*EPF510 04/07/00
Text: Commerce Official Outlines U.S. Asian Trade Policy Priorities
(The WTO remains the centerpiece of U.S. trade policy) (3440)

A senior U.S. trade official emphasized that the World Trade Organization (WTO) remains the centerpiece of U.S. trade policy and that WTO membership for China is important.

In luncheon remarks to the 57th Asia-Pacific Council of American Chambers of Commerce (APCAC) meeting in Manila April 7, Patrick A. Mulloy, assistant secretary of commerce for market access and compliance, said there is no substitute for the confidence and credibility the WTO offers the world as trade grows.

Since the deadlock in Seattle last November, Mulloy said the United States has been consulting with its trading partners and the WTO Director General on ways to move ahead. He said President Clinton has expressed U.S. support for the beginning of a new WTO round this year.

Mulloy, who on April 6 helped inaugurate a new U.S. government American Business Center in Makati, Metro Manila, said last November's U.S. agreement with China on WTO accession will help China create a more open and efficient economy and help the U.S. address a deeply unbalanced trade relationship.

According to Mulloy, U.S. exports to Asia last year totaled $191 billion, while imports were $409 billion. The resulting $218 billion deficit comprises 80 percent of total U.S. deficit with the world, and the top two U.S. bilateral deficits were in Asia: Japan and China.

Following is the text of Mulloy's remarks to the APCAC luncheon, as prepared for delivery:

(begin text)

U.S. Commercial Policy Priorities in a Reviving Asia

Introduction

Thank you, Ambassador Thomas C. Hubbard for that kind introduction. I am quite pleased to be here in Manila filling 3 roles: Leading the U.S. delegation to the APEC Auto Dialogue, pursuing numerous bilateral issues with our gracious Philippine hosts, and, most importantly, addressing APCAC members here today.

For those of you who I haven't had the opportunity to meet yet, I am the Assistant Secretary for Market Access and Compliance in the International Trade Administration of the Department of Commerce. Most of you are probably familiar with the excellent work of the Commercial Service, which is also part of the International Trade Administration. Our job is related to theirs, but a bit different. We work to expand market access for U.S. firms overseas by breaking down trade barriers and ensuring compliance with a broad range of trade agreements.

I realize you've all come here to listen to someone who is billed as an expert on trade issues. There are, of course, always dangers in listening to experts. Being a baseball fan, I am reminded of a comment that Hall of Fame outfielder Tris Speaker made in 1919. He said, "Taking the best left-handed pitcher in baseball and converting him into a right fielder is one of the dumbest things I have ever heard." He was, of course, speaking of Babe Ruth. With that caveat on the dangers of listening to supposedly expert analysis, I'd like to make a few remarks.

You are all aware of Asia's tremendous commercial significance to the United States. U.S. exports to Asia last year totaled $191 billion, while imports were $409 billion. The resulting $218 billion deficit was eighty percent of our total deficit with the world. Our top two bilateral deficits in the world are in Asia: Japan and China. These two countries accounted for over half of our deficit with the world. Clearly, Asia is a region where we have significant commercial policy work to do.

I want to talk briefly today about our commercial policy priorities in a reviving Asia. My basic theme is a simple one: that we need to be forward looking in our approach while simultaneously enforcing the commitments of the past. I would like to talk first about our priorities in the WTO, and then about China. From there, we'll spend a few moments on India, Japan, and a few other issues in the region.

WTO

The WTO remains the centerpiece of U.S. trade policy. As the President recently said, there is no substitute for the confidence and credibility the WTO offers the world as trade grows. And, as you know, the President has expressed his support for the beginning of a new WTO round this year. We would support a new round that includes the "built-in" agenda plus a limited number of other issues. We would not be able to support, however, an agenda as ambitious as the one put forward by the European Union. We see no need to engage in a broad range of negotiations, such as on competition policy or investment, that many developing economy members do not support and which would delay progress in the priority negotiations on services and agriculture.

Since the deadlock in Seattle last November, the U.S. has been consulting with our trading partners and Director General Moore on ways to move ahead. We support his efforts to devise a confidence building package of transparency measures, market access for the least developed, technical assistance, and ensuring progress on the built-in agenda.

Other issues we must address in the context of ongoing WTO work include implementing various past commitments. A set of WTO agreements covering intellectual property, trade-related investment measures, customs valuation and other issues came fully into force this year. We recognize that these agreements are complex. Some countries have genuine difficulty in implementing them despite making sincere efforts to do so. In such cases, our preferred approach is to work through the problems on a practical, constructive, and pragmatic basis. However, in the case of outright refusal to keep promises, we will not hesitate to use dispute settlement to enforce compliance.

And last, but certainly not least, is WTO accession for a number of economies, including China and Taiwan.

China

The bilateral agreement we reached with China on WTO accession last November caps nearly three decades of patient, detailed work, dating back to the lifting of the trade embargo in 1972. It is a comprehensive agreement, which covers industrial goods, services, farm products, unfair trade practices, and almost every barrier to American exports. It also gives American workers and businesses stronger protection against unfair trade practices, import surges, and investment practices intended to draw jobs and technology to China. The agreement will help China create a more open and efficient economy, and it will help us address a deeply imbalanced trade relationship.

Secretary Daley has been in Beijing this week chairing a JCCT meeting that is aimed at finding ways to achieve a more equitable commercial balance between China and the U.S. In preparation for this week's meetings, I was in Beijing three weeks ago to co-chair the Trade and Investment Working Group. We explored the creation of a stronger and more regular dialogue within the working group to resolve commercial disputes. We also pursued cooperation on standards issues, examined ways to increase Chinese purchases of U.S. goods, and discussed the need for an expanded dialogue on China's WTO obligations. The JCCT plenary meeting this week will lock in these and other commitments, particularly an expanded dialogue on China's laws and regulations and how they conform to China's WTO obligations.

The question before us, before Congress, is whether we will take advantage of the commitments contained in the WTO agreement and reinforced in the JCCT. China will become a WTO member regardless of the outcome of the debate. The only question, ironically, is whether U.S. businesses and workers will receive the full benefits of China's accession and the historic agreement that we negotiated. By contrast to China's historic set of commitments, we have only one obligation: we must grant China permanent NTR status or risk losing the full benefits of the agreement we negotiated. An agreement that goes well beyond sharp reductions in trade barriers at the border. An agreement under which China will:

-- permit foreign and Chinese businesses to import and export freely to and from China;

-- reduce, and in some cases remove entirely, state control over internal distribution of goods and the provision of services;

-- enable foreign businesses to participate in information industries such as telecommunications, including the Internet; and

-- subject government decisions in all fields covered by the WTO to impartial dispute settlement when necessary.

These commitments alter policies dating to the earliest years of the communist era. They represent a remarkable victory for economic reformers in China, and reflect a judgment -- still not universally shared within the Chinese government -- that prosperity, security, and international respect comes from economic opening to and engagement with the world, and ultimately development of the rule of law. That is the opportunity before us. Those are the stakes. And that is why the Administration is committed to permanent NTR status for China on the basis of this historic WTO agreement.

India

I would like to turn from China now to spend a few minutes on India. As you all know, the President recently traveled to India; the first U.S. President to go there in over twenty years.

As the world's largest democracy, India should be a natural partner of the United States. Of course, due to the Cold War things didn't turn out that way. Both the United States and India agree that it is time to chart a new and purposeful direction in our relationship. In his speech to the Indian Parliament, the President noted that "the first...challenge [for India and the United States] is to get our own economic relationship right." He recognized that the private sector will lead this process, but that it is the role of governments "to reduce the remaining impediments to trade and investment between us."

I was privileged to go to India prior to the President's visit, to advance trade and commercial issues for the President and Secretary Daley. From the perspective of the business community, I believe the most important accomplishment to come out of the President's visit was the establishment of the U.S.-India Commercial Dialogue. The public-private sector Commercial Dialogue is part of a new broad institutionalized dialogue that President Clinton and Prime Minister Vajpayee agreed to as a means for achieving their goal of establishing closer relations between India and the United States.

The Dialogue, to be lead by Secretary Daley and Minister of Commerce and Industry Maran, is intended to deepen ties between the American and Indian business communities. It will encompass regular government-to-government meetings to be held in conjunction with private sector meetings. Its aim will be to facilitate trade, and maximize investment opportunities across a broad range of economic sectors, including information technology, infrastructure, biotechnology, and services. Close contact will be maintained with business associations, and activities will be planned with the benefit of such private sector input, including the establishment of subcommittees to pursue specific projects or sectoral issues of mutual interest.

Japan

It is impossible to discuss U.S. commercial objectives and priorities in Asia without talking about Japan. Our commercial policy agenda regarding Japan remains built upon three simple facts. First, Japan is the world's second largest economy. Second, Japan is our third largest trading partner. Third, Japan does not have a genuinely open market.

Now, I am pleased to report that, after years of discussions, we have agreed with our Japanese counterparts on the first two points. The third, however, still remains a bone of contention. And it is that third point, the lack of a genuinely open market, that lies at the root of what I personally regard as a simple and important fact: The U.S. has not had a trade surplus with Japan since 1965.

As you may know, we have a greater scope of bilateral trade and market access agreements with Japan than with any other nation. This reflects both the breadth of our commercial relationship with that nation and the fact that it has been necessary to negotiate such numerous pacts to try to secure unimpeded access and resolve trade problems in this traditionally difficult market. These agreements cover a range of sectors from key manufactured products such as autos, medical equipment and drugs, telecommunications equipment and computers to key services such as finance, construction and transportation. In some we have achieved enhanced access, in some we have not.

The Commerce Department leads on medical equipment, where we have had some success, and on construction, where market access remains severely restricted by various public and private practices. We co-lead on autos and parts, where the major issue is the expiration of the 1995 agreement this December and what will follow. I am very disturbed by the Japanese government's totally uncooperative stance regarding renewal of the flat glass agreement and the consultation provisions under one of our construction agreements. I don't want to see this repeated for autos.

As has been widely reported in the press, we have been unable to reach an agreement with Japan on a plan to reduce NTT's exorbitant interconnection rates as envisioned in our Enhanced Initiative on Deregulation. USTR has announced that it will defer any decision to take this case to the WTO until the end of July. I am hopeful that a political solution will be found, but we will insist that NTT not be allowed to block rate reduction which is both a commitment by Japan and certainly in its interest in bringing Japan into the information age.

Now, I could deliver an entirely separate speech on Japan's economy, its responsibilities as a major economic power, our sectoral agreements and disagreements, and a host of related topics. Rest assured I do not intend to do that here. But I do want to briefly address one more issue, and that is a recent ACCJ report on our efforts to open the Japanese market.

The report grades our trade agreements with Japan and draws several conclusions. First, we need close and sustained communications between U.S. business and government. Second, we have significant work in front of us to prevent a snapback in recent gains. And third, we need to work harder at monitoring the enforcement of existing agreements. Well, I have this to say to the ACCJ ---- I couldn't agree more.

We recognize the importance of working closely with the U.S. business community. We also recognize that we have significant work in front of us, not only to prevent a snapback in past gains but also to further open the Japanese market. And, as the President's recent budget submission acknowledges, we must devote additional resources to the enforcement of existing agreements. These are among our highest priorities, and we remain committed to success.

Crisis Countries

It is a mark of how much the rest of Asia is reviving that I didn't feel compelled to open this afternoon's remarks with a reference to the effects of the financial crisis. We have seen a recovery far quicker than had been anticipated; another reason to be leery of expert predictions, whether they be in baseball or economics.

For example, South Korea has made an incredible turnaround since it was struck by the economic crisis in late 1997. In fact, last year Korea's economy grew by a remarkable ten percent. I say remarkable because its economy actually shrank by nearly six percent in 1998. South Korea's economic growth is clearly back on track after the economic crisis and will continue to show strength this year.

While that economic strength has led to a resurgence in U.S. exports, we still find a number of long-standing market access barriers, in sectors such as automobiles and pharmaceuticals, that we continue to address. In addition to seeking compliance with commitments in these areas, we are also pursuing a forward-looking cooperative effort: the U.S.-Korea Committee on Business Cooperation, or "CBC" for short. The CBC is an advisory group made up of representatives from our two countries' private sectors which have been tasked with developing guidance on ways to increase trade. Their work will begin shortly.

Here in the Philippines, there was a less dramatic manifestation of the crisis. There were a number of reasons for this. One reason was lower exposure to short-term foreign borrowing, and past reforms to supervision and regulation of the banking system. In addition, it is important to note that the market liberalization begun in the mid-1990s also contributed to a business environment that was better able to withstand the crisis.

The challenge now facing the Philippines is to expand and deepen market-opening reforms. We remain pleased that the Government of the Philippines has taken positive steps in a few areas, such as meeting its obligations under the WTO Customs Valuation Agreement, and eliminating the pre-shipment inspection requirements. However, there are other areas where we are concerned that movement has been in the wrong direction. It is in these areas that I have focused my discussions with Philippine government officials over the past several days.

Other crisis economies are reviving as well. Thailand, which has earned well-deserved praise for its adherence to an IMF program, may see five percent growth this year. Indonesia, recently identified by Secretary Albright as one of four key democracies on which the U.S. will focus attention, is beginning to see new growth sprout from the devastating effects of an economic and political crisis. Malaysia and others in the region have brighter economic prospects than they did a short time ago.

Yet this is not to say that everything is fine and we're back to business as usual. For one thing, the tremendous human cost of the crisis, particularly in the form of higher unemployment rates, is still with us. And second, but perhaps even more important, is that there are many unfinished reforms. The easing of the economic crisis may have removed some of the political pressure to carry out painful structural reforms, but that doesn't make them any less necessary. It would be a tremendous and tragic irony if the seeds of the next crisis are sown in the failure to complete reforms at the end of this one.

GMOs

Much of developing Asia's growth, both current and future, is built upon the embrace of high tech. The concept of "leap frog" development, of bypassing entire stages of development or technology by moving to the cutting edge and adopting the latest that science can offer in products and processes, has been embraced by many in the region. It is a visionary approach. And yet, it is not without its striking anomalies.

The same science and technology that opens the door to rapid economic development also holds the key to solving one of developing Asia's most pressing needs: an adequate food supply for a burgeoning population. Yet the topic of biotechnology and genetically modified (or GM) foods has become a hot button issue in several economies in the region. Opponents of biotechnology are quick to decry what they have labeled "Franken food", and opportunities for demagoguery abound. But these are attempts to stigmatize a technology that in fact has had no demonstrable ill effects on human health. The U.S. has been a proving ground for biotechnology, showing that a science-based, transparent food safety evaluation process works to ensure high levels of food safety.

Unfortunately, much of the discussion of this topic has been focused on perceived risks, without equal consideration of the many benefits, particularly for improving agricultural yields and reducing the use of chemical pesticides and herbicides. The rational use of biotechnology in agriculture can be an important step toward meeting the very real concerns about sustainable development in Asia. This is an area where a science-based, and rules-based, policy dialogue is critical. And it is a priority issue for us, not just in Asia but around the globe.

Conclusion

Yesterday morning, at the Auto Dialogue, I spoke in support of private sector recommendations that would liberalize trade and allow for the growth of industry through the removal of government policies which act as an unnecessary hindrance to that growth. My basic message here today is the same. With input from the private sector, the U.S. government must pursue trade liberalization policies that are both forward looking and recognize the importance of enforcing past commitments.

This afternoon, in looking out at this audience, I see the private sector that provides those of us in government with that all-important input. You set our agenda and our goals, and the business you are able to conduct is our best way of keeping score. With patience and perseverance, there is no limit to what we can achieve together.

Thank you.

(end text)

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

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