Remarks of Franklin L. Lavin
Under Secretary of Commerce for International Trade
Computer & Communications Industry Association
Washington, DC May 17, 2006
(as prepared)
Thank you Ed Black for inviting me to speak at your 2006 Washington Caucus. CCIA is a strong supporter of free trade and open markets and a great ally in the Administration’s efforts to enhance U.S. competitiveness. It’s a pleasure to join you this afternoon.
Although it is a relatively small segment of the overall U.S. economy, the information technology (IT) sector plays a critical role, accounting for 27 percent of the U.S. economy’s gross domestic product (GDP) growth in 2003, despite representing less than 7 percent of all companies and only 8.7 percent of GDP.
IT products, such as high performance computers, enable the development and growth of almost every other industry sector – from automobiles, to pharmaceuticals, to textiles – through the productivity gains and cost reduction they provide in administration, research & development, manufacturing, and distribution. The IT sector is also a leader in R&D, which is so critical to America’s competitiveness.
American IT companies have a global outlook, accounting for a disproportionately large share of U.S. exports, reaching $115 billion (or 14 percent of total U.S. manufactured goods exports) in 2005. Foreign countries worldwide recognize that IT is a driver of economic growth and they are eager for U.S. products and services. The worldwide IT market exceeded $1 trillion in 2005 and is forecast to grow at an average annual rate of 6 percent through 2010. That means good business for American companies.
The Asia region accounts for $213 billion or 20 percent of the worldwide total, and has some of the fastest growing IT markets in the world, such as India and China. Today, with that in mind, I’d like to talk about the U.S. involvement and activities in Asia, particularly in China and India. I’ve just returned from India and we concluded the 17 th session of the Joint Commission on Commerce and Trade with China in April. I’ll also comment on the important subject of Internet freedom. But, first, I’ll discuss the President’s trade agenda more broadly.
The Bush Administration is committed to a very aggressive trade policy agenda based on free trade driving economic growth worldwide. The United States is pressing ahead with trade liberalization globally, regionally, and bilaterally, placing America at the heart of a network of initiatives to open markets and create the conditions for increased prosperity at home and abroad. At the Commerce Department, we are working with our colleagues at the Office of the Trade Representative to keep the pressure on for opening markets and moving U.S. companies ahead in the global marketplace.
To be sure, however, the top trade priority for the Administration is ensuring a successful conclusion of the WTO Doha Development negotiations.
As you know, the April 30 deadline for agreeing on modalities for tariff cuts on agricultural and industrial products was not met. This means all countries need to redouble their efforts to advance the WTO Doha negotiations.
There is still time to reach this decision and take the follow-on step of developing offers based on these modalities by the end of July. However, we all must act very quickly to have a chance of completing negotiations by year's end. The window of opportunity is closing rapidly.
Our commitment to an ambitious and comprehensive Doha Development Round agreement is unwavering. The President believes reducing trade barriers is a critical part of generating global economic growth and reducing poverty in the poorest countries.
It is imperative that we explore together how we can build up what can be put on the negotiating table to support ambition, rather than jockeying for political cover and/or bowing to domestic protectionist pressure by calling for a smaller overall result in the name of "realism".
The Bush Administration also does not believe WTO Members should settle for half measures. A "Doha lite" solution would not provide the type of impetus to global economic growth and development that we all want from this negotiation. We stand ready to lead and contribute to achieve a strong agreement.
As we pursue our multilateral negotiations, the Bush Administration has been very active in bilateral trade negotiations.
Since the Administration has been in office, we have concluded Free Trade Agreements (FTA’s) with Chile, Singapore, Morocco, Australia, Bahrain, five Central American countries and the Dominican Republic and Oman.
To give you an idea of the importance of these FTA’s, consider that, while our FTA partners currently make up for only 7% of World GDP outside of the U.S., they account for 42% of U.S. exports. That illustrates dramatically how free trade agreements help U.S. exports flow.
The Administration is actively negotiating to open up more markets. We have completed negotiations for FTAs with Peru and Colombia and we continue to negotiate possible agreements with Panama, the United Arab Emirates and Thailand.
We are also beginning talks with Korea and Malaysia in June. Free trade agreements with Korea and Malaysia will help lock in market-opening reforms in these countries and make them more helpful partners in the WTO Doha negotiations, particularly in pushing for liberalization in advanced developing countries such as Brazil and India.
FTAs with Korea and Malaysia will also help solidify our bilateral political and strategic ties with these countries and help resolve long-standing trade problems that will not be addressed in the WTO Doha negotiations. A FTA with Korea is particularly important to counterbalance China’s influence, as China is actively courting Korea as an FTA partner.
Moreover, these free trade agreements will help underscore the U.S. long-term commitment to and engagement in the region. This action could also encourage other countries, such as Japan, to open their markets further or risk falling behind.
Let me now turn to the important subject of China
Thirty years ago, China was a nation mostly closed to international commerce. Today, it is the world’s third largest trading power.
China’s emergence over this period as a major international player has not only redefined the global trading system, but also has had far-reaching economic and political impact on China, the United States, East Asia and the world.
Total U.S. exports to China increased by an impressive 21 percent in 2005, building on 22 percent growth in 2004 and making China our fastest growing major export market and our 4 th largest trading partner.
As China’s economy and our bilateral trade have grown, our trade relationship has become enormously complex.
Despite many positive developments, there is concern that the U.S.-China trade relationship lacks balance, with China’s focus on export growth and developing domestic industries not being matched by a comparable focus on fulfilling market opening commitments or on the protection of intellectual property rights (IPR).
We are attempting to address many of the challenges in our trade relationship with China through the US-China Joint Commission on Commerce and Trade (JCCT).
The 17th JCCT session, co-chaired by Secretary of Commerce Gutierrez and United States Trade Representative Portman and China’s Vice Premier Wu Yi, took place on April 11 in Washington.
The overall tone of the JCCT was positive, and real, concrete steps forward resulted from the meeting, demonstrating that we can get things done with the Chinese. This is especially important given the negative and rancorous rhetoric about the U.S. - China relationship coming from some quarters.
I want to highlight some positive outcomes from the JCCT for the IT sector:
First, the Chinese government committed to make adjustments to its high registered capital requirements for telecommunications service providers. The United States and China have been addressing this issue since early this year in the JCCT Telecommunications Dialogue, and will meet soon to discuss implementation of this commitment.
Also, China made a clear restatement of its commitment to technology neutrality in the development and licensing of third-generation (3G) mobile communications standards. It agreed to ensure that telecom service providers would be allowed to make their own choices about which standard to adopt, and to issue licenses for all 3G standards in a technologically neutral manner that does not advantage one standard over others.
Very importantly, China announced a requirement that PCs produced or imported into China must be pre-loaded with legal, licensed operating system software. In addition, Chinese government agencies must purchase computers with legal, pre-loaded software. In line with these requirements, several Chinese computer manufacturers recently signed agreements to purchase U.S. operating system software.
In addition to the legalization of software in government agencies, China has also launched efforts to ensure the legalization of software used in Chinese enterprises, and has agreed to discuss U.S. proposals regarding government and enterprise software asset management in the JCCT IPR Working Group.
Finally, China agreed to begin formal negotiations to join the WTO Government Procurement Agreement (GPA) and to submit its offer of coverage (known as “Appendix I”) no later than December 2007.
This commitment a very important step by China, which sees government procurement as a useful policy tool for the promotion of domestic industry, especially the IT sector.
I can assure you that the Commerce Department and USTR will continue to engage China on this issue prior to the start of formal GPA talks, taking incremental steps to improve the environment for negotiations.
Of course, the other emerging giant in Asia is India.
India is a priority for ITA and we are active in several bilateral dialogues with India, including the Commercial Dialogue, High Technology Cooperation Group, and the Trade Policy Forum.
Earlier this year, my Indian counterpart and I agreed to elevate, expand and enhance the Commercial Dialogue and involve greater engagement by the two private sectors.
I went to India in early May to chart a course for the revitalized Commercial Dialogue. The expanded agenda for the Dialogue will cover intellectual property rights enforcement, antidumping and countervailing duty procedures, and commercial opportunities for small and medium-sized enterprises.
The U.S.-India High Technology Cooperation Group (HTCG) has been one of the most successful in our bilateral dialogues with the Government of India. Commerce also is a key participant in the Trade Policy Forum, USTR's part of the Economic Dialogue. The Forum provides a structure for resolving concerns related to tariffs and non-tariff barriers, intellectual property protection, services, investment, and agricultural trade.
I plan to return to India later this year with a business mission that reflects the pace and potential of U.S.-India commercial ties. Our success in India will depend upon the active participation of Indian and U.S. industry, and I would like to encourage CCIA to remain engaged with us as we move forward.
I’ll conclude my remarks today with some brief comments on the important topic of Internet Freedom.
The Internet is a powerful tool for innovation, commerce, and the wide dissemination of ideas. It should not be abused to restrict political freedoms or freedom of expression.
The Administration is actively engaged in advancing freedom of expression and working to deter repressive regimes from stifling dissent. We are using a broad range of diplomatic and commercial policy tools in that effort. We are urging the Internet industry to take voluntary action to ensure that, as companies spread the availability of the Internet around the world, they also take care to ensure that it is not abused as a means of political repression.
We are exploring options for supporting U.S. companies considering entering or operating in restrictive environments and we will work with U.S. companies to advance our objectives globally.
In conclusion, I would like to invite the members of CCIA to continue to work with us at the Department of Commerce to advance market liberalization and access for American products and services. Ultimately, for the mutual benefit of the peoples of all countries, open markets are vital. To that end, our trading partners in Asia must increase market access for U.S. firms and live up to their international trade commitments. Overall, I’m pleased to say that we are making progress in Asia and I’m very optimistic about our prospects there.
I would be pleased to answer your questions.