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

 

Grand Hyatt Hotel

Beijing, China

July 12th, 2005

MODERATOR:  Ladies and gentlemen it’s my great pleasure to introduce today our Secretary of Commerce Carlos Gutierrez.  He had a tough day yesterday negotiating on your behalf and, for this morning’s session, which will be about half an hour, he’d like to explain to you some of the outcomes from yesterday’s meetings.  Please welcome Secretary Gutierrez.

 

SECRETARY GUTIERREZ:  We were just catching up.  We just realized that we were in the cereal business together in Viet Nam some time ago.  Thank you for the kind introduction and thank all of you for your interest in being here.  All of you members of the AmCham and U.S.-China Business Council are doing a great deal to strengthen and improve the China-U.S. economic relationship.  I think you do as much as anyone else.  And, in many ways, on a day-to-day basis what you do does more than anything else we can do to strengthen the relationship:  to really make it meaningful, to make it real, to build long-term personal relationships which is so important, as you well know, in our business dealing here in China.  So, I want to thank you for everything that you are doing.  It’s not just the business and the products that you are selling but in many ways you’re spreading values, whether it be governance, whether it be training people, empowering people, believing in people, holding people accountable, giving them authority.  Things that we believe say great things about U.S. business and really go beyond just selling a product.  So, thank you for everything you do.

 

As you well know, China and the U.S. have been the two main engines driving growth in the global economy.  Without strong growth in China and the United States, economic activity around the world would be suffering.  There’s no question that these two countries are, today, the drivers of worldwide growth.  The U.S. being the fastest growing developed market and China the fastest growing developing market.  The most striking aspect about the Chinese economy is the remarkable progress made over a relatively short period of time.  Since China opened its economy and really opened up to the world 26 years ago, the scope of economic progress has been truly amazing.  If you think about it, in America we have been developing our new market economy and developing a strong private sector for over two hundred years.  So, we’ve had a little bit more time to do that.  China has taken long strides from a government-controlled economy to a greater competition and more open commercial activity.  And, you can see and feel the results just about everywhere you go.  So, as we think about this relationship, we should be mindful that China has come a long way in a relatively short period of time. 

 

We seek a closer partnership with the Chinese people and we hope to build closer ties by sharing the benefits of our experience.  The Joint Commission on Commerce and Trade is one of the most effective tools to address bilateral issues and improve relations.  We just finished a productive meeting and I would like to run you through some of the highlights.

 

First, let me just say, that the real outcome of the meeting will be known when we see the results in the months ahead.  It is always very tempting to declare a meeting successful.  But, frankly, as great as it felt in the meeting and as many things as we said in the meeting, we will not know if this meeting was a success or not until some months in the future.  Because, ultimately, what will make it successful will be results, will be outcomes, will be actions.  And, that’s what we will have to wait and monitor in the future.  So, we will continue to monitor the commitments and insure that we ware all following through on those commitments. 

 

As I said here last month, one of the most critical areas to the United States is full protection of intellectual property rights by our trading partners.  This has been an issue of special concern here in China and we saw signs during our meetings yesterday that China is preparing to address this problem with a deeper level of seriousness.  China committed to raise the number of IPR prosecutions in the Chinese marketplace.  Many people will be going to jail in China for stealing intellectual property.  A range of (inaudible) techniques will help stop IPR pirates.  To improve protections for movies, China will clamp down on sales of products that are still going through import and censorship reviews.  Dedicated law enforcement teams will carry out the crack down.

 

As I am sure you all know, stolen software is widely used throughout China.  The Chinese government will now classify end user piracy as an activity that brings harm to the public interest.  China’s declaration means that anyone using stolen software could potentially face punishment across the country.  Of course, as with anything else, the effectiveness of this will depend on the enforcement. 

 

At last year’s JCCT China committed to make progress in insuring the use of legal software in government agencies and progress has been made in this area.  This year they have made promises to take steps to insure legal use of software in state owned enterprises and I am sure all of you who are in that business know that this has been an important issue for all of us. 

 

Competition between trading partners is the key to protecting intellectual property.  Officials from China and the United States will serve together in an IPR law enforcement working group.  Officials from the Department of Homeland Security, Justice and the FBI will work with Chinese experts from the Supreme Peoples Procuratorate to the Ministry of Public Security to the general administration of Customs to turn the table on IPR criminals.  The group will share information at a new level.  They will report big seizures.  They’ll keep hard statistics to track success.  And, the group will make sure that Chinese authorities are armed with our most effective enforcement techniques so that we gain the upper hand against global IPR criminals.

 

Trade fairs in China have been both a supermarket for piracy and a distribution channel for illicit goods.  China has made efforts in the past to address this problem but now has promised a broader, stronger more intensified effort.  Law enforcement works best when prosecution quickly follows the crime.  New guidelines should shrink the time it takes a referral to move from the agencies that detect the crime to those that prosecute the crime.  As all of you know, protecting IPR in China will take strong and sustained efforts by the Chinese government.  Foreign governments and companies can also play a role.  We don’t have an instant fix.  However, we did agree on additional steps that will useful in improving the IP situation for you here on the ground.

 

You’re probably aware that China is considering measures that would have restricted government purchases of software to domestic suppliers.  Much of the developed world belongs to WTO’s government procurement agreement.  The GPA seeks an open and competitive process for government procurement.  When China joined the WTO there was an agreement that they would also join the GPA.  It also committed to start negotiating its membership to GPA as soon as possible.  China will now intensify consultations to pave the way for membership and will keep its draft regulations under review until they are fully consistent with WTO rules.  Those of you in the software business know that these regulations were about to be published and the government of China has agreed to delay these regulations.  And, hopefully, when they are published they will be not only WTO consistent but we have requested that they be also consistent with GPA. 

 

For the first time since joining the WTO China will hand the WTO a list of all the government subsidies taking place in China by the end of the year.  This will give us a much clearer picture of what is actually happening in the Chinese economy.  China also agreed to publish all the rules and procedures for getting approval to enter the distribution services market in a single journal.  China also promised to take some steps toward increased transparency in its issuance of trade related laws and regulations.  This will bring greater transparency for U.S. companies doing business in China.

 

On distribution rights, China confirmed that all of the companies located in free trade zones will be able to freely distribute products throughout China.  To help other companies gain distribution rights, China is publishing a “how to guide” on the internet--also a step forward in transparency. 

 

President Bush wants to maintain strong and lasting economic ties between China and the United States.  We know that the way to build trust is to speak and act with candor, cooperation, and with mutual respect.  As I said earlier, today’s meetings are an important step forward, but it is just one step and we need to follow through to insure that we are both delivering on the commitments. 

 

Right now, the Chinese have full access to the U.S. market.  We have the largest market in the world and Chinese companies have full access to this growing and vibrant market.  I wish I could say that American businesses enjoyed the same access in China.  But the reality is that we do not and frankly we will not be satisfied until that imbalance is rectified.  We are not going to achieve that overnight.  But, we have to be consistent in our purpose and know that every time we meet, every time we talk about our relationship, we take steps forward, with the view that one day it will be rectified – the balance will be rectified.  It’s just not going to happen tomorrow.  The important thing is keep making progress, keep pushing forward, keep believing that this economy is going to continue to grow, going to continue to flourish and it will be an even greater market in the future. 

 

The guiding principle, of course, is that results matter.  Agreements count for little unless they are implemented.  And, we talked about this yesterday, and I believe there is broad agreement on both sides that there is no substitute for results.  And, we’ll be working closely with China to make certain these reforms deliver concrete results, results that can be tracked and measured.  So, I hope all of you will continue working with us to help China and the U.S. build candid, cooperative and constructive relationships that are in the interests of both our countries and in the interests of our presidents.  You can do so much to help us out and please don’t be passive players.  I know you have your business to take care of I know you are very focused on your business and that of course is your number one priority.  But, I think in this moment, in this historic time, you also play a role in helping China and the U.S. continue to come together economically and where there are issues, lets hear about them so we can address them.  But, think about what you are doing you are truly establishing probably what is and what will be the world’s greatest economic relationship in not too many years to come.  So thank you for your efforts, thank you for everything you are doing and thank you for your attention.  Thank you very much. 

 

[Applause]

 

MODERATOR:  Thank you Mr. Secretary.  Couple things, we have time for three questions.  I would like to remind the audience that we will not be taking media questions. We have some microphones around so if you would raise your hand and then we will pass the questions. 

 Thank you.

 

QUESTION:  My question, Mr. Secretary, is was 3G issue discussed in JCCT, or will it be discussed?  Thank you.  The third generation mobile network.

 

SECRETARY GUTIERREZ:  It was not discussed as part of the agenda.  We actually have a meeting today with the Ministry of Information and we will most likely talk about that in more detail.  There may be something in the slip, in the sheet that we passed out on outcomes. It wasn’t one of the major outcomes but there maybe a statement in there on 3G.

 

QUESTION:  Mr. Secretary, you said agreements need to show results.  If you do not see results from these agreements would you be willing to take China to the WTO?

 

SECRETARY GUTIERREZ:  Well, we’re focused on achieving the results. We’re focused on working together.  As you can imagine, when you asked your question, I am not going to speculate as to what we will do and what won’t do if things don’t turn out the way we hope.  We are going to work very hard to insure that we do deliver results and that we are getting done what we agreed to.  If we don’t we’ll have to cross that bridge.

 

QUESTION:  Mr. Secretary, I work for Pfizer and I want to thank you on behave of all the member companies here for the great work that the embassy has done and the PTO. They’re truly great supporters of us.  My question relates to IPR.  I know that you said in your last visit here that you are very supportive of this.  It’s the lifeblood of our industry.  For those of us who have issues, what can we do to help you follow up on these open issues? 

 

SECRETARY GUTIERREZ:  Thank you.  The first way I will answer that probably the most difficult one for you which is, if you have issues bring them forward.  One of our frustrations, frankly, is that when we talk to our Chinese partners, sometimes they will say, well that’s not what we are hearing from industry.  In fact when we ask industry, industry says things are fine.  And I understand that, because I’ve done business here and I have had my company here.  Nobody wants put their own industry in jeopardy, so you would rather do it through a body or do it through the government.  But, to the extent that – please know that every time you say things are fine, and they are not, it just makes it more difficult for us to convince Chinese officials that there is work to do.  That’s probably the first thing I will say.

 

One of the agreements that we reached is that there will be a representative of the Chinese government in the embassy in Washington--at their embassy – to consolidate IPR issues and complaints.  Hopefully that will be a great tool that we can use.  In the time being I would say, use the resources of the Commerce Department.  And, if I may, refer to resources at the U.S. Embassy under the leader ship of Ambassador Randt.  On your right is John Dudas who is the head of PTO (Patents and Trademarks).  So, please contact us.  We need to know the information and we need to have facts.  And, they are very helpful. Because, when we talk in generalities, we don’t get through because they want to hear facts.  So, you could be of a lot of help--and again by saying things are doing fine when they are not you could really set us back some times.  So I really appreciate the question.  Thank you.