U.S.-China Trade Relations and Chinese President Hu Jintao's Visit

Secretary Gutierrez.

SECRETARY GUTIERREZ: Thank you. Good afternoon. I'll make some brief comments before taking your questions. As you are all aware, we conducted our annual Joint Commission on Commerce and Trade meetings recently and made some good progress. We acknowledge that we still have a ways to go, but we made important progress. Obviously, the real outcome will be in the results and the real progress will be shown in the results and that will happen over time.

A couple of the big areas that we announced -- beef, of course. The Government of China agreed to reopen their market for American beef. We have a phase where we're going through the technical protocols, but the important thing is the decision to reopen the market once we have the technical protocols in place.

And also importantly, the Chinese Government's agreement or decision to require PCs to have preloaded operating systems, and those are PCs that are coming into the country, imported or PC's sold within the country, but that's also an important step forward.

And ultimately, our big areas that we are in constant discussions with Chinese officials are areas related to market access. As you know, we have pretty much full access to our market and we have asked that we get a similar level of access to the Chinese market.

The other area is intellectual property rights. We know that there's a considerable amount of piracy still in China, whether that be software or whether it be optical disks, and we want our intellectual property rights protected in China.

And then the third area is transparency and the rule of law, especially in business law, that new laws be transparent, that they not give an advantage to domestic companies over foreign companies. And those are three areas that continue to be where we focus our discussions.

I'll stop there and take your questions.

MODERATOR: Yes. Can we go to the front row here?

QUESTION: My name is Kaori Iida. I'm with NHK Japanese Public Television. Mr. Secretary, what are you in your Department hearing from American manufacturing -- from the American manufacturing sector with regards to the concern of the Chinese currency issue? Is it serious? And also how do you think President Hu Jintao should address this particular issue when he comes to Washington?

SECRETARY GUTIERREZ: Well, you asked me the one question that I was not prepared to answer. (Laughter.) As you know, we like to keep our comments on currency focused in one agency -- that's Treasury -- so that we're not sending mixed signal or mixed comments, so I would prefer that Treasury answer any currency related questions.

QUESTION: (Off-mike.)

SECRETARY GUTIERREZ: Again, you should ask that to Treasury. Thank you.

MODERATOR: Next question. To TASS here.

QUESTION: Thanks. Thank you, sir, for coming over. My name is Andrei Sitov. I'm with TASS, the Russian News Agency. You referred in your remarks to IPR and concerns that are still there. Some people suggest that this is exactly because of this experience that the negotiations in WTO with Russia is stalled. Can you comment on those -- on that kind of opinion?

SECRETARY GUTIERREZ: Thank you. I don't believe that the negotiations with Russia on WTO are directly linked to anything that's happening in China. The negotiations with Russia are very much about bilateral issues between Russia and the United States, negotiations with China are very much about bilateral issues between China and the United States, so I would not link the two.

QUESTION: But also since -- the change of guard in the USTR, do you think it can influence the negotiations, the change of guard in the USTR today?

SECRETARY GUTIERREZ: I do not believe it will have an impact in negotiations. It is the same administration, the same policy. The successor to current USTR Rob Portman, Susan Schwab, has been very involved and, if confirmed, she would follow, I'm sure, a very similar policy. So we should not see a change.

MODERATOR: Bangladesh here.

QUESTION: Mr. Secretary, thank you. My name is Arshad Mahmud and I represent Prothom Alo newspaper in Bangladesh. I have a general question, not related to the Chinese specifically. Being the Secretary for Commerce and given the fact that the United States is running this huge trade deficit every year, how long do you think you can sustain this kind of deficit and do you see in the foreseeable future when that can be corrected and in what way? Thank you.

SECRETARY GUTIERREZ: Well, let me just say that, as I've said often before, the trade deficit is important and it's a number that we pay close attention to. But it's not the key driver, it's not the key number in our economy and we don't develop strategies specifically designed to reduce the trade deficit. The important thing is: Is our GDP growing? Are we creating jobs? Is our unemployment declining? Are we keeping inflation in check? Those are the big macro numbers that really drive the health of the economy. And within that, there is also the trade surplus or deficit, but I wouldn't use that as the number by which to gauge the health of the U.S. economy. There are countries in the world that have a trade surplus but are growing at 1 percent and have 10 percent unemployment. I don't think we would change our economy for that economy just because they have a trade surplus.

QUESTION: But it's one --

SECRETARY GUTIERREZ: Of course. I mean, we look at all the numbers. We pay close attention to all numbers. I would say that's a better way of phrasing it than to say that that is the -- now let me just say this. Over time, there are countries around the world that should spend more and save less and we believe that at some point in the future we will have to increase our savings. But those are long-term, gradual trends. It's not a reactive policy that we need to take tomorrow. We could change the trade deficit very quickly. We can make it go in a very different direction very quickly. But in doing so, we could do a lot of damage to our economy. So we look at the big macro numbers. Trade is one of many other indicators that we look at.

MODERATOR: Go to the front row here.

QUESTION: I'll change it up and ask a question about China. What can you do? I mean, clearly --

MODERATOR: State your organization.

QUESTION: Klaus Marre with the German Press Agency. Since you need the Chinese just as much as they need you as a market and you need them and they're such a powerhouse now, what can you do to get them to agree with you on things like enforcement of intellectual property rights because it's been taking so long and you keep asking them to do it the way you want them to do it and to enforce it. But what can you really do at this point to get them to agree with you?

SECRETARY GUTIERREZ: Well, let me say first of all we've made progress. We haven't stood still. The relationship hasn't stood still. We have made progress over the years. We haven't made as much as we would like to, but we should acknowledge that progress has been made.

I don't want to speculate as to what we can do or what we are willing to do, but we are China's most important customer, so I remember when I was in business, when my most important customer asked for something, I usually listened. And we would expect that the Government of China would listen to our concerns and we will continue in a state of engagement, dialogue, discussion, candid debate. We believe that is ultimately the best way to resolve problems, but we have -- we don't want to discard any options.

QUESTION: Thank you. Sonya Schott with Radio Valera, Venezuela. I would like to know if the increasing percent of China in Latin America represents any source of concern for the U.S.? Thank you.

SECRETARY GUTIERREZ: We do business in Latin America and China does business in Latin America. This is a worldwide economy and we believe that it is beneficial for a worldwide free enterprise system to have countries trading with each other.

QUESTION: Marty Crutsinger with the Associated Press. Mr. Secretary, when you were in China a few weeks ago, you warned of a protectionist backlash in this country if China did not do more to resolve trade tensions. Have they done enough? And if not, what more do they need to do during this trip this week?

SECRETARY GUTIERREZ: As I mentioned, we made good progress at the JCCT. There's still more work to be done. We believe that a very major opportunity that President Hu has when he comes to the U.S., when he arrives shortly to the U.S., is to understand why there is so much concern among the American public for our trading relationship with China and why there's a perception that the relationship requires balance. And there's also an opportunity for President Hu to explain China's policies so I wouldn't underestimate the importance of this trip to explain to the American people from his point of view why protectionist policies are not the way to go. We'd like to hear from the Chinese as well. So it's an opportunity to really use his visit to engage the American public on this important debate of trade with China.

QUESTION: Can I ask a follow-up?

MODERATOR: Sure. A follow-up here.

QUESTION: President Bush talked about intellectual property rights as one of the issues that he was going to raise with President Hu and also currency. I know you can't speak generally about currency, but are you looking for movement in either of those issues in these talks?

SECRETARY GUTIERREZ: Well, again, we just came off the JCCT agreement of the preloading of software, which we believe is a significant step forward, especially since the subject of pirated software has been a concern. The Chinese Vice Premier Wu Yi also gave us a national IPR plan which has been launched in China. The significance of that plan is that it is a plan that was created in China by the Government of China. They have ownership over that plan. In that plan they talk about creating IPR courts, they talk about closing down optical disc plants. And now, as we mentioned before, it's a matter of seeing the results. It's good progress. It's definitely good intentions. What we would like to see now are the results of the plan that she presented and that could be a very comprehensive plan if it's followed through and implemented.

MODERATOR: Go to the back there. The gentleman. Yeah.

QUESTION: My name is Zhengxin Li from China, Economic Daily. Speaking about trade deficit, this (inaudible) delegation and did a great shopping in this country. One of the China's complaints is that this country controls a high tech products, the (inaudible). What is the Administration preparing to do to improve in this respect? Thank you.

SECRETARY GUTIERREZ: Thank you. We did agree at the JCCT to have a high technology working group to continue the dialogue and to hear the specific concerns of the Chinese Government. I will say that in the context of our exports to China, which are about $41 billion, that the amount subject to a license is very small and the amount that has been rejected, I think, adds up to about $12.5 million so it's not a material number when you compare it to what we export and the size of the relationship. But as I said before, we do have a high technology working group and we will be in dialogue with Chinese officials.

MODERATOR: Go to Ben here.

QUESTION: Thank you Mr. Secretary. My name is Ben Bangoura with Afrotrading.com in Washington. When it comes to trade issues, developing countries have often complained about the effect that developed countries like United States have not been willing to open up their borders to (inaudible) as a way to a fair and sustainable development. What plan do you have to address such issues, including agricultural subsidize in African countries, for instance?

SECRETARY GUTIERREZ: Thank you. Well, I will say that there is no country as open as the United States. And if you look at applied tariffs and you compare the applied tariffs to other countries around the world, we are as open as you can be. This is why we took the position that we did at the WTO talks in Doha. We saw it as a major opportunity and we continue to see it as a major opportunity to substantially reduce barriers so that the developing world can trade more with the developed world. Many people saw it as a debate within the developed world and see it as a debate within the developed world. We believe it's more about the developing world being able to sell to the developing world and to the developed markets.

So WTO and the Doha round continues to be the best opportunity we have to make a substantial reduction in tariffs, in barriers and lift over a half of billion people out of poverty around the world and we should not let that opportunity go by.

MODERATOR: Phoenix TV.

QUESTION: Christine Xie from Phoenix TV of Hong Kong. In order to address the issue of a trading balance, apart from the efforts from Chinese side, what can we expect from the U.S. side? To be specific, what can we expect from President Bush and what he's going to say related to this during the summit?

SECRETARY GUTIERREZ: Well, again, we have, in terms of the trade balance, we have about a $200 billion deficit surplus for China. And what we have been determined to do is to prevent any protectionist sentiments in our country to take hold which would prevent us from buying what we're buying from China. So we're buying over $240 billion a year from China. We believe that's quite a substantial contribution and we have asked the Government of China to help us prevent protectionist policies that would restrict imports coming in from China. So I think the biggest contribution we can make is to continue to keep our market open. But in order to do that, we need help from China. We need some progress on intellectual property. We need some progress on market access. We need some progress on the areas that we've spoken about.

MODERATOR: Go to a follow up here. Wait for the mike, please.

QUESTION: We understand that JCCT has reached -- has been very successful and laid a good foundation for the summit. Are we going to see any, you know, agreement concerning trade during the summit also?

SECRETARY GUTIERREZ: Well, I won't preempt anything that our two Presidents will talk about or agree to. We do have the JCCT agreements. Those have been agreed to and those have been published and the two Presidents will have very open and candid discussions. And to the extent that they agree to something that's -- we'll all be looking forward to hearing. But I don't want to say one way or the other. It's really their meeting.

MODERATOR: Go to the third row here.

QUESTION: My name is Yong Tang from People's Daily China. My first question is China cannot -- is unable to import your high-tech products from America due to the rather -- due to the export control of high-tech products of America. So I'm wondering do you have any plans to loosen this kind of control in the future?

My second question is somebody said the trade protection is quite strong in Washington, D.C. I'm wondering where does this trade protectionist comes from? It comes from the White House or it comes from the Capitol Hill. What has to be done to make the U.S.-China trade relations become truly a win-win relations? Thank you.

SECRETARY GUTIERREZ: Thank you. As I mentioned before, we have a high-tech working group that came out of the JCCT that will discuss our high-tech exports to China and it will enable us to hear the Chinese officials concerns regarding high-tech exports. And as I mentioned before, the amounts subject to license is quite small and the amount that has actually been rejected, as part of our policy, amounts to about $12.5 million. So it really is a very small and immaterial number.

I would say that the questions about trade with China and some of the questions about protectionism have come directly from the American people. They want to understand why our intellectual property is not totally protected in China. They need to understand why we don't have as much market access as we would like. And it's also important to enable the American people to understand that the relationship has made progress. So this is why I was saying that this is an opportunity for President Hu to talk to the American people. He'll have a chance to do that and to explain the progress that he has made, the progress that China will make, and some of the measures that they're taking to give us market access and protect intellectual property and have more transparency in business law.

MODERATOR: Yes, sir.

QUESTION: Yes, Mr. Secretary. This question has to do with AGOA. I understand that you have that provision with African countries. What do you see as a stumbling block for the overall (inaudible) African countries not being able to take advantage of this law and what should they do to make sure that this is their game to play?

SECRETARY GUTIERREZ: I appreciate the question. I'm not as well-versed specifically in what's happening today with AGOA countries. I will say, generally speaking, what we have seen is that often, capacity-building for trade is necessary. So that, often, could mean developing standards to be able to export agriculture. So it's understanding customer standards and what those standards need to be.

But very often, it is getting close to potential customers, understanding their needs, understanding what types of testing protocols need to take place. So it's what we call capacity-building in general. But we would hope that AGOA countries would take advantage of that and would use the agreement to build as much trade as possible. And as you say, get into the worldwide arena, because there's a lot that African countries can contribute and there's a lot that they can benefit from, from being in the worldwide trade arena, as you say.

MODERATOR: Time for one last question. Yes, sir.

QUESTION: My name is Yunzhao Pan, from China's Xinhua News Agency. I know that you had mentioned that there's a huge trade deficit imbalance between China and the United States. But you have to admit that a lot of the products exported from China are manufactured by American companies and other foreign companies in China. So in part -- a part of the trade deficit is caused by American companies, you must say that. So what's your comment on that?

SECRETARY GUTIERREZ: Well, that's why -- and it's a fair point, but that's why the important point that we make is, give us market access and protect our intellectual property so that we can export more to China. We have not laid out a specific trade number. We haven't said, "We want you to cut our trade deficit by X percent." We have just said, "Please give us access, protect our intellectual property, and give us transparency in the rule of law and we will be able to compete." But we're not asking for a specific number; we just want access and we want our intellectual property to be protected.

MODERATOR: Thank you very much.