TEXT: BARSHEFSKY ON U.S. TRADE POLICY AND TRANSITION ECONOMIES
(China WTO accession will offer concrete benefits)

Washington -- Once completed, China's accession to the World Trade Organization (WTO) will offer concrete commercial benefits to the United States and China and the potential for a more secure and stable future relationship, according to U.S. Trade Representative Charlene Barshefsky.

"And together with our negotiations with the transition economies of Europe and Indochina," she added, "it forms part of a larger vision which is in the interest of these nations, of the United States, and the world."

During a speech on American trade policy and transition economies at the Financial Women's Association of New York May 19, Barshefsky noted that for all those countries, as they integrate themselves into a prosperous and open trading system, reform will advance and their people will have better futures.

"Likewise," she said, "Americans will have new opportunities and stronger guarantees of fairness. And the world's chances of peace, prosperity and the rule of law in the next century will be far greater."

Negotiators working on China's WTO accession have made very significant progress, Barshefsky said. "In April we substantially completed a market access package on agriculture, industrial goods, and services as well as fair trade rules. This includes a commitment by China to participate in the Basic Telecom and the Financial Services Agreement as well."

Barshefsky stressed that there is more work to be done on China's WTO accession. "Some important issues, including in financial services, remain unresolved," she said. "As in all accessions, conclusion depends on the acceding government, and China must meet the concerns of other WTO members as well. But we have the prospect of completing the work soon."

The U.S. Trade Representative noted that the political environment surrounding China's accession talks had been complicated by NATO's accidental bombing of the Chinese embassy in Belgrade. "This was a tragic mistake and the President has apologized for it on behalf of our country; but expressions of grief and anger in China over the event are understandable. At the same time," she said, "the volley of media accusations in Beijing have raised questions in the minds of many Americans whether China will maintain the momentum toward improved relations with the United States."

The events of the past few weeks will serve as a test for the broader U.S.-China relationship, as well as the ability of leadership in both capitals to focus on longer-term interests, Barshefsky said. "As emotions cool, I believe we will both look ahead to the relationship the United States and China should have in the next century -- one in which we realize the interests we share in our bilateral relationship and in the broader area of Pacific stability and prosperity."

Following is the official text of Barshefsky's remarks:

(begin text)

A STRONGER PEACE:
AMERICAN TRADE POLICY AND THE TRANSITION ECONOMIES

Ambassador Charlene Barshefsky
U.S. Trade Representative

Financial Women's Association of New York
New York, NY
May 19, 1999


Thank you very much, Janet.

I am deeply grateful to the Financial Women's Association for this award; and I want to congratulate Abby Joseph Cohen, who has been a trailblazer for women in the financial industry, on her recognition as Private Sector Woman of the Year. The combination of intellect, optimism and realism she brings is wonderful, and I am very proud to be in such company.

Let me also say how appreciative I am to be recognized by such a distinguished women's organization. Janet, of course, was a pioneer in bringing the Internet to government in the first term of the Administration; each of you is a person of accomplishment and distinction. So I feel deeply honored by this award.

I should also say that my work in trade, of course, is as part of a team. The President and Vice President personally are committed to American leadership in the world economy. Our career USTR negotiators are superb -- some of the most talented and resourceful people in government. And none of us could succeed without the support of the private sector, Congress, and the public.

INTRODUCTION

This year, that support will be more crucial than ever. We are preparing for the WTO's Third Ministerial Conference in Seattle and a new Round of global trade negotiations. We have regional initiatives proceeding in Europe, Africa, Asia, the Western Hemisphere and the Middle East, and an active bilateral agenda in Japan.

This evening, I would like to offer some thoughts on one of the most complex challenges: the integration of the transition economies -- China, Russia, Vietnam, the former Soviet republics -- into the world economy and the trading system. And let me begin at the beginning:

"A basic essential to peace, permanent peace, is a decent standard of living for all individual men and women and children in all nations. Freedom from fear is eternally linked with freedom from want. [And] it has been shown time and time again that if the standard of living in any country goes up, so does its purchasing power -- and that such a rise encourages a better standard of living in neighboring countries with whom it trades."

THE ACCOMPLISHMENT

This observation -- made by Franklin Roosevelt in a 1944 Fireside Chat -- outlines, in a few sentences, the foundation of America's postwar trade policy. For living standards and growth, trade is not a luxury but a necessity; for national strategy, it is an invaluable support to peace. And ever since, that Fireside Chat, from the creation of the General Agreement on Tariffs and Trade in 1948 up to today's World Trade Organization, we have led in the development of a worldwide trading system, built upon the basic American tenets of transparency, opportunity and the rule of law.

The system has grown in membership, from the original 23 GATT members to today's 134 economies and 4.5 billion people. And it has grown in scope: tariffs, now reduced by an average of 90%, remain central to its work, but are now joined by agreements on agriculture, services, sanitary and phytosanitary standards, intellectual property, technical barriers to trade, the Information Technology, Basic Telecommunications, and Financial Services agreements, as well as dispute settlement, oversight bodies for each agreement, and a forward work-program on newer issues.

And the results have fully justified Roosevelt's vision. An opening world economy gives each WTO member export markets, helping speed technical progress and raise wages. And it has let imports raise the standard of living for consumers -- especially the poor -- and industries find the best price for inputs and become more efficient. Global trade has grown fifteen-fold since 1960, world economic production has quadrupled; and per capita income more than doubled.

This in turn provides families and governments resources to improve health, invest in education, protect the environment and advance other social goals. And in consequence, life has improved nearly everywhere. World life expectancy has grown twenty years; infant mortality dropped by two-thirds; and famine receded from all but the most remote or misgoverned corners of the world. And as regions of the world once known for poverty and conflict -- Central Europe, Latin America, Southeast Asia -- have become industrial centers with rising living standards, stabilizing governments and strengthening peace.

America fully shares in these benefits. Trade, together with the President's commitment to fiscal discipline and education, has helped create the best economic environment we have ever had: eight years of uninterrupted growth; 18 million new jobs; four consecutive years as the world's most competitive economy.

And in the financial crisis, the trading system proved its worth in another way. Today's strong rules have helped ensure that -- despite 40% of the world in recession, six major economies contracting by 6% or more, and the American trade imbalance rising -- we have so far seen no broad reversion to protectionism. This has prevented enormous economic damage at home, guaranteed affected countries the markets essential to recovery, and helped avert the political tensions that can arise in economic crisis.

NEW ROUND

The question, of course, is whether these accomplishments are enough. As the President's call for a new global Round of trade negotiations indicates, we believe they are not.

To begin with, the WTO can do more. Trade barriers remain high, especially in agriculture and services. Science every day creates new products and methods of trade. And the WTO itself can be reformed to make it more transparent, more able to help developing countries make and comply with commitments, and more effective in cooperation with institutions in related fields like the International Labor Organization or the IMF and World Bank.

TRANSITION ECONOMIES

Just as important, however, the trading system is incomplete.

The GATT's original members were in essence the World War II Allies and Latin America. Since 1948, it has responded to two of the great developments of the postwar era: the reintegration of Japan and Germany, and decolonization. And today we face an equally profound challenge: the end of the Cold War.

The largest group of countries outside the system comprises the so-called transition economies -- China, Russia, Vietnam, Ukraine and other former Soviet republics. They make up 18 of the 30 applicants for WTO membership and represent the vast majority of the 1.5 billion people outside the system. To have them outside creates a large and dangerous distortion of world trade; leaves them with weaker guarantees of access to markets today and more so in the future, as the WTO's coverage of agriculture and services industries grows. Ultimately, it raises questions about their stake in a stable and prosperous world. By contrast, their entry, on commercially meaningful grounds, together with membership in regional associations like the European Union, APEC and ASEAN, will strengthen reform at home; strengthen the WTO; and strengthen peace by giving them greater interests in stability beyond their borders.

EUROPE

The importance of these steps is clear in the experience of the Central European countries -- Poland, the Czech Republic, Hungary, Slovakia, Romania -- where reform is essentially complete, which have been WTO members for many years, and are now preparing for entry into the European Union. Their successful reforms have strengthened prosperity and stability throughout Europe. As Poland's Trade Minister said last May:

"Poland's accession to GATT in 1967 helped us to retain institutional links with the international marketplace at the time when my country was still subjected to a political and economic system alien to the aspirations and entrepreneurial spirit of its people... [and] after the transformation process, our participation in the GATT/WTO framework has helped to consolidate the reform."

The integration of the remaining countries is technically complex and, especially with respect to the larger economies, politically charged as well. But it is profoundly in our interest and that of world peace and stability in the next century. And it is also well underway.

Since its creation in 1995 the WTO has admitted five transition economies: Slovenia, Bulgaria, Mongolia, Kyrgyzstan and Latvia. Each case has set important precedents and lessons for the future. This year, we have completed bilateral talks with Estonia, and made significant progress with Albania, Armenia, Croatia, Georgia, Lithuania and Moldova. Their governments -- some in the Balkans and the Caucasus operating under the most difficult of circumstances -- deserve immense credit. And we have continued negotiations with Russia and Ukraine, although internal politics in both cases has kept the process a bit slower.

INDOCHINA

With Vietnam, Laos and Cambodia, the process is less advanced but also moving ahead. We are beginning with support for their regional integration into ASEAN, and with the negotiation of bilateral commercial agreements as precursors to WTO membership.

We have already completed such agreements with Cambodia and Laos, and will work with Congress toward Normal Trade Relations (formerly MFN status) for Laos this year. Cambodia already has the status and has begun to develop its trade with the US as a result, although this of course has been hampered by political events.

We are also negotiating actively with Vietnam. Late last year we entered into force a bilateral copyright agreement, making American software, books, music and films the first foreign works ever protected in Vietnam. Our next goal is a comprehensive agreement including goods, services and rules that would allow us to endorse MFN status and lay a foundation for Vietnam's eventual WTO accession. In the past months, Vietnam has taken important steps forward, for example on non-tariff barriers, intellectual property and customs procedures. We anticipate another meeting with the Vietnamese in the weeks ahead, and hope for commitments to move in the right direction in other areas, such as trading rights and key service sectors, so we can conclude the agreement.

CHINA

At the same time, of course, we are in the midst of negotiations on WTO accession with the largest transition economy: the People's Republic of China.

The potential benefits of China's accession to the WTO are evident in the costs of China's Cold War economic isolation. Until the 1970s, China's economy was almost entirely divorced from the outside world. The consequent loss of foreign markets and investment impoverished China at home, and meant that Asia's largest nation had little stake in prosperity and stability beyond its borders. Every Pacific nation felt the consequences not only in economics and trade but in peace and security.

With the reform beginning in 1978, this is changing. China is one of the world's major exporters; its Asian neighbors are among China's markets and leading investors. The result may well be evident in China's response to the financial crisis: where once it might have seen revolutionary opportunity, China now sees a threat to its own economic interests, and has thus contributed to IMF recovery packages and maintained currency stability. American policy has encouraged this over the years, from the lifting of trade embargo in the 1970s, through the grant of normal trade relations (MFN) in 1980 and its renewal ever since; China's participation in APEC; and our agreements on intellectual property, textiles and market access in the 1990s.

But China remains insecurely and only opportunistically integrated in the world economy. Trade barriers remain high in agriculture and manufacturing, and its service market is among world's most tightly closed, depriving China of the jobs, efficiency and innovation competition could bring to the domestic economy. In the broader sense, a weakly developed rule of law threatens long-term growth and attractiveness to foreign investors. Likewise, these problems block exports of American goods and services, and bar China's neighbors from a market which is especially important during a time of crisis and recession in Japan.

WTO accession, on commercially meaningful terms, will help us address these problems in a way that serves all our interests.

In economic terms, China's WTO accession will open up major new export opportunities in virtually every sector, manufacturing, high technology, financial services, telecom, agricultural commodities and more. For China, it will help create new jobs and a more efficient economy, offering a short-term source of confidence in a difficult year as it fundamentally advances China's long-term domestic reform agenda. And it will strengthen China's long-term access to world markets; and to give an idea of how important this is to China's future, China's exports to the U.S. this year will make up roughly 5% of Chinese GDP -- the equivalent of nearly half of all US exports to the world.

At the same time, WTO accession will contribute to critical strategic goals. The concepts WTO commitments embody -- transparency, greater openness, public and enforceable commitments -- will help develop the rule of law within China and advance international standards of behavior in commerce. And by more firmly integrating China into the Pacific and world economies, WTO accession will strengthen China's stake in peace and stability, complementing our larger diplomatic and security policy efforts in the Pacific region.

PROGRESS THUS FAR

We have made very significant progress in this accession. In April we substantially completed a market access package on agriculture, industrial goods, and services as well as fair trade rules. This includes a commitment by China to participate in the Basic Telecom and the Financial Services Agreement as well. While some issues remain unresolved, including certain financial services issues, we have the outlines of an agreement with four major characteristics.

The work is not yet done. Some important issues, including in financial services, remain unresolved. As in all accessions, conclusion depends on the acceding government, and China must meet the concerns of other WTO members as well. But we have the prospect of completing the work soon.

NEXT STEPS

The political environment surrounding the WTO talks, of course, is clearly complicated by the events in Belgrade ten days ago. This was a tragic mistake and the President has apologized for it on behalf of our country; but expressions of grief and anger in China over the event are understandable. At the same time, the volley of media accusations in Beijing have raised questions in the minds of many Americans whether China will maintain the momentum toward improved relations with the United States.

This is a test for the broader US-China relationship, and the ability of leadership in both capitals to focus on longer-term interests. As emotions cool, I believe we will both look ahead to the relationship the United States and China should have in the next century -- one in which we realize the interests we share in our bilateral relationship and in the broader area of Pacific stability and prosperity.

The WTO accession is part of this. Completing it, on commercially meaningful grounds, will benefit both countries, and in the long term can create new areas of mutual interest. This remains a shared view, as we continue the talks with a goal of entry this year.

CONCLUSION

This negotiation is in the best tradition of American trade policy.

The China accession offers concrete commercial benefits to both partners and the potential for a more secure and stable future relationship. And together with our negotiations with the transition economies of Europe and Indochina, it forms part of a larger vision which is in the interest of these nations, of the United States, and the world.

As they integrate themselves into a prosperous and open trading system, reform will advance and their people will have better futures. Likewise, Americans will have new opportunities and stronger guarantees of fairness. And the world's chances of peace, prosperity and the rule of law in the next century will be far greater.

These are the principles which have guided our trade policy throughout the postwar era, and have done so much for Americans and the world. Today, as fifty years ago, they offer us the hope of freedom from want, and freedom from fear.

I am very proud and grateful that the Association has chosen to recognize me, and indirectly the USTR, for such part as we have played. And I am just as grateful for your support and your help in the work ahead.

Thank you.

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