Text: Consul General Klosson July 13 on China's WTO Accession
(U.S. backs China's World Trade Organization bid)The United States supports China's entry into the World Trade Organization (WTO), says Michael Klosson, the U.S. Consul General in Hong Kong.
America wants to see "a China integrated into regional and global institutions, playing by the accepted international rules, cooperating and competing peacefully within those rules," Klosson said in a July 13 speech in Macau.
The alternative of having "the world's third largest economy function outside of the WTO rules-based structure" would "be bad for all of us," Klosson continued.
Considering the long-term consequences of China's WTO accession, he said, "we see positive consequences for the United States." Following is the text of Klosson's remarks, as prepared for delivery:
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A United States Perspective on China's Accession to the WTO
Remarks by U.S. Consul General Michael Klosson
to The Macau World Trade Center
July 13, 2000
(as prepared for delivery)I'm very happy to be back at the World Trade Center -- which hosted our first ever "America Day in Macau" in March. I'm particularly happy to have this opportunity to talk with you, together with colleagues from Macau, China and the European Union, about an event which should have overall long term, positive consequences for us all -- China's accession to the World Trade Organization. Talking about the WTO is particularly appropriate in Macau: it is a reminder of Macau's separate WTO membership, its international character, and the importance of the rule of law to its prosperity.
I share the podium today with Frank Martin, President of the American Chamber of Commerce in Hong Kong, who can speak more knowledgeably about the implications of China's entry into the WTO for U.S. business. In my remarks, I will thus seek to put China's accession and the continuing debate in America on Permanent Normal Trade Relations status (PNTR) in the context of our policy toward China, and then discuss some of the overall implications for the U.S., Macau, and China itself.
I. U.S. Policy Toward China
This past year and a half have been a difficult period in U.S.-China relations. Despite all that has happened, however, the relationship now appears to be moving along a more positive path. The U.S.-China WTO agreement has been an important engine for that progress, and President Clinton's all-out campaign to gain Congressional approval of PNTR an important indicator of the importance we attach to our relations with China.
President Clinton's meeting with President Jiang Zemin in Auckland last September marked the turning point. That meeting provided the impetus for the conclusion of the U.S.-China WTO bilateral agreement on November 15. This was followed by our December 15 agreement on handling property issues connected with the accidental Belgrade bombing, helping to close that regrettable chapter.
The great efforts over the past seven months made by the President and his Administration to secure a positive vote on PNTR in the House of Representatives were tangible evidence of our commitment to the relationship. That May vote in the House and a similar positive vote in the Senate, which we hope to see soon, are signals of America's intent for a positive relationship with China.
With bilateral relations on a positive course, we have also worked to engage China in other areas of fundamental national interest. Visits by senior U.S. officials this Spring and Summer, Secretary of State Albright in late June and Defense Secretary Cohen this week, signal progress in our strategic dialogue with senior Chinese officials. Our nonproliferation dialogue was resumed last week by a visit to Beijing by Senior Advisor to the President and Secretary for Arms Control and International Security John Holum. We will know that this relationship has been normalized when senior Chinese leaders resume their travels to the U.S. to engage us in substantive discussions.
Within this overall context, I do not wish to minimize the significance of outstanding issues. Clearly, there remain challenges in our relationship with China, including on issues such as Taiwan and human rights. But we seek to engage China in order to encourage development of a stable, confident, prosperous and open China, one which respects and builds upon the diverse views and strengths of its own people.
A stable China is a country willing to work with its neighbors and partners in such areas as the South China Sea, and that fosters stability in the Asia Pacific region and beyond. We have been able to cooperate constructively on the Korean Peninsula and in South Asia even during the difficult period following the accidental bombing of China's Embassy in Belgrade. We also seek to boost cooperation to counter transnational problems such as narcotics trafficking and environmental degradation.
We seek a prosperous China because a prosperous China is more likely to be stable and because China is an enormous and growing economic market. Though many parts of its economy remain backward, it is already our fourth largest trading partner. China, for example, adds enough phone lines every year to equal the size of one of the major regional operating companies in the U.S. It has the largest wireless communications network in the world. All of this speaks of tremendous export and investment opportunities.
We want an open China which welcomes diversity and change, that not only respects freedom of thought, expression and religion, but also recognizes that these freedoms benefit both its people and the government by ensuring that the best new ideas emerge.
We also want to see a China integrated into regional and global institutions, playing by the accepted international rules, cooperating and competing peacefully within those rules. The alternative -- having the world's third largest economy function outside of the WTO rules-based structure -- would be bad for all of us.
II. Economic Benefits of China's WTO Accession
When we look at the long-term consequences of China's WTO accession, we see positive consequences for the U.S. and, I might add, Macau, in three distinct areas, all of which are closely tied to our overall goals for the U.S. China relationship: 1) economic growth for China and all her trading partners; 2) development of the rule of law and greater transparency required by the WTO system; and 3) China's greater integration into the global economy.
Lest anyone think that in talking about our broader goals, I'm trying to minimize U.S. commercial interests -- let me say right up front: our bilateral agreement and China's entry into the WTO holds out great commercial potential for the United States, but also for China and its other trading partners.
As you know, the reform and opening up that China began in the late 1970's created opportunities for foreign businesses. But substantial barriers and economic challenges remain: bans on foreign participation in the information industries; investment performance requirements in areas like technology transfer and local content; control over economic contact with foreigners; and restrictions on the ability of both foreign and Chinese businesses to distribute their projects and trade with one another. Not a single Hong Kong or Macau company, for example, is currently allowed to provide wholesale sales and distribution in the Chinese market. China's neighbors -- as well as overseas partners like the U.S. -- remain blocked from an economy which, like Japan's, should be an engine of growth for all of Asia.
The terms of China's accession to the WTO, incorporating the U.S.-China bilateral agreement as well as those concluded with its other trading partners, will address many of these obstacles. Tariffs on industrial goods, agricultural products and information technology products will fall. Service sectors, such as telecommunications, distribution, insurance, and banking, will progressively open over time to foreign service providers. It will be easier for outside companies to invest in the Mainland because Chinese government rules requiring technology transfer, local content, and export performance conditions will be removed. Foreign companies will also be allowed to compete for sales to state-owned enterprises on a commercial, non-discriminatory basis. Finally, WTO accession means that the U.S., Macau and China's other WTO trading partners will be able to use the WTO's binding dispute settlement mechanism to resolve problems. This will constitute a major improvement in the safeguards for our industries and businesses. It goes without saying that compliance with the terms of accession is the essential ingredient in achieving the full commercial potential of China's integration into the world economy.
I don't want to minimize the potential adverse consequences of China's WTO accession on Macau -- such as more competition for local companies from foreign companies selling directly to China and from Chinese enterprises freed from textile quota restraints. All of this is likely to produce some structural adjustment in Macau's employment mix. But these are counterbalanced by new opportunities for people involved in trade, tourism, accounting, advertising -- anything and everything associated with China, in both its domestic development as well as its international outreach. In addition, increased prosperity in southern China will translate into growth in retail sales and Macau companies will be able to extend their distribution networks in the PRC.
Overall, I believe Macau will benefit from development of its historical role as a gateway into China. Macau's economy and market, while small, have their strengths: low rents, a convenient new airport where landing slots are still available, a well-developed tourism and leisure industry, reasonable warehouse facilities for logistics centers, and easy access to the booming Pearl River Delta. Macau also has the services capability -- in backroom support, telecommunications, and especially in training -- to support the expansion of business operations with the Mainland. The Special Administrative Region's free market policies can serve as a model for others in the region. It is important to remember, however, that this role -- and, indeed Macau's continued prosperity, are guaranteed by its rule of law, convertible currency, free flow of information, and active participation in international and trade organizations -- all things that businesses need to prosper in an increasingly internationalized market place. I encourage you, both government and business, to do more to promote Macau's competitive strengths to Americans and other potential international business partners, as China accedes to the WTO.
III. China's WTO Accession and U.S. Policy
The benefits of China's WTO accession for the United States and Macau go well beyond the economic. China's WTO accession helps cement China's commitment to further reform of its economic system and it will encourage the promotion of the rule of law. The result will be continued change inside China. This change will not come overnight, but over time it will be dramatic, contributing to a more open China, one that is better understood by -- and better understands -- the rest of the world.
Is this connection automatic? No. But I believe the linkage is a strong one. To take just one example, our work with China on intellectual property rights (IPR) rests on a commitment to fight theft through piracy of our most creative industries. But it has meant more than that: to develop an intellectual property policy is to draft and publish laws; to train lawyers and officials; to improve and ensure access to judicial procedures; ultimately to create due process of law where it did not exist before.
The Chinese government, I believe, understands that to bring real prosperity to its people, it will need to extend the reforms of the past twenty years. It has decided that this means it is necessary to enhance competition and provide incentives to the Chinese people to make the required investments to modernize their economy. To do this, they must also establish the legal protections for these investments. This too will benefit the people of China and Macau, and indeed, anyone seeking to do business with China.
Beyond the straightforward effect of WTO accession, Macau businessmen can play a significant role here. By investing and doing business in China, you can help bring to the Mainland international standards - of quality control, management systems, and reliability. You can provide jobs and at the same time teach workers to strive for on-time, consistent, up-to-specifications service, and teaching them the internal controls that will deliver such quality and productivity. Through your network of relationships and contracts, you can integrate sometimes-remote communities with the rest of the world. Your own government's recent efforts to strengthen IPR enforcement provide a positive example of what must be done to root out the pirates and protect creative industries. The Macau SAR's reform of law enforcement and maintenance of public order while protecting the fundamental human and civil rights of Macau citizens serves an important demonstration effect for law enforcement bodies in the mainland. I encourage you to insist on high standards in dealing with money-laundering and corruption; to lead a drive to clean up the region's air, water, and sewage; and to share with local Chinese officials the advantages of transparent laws and their consistent application to all.
Finally, as Hong Kong Chief Executive C. H. Tung told a U.S. audience in April "China's accession is not simply about business opportunities. It is also about strengthening economic stability in the region. It is about developing the global economy on responsible, rules-based principles. It is about maintaining the steady momentum of growth for the betterment of everyone in the world."
Reform and integration into the global economy will make China a responsible member of the Pacific community. We've already seen what this means in practice: when the Asian financial crisis began, South Korea and ASEAN were the source of a seventh of China's foreign direct investment, and the market for a sixth of its exports. Thus, while in 1967 these nations were China's ideological rivals, in 1997, they were the customers supporting Chinese factories and farm incomes, and investors creating Chinese jobs. This was the backdrop to China's decision to maintain currency stability and contribute to recovery packages for its Asian neighbors during the financial crisis. This has a direct, positive impact on U.S.-PRC relations. The more China is integrated into international organizations and agreements -- whether the WTO or the UN -- the more likely the U.S. and China will be able to work together constructively, and the less likely we will find ourselves confronting one another across a hostile divide. This will be good for Macau and Hong Kong. China's accession to the WTO and the passage of PNTR will enhance the stability of the Asia-Pacific region to the benefit of all - China, the U.S., Macau, and our partners.
IV. PNTR for China
Approval of PNTR is President Clinton's key legislative priority for his last year in office. We were pleased that the U.S. House of Representatives voted 237 to 197 in May to grant PNTR to China. The endgame remains to be played out in the Senate.
Our largest concern at present is with the timing of the vote and whether the bill passed by the Senate is identical to the House version. Some other bills and amendments have been proposed, including Senator Thompson's China Nonproliferation Act and Senator Toricelli's "Worker Rights and U.S. Corporate Responsibility." If they are passed as part of the PNTR bill, and not as separate legislation, the House and Senate will have to conference and then hold a second vote on what comes out of the conference. I can assure you that we are working overtime to ensure a successful outcome and we are optimistic that we will achieve our goal.
To sum up, then, the economic liberalization and further opening to the world that will accompany China's accession to the WTO create commercial opportunities for China's trading partners, will accelerate reform and encourage development of the rule of law in China, and ultimately help to stabilize peace in the Pacific. WTO implementation will bring enormous challenges for China, but also opportunities for all of us who trade with China. The reward will be worth the effort - a more prosperous and stable region, enhancing the forces of reform in China, and an enhanced bottom line for U.S. and other partners, including Macau, which trade with China.
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(Distributed by the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
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