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

Assistant Secretary of Commerce for Market Access and Compliance, William Lash Speech at University of International Business and Economics

Beijing, China
April 11, 2005

Posted on Apr 13, 2005

MODERATOR: Ladies and gentlemen, good afternoon. Our guest speaker today is Assistant Secretary of Commerce for Market Access and Compliance of the United States, he Honorable William Lash. We also have another our distinguished guest, Mr. Henry Levine, Assistant Secretary of Commerce. Mr. William Lash was sworn in as Assistant Secretary of Commerce on July 25th, 2001. In his position, Assistant Secretary Lash and his team negotiate with foreign governments for the full compliance of more than 253 agreements the United States has signed. He is particularly committed to the issues related to the protection of U.S. investments and intellectual property rights and heavily involved in the solving of commercial issues with U.S. trade partners. He also serves on the United States Economic Commissioner to the Organization for Security and Cooperation in Europe.

Before entering government service, he was a professor of Law at George Mason University School of Law. His areas of teaching and research included international business transactions, international environment law, regulation of foreign trade, corporate acquisitions and mergers, and the corporate finance.

He also served as a Distinguished Senior Fellow at the Center for the Study of American Business at the Washington University. The Honorable William Lash was previously Associate Dean and Director of Law at St. Louis University from 1990 to 1991.

Mr. Lash has published more than 100 articles on a wide variety of business issues in scholarly journals, magazines, and newspapers, as well as numerous books, monographs, and contributing chapters.

Assistant Secretary Lash earned his B.A. degree in Political Science from Yale University and his J.D. from Harvard University.

WILLIAM LASH: Go ahead.

MODERATOR: In his position, Assistant Secretary Lash has given great priorities to the dialogue with the Chinese Government on various trade issues. In recent years, he is particularly concerned about the issues related to the protection of intellectual property rights in China. To my memory, this is Mr. Lash's second visit to the UIBE and a (unintelligible) member of the highly intellectual discussions on (unintelligible) policy of China that I had with Mr. Lash in his last visit to the UIBE.

The economic reforms and open economic policy have greatly accelerated China's pace to industrialize its economy. Now, China is emerging as one of the largest trading nations in the world. While millions of people on this planet believe that China has relied mainly on unfair trade practices to achieve its success. Trading skills do exist between China and its trade partners. However, there is one positive evidence that (unintelligible) China has made consistent efforts to reduce commercial barriers over the last 20 years. And the (unintelligible) for a country with 87 percent of the population still living in rural areas was unprecedented fast. The historical evidence since the inception of reform in 1979 has indicated that China has the wisdom to be a positive trade partner and has contributed positively to the improved welfare of the whole world.

The UIBE is the center of China's trade policies research. This university is committed to the establishment of a more open trading system in China. We feel privileged to have Assistant Secretary Lash with us today as it provides us with a good opportunity to share with him his wisdom and ideas about the global trading system. And we ask Assistant Secretary Lash to speak on harnessing globalization opportunities and challenges.

WILLIAM LASH: Mr. Vice President, honored guests, students, it's a pleasure to be back here at UIBE. I remember quite vividly our discussion with the faculty last July. It made me long for the days when I was still a professor and we could spend hours talking about the challenges of globalization in the world trade. Particularly good, though, to have a chance to talk to students, because you're the new decision-makers. Upon your graduation you'll be taking responsible roles in the private sector and in the government of your country. And you'll be the true ambassadors of China and try to bridge gaps between not just the U.S. and China, but China and all partners. And this university is very well known and well respected in my country, as well.

The MBA Program, International Trade, is recognized by all American universities. So it's appropriate to be here to talk to you about globalization.

All around the world, when the word comes up Globalization, people have a reaction. And it's never a neutral academic reaction of a term, you know, without being defined. In most countries or in most classrooms around the world, there are those who say, Globalization, yes, great idea. It's important to bring us all together in harmony, economic trade, prosperity.

Then there are those that say, Globalization, how can we stop it? Why do you want globalization? When I look in this room I see Abercrombie & Fitch shirts, a good sign of globalization. Brand name that, you know, (unintelligible) in my country. Shirt may have been manufactured in yours and traded around the world. I see students wearing clothes exactly what I see in American universities. It's important for people to recognize that globalization is not about making one common culture of all of us. It's important that we can respect traditional Chinese culture, traditional Chinese values, as well as traditional American values.

But the things that unite us about globalization should be shared. The importance of tearing down barriers that keep us apart. My deputy, Mr. Levine, has spent -- I won't say how many years, but he's a very young man -- serving to bring -- build bridges between the U.S. and China. The Department of State and now fortunately the Department of Commerce as our Deputy Assistant Secretary for all of Asia and Pacific. And he's seen tremendous transformation over the years. As a professor and as a policy maker, I too have seen tremendous changes. I think the important -- the biggest gain for all of us is we're gaining more understanding.

We do not view each other as Us and Them. We think of Us and Them, a common us, whether we're students, professors, whether we're policy makers or business people. We all want to promote the same thing: tearing down barriers, making opportunities so that students in Beijing have the same opportunities as students in Washington or in Paris or in Dubai.

When people talk about globalization around the world, we often see protests. Whenever there's a trade conference for a meeting anywhere, there'll be the anti-globalization protestors. And they have a very limited understanding of globalization. And the funniest thing about their limited understanding is not their lack of understanding of economics or trade or policy, but their lack of understanding -- I'll say of physics, because they act as if they could stop globalization. You know, trying to say, I'm against globalization, is like saying, I am against gravity. You have no choice in the matter. It's a fact. You have to find a way of making sure globalization can be utilized and harvest, again, (unintelligible) (unintelligible) and justice, communication and development.

When I think of people who have been outspoken supporters of globalization, I don't think of American economists like Milton Friedman. I don't think of my own President. I think of Kofi Annan of the U.N. who points out very correctly, The poor suffer not from too much globalization, but from not enough globalization.

Countries that have been isolated, that do not engage in trade, are the ones that miss out on the opportunities in their nation. Medical treatment. Communication. Production. Job security. Things that, you know, my previous Secretary, Mr. Evans, always pointed out around the world, whether it was China, whether it was Afghanistan, whether it was the United States or London. Everyone in this room wants the same thing. You want to be able to be rewarded for your work. You want to be able to be creative. You want to be able to be successful, take care of your families.

The same thing is true: Globalization is a way of getting your ideas into the marketplace. Not just the marketplace for commerce, but the marketplace of ideas. The marketplace for innovation. And with that globalization, whether it's the WTO, whether it's bilateral free trade agreements, comes responsibility. capitalism has a heart. It has a face. It has responsibilities. Many people think of capitalism as simply winning at all costs. We've seen that. It doesn't work. We've seen that with oligarchy in Russia. We've seen that with fake privatizations where a few people are able to run in, grab natural assets for very little money and become billionaires overnight. We were doing this study looking at globalization, looking at economies. We found that Russia had the greatest number of new billionaires. About 30 new billionaires over the past decade. Yet you couldn't trace the innovation that led to that wealth.

Bill Gates created Microsoft. He innovated and created his wealth. If you look whether it's Ford or GM or any great company, somewhere there was a person with an idea who took a risk and brought it to the marketplace. That was the true face of capitalism, providing a product or a service for your fellow man, and being responsible for treating your workers well, serving your community, reinvesting in your community.

In cases of the oligarchy in Russia, what we're seeing is globalization with no -- and capitalism with no rules. You know, capitalism requires the rule of law. What we're seeing in other markets is the rule of the jungle. Survival not of the fittest but perhaps of the fastest or the meanest. And that is not the face of globalization that we want to encourage.

As the Vice President pointed out, China has been a very important global partner for the United States and other countries. Now, you are -- you've gone from being our 11th largest trading partner five years ago to our 5th trading partner this year. (Unintelligible). We recognize its value to us and apply it carefully as Mr. Levine can attest, because he comes to China almost every other month. He's lived here for many years, as well. He was our Consul General in Shanghai. But we recognize that this relationship requires constant work because we are (unintelligible) complex.

If somebody would come in and say, I understand China, we're saying, I understand America. Well, America's a big place and China's much larger. Coming to -- I can say I've been to Beijing, you know, ten times. I don't understand China. I couldn't possibly. You have 1.4 billion people. I haven't met them all. If you go to the United States, you go to New York City and go to Washington or go to Orlando or Disney World, you can say, I've been to America. You've met some part of America but you've missed hundreds of millions of people with different views and different values and also different challenges in their day-to-day lives. The important thing about globalization is trying to make sure that you understand some of those views and understand how you nurture that relationship.

But the basis of all those relationships are our agreements. Voluntarily signed. Voluntarily signed by two nations meeting as friends, partners and equals, to support China's WTO accession several years ago and the new opportunities and responsibilities that come with that. The role of the WTO is not to open up China to the world; it's also to open up the world to China. It gives China increased opportunities around the world.

And it means protection in global trading rules. And at the same time, it puts additional mutually shared responsibilities on China to keep commitments, to open and protect markets, to allow other trading partners to sell in this market, to share in this market, and to protect your innovation. We've had for many years a program called a Joint Commission on Commerce and Trade started by our ambassador. He was a commercial officer many years ago. This gives a formal dialogue and working groups to work out issues between the two of us.

I don't say problems. I say issues. Amongst friends there are no problems. They're issues that need to be resolved by mutual respect and by common engagements. But we've made tremendous progress working on these issues, but more needs to be done. You know, in economics I think the most important word, the loveliest word is the word More. You always want to have more success, more opportunity, and more innovation. Working in dialogues is the best way for us constantly to promote that.

The WTO has several major agreements. And as the Vice President pointed out, we've been focusing heavily on protecting intellectual property, patents and copyrights, trademarks. Because when we're dealing in a global environment, your good name is the most important name you have. The name of -- your individual name -- you'd be horrified if you found out another student had taken your name and was submitting shoddy work. You get a bad grade from the professor. They call your parents and send a note saying, Your student's failing, despite the fact you've been studying, doing all the right things.

Imagine if you're a company and you've been working on a project for ten years, five years, fifteen, twenty. You're successful. You've innovated. You're world renown for quality, safety and innovation. Yet you find out someone else has entered a major market like China using your name and selling your product. They've stolen not just your money -- you can always get more money. It's hard to say that when you believe in economics. You can always get more money. But you can never get your name back. And when a consumer buys a product, when you go into McDonald's, you expect two all beef patties, special sauce, lettuce, cheese, pickle, onions and a sesame seed bun. Every American student knows what's in a Big Mac. We're taught that in school.

You expect a certain quality. You expect a certain service. If someone were to take that name and open another store and say, I am also a McDonald's, and you walk in and you go for your food and it's not the same standard. It's poorly packaged, doesn't taste right, it's stale, the bread is moldy. If you've never been to a McDonald's before and you say, Well, I'm out. I will never again try McDonald's. And if I buy a pair of Levi jeans and I think, Wow, these are great. I take them home and I watch them and they fall apart, I will never again buy a pair of Levi jeans. The person who has benefited from that is the counterfeiter and the pirate. And the person who's been injured is you the consumer and the innovator, whether it's McDonald's, whether it's Starbucks, whether it's Levi jeans. And nothing is ever a secret.

If you have a horrible experience, you tell everybody. I always say, Bad news rides a fast horse. Word gets out very quickly about the importance of your bad experience with a particular company. The same thing is true globally. And around the world, the question of piracy has gotten more and more severe. And while I know that students would never buy a counterfeit CD or DVD, ever, the debate on piracy goes far beyond that. It goes to medical supplies, pharmaceuticals.

Imagine when you're taking a pill to your grandmother and you give it to her. You want to trust that pharmaceutical. That's your grandmother's life at stake. What if it's counterfeit? And the fact is many of them are becoming counterfeit. If you have a young niece or nephew or a child or a sister or brother who's an infant and you're giving him infant formula, you want to trust that can. And if it's counterfeit, your loved one can die. Counterfeiting goes far beyond jeans and CDs. It covers every part of our economic relationship.

I travel around the world. I've been in over 80 countries now in the past four years. Mrs. McDonald and I just came back from Saudi Arabia and there was a big display in the Standards Bureau of Saudi Arabia and Riyadh of counterfeit goods from China. And it ranged from clothing to electrical appliances. Okay. It would melt if you plugged it in. Imagine the danger of that with the American names. Auto equipment. Brakes of your car. Imagine if you're in your car at a high speed driving -- I know you wouldn't drive at a high speed. That would be wrong. But if you're driving at a high speed and a bus is coming at you and you apply the brakes and the brakes don't work, end of story. You bought good brakes, you thought in good faith. Counterfeit. I've seen counterfeit brakes in this display (unintelligible) China.

But pirates are not your friend selling harmless CDs or DVDs. The pirates are the ones trying to destroy your reputation as a country, your belief in innovation. And in some cases, your very life. Piracy is a life and death issue and is an epidemic that we're trying to deal with globally. I'll give you a little fast trick. Like I say, there's always magic in the classroom.

I have here five decks of cards. I'm going to tell you a story of piracy. This is an old style deck of cards in America. It's called B. Very simple. Used for over a hundred years. Every name there has a reason only known for the guy back in Cincinnati who's probably in his 80s. And has certain things, saying, you know, Made in Cincinnati, Ohio, the markings of the deck, very traditional.

Well, years ago -- about two years ago, to be exact, I was in Guangzhou. I see a card deck brought by a company called also B. How did that happen? I said, Whoa, gee, also says Club 92. By the way, no one knows what that means other than the company in Ohio. Registered brand, playing cards. Even the back -- but this one, I think, was counterfeit. How do I know it was counterfeit? Well, it says Bee Playing Card testified by ISO -- are you familiar with ISO? -- ISO Quality System. The difference is the word Quality was spelled wrong. So I knew that was counterfeit and we got our team working on it, got them at the market.

Last July when I was leaving this visit of China, I'm in the (unintelligible) store. I'm feeling good. I have a few RMB left to spend. Buy a small gift for my child. I see a deck of cards. I stumble over there. It's not B. It's Beb, B-E-B. I've written books and articles. I went through our dictionary and there's no such thing as a Beb. Same exact market. We went back, told our embassy to start working on that.

As some of you may or may not know, in America card playing, poker is very popular. And they treat it like a sport. It's on ESPN. One day it may be in the Olympics but right now it's simply helping ESPN. Well, I bought gifts for some of my friends, including Mr. Schwan [phonetic]. I bought him these very nice poker sets with the -- came with heavy chips like in Las Vegas. It came with a big heavy aluminum case. Very impressive gift. I buy it and I open the case and in there was another deck of cards. This was saying (unintelligible) but there's a big Bee on it. I open the deck and found out the same exact markings as the American cards. Different quality, mind you, but same exact marking. But saying that this owner owns the design of this card. Interesting, since this card had been designed over a hundred years ago by a fellow in America.

So we're looking into that right now. I bought another one of my aides a similar set of pokers. I buy everyone the same gift; therefore, there's no jealousies. And his did not have a Bee. I was, Okay, good. It was a drone, which is a form of bee. Haven't opened the deck yet, but who wants to bet it's the same exact copy? And the answer is, Voila, the same. The fact is, this is not an expensive product. This probably costs about $3 in the U.S. Yet -- and the profit margin on a deck of cards could not be very high. And the quality could range in your qualities. But is this worth cheating over? Is this worth damaging your reputation? Is this worth having companies in Ohio writing to their member of Congress, having government officials spend your government's time, my government's time, trying to find these people? And I point out, if a person is going to lie and cheat over a deck of cards, what would he do on medical equipment, automobile parts, things that are important worldwide?

And when I talk about piracy in the global economy, it is not purely a U.S./China or EU/China issue. When I was in Afghanistan a year ago -- I'm going back later this month -- the Afghan Government was complaining about the dangers of capitalism material coming into their country from China. Because the Afghans again are just new emerging back from the global economy. I've been isolated for years. And they don't know the same way you would know a high-quality product. They don't know a Bee from a Beb from a drone from a (unintelligible). They don't know a McDonald's. They don't know necessarily Levi's. They see a name and they want to trust it. It's very simple. When you walk into a store you want to know at a very simple level the product you're buying will not kill you. It's a very fair exchange.

But try to get that conveyed and protected for our partners in the developing world is very important, and having the globalization brought together to help fight piracy is important not just for U.S. economy, not just for developing world partners, but for innovators in China, people in this room. When you leave here and want to start businesses as entrepreneurs and come up with a design, do you think that a pirate is only going to copy American products? Not what I've found. They'll copy the best. And if your software is the best, if your design or logo is the best, if your marketing's the best, they will copy that.

And they will rob not just your pocket, they will rob your dreams. They will not just steal your trademark, they will steal your souls. And that's why it's important we use this part of globalization to help fight piracy. Better communications, better enforcement. Pirates respect one thing I've seen around the world. Not marketing. It's not a question of nice laws. Pirates respect force. These people have to be put in prison.

Because when we go through the tremendous accomplishments in this economy and this country -- and I think of China as -- I call it the Olympic Country. You hold the Olympics in 2008. There is no country right now in this world that has met the Olympic credo of Higher, Faster, and Further better than China. And you do not want to go into the economic history books with a mark next to your name saying, They got there but by misusing globalization. They got there by allowing piracy. They got there by not respecting dual law.

And that's why I think it's important that we continue to work together, cooperatively, jointly, but most importantly, aggressively to fight this great challenge.

As we keep working together on globalization issues and harmonization in trade, it is important that we keep another theme. And this is what I used to write about as a professor. The basic theme of trade policy must be transparency. You have to know what your partner is thinking. When you have an examination, you want to know not exactly which questions are on the test. That wouldn't be a bad idea if you're a student. But you want to know that your test you're having on international tax is not going to be talking about international real estate. You want to know that, again, there are no surprises. What is your partner thinking?

For transparency, it is vital that when new rules and regulations need to be issued in compliance with WTO, according to a mutually agreed upon responsibilities, that your partner has said, Here's what I'm working on. Do you want to comment on it? This is not a question just for China. All countries who long to the WTO have the obligation of notification. Because we all have bureaucracies and government agencies. We all have legislative branches that might be writing a rule or regulation that is not WTO consistent, that might hamper trade rather than enhancing it. And it's important that your partners have a chance to comment on that, not to stop you but to help you.

Not to hamper your progress, but to help speed up your progress. Because all around the world -- I remember one (unintelligible) my first visit to China, when our country's economy was not doing as well, there was no one that was more concerned with how our economy was doing other than the American people and the Chinese Government. They were very concerned not just as friends but as trading partners, that a strong economy in the U.S. meant strong trade for China.

And the same thing for America. Over the past four years, you know, we still applaud -- we're delighted to see a strong Chinese economy. Our exports are grown in China. Our investments have grown. We want to see more of that. So when you ever hear in the media other people saying that U.S. is trying to slow down China's economy -- Americans have a lot of faults for any other country but we're not crazy. And we want to make sure that our customers and our friends and our partners are doing well. And we want to make sure that the rules are being applied fairly to everybody, including China. And we want to make sure that transparency takes place. We want to make sure that property rights are being adequately protected. And we want to make sure that you as the young leaders of tomorrow have the same future as students studying right now in Washington and Los Angeles.

You know, this is an incredible time in the global economy. So much is happening. Around the world new opportunities every single day. Enter the communications. New innovations, new creations. This does nothing for anyone unless we can all benefit. People do not create just to hide it in a box and say, I invented this new medicine. I don't want to sell it to anybody. I invented a new car but it's just for me. I got a new song I'm going to sing, but I'll sing it in my shower by myself.

It's not very rewarding either emotionally or financially. But they want to make sure that when that product goes out in the marketplace, whether their an inventor in Guangzhou or Beijing or Chicago or New York, that they are able to benefit their consumers and themselves, both financially as well as spiritually. Sharing is an important part of the economy. Sharing is an important part of globalization. But sharing comes with both opportunities as well as mutual commitments. I know that the students at UIBE and your faculty will continue to be our friends and partners as we look forward to sharing a brighter future and a brighter global economy. Thank you. I'll take any questions.

QUESTION: (Unintelligible) I'd like to take this opportunity to ask you one question regarding the evaluation of the transparency. Do you think it's an issue need to be resolved (unintelligible)? I noticed you used the word issue, not a problem. So that's my question. Particularly in the context around the (unintelligible) of the (unintelligible) between the (unintelligible) between China and the United States. Thank you very much.

WILLIAM LASH: Thank you. That's an excellent question. One of the things that I know our entire administration and our Congress -- and I've mentioned numerous times from my visit to China -- is that we believe very firmly that a floating currency is a sign of a mature economy. And we believe that's also an obligation that would go towards China. And it's important that it's not only a U.S. issue. Other countries are similarly making requests and suggestions. We continue to be working our Department of Treasury with the Chinese administration. Our Congress continues to make that point at the same time, the importance of addressing the question of is the currency in China artificially being undervalued.

When I mentioned the part earlier about the heart of WTO, is that we are mutually bound by promises voluntarily and (unintelligible). We believe that a floating currency or (unintelligible) range of currency is going to be an important step to show China's commitment to this mutual obligation for openness and transparency. Yes, ma'am?

QUESTION: Good afternoon, Mr. Lash. May I ask two questions?

WILLIAM LASH: Sure. (Unintelligible).

QUESTION: Yeah.

WILLIAM LASH: I have a very poor memory.

QUESTION: Okay. You can answer the first -- okay. Would you confess that intellectual property will be the focus of competition in international trade? Yes or no?

WILLIAM LASH: I think it's an ever-increasing part of our accomplishing model that innovation and the protection of that innovation is at the heart of many of our knowledge-based societies. That I did not pretend that one pair of jeans is really better than another pair of jeans. I don't even wear jeans. The fact is that there is an identity that you -- when you buy Wranglers versus Levi's versus a local brand or some designer brand, you're voting. Saying, I would like this type of product. When you walk into a franchise, you go to a McDonald's versus another franchise, you're saying, This is the experience I want. The food is good. But you're making -- again, it's the branding and the intellectual investment that has to be protected.

I find that globally, more and more people are focusing on protecting that knowledge-base investment, particularly given the Internet. Now we've seen a larger amount of the complaints about piracy focusing on Internet-based or IT-based piracy. But that is where the economies are all moving.

QUESTION: Oh, yeah. So in order to meet the needs of globalization and international trade situations, would you please give us some suggestions on how can the Chinese enterprises and institutions improve the ability of grasping and using the intellectual property rapidly?

WILLIAM LASH: Sure. I'll give you a good example of the two points. I'll say it from the enforcement as well as economic policy. Around the world most people like free stuff. If I said, Hey, would you like a free car? Most people would say, Oh, yeah. I've been to one country where they'd say no because they say no to everything. I won't say where it is.

But usually people (unintelligible) in trade. If we have enforcement to protect against theft, real meaningful enforcement, the model I'd say globally is, I like numbers saying arrest and raids. I like this and that. End of day I want to know factories have been permanently closed for piracy and pirates have been punished, put in prison. At the manufacturing level. A street person selling a few DVDs, no. I want the entire web. I want the manufacturer. The big boss is who we're trying to get.

From the point of view of encouraging the protection of IPR, it has to be internalized in China for two areas: both safety as well as economics. More has to be done for the Chinese consumers to recognize the dangers they're facing from counterfeit pharmaceuticals where there have been thousands of deaths in the country. Counterfeit auto parts. Other things, what's out in that marketplace beyond CDs can kill you. That has to be -- and that will make you very alert. That you know in your mind (unintelligible) pharmaceutical, how many of you take a pill when you're sick, hold it up to a magnifying glass and two copies, make sure you have the right one. You don't have time for that and neither does your grandparents.

But the danger is all too real. Throughout the course of manufacturing from pharmaceuticals to industrial goods. So recognizing it as a safety issue is important. And also, the innovation point. When I was here last in China I went to a store. I bought counterfeit golf clubs. And I knew they were counterfeit because the real clubs had just come out in America. They were about $500 per club. And the counterfeit was about $40 and they gave me two free hats so I knew it was a good negotiation.

But when I got the club back in my room, I was checking it and I hit a few in the store. It was a decent club. It wasn't a bad quality club. And if they'd taken that same club, and if I was in business like I used to be when I had money, I would go back to that manufacturer and say, Don't call this an American club because you're counterfeiting. And no one would be deceived long term. And it's illegal. But if we were to call that the Beijing Blaster, the Great Wall Driver, you could sell that anywhere around the world. Developing the quality Chinese brand is important.

And we've seen Chinese brands developing in many parts of the global economy. I think (unintelligible). Globally recognized, globally competitive. The same type of importance must be focused on promoting Chinese brands. I bought as an experiment three Rolex watches in Beijing last year for $10. Good negotiation. I knew they're not real Rolex because of the price. Also the fact the word Superlative was spelled wrong. But when I was in the car with my watches, one of my aides took the watch apart and goes, "This is a self-winding watch." There's always a market for a decent self-winding watch. And if they could sell three of these watches for $10, creating again, a Chinese brand name, would be competitive all around the world.

Yet it's important for people to recognize Chinese products are very welcome in the U.S. market. And when I go to a Wal-Mart or an American store, you know, from the shoes to electronics to clothing to household furnishing, Made in China is very common. So American people have no problem buying Chinese goods. Around the world we have no problem buying Chinese goods. The problem is people trying to pass off counterfeit goods as American goods. Developing the brand name -- something that I think is pretty important -- province by province. That message needs to be done. Because they can compete. And no one minds people who compete. It's the cheating that bothers us.

QUESTION: Thank you very much.

WILLIAM LASH: Thank you, ma'am.

QUESTION: Good afternoon, Mr. Lash. I have a question. While we all believe that the law of fair trade is good for globalization, especially for those developing countries, but I'm afraid some countries just want (unintelligible) to protect their domestic industry in the name of fair trade. So may I know your viewpoint toward this question?

WILLIAM LASH: Sure. Yeah. We believe in free trade, because fair trade is one of those terms that's hard to define. And fair trade means following the rules of free trade that's been agreed upon, that's fine. But I use that because the word free trade is used always in discussions in rhetoric. And often it has no real meaning. And when we believe that -- as we do in our administration, that we have a free trade agenda and our President is promoting free trade around the world, both the WTO expansion and our bilateral free trade agreements around the world, following up to those obligations is an important part of that what we call fair trade. Honoring your word, honoring your commitments.

The question of protectionism around the world, many countries have sensitive products. But we find that under a free trade discussion, there's always been a way to manage disputes, manage sensitivities, whether it be cultural protections or whether they're sensitive industries. Almost every free trade agreement has certain basic elements. One of them, for example, will be a safeguard provision taken at -- and this goes back to the 1947 General Agreement on Tariff and Trade, the GATTs. Says that under the agreement, if you find that by liberalizing trade and lowering tariffs, one of your industries is facing extermination literally from an influx of imports, you have to ability to adjust. That is still consistent with free trade.

Fair trade also means following the rules of the trading system. That means not dumping a product in another country. Not using illegal subsidies. Not engaging in piracy. So it's important that people always recognize that every country that belongs to WTO, all 148 at the last count, have made mutual promises and commitments. And in the same way that great men and women keep their word, great countries have to keep their word. And that is really the belief, I believe, behind fair trade. Yes, sir?

QUESTION: We know that the basic statement of the two governments, of U.S. and China, is encouraging the free trade between the two countries (unintelligible). This year few people in United States think that businesses in China has (unintelligible). And so I want to know that before we can prove that, is doing business with China is (unintelligible) benefits of the United States, how can you prove -- what efforts of the United States help to (unintelligible) to do free trade with China? And do you think that these problems between the countries can easily be solved in recent years or months? Thank you.

WILLIAM LASH: Thank you. Well, it's a good question. We spent a lot of time focusing on our bilateral relations and our multi (unintelligible) relations.

QUESTION: People in United States and some of them think that because (unintelligible) being fixed (unintelligible), it's not -- it's reasonably fixed. Yeah. So we want -- and the Chinese (unintelligible) can exchange (unintelligible). So before we can prove that this generally is wrong, how can you do to persuade the American people to do free trade with China?

WILLIAM LASH: Sure. Again, we spend a lot of time on our bilateral relationships and we spend a lot of time and lot of money getting American companies to export to China and they're doing well. But also, given aside the trade deficit, there will never be a question that our market's open to China. That I think (unintelligible) $166 billion trade deficit. So clearly there's a lot of Chinese products coming into America every single day across the board. So we have to prove to Americans that the benefit of trade with China -- what we're trying show, whether it's going to be a currency discussion, whether it's the question of protecting patents and copyrights, we're trying to show the importance of China living up to her global obligations.

And another interesting point, when I talk around the world with other trading partners, other trade ministers and officials, we will chat bilaterally for a few minutes. And then eventually it gets down to, How was your market adjusting to China trade? Well, are you having a big deficit? What products are getting in? What are your manufacturers saying? Given the size and the tremendous access that China is enjoying in the U.S. marketplace, I've taken every challenge that our markets are open. What we're trying to make sure is that both in China's marketplace and in third-country markets where we hopefully are trying to have fair and free competition is China, that we're not fighting against what we believe an unfairly undervalued currency. So the discussion behind this -- and I don't think it will be solved in minutes or days.

I know it's something we've been working on for well over a year bilaterally. Our Treasury experts, Ambassadors Feltz and Martin, working with its Chinese counterparts is to make -- to try to get to a point where there can be a free floating currency. Given China's role in the global economy, you know, that, we believe, will be a responsible action. Thank you, sir.

QUESTION: Good afternoon, Mr. Lash. Another question involves the money (unintelligible) policy. China is now under (unintelligible) pressure from some of its major trading partners who claim that (unintelligible) RMB has been given China's (unintelligible). So in your opinion, whether the change of RMB rates will improve the international (unintelligible). Thank you.

WILLIAM LASH: Sure. Yeah. I think obviously -- I mentioned earlier -- we believe that a free-floating currency is a good sign of a mature and responsible trading partners. We support efforts to revalue the RMB. You know, we don't know the exact number. We have ranges, obviously. It'll do two things: Again, it will increase fair competition from China. But it also sends an important signal to your trading partners that China is not afraid of fair competition. Whether it's in textiles, whether it's in machine tools or manufactured goods, whether it's in telecommunications. Yeah. Everyone -- every great country, and my own included, likes to compete. Companies all go to work thinking, Well, today I'll see what happens because I don't have to worry about it. You want to compete. You want to see if you are the best.

But we find that with an unfair currency, devaluation, undervaluation, that being the best might not be good enough to win. And that I think will send an important signal if the authorities in China allow the RMB to float freely.

QUESTION: Mr. Lash, it's not your first time in China. So have you ever been to the silk market?

WILLIAM LASH: Oh, Silk Road? Silk Alley?

QUESTION: Sorry?

WILLIAM LASH: Silk Alley? Is that -- yeah. Yeah. No. (Unintelligible) I've never been there. I have a rule that when I look -- I never look for pirate materials in the obvious place. My view is always like, Get off the plane to just stumble around and see where my feet take me. So I go into a large area. I go to a big store or a big mall where there's many stands. And I find that there's pirate materials already waiting for me. It's too easy to go looking for them. I find it's best -- the best test is just to walk into, you know, any crowded market and see what I can find.

QUESTION: And my question is, silk market is famous for selling imitated products or, let's say, counterfeits. And now, more and more foreigners will come to China, whether in business or in tour. They seek -- they look for this market and they buy things there. Although they have known before that those products are imitated. What's your comments on such phenomenon?

WILLIAM LASH: Well, again, I'll tell you a little story (unintelligible) my overall view on piracy. Years ago I'd written a book on international trade law. And professors don't write books to get rich. We write books to get our ideas out to let other professors know, other universities know what we're thinking. And one day I was walking to my classroom. My classroom's about a little bigger than this. And I'm walking from the back -- you know, the door, to the podium. And I see a student who has my back but it's not my book. It's not hardbound and there's no picture of me on the back. So my (unintelligible) my materials. And I grabbed him, I said, Hey, come here. Where did you get that? Off the Internet. Some student at another university had taken the book out of the library, copied it and scanned it up to the Internet.

I had my publisher track down that site and had that shut down. And for the student in class I said, You can come back to class when you know how to play by the rules and buy the real book. I should have made him buy two copies as a penalty. But the fact is, I would have taken that very seriously. And that there's no reason -- and there's never a need for anyone to buy counterfeit materials, especially when they know they're counterfeit. One of the challenges I think is our view is you have to cut off supplies. That the fact that people know you go to Silk Alley and buy counterfeit materials, we've got to get rid of Silk Alley. You've got to drive the counterfeit materials out. We were in one facility earlier yesterday, and I always wear the same type of clothes. I have my American flag on that says Never a Trick. And I was walking around this particular place and there were stalls with their licenses above them, all legitimate, legitimately licensed. And they were selling counterfeit materials. Imitation clothing and other products. And I negotiated to get the price down, but not too low. I wanted to see what they would try to sell them for.

And I said, "You know, oh, you know, can I come back and get more?" "Sure." "Will you give me your business card?" "Sure." "And a receipt?" "Sure." The pirates had absolutely no shame. Every country has piracy. Everybody -- no one is immune from piracy. But in Spain, for example, the pirates who sell only CDs have their materials in a little bag on the ground. Have it by a string. So when the cops come, they can pick up the bag and gone. Look like Santa Claus with CDs.

In American, they have little teeny tables and the cops come, table folds and they go away. Only in certain markets -- and China's one of them -- they have big stores. They have licenses and business cards. So the problem is not the fact that consumers are coming out and buying them. And like the Americans, I tell them, "Get you back in Customs." Probably scared them a little bit. I can't scare the Australians. They're not under my jurisdiction. But the fact is, you've got to cut off the source. That we should not know where pirates take place. Most illegal activity around the world takes place in the dark and at night.

I worked as a prosecutor. There's very few broad daylight crime except on TV. The fact the pirates operate so easily, so openly, shows that it's not the problem of the consumer. The problem has got to be at the supply. You've got to drive these people out of the stands. And it's not a question of small companies, you know, dealing in that. Someone is supplying them with that counterfeit product. I don't think they're back in their kitchen making wallets or making hats or CDs and DVDs. So it's important -- and around the world we've managed to go right at those sources. In Warsaw, Poland, there was a large market selling counterfeit goods. I talked to the mayor and I said, "You know, sell what you want to but take out the CDs, software and DVDs." He goes, "Fine." It's been cleaned.

We've had similar issues in Thailand, getting issues where the big mall will be DVD or piracy free zones. And I know that if this were the priority for law enforcement in China, I can't help but believe it would be dealt with. Because there are police officers right outside that mall.

QUESTION: Thank you. My question is that there are (unintelligible) U.S. Congressmen to give China six months for deadline to be (unintelligible) RMB or they will impose higher tariff on Chinese imports. What's your comment on that?

WILLIAM LASH: Again, you know, I can't comment on acts that our Congress is taking because they're not -- I'm under their control, not they're under mine. But I do believe that their legislation is symbolic of the frustration and deep concern throughout our country about the failure of China to, again, revalue the RMB. I think, you know, Congress is not -- Congress is not a body that acts with one person. You have 585 members of Congress. They cover our entire country from the big cities to the small towns, from conservative to extremely liberal and progressive, from New York to Kansas. But for this legislation, which has been sponsored by a member from New York and South Carolina and other members are looking into it, it demonstrates the deep concern not our Congress has, but our companies and our people have about the RMB issue.

MODERATOR: Last question.

QUESTION: Okay. Hi, Mr. Lash. On April 4th, just a week ago, the U.S. announced emergency restriction investigation on the imports of Chinese (unintelligible) and garments. (Unintelligible) the news, (unintelligible) without the application from the (unintelligible) U.S. and the province, (unintelligible) details (unintelligible). Some say it is irrational. Some say it is unreasonable. I know some even say it is current (unintelligible). Now, how do you comment on this issue?

WILLIAM LASH: Certainly.

QUESTION: Thank you.

WILLIAM LASH: Yeah. It's an important issue for China. It's an important issue for America. When the textile agreement expired end of last year, everyone was watching. We all knew there would be increases in textile imports, particularly from China. All around the world we knew that. One of the things that no one knew will be the size and the amount. The increase in imports for three categories -- I think it was knit tops, men's pants and one other --

QUESTION: Shirts.

WILLIAM LASH: And shirts. Okay. Shirts -- was 1200 percent. Now, I'll give you an idea. Under -- for trade policy, disruption, market disruption, traditionally, a number of 50 percent would get you on trade disruption. 1200 percent, everyone's jaw drops. Not just the U.S., also European Union has imposed -- is imposing -- going to a similar investigation. What we are doing is no prejudgment. There is no barriers, obviously. Nothing else has been taken. But as a country, it would be irresponsible to see an unprecedented rise in imports, like 1200 percent, and not try to investigate the market conditions and what's happening in the future. And also, it is not a pretentious model. I mentioned before about globalization and mutually bound promises. When China joins the WTO, one of her commitments was to this particular safeguard mechanism so that we could have a chance to monitor, investigate, and if need be, adjust (unintelligible) judgment case. But this is a commitment from China to her trading partners. Not just the U.S. EU is also, again, imposing a similar investigation. It would be irresponsible for any nation to have such an unprecedented surge of imports without investigating.

So that is really what our government is trying to do. We did it on our own initiative (unintelligible) without having industry. If the imports were 100 percent, (unintelligible). When it's 1200 percent, you don't need to wait for industry. You're irresponsible if you don't take action yourself to find out what's happening in your marketplace. But I know we'll be taking a serious look throughout that whole process. And China will have a chance to comment, as well. Okay. Thank you very much.

MODERATOR: Thank you very much, Assistant Secretary Lash, for the excellent presentation and informative information. You know, this is really a lecture (unintelligible) professor. And we also appreciate the U.S. Embassy for giving this opportunity to our students and the (unintelligible) to you as a senior (unintelligible) compliance officer (unintelligible). And also with a (unintelligible) specialist from U.S. Embassy, Tony Sino. (Unintelligible) efforts for coordinating this important opportunity for our students and the colleagues. And in the future we'll have more time and opportunities to interact with (unintelligible). Thank you very much, the delegation and also the (unintelligible). Thank you.