Posted on 03/17/2006 2:04:45 PM PST by MRMEAN
U.S. Commerce Secretary Carlos M. Gutierrez
REMARKS TO ASIA SOCIETY
March 14, 2006
Washington, DC(Remarks As Prepared for Delivery)
Thank you for those kind words, Diana. I also want to thank the Asia Society for its leadership in promoting understanding between America and the countries in the Asia-Pacific region.
As our economies have become more interconnected, I know your educational programs have expanded to include globalization. Today I'd like to focus on one critical aspect: the U.S. China economic relationship.
As you know, President Bush and this Administration strongly believe in the power of free and fair trade to spread prosperity and promote peace and stability. Economic activity related to trade accounts for almost a third of our GDP. And some 12 million American jobs depend on exports of goods and services.
We're all here this afternoon because we share a vision about the power of international trade to develop the global economy.
We understand that economic cooperation between China and America has greatly benefited both our countries.
We believe that the dynamic growth unleashed by free trade is the best hope for developing countries.
Three issues dominate discussions related to trade with China:• The size of our trade deficit
• Our access to China's market
• And the climate for intellectual property
The Bush Administration believes that substantial progress on IPR and market access would reduce our present trade deficit.
We believe that China's senior leaders support our goals. However, producing results across the central government and at the provincial and municipal levels remains a large challenge.
Because we share the optimistic goal of a stable and prosperous partnership between America and China, we also share an obligation to encourage the Chinese government to act on the areas of trade friction that are casting a shadow over our economic relationship.
In America, we look outward with optimism and confidence. We compete freely with any partner who offers us fair terms of trade. We seek new markets to open and explore.
And few emerging economies will have a larger influence than China over the global economy during the 21st Century.
For more than 25 years, the U.S. has pursued a policy of open commercial exchange with China.We have encouraged Chinese leaders to embrace market principles and welcomed China into the global economy. We supported China's accession to the World Trade Organization.
Today, exports supply 40 percent of China's gross domestic product and the U.S. market has been directly accountable for more than 20 percent of China's export growth over the last 20 years.
The U.S. has accounted for a large part of China's economic growth and during that time, hundreds of millions of people have been lifted from poverty in China.
America has also benefited from trade with China. U.S. exports to China grew by 20 percent last year which built on 22 percent growth from the year before.
China continues to be one of our fastest growing trading partners. U.S. companies invest billions of dollars in China.
However, the reality of trade with China continues to fall far short of its potential. Our trading relationship is weighed down by a $202 billion deficit.
If our economic relationship is to stay afloat, China needs to lighten the load by carrying out reforms and delivering results.
As Deputy Secretary of State Zoellick has stated:"It is time to take our policy beyond opening doors to China's membership into the international system: We need to urge China to become a responsible stakeholder in that system."
The Administration believes that China, as a major player, has a responsibility to strengthen the international trading system. After all, it is that same system that has empowered a strong and growing Chinese economy.
Few markets have captivated the world's commercial imagination like the possibility of doing business within China. American entrepreneurs and our most innovative companies dream of an opportunity to offer their products to a billion consumers.
Our relationship has matured beyond the stage when our focus should be measured by potential. Now, our trade relationship needs to be measured by results. We're concerned by some of the facts.
Let's begin with the broad question of balance.
Although, China's tariffs have fallen as China implements its WTO commitments, U.S. and other foreign companies still face a wide array of barriers within China.
These barriers include industrial policies and technical standards that put imports at a disadvantage as they shelter and protect Chinese domestic industries.
This is especially problematic in the information technology sector. Government procurement policies support favored domestic sectors.
For example, the Chinese government recently announced that it will give preferential treatment to products containing the Chinese infrastructure or WAPI standard in purchasing decisions. This will give Chinese products a huge advantage.
The lack of transparency in the Chinese regulatory system and weak law enforcement place U.S. and other foreign companies at a disadvantage. Chinese companies, by contrast, gain advantage through their government connections.
Regulations also restrict market access in telecommunications. Foreign companies are required to invest $241 million before being allowed to provide basic telecommunications services.
The bottom line is that our companies do not have their rightful access under the terms of China's WTO commitments.
Subsidies are another ongoing problem. China's state-owned enterprises gain a significant edge through extensive and non-transparent subsidies.
It's hard to judge the full scope of this problem because China still hasn't submitted to the WTO a complete list of all the subsidies present in its economy.
We know that, in sectors like steel, Chinese state-owned enterprises are extended loans by state-owned banks which are never repaid. This trend is creating overcapacity in the Chinese market.
In keeping with its emergence as a major trading country, China has a responsibility to ensure that U.S. and other foreign companies have full and fair access to the Chinese market.
If officials in China wonder why so much attention is given to the issue of intellectual property protection, the answer can be found in the scale of the problem.
The numbers tell the story:
Last year, China was the second largest market for personal computers in the world but it was only the 25th largest market for software.
There's simply no reasonable explanation that can account for that deficiency.
In the case of software, our trade deficit is being depressed by nothing short of criminal activity.
Two years ago, 18 out of 20 copies of software installed on PCs in China were pirated. Those thefts cost U.S. companies more than a billion dollars.
The situation is similar in the music industry. Two years ago, 17 of 20 recordings sold in China were pirated.
And the trend continues with movies. Two years ago, 19 of 20 film DVDs sold in China were pirated. Those thefts cost U.S. companies $280 million.
During 2004, the Chinese film, "Hero," earned almost as much at the box office in the United States as every U.S. film combined earned in China.
The implications of those numbers are clear: First, China is pretty much a closed market for the commercial screening of American films.
Second, the theft of music and movies in China is the norm and the legitimate sale of these items is the exception.
Imagine going to the grocery store and watching 17 out of 20 customers shoplifting items from the shelves and walking out of the store without paying.
Pirated goods represent a far larger problem than simply lost sales within China.
Two years ago, the U.S. Customs Service found that 63 percent of all the counterfeit imports seized in the U.S. came from China. Last year, Chinese counterfeits had grown to 69 percent of seized imports.
Our Customs officials routinely find fake automotive parts and low-quality electrical goods that carry a phony Underwriters Laboratory safety seal.
In one case last year, law enforcement disrupted a criminal enterprise that was making counterfeit drugs and attempting to sell them in the U.S. market. Suspects in the case are now awaiting prosecution in both the U.S. and China.
It's estimated that 10 percent of the world's medicines are counterfeit and it's safe to assume that China makes the lion's share of those fake drugs.
Ironically, the most compelling reason for China to create a secure business environment for IPR is its own self interest.
Last year, a million new patent and trademark applications were filed in China. The winds of economic freedom are stirring innovators and entrepreneurs across the country. These ideas and products deserve to be protected.
One study projects that if China simply cut its software piracy rate from 90 percent down to 80 percent, it would generate $6.5 billion in tax revenue. And it would create 2.6 million jobs in China.
We believe that the Chinese government can do more to step-up enforcement:• During 2004, the Chinese government reported that only two percent of the criminal IPR copyright cases taking place in China involved foreigners
• During 2004, less than one percent of China's administrative trademark and copyright cases were referred for criminal prosecution
Contrast that response with the reported 30,000 Chinese law enforcement officials assigned to police and patrol the Internet. Surely, those officials could be identifying and enforcing more cases of digital piracy.
China could be making far more progress in uncovering and closing down the most dangerous and economically destructive sources of piracy. We don't doubt China's significant new efforts; however, our focus is results.
It is unfortunate that American companies that once saw China as a land of opportunity now offer a mixed assessment.
China needs to think about the problems in the correct terms and gradualism should not be a response to the underlying issues.
One of this Administration's goals is to preside over a period of progress and increasing cooperation between the U.S. and China. China's leaders also talk about achieving greater progress.
I know that everyone here today seeks an era of positive development in U.S.-China trade. I wouldn't be giving you a candid assessment without mentioning our growing concern about the rising level of trade tension on Capitol Hill.
When China fails to act, it only strengthens those who want to build protectionist barriers around the U.S. market. That's the last thing we need.
China's failure to address economic frictions will have consequences. Without concrete results, the Administration, and the American people, may be forced to reassess our bilateral economic relationship.
And without results, I'm afraid Congress may go down a path that none of us want.
Maintaining support for trade within a democracy requires cooperation from our trading partners.
And with the stroke of a pen, China could open critical closed sectors to competition from U.S. companies.
In areas like telecommunications, IT, services, and direct sales, China has a real opportunity to deliver results quickly. Progress would greatly strengthen those of us who oppose protectionist policies. The commercial relationship should be a source of strength that bolsters the overall relationship.
Over the long-term, the biggest beneficiary of those results will be the Chinese people themselves.
Creating a safe climate for intellectual property and a more open and transparent marketplace is squarely in China's own vested interest.
We all want to see greater stability and trust in the relationship between China and the United States.
The Asian Pacific Partnership--an initiative to promote clean development and cooperation on energy and environmental issues--is a great example of what we can accomplish by working together.
This is an historic moment.
We can either go forward, creating prosperity for both countries, or we can drift backwards, putting at risk the social harmony and expanded prosperity in China.
I trust we will both have the wisdom to do what is right for our people.
The Asia Society has been a leader in promoting stronger ties between China and the U.S. and I thank you for your efforts.
Each in our own way, we need to continue encouraging China's leaders to act as responsible stakeholders and, in so doing, help to create a more prosperous world.
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US Department of Commerce, 1401 Constitution Avenue, NW, Washington, DC 20230 Last Updated: March 14, 2006 1:29 PM Contact Secretary Gutierrez by e-mail at cgutierrez@doc.gov. Direct inquiries about this page to webmaster@doc.gov. Privacy Policy |
it was a Mistake for Bush 41 to give China preferred nation trading status.
The chinese will claim the criticism is unfair and we're trying to contain them, yada, yada, yada.
I agree on that.
"it was a Mistake for Bush 41 to give China preferred nation trading status."
Even countries like Libya, Iran, Syria, Sudan and Iraq have "Most Favored Nation" (MFN) status. Of all the countries in the world, only Laos, North Korea, Cuba, Serbia, Ukraine and Afghanistan don't have MFN/NTR status. Equating North Korea with China is kind of a stretch. Even if the US doesn't trade with China, the Euros will and are.
The status doesn't mean much, that's why now it has been renamed as "Normal Trade Relations" (NTR).
I understand that. It was still a mistake. It used to be we could use it to get countries to comply with our foreign policy goals or suffer the economic consequences. Consequences that actually used to mean something.
Thanks to politicians who now go to work as lobbyists for foreign countries when they get kicked out of office, we have done away with one of our biggest "peaceful" sticks. Now we have nothing to negotiate with except military action.
I'm in favor of "free trade", but only between functioning democracies, and only when the trade is actually on a level playing field. Our current form of free trade has opened us up to the predatory trade practices of every thug nation on the planet. Meanwhile we tie our own hands with rules and regulations that only we are dumb enough to follow.
/rant.
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