TEXT: DALEY 12/17 REMARKS TO U.S.-CHINA TRADE COMMISSION
(Daley calls for 'fair shake' for U.S. firms)Washington -- "I fear trade issues could lead us to substantial disengagement from China," warned Commerce Secretary William Daley at the 12th U.S-China Joint Commission on Commerce and Trade.
"China is the source of the second-largest U.S. trade deficit, after Japan," noted Daley at the December 17 opening. "The deficit could reach $60 billion this year and $70 billion next year -- if we let it.
"And if we do," Daley cautioned, "there could be a public backlash in America. As these numbers worsen, workers fear for their jobs. The issue of trade moves from Wall Street to Main Street."
"All we want is a fair shake for American companies," Daley said.
"We must work even harder," said Daley, "to prevent commercial issues from interfering with broader U.S.-China relations. It would be very unfortunate if they did."
Following is the official text of Daley's remarks, as prepared for delivery:
(begin text)
REMARKS BY
SECRETARY OF COMMERCE WILLIAM M. DALEY
12TH U.S.-CHINA JOINT COMMISSION ON COMMERCE AND TRADE
WASHINGTON, D.C.
DECEMBER 17, 1998
As Prepared For Delivery
These meetings over the next two days come at a critical time. They are just about the most important the joint commission has had in a decade.
The relationship between our two great nations is the closest it has been in a long time. The progress made in two historic Presidential Summits -- October 1997 and June 1998 -- was unprecedented.
I was with President Clinton when he visited China in June. I have many good memories. Most of all, I remember standing in the Great Hall of the People, listening to the incredibly frank exchange of our two presidents. You might say those trips were the re-birth of the American-Chinese relationship. Today, as we turn to the commercial side of the relationship, I hope we can be as frank.
Economic diplomacy is indeed at center stage in global affairs. Without economic progress and all that it brings -- new jobs, rising incomes, higher living standards -- what good is all we have done to secure peace and stability?
Let me begin by repeating what has been my message -- loud and clear: the U.S. market is the most open in the world. And American workers and companies believe fairness requires all world markets -- including China's -- be open to us.
As long as I am Secretary of Commerce, and I see the ballooning trade deficit between our nations, it is a message you will hear often. This is unfortunate. Trade has been the enduring part of our relationship. When other issues threatened to pull us apart, trade held us together.
To be honest, I fear trade issues could lead us to substantial disengagement from China. Given the broader Asian economic turmoil and the global economic slowdown, this year's financial crisis could become 1999's trade crisis.
This morning we reported our latest trade numbers. And they are not good. While the deficit improved slightly in October, the overall picture remains grim. The deficit this year could hit a record $170 billion. Meanwhile, the trade gap with China showed little improvement.
China is the source of the second-largest U.S. trade deficit, after Japan. The deficit could reach $60 billion this year and $70 billion next year -- if we let it. And if we do, there could be a public backlash in America. As these numbers worsen, workers fear for their jobs. The issue of trade moves from Wall Street to Main Street.
Mr. Minister, we have discussed these problems before. All we want is a fair shake for American companies.
Let me also note that none of this has escaped the Congress. The eyes of U.S. lawmakers are clearly focused on China.
China, as you know, is America's fourth largest trading partner. Our total trade has grown more than fifteen-fold since 1981, to over $75 billion. But it is too one-sided. Imports from China out pace exports to China, five to one. There is simply no excuse for this. U.S. exports have never been at the level they should be.
America is China's largest export market, accounting for nearly 20 percent of your exports. But we supply only 11 percent of your imports. And while China's imports are expanding four percent a year, hardly any of the gain is American goods.
This is not to say we haven't made some progress. I witnessed the signing in June of $1.6 billion in contracts to U.S. suppliers. In September, Under Secretary Aaron witnessed some $200 million.
We held a series of important commercial seminars this year. Issues included export controls, project finance, commercial law, electronic commerce, and oil and gas.
But these are bits and pieces. The fact of the matter is, our companies do not have the market access they ought to have. And, it is getting worse. In the last few months, new restrictions were imposed on at least 9 key sectors -- from agriculture to telecommunications to insurance.
Many U.S. companies believe that China holds the greatest potential for global export growth. They have played by your rules. They have invested, transferred know-how, capital and technology. And we are now your third-largest investor.
But harmful rules -- such as export performance, local content, technology transfer, and equity requirements -- are severely limiting investor options.
Of particular concern are new foreign exchange controls. They are impeding U.S. exports. They are causing significant delays in payments to U.S. companies. I must point out that investors are now wary of Asia, including China. They are pulling back. And they will not invest again unless reforms are made, and made to stick permanently.
However, China is moving in the opposite direction -- for what reason, I cannot understand. Perhaps China believes U.S. businesses will do anything to invest. But I think you may underestimate the current level of frustration, and the attractiveness of other global markets.
Every week we hear about this from American executives. I share their frustration.
In June during the Summit, I was very hopeful we would see significant progress. But it has been six months. And there has been no movement on allowing new telecommunications technology to enter China, notably CDMA. There has been no progress on insurance, and no movement on arbitration and dispute settlement.
So, where do we go from here?
First, China's accession to the World Trade Organization. Negotiations have intensified over the past four years.
Progress has been made in key areas: tariff reduction, TRIPS and trading rights. But not on market access.
Obviously, we want China in the WTO. Much has been done to achieve that goal. China is in the midst of sweeping economic reforms. Growth remains solid. But these reforms, and this growth must continue. Closing markets in key sectors will not help. I know you are eager to make progress before next Spring. But without a good market access package, President Clinton will have a hard time working with the U.S. Congress on permanent, normal trade relations for China.
Second is the work of the JCCT. I believe the commission made more progress this year than ever before. We have seen a nearly-continuous dialogue at every level of government.
In the past year, many of you participated in dozens of commercial seminars and sectoral working groups held on both sides of the Pacific. All of which expand our commercial dialogue.
In the year ahead, I hope to see more of the same. But this will require even more effort. It will mean embarking on new avenues of cooperation, to resolving problems, and to remaining focused on bringing more benefits to U.S. and Chinese businesses.
Third, and finally, I know we are here to talk about trade and economics. But there are a number of other critical issues that profoundly affect our economic relationship. In particular, the actions China takes on human rights; non-proliferation; and religious freedom all matter very much. I absolutely believe a lack of progress on any of these -- or even worse, backtracking -- can hurt our commercial ties. They affect other aspects of our relationship, also. And none can be separated out from the rest.
As to the next two days, we have set a very ambitious agenda. Much of it is focused on winning agreement on core issues: market access; export controls; and commercial law. In setting the agenda, we sought input from private industry. Their number one priority is new restrictions on trade and investment. They believe their investments and trade prospects are greatly jeopardized. So I hope to see progress on this today and tomorrow.
In addition, U.S. firms should be allowed to address their concerns directly to Chinese officials in Beijing. I appreciate your agreement on this. And I hope it will happen early next year. At the same time, U.S. officials are seeking separate negotiations to resolve the situation.
In the meantime, the restrictions should be frozen pending these consultations. Frankly, it will be difficult to remain seriously engaged on WTO accession with new restrictions on the rise.
The JCCT can help. We can rededicate efforts in the next year to expanding access to Chinese markets. This is the best hope for reducing America's deficit with China.
The deficit hangs like a dark cloud over our countries. Together, we can do something about it. On this, Mr. Minister, I seek your personal involvement.
We also must work harder to make China more business friendly, especially when it comes to business law and regulation. I hope for progress on U.S. export controls, also.
Finally, we must work even harder to prevent commercial issues from interfering with broader U.S.-China relations. It would be very unfortunate if they did.
To that end, I look forward to my trade mission we are planning for the Spring. It will focus on China's huge effort to improve public infrastructure -- from highways to telecommunications. And since we are in the Commerce Department, let me make a pitch for our American companies. In all these areas, they are global leaders. You met them last night at dinner. They want very much to be a part of China's vision for the 21st century.
Let me close on this. There is a saying from the book of Han that reads "To see a thing once is better than hearing about it a hundred times." You have already heard me talk 100 times about the trade problem. Now I hope we soon see a positive result.
Thank you very much.
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