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

Transcript: USTR Says China Can Play Important Role in WTO
(Zoellick's question-and-answer session in Beijing)

Although China has historically taken a cautious or conservative approach in international institutions, in time Beijing could play an important role in the World Trade Organization (WTO), according to U.S. Trade Representative Robert Zoellick.

In a question-and-answer session after a speech at the Chinese University of Finance and Economics in Beijing April 9, Zoellick suggested that Beijing would have "to figure out as a new WTO member what role it will play in this institution."

"I think that China's success in using openness as part of a reform and development strategy will be a model that others can draw from," he told the Chinese students. "There are many countries around the world I think that can benefit from China's experience."

Zoellick said China has tended to operate "cautiously" in the international organizations it joins because it wants to "act in its own national interest."

But, Zoellick added, international organizations that deal with economic issues are "sometimes a little different than political or security organizations. There is a much greater potential for a win-win venture from integration and involvement."

Zoellick said he hopes China's role in the WTO will be one "where it encourages other countries and plays a leading role."

In response to a question on U.S. steps to protect the American steel industry from unfair pricing of steel from foreign producers, Zoellick said President Bush imposed restrictions on foreign steel imports "after some nine months of review."

The safeguards on steel are "for a limited period of time in accordance with the WTO rules," he said.

The U.S. Trade Representative acknowledged that safeguarding steel exports to the American market is "a sensitive issue" in China.

"One point that I've stressed is that, as is China's right in the WTO, we will have consultations," Zoellick said.

The problems in the steel trade came about because "the global steel market is one that has a long history of market intervention," he added.

According to the trade official, China's accession to the WTO will require "a lot of changes and this is not going to be quickly and easily understood throughout all of China."

Zoellick suggested one reason Beijing was "so committed" to WTO accession was to "break down barriers within China, not just barriers between China and the world."

WTO membership for China, he went on, "will allow greater movement of products within China and greater movement of people. I think this will lead China to become an even more dynamic economy in the future."

Transcript of Question and Answer Session
Following the Speech of
United States Trade Representative
Robert B. Zoellick
Chinese University of Finance and Economics
Beijing, China
April 9, 2002

Ambassador Zoellick: So, I think we're open for some questions. Now I, you know, I used to teach. I used to teach at Harvard, at the Kennedy School of Public Policy, and I found that students were never afraid to ask questions. So I want to have some of yours. Yes, ma'am.

Question: I want to ask you some questions about the clause 201. As you know, the USA has carried out clause 201 to limit the import of steel. Would you please tell me, or tell us, your opinions about clause 201? Do you think that clause 201 will do harm to free trade? Do you think the clause 201 does not accord with the principle of WTO? Thank you.

Ambassador Zoellick: What a surprise [laughter]. First, as you probably know, the WTO rules permit actions that are called safeguard actions. And indeed, there are some twenty countries that now have safeguard actions in place. And these safeguards have to be limited. And so, what President Bush decided to do after some nine months of review, is to impose safeguards on steel for a limited period of time in accordance with the WTO rules. Now, I know from talking with my colleagues in the Chinese government, this is a sensitive issue in China, in part because you're just coming into the WTO. And one point that I've stressed is that, as is China's right in the WTO, we will have consultations. And one point that I mentioned this morning, which I think is an important point for China to know, is that when we've reviewed the steel products that we will apply these safeguards to, it only amounts to about $204 million of steel trade last year. And that amounts to about 37% of all the steel that was exported from China to the United States. So, there's already been a major exemption of almost two-thirds of China's steel products from this.

But, third, this problem comes about because the global steel market is one that has a long history of market intervention. I know most of you are economics students, but maybe you also study a little history. And there was a point in Chinese history where Chairman Mao would send people out to try to create iron, not very successfully, I might add. But even today, China has taken policies of subsidies for its steel industry. It issued directives to reduce the degree of steel imports, and there are actually tax rebates that China applies to try to reach this goal. Now, my point in this is not to be critical of China. My point is to say that if there's any market in the world that needs some negotiations on over-capacity, and on dealing with unfair practices, it's the steel market. And that's another part of our program.

But, in addition, I think it's important to keep this steel action in context. The United States, as I mentioned in my speech, imported some $104 billion of goods from China last year. We have a trade deficit of about $80 billion. Those are big numbers, even for the United States. So, if you take the $200 million of steel, I know many of you are quicker at math than I am, but it comes out to be about two-tenths of one percent. And the point is, we need to follow the rules, and China has its rights under the WTO with these rules, but we also need to keep these issues in context, because we have some issues with China about its performance under the WTO rules as well, but, as I said, it's my inclination to try to work with China and give it time as it moves through these.

But I'll make one last point. While the question on steel was inevitable, I would like you to know that it's not the primary purpose of my visit here. The primary purpose of my visit is to try to listen and to learn, to Chinese and Americans doing business here, about the economy and reforms. And there's a reason why I'm doing this. Last year, when I came to China, I came twice to Shanghai, and I had to focus on some particular tasks, primarily finishing China's accession to the WTO, so we could get that done last year after fifteen years. And the one unfortunate part of that otherwise useful work is, I didn't have a chance to do what I find most important, which is to get a better understanding of what's happening in a country. And if there's any country where one needs to do that, it's China.

And a point that I made yesterday to the Vice Premier and I've made to Chinese that I've met in the academic world, and the business world, is the profound respect that I have for what China has accomplished. Now, as I look around the room, I realize that I probably first came to China before you did because I was here in 1980 and I don't know if many of you are 22, maybe a few older. And I remember the China of 1980, and I visited it in Guangdong, and I've seen the China today. And it is a tremendous transformation, of which Chinese are deservedly proud. And one reason I wanted to come to your university to speak today is that it's easy at your point to look at this and perhaps just take it in a day-by-day question of studying for this exam or preparing for this job. But I want to try to urge you to look beyond. Because, what China has accomplished in twenty years is historic, and the challenge for China in the next twenty years is also historic, and you will be part of that. You are part of the top of China in terms of education, and your contributions will be extremely important. And China is like the United States in a very important way. And I go all around the world, and I don't get to say this in many countries. Your future will determine the future of the world, just like my country will. Your actions for China will be vital for what happens. So, I just wanted to emphasize that I think it's a particular pleasure to talk to students because you will be the people who write the history of China's future.

Question: Oh, thank you. I'm a journalist student from the Chinese language department and today I have two questions.

Question: Third year student in the university. I have two questions to ask you. The first is that this afternoon I had an advertising class and in the class my teacher showed us some videotapes about the famous advertisements in the world and I can clearly remember one of them that is from America. That's an advertisement about cheese. It's a funny advertisement. It said that a candidate who ran for election for president and when he finished his speech before many people, a little girl walked toward him and showed him some cheese, but he said, "Oh, sorry, I don't like to eat cheese." From then on, his nightmare comes because people don't like the candidate who doesn't like to eat cheese. So, we can imagine what the outcome is.

My question is that, when we do business with each other, just like China and the U.S.A., and I think that in the age of globalization, we have many transparent information and sometimes when we merchandize our products, we have to advertise our products, but just like the advertisement I mentioned before, when we merchandize the products, we have many differences and we have different cultural backgrounds, so we may have paradoxes, dilemmas. And so, when President Bush came to China in February, during his speech at Tsinghua University, he also suggested that he wanted to keep encouraging bilateral contact and exchange between the two countries. I'm sorry. I'm a little nervous.

Question: So, first, my question is -- what suggestions could you suggest to solve this problem? I mean, when you do business with China, what kind of suggestions can you suggest to solve this problem? I mean, how to encourage people's contacts and exchange of information, transparent information, true information? The second question, maybe it's a personal question, because you know, in many universities in China, many students are struggling for the exams to go abroad, to study abroad, like TOEFL and GRE. (Laughter)

Question: Yeah. Just like you mentioned in your speech that some Chinese Americans contribute a lot to the American society, but we know that from last year after the attack, I'm sorry to mention that, after the attack, the USA government restricted the policy on study abroad. So, I'd like to ask, how do you think about this situation?

Ambassador Zoellick: Oh, thank you. (Applause). First, I don't know of any candidate that lost election for not eating cheese. But, I used to work for President Bush's father (laughter) and he once admitted he didn't like broccoli. I don't know how you say broccoli in Chinese, but he lost, so maybe broccoli is more dangerous than cheese.

On advertising, I would say that China seems to have done pretty well because you sell many more products to the United States than we sell to China. And I think that reflects in part some of the business networks that China has developed with the United States, because many of the products that China sells are sold through companies that are United States, or Japanese, or European, whether there be electronics products, or whether they be apparel, or whatever their nature. And I think what this is representative of, is something that you will see more and more of in your career -- which is the integration of business networks, so that one company will have part of its operations in China, part in the United States, maybe part in Brazil. And I know from my business experience, that most successful companies now have to see themselves as global competitors. They have to have a business strategy that, at the one hand, operates globally to compete, but at the other hand adapts locally to local conditions because people in Beijing may not be the same, have the same tastes as someone in Shanghai, much less Rio de Janeiro, or Mexico City, or Paris. In some areas, they may. But, I think that combination of being able to compete globally, but adjust locally, will be critical. And that's one reason why WTO accession is important for China. Because China will now be in the rules of the global market place, and you will also become more efficient and recognize where you can particularly compete most effectively, and in the process, create more value.

The last point about your first question is I think people best learn about others through more open societies, and this is where the Internet is useful. And one of my themes of my remarks is clearly that openness is not easy. It's not easy in my country either. People get frightened of change. Sometimes they get frightened of people that come from foreign countries, as they did in the past. But I honestly believe that the United States' major strength is its openness because it forces us to be adaptable. I'm a little older than you are, so I recall, for example, even in times in my professional life, where people said "Oh, the United States can't compete. You know, it's no longer competitive." And Americans said that. And my view was, our greatest strength was staying open. So, we create whole new industries, in part from people from foreign countries, whether Indians or Chinese or others. And I think for China, it's a different problem. You have a much bigger population, you're at a different stage of development, but openness to people and ideas, and capital, and goods will be important for your future.

On the second question, the first suggestion I give you is that if there are fewer places, you're going to have to study hard. But, I'm sure you will. More broadly, I'll say this. The events of September 11th were obviously an effect on the United States, but it's an effect on the world. There were people from 80 countries that were killed in the World Trade Center. And, frankly, I know that there was commentary about some in China that were negative of the United States after that, but most of the commentary I saw was one of empathy and sympathy, as you would see around the world. But, the United States is now struggling of how it reconciles that openness with the dangers of terrorism. And people can come in and take advantage of things. My own view is that openness, as I said, is our strength. And I think the United States benefits from having students from all over the globe. I think some of them stay in the United States and they make us better. Some of them go back, and they have ties and knowledge and information. So, I obviously recognize that this is a process of adjustment in the United States, in terms of students, but, frankly, I have always felt that one of the best investments the United States can make is having students come to the United States. And, if you look at our universities, there's still an awful lot there and, frankly, as I've said, I think it benefits us. So, I hope that those of you in the room who want to make it, can make it, and I hope you benefit from it.

Question: Several days ago, President Bush expressed Taiwan as Taiwan Republic in his presentation, and they explained it as an oral mistake. Do you think it's reasonable? As you have said, we are good friends, and we respect each other. That's all.

Ambassador Zoellick: Yes, I think it was an honest mistake, and I know there's no difference in our policy, no change in our policy. But let me make a point about this that I'm not sure anyone else has made yet, so you'll get a new point (I see my colleagues shudder). The ironic thing about the statement, and the reaction to it, was that President Bush made that statement about China coming into the WTO because he's very proud of that accomplishment in his first year as president. And I know, because I'm the person that was assigned the job to do it. And I know that shortly after President Bush took office, one of my assignments was to try to break through the problems to make sure that we could bring China into the WTO.

Again, because I'm a little older than you are, I worked on this issue the last time I was in government, from '85 to '92. It was the President's feeling, certainly my feeling, that we had to move to resolve this. Because sometimes if problems aren't solved, they get worse, they spiral out of control. And so, I hope the key message you take from that is his misstatement was based on a speech where he was talking about his pride about bringing China into the WTO, and I think that will be the legacy.

Question: You know, China is a new member of the WTO. If you open the market to the outside world and the transition is for the market economy. And China must also protect its young industry. For example, a few years later, the foreign banks can come to China to establish branches. How do you think the barriers for the foreign banks and also the difference between the regulations, for example for the competition and monopoly and the customs of the difference? Thank you.

Ambassador Zoellick: This is a very interesting question, and it's a question that I've been trying to learn more about today from my Chinese hosts. But let me explain why I think it's particularly important.

On the one hand, I know that China's financial sector has to go through adjustment. It's got large, bad loans that have to be handled, and it has to prepare for a new era of competition. So, on the one hand, it's important for China to go through that adjustment. But I'll tell you the other side of this, is that, I worry that if China waits too long, in opening up the financial markets, you won't have the capital intermediation system that you need to be able to support new business growth in China. So there's a tension.

When I was outside of government, I made my living in financial markets. And indeed, I came to China in around '96 or '97 to talk with the People's Bank about creating the housing finance and mortgage market. And, I know that financial intermediation is critical to capital allocation, which is critical to growth and productivity in a society. China still is suffering from the old system. So, I think it needs to be able to move more quickly to have competition in banks, and securities, and overall venture capital, so that entrepreneurs and business people can create jobs to hire people, because some people are going to lose jobs in state owned enterprises and others.

So, I think that's a balance that China is working through right now, and, you know, I think that's obviously a complex question that the Chinese officials will know better than I do how to strike the balance. But I do think it's a question one needs to keep pushing, because I think the natural inclination is to go slow, because you don't want to take on too many of the old problems. But if you go too slow, I think it'll hurt your growth.

Question: Mr. Zoellick, welcome to China. Thank you for your excellent presentation. I am glad you are from the Kennedy School in Harvard University. I just learned that several days ago our government has a cooperative program with your school. We are sending leaders from municipal level or provincial level to your school for some training. You have a training program. As you know, we are in urgent need of some experts who know the rules of WTO and in other areas. For example, we need lawyers, accountants and financial experts. So, how do you expect that we have some exchange program or some training exchange between your country and ours? Thank you.

Ambassador Zoellick: Thank you. Before I returned to government in early 2001, I was actually offered a professorship of public service at the Kennedy School. So, if President Bush hadn't won, I might have been one of your professors if you go on this program, which I'm sure you find a frightening thought.

I think your point about training is critical. One element that I discussed with my colleagues today and I discussed with the Vice-Premier yesterday is that we have some technical assistance programs with China to try to help with training. Now much of this is oriented more toward officials, whether in the provinces or in Beijing. But I know that the Kennedy School at Harvard has also put together some programs for mid-career officials. I think that's another benefit, whether offered from universities or private sector or due to government benefits. I think that this will be very important for China's ultimate success because we all recognize that the WTO accession involves a lot of complex rules. It's going to require a lot of changes and this is not going to be quickly and easily understood throughout all of China.

My sense is that one reason why the Chinese government was so committed to WTO accession is that it will break down barriers within China, not just barriers between China and the world. It will allow greater movement of products within China and greater movement of people. I think this will lead China to become an even more dynamic economy in the future.

Question: Thank you. I'm glad to have a good opportunity to communicate with you. [unintelligible]...As one of the most important members of WTO, how should China reply to more and more economic and trade disputes?

Ambassador Zoellick: I think I've got the question and if I didn't, you come back and ask me again.

China will have to figure out as a new WTO member what role it will play in this institution. I think it has the potential to play an extremely important role. One of the points I made in my speech was that I think that China's success in using openness as part of a reform and development strategy will be a model that others can draw from. About six weeks ago I was in Africa, and about three weeks ago I was in Latin America. There are many countries around the world I think that can benefit from China's experience.

If one looks at the history of China in international organizations, it tends to operate cautiously because it is wary of being connected with one group or another. It wants to act in its own national interest. That certainly makes sense. But one of the issues that China will need to reflect on is that international organizations that deal with economics are sometimes a little different than political or security organizations. There is a much greater potential for a win-win venture from integration and involvement. Therefore, I hope that China's role in the WTO will be one where it encourages other countries and plays a leading role, leading in different categories: East Asia, developing countries, large economies.

I once wrote an article in a newspaper suggesting that China could be a candidate for the G-8 process over time. I still believe that's something that one can work towards because I think China, if it stays on the path, will be an increasingly influential economy.

Now, this raises the question of using dispute settlement. My focus, frankly, would be on the role China could play in the new global negotiations we launched, the role in Doha. One of the topics I discussed today with MOFTEC was how we need to consult on that because I think there are many commonalities of interests. I would like to work with China on biotechnology. I mentioned the rice genome research. I think there are many common interests in biotechnology.

In dispute settlement, these are difficult questions because the dispute settlement is there to resolve problems and that's one of the innovations. But one also has to be careful of overuse of it. Because I could tell you that there are many countries around the globe that right now are in violation of various rules. I could bring actions against them, including China, because it hasn't yet had time to implement some of its WTO obligations. But instead, it's often best to try to work through the process if you can. So actually in the year and a half or so that I've been in office, we've brought very few WTO actions, I think maybe one or two so far. But these will be issues for China to decide and I think the key point is this is a very important international institution and its future will partly be dependent on the Chinese approach.

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