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Manufacturing is still critical to the economy United States. Clyde Prestowitz, says it's time to start realizing the positive spillovers that manufacturing creates... Read more  

Events & Activities

Stephen Olson at Chinese Development Institute Conference


 Clyde Prestowitz giving presentation to CDI...


Steve Olson teaching trade negotiations at the Mekong Institute...


Stephen Olson to speak at upcoming workshop organized by the International Institute for Trade and Development on 

"Economics of GMS Agricultural trade in goods and services towards the world market"

Chiangmai, Thailand Sep 8-12.

(02/09/05) Clyde Prestowitz quoted in Investor's Business Daily

Clyde Prestowitz quoted in Investor's Business Daily (02/09/05)
IBM PC Division Sale To Lenovo Expected To Get Regulators' OK; Big Blue is big lobbyist, PCs are not high tech, so most experts content.(A)

Washington wouldn't let China buy a U.S. firm that made on-board processors for cruise missiles.

But PCs are such a commodity -- anyone can make them -- that U.S. security would hardly be affected.

That's why most analysts think U.S. regulators ultimately will approve IBM's $1.75 billion sale of its PC, laptop and notebook unit to Lenovo, China's biggest PC maker.

"There really is no high tech here," said former Reagan administration trade adviser Clyde Prestowitz. "People think those PCs and laptops are high tech, but they're really not. Some of the parts are, but IBM doesn't make those."

The view follows word on Jan. 28 that the Committee on Foreign Investment in the United States will review the deal.

The interagency panel can block deals like IBM/Lenovo on national security grounds. The probe could last 45 days.

Glitches could still arise due to bilateral tensions, like China's forced landing of a U.S. surveillance plane in 2001. The deal also spotlights larger issues like how much of a tech advantage the U.S. would be willing to give a rival like China.

Some worry the deal would give China access to advanced research that would let them build tiny, incredibly powerful nano-PCs in the future.

Despite such misgivings, most analysts say, Big Blue has done its homework and is reasonably sure the deal will pass.

Huge multinationals like IBM have extensive government operations offices in Washington, work closely with U.S. embassies abroad and usually hold informal talks with the government before big deals. Influential lobbyists help grease the wheels with officials.

A source in Washington who asked not to be identified says IBM has hired Brent Scowcroft, former national security adviser to Presidents Ford and George H.W. Bush, to lobby for the deal. The Scowcroft Group didn't return calls. Insiders say the ex-Air Force general is part of a group of experts on China that favors close economic ties with Beijing as the best guarantee for world peace.

"I've worked closely with the IBM crowd in the past," said Steven Clemons, executive vice president of the New America Foundation, a D.C. think tank. "It would be nearly impossible to imagine a circumstance in which IBM did not consult beforehand with the Bush administration."

Analysts also expect the deal to clear because the Bush administration, despite hiccups with Beijing, backs "constructive engagement" with China by making it a full member of the global economy.

Security and political factors might create last-minute hurdles.

Dual-Use Concerns

Most U.S. concern is focused on dual-use technology. This is tech that can be transferred from the U.S. to China that has civilian and military uses.

In the 1990s, China used advanced encryption devices from the U.S. to make its military codes more secure.

PCs are different, but some analysts say the U.S. shouldn't risk fallout with a key trading partner by denying tech that's so widespread.

Even if the IBM deal fell through, Lenovo could easily strike similar deals elsewhere.

"If Lenovo wasn't buying PC technology from IBM, they could just as easily get it from a Japanese or European company," said Cato Institute trade policy analyst Daniel Ikenson.

But IBM and Lenovo plan to jointly develop next-generation PC technology, giving Lenovo access to research from top scientists at IBM's PC center in Raleigh, N.C.

A Chinese government agency, the Chinese Academy of Sciences, owns a third of Lenovo. The academy plays a key role in exploiting technologies in China.

The fear is Lenovo might transfer sensitive technology it develops with IBM to China's military.

Innovations in nanotechnology, or the science of making molecule-sized devices, also could make next-generation PCs more powerful than anything that can be bought off the shelf today.

Hewlett-Packard announced a milestone Jan. 31 in crossbar latch circuitry that might shrink computers to incredibly small sizes.

"PCs have obvious military applications," said William Triplett, a former chief Republican counsel for the Senate Foreign Relations Committee. "The question is, where do you go from here as far as military uses for PCs?"

Chinese Firms Punished

Other issues might block U.S. approval of the deal.

The U.S. early this year punished eight Chinese firms for providing advanced missile technology to Iran. Specific penalties weren't disclosed. But they usually bar offending firms from doing business with the U.S. government. They also can be denied tech export licenses.

The move affected giants: China Great Wall Industry and China North Industry, or Norinco. Like Lenovo, both are partly owned by the Chinese government.

The incident hasn't affected overall U.S.-China relations. And so far there's no reason to think the IBM/Lenovo deal might be affected.

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