Secretary's Speech

Secretary of Commerce Carlos M. Gutierrez
2007 George Bush China-U.S. Relations Conference
Washington, D.C.

Thank you, I’m pleased to be at the third gathering of the U.S.-China Relations Conference. On the heels of China setting its policies for the next five years, this conference could not be timelier.

Now is a good time to consider what will propel China in the future, and discuss how policies of openness can help our nations fully benefit from the ties we’ve worked so hard to build.

This year China’s economy will grow faster than any large economy on earth, a continuation of almost 30 years of nearly double-digit growth. As China’s economy has developed, so has our trading relationship.

And as this relationship has grown, so have the opportunities and challenges. The U.S. is China’s largest trading partner, with bilateral merchandise trade nearly tripling during the past five years. This rapid growth has been beneficial to both of our countries.

Indeed, since China joined the WTO in 2001 the pace of U.S. export growth to China has quickened.

Last year our exports to China grew 32 percent to $55 billion. This year, China will likely become our largest import partner and our deficit with China will be the largest between any two countries in history.

This complex relationship needs to be managed carefully. Perhaps the biggest challenge is that there are strong forces in both countries seeking to rebuild protectionist barriers we have worked so hard to remove.

President Hu has stated that it’s not healthy for our relationship to be so imbalanced, and not good for China’s economic security.

China has begun to address these concerns; however there are other actions and policies challenging the ties between our two countries. We both want a sustainable, secure and mutually beneficial relationship. That can only be achieved through openness in our interactions and openness in our markets.

We believe openness must include:

• A commitment to competition and open markets;
• Lower barriers to trade and investment;
• The encouragement and protection of innovation; and
• Mechanisms to ensure product safety.

These are principles which we offer in our own market, and which we seek from our trading partners.

This is the kind of relationship we want with China.

The Bush Administration has made openness a priority. The U.S. has free trade agreements with 14 countries, six of which were implemented last year. Our openness is a critical factor in making us the most competitive, free and innovative large economy in the world.

We are committed to tearing down trade barriers wherever they impede progress, and ensuring a level playing field in any country in which Americans do business.

This openness is paying off:

• U.S. exports were up 12.7 percent to $1.4 trillion last year, an all-time record;
• U.S. companies are doing unprecedented business around the world;
• Our unemployment rate is a low 4.7 percent;
• Real disposable income has increased by over 12.5 percent—an average of over $3,750 per person—since President Bush took office.

This is why we are committed to a successful Doha Round in the World Trade Organization.

We believe that protectionism doesn’t protect. Our country is best when we’re leading, international, open and engaged.

Openness is essential for China’s global leadership and is a requirement of WTO membership.

While we are trying to lower barriers to trade, there is a risk that some in China are stepping away from longstanding policies of closer global economic integration—policies which have been a source of China’s incredible growth.

One example of a stepping away from openness is the direct and indirect subsidization of Chinese companies. This reduces market access and stifles competition in China, and creates market distortions everywhere.

Another concern is China’s foreign investment policies. We encourage foreign investment in our economy because it brings jobs to Americans, provides greater choices for consumers, and encourages innovation and productivity growth.

Unfortunately, there are whole sectors of the Chinese economy where American companies are restricted from investing, doing business or offering services.

For example:

• U.S. telecomm companies cannot sell basic services;
• U.S. financial houses and securities firms face numerous restrictions;
• Distribution channels are hampered by unequal and burdensome regulations; and
• U.S. insurance companies have trouble getting registered locally, as do direct selling companies.

In addition, we are increasingly concerned about the implementation of government mandated technology standards and the application of new anti-monopoly laws. These could be detrimental to competition and harm American companies.

These issues will be raised in our bilateral JCCT meetings in December.

Another key source of America’s competitive advantage is intellectual property which accounts for over one-third of the value of all publicly traded U.S. companies—an amount equal to almost half of the U.S. GDP.

However, IP protection has long been a problem in China, with widespread counterfeiting and piracy of both Chinese and foreign products.

Indeed, most of the fake goods sold in China today are counterfeits of Chinese brands.

These fakes are also being exported, putting genuine products at a competitive disadvantage around the world. In fact, more than four out of five counterfeit products seized by U.S. customs last year originated in China.

Some progress has been made recently. New rules requiring legal operating software to be pre-loaded on computers, and a commitment to join the World Intellectual Property Organization, are good moves. However more needs to be done.

IPR in China remains a critical concern for the U.S. This is why the U.S. has filed cases against China in the WTO, and it will continue to be an important issue in our bilateral dialogue with the Chinese.

An important part of IP is trademarks and brands. For China, enhancing the “Made in China” brand worldwide is critically important—and increasingly at risk. A brand symbolizes what a company—or a country—stands for.

That’s as true for the U.S. as it is for China.

Indeed China has one of the highest numbers of counterfeit pharmaceutical incidents in the world, affecting Chinese citizens as much as foreign customers. Clearly, it’s in China’s own interest to do more to address this problem.

On our end, we’re taking action to improve import safety. I am a part of a Working Group currently reviewing existing product safety procedures, regulations and practices.

We’ve found that managing the challenges we face in a science-based, transparent and open way is the right approach. We also recognize that product safety doesn’t begin and end with inspections at the border—it must be built in from the start.

China—and all of our trading partners—must do their part to ensure their products are safe.

Together, we can keep our economies safe and secure.

This Administration is committed to open markets because we believe more trade and more competition is good for our economy and for the world. With an even playing field and partners that are willing to play by the rules, we all win.

Maintaining openness in the U.S.-China economic relationship is not easy, but it’s necessary.

There is much at stake. A prosperous China is in America’s interests, and a prosperous America is in China’s best interests.

We need leadership on both sides to continue to find our way forward. When we do, both our countries—and the world—will be better for it.