Ambassador Peter Allgeier
Deputy U.S. Trade Representative
U.S. Ambassador to the World Trade Organization
Roundtable with Chinese Media
Beijing, China
March 14, 2007

AMBASSADOR ALLGEIER:  Good morning.  My name is Peter Allgeier.  I am the Deputy US Trade Representative and the US Ambassador to the WTO. 

We just had two days of meetings here in Beijing on matters dealing with the WTO Round, the Doha Round, as it’s called.  We met with MOFCOM Vice Minister Yi and representatives from many Chinese ministries and agencies.  We were meeting with our Chinese counterparts to work together to build up the Doha results in two important areas -- in trade and industrial products and in services.

There are three major areas in the Doha negotiations and we need success in all three to have a successful result.  There is of course agriculture, industrial products, and services.  As I said, yesterday and the day before we were just dealing with the industrial products and the services.

We and China both agree that we have three major objectives in the Doha Round.

First of all, we obviously both want to advance our own commercial interests in the round by improving market access for our goods and services. 

Secondly, this round of negotiations is called the Doha Development Agenda, so our second objective is to contribute to the development of the developing countries and the best way to do that is to provide better market access for their goods and services.

The third objective that we share is to strengthen the international system of rules that exists in the WTO.  Of course China has been a member of the WTO only since 2001 but the period since 2001 has been a period of most dynamic Chinese growth and it has been helped enormously by international trade and the rules of the WTO.

Of course the benefit of China joining the WTO was that all the other 149 members have to treat China the same as they treat each other.  They give China, we give China the most favored nation treatment.  That has been a great help in stimulating Chinese exports.

So as a result, since China has joined the WTO its exports have grown 264 percent and it’s foreign exchange reserves have reached almost one trillion US dollars.  And just as in the United States, in China also international trade contributes an enormous amount to economic growth in the country.

So since China has joined the WTO per capita GDP, gross domestic product, per capita, has grown 42 percent.  For China.

So that’s the general context in which we were discussing how we’re going to move the Doha Round to a successful conclusion.  So let me just say a word about each of the subjects that we discussed with Vice Minister Yi.  First of all industrial trade.

Both the United States and China share something in common and that is that right now we both have rather low tariffs compared to the tariffs in other countries, particularly in other large developing countries such as India and Brazil.  So, for example, the average industrial tariff in the United States is less than three percent and the average industrial tariff in China is less than nine percent.  But other major developing countries have significantly higher tariffs where their averages may be more like 15 percent.  Since these markets are going to be among the most important over the next ten years of so, both the United States and China have an interest in getting those tariffs down.

Some people say well, China already did a lot reducing its tariffs to join the WTO.  Why should it have to do any more?

Well, China did have to reduce its tariffs in order to join the WTO and to get the benefits of the other 149 countries giving China the lowest tariffs that it charges on other countries.  So that was the price of having the same treatment as everybody else in the WTO.  But what we’re talking about in the Doha Round is a reciprocal reduction of tariffs to create new market access and all of us, including the United States who has among the lowest tariffs in the world, are going to have to reduce our tariffs further in order to get our trading partners to reduce their tariffs further.

Now we have already agreed in the WTO that we’re going to cut the tariffs using a special kind of formula, and the way this formula works – it’s called the Swiss Formula. Those people that have higher tariffs are going to have to make a deeper cut than those who have lower tariffs.

What that means is countries like China and the US who have lower tariffs, we will have to cut our tariffs a few percentage points, but in return countries like India and Brazil who have much higher tariffs, will have to cut their tariffs by many more percentage points.  So for countries like the US and China it’s actually a good deal.  We give up a bit more, but we get much more in return.

We also talked about services.  Services such as financial services, telecommunications, energy services, what is called express delivery, and other services such as computer-related services.  This is going to be an increasingly important area for China internationally.  In fact we’re already seeing that Chinese banks, Chinese telecommunications firms, are moving to provide services overseas.  If China is to succeed in providing these services overseas, they want to have the rules set overseas and they want the markets open overseas for these services.

I’ll just give you one example.  In telecommunications you have a company called China Mobile.  Now if China Mobile was to provide mobile telephone services in a Latin American country or an African country, China Mobile is going to want to have certain rules in place so they can do that properly. 

So, for example, China Mobile is going to want to have the freedom to decide can it work just as a completely 100 percent owned company in Latin America?  Does it have to have a joint venture?  Is it limited in how much it can own?  It’s going to want to have the freedom to decide what’s going to be the best in that particular market.  And it’s going to want to be treated exactly the same as a local company, so there shouldn’t be different rules for China Mobile in this Latin American country than there is for a Latin American supplier of mobile telephone service.

For these reasons it’s in China’s interest and the US interest to open markets for industrial products and for services and to set fair rules for services.  We talked about that the last two days as to how China and the US can work together to get that result in the Doha negotiations.

Why don’t we go to questions now?

QUESTION:  Sir, I have a question, and just [inaudible] and you take the submissions, how to get the results in the Doha Round.  So I want to know the detail in the solution, how US and China can work together to have the large developing countries like [inaudible]?

AMBASSADOR ALLGEIER:  There really were two parts to it.  One is to talk about the kinds of things that we both look for in other countries.  What are the kinds of changes we want to see other countries make in their tariffs or in their rules on services.  The second thing, and this is very important, we talked about what we each are willing to do to open up our own markets because the rest of the world looks to the major trading countries including the United States and China to lead the way and to make contributions ourselves to the negotiations.

So, for example, in services we went through sector by sector talking about what each of us is willing to do, what each of us is seeking from the other in opening services markets.

QUESTION:  China Commerce Minister said in the recent press conference, he said the European Union and United States are not making concessions  in agricultur which is maybe why the Doha Round is in a  dilemma, without much progress.  And he also said there is something that the squeaking wheel gets the oil.  So who actually squeaking the wheel?

AMBASSADOR ALLGEIER:  Certainly agriculture is probably the most difficult part of the negotiations.  The United States has already said that we are prepared to reduce very significantly our agriculture subsidies and our agricultural tariffs provided other countries who have even higher tariffs and give even more subsidies such as the European Union, will do the same.  But there are many other countries that have even higher agricultural tariffs and higher subsidies – Japan, Korea, Switzerland, Norway.  All of these countries have to make contributions in agriculture.

Our President, President Bush has said he wants to eliminate all trade-distorting subsidies in agriculture, but we can only do it if our competitors are doing the same. 

As for the squeaky wheel, there are 150 squeaky wheels in the WTO.  All different sounds coming from the WTO squeaky wheels, so there needs to be a certain amount of oil put on each of the squeaky wheels.

Every single country has to make a contribution.  Not identical contributions, but everyone has to make a significant contribution.

QUESTION:  In fact in that same press conference Minister Bo said that many other countries now called for China to play a bigger leadership role at the WTO which Mr. Bo interpreted as a kind of very tricky request.  In fact the absence of such a request for greater leadership was for China to make greater concessions or make more offers to other countries.  So what’s your comment?

AMBASSADOR ALLGEIER:  Well, in fact we do hear that in the WTO.  People look at the enormous success of China as a trader and say it’s only fair that China make a contribution.  We hear exactly the same thing directed at the United States, even though we have one of the most open markets in the world.

The fact of the matter is that the larger trading countries do have a responsibility to contribute significantly to the round and to make further concessions.  We may not like it, but that’s our responsibility.

QUESTION:  I’m from Caijing magazine.  I wonder how Minister Yi responded to your recommendations given all China’s complaints previously that the major players are beating around the bush these days because they can’t make any concessions on agriculture, so they are now putting more pressure on China to make more concessions on industrial goods and services.

Also, did you get into any specifics, how much does China need to give in and the United States need to give in how much India and the Brazil side?

AMBASSADOR ALLGEIER:  It’s not a question of putting more pressure on China because other countries aren’t giving on agriculture.  The pressure on us, the United States and Europe to do more on agriculture remains.  We are going to have to do more on agriculture. We have said we will.  The question is, how much more will the European Union do in comparison to the US?  We’ve got to have a certain equity there.

Now if we are going to give more on agriculture we’re going to have to get more somewhere else, and for the United States and for Europe, that means in industrial products and in services.  But for China too, its own economic interest, obviously, is getting lower tariffs in places like Brazil and India and Argentina.  So with China, we have a common interest in getting industrial tariffs down and getting services barriers down.

But one of the things we did was to talk about whether we can get tariffs even lower than the formula in certain sectors that would be of interest to China and the United States.  For example, in the sector of electronics and electrical goods.  So for example in electronics, China is the largest trader in the world in electronics, but we face tariffs in India, for example, that average 14 percent; in Brazil they average 15 percent.  So it’s in both our interests to get those tariffs down.  One way to do it is perhaps to have a sectoral agreement on electronics that would reduce the tariffs even more.

I will tell you when you talk to the different delegations in Geneva and you ask them the question, who will benefit the most from the Doha negotiations, you consistently get the same answer.  Two countries would be the biggest beneficiaries:  one, Brazil because of agriculture; and the other, China, because of industrial products and services ultimately.

QUESTION:  The expiration of Trade Promotion Authority will be in the near future and [inaudible] to shape Doha Round.  And [inaudible] observed that the United States has made great efforts to seek progress in FTAA and bilateral relations such as the FTA with Korea.  So which is more realistic and important for the United States?  Doha or FTA?

AMBASSADOR ALLGEIER:  First of all, Trade Promotion Authority.  That is a special procedure we use in our Congress when we bring a trade agreement back to them.  They have to vote on it, yes or no.  They cannot make any changes in it.  Normally when a bill goes to Congress they can make amendments, but under TPA they cannot make any change.

Obviously this is important to our trading partners because once they negotiate with the trade negotiators they don’t want to have to then negotiate separately with 535 members of the US Congress.  We don’t need Trade Promotion Authority to negotiate.  We only need it at the very end when we bring the agreement to our Congress for approval.  President Bush has announced that he will seek the renewal of Trade Promotion Authority and we already are talking to the members of Congress about how to do that and we are optimistic that they will pass a renewal of Trade Promotion Authority sometime this year.

Your second question was about Doha negotiations versus Free Trade Agreements.  The policy of the Bush administration from the very beginning has been that we’d pursue both of those simultaneously.  So even as we have been negotiating the Doha Round, we’ve proceeded with other Free Trade Agreements, for example with Central America, with Australia, with Morocco, and as you said, right now we’re negotiating one with Korea.  We are confident that we can complete the Free Trade Agreement with Korea and complete the Doha Round.

QUESTION:  I’m from China Business Weekly.  About Doha Round, sir, could you estimate for us, could you forecast for us when the Doha Round will be restarted?  Also could you forecast when a Doha agreement could finally be signed and be approved?  Maybe you can give us your estimations of the best scenario and also the worst scenario.  Also, could you tell us what impact the best scenario and the worst scenario would have on international trade in the future?

AMBASSADOR ALLGEIER:  Is that one question?  [Laughter]. 

First of all, the Doha Rounds have restarted.  We already are negotiating and have been negotiating very intensively throughout 2007.  So we’re already negotiating.

Our hope is that we could complete the Doha Round by the end of 2007.  Normally about a year is allowed for all the countries to go back and get the agreement approved in their legislatures and their parliaments and so forth.  So if we were to finish in the end of 2007 and allow a year for legislative approval then it would go into effect the beginning of 2009.  Of course there still is an implementation period.  It could be five or ten years.  So the best result would be a very strong market access opening in agriculture, in industrial products, and in services.  Then we could expect trade to contribute significantly to economic growth in all the economies.

The worst outcome would be if we fail to have any agreement and then the impact would be very different from one country to another and the biggest losers would be the poorest countries because people wouldn’t be interested in doing Free Trade Agreements with them and they would not get new market access in other economies.

QUESTION:  I just want to follow up on my earlier question.  During your negotiations with Mr. Yi and other government officials, what exactly did they say to the United States recommendation or proposal?  Were they optimistic?  Were they understanding?

AMBASSADOR ALLGEIER:  They said they would give the suggestions very serious consideration and we agreed that we would meet again very shortly in Geneva in the coming weeks, on both of these subjects – industrial trade and services.

Thanks.

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