U.S. Dept. of State - IIP: The United States and China

Text: U.S. Commercial Service Director General Searing on China Trade
(Chinese WTO membership will be "catalyst for a new China")

Assistant Secretary and Director General of the U.S. Commercial Service Marjory E. Searing spoke in Cleveland, Ohio, August 17 on the significance of the United States granting China Normal Trade Relations (NTR) status and endorsing China's membership in the World Trade Organization (WTO).

Normal Trade Relations Treatment with China
Marjory E. Searing
Assistant Secretary and Director General
U.S. Commercial Service
World Trade Center, Cleveland
August 17, 2000

I'm happy to be here in Cleveland today, and I'd like to thank the World Trade Association of Cleveland and the Northern Ohio International Business Organizations for organizing this event.

I lead an organization called the U.S. Commercial Service. We take pride in being the place you should go for your global business solutions. Through our 105 offices in the United States and our 157 offices in 84 countries, we help U.S. companies succeed in markets throughout the world.

I'd like to recognize our U.S. Commercial Service staff who serve the Ohio business community. During the past 11 months, our U.S. Export Assistance Center has conducted 967 counseling sessions with 470 small and midsized businesses. As a result of this assistance our clients in the Cleveland metropolitan region have reported during the past 6 months an increase in sales of $25 million. Paraphrasing the late Senator Dirksen....a million dollars here a million there-pretty soon you're talking real money. Join me in giving a round of applause for our Export Assistance Centers in Ohio.

I'm here today to talk about the challenges and opportunities of doing business in China.

Centuries ago, the Chinese coined a phrase that roughly translated means, "May you live in interesting times." It can be a blessing or a curse, depending on your perspective and your experience.

Today, China again presents us with a contradictory situation-something that can be seen as a problem or an opportunity, again depending on your perspective. I'm talking, of course, about China's entry into the World Trade Organization and granting China permanent normal trade relations with the U.S., which will provide U.S. firms the benefits of China's WTO membership.

Three -- that we in the Department of Commerce, including the U.S. Commercial Service, can and will help you take advantage of this agreement.

I'll cover some general points about the agreement, including how Commercial Service of the U.S. Department of Commerce, will help you utilize this agreement to help your bottom line. I'll also talk about a few promising sectors, and what this agreement means to you in Ohio.

In many ways, China appears to be an exporter's fantasy. It is a huge and growing market of over one billion people. It is a major producer that is becoming a major consumer. And it is a country hungry for Western goods, from dairy products to fiber-optic cable.

In 1999, China imported from the U.S. goods worth over 18 billion dollars. That should mean opportunity for U.S. business, including small and midsized companies. But right now, much of this opportunity is simply out of reach of many smaller U.S. businesses who don't have legions of lawyers or deep corporate coffers they might need to resolve trade disputes.

Today, China's trade barriers are high, and its business infrastructure antiquated. U.S. companies selling in China face arbitrary import bans, widespread piracy of intellectual property, and restricted access to distribution networks. In effect, a "Great Wall" stands between American business and one of the world's largest markets.

China's accession to the WTO will give us a place and the tools to gain greater market access and to resolve trade disputes.

This spring, the House passed PNTR for China. The Senate will resume debate on the bill on September 5, and President Clinton hopes that there will be a vote in September on what he has called not a partisan issue but "an American issue," one of profound importance to our economic and national security.

If the Senate passes the measure and China goes on to receive WTO membership, the "Great Wall" will come down. WTO accession commits China to play by international rules. It obligates China to undertake internal reform that will result in more transparency and greater access for U.S. business. Also, by opening up China's economy and accelerating the process of economic reform, this agreement has the potential to stimulate the development of a more open, democratic society. For China, the potential for lasting change is as great as any in her long history. The Chinese also live in "interesting times," and know as well as anybody the ambiguous meaning of this wish.

China's entry to the WTO will finally allow U.S. businesses-most importantly, small and medium-sized companies-greater access to the world's greatest emerging market. The agreement will also grant U.S. companies the right to import and export most products without Chinese middlemen. U.S. firms will be able to market, wholesale, retail, repair and transport their products within China. Currently, all of these are prohibited.

But despite the current obstacles, smaller U.S. companies have been able to make sales in China, encouraging us to believe that small companies will enjoy vastly more opportunity once PNTR and WTO accession are in place. The "Great Wall" is still there, but over time it has become porous.

-- China is a significant and growing export market for U.S. Small and Medium-sized Enterprises-the 10th largest in 1997, up from 12th in 1992.

-- In that same year, 82 percent of all U.S. exporters to China, and 63 percent of Ohio exporters China were SMEs.

-- And, finally, the number of SMEs exporting to China rose faster than the number of large firms exporting there.

Ohio's businesses are also selling more goods to China. Ohio's exports to China more than doubled from 1993 to 1998-reaching $359 million, computers and industrial machinery the largest sector. But China currently uses tariffs to artificially inflate the prices of these and other imported goods, making them less attractive to Chinese consumers. This agreement will change that.

-- Tariffs on machinery will be reduced; on all information technology, including computers, tariffs will be eliminated.

-- Also, tariffs on a wide range of other Ohio exports will be sharply reduced. This includes building materials, auto parts, paper and wood products, and medical and scientific equipment.

-- Ohio's farmers will benefit from the agreement as well, no longer having to compete with export subsidies on China's agricultural products. Barriers that currently restrict exports of meat and grains will be gone, and tariffs will be cut on a range of products such as dairy products and pork.

But even before these changes occur, we know of companies in your State already doing well in the Chinese market.

-- Worldwide Connections of Toledo is a three-person firm that does 70 percent of its business overseas, according to company president Stanley Zyla. Currently, approximately 15 percent of their total revenues come from exports to China, including building materials such as flooring, rubber products, and adhesives. Worldwide Connections operates in dozens of countries around the world, but Mr. Zyla especially values working with Chinese counterparts. He believes that extending Permanent Normal Trade Relations to China will ensure that his business there can continue to grow.

-- Cincinnati Machine has had good fortune in China as well. After recent advocacy help from the U.S. Commercial Service, the company sold a $100,000 machine tool product to Chinese company ABC Machinery in Tianjin, China.

And in June, Mustang Dyamometer, a maker of emission testing equipment in Twinsburg, made a large sale to Shanghai Volkswagen. Mustang is currently working with the China national government and some provincial governments to help figure out the best processes for do emissions testing throughout the country. Our Export Assistance Center in Akron is providing help to Mustang, as is the Environmental Protection Agency.

As Cincinnati Machine and Mustang discovered, the U.S. Government is a valued partner in getting around walls and trade barriers in China. We want to play an even greater role when the walls and barriers come down.

Our dedication to ensuring China's compliance does not end with the Senate's vote on PNTR, or with China's accession to the WTO. Former Secretary of Commerce Daley outlined a five-point plan that will keep us focussed on China as it implements its commitments. Our goal is to see the agreement fully implemented and American firms as beneficiaries.

-- We will concentrate enforcement efforts. A Commerce Department China Team has been established, comprised of a dozen officers including: China experts, WTO and legal experts, trade promotion experts, and trade agreement compliance specialists.

-- We will help China reform by providing technical training and other assistance on WTO compliance issues to Chinese officials charged with implementing China's WTO obligations. Similar training will be offered to the U.S. businesses in China, and to U.S. embassy personnel.

-- We will promptly address market access problems. Within 14 days of receiving a business complaint, our rapid response team will engage the appropriate officials in China to address the problem. This will help make it possible to address problems before they become protracted trade disputes.

-- We will give U.S. companies a head start by providing them information and tools on exporting to China. These include exporting seminars through the Commercial Service's nationwide network of Export Assistance Centers-including the one here in Cleveland; video conferences; creation of a China Market Information Center; and WTO awareness programs. We will also sponsor more virtual trade shows in China, like the one that begins next week and focuses on Information Technology. Virtual trade show leverage the Internet and video conference technology to help U.S. companies market their products and services throughout China for one year without having to travel there.

-- And finally, our China team will aggressively monitor trade statistics for critical sectors, watching for surges in China's imports to the United States and identifying areas where market opening is not taking place. As for import surges, you can be sure that antidumping enforcement will remain as strong as ever. China=s accession to the WTO will change nothing in the way we enforce our antidumping law with respect to China.

The Department of Commerce's International Trade Administration has resources to ensure that China's entry to the WTO and its gain of permanent normal trade relations benefits your business.

-- The office of Market Access and Compliance will work to obtain market access for American firms and workers, and to achieve China's full compliance with trade agreements.

-- Import Administration, as I mentioned earlier, will monitor China's imports and handle any dumping complaints that might arise.

-- The Advocacy Center of our Trade Development unit offers help to companies dealing with intractable foreign governments, complicated regulations, and bureaucratic red tape. Assistance can include coordinated action by several government agencies, support by U.S. embassy personnel, or even a visit to a key foreign official by a high-ranking U.S. government official.

-- The U.S. Commercial Service, will help U.S. business, including every one of you, use this agreement to your advantage. We want to see American companies, especially small and midsized businesses, enter the Chinese market and succeed there. Last year, we assisted U.S. companies make more than $14 billion in reported sales worldwide. This year and next, we expect to do even better.

-- Whether your company requires extended export counseling, China market entry strategies, in-depth market research or direct advocacy with the Chinese government, the Commercial Service is here to help you.

-- We maintain five offices in China-and not only in Beijing. We are located around the country--Shenyang in the northeast, Guangzhou in the southeast, Shanghai on the east coast, and Chengdu in central China. We offer an on-the-ground network of seasoned trade professionals-people who know the market inside out. For example, Erin Sullivan, our Principal Commercial Officer in Shenyang wrote me earlier today and asked that I share with you the news that the most promising sectors in her region are information technology and pollution control. She says Liaoning Province is building its telephone and Internet infrastructure; intensifying pollution control and environmental protection; and upgrading its public transportation systems. Our people like Erin Sullivan are invaluable sources of information and help gaining access to regional decision-makers. Led by Senior Commercial Officer Lee Boam in Beijing, they are there for you, and I hope you will take full advantage of them in the important months that lie just ahead.

-- In addition to our great people in China, the Commercial Service offers a wealth of information that you can access from your desktop, at www.usatrade.gov. Here you can find up-to-date trade leads and market research gathered by our specialists across China. You can check out our Contact China, a 68-page booklet that contains everything from industry overviews to contact names and numbers. Or register for a free subscription to the China Commercial Brief, a weekly electronic newsletter with trade leads and commercial updates. Also available at usatrade.gov is our library of webcasts, including one on doing business with China, titled Approaching the Dragon. It's packed with insight on China's commercial climate and business culture. On our site you will find dozens detailed research reports on promising sectors.

We are ready to assist you on your first or next trip to China. Let's talk soon about your business objectives and how we can help you with market entry or market expansion solutions.

And what can we expect in the future? China and especially its larger urban centers will change dramatically in the next five years. The change may be greater than the last 20 years. State enterprises will shrink and privately owned enterprises will replace them. New sources of growth will be sought, as the high growth rates of the past decade level off. More small and midsized enterprises will emerge and will play a more active role in the economy. Conditions for foreign investors will improve so that both central and municipal governments can arrest the drop in foreign direct investment. Internet use will grow, and the user community will be become more active in many areas of life including commerce. Look for more web-based commercial activity. If China becomes a member of the WTO, expect rapid market liberalization and an increase in entrepreneurial activity. WTO membership will be the catalyst for a new China to emerge.

The old China that feared outsiders and built walls to keep them out will increasingly reach out to the rest of the world. And China's age-old view of itself as the Middle Kingdom--an arbiter between heaven and earth, an oasis of unmatched knowledge, power and cultural refinement-may yet come to pass. It won't happen through force of arms or isolation, but through creative and commercial engagement with the rest of the world. It is bridges, not battlements, that China and the world need now.

PNTR and WTO accession are huge steps in the right direction. And as the Chinese say, a journey of a thousand miles begins with the first step.

No need to wish that you live in interesting times. And I mean that as a blessing and benediction. If you are living here, not far from the Pacific Rim, if you are preparing to do business with China---you are living in interesting times.

(Distributed by the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)