Deputy Secretary's Speech

Deputy Secretary of Commerce David A. Sampson
Greater Houston Partnership
Houston, Texas

Thank you, Minister Zheng, for sharing your perspective on the macroeconomic relationship of our two countries and the potential that it holds. I’d like to thank the Greater Houston Partnership for the invitation to join you today. It is always great to be back in Houston, the hub of so much international activity. A month ago, I was down here with a trade delegation from Bahrain during the Houston Livestock Show and Rodeo, and they were very warmly received and shown true Texas hospitality by this community, and I’m sure you all will be as well.

I am also pleased to be here with my close friend and colleague, Tim Adams, from the Department of Treasury. Tim has done a great job in his leadership of the SED, and I am particularly pleased to be here at a time when Houston is celebrating its relationship with China. I have had the privilege of partaking of the hospitality of our friends in China many times, including a visit to Dalian and Houston’s sister city, Shenzhen.

It is nice to see representatives from Shenzhen as well as Dalian and Tianjin here. As a Texan, it is a special privilege to be able to welcome you and share with you Texas hospitality at this conference and festival whose theme is all about the relationship we have with our friends and partners in China.

As a witness to China’s growth I have been incredibly impressed by what China has accomplished.

In less than thirty years, China has transformed itself from an impoverished, centrally planned economy, to one that is rapidly industrializing, headed toward middle income status, and substantially more market-oriented. Over this time period, China has experienced the highest sustained rate of economic growth that the world has ever seen.

This growth is continuing today, with sizzling GDP growth of more than 11 percent in the first quarter of 2007, higher than any large economy in the world. As a result, more people have escaped poverty over the past thirty years in China than in any country, at any time, in human history.

An important factor in that growth has been international trade. China has become our nation’s second largest trading partner, with total trade of more than $340 billion last year.

At the same time, China has integrated itself into the world economic system, and we were pleased to support China’s accession to the World Trade Organization. By doing so, China has opened itself up to the world by creating an environment that encourages trade and investment. China was the fourth-largest export market for American goods and services, surging more than 32 percent in 2006. Here in Texas, exports to China have more than doubled in the past three years. And China received more foreign direct investment than any other country in the world last year. This has been good for China and for its trading partners, including many here at this conference.

All of this activity has created tremendous opportunity. It has also made our relationship more complex. This is natural in any large, quickly growing partnership. However, this administration believes these sources of friction must be addressed openly and honestly, if we want to maintain a smooth, positive growth.

Although many companies have done well in China, others still face a range of trade barriers in doing business there. While Chinese products enjoy wide access in the United States, we continue to work with China to address barriers to U.S. products.

Indeed, China’s President Hu has called for more balance in the trade relationship, and it is our hope that becomes a reality in the near term. Let me be clear: we want to avoid a situation in which economic issues spill over and become political issues.

So whether it is market access issues, intellectual property protection, or simply the international implications of the transformation underway in China’s economy—the U.S. and China are looking at a range of issues we need to address.

The objective of acknowledging these issues and challenges is not to restrict or retrench our trade with China, as some voices of protectionism are calling for. It is to expand our relationship by systematically addressing and restoring issues to achieve greater openness and strengthen economic ties.

We have seen this work advantageously in our other trading relationships, such as our Free Trade Agreement partners. Certainly in Houston, when you think free trade, you think of NAFTA. Houston has benefited from that in the booming trade with Mexico, which has helped make Houston the largest port in the country. The implementation of NAFTA was not without its own friction and obstacles that needed resolution. And I am certain that expanding our relationship with China will only increase the volume of energy, high tech, agriculture, chemicals and other products and service trade originating in Texas.

This administration bases our trade policy on five pillars:

• First, bilateral negotiations;
• Second, the WTO process;
• Third, trade remedies;
• Fourth, export promotion work; and
• Fifth, our overall trade agenda.

Let me briefly review each of these.

The first pillar, and the most important mechanism in addressing trade challenges, is bilateral negotiations. This is our preferred way of doing business with China, because they allow us to move ahead in an expeditious manner. The two main bodies we have for our China negotiations are the Strategic Economic Dialogue (SED), led by the Treasury Department, and the Joint Commission on Commerce and Trade (JCCT). Through them we are able to raise trade issues with China and explore ways to resolve them. We have made very significant progress in the JCCT on a specific, tactical level, while the SED focuses more on a higher, strategic level.

The challenge, of course, is that the negotiating approach does not always show results as quickly as we would like, so we must utilize the other trade tools at our disposal.

The second pillar is the WTO Dispute Settlement System. This process is led by the United States Trade Representative. Earlier this month we did initiate two WTO dispute settlement proceedings on two different intellectual property cases. In the first case we are seeking real solutions to epidemic piracy of copyrighted works in China. In the second case we seek to end barriers to the importation and distribution of authorized copyrighted materials, so the Chinese public can enjoy and benefit from legitimate videos, books, films and software. Let me explain why this is important. U.S. companies lose an estimated 250 billion dollars a year to piracy and it costs hundreds of thousands of U.S. jobs. 75% of the value of publicly traded .U.S. companies is intangible assets. So it is critical that we have programs to enforce IPR protection, not just in China, but all over the world.

Both of these violations cause serious harm to American companies. So we are using the WTO process to protect our interests and resolve these disputes for the benefit of both our countries.

The third pillar is trade remedies, which includes anti-dumping and anti-subsidies cases.

Earlier this month the Department of Commerce made a ruling in an anti-subsidy investigation that China is subject to countervailing duties. In the specific case before us, we made a preliminary determination that Chinese exporters of a particular kind of paper have received prohibited subsidies that give them an unfair advantage over U.S. producers. We look forward to resolving this case also.

The fourth pillar is export promotion. At the Commerce Department, our primary mission is to help U.S. companies succeed overseas. In practical terms, this means we undertake projects from trade missions and trade fairs, to advocacy on behalf of U.S. companies, to the trade negotiations I mentioned earlier.

We also work closely with businesses in Houston and throughout Texas by way of our U.S. Export Assistance Centers. Our trade experts have worked with your great economic development team at the Greater Houston Partnership and with Texas state government including support for Texas’ very successful trade missions to China.

Both the Secretary and I believe one of the most important roles we can play as we travel is to advocate for U.S. businesses overseas. And the Secretary has made it very clear to his senior management team that helping turn the U.S. economy into an export powerhouse is one of his top priorities.

And we have worked with hundreds of businesses here, with billions of dollars of success stories to tell. And the interest in opportunities is growing here and across the nation, and so we now have more than 120 people on the ground in six cities across China, making our China mission by far the most active venue for export promotion within the Department.

All of these policy pillars need to be viewed in the context of our overall trade agenda, the fifth pillar. The point is that the best way to show our trading partners the advantages of open markets is to put these theories into practice in a strategic way. This includes thoughtful bilateral proposals to open up new markets, improving trade practices globally through the WTO, and through an aggressive policy of free trade agreements.

For example, air travel. It is nice to be able to travel from Washington to Beijing directly. We look forward to the day when we can announce a direct flight from Houston to Beijing. Under the right circumstances all things are possible.

Houston is well positioned to take advantage of a growing relationship with China not just today, but for many years to come. A balanced, fair and open relationship is what we seek, so that American companies have the same ability to operate in China as Chinese companies do in the U.S.

I am optimistic about China because I believe that China has responsible leadership and I always look forward to engagement with our Chinese counterparts. And I know the entrepreneurial spirit and talent of the Chinese people. China has achieved so much and the benefits of this market-oriented approach over the last 25 years have become self-evident.

I believe this administration has shown time and time again the importance we place on our economic relationship with China. We will not give into the bashing of China that can be found in parts of Washington and in the media. We want to continue to engage China in a constructive way that will promote closer economic and strategic ties.

We seek to be good partners, and what you are undertaking here in Houston over this weekend and next is a testament to the warm and growing connections not only between the people of Houston and China, but between our two nations.

Thank you.