Transcript: USTR Says Free Trade, Open Markets Help Reform Process
(Zoellick's press roundtable in Beijing)The United States is committed to free trade and open markets and believes such mechanisms can be an effective part of a reform strategy for developing economies such as China's, according to U.S. Trade Representative Robert Zoellick.
The United States also supports China's efforts to develop stronger trade ties in the region, Zoellick said in an April 10 news conference in Beijing before traveling on to Japan.
"My view is that if China develops a stronger trading relationship with Southeast Asia that's great," he said.
"As President Bush has said, and as I've said, we believe in open trade and open markets for the efficiency, but also it's clearly being used by a number of key developing countries as part of their reform strategy," Zoellick told reporters.
That's why the United States expects China to live up to its WTO commitments, because China "traditionally is a country that takes pride living up to its agreement -- we want to work with them as they do so," he continued.
The U.S. trade representative said he wishes the global economy were less "dependent on the United States market for everything."
It would not hurt "if the Japanese and others opened up," he said.
"We're not mercantilists. We actually believe open markets are useful for everybody. And frankly, we believe we can compete," Zoellick said.
Zoellick told reporters that he understands the balancing act Beijing faces regarding reform of its financial sector.
"On the one hand, as they know and we know and the whole world knows, there's a big problem of bad loans, Non Performing Loans, in the system," he said. This situation stems from "the fact that the banks were basically finance and accounting mechanisms for state-owned enterprises," Zoellick continued.
"My sense is that while that asset disposition process has started, it hasn't really moved to full force yet. There's a political issue with this," he added.
Related to cleaning up bad loans in the system is the need to make that financial system function as an effective intermediation system, Zoellick said.
According to the U.S. trade representative, Chinese officials are "primarily" focusing on commercial banks.
"That is critical because if you don't have a financial intermediation system, you're not going to channel capital to the most efficient uses, including capital to small businesses which are going to be key for employment growth and the dynamism" of young Chinese entrepreneurs, he warned.
"The balance is, how quickly do you move to create an effective financial intermediation system, which is going to require dealing with the bad asset problem," Zoellick said, adding that "if you go too slow, you're going to stultify the economy by not being able to move and allocate capital to more efficient uses."
On intellectual property rights (IPR), Zoellick explained that it was vitally important for China to have an effective IPR regime "because most companies coming in these days are now in knowledge industries."
If China wants to continue to be a locale that attracts foreign investment, it is in Beijing's own interest to effectively protect IPR, he said, noting that foreign business participation in an economy increases that economy's competitiveness.
Zoellick added that in his opinion China's own intellectual property development will soon make it clear IPR protection is in Beijing's own self-interest.
On the launching of the Doha round of trade liberalization negotiations of the World Trade Organization (WTO), Zoellick said he sees China playing a useful role.
The U.S. trade agenda parallels that of "most of the developing world, in that, we're most focused on market access for goods, agriculture, and services," Zoellick said.
In response to a question on steel exports to the United States, Zoellick said the issue should be put in context.
According to the U.S. trade representative, the tariff would affect $204 million of China's steel exports to the United States, or about 37 percent of last year's steel exports. The remaining 63 percent of Chinese steel exports would not be affected by the temporary tariff.
Zoellick noted that China's steel exports are only a fraction of that country's total trade with the United States.
"When you're trading $104 billion ($104,000 million), this is de minimus. It's 0.2 percent, obviously," he said.
In the larger U.S.-China trade relationship, Zoellick continued, "not only do they export $104 billion ($104,000 million), but we have an $80 billion ($80,000 million) trade deficit with them. Frankly, we have some issues of concern with China as well," Zoellick said.
Zoellick added that "safeguards are part of the WTO process" and said that "the Chinese are aware of how safeguards work because, indeed, we've been negotiating special safeguards in terms of the accession process in apparel, as part their WTO accession."
Following is a transcript of the press roundtable with USTR Zoellick in Beijing April 10:
(begin transcript)
Ambassador Robert B. Zoellick
Press Roundtable
Beijing, China
April 10, 2002Zoellick: Thank you all for coming by. What I thought I'd do is just give you a brief overview, and then take any of your questions.
As you probably all know, I came here from stops in Thailand, Singapore, and Indonesia. While I had some specific items that are obviously germane to each stop, my overall focus of this trip was to try to get a better sense of the economic development and conditions. In doing so, I'm trying to relate it to our overall trade strategy. I know some of you cover this with greater detail than others, but in essence, we've been trying to promote trade liberalization on multiple fronts, globally, regionally, and bilaterally, and part of my job is how we interconnect those so that they're mutually supporting.
At this stop, I really had four objectives. The first and most important one was to listen and to learn. I wanted to try to get a better sense of the economic context and state of the reform process. Without boring you endlessly, I first visited China in 1980 when I was in Hong Kong. I was living in Hong Kong at the time, and I went to Guangdong. I've come back here on a number of occasions in the private sector and government over the years, and I find that the transformation is nothing short of extraordinary. It's also one of the parts of the world where I think it's extremely useful to come out and try to see and touch and feel it a little bit. Last year, it was just the fortunes of the schedule that while I visited China twice, I was in Shanghai, and both of them were very focused on dealing with particular problems. The first was the breakthrough we had in June, and bringing China into the WTO after it had been stuck for about a year and a half. Then the second meeting, also in Shanghai, was the follow-through on some of those items, but equally important, trying to build momentum right before the Doha Ministerial in terms of launching a global WTO.
I didn't get to do what I would have liked to have done, which is to kind of talk with people and get a feel for the conditions. What I tried to fit in over the past two and a half days is trying to tap multiple sources. I had a good meeting with Vice-Premier Wen, about 90 minutes. Obviously, given his importance and position, it was a good opportunity. I'd never met him before. I had some meetings with the MOFTEC people, and my staff have had a lot of others on details of this. Yesterday morning I met with a combined group of the American Chamber and the US-China Business Committee, and that was very useful, because while we talked about some specific problems, I got a much better sense of some of the strands and themes related to overall economic conditions. I had lunch with the vice-president and some of the researchers at the Chinese Academy of Social Sciences. Yesterday I gave a speech at the Central University of Finance and Economics, and I actually like to meet with students. I don't know if you got reports on this, but you even learn something from the questions you get, obviously. There are some questions that are a little bit more posed, but others are more genuine. Then, I just finished a fascinating two-hour session this morning that the Embassy put together, meeting some young Chinese from the private sector. Just to give you a little feel for this, one was the CEO of Sohu.com, another was the president of SparkIce, another was the head of the environment NGO Global Village, the president of Horizon, a fascinating polling firm, the dean of the People's University School of Public Administration, and his focus has been on social security reform, the president of Com-T, which is an international phone service provider, a young woman partner at an international law firm, and the head of the World Bank office. So basically, I sort of pummeled them with questions about these topics. That really is my prime purpose, and that was very useful in terms of trying to get some better sense.
Second, was to try to follow through on the WTO accession process. Again, I've been involved with this for some ten years, back when I was working with President Bush's father. So, I believe this is an historic step, and it is driving internal reforms, and I want to try to get a sense of how it's doing so, and then with our MOFTEC colleagues to kind of work through some of the issues we have.
Third, I wanted to try to launch more serious discussion about the agenda for the new global negotiations. I was just talking about this with CNN. We are very committed to try to move forward the WTO round we launched at Doha. We have a completion date of 2005. I think China will play an important role. I think we have a lot of commonalities of interest, and so I wanted to try to lay a foundation for that.
Fourth, I gave a speech on the challenges of globalization for the United States and China. I gave an historic perspective, in part because I like history. I think we brought copies of this. Just so you know, because different people do these in different ways, I either write my speeches myself, or am very deeply involved with the creation and editing process, and so I tailor them for a particular purpose.
In sum, I always find my visits to China to be extremely fascinating. I tend to go out and run in the morning with one of my colleagues, so I have a chance to see some things early in the morning. I have not been to Beijing in three years, and even the changes in that time are so startling. Obviously, there are big problems. One that I was trying to get a better sense of is the financial sector, and how that's going to proceed. I find it, as many people do in the business community, to be a very dynamic environment.
Late today I go on to Japan, which will be the last stop, and there I really have three purposes. One is again to try to get a sense of economic conditions in Japan, and the state of the reform process. Second, since it's very convenient, I'll just finish a visit through Southeast Asia and China to exchange views on regional economic conditions. And third, again, to consult on the WTO process, because Japan is obviously very important to go forward with that. Fourth, well of course we'll have bilateral issues. We've got complaints, they've got complaints, as always.
So ask away.
Q: What progress have you made narrowing differences over the steel tariffs issue? China's demanding compensation and recognition as a developing country -- how far are you willing to go to make those plans?
Zoellick: The first thing that I've tried to point out, and I think it's something that was new information for the Chinese -- I hope it's useful -- is that I gave them information on the specific tariff items, that there will be an increase of tariffs under the safeguard. When you look at those tariff items over last year's exports, it only amounts to $204 million of steel trade. That turns out to be about 37% of last year's exports. So, the first message is, when you're trading $104 billion, this is de minimus. It's 0.2%, obviously. I think that was useful to know, because I think part of this issue for the Chinese is the appearance of this, as they come into the WTO. I think it probably helps them to know that some 63% of their steel exports are not included at all.
Second, and I feel this is appropriate for an important trading partner, I explained our logic in this. Obviously, the safeguards are part of the WTO process. The Chinese are aware of how safeguards work because, indeed, we've been negotiating special safeguards in terms of the accession process in apparel, as part their WTO accession. There are some 20 countries that have safeguards in place, so it's interesting that there's a hue and cry when the United States does it. But when Japan did it, or Korea did it, or Brazil did it, or Argentina did it, or frankly, the European Union did it, it was sort of more accepted.
Third, I emphasized that China, as a WTO member, has a right to consultations, which we engaged in. I tried to explain, because I know there's been some confusion on this as well, how the process of considering exclusions work, which are areas where either countries or companies will apply to the United States in a condition where either there is not a good US source, or there is not a competitive US source. And I wanted the Chinese to be aware of that.
Fourth, however, I also shared with them my view that one needed to look at this issue in part of the larger problem in the steel market. If I consider an international market over time, it's hard to find one that has been more manipulated than steel. I'll spare you all the historical references, but I'm sure if you want, I'll go through them. But even in the case of China, between '96 and 2000 they had about $6 billion of subsidies. Going forward, they announced another $6 billion of subsidies. In '98 they suggested they wanted to restrict their own steel imports by about forty or fifty or sixty percent. They have a target by 2010 of being self-sufficient in steel. All I have to do, frankly, is point to some of their own actions -- and these are backed by various tax rebate policies and others. What I urged them, because in some ways China has some interests like the United States in this, is to say, we also should work together in the global negotiations that President Bush urged last June, to deal with the global capacity problem, and to deal with the unfair practices.
Fifth, I tried to put this, again, in the larger context, and urged them to do so. Not only do they export $104 billion, but we have an $80 billion trade deficit with them. Frankly, we have some issues of concern with China as well. As I said in my speech yesterday, and have said in other speeches, it's not my urge to be litigious. I want to try to work these through with the Chinese. And so I urged that we try to work on these issues with a cooperative approach. From my own point of view, I was in Brazil right after he announced the steel safeguards, and it was immensely useful, because I could point out that 87% of their exports were excluded. Frankly, in the aftermath, I think we've worked well with Brazil. It's too bad that I couldn't have been here at the same time, but it's the limits of modern travel.
The key point is, while obviously this was a point of discussion, and it's the one that all you guys ask about, it was not the primary part of my visit, and I don't think it's their primary interest in my visit.
Q: What do you expect from China in the Doha round? Or, what are you expecting from them of it?
Zoellick: It's premature to answer that. That's one reason why I wanted to try to launch a discussion. I'll make these observations: China played a very constructive role in 2001, even before it was a member, in urging countries to try to resolve differences to launch the Doha round. At the June meeting in Shanghai, my counterpart, Minister Shi, I think helped influence some of the Southeast Asian countries. I know when I took office that most of them didn't think that we'd be able to reverse the failure of Seattle. So, part of it was a general -- if they are committed to this as a round of liberalization. To be fair to China, they just finished WTO accession. It's going to take them a little time to think about their negotiating agenda.
Second, and more specifically, the United States agenda has had to parallel that of most of the developing world, in that, we're most focused on market access for goods, agriculture, and services. That is a more traditional agenda for global negotiation. The Europeans and Japanese have put in other issues: competition, policy, investment issues. We needed to bridge the gaps on those in Doha, because the Japanese and Europeans needed some movement on those topics, so they could be willing to negotiate agriculture, because their agricultural policies are horrendous. Frankly, I think what I was trying to get going here was a sense of, where does China see its interests in further liberalization, so we could try to cooperate on that. That's what I've discussed with the ASEAN countries, too.
Q: I'd like to ask a somewhat more philosophical question. As you know there has been a fair bit of labor unrest in China, at least in recent months, and some very large demonstrations, not reported inside the country, but by foreign press. As you consider applying measures that will affect China, or objecting to things China does within WTO, are you committed or do you intend to allow a sort of concern for social stability here to enter into those decisions? Or is that something that you're just not supposed to think about?
Zoellick: Well, it's a good question and it's a question that I asked about. I was trying to get a better feel for what was going on. Let me try to start the answer in a more philosophical way as well. As President Bush has said and as I've said, we believe in open trade and open markets for the efficiency, but also it's clearly being used by a number of key developing countries as part of their reform strategy. And this may be the best model of all, again the transformation over twenty years. This is why, while we expect China to live up to its agreement -- China traditionally is a country that takes pride living up to its agreement -- we want to work with them as they do so. There's a list of items that I reviewed here today where they're not quite living up. Some are more time sensitive than others. But my experience is, perhaps in the United States, often there's one bureaucracy that wants to live up to it and another that doesn't and you're better off trying to work with them.
On the labor unrest issue in particular, the answer that I got from at least a couple of sources, was that this has often been driven more by the frustration of the workers with what they perceive as people not following through properly on the payments that they are due. And so, it is less a problem of openness and trade liberalization and more it's a problem of transparency, rule of law and dealing with corruption. And one reason why I've been working on this issue for ten years is I think the best way to address those issues is through areas like the WTO accession. So, one of the other reasons I was trying to meet some of the younger business people here is I was trying to get a sense of how those remaining problems, which we all know are significant, will impede economic development. So, in one way, I take that as a significant issue. I was trying to find out about it. At least what I've understood as being the major cause of it really isn't driven by trade liberalization per se.
Q: You've mentioned a few times that there are a list of things that you think China's not following through on. Can you tell us a bit more about some of those?
Zoellick: Sure. This is not to be thumping them on it. It's just items of discussion and we had good discussion. There's the tariff rate quotas for agricultural products and for some industrial products. There needs to be some follow-through on insurance and they said that they would accept licenses based on credential standards. It hasn't yet happened, but again, it's April here. There's a more timely issue related to express mail services and this is a classic of what happens which is -- the authority has been shifted to the post office system in China and the post office system has come up with new reasons why it wants to sort of limit the competition that was already created. It's an interesting issue because it also has elements related to the provincial post office systems and their authority. That one's got more of a time sensitivity to it.
China has been trying to become a member of the Information Technology Agreement and it's very close to doing so. They had some restrictions on the ability to import IT products through requirements for end-user approval. We think we can work those out. Another topic, frankly, on the positive side, is we have some technical assistance programs to try to help with the implementation of some of these items. We've talked about those.
Biotech -- obviously, here, I was very interested in exploring, as I came in, I saw the articles about the research in China on the rice genetic map. When I was in Africa, I talked to President Mbeki and President Moi and President Mohai about this. I talked with the Brazilian Ag Minister about this. This is an area where I think there's huge potential to deal with malnutrition, deal with disease, and I was interested in starting a dialogue on that with the Chinese. And IPR is obviously an issue where, again, China has made great strides, but, one of the nice things about running in the morning is you can find any CD or disk that you want that someone has pirated.
So, I don't mean to emphasize these in a negative fashion. We had an issue we were very concerned about related to soybeans and grains because they were going to move towards new biotech approval regulations, but they hadn't created a process by which you could even get approved yet. So, with President Bush's raising the issue, we were able, I think, to get that on the right track for now. That's a different biotech question. That's the biotech approval as opposed to some of the other issues.
So, as you would expect, with a country that is a huge trading partner of the United States and covers everything from agriculture to services to steel, you've got a number of things to talk about. But, again, I had the opportunity this time to visit with a new Vice Minister, Vice Minister Ma, who had been involved a lot with the investment issues, and I was actually, it's one of the reasons it's good to come out here, I had a chance to talk with her at length and I think she's an extremely good professional. I obviously had a good working relationship with Minister Shi and Vice Minister Long and others. These are serious people trying to do the right things and they've got a lot of challenges, but so do we.
Q: You mentioned that you were able to get, after President Bush was here earlier this year, you were able to get the certification of certain agricultural products on the right track again. I think the key with this is the dispute about gene modified products. As I understand it, it's basically a three-month period whereby China will accept safety approvals from the country of origin. Were there any discussions about what happens after this three-month period?
Zoellick: My Chief Agricultural Negotiator, Al Johnson, had been here not long ago and had detailed discussions. What I just wanted to emphasize was we needed to follow through on that because as you rightly said, just to try to put this in lay person's language, the Chinese were having a new biotech regime that required approvals, but they didn't have the approval process in place. So, kind of the cart was put before the horse. So, the first thing we worked out was to say that countries could demonstrate their own approval process for products during this period up through which they will actually conduct the processes to do the approvals. So, that's sort of an interim step. What we have to keep working on is to make sure that that approval process works in a fair, transparent, scientific-based way and, again, from the Vice Premier on, I certainly had no sense that they're not committed to doing that but, you know the devil's in the details. So that's something we'll need to continue to work on.
Q: What was the problem with the tariff rate quotas? Is it in effect that they took some old ones and actually issued quotas?
Zoellick: They haven't implemented them yet. They've put out some general regulations about how they're going to work and there's some ambiguities in that. In some of these, they put out some of the overall quota levels, but they haven't allocated them. So, frankly, this is a real economic problem -- you can't send until you get your quota. Part of this is an implementation timing issue, but we're also scrutinizing these closely because implementation timing can also become protectionism.
Q: But what sort of reaction do you get from them when you raise that issue? Do they say it's just a teething problem or do you get a sense of a delay because they were trying to...?
Zoellick: In the meeting that I had with Vice Minister Ma, I sort of listed these and sort of gave a general impression of them and then my staff had some follow-up discussions yesterday and will today about some of the details of it.
Q: You've said repeatedly that you came here to listen. Could you share with us your new, improved view of what are the Chinese most important two or three problems in WTO implementation? What are the stumbling blocks?
Zoellick: Let me answer that in two ways. In the narrower form of the question, I just listed the WTO accession issues. In the larger form of the question, which was the one I was really trying to dig at, about larger economic reform process here, the sector that I go home most focused on is the financial sector. Let's see if I can explain this complex problem with some remote articulateness. I think the Chinese government has a balance here. On the one hand, as they know and we know and the whole world knows, there's a big problem of bad loans, NPLs, in the system that has historical roots of the fact that the banks were basically finance and accounting mechanisms for state-owned enterprises. They've created some asset-management companies. It was good to have a chance to talk to the Vice Premier because, as you know, he's supervised finance and agriculture and others. So, he was explaining to me a little bit about some of the things they're doing in that area. My sense is that while that asset disposition process has started, it hasn't really moved to full force yet. There's a political issue with this that one of the other private Chinese people said is that these loans were often to companies that were considered the crown jewels of the old system, so it's a little hard to sell them on ten cents on the dollar.
Now, the related problem is that cleaning up the bad loans is also important in terms of being able to create a true, what I call a financial intermediation system. But they're primarily focusing on commercial banks. Now, that is critical because if you don't have a financial intermediation system, you're not going to channel capital to the most efficient uses, including capital to small businesses which are going to be key for employment growth and the dynamism of some of the young Chinese I met down here. So, the balance is, how quickly do you move to create an effective financial intermediation system, which is going to require dealing with the bad asset problem, and if you go too slow, you're going to stultify the economy by not being able to move and allocate capital to more efficient uses. Now, let's not be too hard on the Chinese because the country that I'm going to, Japan -- which is in a far greater state of development and income -- this is their core problem. They're not moving capital from the old economy to the new economy and they need to deregulate and they need to sell some of the assets.
I have a particular background in this because I've both dealt with financial markets and I was at our Treasury Department when we dealt with the S&L problems, and when we created the RTC. So, I can speak from first-hand experience that the value of bad assets tends not to get better over time. Secondly, while I know that when you do early sales, there's a large bid-ask spread, that over time something wonderful takes hold, which is the ability to get profit. So more people will come in and be able to find that prices will go up. It partly depends on what you're selling here and what the value is left, whether it's land or whether there's any value in the underlying asset. So, that issue, obviously there's been a lot written on this. One of the people I've found most useful on this is a guy at Brookings -- Nick Lardy. That sort of jumped to the forefront for me as I'm trying to think about the growth pattern.
Now, in the near term, as you can see, the Chinese government is putting a lot of capital into infrastructure projects. For a while, that's maybe not a bad alternative because they need to develop the infrastructure. But, we've seen what happens when infrastructure development and capital loses contact with economic reality in Japan where the challenge is how many rivers can you brick with concrete. So, this is an issue that was forefront in my mind. Now, it relates to WTO obligations in that how do you move to your asset management obligations to companies, and how do you open up things to a commercial banking system. But, the good news is this is a country that has a pretty high savings rate so people are saving the money. The question is, at least what I was told, many of the so-called commercial banks are primarily investing in government debt. And the question is, in addition to creating an effective commercial banking system, can you create a securities market. Since I have an interest in economic history, the United States went through this too. It's a combination of railroad bonds and others that created a bond market in the United States. In the United States in the early 19th century, there were huge problems with defaults and quality. I don't mean to be critical; I mean to be observational.
Q: Can you tell us what were your impressions of Vice-Premier Wen JiaBao?
Zoellick: As I said it was very nice that he spent ninety minutes, so it wasn't just a courtesy call. We, with translation, got into some of these issues in a general way. I pressed on the financial issues and what I found was somebody who was clearly well-informed and had a very organized mind, in terms of answering these questions. Not surprisingly these are questions he had thought about and he had organized answers on them. I wouldn't expect in a first meeting to get huge revelations about the nature of the problem. But I was very impressed and I was pleased that he took the time and I hope to be able to work with him in the future.
As you know the big issue that dominates China these days is the question of the succession process. This is a person who I expect will be playing an important role in the future and it's good to start to develop that exchange. Just to give you again a context, I said to him -- after I gave him a little bit of my interests in the country and my background with it -- I'm not going to bother you with individual trade issues. I'm sure he had a sigh of relief on that. And we didn't.
Q: I've talked to some Chinese officials who have said that the U.S. imposition of steel tariffs has rather undermined their momentum toward fulfilling certain WTO commitments. Is that your sense at all? Did they ever bring that up? And secondly, do you feel China is becoming more assertive now in using the WTO? I mean Chris Patten was here just the other day and they're talking about jointly opposing the U.S. steel tariffs and consultations. Is that your sense too? Are their anti-dumping mechanisms also gathering speed and momentum?
Zoellick: Well, I cautioned in some meetings about following the running dogs of European imperialism because while the Europeans wanted to carve up China, we wanted to open the door to it. I didn't get that in any aggressive sense. I get the sense that this is a country that is sensitive, after having tried to explain to its own people that WTO is a rules-based organization, how the rules work. In general, I find that the Chinese in this issue and others are proceeding with care. They're trying to understand what's in their interest. It's always been China's approach in multilateral organizations. They haven't played bloc politics; they've sort of tried to think through the approach. That's why I was also inviting a fuller discussion about where we go with the WTO Doha agenda to set up a cooperative model on this.
Now, in the area of anti-dumping that you mentioned -- and this is the type of dialogue, you see, I'm trying to develop with them -- number one, I found it interesting that this Chinese lawyer was saying that she's got to represent U.S. and other clients against Chinese imposition of anti-dumping laws. So, the street runs both ways on this. I cautioned that I think -- and this is relevant in the Doha negotiation -- the issue where China is going to have its hardest time on this may not be with the United States and other developed countries, but with other developing countries. Take textiles and apparel. As you probably know, all our quotas come off in 2004. So, for all the complaining I get from well-established reporters, my strategy is basically you keep that process going, so we open up the market and then we still have tariffs. But our tariffs, frankly, are a lot lower than many of the countries that are complaining.
As I've warned people in Africa and Latin America and Southeast Asia, I've said as you consider building your economic future on apparel you'd better look at some of your competitors around the world because the quotas are actually helping you now. What I've pointed out to the Chinese is as they think about these issues they need to think about how they're going to fit in with some of the developing world. As you know, I was in Southeast Asia and so there was some reporting that he's focused on Southeast Asia as a bloc against China. You know this isn't the Dulles view of the world. My view is that if China develops a stronger trading relationship with Southeast Asia that's great.
Frankly, I wish that the world wasn't quite so dependent on the United States market for everything. It wouldn't hurt if the Japanese and others opened up. I think if China develops a deeper integration with the Asian region, fine. I think it's helpful if, at the same time, Europe has good relations with Southeast Asia and we have good relations. We're not mercantilists. We actually believe open markets are useful for everybody. And frankly, we believe we can compete. I remember being in this region some ten years ago and everybody thought the United States economy was finished and I thought that was b.s. and I think it's been true. Our fundamental strength is our openness.
Now to come back on the assertiveness on steel and, your point about how it's affected their overall explanation. What I tried to explain to them is part of this depends on how they talk about it. What I'm here in part to tell them is (a) it's 204 million dollars of your exports; (b) it's temporary; (c) it's under the WTO rules and it's an accepted process for other people; (d) put this in the perspective of 104 billion dollars of exports and (e) we'll work with you in terms of exclusions and other topics as this goes forward.
The other thing -- and I felt again that this is what good trading partners should do -- I was partially trying to explain how this problem came about. And part of what I was trying to explain is if you look at the '99 OECD numbers for openness in steel, the United States had 30% of the market was exports and Japan was 7%. Between 1970 and 1998, five Japanese steel companies did not change their market share one percentage point in even one year for twenty eight years. Now, I've been in markets and I've never seen a market work that way that's a true market. So, as I was partially explaining, this has been a rigged international market. It's very hard for me in an environment where the United States is, at least, more open than other countries, the dollar remains strong, and a 437 billion dollar trade deficit. I want to keep the market open and frankly, it's a market where everyone knows that it's been permeated with subsidies and restrictions and then I've got 30% of the producers in bankruptcy, including the efficient mini-mill producers, where no one doubts their productivity. Well, then we have to have access to the same rules that other people, safeguards, have and that's all that we've done.
So, in a way, I'm trying to explain to them that this is not some rush to protectionism. That wouldn't be in our interest and it wouldn't be in their interest. But we also have to deal with economic realities at home and, frankly, people talk about this as politics. I've explained it's the politics of globalization. It's maintaining support for open trade. It's, frankly, making sure that we can help those constituencies go through their adjustment. Remember, the steel industry gets three years to do this and we're going to put in an eighteen-month review. They've got to improve themselves and at the end of the day I expect it'll be a smaller and more efficient industry.
So, that's the sort of explanation I'm trying to give them. My sense is that they understand that, but I understand they also have to manage their politics and that's one of the reasons I was trying to point out that this is pretty 'de minimus.'
Q: On IPR, did you see any cause for optimism, particularly with regard to video piracy and things of that sort?
Zoellick: The Chinese have taken some important steps over the past decade when (inaudible) of this and this is not a problem that they only are the violators on. But there's still a long way to go. One of the other points I've tried to make in this -- and this gives you a feel for the conversations I'm trying to have with people -- is that IPR is critically linked to investment because most companies coming in these days are now in knowledge industries. So, if you want to continue to be a location that draws foreign investment -- and that's the other thing you can see how they're using foreign business participation to help increase competitiveness -- it's in their own interest to do this. And then on top of that you take a society like China where I suspect that its intellectual property development is going to be pretty high, whether it be in software or other areas, and it's in their own interest. So, the idea is to share how it's in their self-interest to take action, but obviously to recognize that this is a problem that still needs a lot of work.
We'll take yours real quickly and then I've got to go.
Q: Did the U.S. business community here want to see the U.S. go a little harder with China on some of these issues?
Zoellick: The people who I met with are people who know China and they felt that China had been doing a pretty good job. They recognized that there were problems. They were focused on some of the bigger problems, in terms of transparency of the system and financial markets. But I think that the U.S. agricultural community is probably more anxious and there wasn't anybody from there at the meeting. But I hear from them plenty at home. Okay, thanks.
(end transcript)
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