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

Commerce Chief Urges China To Protect Intellectual Property

Secretary Gutierrez also defends U.S. import controls on textiles

Following is the transcript of Secretary Gutierrez's press roundtable:

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Secretary of Commerce Carlos M. Gutierrez
Press Roundtable
Beijing, China
June 3, 2005

SECRETARY GUTIERREZ: I'll go ahead and make some brief comments and then turn it over to you for questions. We have an important relationship with China, a very large relationship. A lot of people in the U.S. are affected by this large trading relationship as well as people here in China. We have made progress over the years but there are still important areas where we need to make more progress. One area is intellectual property rights. We believe that violating intellectual property is no different than counterfeiting money. And, we would like to see it treated that way. The government of China has made progress in instituting laws preventing the violation of intellectual property. We would like to see more enforcement.

We also have issues regarding market access. We have the largest, most dynamic economy in the world. And Chinese goods, Chinese companies have pretty much open access to our market. We would like to see more access in the Chinese market. So we're just asking for a level playing field. So that's what I am going to transmit to our Chinese partners and I'll also be listening to their concerns.

QUESTION: We've repeatedly heard American officials come here and talk about intellectual property. What are you doing that's different in terms of strategy to actually gain something from the Chinese side? And do you see the government here as partners or adversaries?

SECRETARY GUTIERREZ: Well, as I mentioned, the government has made progress in the area of developing and instituting laws that protect intellectual property. We want to see greater enforcement. We are willing to do whatever we can to help but we believe that the time is now to show results.

QUESTION: But many people say it's simply not in the Chinese government's interest. What are you planning to do on this visit and maybe future visits to change the equation, to make it clearly in the government's interest?

SECRETARY GUTIERREZ: Well, China is beginning to transition from a manufacturer of commodities to an innovator. We heard that in China in the past, most applications for patents were from foreign companies. Last year for the first time Chinese patents constituted the majority of the applications. That means that the protection of individual property is also in China's interest, because they in turn will have intellectual property that they will want to defend. So it is in their interest.

QUESTION: What is your view of the calls by the music and movie industries and all their lobbies in Washington to take a case against China for piracy at the WTO?

SECRETARY GUTIERREZ: Well, that would very much depend on the companies and whether they want to step forward to request that a case be taken. We just recently, walking around Beijing, were offered a DVD of the new Star Wars movie at one dollar. And we had our choice of many, many movies. So the violation of these intellectual property rights are very visible and present anywhere you look.

QUESTION: Have foreign -- have American companies been forthcoming enough in providing you the data that that you would need to file a WTO action?

SECRETARY GUTIERREZ: We have seen plenty of information to suggest that there is intellectual property violation. I had the opportunity to experience that in my previous role where the brand that I happened to be using was copied here in China. If companies have a specific case I'm sure they will bring it forward. But it's to everyone's interest to be open about the facts. And it's to everyone's interests to be open about the violations. And I repeat, it's to the benefit of U.S. companies, but it's also for the benefit of China and Chinese companies who are beginning to have an interest in intellectual property. And in the future, as time goes by, they will have increasing interest in their own intellectual property.

QUESTION: One proposal by some officials in the European Union to solve this question of textile would be that China, instead of imposing tariffs, actually imposed quota herself. Maybe not up to 75 percent but maybe 10 percent or something like that. And if they are self-imposed, there would be no need for the EU or the U.S. to impose those safeguard measures. Would you agree with that (unintelligible)?

SECRETARY GUTIERREZ: Well, I can just tell you that we looked at our information and we concluded there was market disruption and we took the action that we are entitled to take under WTO. I do not want to react to any speculation about any alternatives, nor am I here to conduct any negotiations. I'm simply here to explain why we believe that we had every right in the world to do what we did.

QUESTION: You said that you -- that they've made progress and developments to laws on protecting IPR; it's time to show results. Have they made any headway at all that's discernible to your point of view on DVDs, music, movies, that sort of thing? Any at all in the last year?

SECRETARY GUTIERREZ: Well, as we've spoken with our Chinese partners, they have stated that they have made progress. And, I want to hear what progress they've made. I don't want to dismiss what they're saying without listening to them. Companies tell me that they have not seen much change. But I believe I owe it to the Chinese officials to hear what progress they believe they've made in the enforcement area.

QUESTION: Mr. Secretary, you said earlier that you came here with the intention of trying to convince China to take real action, especially towards IPR in order to head off potentially more anti-trade sanctions with Congress. And so far I think some Chinese officials say that, you know, they are moving towards flexible regimes and that it is going to take some time. Do you see -- what progress have you seen from China and might it be possible to head off these anti-- these trade barriers coming out of Congress? And might this expand beyond textiles into other areas?

SECRETARY GUTIERREZ: Well, textiles happen to be an area where the information and the facts suggested that market disruption was occurring. Therefore, under WTO rules, we have the right to put in place safeguards. We are only asking for the playing field to be level. President Bush has stated repeatedly that we do not want a trade war. We are not protectionists, by any means. We simply want a level playing field for our workers and for our businesses. That means that our intellectual property be respected. It means that we have as much access to this market as China has to our market. So we just want a level playing field so that we can allow businesses to compete, businesses to innovate, businesses to provide consumers with products that make their lives easier, that make their lives more enjoyable, that provide jobs. But, we want a level playing field.

QUESTION: How badly was the business and the brand of your previous company, as you called it, damaged in China by piracy?

SECRETARY GUTIERREZ: Well, it was copied. And interesting, this was 1996. And back then we were not able to win the case in a court of law. Today progress has been made from the standpoint of instituting laws and having the legal framework. The challenge now is to enforce.

QUESTION: You actually sued back then, the company?

SECRETARY GUTIERREZ: No. It was a long time ago and the previous job and I don't represent that company. But, my memory is that we tried to stop it. Intellectual property violations, counterfeit of goods, is equal to the counterfeit of money. I don't think there is a government in the world that views the counterfeit of money as a minor offense. And, our trading partners around the world need to understand that the violation of intellectual property and the counterfeit of goods is equal to the counterfeit of money in terms of a crime and it should be treated as such.

QUESTION: You just used the word partner to describe your Chinese counterparts. I mean, given what you've just said about your own experience, about your experience today, finding DVDs, given that we've seen companies like Hua Wei acknowledge that they've stolen intellectual property and then have gotten a huge line of credit from a Chinese controlled bank to go out and export the products around the world, what are you seeing that indicates that you're dealing with a partner?

SECRETARY GUTIERREZ: Well, we do a lot of business with China. You're talking about a lot of billions of dollars. We sell to them. They sell to us. That's what I would call a partnership.

QUESTION: But on this issue, in terms of gaining enforcement on intellectual property...

SECRETARY GUTIERREZ: We are approaching this the way we approach all other issues. They are a partner, and we want to approach this as a partner and we want to see them enforce their laws the way we would expect a partner to enforce their laws.

QUESTION: Mr. Secretary, what did you discuss with Mr. Ma Kai today? What did you talk about?

SECRETARY GUTIERREZ: We talked about the environment. We -- he had the opportunity to express the Chinese government's disappointment over our decision on textile safeguards and I had the opportunity to explain why we believe it was a decision that we had the right to make.

QUESTION: Mr. Secretary, did you also tell Ma Kai that these safeguards would be in place for one year only and there would not be an extension beyond one year? That was your point you made yesterday. I'm just wondering if that was --

SECRETARY GUTIERREZ: I did not get into the -- no. We didn't get into the specific conversation.

QUESTION: Is it the government -- the U.S. administration's case that the safeguards will be in place for one year alone and not extend under any circumstances beyond one year?

SECRETARY GUTIERREZ: That is the -- yes. That is the determination that has been made and then we go into a -- what is called a consultation period.

QUESTION: Where would you like to see the U.S. textile industry go in the next year? You were hit over the head by this repeatedly at that Tsinghua University session yesterday. What would you like to see happen with U.S. textile companies in the next year?

SECRETARY GUTIERREZ: Well, I think it's -- this is more than just about the textile industry and we're focused on the textile industry because this happens to be the case at hand. I think all U.S. industries need to see that this is a rapidly changing world. It is a very competitive world. And that in order to compete effectively in this very dynamic environment, that we need to be innovating in all industries. We need to be ahead of the competition. We need to be faster. We need to be more efficient. We need to have better ideas. That's the message for all industries. I'm not an expert in textiles so I don't have any advice for the textile industry specifically. All industries need to understand that this is a fast-moving environment, a very competitive world. And, we need to be more competitive every single day.

QUESTION: Mr. Secretary, as was mentioned before, many officials have come through Beijing over the past years with this message about IPR. It does seem that there has been very little improvement. And from what you are saying now, this issue is tantamount to Chinese companies counterfeiting U.S. money. Now, that suggests that perhaps you might have sanctions in mind or you might also be thinking about incentives for the Chinese government to take swifter action. I'm just wondering what concrete measures or steps you'll be suggesting to the Chinese?

SECRETARY GUTIERREZ: I'll be speaking with Chinese officials and I will be mentioning to them as I mentioned to you that they have made progress in the area of establishing a legal framework. And we believe that the time is now to see results in the enforcement of their laws.

QUESTION: Can I just one thing, clarification? Thank you very much. But are there six categories of textile where China has actually still tariffs in place? Is this true?

SENIOR COMMERCE OFFICIAL: I'm sorry?

QUESTION: Are there six categories of textile where China still has got tariffs in place.

SENIOR COMMERCE OFFIAL: Tariffs are -- duties or tariffs are in place for everybody. Quotas...

QUESTION: No, self-imposed.

SENIOR COMMERCE OFFICIAL: You're talking about quotas.

QUESTION: Yes, yes.

SENIOR COMMERCE OFFICIAL: Oh, the tariffs that China has self-imposed?

QUESTION: Yes.

SENIOR COMMERCE OFFICIAL: They have had several announcements over the last few weeks that they --

QUESTION: I'm talking about (unintelligible) --

SENIOR COMMERCE OFFICIAL: -- (unintelligible) and then there are reports that I saw today that backed off on all of that. We were told today that some of those tariffs are still in place. And we just don't know the details of it at this point.

QUESTION: Are you definitively ruling out extending safe -- I mean, imposing safeguards again in future years?

QUESTION: But that's what you're saying....

SECRETARY GUTIERREZ: No. No. No.

QUESTION: and I want to be clear on that.

SECRETARY GUTIERREZ: No. No. No.

QUESTION: and understand. Okay. I don't want to...

SECRETARY GUTIERREZ: We are driven by numbers. We're driven by facts. We're driven by analysis and we will always be looking at the numbers in our industries to determine if there is true market disruption.

QUESTION: Okay. So we're just talking about the expiration of this year's tariff?

SECRETARY GUTIERREZ: Yes.

SECRETARY GUTIERREZ: Thank you.

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