U.S. and Hong Kong (1985-1997)

SEC. DALEY 10/6 PRESS AVAILABILITY IN HONG KONG

Following is the transcript of the press availability:

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THE HONORABLE WILLIAM M. DALEY
U.S. SECRETARY OF COMMERCE
PRESS AVAILABILITY
CONRAD HOTEL
HONG KONG SAR, CHINA
OCTOBER 6, 1997

Schedule is subject to change

MONDAY, OCTOBER 6

9:30-10:15am

Meeting with SECRETARY DALEY: Good afternoon and thank you all for being here. I'd like to also thank the Consul General, Richard Boucher, for being here again with me and for the support he has given this mission.

Before taking any questions, let me just make a few remarks and tell you how successful, in my opinion, my first visit to Hong Kong has been. It has provided me a first-hand opportunity to view that, after one hundred days, this Special Administrative Region remains a free and an open society. It is of the utmost importance for our bilateral relationship that Hong Kong continues to be Hong Kong. It must remain a free and open society with a stable economy.

In meetings today with Chief Executive Tung Chee Hwa and also the Chief Secretary for Administration Anson Chan, and Secretary of Trade and Industry Denise Yue, I related to them what the U.S. business community has told me -- and told me often -- that they continue to be optimistic about Hong Kong's commercial future.

Early today I reached an understanding with Secretary Yue to cooperate closely on trade and strategic commodities, which supports our policy of giving Hong Kong broad access to U.S. goods and technology. We will meet regularly to share information and cooperate on enforcement. Hong Kong will continue to comply with internationally-accepted export controls.

I also raised concerns about intellectual property rights protection, for Hong Kong has increased its efforts to combat piracy, but continued retail sales of pirated goods is not acceptable. From my discussions with Hong Kong officials, I believe that the government recognizes the gravity of the problem and is beginning to take the steps which are needed to address the situation. I underscore the need for prompt and effective action against both the production and the retailing of pirated software and CDs.

In a few hours, I will travel to Beijing to open the 11th Session of the U.S.-China Joint Commission on Commerce and Trade, which is a forum for cooperation and trade issues. I look forward to working with Minister Wu Yi. While there, I will reaffirm the important role a free and open Hong Kong plays in the global marketplace, as well as to promote the development of U.S.-China trade in a more balanced manner. The U.S. has a strong interest in expanding trade with China, in its continued economic development and in the liberalization and opening of its economy.

The JCCT will focus on building the practical steps to strengthen commercial relationships between our two nations. And the agenda includes commercial law, trade finance, standards, market access, a variety of sector-specific issues, and also export controls.

I will also travel to Dalian for the first China-U.S. Telecommunication Summit, where 20 U.S. companies will participate along with U.S. and Chinese government officials to discuss the future of the Chinese telecommunications market. U.S. companies are the most advanced in the world in this field, and we expect that they will play a large role in this very dynamic, growing market.

I thank you and will be happy to take any questions which you have.

Q: Secretary Daley, you just mentioned the trade deficit between U.S. and China, but some experts said that one of the . . . (inaudible) . . . that U.S. controls exports to China, so what's the U.S. government consider (inaudible).....

DALEY: The limitations which are on some items for sale in China are important. And there are important reasons that there have been limitations. In our opinion, even if those limitations would be receded, the trade imbalance would still be rather substantial and unacceptable at those figures. What we have seen is, as I've mentioned in my talk earlier, the tremendous growth in imports into the United States from China, but a very small growth in exports to China from the United States. And it is that lack of any growth at all in our exports, that is of great concern to us. But I firmly believe that, even if those controls were taken off, it would not change these sorts of numbers which are now at a pace, as I've also mentioned, that will be somewhere around US$44 billion, at an annual rate which will be second only to Japan's, a US$50-some billion trade deficit with us.

Q: When Chinese Trade Minister Wu Yi commented that the Congress will renew MFN, that they have created a feeling of instability among the business community in China and have been . . . (inaudible) to bilateral development, so she suggested you should cancel the annual review and give to China (inaudible) . . . do you agree?

DALEY: Oh, I would think that we would have to see further action before Congress would agree with the opinion of trying to take an annual review off the table. As you may know, when the vote came up in July in our Congress, there was a very substantial vote in favor of extending MFN. The Administration, the President was very committed, as he has been in the past, to seeing that through. And I would imagine that, if it is not lifted, even though there may be a disagreement next summer, that we would have the same sort of strong vote of support, as long as there has continued progress being made as China's economy grows and opens and other areas of improvement occur. So I think it's a process that will continue. I understand the Minister's concern and the need for stability or a feeling for stability, but there are reasons, obviously, behind Congress' determination that it not be extended beyond a year at this point.

Q: Do you have any sense when you talk to U.S. companies that they are getting fed up with doing business in China . . . (inaudible)?.

DALEY: What I do find somewhat interesting, to be frank with you, in my discussions with the U.S. business community, is a broad spread between opinions. You have some people who, as you've mentioned -- companies like Ameritech -- who have decided that, in their long-term interest, they can't be successful or they haven't found a way to be successful. There are others whose margins are too small to stay and wait for them to grow.

On the other hand, you've got the other extreme of companies who are incredibly positive, and very few people in the middle, to be frank with you -- which is surprising to me. But we have heard -- and it has been reported in numerous publications -- of many companies' decisions to move on to other markets, at this point figuring that it's not a market that they can do well in.

But on the other hand, as I've mentioned, I've had the opportunity to spend a lot of time with companies in the last couple of months -- and even as recently as last Thursday I had lunch with about 10 companies -- all of whom were extremely optimistic and positive, much of it as a result of the actions of the 15th Congress, and the perception of what was decided there and what was announced, and just probably also a feeling of certain evolution, that is occurring in China as far as the economic improvement and opening that's going on. And so I do hear the negatives, but on the other hand, there are a lot more people who, I think, are positive about opportunities that may be existing and being created in China than they are negative.

Q: Hong Kong have some factories (inaudible) . . .

DALEY: As you know, the Customs Department withdrew the one entry band requirement, and we do have great concern about illegal transshipments. And the Customs Department will continue to monitor and work closely with the Hong Kong Government. We appreciate the cooperation which we have gotten from the Government of Hong Kong to make sure that our concerns are addressed. And as you all know, there were certain actions that have been taken in the past, but, do we see improvement? And the Customs Department does, but it is an issue that is of paramount concern to us, and we will be continuing to be vigilant. The Customs Department will, which is not under the Department of Commerce. But our working with the Customs Department, we will stay very vigilant to make sure that some of the abuses that we had seen, and the illegal actions that had occurred do not begin to occur again.

Q: Will you make a visit in November...(inaudible)?

DALEY: In November, I'm sorry.

Q: I'd have questions related to trade with U.S. and Japan. Recently U.S. (inaudible) . . .

DALEY: Well, I've had a habit since I became Secretary of Commerce not to comment at all on exchange rates. Secretary Rubin does. There have been occasions, before I became Secretary, where Secretaries have made comments that were misinterpreted by the markets, and I've made a concerted effort not to have myself be part of a story tonight that somehow plunges the market somewhere. So I'll leave that question alone. But I will say this, the imbalance in trade that's going on with Japan is of great concern to us. It is growing at a pace that is just not going to be politically acceptable. We have concerns that, obviously, with the Japanese economy right now, that there has not an attempt to try to grow out of it by exports which have occurred before. Prime Minister Hashimoto had assured the President and had great discussions with him earlier in the year that there would be regulatory reform and other actions taken that will stimulate some domestic growth, and not through the growth of exports. We have not seen that occur yet, so it is the pace of which their exports are growing that is going to cause some problems in a long term.

Q: Just a further comment on intellectual property problems in Hong Kong, you mentioned that there has been progress on part of the government, but with Hong Kong still on a watch list from the USTR, is the progress enough to solve the problem?

DALEY: There will be a review of the 301 action later on this year. We've seen progress as I've mentioned, in my discussions with Denise Yue and Anson Chan. We are very positive and we see very strong cooperation going on. But this is a serious problem and has been acknowledged by the people I have met with today. They believe that the steps that they have taken and the actions of the raids lately have produced strong results. But they understand that the importance is not just to us, more importantly, to the businesses in Hong Kong -- to make sure that their rights are protected. So we think that there is good cooperation going on, and we look forward to strengthening that, but it is a problem that is very serious.

Q: Secretary Daley, do you expect to sign (inaudible) . . . business while you are in China . . . when you think about your function as Commerce Secretary, how do you balance your obligation to support general employment in the U.S. with your wish to support specific (inaudible) businesses?

DALEY: First of all, I'm optimistic that there will be some movement on a number of matters that have been brought to my attention -- to advocate on behalf of with the Chinese Government. Many of these have been in what we call the "pipeline" for quite a long time, and we'll hope to see some movement. Again, with the trade numbers being what they are, I think it would be very helpful to this relationship which is growing and building and which we're were so committed to develop and to make stronger -- that some of these matters be acted on, and acted on soon. Because, as I say, some of them have been in the pipeline for quite a long time.

It is a balance between policy and advocating non-specific, on behalf of specific companies, we have a vetting process that our Department goes through to make sure that there is no other American companies that are competing. When I advocate on behalf of a specific company -- and if there are multiple American companies that are in the same activity -- then we advocate on behalf of all of them, and not one specifically. But the policy comes first and then the specific advocacy on behalf of a company comes second. My role is to advocate on behalf of all business, and on behalf of a general group of American businesses first, and then these specific companies. But I do take very seriously that role of advocating, as our competitors have done. The other countries around the world who have led trade missions and their prime ministers and the presidents are all very aggressively moving throughout not only Asia, but Latin America on behalf of their industries and their specific sectors that they would like to see to get opportunities. And so we will stay as aggressive and as competitive as any other country out there. We may not spend as much money as some of them do, but we will try to be aggressive in other ways.

Q: It seems to be that (inaudible) in many ways human rights concerns are separated, but yet in Hong Kong quite a few trade unionists say that there may be the field of business or commerce (inaudible) workers rights (inaudible) . . . do you have any particular opinion?

DALEY: We believe that workers' rights are an extremely important issue that should be addressed in all sorts of different forums. At the Singapore Ministerial last December, we were the country that insisted that workers rights be addressed and that there be some discussion of this. So as, I think, you see trade developing in new . . . trade used to be discussed strictly in a majority in a context of what's the tariff, there are plainly other issues that have developed beyond tariffs alone in discussions of trade: workers rights is an important one, we see the environment affecting the economies of many countries right now in Asia. So you can't separate independently a number of issues today as you used to be able to before, so workers rights and human rights are very important issues to our country, as I know they are to many countries around the world.

Q: Japan and the United States seem to be on the opposite ends of the spectrum in terms of support of China's entry to the WTO, would you please comment on that?

DALEY: Well, I wouldn't say we are at opposite ends of the spectrum. We both support China's accession to the WTO. Japan has put forward and has accepted certain things that we are not willing to accept yet, but we don't stand alone. I think, there is great concern on behalf of other members of the WTO, and it is not just the United States. A number of the Europeans, obviously the European Community has great concerns. And I'm looking forward to more aggressive tabling of their proposals and market access than Japan has been willing to accept. But I think the basic premise is, we all want to see China get into the WTO, and it gets down to the details obviously of under what conditions. But the bottom line is that it is important for China to be in the WTO, and it is important to the entire world trading system that China come into the WTO under commercially-accepted principles, in our opinion.

Q: Are you going to be with China (inaudible) . . . trade deficit with China?

DALEY: We're going to try to deal with them. In the long term, they will be dealt with when China enters the WTO under the right circumstances, the right being right for the entire 150 members of the WTO. We will discuss specific matters that we find problems that have been brought to be our attention by U.S. companies that have prevented their ability to get into the China market. As I mentioned earlier, our U.S. exports to China have just not risen at all, and at the same time, China's exports to U.S. have sky-rocketed. We are not in a different situation than most other countries in the world as far as exporting into China. And it is not, as I've mentioned in my speech, it is not because U.S. companies are not competitive and don't know how to do business around the world. They do. And they have proven over the last number of years how competitive are they can be. And so there are other factors that are preventing the growth of U.S. exports into China than U.S. companies' ability to compete there.

Q: Can you say something about how to make China cut its trade deficit?

DALEY: Again, I think, there is a host of things that may occur that will stimulate, hopefully, stimulate imports into China. And those are things we will discuss at the JCCT tomorrow. They are at the heart of the WTO negotiations and discussions which I don't expect to be addressed -- the WTO negotiations -- tomorrow, except in a broad context. But market access is the issue for entry for China into the WTO. And again, it is not just the United States saying this. We don't stand alone in a strong desire for China to, number one, be brought into the WTO. I think there is pretty much universal acceptance that that must happen and should happen. But, again, it is upon the terms in which it will happen. As I've stated in the speech, those members have participated in a free and open trading system for 50 years, and have had the benefits of that -- and also the obligations -- for the last 50 years. So, as China comes into that system which has been an existence -- and we and so many other countries have been participants in -- they have to appreciate the fact that they must come quickly to a point of acceptance by a number of these countries that have been so active and have been at forefront of trying to open other countries' markets over the last 50 years. And it has not been easy, as we still find, not just in China but in many other parts of the world -- the barriers, whether they are tariffs or non-tariff barriers, that exist to goods coming in.

Q: Can I ask you to comment what kind of sanctions you have in mind for Malaysia's involvement in the gas project in Iran?

DALEY: First of all, I would leave the issue of sanctions on Malaysia to the State Department right now. It has not been brought to my attention as far as any sort of action or movement on any decision that needs to be made. Our Department will be involved if and when there is discussion of any actions, but as of this point, I have not heard of any, so I would leave it at that.

Q: Some say that Hong Kong politics is controlled by businessmen and grassroots interests are suppressed . . . what are your opinions about this?

DALEY: We obviously want to see a continuing opening of the political system in Hong Kong -- and in many other parts of the world. We do believe that there has been progress. I think, many of the predictions of what would happen after July 1 have not come about, which has been positive. And, I think, Hong Kong has got to stay on the road of continuing democratization and openness. It is a hallmark of the success of Hong Kong, when you compare it to so many other countries in Asia. And the success of the economy is because of the rule of law and the free flow of information that has existed here for so long. And without that, and any pullback, the enormous success which you've enjoyed would probably not continue.

Thank you very much.

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