Text: Under Secretary of Commerce Aaron Mar. 2 on China Trade Ties
(Aaron says permanent Normal Trade Relations good for U.S.)Granting permanent Normal Trade Relations (NTR) status to China is in the U.S. interest, according to Under Secretary of Commerce for International Trade David Aaron.
"It is clear that we have a tremendous amount to win by granting [permanent NTR] to China and everything to lose by not," Aaron told participants in a keynote address to a panel on China and NTR at the Washington-based Economic Strategy Institute March 2.
Negotiating a trade deal with China regarding that country's accession to the World Trade Organization (WTO) and granting China permanent NTR status, Aaron told journalists, diplomats, economists and China scholars, is part of a process to secure "an historic opportunity in our foreign policy goals toward China and our long-term commitment to the global trading system."
As a means of developing support for permanent NTR for China, Clinton Administration officials have been speaking to diverse constituencies -- such as agricultural interests and business associations -- on the benefits to be gained by getting Congress to vote for permanent NTR for China.
Aaron stressed the benefits that would go to smaller U.S. enterprises should Congress pass permanent NTR and China -- as a WTO member -- open its markets to competition from abroad.
"Contrary to claims that the WTO is an agent of big business, it really is about helping 'the little guy,'" Aaron said.
"Small businesses traditionally have smaller resources than larger ones and without corporate lawyers or huge coffers, WTO rules are critical to them to fight against trade barriers and resolve disputes," he said.
"China's WTO membership will finally allow American businesses -- most importantly small and medium sized businesses -- greater access to the world's greatest emerging market," Aaron said.
Small- and medium-sized enterprises (SMEs), Aaron told his audience, "make up over 97 percent of all of our firms that export.
"SMEs have not only played a major role in our export expansion, they have also proven to be its main beneficiary," Aaron said.
"Overall, they accounted for 30 percent of all U.S. exports in 1997. And in the period from 1992-1997, the number of SMEs that export merchandise soared from 108,000 to 202,000," Aaron said.
"That's an increase of almost 100 percent," he stressed.
SMEs are no less significant when one looks at U.S. exports to China, according to Aaron.
In 1997, Aaron said, 82 percent of all U.S. exporters to China were SMEs; during the same year, in 39 states, SMEs made up over half of all exporters to the China market.
The number of SMEs exporting to China rose faster than the number of large companies, Aaron said, adding that "China is a significant and growing export market for SMEs -- the 10th largest in 1997 up from 12th in 1992."
Getting China into the WTO and giving it permanent NTR, Aaron said, would help improve the climate for business in China. China, as a WTO member, he added, would be obligated to follow the rules of that trading organization, which would be especially beneficial to SMEs.
Following is the text of Aaron's remarks, as released by the White House:
(begin text)
The White House
PNTR AND WTO ACCESSION FOR CHINA:
GOOD FOR THE U.S. AND GOOD FOR AMERICAN
SMALL BUSINESSESREMARKS OF AMBASSADOR DAVID L. AARON
UNDER SECRETARY OF COMMERCE FOR INTERNATIONAL TRADEKEYNOTE ADDRESS TO
THE ECONOMIC STRATEGY INSTITUTE'S PANEL ON CHINA/PNTRWASHINGTON, DC
MARCH 2, 2000Good afternoon. I am delighted to be here today at the Economic Strategy Institute for this important forum on Permanent Normal Trade Relations (NTR) for China. I want to thank ESI, and specifically Clyde Prestowitz, for sponsoring this dialogue.
For more than 20 years now the U.S. has pursued a path of engagement and dialogue with China in order to establish a constructive relationship. We have worked hard to contribute to a China that is stable both internally and throughout the region, a China that is open to U.S. products and business, and a China that is open to the world and the free exchange of influence and ideas that more openness brings.
In our relationship with China, trade has remained a central current. In many ways, trade is our most direct link -- it deals with the direct exchange of goods, services and inevitably, information across our borders. Now practice has proven that trade can play two very important roles. On one hand, it benefits our economy and our businesses -- trade has contributed immensely to the unprecedented prosperity we have witnessed over the last 7 years. On the other, successful trade opens economies and brings about quite a bit of structural and social change as a result. Trade can facilitate institutional and societal changes beyond simple economics. We have seen this again and again in country after country.
When we look at our trade policy with China, we need to keep sight of where we are coming from. Remember, 50 years ago China was a closed country. Around the same time President Truman charted our American vision for opening world markets through the creation of the General Agreement on Trade and Tariffs, China was taking a distinctly different turn. Fifty years ago China was fervently implementing policies of economic and political isolation.
But since the late 1970s China has worked slowly to change its economic isolation, encouraged , no less, by a consistent, bipartisan U.S. trade policy. Some of the principle goals of this trade policy have been to support Chinese domestic economic reform, improve market access of U.S. businesses to the Chinese market, and integrate China more fully into the pacific regional economy. We have had some significant successes. This started with the lifting of the trade embargo in 1972, our bilateral Commercial Agreement in 1980 and a series of recent agreements improving respect for Intellectual Property in China and aimed at improving market access in the areas of textiles and agriculture.
On the whole our trade policy with China has helped open the economy, in turn opening more of China to the outside world. But there is much more to do. China's trade barriers remain high, its business infrastructure is antiquated, and as a result American businesses are blocked in many ways from one of the world's largest markets.
Today we face what is perhaps the most important moment in U.S.- Chinese relations: Congress' decision to grant permanent NTR to China, the chance to implement our historic bi-lateral market opening agreement, and the opportunity to secure China's entry into the World Trade Organization (WTO).
Let me clarify each of these. First, most of you are aware that the November 15, 1999 bilateral agreement will dramatically reduce China's tariffs on everything from agricultural and industrial products to computers and semiconductors. It directly responds to concerns about unfair trade practices in China and allows our businesses to export to China from here at home, and have their own distribution network in China, rather than being forced to set up factories there to sell products through Chinese partners.
For years, China has had open access to our markets, while its markets have been in many ways closed to American products and services. This agreement requires China to make wide-ranging new concessions to open its market, while we have agreed only to maintain the market access policies we already apply to China. Most importantly, the agreement helps clear the way for China's entry into the WTO and rules based trade.
But before America can realize the full market-opening benefits of Chinese entry into the WTO, Congress must answer a simple question: will it grant China permanent Normal Trade Relations status, which is the same arrangement we have given to 132 other countries in the WTO. Doing so is necessary to guarantee the full market-opening benefits of the agreement we negotiated with China.
Now the Administration understands that there are reservations about China's WTO accession. Though few critics question the economic benefits of the package, some cite China's poor record on human rights, or our national security concerns in China's growing tension with Taiwan. These are certainly legitimate apprehensions and the Administration continues to address them. What we must ask ourselves, however, is one fundamental question. Will our interests in China -- including security and human rights concerns -- be advanced or undermined by letting China into the WTO? I think the answer is clear. When it comes to benefits, there are few we can find when it comes to keeping China out of the WTO. We lose the economic benefits as well as the reform and opening measures that China has agreed to. Furthermore, we do not find ourselves in any better position to influence China on human rights or security issues. To the contrary we would discredit those who are working for positive change in Chinese society.
With the passage of PNTR and China WTO membership, we gain in four distinct ways. First, WTO accession commits China to the rules of the international economy. For the first time, many of China's most important agreements will be under review by an international body. It means China concedes that governments can not behave arbitrarily at home or abroad and that government actions can be subject to international rules.
Second, the agreement obligates China to undertake internal reform. China has agreed to take specific actions to ensure fair treatment for businesses operating in country. By taking these measures, China deepens its market reforms and intensifies the process of change.
Third, by opening up China's economy and accelerating the process of economic reform, the agreement has the potential to open China's society beyond just trade. By helping to liberalize the economy, WTO accession will create new economic freedoms for Chinese citizens and promote the rule of law in many fields now dominated by the state. That is why a number of leading Chinese democracy advocates openly endorse WTO membership not only for its economic value, but as the foundation for broader future reforms.
And fourth, China's WTO membership will finally allow American businesses -- most importantly small and medium sized businesses -- greater access to the world's greatest emerging market. I should add that our China/PNTR website has detailed information on the accession agreement as well as state by state summaries of the benefits of China WTO accession to U.S. businesses. You can access the site at www.chinapntr.gov.
The global economy has become directly important to the American economy, and this does not apply exclusively to large corporations. What many fail to realize is the increasing importance exports play to the backbone of our economy -- I am referring to SMEs.
Today we are the worlds largest exporter, with $934 billion in exports of goods and services and twelve million Americans owing their jobs to exports. And SMEs make up over 97 percent of all of our firms that export. Ninety seven percent!
SMEs have not only played a major role in our export expansion, they have also proven to be its main beneficiary. Overall, they accounted for 30 percent of all U.S. exports in 1997. And in the period from 1992 -- 1997, the number of SMEs that export merchandise soared from 108, 000 to 202, 000. That's an increase of almost 100 percent!
When we look at our exports to China, SMEs are no less significant. Lets look at some of the facts.
-- In 1997, eighty-two percent of all U.S. exporters to China were SMEs;
-- During the same year, in 39 states, SMEs made up over half of all exporters to the China market;
-- The number of SMEs exporting to China rose faster than the number of large companies; and
-- China is a significant and growing export market for SMEs -- the 10th largest in 1997 up from 12th in 1992.
China's WTO accession will be significantly benefit American SMEs in two ways. First it binds the largest emerging market in the world to the rules of the road in trade. Second, it significantly improves the business environment within China. Both of these factors are very important to small business.
Contrary to claims that the WTO is an agent of big business, it really is about helping "the little guy." Small businesses traditionally have smaller resources than larger ones and without corporate lawyers or huge coffers, WTO rules are critical to them to fight against trade barriers and resolve disputes. The bilateral agreement goes a long way in reducing these trade barriers. China will cut tariffs on industrial goods from 24.6 percent to 9.4 percent. Similar slashes will be made in sectors such as furniture, agriculture, and services, just to name a few. As a result of our bi-lateral WTO agreement, China will also create a more favorable business environment, granting American companies the right to import and export most products without Chinese middlemen and allowing American firms to market, wholesale, retail, repair and transport their products within China. Currently all of these are prohibited.
Not only do these changes hold significant benefits to the export prospects of small American businesses, they will also go a long way in reforming China's economy -- a step most agree is pivotal to bringing reform to the entire country.
So it is clear that we have a tremendous amount to win by granting PNTR to China and everything to lose by not. Today we are staring at an historic opportunity in our foreign policy goals toward China and our long-term commitment to the global trading system. By granting China PNTR we gain increased openness of China, internal economic reform, China's obligation to the rules of the international trading system, and extensive market access for U.S. businesses to the largest emerging economy in the world. At the same time, we maintain the market access policies we already apply to China and lose no leverage in addressing our human rights or security concerns.
PNTR and China WTO accession represent a rare "win" "win" situation for the U.S. China, the global trading system, American small businesses, and the world. Congress should move forward and pass Permanent Normal Trading Relations for China to ensure that this historic opportunity is not lost.
Thank You.
(end text)
(Distributed by the Office of International Information Programs, U.S. Department of State. Web site: usinfo.state.gov)
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