U.S. Relations with the People's Republic of China (2005)

China Urged To Reduce Friction in Trade Relationship with U.S.

Commerce Secretary Evans says U.S. needs to see "demonstrated results"

Following is the text of Secretary Evans' remarks, as prepared for delivery:

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U.S. Commerce Secretary Donald L. Evans' Remarks

AmCham/U.S. China Business Council

January 12, 2005

(Remarks As Prepared for Delivery)

Let me begin by thanking both AmCham China and the U.S.-China Business Council for the tremendous work on the part of your members. You all do so much to advance the vital economic relationship between our countries. This is my fourth trip to China. I hope that demonstrates the importance we place on our relationship here and the commitment we have to strengthening our economic ties.

Before addressing the business at hand, I think we should take a moment to acknowledge an event that places economic concerns and other points of international tension into their proper light. Several weeks ago, we all saw the tremendous power of nature. The tsunami that devastated many parts of Asia calls all of us to look into our hearts. Americans have once again demonstrated their amazing capacity for compassion and generosity.

The United States Government, American citizens and American corporations are providing an amazing level of support to the victims of this terrible tragedy. Our military is working round the clock to deliver aid to countless people in need. America's response makes me proud of my country.

Around the world, your companies are offering assistance in many ways that demonstrate the compassionate heart of the American people and the essential goodness of the organizations within which you serve. In a rural village in Western China, I saw the incredible difference that one American company is making in the life of a family. I know many of you are familiar with this story, but it is one that truly touched my heart.

Boeing understands that lifting up the communities in which it does business is one of a corporation's highest responsibilities. Out of the hundreds of worthy efforts I've seen, Boeing's leadership and commitment to stewardship, as it's practiced here in China, stands as one of the most powerful examples.

During my service as Secretary of Commerce, I made a large commitment of time and attention to corporate stewardship.

I did so because the men and women serving in business are one of the most powerful catalysts we have for positive action in American society.

As I've said many times, businesses are at the strategic center of any civil society because they are the place where people go to find a job. Through this pursuit, men and women transform their lives and put their values into action to improve their society.

As I've traveled around the world, I've discovered that we all want the same things. We want a roof over our heads. We want to feed our families.

We want to educate our children. And we all want to live in a safe and secure environment.

The efforts of men and women serving within American businesses in developing economies are directly and indirectly helping millions of people discover the promise of better lives. Beyond assistance through grants, donations, and sponsorship, Americans doing business in countries like China are helping to support a powerful transformation: the advance of economic liberty.

By fostering the central concepts of competition, innovation, trust, and accountability, American businesses plant the foundational concepts needed to support self-government and responsible societies. Your investments bring your values to the market.

You set high standards in worker safety, environmental safety, and business integrity.

Every person with whom you do business can become an advocate for the concepts that support a stable and self-governing society. A hunger for transparency, the rule of law, respect for property rights, and individual freedom are all aspirations that follow democratic free-market capitalism into the markets in which you are doing business.

I salute you all for helping to free minds as you are opening markets with your products and services.

We know that our political and economic system is not perfect, but it is fairer and more efficient in allocating opportunity to our citizens than any competing system by which societies are ordered. Your work introduces the root concepts of freedom, and that will have an enormous impact in the years and decades ahead. I thank you for all your efforts and sacrifices.

Our trading relationships add enormous value to America's economy and to our partners around the world.

Our markets are open because we believe that competition creates excellence within our own economy. We willingly compete with countries around the world and ask only that trade take place on even terms. All we want is a level playing field.

During the Bush Administration, a pro-trade majority in the U.S. Congress has joined the President to make important advances in building a more liberalized trade policy. However, this pro-trade majority's support for market-opening agreements depends upon a strong focus on fairness in our trading relationships.

All of us can be encouraged by the deepening relationship between our countries and China's engagement with the world. China and the United States have been the two engines of growth during a global economic downturn.

Secretary of State Powell has said that the U.S.-China relationship has never been better. There are a number of positive indicators that show the progress in our relations:

• China is America's fastest growing export market.
• China is providing important help on international security issues.
• U.S. agricultural exports to China are up dramatically.
• China is making progress toward satisfying its WTO commitments.
• Chinese companies are increasingly investing in the U.S.
• We're achieving productive cooperation through the JCCT.
• We've reached agreement on difficult issues like the WAPI standard.

However, preserving the continuity of U.S. domestic political support for free trade in general, and the U.S.-China economic relationship in particular, requires movement from China on a number of areas. Many of us in the United States believe this relationship will continue to produce increased peace, prosperity, and stability in the world. However, we need to see demonstrated results from the Chinese leadership.

When China's leaders fail to produce results on the points of friction in our trading relationship, their failure only empowers those critics within the U.S. political system who seek to roll back our level of economic engagement.

Some comments out of China last year suggested that structural flaws in the U.S. economy were to blame for the trade deficit between our countries. This was troubling because misguided comments like these only serve to exacerbate trade tensions within the U.S. and make finding meaningful solutions more difficult.

Let me remind those members of the Chinese leadership who value the vitality of our economic relationship about the strength and depth of the Bush Administration's commitment to maintaining positive momentum.

During the months leading up to the U.S. presidential election last fall, there was sustained and intense domestic pressure to criticize China in a manner that would have, without question, damaged the health of our economic relationship. President Bush refused to allow domestic political tensions to threaten the vitality of the deepening spirit of cooperation between our countries.

The President acted on principle by placing the Sino-U.S. relationship on a plateau above the reach of domestic politics.

This Administration was willing to accept domestic discomfort because of the tremendous respect we have for this relationship and the enormous value we see in its potential as a thriving partnership. We expect China's leaders to demonstrate an equal level of commitment and resolve as they remove the remaining obstacles that complicate our relationship.

China seeks to assert economic leadership. We welcome China's aspiration to play a key role in the global economy. But that status can only be earned by taking the actions required of a true global leader.

We are all aware that China is eager to complete the transition from a developing market to a free-market economy.

But for the United States, Market Economy Status is much more than a label or simple classification. The criteria that define Market Economy Status measure a given country's commitment to empower its citizens by providing them economic freedom.

Countries aspiring to be treated as market economies must end government intervention and allow market forces to drive their economies.

The most frequently heard complaint from American companies and elected officials concerns the skewing effect that China's fixed exchange rate policy has on fair competition. Secretary Snow is the Administration's spokesperson on exchange rate issues and he has forcefully advocated the position of the United States.

We believe that the best international economic system is one based on free trade, free capital flows, and market-determined exchange rates. Market-determined exchange rates are the key to a well-functioning financial system. This is the best policy for major economies, including China.

The Administration has urged China at every opportunity to move as soon as possible to a flexible, market-based exchange rate. We will continue to encourage them to do so and we will actively assist the Chinese in their ongoing efforts.

We need demonstrated results from the Chinese leadership in a number of critical areas:

Ending the climate of loose IPR protections in China is a critically important goal and I'll be speaking further about piracy and counterfeiting at the Ambassador's IPR roundtable tomorrow.

In addition to IPR, we are closely tracking market access issues that China agreed to as part of its WTO accession. One key area is China's liberalization of distribution services.

It's very important that U.S. companies are able to take advantage of China's recent opening of the retail, wholesale, and commissioned agent sectors.

We are especially concerned that China's forthcoming direct selling regulations will undercut the opening of this sector to U.S. companies.

Direct sales enterprises have the potential to employ many people in China and the entrepreneurship it creates will drive economic growth.

In speaking to the Chinese leadership, we will stress with them the importance of separating business and politics. Procurement decisions should be transparent, open, and competitive.

We remain concerned about exclusionary regulations that put U.S. companies at a great disadvantage in trying to compete in China's market.

In addition, we would like to see progress on structural issues in the Chinese economy.

State-owned banks should not extend loans to failing state-owned enterprises.

Underpinning all of the needed reforms in China is the need to adopt a stronger and more transparent rule of law. China has made substantial progress in this area but more reform and additional resources for enforcement are necessary.

We look forward to developing a higher standard of economic cooperation with China that can level the playing field.

It is strongly in the interests of both of countries to build a relationship that is stable, sustainable, and the source of greater peace and prosperity.

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