese
contribution to that individual

technologies is irrelevant.

But you're right that it never
in these type of geographic.

Differentiators are really
whole hard to to hold true

to when the way to.

Knology developes is typically
not that fashion in fact

one of the things I really wanted to do
for this project was go to the I.S.O..

And I to you and

say OK you guys have passed these
standards in the past in the last decade.

Each year.

Tell me which ones are Chinese standard
which ones an American Standard which

ones German standard will go and
then I'll be able to see you know.

The Chinese contribution is going up like
that that is in possibility to do you.

You cannot do it you could look at
the number of comments that people make or

other types of things but
in reality every international standard is

is made up composed of ideas and
contributions from all over the place and

so actually figuring
that out is in Israel and

possibly there's a there's
a couple folks as a Hopkins and

Oxford they pair did a study on
standards and trying to measure success.

But oddly did was they men they
measured how many proposals people met

made not how many were adopted and
so actually figuring out

the geographic regions of a standard
is is really really really hard.

Yes.

You know if we just think about the B.T.O.
side which are.

It's trade related issues I think actually
the Chinese have moved up that learning

curve faster than any other area.

So when trade remedies which
is astray didn't go in today.

The Chinese are actually more active and

more successful than
they are in standards.

And the Chinese have figured out
the rules because they were so

they've been accused of dumping so
often themselves.

And in that process they
had to hire lawyers and

respond in jurisdictions abroad.

They then developed they thought
well what we can do this too.

So they hired they create their
own anti-dumping regulations.

You then see the emergence of
China's own legal community

international trade ambulance chasers.

Who who know how to go make Chinese
companies think they've been

injured and bring cases.

You've seen Chinese at the level when
there's a dispute that goes to Geneva.

There are lawyers
typically not well trained.

There's only been I guess four
hundred two cases brought to

the dispute system since one
thousand nine hundred five.

So it's not a whole lot of business.

So there's just a there's just
a small handful about five or

six law firms that really specialize in
cases and they hire these while yours.

To represent them.

And so on the American side of the case.

Will be.

A Harvard trained lawyer.

And on the other side for representing the
Chinese will be a Harvard trained lawyer.

And they're.

Hey it's just like That's right.

The Chinese have begun to bring in some
of their own domestic lawyers to provide

some stuff help on the side but they're
not capable of doing it on their own yet.

But on that side since the promotes
protectionism under certain circumstances.

It's really not been about
you know figuring out.

Domestic liberalism versus mercantile ism.

It's really been about the rise of
the Baby Taylor extremely complex

the unofficial norms.

Take a really long time to learn.

The Chinese have really
been going to school.

I think because of the government industry
weakness in terms of consultation

they're better tacticians and strategists
they end up achieving what they want but

they usually could get a lot more or
do a lot more for

China if they had better
consultation with industry but.

I don't think that's about that these
are Western organizations versus

you know Chinese ones or
something like that.

I just in the one example in the.

New when you're new diplomat
you get sent to Geneva.

Many of the developing countries take
a class at the they provide training.

I think it's a thirty day class
you spend a couple hours learning

how wonderful the B.T.O.
is to promote liberalism.

You spent twenty nine and a half days
learn how to screw the other side in a go.

She ations All right.

And that's as I swear I swear that's
that's what you learn at the W T F Yeah.

It was really really

you know you

see right there.

It was and you're from your

Aren't you the same thing we're.

Yeah yeah I've heard Mr Prestwood
speak before in person as well and

he's taken what he said about Japan and
just replaced the word China.

In there and so he I mean he has the same
feelings I think what I think the Chinese.

There are many Chinese who would love to
be able to do what they think Japan did.

And they.

And those Chinese think
Japan was Japan Inc That

totally shut out the inside world
had no domestic divisions and.

Not the Japanese consumer
to dump stuff abroad.

I think.

In my view in China the way I see China.

I see competing norms.

Within the government
outside the government.

No.

A.

And enunciated central government
policy that then quickly.

Fragments into many different strands

with different people
implementing in different ways.

And I think that that
difference between the two is.

In many ways a product of the fact that
China has been an active recipient and

seeker of foreign direct investment and
that those three hundred thousand firms.

And the production that work.

The Chinese companies are part
of have made as a created a.

A strong liberal bias among some Chinese.

Company we would call liberal bias so
I would

say there are entrenched liberal interests
in China that did not exist in Japan.

I now run into Japanese companies that.

Sad what the Chinese Japanese did for
example with their cell phone technology

that collapsed and have argued that
in fact they need to move in a much

more liberal debt direction and
Panasonic and others who are in China are.

Are trying to get the Chinese to play
the game in the way that Intel and

others are also also trying to do so.

I think perhaps the different ways
engaged the international system

has affected a different type of outcome.

Also I mean it's you know neither here nor
there.

I'm less.

I don't think I think the revisionists
the chambres Johnson view of Japan

is not always the the true view of Japan.

So I think there's a lot
more disagreements and and

I brought up the bait of V.H.S.
fi and there's others.

That you can invest.

Yeah.

Yeah.

Yeah I would imagine that in solar and
in energy the Chinese are going to be big

participants in standards both in green
technologies and traditional ones

I mean the Chinese you would think that in
coal or liquefied natural gas the Chinese

which are really important to China they
would be big players in these areas.

I'm a horrible at giving
investment advice.

I've done that to the detriment of
the relationship with my mother.

So since I value our relationship.

All with withhold specific advice
about which companies to invest

in but I do think China is continuing
to grow I don't I don't believe the.

Theory that you should that you should

play to sell China short I still
think there's plenty of room to grow.

So there are probably lots of
different areas where one can do well.

One.

But one.

Why

there is I'm down

below zero zero

zero zero zero year

or more of your back to me

again why would you raise

the amount of money that it takes to
induce a company to set standards

is actually relatively small.

So it's much cheaper than.

Inducing the American financial
community to get their house in order.

And so it really isn't an expensive
proposition to encourage

this type of activity but but most of
the Chinese companies that do this.

I mean they.
Maybe drawn by the government financing

but most of them really think that.

You know riots Sony successful
why is Qualcomm successful

they really think that that control of
the IP and the royalty is means a lot.

They really believe that.

And because they were on the other
end paying the royalties.

So that real life experience.

Has To taught them the lesson that
it's better to be on the other side of

that table.

And.

Now there are other business models right.

You can develop standards.

In which you charge nothing and
then sell this and

then there's a common platform and
the pie gets bigger for everybody.

Right.
Or you could charge just a little bit.

Or do something else you
could have no standards.

Right.

You could be like Taiwanese companies.

Which just accept standards
whatever anyone else sets.

And then produces to those
faster more efficiently

adaptable that then then others.

Right.

And also of course the Taiwanese can't
participate in these international

standards bodies at least
the state based ones so.

So when I tell the Chinese you know
why don't you try and do like Taiwan.

You know the response is.

That little bit.

You know that that's what they're
thinking you know we're big China.

How could how can you tell us
that we can't aim higher power.

Why can't we be at the top of the pyramid
they really believe that that is not just

one of several business strategies but
the best one I mean Qualcomm is just.

Money and no it's just too easy.

But I do think that as companies fail
individual companies learn and adapt.

So I do think the.

That we are seeing the slow.

Evolution of the way Chinese.

Engage standards bodies in a more positive
direction and I think that's why Huawei

and other telecom companies are being more
influential because they've they're not

looking for just that one killer standard
that's going to be everything for them.

So you know the rap the story received
a whole lot of global attention and

it became the symbol for China's
standard strategy when it's really just

one of many different types
of efforts that they give so.

So I mean I see we're learning.

I would like.

You know one of the things that
the Chinese have done at the W T O.

In the T.T. committee technical
barriers to the Committee on

technical barriers to trade
is they in two thousand and

five put forward a paper asking for
the committee

in its next three years to discuss the
relationship between standards and I P.

Because they say.

The person that wrote this paper who
works in the ministry of commerce

based on his research sees intellectual
property as an anti-competitive

tool in which you get monopoly
rents from owning the IP.

And that was quickly shot down.

And he got nowhere with that.

And the Chinese are now in
a pact trying to have a talk.

You know informal conversations about it.

There he is going against
the trend of Chinese industry

which is actually trying to develop IP so
that they can develop monopoly rents.

So they can replace the folks
that they're fighting against.

However.

And so he's totally disconnected
from Chinese industry and

he doesn't know them very
well they've heard of him but

they don't care about him but
I think actually what he's trying to do.

In principle makes a lot of sense that the
is really good at protecting innovators.

But it's really not very
good at promoting diffusion.

And so that balance between the two.

I think is worthy of discussion.

And I tell my U.S.T.R.
friends that they go no.

Not going they're not going there.

And you know he's he may be bringing
it forth because of some you know

north south conflict type of thinking but
I think there's you know most

of us are on the consuming side of
the technology not on the innovating side.

Maybe not Georgia Tech students and
professors but at I you we are and so

I want there to be a little more balance
in the way of on the diffusion side.

No thanks.