TEXT: SEC. DALEY 10/21 REMARKS TO WORLD AFFAIRS COUNCIL
(China's lack of openness bad for U.S.-China relations)Washington -- The growing U.S. trade deficit with China and some of China's trade practices could seriously hurt U.S.-China relations if they continue, according to Secretary of Commerce William Daley.
"The lack of openness in China is bad for business, and it is bad for our overall relationship. And frankly, it may stimulate a domestic backlash if it persists much longer," Daley said in remarks to the World Affairs Council in Washington October 21.
Speaking of the escalating U.S. trade deficit with China, Daley said: "That does not sit well with me, with President Clinton, with Congress, or with American firms and workers."
Daley also expressed U.S. concerns with a trend that requires foreign companies to make their products in China and discourages exports to China. "What a company transfers abroad in terms of technology comes back eventually in products that can compete with their own and this very much concerns me," he said.
Daley said he will undertake a trade mission to China early next year as part of a series of steps the Clinton Administration is taking to deal with the economic problems in many key emerging markets. Daley also said the Administration is taking steps to spur economic growth around the world to deal with global economic uncertainties.
"Our economic success will not continue unless prosperity returns to other parts of the world -- especially to emerging markets in Asia, Latin America and Russia," he said.
Following is the text of Daley's remarks, as prepared for delivery:
(begin text)
Remarks by
Secretary of Commerce William M. Daley
World Affairs Council
Washington, D.C.
October 21, 1998Tonight, I want to share my perspective about the situation in Asia and elsewhere. And then I will discuss the actions we are taking at Commerce in response. They are very aggressive actions, because I think, frankly, the situation calls for that.
In my role as America's bookkeeper, I announced the monthly trade numbers yesterday. They reflected the gloomy situation that is out there. Unfortunately, the deficit hit a record high in August -- almost $17 billion -- much of that with two countries: China and Japan. Excluding those two countries, our exports to the Pacific Rim have fallen 20 percent from a year ago.
Let me be clear. These numbers do not mean we are headed into the Great Depression. A lot of the world's economies may be struggling, but the U.S. economy is still in very good shape. The business community has added almost 17 million jobs since President Clinton took office. Inflation is at historic lows. And for the first time in 29 years, we have a budget surplus that Washington hasn't squandered -- yet.
But our economic success will not continue, unless prosperity returns to other parts of the world -- especially to emerging markets in Asia, Latin America, Africa, and Russia. The fact is one third of our growth since the President came to office has been due to exports. And now that exports are not expanding, our own expansion is being challenged.
Many of your companies have been hit with lower earnings -- although Super Tuesday, yesterday, wasn't as bad as it could have been. But it matters what happens outside our borders when Coke sells in 200 countries. It matters when Gillette does more than 60 percent of its business outside the United States.
What we are seeing is no matter how good the product, or the management, or the marketing -- companies are hurting because of conditions and government policies beyond their control.
Recently I was with Lou Gerstner of IBM, and he made this very point with regards to the Internet. Look at all the promise the Internet holds to change the way businesses do business, and students learn, and people communicate. But the promise does not ride on the technology. It rides on sound policy, doesn't it? On whether we tax it, what we do regarding privacy and security, how we police it.
Let me say what concerns the President about the economic situation is how quickly news in one country sets off alarms around the world. Investors move like a herd, with sweeping consequences to countries with weak and strong policies alike.
In reaction to these uncertainties, President Clinton has laid out plans to spur growth around the world. This week, Congress passed -- finally -- his request to provide funds to the International Monetary Fund. Our contribution will expand the reserves, so the IMF is stronger and ready to act. By the way, I am grateful to those in this room who fought to get this through. Thank you very much.
The President has asked other economies to do their part, in particular Japan. Let me give you a number that is astounding. And this isn't from my books, this is from Japan's numbers.
In the first eight months of this year, Japan's trade surplus with countries outside of Asia is almost three-and-a-half times as large as it was at this time last year. Clearly this shows Japan is a major source of instability in world trade. They must do more to contribute to the growth of other countries and grow their own economy. The fact is Asia cannot recover without Japan recovering.
Now, in response to these economic troubles, I am shifting and re-allocating our resources at Commerce -- particularly in emerging markets. I want to outline six specific actions we are taking.
First, I plan to significantly boost the number of American commercial officers we have abroad. By the year 2000, I hope to double our staff in Africa, add 35 percent more people in Latin America, and 50 percent more in China. Let me say this is on top of the people we have added recently in China; Vietnam; Azerbaijan; Russia; South Africa; Kenya; Cote d'Ivoire; Argentina; and, soon Israel.
Why am I doing this? Because when there is an upswing, we will be ready to help our companies gain market share. And despite the slow growth, billions are still being spent on infrastructure, on technology, on government procurement. These people can help you find those opportunities.
And in Europe, our staff is working to promote a unified single market, showcasing all of Europe as never before. With their economy strong and the Euro kicking in next year, we are changing to meet the new opportunities this will bring.
Second, I plan to lead an aggressive schedule of trade missions. I will take 20 companies to Africa in early December, a mission that more firms applied to go on, than any in Commerce history. America has only 7 percent of Africa's import market, far less than Europe, and we can do better.
Then early next year, I plan to lead a trade mission to China. The China trip will focus solely on infrastructure. The huge number of highways, and airports, and power plants on the drawing board convinced us to do that.
Let me say some more about China, because as we enjoyed cocktails and dinner, we unfortunately added $20 million to our trade deficit with China.
The very first Commerce Secretary to go there was Juanita Kreps, who served under President Carter. She went just under 20 years ago. Since her trip, our $2.5 billion trade surplus with China is turning into a $60 billion trade deficit this year. That does not sit well with me, with President Clinton, with Congress, or with American firms and workers.
The lack of openness in China is bad for business, and it is bad for our overall relationship. And, frankly, it may stimulate a domestic backlash if it persists much longer.
And let me say there is another troubling trend developing. We are China's third largest investor. And more than ever, China is imposing requirements that companies make products there, rather than export. And increasingly, China is making all kinds of demands on these investments. They are telling our companies to bring to the table their technology, their know-how, their expertise, their capital.
After awhile it catches up with you. What a company transfers abroad in terms of technology comes back eventually in products that can compete with their own. This very much concerns me.
This week, I was to have meetings with Chinese leaders, but those have been postponed until December. Clearly our investors and our consumers have shown great faith in China. And the question I will be asking in December is: where is China's faith in our goods and services?
Third, as many of you know, we often advocate on your behalf with other governments. We try to make sure other countries are Boeing-friendly, and GE-friendly, and the like.
In the last 20 months, we have helped companies win 100 overseas projects, worth about $26 billion. In light of the current financial difficulties, we are seeing some business dry up.
At the same time, governments increasingly are privatizing industries. As they sell off, if the price is right, there are new opportunities out there. So, we are increasing our efforts to make companies aware of this, and to help them land these huge deals.
We just co-hosted a session in Egypt. And this summer, we hosted one in Seoul, making companies aware of how Korea was restructuring its electricity market. Of course, two days later, the British government was in the same hotel in Korea, doing the same for their companies. So the point is, we need to be out there more than ever.
Fourth, we are increasing our efforts to attract more small- and medium-sized firms into exporting. We have hotlines, web sites, and 100 centers around the country to help.
What is amazing is with the Internet, small stores can now sell their products around the world -- just as a Fortune 100 company, with a massive distribution system, does today.
What we are seeing is this: a number of firms that have never exported, are calling us and saying: we have a home page on the web, and somebody in Canada wants to buy our pay phones. Or somebody in Taiwan wants to buy our industrial scales. What do we do? Obviously, we are getting them export ready.
Fifth, as we see exports drop off, we understand much of it is because other countries are struggling. But we will not tolerate when other countries prevent our goods from coming in. So, we beefed up our efforts to monitor the situation and made it easier for companies to complain to us if they see a problem.
I also have made it clear I will not stand by and watch America become the dumping ground for unfairly traded goods. I don't want U.S. workers and communities to bear the brunt of other nation's problematic policies. I added resources to track import surges and price trends in import sensitive industries. If our International Trade Administration finds any unfair trade practices, it will act.
Sixth and finally, an important lesson from Asia is that all countries must have a more transparent legal and regulatory system. When you do business, you need to know what the rules are. You need to know that the rules do not change, and that everyone is playing by them. And those rules must be enforceable.
One of the biggest problems in every emerging market is corruption. Some $30 billion a year in international contracts are alleged to involve bribery -- putting our firms at a great disadvantage. Last year, we pushed through an agreement more than 30 nations signed, banning most bribes. I am very pleased to say that five hours ago Congress passed the implementing legislation. I want to thank Congressmen Bliley and Markey; and Senators Burns, McCain, Sarbanes, and D'Amato -- for all of their hard work on this.
Let me end on this. President Clinton has devoted much time to international issues lately. He has given many major speeches on this topic -- from Geneva in May, to the World Bank meeting here a few weeks ago. But I want to go back to a speech he gave at American University, in the early days of his presidency.
He set forth our trade policy, very simply. He said: "we must compete, not retreat." At the time, there were many pressures to retreat. NAFTA was very unpopular -- especially with people from my own party. And what the President was saying was: we cannot put up a wall around America, and withdraw from the world.
We are better off because we chose to compete. It spurred innovation. It brought us new customers. It created millions of high-wage, high skilled jobs.
Today we still must compete, not retreat. But that phrase has a different significance. It is a matter of staying the course, not heading to the exit signs. It is a matter of restoring confidence in financial markets and in the minds of normal people, who see what is going on, and, frankly, are afraid. It is a matter of understanding that maybe there is less to compete for today, but there is still a lot out there. And there will be more in the future.
These struggling countries will be back -- some stronger than ever. When that happens, Commerce will be there, to help you capitalize on those opportunities. Thank you.
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