AARON 9/2 FPC BRIEFING ON UPCOMING S.E. ASIA TRIP
(Aaron also to attend APEC ministerial, visit China)Washington -- Under Secretary of Commerce for International Trade David Aaron will travel to Malaysia, Singapore, the Philippines and Thailand from September 7 to September 19 on the first high-level U.S. trade mission to Asia since the onset of the Asian financial crisis.
"We believe there are still good commercial possibilities in the region," Aaron said at a September 2 briefing at the USIA Foreign Press Center. "The United States is here to stay in the region, in terms of a trading partner and an investment partner, and we are interested in building long-term relationships and sustaining those long-term relationships. And this is why we believe it is timely for us to take a trade mission to the region."
The mission will include 12 U.S. firms in the telecommunications, information, and environmental technology industries and will focus on issues related to the Asia-Pacific region's economic recovery.
"The American companies I'm taking are committed to being an integral part of Asia's recovery and to remaining engaged in the region," he said.
Aaron stressed that recovery efforts in Asia will depend heavily upon the actions the affect countries take, especially in Japan's case.
The length of time economies will take to recover "will also depend on the extent to which there is a serious commitment on the part of the countries concerned to trade liberalization and structural reform," he said.
"The crisis can't be used as any kind of an excuse for backing away from trade liberalization commitments," he added.
While in Malaysia, Aaron will also attend the Asia-Pacific Economic Cooperation (APEC) ministerial meeting on small and medium-sized enterprises.
APEC's early voluntary sectoral liberalization effort "is essential as a confidence-building measure and to send a signal to financial markets, and also for APEC's own credibility in this time of crisis," he said. "I firmly believe that if this APEC process does not go forward, it would have serious consequences for the region as a whole."
Asian economies must also "take steps to prepare themselves for the next level of trade activity, and in particular electronic commerce," Aaron said.
"APEC countries have roughly 40 percent of the world's Internet users -- a percentage that's likely to grow significantly over the next decade," he said. "We believe that electronic commerce can play a critical role in helping to lift Southeast Asian economies out of the current crisis."
Following his trade mission to Southeast Asia, Aaron will travel to Beijing, China to open the September 22-23 "Financing China's Energy Needs" conference, to review the agenda for the Joint Commission on Commerce and Trade (JCCT) meeting to be held in October in Washington, D.C., and to follow up on some of the initiatives announced during President Clinton's recent visit to China.
Following is an official transcript of the briefing from the USIA Foreign Press Center:
(begin transcript)
Foreign Press Center Briefing Transcript
Technology Trade Mission to Southeast AsiaBriefer: David Aaron, Undersecretary of Commerce for International Trade
MODERATOR: CHARLES SILVER
1:50 P.M. EDT
WEDNESDAY, SEPTEMBER 2, 1998
MR. AARON: As I think we're all aware, the commercial environment in Asia is changing dramatically and rapidly. A little over a year ago, Thailand devalued its currency, which ignited a firestorm, a financial firestorm, across Asia whose consequences are reverberating even today, elsewhere in the world. Unfortunately, today the region still remains far from recovery. Malaysia, Indonesia, Korea, Japan, Thailand are all facing recessions. And even the few countries that have managed to keep growing, Taiwan and the Philippines and Singapore, may now be moving into negative territory.
From the standpoint of the United States, of course, we're concerned because the crisis is also having a negative impact on U.S. exports. After years of substantial growth, U.S. exports were up only 1 percent in the first six months of this year, and Asia is clearly the reason. Exports to Asian economies were down over 30 percent, while exports to the rest of the world were up by 7 percent. And given the different volumes, the net gain was only 1 percent this year. And this is important to us because exports have been the source of at least one-third of our growth over the last five or six years, and now exports are contributing only marginally to that situation.
Now we believe there will be a recovery in the region. We think that is inevitable. But it won't easy, and the duration and the time that it will take will depend a lot on the actions of countries in Asia themselves; in particular, of course, the actions of Japan. It will also depend on the extent to which there is a serious commitment on the part of the countries concerned to trade liberalization and structural reform. This is why, as part of my visit, I will be stressing to every government that I talk to that the crisis can't be used as any kind of an excuse for backing away from trade liberalization commitments.
And we are working through the IMF process and through APEC and other international fora to push for further market-opening actions.
Now specifically, I have three broad missions in this -- on this trip: The first is to attend the APEC ministerial meeting on small and medium-sized enterprises. And I'll be talking about that a little bit in a moment.
The second is to bring with me and conduct a high-tech trade mission to Thailand, to Malaysia, to Singapore and the Philippines.
And third, to visit Beijing, where we -- I will chair a seminar on project finance and also have an opportunity to follow up on the presidential summit, some of the initiatives that were announced there, and prepare for the Joint Committee on Commerce and Trade that will take place a little later this year.
On the APEC ministerial, we consider this a very important ministerial because it addresses the problems of small and medium-sized enterprises. And they are the ones that have been the worst hit by the crisis in Asia. The larger companies have more resources.
They have more connections, more financing connections. So we want to see what can be done to try to be helpful to the small and medium-sized enterprises that have been such good customers of the United States, as well as loyal suppliers.
We also want to give a boost and some additional momentum to APEC initiatives such as APEC's early voluntary sectoral liberalization effort. We believe that initiative -- and the successful conclusion of that initiative -- is essential as a confidence-building measure and to send a signal to financial markets, and also for APEC's own credibility in this time of crisis. I firmly believe that if this APEC process does not go forward, it would have serious consequences for the region as a whole.
It's equally important, in our judgment, for the Asian economies to take steps to prepare themselves for the next level of trade activity, and in particular electronic commerce. APEC countries have roughly 40 percent of the world's Internet users -- a percentage that's likely to grow significantly over the next decade.
And we believe that electronic commerce can play a critical role in helping to lift Southeast Asian economies out of the current crisis.
And I'll be addressing that -- those points at the ministerial.
And finally, in this area we also believe that there's an important challenge -- two important challenges for the APEC countries. One is the problem of the year 2000 issue as it relates to computers and the fact that in the midst of this economic crisis it could be the source of significant disruption of APEC economies if it is not dealt with appropriately. And we think that we need to raise people's consciousness as to the serious -- of this issue, which is only less than 18 months away.
And finally, we also believe it's important to conclude the second round of the Information Technology Agreement.
Now following that meeting in Kuala Lumpur, I will join 12 U.S. firms to lead the first high-tech trade mission to the region since the beginning of this crisis. Indeed, it will be the first trade mission, I believe, that we will have led to the region since the crisis is done.
And the message that I'm trying to deliver here is very simple; we believe there are still good commercial possibilities in the region. The United States is here to stay in the region, in terms of a trading partner and an investment partner, and we are interested in building long-term relationships and sustaining those long-term relationships. And this is why we believe it is timely for us to take a trade mission to the region.
The American companies I'm taking are committed to being an integral part of Asia's recovery and to remaining engaged in the region. So companies are going out there to find customers. We believe that there are opportunities. And we're looking forward to making progress with them.
The governments in the region, whether we're talking about Malaysia, Singapore, or the Philippines and Thailand, all base their plans for industrial modernization and competitiveness on -- and their economic recovery -- on high-tech sectors. And they're looking to the United States to help them meet those demands, and we are there to help them.
Finally, when I go to China, I will be doing essentially three things. One, I will be chairing with the government of China an important conference on financing China's energy needs. Secondly, I will be following up on the initiatives that were undertaken at the summit between the president and the Chinese leadership. And finally, I'll be preparing for a meeting of the Joint Committee on Commerce and Trade which will take place later this year.
On the development of China's energy sector, it is crucial to the growth of the Chinese economy. Their efforts to meet their energy needs present a tremendous commercial opportunity for American companies. But financing is a serious obstacle, an all the more serious obstacle given the condition of today's capital markets.
Impediments in the use of private finance have placed this vast pool of private financial resources beyond the reach of China's energy projects or their power projects. It has also limited the number of projects which can be limited. We hope that this seminar will provide the basis for China to be able to better access this pool of international capital. But it has to be done based on making China and these energy projects structured in a way which are congenial and competitive for the attraction of international capital.
Secondly, I will be there to talk about following up on the summit discussions between the president and Chinese leadership.
There are several initiatives that were adopted at that time, including a housing initiative, an aviation initiative, the issue of insurance. We reached an agreement on end-use checks for national security exports. We've had extensive discussions of legal infrastructure, and of course, the all-important problem of creating greater market access in China to U.S. goods.
So all of these issues will be on the agenda for my bilateral discussions with Chinese authorities, as well as for my discussions in preparations for our Joint Committee on Commerce and Trade, which I indicated will be taking place in a few months. And we believe that we can help build the agenda to have a very productive meeting of that particular group.
We are concerned, remain deeply concerned at the trend, the widening trend of our trade deficit with China. It has historically been 25 percent a year; their exports to the United States have grown 25 percent a year. That has declined, because perhaps a part of the Asia crisis, to about 18.5 percent in the first six months. It's still extraordinarily rapid growth. And U.S. exports, however, have grown very slightly, from 10 percent to 11 percent. So there is a very sharp divergence that continues in our exports. This is not sustainable, and we have to talk about ways to try to mitigate it.
MODERATOR: Okay. That is an (overview), and we open the floor to questions. Let me ask please wait for the microphone. Please identify yourself and your news organization.
Q: You are going to (the) PRC for the second time this year. When we look at the trade relationship with China, it doesn't take a genius to find out that there is a serious problem here. Last year, the trade balance with China was 49.7 billion. This year, it's projected to reach 60 billion. I believe that this administration has tried everything it can to open up (the) Chinese market. I just wonder whether you have any new initiatives in solving the long-term trade balance problem.
Second one: Talking about the Asian financial crisis, I'd like to hear whether the Commerce Department has any new assessment about its impact on the greater Chinese area, namely Hong Kong and Taiwan.
Do you see that -- does this government see Hong Kong and Taiwan as the next time bomb that will experience the same kind of difficulty that Korea and Japan are experiencing right now?
MR. AARON: Well, let me take your second question first, if I may. There's no question but what Taiwan and Hong Kong will be -- are adversely hit, have been adversely hit, and will still face a difficult future. It is possible that all of the -- both areas will be in recession this year and -- but we don't think that they'd represent or face consequences comparable to that of South Korea, for example. And I think the reasons are pretty clear: they -- in the case of Taiwan, they have built up enormous reserves, they have some of the largest -- I think they have perhaps the largest reserves in the region.
And in the case of Hong Kong, they have a very transparent, very well-run, very sound banking system and they have kept their -- you know, I think they're a model of transparency and openness, which has served them well throughout this crisis. So I think both countries don't have the -- both economies don't have the underlying problems to the same extent that Korea had, and so therefore we would not anticipate that the consequences for them would be as great.
But the real problem is that Asia trades with Asia, it doesn't just trade with the United States, and insofar as that trade is in very poor shape, it can't help but adversely affect these economies as well.
On your first point, we are -- we're not giving up, by any means.
We are disappointed that we made no progress to speak of, on WTO accession.
We had thought that Chinese interest in joining the WTO would lead to offers on their part that would remove obstacles to trade in a significant way. That hasn't happened. So now we may have to look at other alternatives, and we are evaluating all of our options. But this will give me an opportunity to talk to our Chinese counterparts about these issues and to try to get an assessment for our own deliberations as to where we go next in the effort to make the Chinese economy more open and to help ameliorate the wide discrepancy in our export picture.
Q: Two questions. You said it's the first trade mission since the East Asian crisis started. Isn't it really the first mission since Donald Garrett (sp)? I mean, wasn't there some decision not to send trade missions to Asia and other regions because of Donald Garrett (sp) and -- because I remember when the president and Secretary Daley went on the mission they emphasized that they were not taking with them any business people because of concerns over -- and the backlash over Donald Garrett (sp).
MR. AARON: I don't think there's any connection to it. I mean, I think the president's trip to China was not aimed at -- did not have a business delegation with it because the president had a different agenda for his conversations with the Chinese. We did have the trade representative, we had Secretary Daley, and we discussed commercial issues. But it was not a commercial mission, so this was a far different kind and a ground-breaking visit on the part of the president. And I think the whole point there was that and not to have a commercial -- it didn't have anything to do with this other issue.
Q: So you're not at all sensitive to the criticism over those issues?
MR. AARON: Well, first of all, I think there's no substantiation whatsoever that there was ever any such thing as Donorgate, that it ever existed.
But the fact of the matter is that Secretary Daley has come in and implemented, I think, some very important -- and clarifications of the procedures. The companies that have been chosen, for example, to accompany me -- this had been chosen by two committees in a double process involving no political appointees whatsoever. So any questions that might have arisen in the past, they certainly can't arise now.
Q: But the second question is a more general one.
You are going now on a mission as far as high-tech information technology, which tend to be very sensitive to, you know, the need to develop an environment supportive of free trade, free flow of information and so on and so forth. Now you mentioned that you are going to emphasize the need not to put restriction on trade and so on in those countries.
But don't you see a backlash developing really in Southeast Asia?
I mean, Asia in general against free trade? more specifically, the decision yesterday by Malaysia to impose monetary restrictions? How do you react to that? Isn't that going -- runs very much contrary to the view that Clinton expressed in Russia yesterday? And how is that going to affect your policies?
MR. AARON: Well, I think that most of the countries in the region that have been adversely affected by this crisis have been working closely with the IMF and have done a good job. I think that Thailand deserves a great deal of credit; South Korea deserves a great deal of credit. The Philippines worked with the IMF for some long time and has done well, as a result, and has done relatively better off than some of the other countries. So I think we have to congratulate these countries on how well they have stuck to the program and have been prepared to pursue more open policies and more transparent financial practices and the rest.
As for the action taken by Malaysia, I think the point here is that -- capital controls are no substitute for the structural changes and the reforms that are necessary in the region, and Malaysia is not excluded in that comment. And yet capital is needed to help make these structural reforms -- and to make them possible. And quite frankly, anything that interferes with the attractiveness of Malaysia as a place for capital investment is going to make their path harder.
So we have to ask questions as to how productive this is really going to be in the long run. Certainly, Malaysia has benefited enormously from the United States' investment in Malaysia. And anything that makes it more difficult for U.S. companies to do business in the region or in Malaysia is obviously going to affect future investment decisions.
So we're concerned about that.
Q: According to schedule, your mission is excluding Indonesia this time. I'm just wondering whether there are any particular reasons on that.
MR. AARON: No, it's just that this mission had to take place between the period of the ministerial conference of APEC and the financial seminar in Beijing. And quite frankly, this was -- this, I think, was chosen as the most productive list of countries to visit at this particular time.
Q: I wonder if you could give a sense of the trends and figures on overall U.S. investment in Southeast Asia since July 1997. How much has investor confidence been dampened? If you don't have figures, some sense of what's been happening -- and has there been a kind of corresponding tilt towards Latin America, in terms of missions and interest?
MR. AARON: Well, I think that from my previous visit out there -- and I think it's fair to say that people who have -- investment which has been oriented towards consumption in the region, I think, has slowed, if not stopped. Investment which has been oriented towards exports from the region has not been necessarily as adversely affected by what's happened. Indeed, I think there's been some increased investment, given the fact that there are opportunities for investment that didn't exist before, because the economies are opening up. But we haven't seen a great surge of investment by any means.
I don't have any exact numbers for you. I can try to see if we have those numbers. I'm not sure that we do, to be frank. But -- because I think we tend to get them from the countries concerned, as opposed -- in other words, there's nobody -- when an American company invests in a third country or another country, it doesn't have to tell the U.S. government what it's doing, but often these other countries keep track of that. So our statistics tend to depend on their statistics. But I'll see if we have anything, and I'll try to get back to you.
Q: Mr. Secretary, just to follow up on Leon's question, you expressed a little concern about the policies of the Malaysian government with regard to its monetary controls. Would you extend the same kind of concern to what the Hong Kong government has recently done in terms of intervening in their stock market. I mean, the government intervening in their stock market. And looking further ahead to the APEC summit later this, how will this kind of -- sort of thing kind of play during the summit?
MR. AARON: Well, I think it's hard to anticipate exactly how this issue will play at the summit, so I wouldn't try to speculate on that. I think as far as the Hong Kong government's actions at this time, these -- you know, the governments, they have to make their own decisions here and they have to decide how they want to spend their money. I think it's our view that spending your money to try to intervene in these markets is -- may not be -- you know, when markets are telling you something, may not be the most productive use of their resources, but they're their resources, so, you know, we have to let them make their own decisions in this regard.
Q: My question has nothing to do with the problem, the subject we discussed this morning, but anyhow, I would like to get an answer from you. My question is about the bilateral relations between the United States and Vietnam. I learned that this month, another round of talks between the -- (inaudible) -- deliberations in Vietnam, that is, deliberations on a trade agreement between the two countries. And according to your opinion, the agreement would be signed sometime this year or not, and if not, what are the divisions?
MR. AARON: Well, I've -- you know, the Commerce Department is not leading these negotiations -- these are obviously being discussed by the State Department and by the USTR; so I wouldn't want to try to get in the middle of them, let alone predict what's likely to make them successful at this stage.
MODERATOR: Any other questions? Beijing?
Okay, then. I'd like to express my appreciation to Ambassador Aaron and to you ladies and gentlemen. Thank you.
MR. AARON: Thank you very much.
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