TEXT: DALEY 7/30 REMARKS TO KENT SCHOOL OF LAW FORUM ON CHINA
(China must open markets, restructure state enterprises)Washington -- China faces many major challenges in advancing their economy past its present point, according to Secretary of Commerce William Daley.
"During my visit (to China), my message to government officials was loud and clear: American workers and companies believe fairness requires China's market be open to us," Daley said in a July 29 address to the Kent School of Law Forum on China.
"What I heard from the Chinese was this: they cannot open their markets because they are afraid their domestic industries will not be able to compete," Daley continued. "I think the exact opposite is true. If China's domestic industry cannot compete it would be because they do not have the kind of competition that would make them better."
"Greater openness is not a barrier to success -- it is essential for it," he said.
Daley warned that China's failure to open its markets not only hurts business but also threatens relations between the United States and China.
"The effects of the Asian financial crisis will exacerbate this problem. As our trade deficit grows, it may stimulate a domestic backlash against countries not playing by the rules," he said.
In addition to opening their markets, Daley urged China to put in place a more transparent and predictable legal and regulatory system, do more to preserve the environment, strengthen its financial and banking systems, and continue its efforts to restructure its state enterprises.
Daley also touched upon some of the issues that will be brought up in his trip to China early next year.
"The huge number of projects on the drawing board convinced us to focus on infrastructure," he said. "We will also be doing much next year in the area of Internet and electronic commerce. Our goal here is to minimize intrusive government involvement."
Following is the text of Daley's remarks, as prepared for delivery:
(begin text)
REMARKS BY U.S. SECRETARY OF COMMERCE WILLIAM M. DALEY TO THE KENT SCHOOL OF LAW FORUM ON CHINA JULY 29, 1998
Let me just say how good it is to be in the company of so many friendly lawyers. In goofy Washington, they aren't all friendly.
I had the great honor of accompanying to China two lawyers who even used to be law professors -- President Clinton and the First Lady. It was a remarkable trip for me, for them, and for our country.
Today, I will talk about my impressions.
I will talk about some of the discussions the President and I had with the leaders in government and business. And I will discuss the follow-up that will occur, because that is really the measure of any trip's success.
Let me say, they kept me rather busy.
In addition to all my meetings with my Chinese counterparts, I opened a hospital in Beijing started by two American women. I helped open Hong Kong's new airport...and a Kentucky Fried Chicken, store number 10,000.
I watched American companies sign almost $2 billion in contracts.
With the President, I went to an Internet Cafe. For those of you who use ChinaOnline, they told me in China there are about one million Internet users, and it is growing about 30 percent a month. That compares to about 100 million users in our country.
Obviously, the memory that stands out most is standing in the Great Hall of the People, listening to the incredibly frank exchange of President Clinton and President Jiang.
It was more than symbolism. I believe, as the President does, that this will open a new era of freer debate in China over human rights and religious freedom.
But, as we have seen in the papers, this will not be quick and easier.
And I think, particularly for the business community, we should be under no illusions that economic reforms will come over night.
Many business people told me the President's trip was incredibly important to opening up opportunities. But we need to look realistically at China.
China faces major challenges in advancing economic progress beyond the present point. China's leaders know that, but we disagree on some of the details.
But the President made it clear we want to work together, because in a global economy their prosperity affects the well being of Americans, and really the entire world.
First, China must put in place a more transparent and predictable legal and regulatory system. This matters a lot to our business people, because 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.
Those rules must also be enforceable. China must have clear procedures. And they must strengthen their efforts to combat corruption.
And Dean Perritt, they need a few more lawyers. They have only 115,000 lawyers in all of China. In fact, I wanted to suggest that to solve our trade imbalance, we export a few lawyers from Washington to Beijing!
Second, the President emphasized that economic development cannot lead to environmental catastrophe, and asked the Chinese to do more to preserve the environment. In Shanghai the President especially hit home this point. He spoke about this at the American Chamber of Commerce. This is hardly a liberal Democratic group.
But he got a big spontaneous round of applause. Why? Because they unfortunately know that respiratory illness from air pollution is now China's number one health problem.
And China's rivers, harbors, and shorelines suffer from terrible water pollution.
Third, the President emphasized the need for China to strengthen its financial and banking systems. The Asian financial crisis today demonstrates the havoc weak and inadequately supervised banking systems can create.
We want to help China avoid similar problems by improving regulations and opening to foreign competition.
Let me add that President Clinton appreciates China's commitment to hold its currency steady. And he appreciates that China has provided financial assistance to its neighbors.
Fourth, China must continue its efforts to restructure its state enterprises.
This is critical to building a modern economy. But this effort in the short-term will also put people out of jobs. So, the President recommended that the Chinese devise new systems of training workers and providing social benefits.
And he asked many of us in the Cabinet to share our experiences and expertise with the Chinese to help them through this transition.
Fifth, and most important to me as Commerce Secretary, the President called upon China to make its markets more open to our goods.
During my visit, my message to government officials was loud and clear: American workers and companies believe fairness requires China's market be open to us.
And what I heard from the Chinese was this: they cannot open their markets because they are afraid their domestic industries will not be able to compete.
I think the exact opposite is true. If China's domestic industry cannot compete it would be because they do not have the kind of competition that would make them better. Greater openness is not a barrier to success -- it is essential for it.
Let me put this trade problem in perspective.
The very first Commerce Secretary to go to China was Juanita Kreps, who served under President Carter. She went just under 20 years ago. Since her trip, our sales to China are up 230 percent. But China's sales to America are up a whopping 1,380 percent. This means the $2.5 billion trade surplus we had with China in 1980 has turned into a $50 billion trade deficit with China today.
Here is one more way of looking at this: In 1980, 5 percent of the goods China sold to the world came to America. Today, 18 percent do. In 1980, less than 1 percent of the goods we sold to the world went to China. Today, we are still stuck in the same ballpark.
This cannot continue. It does not sit well with me, with President Clinton, with members of Congress, or with American firms and workers.
The lack of openness is not only bad for business, it is bad for our overall relationship; it poisons the well in ways that become hard to reverse.
And frankly, the effects of the Asian financial crisis will exacerbate this problem. As our trade deficit grows, it may stimulate a domestic backlash against countries not playing by the rules.
I want, and the President wants, to see a more open Chinese market. As the President says: Americans would do just fine in a fair and free and open market, competing with all other people who would like to sell to China.
And this obviously means Illinois companies. I take great pride that Illinois ranks third, among all 50 states, in exporting to China. Since 1993, Illinois exports to China have grown 38 percent.
Among the big Chicago companies, it probably is easier to name who is not there, because so many are there. And the Commerce Department's staff in Chicago is working with our staff in China to help many small- and medium-sized companies expand into China.
For example, MacLean Power of Franklin Park is there. Cooper Lighting in Elk Grove Village sells lighting and electrical products in China. Midtronics, which makes battery testers and power sensors, has only 70 employees, but they now sell in China.
So does Colloid Environmental Technologies in Arlington Heights. And Bisco of Schaumburg exports dental adhesives there.
Of course, many of our universities have a presence.
I never saw as many cranes in my life as I saw in Shanghai, and I know some of the new buildings were designed by Chicago architects. And I saw quite a few shirts with Number 23.
Now that the Summit is over, what is next?
Early next year, I will lead a trade mission to China. It will be unique in that, first, it will focus solely on infrastructure, and, second, many of our sister agencies, such as Transportation, Energy, and HUD -- will join me.
The huge number of projects on the drawing board convinced us to focus on infrastructure. For instance, between now and the year 2000, China plans to open up a new airport every other week.
And my brother would appreciate this. When the President was on a radio call-in show with the Mayor of Shanghai, one of the callers wanted to talk to the Mayor, rather than the President.
He had some traffic issues to discuss!
At the request of Presidents Clinton and Jiang, the Commercial Law Working Group will be expanding its efforts. For example, they are adding seminars on the important areas of electronic commerce and corporate and partnership law.
At the same time, however, they will continue work on commercial disputes that U.S. companies are having. In an important move, the Chinese government has agreed to address U.S. concerns about the fair enforcement of foreign arbitral awards in Chinese courts.
We will also be doing much next year in the area of Internet and electronic commerce. We are starting our dialogue with the Chinese now, rather than after standards and practices have already developed. Our goal here is to minimize intrusive government involvement.
We want to develop an Internet that is free, transparent, and available to all. And we will be working to expand Internet applications such as long distance learning, telemedicine, and weather forecasting.
What is amazing to me about this technology is that small stores can now sell their products around the world -- just as a Fortune 100 company, with a massive distribution system, does today.
With the help of ChinaOnline and many other efforts, I believe this will open China's market. Everybody thinks they need to be in China, and with the Internet, they can be. I think the greatest follow-up of all, must come from the people of both our countries.
On this trip, President Clinton put forth a new vision for our relationship with China. He showed us how critical China is to America and to the world -- critical to commerce, critical to financial stability, to security, and to the environment.
In Shanghai, the President gave a speech, where he said: "the unique position of the United States as the world's remaining military superpower, with all of our economic strength, is such that we can maximize our influence only by reaching out a hand of cooperation as well as standing strong when the moment requires it."
The President clearly demonstrated that in China. He stood firm when he talked about human rights and religious freedom. He believes one day China will be adopt more democratic values, if we engage and understand and have constant dialogue with the people of China.
Let me close by saying, obviously, it was an honor for me to represent our country, and the business community, on that trip.
And I thank you for the opportunity to tell you about it and sketch our roadmap of what is ahead.
Thank you.
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