TEXT: COMMERCE SECRETARY DALEY ON U.S.-CHINA RELATIONS
(There are still significant differences to overcome)Washington -- There are still significant differences that need to be overcome in U.S.-China commercial relations, according to Commerce Secretary William Daley.
In remarks to the U.S.-China Business Council June 3, Daley said: "Our negotiators continue to work closely with their Chinese counterparts on WTO accession. But the reality is that China has yet to come forward with a commercially meaningful package."
The United States wants to see China's accession to the World Trade Organization, Daley said, "but WTO membership has to be earned."
"We are prepared to be flexible and pragmatic, but we expect China to comply with multilateral norms and obligations. If China is going to reap the benefits of global trade, it also has to accept the responsibilities," he said. "Until it does, the U.S.-China trade relationship will remain badly out of balance."
Following is the text of Daley's speech, as prepared for delivery:
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FOR IMMEDIATE RELEASE
Contact: Mary F. Hanley
202-482-4883Wednesday, June 3, 1998
Remarks by U.S. Secretary of Commerce
William M. Daley
U.S.-China Business Council
1998 Annual Membership MeetingJune 3, 1998
Thank you very much, George Fisher, for that gracious introduction. I'm pleased to have the chance to share my thoughts about the future of the Sino-American relationship.
I promise not to be too long-winded. Not because I don't have a lot to say, but because I heard that Bob Kapp's daughter is graduating from high school later this afternoon. I know what a great source of pride that is because my own daughter graduated last weekend. So don't worry, Bob, I promise to get you there on time.
It's a great honor to be here to celebrate a quarter century of the U.S.-China Business Council. Your work has been a key element in the development of this still-very-young bilateral relationship. In addition to the business services you offer your membership, you perform an important educational role, providing information to Congress, the media, and the American people about the importance of our engagement with China.
And with this morning's announcement by President Clinton that we will renew Most-Favored-Nation trading status for another year, the Council will have another challenging assignment. We look forward to working closely with you again on MFN, which I'll discuss more in a few minutes.
I'm sorry I couldn't be with you last night, but I am very excited about the launching of the U.S.-China Legal Cooperation Fund. Your support of the Rule of Law Agreement reached last October by President Jiang and President Clinton is a true example of the kind of public-private partnership that has made our China policy a success.
Strengthening the rule of law is high on our China agenda at the Commerce Department. Through the JCCT process, we have set up a series of seminars on commercial law issues. We have made progress on recognition and enforcement of arbitral awards, and we have advanced the dialogue on commercial dispute resolution. And now we are glad to have your help as we work with China to build stable, predictable, and transparent legal institutions in the PRC.
The Fund also clearly demonstrates that your commitment to China goes beyond narrow business interests. Yes, rule of law will improve the Chinese commercial climate. But it also will make an important contribution to the growth of civil society in China.
That's the kind of leadership we've come to expect from the members of this group. For 25 years, you have been on the front lines when it comes to our relationship with China. China is probably the most challenging assignment that the global marketplace has to offer. The cultural gaps are so great. The languages are so different. But you've been undaunted. You've been up to the task. You've weathered every storm with us. You've been an invaluable partner to this President -- and his five predecessors -- as we've built a strong, meaningful dialogue with China.
That dialogue has come under considerable attack in the last few years. But in the
face of extraordinary pressure, President Clinton has stood steadfast in support of engagement. His leadership has significantly strengthened the U.S.-China relationship.
With two presidential summits in eight months, clearly we have never before enjoyed the kind of government-to-government dialogue we're seeing today. During President Jiang's visit, we made important breakthroughs on a host of issues, including rule of law, energy, and the environment.
And now, President Clinton prepares, later this month, to make the first presidential visit to China in nearly a decade...and the first of the post-Cold War era. I'm confident that he will continue to identify common ground and shared interests with China.
At the same time, the President will not ignore the very real differences separating us from China -- including our deep concerns about human rights and a range of security issues.
On the commercial front, there's a long way to go, but we've begun to make progress. U.S. exports to China increased 45 percent between 1993 and 1997. American companies are gaining market share in everything from industrial goods to insurance. We have reached a landmark textiles agreement that grants U.S. firms unprecedented access to China's market. We have made tremendous strides on IPR enforcement.
At the Commerce Department, we're doing everything we can to advance the dialogue. Working with MOFTEC, we've pumped new life into the JCCT. It's no longer just an annual meeting; it's a process that continues throughout the year with active dialogue at the working group and sub-cabinet level.
Our Undersecretary for International Trade, David Aaron, recently led a highly successful trade mission to China...a trip that enhanced our prospects in key sectors like insurance and information technologies.
The Commerce Department has a delegation in Beijing right now, working toward consensus with the Chinese on important commercial issues in advance of the Summit.
Of course, there are still significant differences that we need to overcome. Our negotiators continue to work closely with their Chinese counterparts on WTO accession. But the reality is that China has yet to come forward with a commercially meaningful package.
We want this to happen, but WTO membership has to be earned. We are prepared to be flexible and pragmatic, but we expect China to comply with multilateral norms and obligations. If China is going to reap the benefits of global trade, it also has to accept the responsibilities.
Until it does, the U.S.-China trade relationship will remain badly out of balance.
Since 1985, Chinese exports to the U.S. have grown at an average of 25 percent annually. Meanwhile, our exports to China have grown only 10 percent. That adds up to a trade deficit that climbed to nearly 50 billion dollars last year. And it's showing no sign of abating.
Consider this scenario: let's say our 1998 imports from China grow only 10 percent -- that's less than half their historic growth rate. Our 1998 exports would have to grow 42 percent -- a staggering figure -- just to hold the deficit at 1997 levels.
American companies produce the most competitive goods and services the world has to offer. And business leaders like you are working furiously to penetrate the Chinese market. But the fact is that Chinese trade and investment barriers are some of the most difficult in the world to overcome. China's import growth simply hasn't kept pace with its rapid economic expansion.
We have been open and receptive to China's products. In fact, we absorb 30 percent of China's overall exports. All we ask is that they return the favor, by granting the same access in their market that they enjoy in ours.
The stakes are huge. With China prepared to spend several hundred billion dollars in infrastructure projects over the next ten years, we can't afford to be left on the outside looking in.
This is something I bring up in all of my exchanges with Chinese officials, and it will be high on the agenda at the Summit. We will continue to impress upon them that open markets are a win-win proposition...that unfettered two-way trade means higher standards of living for our people and theirs. So far, however, there has not been enough of a genuine commitment that has had any real impact.
Leaving aside the economic implications of the trade deficit, let's consider what it means from a political standpoint. On Capitol Hill, the deficit is interpreted as further evidence of Chinese inflexibility. And as the deficit grows, it makes MFN renewal more difficult.
The MFN fight is as reliable as the Washington humidity. You just know both are going to be there starting every June. And, of course, MFN is the great public policy misnomer of our time. The label denotes some kind of special privilege, some kind of extreme allowance. Of course, it's the same, normal treatment we grant all our trading partners. And it's the same policy that has enjoyed the support of four Presidents for every single one of the last 17 years.
Last year's MFN battle was less bruising than many expected. So there was some hope that we might have a relatively easy time of it this year as well. But now, the controversy over technology exports and satellite export controls has changed the landscape. It's given MFN critics new confidence. And even some of those who have been with us in the past on MFN may now have second thoughts.
Beyond MFN, this export control controversy threatens our overall engagement policy. It is up to us, working together, to clear up the misconceptions and set the record straight.
Let me say this: as a member of the President's Cabinet -- and as an American -- there's nothing I consider more important than protecting our national security. And I would hope and expect that no one in this room would put their own bottom line ahead of the security of the nation and the planet.
The charges being leveled are serious. There should be a thorough investigation. And if there was some kind of breach or violation, stiff punishment is in order.
But let's keep these incidents separate from the question of what our export control policy should be. And that policy should be guided by an understanding of the modern world.
First of all, this Administration has taken a hard-headed, but realistic, approach to controlling high-tech exports. While we have, in certain instances, narrowed the coverage of export controls or streamlined the licensing process, we continue to strictly enforce our laws.
Second, the United States no longer has a monopoly on the most state-of-the-art technologies. All of you face heated competition for sales in China from producers in several other countries.
Third, it's no longer a given that tight restrictions on high-tech exports are the best national security policy. The truth is that they can actually damage our national security.
Here's how: our high-tech companies need access to the world to stay competitive. If we shut them out of global markets, we virtually put them out of business. Without the profits from export sales, they don't have the resources to invest in research and development on the next generation of technologies. And then they are less able to produce the satellites, the high-performance computers, and the semiconductors that our military needs to defend the nation.
In short, our national security depends on our economic security. Our commercial pursuits are a complement -- not an impediment -- to our foreign policy goals.
Finally, let's remember what the export of communications satellites really does: it promotes the spread of American values; it encourages dialogue between nations; it uses the power of information to increase understanding between vastly different societies. And nothing promotes national and global security more effectively than that.
The American people haven't adequately heard this side of the story. We need to get out there -- now -- and make these arguments. Because the support we've built for China engagement -- and the general consensus we've developed for commercial diplomacy -- are under siege.
At the same time that we refocus the debate on technology export controls, we also need to remind people of the fundamentals of our engagement policy.
We need to say -- again and again -- that we cannot isolate one-fifth of the world's population. Estrangement between the world's largest economy and the world's most populous nation is simply not an option in today's world.
We need to talk about China's burgeoning consumer market. We need to talk about the thousands upon thousands of American jobs that depend on U.S.-China trade.
But that's no longer enough to carry the day on MFN or any other aspect of the China debate. We also need to remind people that we are not driven by a kind of amoral capitalism. Our China policy is about doing well by doing good. It's about making commerce a vehicle through which we can make progress on human rights, the environment, nonproliferation, and the full range of bilateral issues.
This, of course, is what you've been arguing for 25 years. But now the heat will be turned up. We need you to be more emphatic, more persuasive, more vigilant than ever before.
We have a difficult test ahead. But I'm confident that our public-private partnership can effectively sustain an engagement policy that creates prosperity and security for Americans and Chinese alike.
I'm confident that we can realize the vision that President Clinton described when he welcomed President Jiang to the White House: AWe can make this new era the brightest chapter in China's long and rich history...the best days America has ever known...and a new age of unprecedented peace and prosperity for all the world.
Thank you.
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