Secretary of Commerce Carlos M. Gutierrez Speech to the American Chamber of Commerce

China World Hotel
Beijing, China
June 2, 2005

Posted on Jun 3, 2005

MODERATOR: -- AmCham and the U.S. China Business Council are delighted to arrange -- help arrange this event today. Before I start introducing Secretary of Commerce Gutierrez, let me start by thanking our long-time friend and supporter Ambassador Randt as well as Former Secretary of Commerce Barbara Franklin, now vice chair of the U.S. China Business Council.

Born in Havana, Cuba, in 1953, Carlos Gutierrez came to the U.S. with his family in 1960. In 1975 he joined Kellogg as a sales representative. Rising to president and chief executive officer in 1999, he was the youngest CEO in the company's nearly 100 years' history. In April 2000 he was named chairman of the board of Kellogg. This past February 7th, Mr. Gutierrez was sworn in as the 35th Secretary of the U.S. Department of Commerce, a core member of President Bush's Economic Team and a very experienced and appropriate voice for business in the U.S. government.

As President Bush said in his nomination, he understands the role of business from the first rung on the ladder to the very top. He knows exactly what it takes to help American businesses grow and create jobs. Opening international markets to U.S. companies to create jobs and build a stronger America is a top priority for Secretary Gutierrez. He believes passionately in President Bush's vision of the 21st Century where America is the best country in the world with which to do business and where everyone has the opportunity to experience the joy and pride of ownership and to live the American Dream.

Secretary Gutierrez oversees a diverse cabinet agency with approximately 38,000 workers and a $6.5 billion budget focused on promoting American business at home and abroad. His department gathers economic and demographic data to measure the health and vitality of the U.S. economy, promotes U.S. exports, enforces international trade agreements, regulates the export of sensitive goods and technologies, issues patents and trademarks, protects intellectual property, conducts oceanic and atmospheric research, does weather forecasting, provides stewardship over living marine resources, develops and applies technology measurements and standards, formulates telecommunications in technology policy, fosters minority business development and promotes economic growth in distressed communities: a wide portfolio.

We will not be taking questions from the press today but Secretary Gutierrez has been kind enough to offer to take ten minutes of questions from the audience. Ed Hotard, our colleague from the U.S. China Business Council who is our co-sponsor with AmCham for this event will be the moderator for that part of the event. So please consider your questions carefully in advance. Please join me now in extending a very warm Beijing welcome to U.S. Secretary of Commerce Carlos Gutierrez.

SECRETARY GUTIERREZ: Thank you. Thank you and good afternoon. I'm fighting a little bit of a cold so I hope I'm able to get my voice across. Appreciate everyone being here. Some people I'd like to recognize. Emory Williams, the AmCham Chair, of course, thank you for putting this together and having me at your event. Charlie Martin, AmCham President. Friend Barbara Franklin, former Secretary of Commerce and U.S. China Business Council Vice Chair. Good to have you here, Barbara. Ed Hotard from the U.S. China Business Council, as well, and then of course our Ambassador Randt. Ambassador, it's great to be with you this afternoon.

I'd like to acknowledge first of all the key contribution that the American Chamber of Commerce and the U.S. China Business Council are making to strengthen the China-U.S. trading relationship. It's a lot more than a trading relationship. Let's call it an economic relationship. You're making a great contribution to a very important partnership that exists in the world, and not just important for two countries. It's important because it is so big. It's important for the whole world.

China and the U.S. have been the two main engines of growth sustaining the international economic momentum. Since China opened its doors to the world 26 years ago, the scope of economic progress has been amazing. America's been developing our market economy for over 200 years. So we've been at making a transition to free enterprise and market economy and developing a private sector for over 200 years. China's been at it for 26 years. So there’s been a tremendous amount of progress.

The good thing for us is along the way we've learned some hard economic lessons. We see the strong partnership with the Chinese people and we hope to build closer ties by sharing the benefits of our own experience. It's a wonderful partnership in that we'll be able to learn from each other. And again, having been at this as a country for about 200 years, we also have some experiences to contribute.

Since 1979 China has averaged 9 percent GDP growth, which is just phenomenal. China is now America's third largest trading partner and our fastest growing export market. Since China joined the WTO, U.S. exports to China are up 80 percent. Economic engagement also produces benefits that transcend individual financial statements. We are doing more than just conducting business. Men and women doing business in China are introducing values: values of transparency, values of the rule of law, values for respect of property rights, individual freedoms, even business values. We hope that the U.S. businesses are providing training programs, providing new skills, providing new ways of looking at things. So you're making a contribution well beyond just what you're doing for your business. You are truly impacting society in a very positive way and you're contributing to society.

So there's a powerful connection between America's willingness to trade with any fair-minded partner and our own dynamic economy. We'd like to think that in the U.S. we look outward with a vision of economic engagement. We have always been a country of explorers. We have always been a country of travelers. We have always been a country of traders. So for that reason free market forces govern our economy. Our economy, our country was built on someone having an idea and being and having an entrepreneurial spirit and a drive and being able to realize that idea and turn it into a dream and turn it into a business.

And that's why we fully support free trade and we supported China's accession to the WTO and normalized our trade relations. The central basis for free market governance is trust and the collective wisdom of a country's citizens. America believes in open markets because free trade policies have strengthened our economy for more than 200 years. So if anyone wonders whether free enterprise works or whether free trade works, look at the U.S. economy. There is nothing like it in the world.

We seek mutually beneficial, enduring economic relationships with our partners and obviously with China. And we have had a lot of positive results and great performance with our relationship with China, going back to the early days, late '70s. We have all made great progress and I think we can all point to great benefits and outstanding performance that we have both had. And the relationship has been good for the U.S. and for U.S. workers and for U.S. businesses, and their relationship has been good for China and Chinese workers and Chinese businesses.

We do have -- as there are in all relationships, we have significant areas of concern and this is a timely meeting given that these areas of concern have been widely talked about in recent days. We have been encouraged by the attention that the Chinese leadership has given to intellectual property rights protection. And many of you will know that this is something that we have been talking about for some time. However, promises in principle eventually -- eventually need to lead to results. And we believe that it is about that time, when discussions about what is going to happen and commitments about what will happen eventually have to lead to some sort of tangible results. And we think that it is the time now.

We're very concerned about China's IPR enforcement. We're very concerned about the level of IPR enforcement. And I know there's been a lot of talk in recent days about textiles. But frankly, I refuse to put textiles and IPR in the same category. We can have a dispute about textiles and that's a very fair dispute to have. That's exactly the type of dispute and discussion and dialogue of that trading partnership we have. But I don't believe that intellectual property rights are negotiable. They're not something to put in a contract. One is a contractual matter, something that needs to be discussed with a department. And maybe once in a while there'll be disagreements. The other is a crime and it needs to be treated as such. That is what we're asking.

I don't believe that any government would allow or would treat as a minor offense counterfeit money. We don't believe that the abuse of intellectual property rights is any different. And this is what we're saying. So there are two very different matters here. There are trade contracts; there are things to negotiate; there are things to talk about. Intellectual property rights is not up for negotiation. And frankly, the abuse of intellectual property rights is not acceptable. So we need -- I'm saying we because we're partners -- we need to come up with a solution and we need to do that pretty quickly.

There are a lot of benefits to that. It's not just for U.S. companies. This isn't just something that works in one direction. There are also Chinese patents and Chinese trademarks that are growing, that will also need protection. And eventually, one day in the future, whether it be ten years from now or twenty years from now, this economy in China will evolve and will develop and will grow from one where of manufacturing products and commodities to one where it will be about innovation. And when that time comes, Chinese businesses will be very interested in intellectual property rights.

Interestingly -- and this is a fact that I just learned -- the number of applications domestically for patents is now larger for Chinese companies asking for a patent in China than for foreign companies asking for a patent. And it wasn't that way before. That means that Chinese companies are innovating and that Chinese companies also want intellectual property rights. So this is good for everyone. It is good for all parties. And frankly, it's about showing the world leadership if we want to be the true -- the true leaders in trade in the world and we are about leading the way and setting an example and being role models, then let's do that. Let's do that and let's start with intellectual property rights.

So that's the big issue from our standpoint and frankly it's not something that I have come to negotiate, nor is it something that anyone else is going to negotiate. We don't believe that something as fundamental as IPR needs to be negotiated. Let's negotiate something else.

Distribution of services are also an area of concern. I know we'll be talking about that. We would like to see progress on direct sales and we want U.S. companies to have a fair shot to build distribution networks here in China. And that's something that we look forward to speaking with our Chinese partners about. When China joined the WTO it agreed to publish all forthcoming regulations in draft form for public comment. That commitment has been uneven and we believe that the process can benefit with greater transparency and it also prevents regulatory conflicts. We believe that China should insist on a fully transparent regulatory process throughout all levels of government in China.

Finally, China should make progress on structural issues such as subsidies for State-owned enterprises. For several years U.S. officials have urged China to make progress on issues driving trade relations. The Bush administration would prefer to resolve trade issues with China through negotiation rather than legislation. President Bush understands that no one wins a trade war.

Unfortunately, the slow pace of progress risks an outbreak of protectionism. If Americans don't consider our terms of trade to be fair, they will not support trade. Those of us who favor economic engagement want to work with the Chinese leadership, but we need more than commitments. We need results. The absence of results only empowers those within the U.S. political system who are pushing an American retreat from the global economy. And I'm going to repeat that, because whoever's listening, I hope they listen because there's so much at stake here. The absence of results only empowers those within the U.S. political system who are pushing an American retreat from the global economy.

So unless the U.S. and China show results, everything we have worked for and everything that's at stake could be in jeopardy because opponents of free trade may get their way. So we need some help here. And if there's one thing I'm asking the Chinese government for, it is for some help. Because if not, we're both going to be at risk.

We believe that enforcement of our trade laws is important. At the same time the administration doesn't believe that new tariffs and other barriers are the right answer to reduce trade frictions. New economic walls between our citizens harm everyone. We believe that the best international economic system is one based on free trade, free flows of capital and market forces. President Bush is committed to strengthening and expanding the ties between China and the United States. We look forward to building on an already strong relationship as defined by candor, cooperation and mutual respect. And we think that could be done in the spirit of partnership. And I think it will be a great opportunity to show that we are interested in the future of free trade and that we are truly interested in the commercial relations among the two countries.

I want to repeat what I said at the beginning, and I would like this to be very, very clear. It's important that it be clear. We do not consider intellectual property rights to be a matter for negotiation. Intellectual property rights violations are a crime. And we don't believe we should be negotiating crimes with our trading partners. Everything else, everything else is up for negotiation.

So we've come a long way. We've had occasional disagreements and will continue to have them. And that's all in the spirit of the relationship. But this is a great time to demonstrate -- a great time to demonstrate the strength of the relationship. And a great time to show that we are committed to our workers, to our businesses, to our citizens, and also to the rest of the world because that is the price of leadership. And today trade and business and the growth of the economy is being led by the U.S. and China. So everyone is looking to us to make progress and to show the way. Show the way for the future of trade and business and free trade and globalization and prosperity. We are the ones that need to show the way. And I'll tell you, I believe we are up to it and we'll soon have a chance to prove it. Thank you very much for coming and appreciate your attention. Thank you.

ED HOTAR: Thank you, Secretary Gutierrez. I think your comments were really excellent and I think the clarity and incisiveness was well understood. We now have about ten minutes for questions from the floor.

QUESTION: One of the things that helped during the WTO negotiations was that Charlene Barshefsky came to the Chinese with a road map on what they would need to accomplish to get into the WTO because there were a vast number of changes to make. Have you come here with any kind of a road map or a list of achievables to help China fix IPR as that is a very broad and deep problem? And on behalf of the business community, I'd like to thank you for your remarks because it's good to hear something so strong on IPR. Thank you.

SECRETARY GUTIERREZ: The opportunity for a road map is the JCCT, which is the next time that we will come together and talk about our agenda and talk about what's important and talk about what needs to be done. But I don't want to suggest that everything is riding on me. And I believe that what we will need is the will and the determination to enforce intellectual property rights laws. We can have a great meeting but if that isn't here, if that isn't readily in the minds of our Chinese partners, then we're not going to get much accomplished at JCCT. So JCCT's the next big opportunity. That's where we really lay out the agenda. That's where we're going to have the road map. I would just ask for the willingness to enforce -- I think we have all proven that when we want to enforce something we can.

QUESTION: (Unintelligible) I have a question about textile issues. As you mentioned that textiles is (unintelligible), I would like to know whether anything in your mind about the fact that the Chinese surge into the U.S. market has kind of disrupted the trade pattern in which you have outward (unintelligible) programs with the Latin American countries. And this is a change of trade pattern that eventually China and U.S. need to deal with.

And another question is China has alleged that the WTO agreement does not -- did not include the interpretation that incorporated a (unintelligible) base textile (unintelligible). And then I would like to know whether you agree that kind of allegation and also would like to know whether the committee on implementation of textile agreements (unintelligible) will take any actions or espouses to China's concerns. Thank you very much.

SECRETARY GUTIERREZ: I appreciate the question. I think it's a very good question. We believe that what we did on textiles and the decisions that we made on textiles are very much our right to do so under the WTO agreement. And our Chinese partners don't agree. We'll have to sit down and look at the language because we believe we do have the right to do that and we exercise our right. And we saw market disruption in certain categories. And we also define market disruption. And it's defining in terms of percentages, what percent does the market have to increase from imports, how much does local production need to be down. So there are guidelines for that. And we believe that we have achieved those guidelines. And we'll be talking about that. We want to be sure that we both have the same interpretation of the WTO agreements. And that's what we should be talking about. That's emotional. That's subject to interpretation. We believe we have the right interpretation. That's what we should be talking about, not whether someone should be allowed to sell counterfeit goods.

QUESTION: I'd like to get your opinions on IPR as it extends to say financial services, insurance banking issues -- what is the scope of it?

SECRETARY GUTIERREZ: Oh, there are intellectual property laws. There is the Office of Trademarks and Patents. There are laws on the books that protect brands, that protect patents, that protect trademarks. All of those things should be protected. They're protected by a law so they should be protected by law enforcement.

QUESTION: How important is the Chinese currency valuation to you? What is your objective in that?

SECRETARY GUTIERREZ: Well, I'll tell you, I -- you said to me? It's actually very, very important for the Secretary of the Treasury. And I will let him know that you asked that question. I hope you understand. I stay away from currency issues.

MODERATOR: I'd like to say I think how fortunate the American business community in China is today to have Secretary Gutierrez as the Secretary of Commerce. And having someone with your background, experience and really in-depth knowledge of the business world, particularly the global business world, is going to be of great value to us as we conduct our business here. Thank you very much.

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Biography

Carlos M. Gutierrez is the 35th Secretary of the U.S. Department of Commerce, the voice of business in government. The former chairman of the board and chief executive officer of Kellogg Company, Secretary Gutierrez is a core member of President Bush's economic team. In nominating Mr. Gutierrez, President Bush said, "He understands the world of business, from the first rung on the ladder to the very top. He knows exactly what it takes to help American businesses grow and to create jobs."

Secretary Gutierrez oversees a diverse Cabinet agency with some 38,000 workers and a $6.5 billion budget focused on promoting American business at home and abroad. His Department gathers vast quantities of economic and demographic data to measure the health and vitality of the economy, promotes U.S. exports, enforces international trade agreements, regulates the export of sensitive goods and technologies, issues patents and trademarks, protects intellectual property, forecasts the weather, conducts oceanic and atmospheric research, provides stewardship over living marine resources, develops and applies technology, measurements and standards, formulates telecommunications and technology policy, fosters minority business development and promotes economic growth in distressed communities.

Opening international markets to U.S. companies to create jobs and build a stronger America is a top priority for Secretary Gutierrez. He believes passionately in President Bush's vision of a 21 st century where America is the best country in the world with which to do business and where everyone has the opportunity to experience the joy and pride of ownership and to live the American Dream. "We have the best people, we have the training, we have the culture," Gutierrez says. "I believe the 21 st century is really and truly the American century."

Secretary Gutierrez was sworn into office on February 7, 2005. Born in Havana, Cuba in 1953, he came to the United States with his family in 1960. In 1975 he joined Kellogg as a sales representative. Rising to president and chief executive officer in 1999, he was the youngest CEO in the company's nearly 100-year history. In April 2000, he was named chairman of the board of Kellogg Company.

Secretary Gutierrez studied business administration at the Monterrey Institute of Technology in Queretaro, Mexico. He and his wife, Edilia, have three children, Carlos, Erika and Karina.