*EPF304 10/29/2003
Transcript: U.S. Commerce Secretary Encouraged by Recent Talks in China
(Evans' October 29 press conference in Beijing) (3940)

Secretary of Commerce Donald L. Evans says he is "encouraged" by talks he had with top economic and trade officials during his just-completed trip to China.

During an October 29 press conference in Beijing, Evans reported that he and his Chinese counterparts focused on several issues, including:

-- The protection of intellectual property rights. According to Evans, more than 90 percent of DVDs, CVDs and software sold in China is counterfeit. Some of it is being exported outside the country.

-- The elimination of trade barriers and opening of markets. "Competition is good for the economy of the world but it has to be on a level playing field," Evans said. "We all have to be playing by the same rules."

-- Specifics regarding the U.S. textile industry. The commerce secretary noted that the United States has lost half of the work force in its textile sector. Half of China's textile enterprises are state-owned. "China is still directly subsidizing state-owned textile factories," he said, but he said he was encouraged by the establishment of a working group that will be promoting U.S-made textiles in China.

-- Export limitation in the high-tech sector. China is the only country in the world, Evans said, where U.S. officials have difficulty in gaining access to the companies that are buying American high-technology equipment. If an "end-use" agreement could be implemented to verify that U.S. high technology is not being used for unlawful purposes, he said, high-technology trade could increase.

Evans emphasized that the Bush administration has not proposed a 27 percent tariff on imports from China, but he acknowledged that the call for such a tariff came from Congress, along with a proposal to eliminate Permanent Normal Trading Relations status with China. The congressional proposals, he said, are "an indication of the sentiment in some parts of our economy that patience is wearing thin and we need to pick up the pace in terms of dealing with some of the unfair trade practices that we see (in China) like subsidies, like lack of effective enforcement of intellectual property rights."

He urged China to speed up the pace of it economic and trade reforms. "We need to move quicker down the road of moving into full compliance with WTO (World Trade Organization)," Evans said.

Following is the transcript provided by the U.S. Department of Commerce:

(begin transcript)

Transcript of
Secretary of Commerce Donald L. Evans
Press Conference

Beijing, China
October 29, 2003

EVANS: Good afternoon. Welcome everybody. I am happy to come by and report on a very successful trip to China. I have been here for four days now and have had a chance to go west. I have also spent the last couple of days in Beijing. I have had many productive meetings during my visit. When I went west I had the chance to visit with Secretary Li of Shaanxi province. In Beijing I had the opportunity to meet with the Vice Minister of Commerce Yu. I had the opportunity to meet with the Minister of the National Development and Reform Commission, Minister Ma. I had the chance this morning to meet with the Minister of Information Industries, Minister Wang. And, I had a very, very constructive over two-hour meeting yesterday afternoon with Premier Wen where we talked about the size of the trade deficit, the gap between exports and imports, and I got a strong commitment from the Premier that we are going to work very hard on closing the trade deficit gap between the United States and China.

I talked a lot about how job security, job creation, and economic development in our country and in all countries, for that matter, is dependent upon free and fair trade. Create the conditions where our workers can compete on a level playing. Create the conditions through providing free market principles, sound monetary policies, sound fiscal policies, because these are the kind of conditions that allow economies to create jobs.

The world has a vested interest in China's success, in China's economic success. China has lifted hundreds of millions of people up out of poverty as it has moved toward capitalism - as it has moved toward a free market economy. But, there is still much work to do. We still have much work in front of us. One of the specific issues we focused on while we were here was the protection of intellectual property rights. There is too much piracy of intellectual property, too much counterfeiting, too much stealing. Over 90 percent of the intellectual property - that is DVDs and CVDs and software - that is sold is counterfeit. Some of it is being exported outside the country.

We also talked about eliminating other trade barriers and opening markets to free market forces. We talked about the very important principle of a level playing field. Competition is good for the economy of the world but it has to be on a level playing field. We all have to be playing by the same rules.

We also spent a significant amount of time talking about the textile sector of the economy. Over half of the work force in America in the last ten years has been lost, over 700,000 jobs. There have been many, many, many bankruptcies and they continue to this very day. The playing field in this sector of the economy is not level. There are many state owned enterprises, many state owned textile enterprises, here in China. In fact, almost half of them are state owned. China is still directly subsidizing state owned textile factories and the rest of the textile industry through a VAT export rebate. Although China has, indeed, dropped the export rebate tax a couple of points. That's progress. But, it needs to go to zero. For every yard of textiles China buys from the United States, Chinese factories ship 50 yards of textiles back to the United States. We don't expect parity but we expect a level playing field. We expect a level playing field where our competitive products in America can find their opportunity to compete here in China. We will be cracking down on unfair trade practices wherever we see them. The textile industry has lodged a number of complaints regarding Chinese textiles. We are currently reviewing those.

Progress on that front while we were here - I was pleased to work with MOFCOM and make the decision that we were going to establish a working group that would be textile specific and give us the opportunity to find ways to close the gap. We will establish a bilateral textile consultation mechanism where we will be actively talking about the issues regarding textile trade between our two countries. We will organize the opportunity for industry-to-industry discussions between our two countries so our respective industries can work together on resolving these trade disputes and trade problems. We are committed to establishing and creating and holding exhibitions here in China so that American textiles can come to China and be introduced to this market so that we can show this economy the good products and good apparel that is manufactured in the United States. So I'm very encouraged by that working group that has been established. We will have active dialogue and be working on the trade differences we have in the textile area.

As I said, I think it has been a very successful trip. I have been encouraged by the trip. I think that we clearly stated a number of our concerns. The number one concern that we have is making sure that we are creating the conditions for job creation and job security in our country which means economic growth in our country. We believe that means jobs and job security all around the world. Let me stop there because I would be delighted to take a few questions.

QUESTION: As far as my knowledge is concerned, the American consumers and companies also benefit from the U.S.-China trade developed in recent years. So, how do you, after all, evaluate the relationship, the economic relationship, between the U.S. and China. Do you think it's a zero sum game or a mutually beneficial relationship? Or, to put it another way, a positive sum game. By the way, when will the U.S. government lift the lift the limitations on the high-tech importations into China?

EVANS: Let me take the second question first, on export limitation in the high-tech sector. China is the only country in the world, the only country in the world where we have difficulty in having access to the companies that are buying this high-technology equipment, what we would call end-use visits. As soon as we can get an end-use visit agreement in place so that we can tell the Congress of the United States and the American people that we are being provided access to visit the plants and the facilities and the businesses that are buying this high-tech equipment, I feel confident that it will improve the environment, improve the conditions for increasing high-technology trade between our two countries.

The first half of your question in terms of, do the American people benefit from trade with China - the answer to the question is, of course they do. We believe that an open trading system will benefit the entire global economy. But, the point we are making is how important it is for it to be fair trade, for it to be a level playing field where we are all playing by the same rules. It is awfully difficult to tell an American worker that he or she is on a level playing field with another company in another part of the world if that company is being subsidized by the government. We don't subsidize the private sector of our economy. So, it's about the fundamental principle of creating the conditions for job growth and job security which means economic growth which is dependent upon free trade and fair trade, trying to create the conditions for long-term economic growth so the strengthening economic partnership between the U.S. and China and the rest of the world can continue to grow and continue to add to the growth in the global economy.

QUESTION: In your speech to AMCHAM you talked about the difficulty of implementing rules down the layers of bureaucracy and across the country. Did you get any assurance from the Chinese side that they would make more of an effort to try to make sure that access for American companies would occur all the way down the food chain?

EVANS: As I said, I had a very constructive meting with Premier Wen yesterday afternoon and made this very point to him. I felt a strong commitment on the part of the leaders of the central government to continue to work hard on making sure that all of the commitments that China has under the WTO penetrate throughout the entire economy and all levels of government because that is key to making it work. If just the central government is committed and you don't get the commitment and the implementation and the enforcement at the provincial level, the city level and the county level then the entire agreement is undermined. It undercuts the spirit of the entire agreement. Yes, I would say that Premier Wen gave me strong assurances that they understand the obligations to make sure that their commitments under the WTO and other trade agreements penetrate the entire economy.

QUESTION: What's the limit of the U.S. patience on some of these WTO requirements? At what point do file a complaint with the WTO and take this to court?

EVANS: Well, I'm not going to speculate into the future. I want to leave here with a very positive message that we had constructive thoughts. I felt the commitment on the part of the leadership to deal with some of the trade issues that are of great concern to us. We have formed not just one but three additional working groups to deal with not only textiles but one that will deal specifically with subsidies. We have a working group that has been set up with MOFCOM where they are obligated under the WTO to identify where they are subsidizing certain sectors of their economy. Through this working group we will be able to work with them as to how they need to fix that problem. We have another working group that we hope to establish, that's not absolutely in place yet, with the National Development Reform Commission which will talk about more economy-wide structural issues - macro economic issues, moving toward free markets, with government being less involved in the micromanagement of the economy.

QUESTION: I would just like to mention the forms of fair trade and the terms of WTO. It is reported that you have proposed to impose additional 27.5 percent tariff to those products coming from China. My question is, have you really made such a proposal? Will you make such a proposal and, if you do, isn't that measure going against the WTO rules? The second is, I understand that you have had a special office in your department to deal with so-called unfair trade practices. What is the legal foundation? What are the laws and rules to support such an office?

EVANS: As far as your first question, we have not, I have not, the Administration has not proposed 27 percent tariff on imports from China. That has been proposed in Congress, by certain member of Congress. I made the point because one other proposal that has been made in Congress is the elimination of PNTR (Permanent Normal Trading Relations) status. The Bush administration opposes those proposals. We are not in favor of those. But, it is an indication of the sentiment in some parts of our economy that patience is wearing thin and we need to pick up the pace in terms of dealing with some of the unfair trade practices that we see like subsidies, like lack of effective enforcement of intellectual property rights. So, don't confuse anything that you have heard that it is a proposal by the Bush administration or the President. He is not in favor of either one of those proposals. It's an indication of some back in America saying that we need to pick up the pace of reforms. We need move quicker down the road of moving into full compliance with WTO.

In terms of the unfair trade practices, we have by law the responsibility to enforce our trade agreements, to enforce our trade laws. So, it's that authority that's granted to the Department of Commerce that requires us to deal with and solve issues of unfair trade practices.

QUESTION: Why is America blaming other countries for the losses of jobs in the U.S. when isn't it, according to the capitalist spirit, free-trade spirit, that companies will look for the cheapest source of labor, in the case of China? Is the U.S. really going to solve the labor discrepancy between Chinese labor and U.S. labor by forcing China to revalue the yuan? And of all the steps that you want China to take, which of them will be the key to alleviate the trade imbalance with China?

EVANS: Well I'm not going to try to point to one key. I'm going to point to the importance of creating the conditions for a level playing field and fair trade. We believe in free trade. You mentioned the strength of free trade. We think that's very important, but in terms of creating the conditions for long-term growth, so that we can look forward to the long-term growth of the American economy and the China economy and the global economy, it's essential that trade be fair, and we're all playing by basically the same rules. Not one time while I was here did I mention labor costs. Not once.

What I did talk about was that you have to enforce intellectual property rights, because 90 percent of what's being sold is stolen. It's pirated. That's not fair to American workers. I did talk about the fact that China has been relatively slow in establishing the regulations for allowing distribution systems to be set up in China, and trading licenses to be established in China, so that American companies can find ways to move their products into the China economy. I did talk about ways that this economy needs to continue to move towards free-market principles. Government needs to be less involved in trying to micromanage the economy, and you need to put the fiscal policies in place, the monetary policies in place, the regulatory policies in place that allow the private sector, the workers of the country to do what they do so well, which is to create the wealth and create the prosperity.

So we didn't come over to talk about any differential in labor costs. What we came over to talk about were the fact that there's still too many companies being subsidized here. Intellectual property rights are not being effectively enforced. That VAT rebate tax that discriminates against foreign competition. We talked about standards that are being established that discriminate against foreign competition. Those are the kinds of rules and principles that we talked about with respect to creating a level playing field, which is what we're all trying to do so that we'll have long-term economic growth and create jobs.

QUESTION: The U.S. government also has some subsidies for the agricultural sector. How would you comment on that? The second is, the U.S. government holds strict control of exports of high-tech products to China. Is this a kind of manipulation of free trade principles?

EVANS: Well I think I already answered the second question, but I'll do it again for you. In terms of subsidies with respect to agriculture in America, as you move to a free-market economy, there are transition periods, and we expect that our workers and farmers in America are going to be provided a level playing field with the rest of the world. Let me say there's no country in the world, or let me put it this way, we have been aggressive in putting on the table at the World Trade Organization taking tariffs on products and goods and services to zero. We have also been the most aggressive country in terms of taking export subsidies, tariffs and other subsidies in agriculture products down to the year 2015. But we're not going to put our farmers into a disadvantaged position to European farmers. They continue to subsidize their farmers in a significant kind of way. We're just going to continue to make sure that our farmers are on a level playing field with other farmers around the world.

When it comes to the export controls, I answered the question earlier, in that the big stumbling block right now is end-use visits. We need to get the opportunity. China is the only country in the world where we can't work through the problem of providing end-use visits for us to facilities where we are selling high-technology equipment.

QUESTION: I would like to know, because you have stated in your report that we have seen a loss of momentum, and after you talked with Premier Wen, do you think China is back on momentum? And did you get any specific assurances from Premier Wen why they are back on momentum?

EVANS: I got assurances that he's committed to closing the trade deficit gap. I got those assurances. He realizes we need to continue to work on that issue. He's committed to work on that issue. I look forward to working on that with him.

QUESTION: You mention in your speech that China is the biggest and fastest growing export market for the United States. What level of export growth would be satisfactory to you? Secondly, I'm wondering, you've mentioned this dialogue on structural issues, do you have any deadlines or any targets or any goals for any of these talks, and how would you compare them to the situation with Japan earlier when you had structural talks with Japan?

EVANS: Again, we're not trying to set goals in terms of export growth. What we're trying to do is make sure we're creating a level playing field. We're trying to create the conditions for economic growth, and that's fair trade and free trade. So whatever growth that leads to is fine, but the principle is level playing field and fair trade. We don't have a target of 50 percent growth or 25 percent growth or 75 percent growth. We have a target of a level playing field. In terms of targets to accomplish certain objectives along the way, what I would say is that what we want to do is make sure that this dialogue remains active and constructive and that we're seeing results along the way. We want to continue to see results, and as long as we're seeing results, we'll feel like we're making good progress.

QUESTION: Premier Wen is scheduled to be going to the U.S. next month. Will there be any mega-deals signed during that visit? Second question is just as the issue of the yuan was raised before China agreed to import more from trading partners, and it seems like after China made a commitment there is a projection that China's trade balance with its trading partners will actually turn into a deficit by next year. This is according to China's Commerce Ministry. Will the same calls and urgings for China to improve its market access etcetera peter off as China's surplus falls?

EVANS: No. I don't believe that it will. I don't believe it will peter off. Any deal signings? We're just going to have to wait and see. I don't know. We're not ready to announce anything today.

QUESTION: Yesterday during a Foreign Ministry press conference a spokesperson said that the United States side might have exaggerated the trade imbalances between the States and China. First she said that the two countries have different ways of calculation, calculating the trade volume, and second she noted that most of China's exports to the States are those goods that the United States does not produce anymore. So actually the United States consumers benefit from the "Made in China" products. And third, she noted that many of the Chinese exports to the United States are produced in China by either joint-ventures or solely foreign-funded companies, and among these joint-ventures or solely-funded companies are American companies or Sino-American joint companies. I would like to hear your response to her statements.

EVANS: My response to differences in numbers in the trade deficit is that we seem to have some gap between what China feels like the trade deficit is and what we feel like it is. It's a big number, whatever it is. Our number for what we think the trade deficit will be for this year is about $130 billion. I've heard another number that China feels like it's somewhat less than that. Regardless of what it is, it's a big number. But again, I think our main message is, what we want to do is continue to work on ways to level the playing field for trade.

(end transcript)

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

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