Tariffs hamstring the US in the race to 5G

A 5G world holds the promise of game-changing technological advancements that have far-reaching implications for the United States’ national security, economy and global standing.

But in order to lead the way in 5G, we need to reduce the uncertainty raised by recent tariffs that are already causing economic harm to U.S. interests, including the telecom sector. The tariffs put in place a month ago are impacting our markets today and will also have long-term consequences for U.S. competitiveness in the race to 5G. 

The United States led the world in the development and deployment of 4G and reaped substantial economic and innovation benefits. 

By one estimate, winning the race to 4G boosted America’s GDP by nearly $100 billion, spurred an 84 percent increase in wireless-related jobs and gave rise to an entirely new app economy. Leading the way on 5G is more important than ever. The stakes are high for our industries and our economy.  

But America faces fierce competition in the global race to 5G. The latest round of tariffs on $200 billion worth of Chinese goods took effect on Sep. 24, impacting a broad range of telecommunications equipment.

The financial damage related to these tariffs is expected to reach hundreds of millions of dollars for the U.S. telecom equipment industry sector alone. 

As an organization representing more than 300-member companies, including manufacturers and suppliers of communications networks in the United States and around the world, the Telecommunications Industry Association (TIA), sees firsthand how painful these tariffs are for consumers and businesses.

For companies large and small across the country that depend on being connected to their customers, suppliers and partners through technology, these tariffs significantly raise the cost of doing business.

By essentially taxing the very equipment and components necessary for maintenance and upgrades, as well as the ongoing reliability and security of our modern telecom infrastructure on which we all depend, everyone loses. 

The impact on future innovation, and the roll out of 5G, is equally stark. One of the key competitive advantages of American industry is that we are avid and early creators and adopters of technology, which has, in turn, allowed companies in the United States to provide more efficient and high-quality services than many international competitors.

Unfortunately, the recent tariffs target equipment that is essential for 5G telecom technology that will enable network-based innovations like artificial intelligence, cloud computing and the internet of things. Taxing that equipment, in addition to raising costs for consumers, will hinder innovators and discourage U.S. adoption of advanced technologies.

Other than these tariffs, this administration has been aggressive in its advancement of policies that remove barriers to future technologies and accelerate American leadership in 5G.

Critical initiatives to unlock the potential of 5G, such as the Federal Communications Commission’s (FCC’s) moves to accelerate wireless small siting and freeing up additional spectrum, illustrates this administration understands the economic potential of 5G.

Estimates are that the potential for U.S. leadership in this next-generation wireless technology includes 3 million new jobs, $275 billion in private investment and $500 billion in new economic growth.

Such actions by this administration are welcome and timely given how aggressively the Chinese government is working to proactively help its own domestic telecom industry through nationalist policies and systematic state investments in network infrastructure.

This makes it all the more important that our leaders take action to promote, not financially handicap, telecom companies here in the United States. This competitive backdrop with China underscores the importance of creating a favorable policy environment in the United States.

The 5G contest is already underway, with the four major operators in the United States having publicly announced they will begin providing 5G services between late 2018 and mid-2019. 

We agree that China’s unfair trade practices and policies must be addressed, but we need to do so without punishing American companies and consumers now and into the future.

Tariffs on network equipment will only serve to slow the deployment and upgrades of U.S. high-speed internet services and next-generation network technologies.

Far from helping to achieve the dismantling of problematic Chinese policies, tariffs will ultimately damage our technological and economic competitiveness and hurt our economy. 

 Wes Johnston is the CEO of the Telecommunications Industry Association (TIA).