Secretary's Speech

U.S. Commerce Secretary Carlos M. Gutierrez Press Roundtable at China World Hotel American Chamber of Commerce in Japan
Beijing, China

Secretary Gutierrez: Good Morning. You were all in the speech? Were you all in the room? So why don't we open it up? Please know that Ambassador Randt and I will be answering questions. OK, who would like to start?

Question: Good morning. I'm wondering if you've had an opportunity to see Grassley-Baucus legislation, the U.S. Trade Enhancement Act of 2006. And also, if you'd be willing to make a comment on Senator Baucus, who yesterday, when this legislation was introduced, said that China doesn't play by the rules and the U.S. government isn't doing [what] it can to make sure that China is playing by the rules. Is China playing by the rules? Are you doing all you can? And also, I just heard your speech and you said that the U.S. is committed to helping China with brands, patents and copyrights. And yet the U.S. position is not happy with WAPI, the WAPI standard. This is an example of China trying to make the rules. Can you explain the inconsistency or, if it's not an inconsistency, what the U.S. is unhappy with in WAPI?

Secretary Gutierrez: OK, you asked a couple of questions there. Well, as you heard in the comments, we believe that China still has a lot to do. We should recognize that China is making a serious effort to reform many of its business regulations. We believe that they are serious about tackling the intellectual property rights problem. But clearly, as I mentioned, there is a long way to go. And I mentioned certain areas, such as transparency. I mentioned the areas of subsidies. I mentioned market access. I mentioned intellectual property rights enforcement. So, I don't think anyone disagrees that China still needs to do a lot of work, but the U.S. is working very hard with China; we're working together very closely. We have a very mature relationship. We have very candid and honest discussions. And, we are doing what we believe we should be doing, which is engaging the Chinese government officials, having a very honest, very candid dialogue with them. And, we believe that that will lead to the types of reforms that we would like to see. Whether they happen as fast as we'd like, that's another matter. But we believe that the senior Chinese officials want to take this country in the right direction.

Question: There have been many reports lately about foreign companies, including American companies, having deals and purchases in China held up for various different reasons. [Inaudible] and also perhaps Citibank. Have any representations been made to you about this? Do you have a view about this? And have you yourself made any recommendations or your officials on behalf of any American companies who have been ensnared, if you like, by the current slowdown in China?

Secretary Gutierrez: We have an advocacy center, and within that center there is an advocacy process whereby if any company would like us to advocate on their behalf, they have to fill out a very detailed application and they have to go through a very formal screening process that is vetted by a number of bureaus within our department. That is a confidential process, so I am not in a position to tell you what companies have requested and received approval for advocacy. But it is something that we do. And I don't have any specific information to suggest that there has been a recent increase in holding up foreign investment in China. I don't have a sense of this.

Question: I just have a question about auto imports and imports of car components. It appears that the EU may be instigating a vote against China, or considering that the WTO is requesting. . . that they're requesting consultations in the WTO, and there was a story in the The Wall Street Journal saying that the U.S. might join that. Can you just tell what the current state of play is in the relationship with China over the issue of auto imports and parts and components imports, whether you may consider joining the EU in this issue, in taking this issue to the WTO? Thanks.

Secretary Gutierrez: I won't get into whether we're considering joining with the EU or not for obvious reasons, and that is something that the United States Trade Representative is responsible for. We have had a number of discussions about auto parts and tariffs and whether the tariffs that are being applied on auto parts are correct under the WTO framework. So it is an ongoing discussion that we have with Chinese officials. I did see a . . . very quickly I saw the headline on the European story this morning, but I can't comment on whether the United States is part of it or not. My understanding is that this is only the European Union doing this.

Question: Mr. Secretary, with specific reference to this Baucus-Grassley legislation that was unveiled last night, how helpful do you think your dialogue, the Bush administration's dialogue, with the Chinese is?

Secretary Gutierrez: Well, I have to admit, I've been traveling and a little bit off the time schedule in Washington, so I'm not as familiar, I'm not as well-versed on the legislation as I'd like to be. Anytime that the U.S. government can convey alignment regarding a foreign country, that's always a good thing. What we don't want is to convey contradictions and different points of view. However, we believe that the way to address issues--to address any conflicts that we may have with any of our trading partners--is through negotiation, is through dialogue, is through engagement, and not through legislation. I say that not knowing exactly what the Grassley bill entails. That's more of a general point about managing our relationships through legislation as opposed to through engagement and negotiation.

Question: I understand there was some talk about not continuing with the JCCT meetings in the future. Can you tell us a little about what led to this kind of thinking? Was there a feeling, perhaps, that nothing substantive is being achieved in these talks? And what would be some of the goals for the upcoming one? What would you hope to achieve in the upcoming one?

Secretary Gutierrez: Actually, I don't recall any conversations related to canceling the JCCT as a concept or as an annual meeting. I was asked a question in Washington, maybe a couple of weeks ago, about the JCCT, and I mentioned that a bad JCCT is less desirable than no JCCT, for obvious reasons, because this is a very important time in our relationship. President Hu is going to meet with President Bush. We think it would not be a positive development to have a weak or a non-productive JCCT at a time when our two leaders are meeting. We have had meetings. I believe that we have a better chance today of having a good JCCT, but you never know until, first of all, a) you have the meeting and b) you let time go by to see if the results are achieved.

Question: What do you mean by a bad JCCT? Have you had one in the past? Can you give us an example so everyone understands? And you didn't get to my follow-up question--that was what you hope to accomplish in the upcoming JCCT.

Secretary Gutierrez: Let me say, for me, a bad meeting would be if you meet with someone and take a lot of time in that meeting and spend a lot of hours in the meeting room, and you walk out and you say we didn't achieve anything. That's a bad meeting. So, call it a JCCT, call it anything. We have not had meetings like that. JCCT we have made progress, and every JCCT we have made some progress. In terms of what we're looking for this time, I'm not going to give you specifics because I think that that is something that we want to deal with with our trading partners, and we owe it to our trading partners to do the specific negotiation in the meeting room and not in public. But what we are looking for is tangible progress, tangible action. We're looking for things we can point to and say these are results that we didn't have before the meeting.

Question: Thank you, Mr. Secretary. Two questions. First of all, I'm wondering if you could shed more light on your negotiations with Wu Yi and Bo Xilai. I wonder if the Chinese side voiced any concerns [inaudible], especially at the issue of controlled or restricted exports concerning certain sensitive technologies to China? Second question is, Wu Yi is going to the U.S. next week. I wonder if you could tell us more about who she's going to meet with or how her schedule's going to look. Are you going to meet her again in the U.S?

Secretary Gutierrez: This is a two-sided relationship, so we have our list of issues, and the Chinese government has, rightly so, their list of issues. One of their concerns is around export controls, and we have explained that this, for us, is a delicate balance, once again, of national security and commerce. But, yes, without getting into more detail, yes, that is one of their concerns and they have others. So, yes, we have a U.S. list and we have a Chinese list. In terms of Madame Wu Yi's schedule, I would prefer if you would get her schedule from her office.

Question: Yesterday, as one colleague mentioned, you met with Wu Yi and other Chinese officials. You mentioned in your speech earlier about rising protectionist sentiment in the United States. I wonder, what was your presentation, what were your arguments to Chinese officials yesterday? Did you tell them that there were specific items on our stage that you want progress on quickly and, if so, what are those items? You know, what were the things you covered in the meetings? Did you express a specific goal that you hope they meet?

Secretary Gutierrez: Well, again, I'm not going to get into specific items that we talked about in our meeting. But clearly, a protectionist sentiment in the U.S. and a sentiment that is backed up by action and legislation, that moves China's number one customer to a protectionist stance, would be very bad for China and for the United States. China agrees with us. So we have asked them to understand that, and understand that they play a role in creating a protectionist sentiment in the U.S. And, they also understand.

Question: The Chinese regularly warn against the danger of what they call "politicizing the U.S.-China trade relationship." I wonder if in meetings with them, they tell you what they mean specifically by this, by danger of "politicizing the relationship," and I wonder as well, do you yourself, Mr. Secretary, think that there is a danger in the relationship of politicizing what should be an economic and trade issue?

Secretary Gutierrez: This is an almost 250-billion-dollar relationship, so there are a lot of financial resources at stake, there are a lot of jobs at stake, there are a lot of livelihoods at stake, and that is a point of view with which we both agree. That there's too much at stake, there are too many jobs, there are too many lives, too much investment, for it to be belittled by politicization. It's a business relationship, and it should be a business relationship, and our discussions should be around how we improve the business and talk facts and talk candidly and talk about business as it is.

Question: Mr. Secretary, in your speech, you said that you expect Hu Jintao, in his visit to Washington, to deliver. I'm wondering what specific issues to expect the President to deliver on. What will mark a successful negotiation between the two sides? And how important will trade issues be overall in this visit?

Secretary Gutierrez: This is a very broad relationship. Trade is a very important part of the relationship, but trade is not the only part of the relationship. The leaders have--just as we do in trade--they have discussed areas of interest, and a successful meeting for them would be to achieve some movement and some agreement on some of those areas of interest and have a sense that we are making progress, that we are moving forward. I'm not going to preempt our President about what those areas of interest are, nor am I going to even try to guess what President Hu's areas of interest are. But they're both looking to find common ground.

Question: You had mentioned in your speech [inaudible], you had mentioned that it would be useful, when you were outgoing, what you or Wu Yi or Bo Xilai had spoken about directly. And you mentioned that you would like more clarity in the laws and you would like to see open sectors, now closed, opened up. Could you just tell us in the current vernacular, a simple way, a bit more specific about what you mean?

Secretary Gutierrez: There are some markets where we can't sell our products. There are some systems that we can't apply--and again, I am not going to get into specifics--but there are some products that we cannot sell in China because the marketplace is closed. There are some laws that we have requested that they publish any new regulations in an expedient fashion so that businesses know what new regulations are coming, and they can prepare themselves. We have found that, at times, those regulations are published late, or they're not published. There have been instances where some U.S. businesses suspect that domestic industries have more information about laws that are going to be published. And those are things that create a playing field that isn't level.

Question: Can you list a specific example of one case? One case like that?

Secretary Gutierrez: One case where. . ?

Question: A law has been published [inaudible]

Secretary Gutierrez: I can't. It's a general feeling and I don't want to get into a formal public accusation. I'm just talking about a trend that we see, that we think can be improved as China continues to make this a more investor-friendly environment and China continues to make its progress in becoming a responsible stakeholder of the worldwide community. And I'll leave it at that.

Question: [Inaudible] . . . the United States might be forced to reassess the economic relationship between the U.S. and China if Beijing fails to address the tough issues between the two countries, so could you please explain how to reassess the relationship? Thank you.

Secretary Gutierrez: We just had a visit by two senators that have legislation that would apply a 27 and a half percent tariff on incoming Chinese products unless certain things happen. That would be quite a reassessment of the relationship, and those are things that are happening that we need to prevent. By working together, the government of China, the government of the United States, can prevent those types of things happening, which would create a major change in the nature of the relationship.

Question: You mentioned that you're trying to work towards avoiding that kind of action, like the Schumer-Graham bill is requesting. But with the postponement of the bill, are you concerned that it's taking away some pressure on China to meet the U.S. demands? And also, are you working under any kind of timeline, you know, what China needs to do at what time to meet the U.S. demands and satisfy [inaudible]. And finally, sir, do you expect any commercial deals to be signed during Hu Jintao's visit?

Secretary Gutierrez: I'm not concerned that by delaying the legislation that that takes pressure off China. In a mature relationship, I don't believe that China is a partner that can only be managed through pressure. We do a lot of business together, we've come a long way together, we have an increasing, maturing relationship. I don't believe that the only way we can make progress is through pressure so, no, it doesn't worry me. In terms of contracts that President Hu will sign in the U.S., again, I would ask you to ask President Hu's office. And if you find something out, please call us.

Question: Can you be a bit more specific on IPR? I mean, high on our wish list is more aggressive enforcement, but is there any realistic hope about that and how are we going to measure it?

Secretary Gutierrez: We have ways of measuring IPR. We have indicators. For example, the percent of product that we seize at our border, what percent of it comes from China. We know today 69 percent of it comes from China. So that's one measure.

We also measure key indicators such as--and these are industry-wide indicators--the number of the dollars of software sold for each PC. And, as I mentioned in a discussion not long ago, China is number two in the world in PC sales, but 25 in software sales. We believe that's an indication of the use of pirated software--which by the way, I believe the Chinese government is committed to addressing. What are they doing? They are closing down factories that manufacture illicit goods. The question there, of course, is will those factories remain closed? We believe they will. We will soon know.

They are increasing the level of criminal prosecutions for intellectual property violators. So, as opposed to it being a relatively minor administrative case, it becomes a major criminal case, and we've seen that increase substantially and I know they are talking about that as well. They are opening up IPR courts throughout the country. They're opening up IPR centers throughout the country. I am going to be attending an IPR seminar among this group of Chinese officials who are in charge of enforcing IPR.

So, clearly, there is a lot of activity throughout the country, and I want to repeat that there is leadership at the very top that sees this as a priority. And as they have mentioned in the Five Year Plan, that becoming an innovation society is an important priority, that can't happen without a strong intellectual property rights environment. And they see that, and they are clearing toward that. So, we're seeing activity. What we should talk about at some point in the future is the continued measurement of results.

Question: You've had a chance to spend more time in China and see some of the realities of this economy, the fragility of the banking system, etc. In your speech, you spoke about the dangers of falling into a mire of protectionism. You've talked to us about dangers to China of that U.S. protectionism. Do you believe that these measures could have a destabilizing effect on this economy?

Secretary Gutierrez: That's a very good question. We are China's number-one customer, and I recall that, in my days in the business world, the thought of my number-one customer changing strategy or changing policies that would affect my sales was a major issue for us. So anytime your number-one customer goes through a change as dramatic as would be going from an open market to a protected market, that would have a very significant impact on the Chinese economy and Chinese society. So, we not only want to avoid it because we think it's wrong for the U.S. economy, we also believe it would be devastating for the Chinese economy.

Thank you very much.