SECRETARY GUTIERREZ:  Good afternoon.  I would like to thank everyone for coming this afternoon and I want to thank our Chinese hosts for all the hard work they put into setting up and preparing the 16^th annual JCCT meeting.  Representing the U.S. delegation is my fellow JCCT co-chair United States Trade Representative Rob Portman and the Secretary of Agriculture Mike Johanns. 

I believe today’s meetings are a step forward.  However, we must insure that commitments translate into results.  Let me just highlight two of the outcomes of our discussions today.  The first is in the area of intellectual property.  The government of China has agreed to increase criminal prosecutions for intellectual property crimes.  The government of China has also agreed to increase the percentage of cases that are referred for criminal prosecutions.  And, importantly, Chinese officials have also agreed to strengthen efforts to stop piracy at trade fairs and to establish a nationwide effort to improve police coordination in investigating IPR crimes across all parts of China.  These are important steps forward.

The second issue where we have made progress is in the area of market access, especially for U.S. software.  The Chinese government software market is an $8 billion market and this is a very important matter – a very important issue for U.S. companies. 

As I said, today’s meetings were a step forward but it is only one step.  The real outcome of this meeting will be known when we see the results in the coming months.  Right now we know that China has full access to the U.S. market.  American companies simply want the same access in China.  President Bush has instructed us to not be satisfied until that imbalance is rectified.  Commitments made in meetings are one step but only one step.  And, as President Bush has reminded us, very often what really counts are the results.  What really matters are the outcomes.  We will be working very closely with our Chinese partners to insure that we achieve the results agreed to at today’s meeting.  Thank you and I would like to turn it over now to Ambassador Portman.

AMBASSADOR PORTMAN:  Thank you Secretary Gutierrez and I agree with Secretary Gutierrez that we had frank and constructive meetings today.  The JCCT is an important bilateral mechanism in the U.S.-China relationship.  It’s an opportunity for us to engage constructively with one another on the very important economic and trade relationship that we have.  In fact, I believe that the fact that Secretary Gutierrez, Secretary Johanns and I are all three here signify the importance that the United States attaches to the economic relationship with China and the importance we attach to our very real trade issues which separate us.  I want to thank our Chinese hosts for their preparations for these meetings. 

I would sum up the outcome of this year’s JCCT as measured progress.  The Chinese have agreed to take a number of actions that Secretary Gutierrez has said that are important to us.  He has outlined well the intellectual property changes.  One additional one that will be helpful to me, frankly, in Washington, because I receive a lot of complaints from U.S. companies about intellectual property, is that the Chinese government has agreed to have an ombudsman in the Washington embassy of China to help small and medium size U.S. businesses better protect their intellectual property rights in China. 

We have also received a commitment to delay proposed government procurement regulations for software that would be very damaging to U.S. business.  We have also received a commitment by China that they will notify to the WTO all of its subsidies which is government support for China’s industry services and agriculture by the end of this year.  This is something that we have asked for, for a long time.  It helps with regard to transparency.  It helps with regard to knowing better the details of our trade relationship – to be able to better inform.  We also received a commitment to insure the right of U.S. businesses to distribute their goods throughout China.  And, there have been a number of licenses issued recently as a result of the JCCT, so we have been able to clean up a backlog in licenses for distribution.  We also have a commitment that direct sales persons will now be able to sell U.S. made products door to door in China. 

Secretary Gutierrez has said it well.  This is a step forward and we welcome these new commitments and I want to thank Vice Premier Wu Yi for her personal efforts to make this progress.  However, even with the measured progress in these areas much more needs to be done to address the very real problems we face in market access.  At a time when the U.S. is running an historically high deficit with China, the current imbalance in our trade is neither healthy for China nor the United States.  There are many factors that contribute to that imbalance but one is the need for better access to the Chinese market.  Through the JCCT we’ve made some progress today but our job now is to insure that more actions are taken to insure market access, intellectual property protection and other vital issues in our economic relationship.  We need to balance the relationship.  We need to further expand U.S. exports by having the Chinese open their markets just as we have opened our market in the United States to Chinese products. 

I want to close by saying that this evening I will have the opportunity to travel to the city of Dalian in China where China is hosting an informal and very important gathering of WTO members to try to advance the ongoing Doha development agenda which is the WTO world trade negotiations.  Secretary Johanns will also join me at this important meeting.  China is represented by Commerce Minister Bo Xilai at these meetings and I want to commend China for what I see is an increasingly important role that China is playing in expanding world trade through the Doha development agenda.  Thank you.

SECRETARY JOHANNS:  The meeting today for agriculture was very successful.  There are five areas that I would like to touch on just very briefly and then we will be happy to answer any questions that you have.

In the first area I am very pleased to indicate that as a result of our cooperation through the U.S.-China high level working group on biotechnology, the Ministry of Agriculture has approved the final pending biotechnology event which is NK603 corn. 

The second area, in the past week the USDA and the Ministry of Agriculture held the inaugural meeting of the USDA-MOA joint committee on cooperation in agriculture as well as the first session of the newly formed agriculture working group of the JCCT.  This set the stage, and we agreed to pursue, further cooperative research and exchanges of mutual interest.  We also announced a follow on project funded by the Trade and Development Agency which will be coordinated by the Department of Agriculture which will provide training on trade related aspects of biotechnology. 

The third area, each side has agreed to provide a transparent process outlining the remaining steps for the commencement of trade for our respective market access requests for beef and related products and for cooked poultry.  This October USDA will host a BSE technical team from China.  China will host a food safety and inspection service audit team. 

The fourth area, both sides have reached an agreement on furthering our technical cooperation through a memorandum of understanding on food safety and plant and animal health.  We initialed that today. 

And then, in the fifth area, we’re also very pleased to indicate that we intend to continue training in sanitary and phytosanitary matters.  We have agreed that China will provide training for U.S. experts and that the U.S. will host a long-term training program for Chinese experts later this year.  So, our work in the area of agriculture as a result of this meeting and other meetings held in conjunction, has been very fruitful.  I also want to express my appreciation to our Ambassador and his team and to our Chinese hosts for hosting this meeting here.  We would be happy to take questions if you have any.

SECRETARY GUTIERREZ:  We have time for a few questions.  Yes, sir.

QUESTION:  I would like to ask a question of you Secretary Gutierrez and you Mr. Portman, if I may.  I know that the Commerce Department has a Bureau of Industry and Security which looks at dual use technologies and there is also the U.S.-China Economic Security Review Commission.  Can you tell us who, insofar as economic security in a broader sense, what you are doing, what the challenges are by the PRC?  On the issue of software, I guess this would be for Mr. Portman, could you elaborate on what the agreements were today to open up the software market and if there were any other parts of the telecommunications or information technology industries involved?

SECRETARY GUTIERREZ:  We require a license for exports that are deemed to be sensitive from the standpoint of national security.  To give you an idea of the scope of that, today the amount of business done that requires an export license is approximately $540 million.  That’s less than two percent of our total exports to China.  The amount of licenses that have been denied total about less than $11 million.  So, we are talking about something that we believe is important, is sensitive to our national security.  It’s something that we will monitor very closely but it is not something that is standing in the way of the development of our trade, at least from the standpoint of what the numbers suggest.

AMBASSADOR PORTMAN:  With regard to your question on intellectual property, software and telecommunications, let me first say that I have just been informed that this document is now being circulated to the press which is a fact sheet which the three of us have prepared which outlines some of the progress that we have talked about today.  With regard to software, the first place to go is intellectual property.  We strongly believe that the software market in China is not as great as it should be because there is such rampant piracy of U.S. software.  So, we are very concerned about that.  We believe that the steps that are outlined here which include increased criminal prosecutions, a commitment from China to do that, are important.  But we need to see outcomes.  We are not satisfied with process.  We need to see results.  So, this will outline a number of commitments on process on prosecutions and on increasing the ability of China to be able to stop the piracy which hurts Chinese entrepreneurs and innovators and inventors and recording artists and movies, just as it does the United States. 

Second, with regard to software specifically, we are very concerned about the proposed Chinese regulations for government procurement which would prohibit us from having access as U.S. exports to the very large, very significant Chinese procurement market.  This is something that we have raised repeatedly and we have raised it again today and have received an assurance from the Chinese government that they will not issue these very damaging draft regulations on software procurement in their current form as it further considers public comments and makes revisions in light of its WTO commitments.  So, we’ve got a commitment for delay basically. And, again, this is very important to us.  The Secretary has talked about how important software is, talked about it being an $8 billion market here.  We are looking for a level playing field. 

We also had a commitment from the Chinese government today to redouble their efforts, and accelerate their efforts, to join the WTO government procurement agreement.  And, for those of you who follow trade, you know that this is an extremely important aspect of protecting software because it takes the WTO commitment to the next level which is requiring, just as the United States does, that there be a procurement requirement as well that would protect U.S. software and its ability to be used by Chinese government entities and by state owned entities.  So, we have made some progress, we would like to see more progress and more definition.

With regard to your question on telecommunications, we did not receive all the commitments that we sought in terms of addressing barriers to telecommunications exports, or financial services including insurance all of which are very important to us.  These are areas where the United States has a relative advantage; we’d like to see more market opening.  But with regard to telecommunications, China agreed to a new dialogue to discuss, among other things, capitalization requirements which we believe is the single most important issue right now with telecommunications as well as resale services and other issues agreed to by both sides. So we have an agreement to open a new dialogue with regard to telecommunications.  Hope that answers your question.

SECRETARY GUTIERREZ: You will all be receiving a sheet of paper with all the outcomes for your background material.  Looks something like this.  Ok.  Thank you.  Yes sir.

QUESTION:  I wonder whether you have made any progress in the textile disputes during your discussions today?  And my second question is on CNOOC and UNOCAL.  I wonder if you have discussed this particular case in today’s meeting as well, and whether any progress has been made?  And can you comment on the composure of the safeguards?  Who is representing the Department of Commerce and who is representing USTR in that Commission?  Thank you.

SECRETARY GUTIERREZ: We explained today to Chinese government officials that we applied safeguards on several categories of Chinese textiles based on market disruption, which is our right to do so under WTO.  And, we agree that going forward in the spirit of our partnership that we will continue to consult as we look at further market data in the future. 

Regarding your question on UNOCAL, this is a…it’s a sensitive matter.  This is an acquisition.  We do not comment on acquisitions.  There are several parties involved and you mentioned our foreign investment review process that is a confidential process.  So we just ask that we let the process take hold, that we let it proceed, and do so in a manner that is fair to all parties which is strict confidentiality.  You had a question on you had a question on visas you said?  No, ok, thank you.  Yes sir.

QUESTION:  Did you talk about this case in today’s meeting? Can you confirm that?

SECRETARY GUTIERREZ: We did not.  No.

QUESTION:  No.  Ok.

QUESTION:  Should the American public be in any way concerned about the prospect of CNOOC buying UNOCAL?

SECRETARY GUTIERREZ:  Well, as I just mentioned, this is a process that is done in confidentiality.  I believe it would be highly inappropriate for any of us to comment publicly about an acquisition process which is taking place and where there are several parties involved.  And, I also mentioned that the whole foreign investment review process is one that takes place in strict confidentiality, so it would be very inappropriate to make any comments.

QUESTION:  I have question that is still about the textile issues, since you did not reach any agreement today.  So I want to know… What is the main obstacles that you can not reach an agreement and will you discuss the problem, continue to discuss about it when, where and how?  Thank you.

SECRETARY GUTIERREZ:  Well our process with that we have agreed to under WTO calls for a consultation period.  And we have had one meeting with Chinese officials within that consultation period.  And we will have future meetings as part of that consultation period. And we agreed that we will continue to consult any of these matters come up a when there is market disruption. When we believe that our markets our markets are being disrupted in a manner that requires action, we will consult with our Chinese partners on that.  So consultations are taking place.

AMBASSADOR PORTMAN:  Can I just follow up on that question for a moment because I know there is a great interest in the textile issue, and make a point that Secretary Gutierrez frankly made in our discussions, which is to put this in some context. We have a very healthy trade relationship with China, as you know, including an historically high trade surplus on the part of China.  All of the invocations combined, all of the safeguard invocations combined, constitute roughly fifteen percent of the textile trade and less than 1.5 percent of our trade with China.  Also this year alone in 2005, textile exports to China will double.  And, I just think we need to keep this in mind as we are talking about the textile issue, and put it in the context of our broader relationship. 

Thank you.

SECRETARY GUTIERREZ:  Yes in the back there.

QUESTION: Do you expect an agreement with China on textile and do you have a timetable for it?

SECRETARY GUTIERREZ:  As I mentioned we are in consultations with Chinese officials.  We have had one meeting already in consultations.  We will proceed with that consultation period and, as we have agreements, as we have matters to announce, we will do so.  But, I believe it’s premature to announce agreements before they have been reached.  And, we did say today that we will continue to monitor market information to determine whether our markets are being disrupted and that we will consult with Chinese officials, that we will apply our rights to put safeguards in place in a prudent manner.  But, we are currently in consultations and we will let that process evolve. 

QUESTION: Secretary thank you for giving me the opportunity to ask a question. When you say increase the number of criminal prosecutions, can you give us specifics because the Chinese government just today in a state council press conference said that they investigated over thirty thousand trademark violations last year, fifteen thousand in the first six months of this year alone.  They have processed hundreds and hundreds of thousands of people, put people in jail.  So what kind of commitment did you get from them?  How much of an increase would you like to see, doubling? Tripling? quadrupling? Can you give us specifics please?  Thank you.

SECRETARY GUTIERREZ:  Well at this point…  That’s a very good question and your question goes to the heart of what we agreed today is what matters ultimately is results and what matters is outcomes.  We agreed to increase the number of prosecutions, we agree that the number of cases taken forward will increase and now what we have to do is monitor those cases and compare them to what they have been doing this year.  Ultimately, we know that there is a piracy rate in the market place for software and the result that will count the most is that piracy rate decline.  And, the result that will also reflect these efforts will be that our sales of videos, our sales of movies, our sales of software, increases.  Because, that is the ultimate outcome of increased efforts on piracy is that sales of legitimate goods increase.  And, that is really the measurement that will count and that is what we will be looking at.

We have time for one more question.

QUESTION: You say that you want outcomes.  Will you measure the outcomes of a more open Chinese market by a reduction in the bilateral trade deficit?  In other words, will you measure China’s performance by the bilateral deficit being reduced?  And, if so, over what period of time? 

SECRETARY GUTIERREZ:  Well that is – That’s one of the measures that we will look at, obviously, is the difference between China’s exports to the U.S. and our exports to China.  What we will focus on very, very intensely is our exports to the Chinese market.  As I mentioned before, China has full access to our market.  What we want is full access to the Chinese market.  So, what really counts is how much we are exporting to China.  And, how much access we have to the Chinese market.  And how much we can increase our exports to the Chinese market.  Today we do roughly $35 billion of exports.  That number needs to go up.  That number needs to increase.  And, that’s the number that we will be focused on. And, that will be the reflection of whether we have more access to the Chinese market or not.  I believe that is all we have.  I thank you for coming, I thank you for your attention. Thank you.