Copyright 2000 Federal News Service, Inc.
Federal News Service
May 17, 2000, Wednesday
SECTION: PREPARED TESTIMONY
LENGTH: 8199 words
HEADLINE:
PREPARED TESTIMONY OF TESTIMONY OF AMBASSADOR CHARLENE BARSHEFSKY U.S. TRADE
REPRESENTATIVE
BEFORE THE HOUSE AGRICULTURE
COMMITTEE
SUBJECT - CHINA'S WTO ACCESSION AND PERMANENT NORMAL
TRADE RELATIONS
BODY:
Mr. Chairman,
Congressman Stenholm, Members of the Committee:
The House's vote on
extension of permanent Normal Trade Relations to China, as China enters the
World Trade Organization, will be one of the most trade and foreign policy
decisions the United States has made in many years. I thank you for this
opportunity to testify before the Committee on its significance for the United
States.
INTRODUCTION: ONE-WAY CONCESSIONS
In a sense, this
decision presents us with a simple choice.
Last November, after years of
negotiation, we reached a bilateral agreement with China on WTO accession which
secures broad-ranging, comprehensive, one-way trade concessions on China's part.
These concessions: - Open China's markets to American exports of industrial
goods, services and agriculture to a degree unprecedented in the modem era,
through specific and detailed commitments on tariffs, quotas, trading rights,
distribution, sanitary and phytosanitary measures, the full range of services
industries and other issues. Strengthen our guarantees of fair trade, with
specific provisions to address dumping into the U.S. market, import surges,
technology transfer as a condition of investment and other practices intended to
draw jobs and research to China, textile trade and other issues. Give us far
greater ability to enforce China's trade commitments. And facilitate the WTO
accession of Taiwan, which has made an equally valuable set of market access
commitments. By contrast, we agree only to maintain the market access policies
we already apply to China, and have for over twenty years, by making China's
current Normal Trade Relations status permanent.This is the only policy issue
before Congress. Regardless of our decision, China will enter the WTO.
Regardless of our decision, it will continue to sell in the American market. The
only question Congress will decide is whether we accept the benefits of China's
accession and the agreement we negotiated; or whether on the contrary, by
turning away from permanent NTR, we enable our competitors in Asia, Latin
America, Canada and Europe to take advantage of these benefits while American
entrepreneurs, farmers and factory workers are left behind.
I. CHINA'S
WTO ACCESSION IN HISTORIC CONTEXT
From the perspective of trade policy,
therefore, this is a relatively simple decision. But China's WTO accession also
has deeper implications.
China is the world's most populous country;
over the past decade, it was the world's fastest-growing major economy. Our
relationship thus affects all of America's foreign policy and security goals in
Asia today, and its future course will be one of the major issues for Americans
throughout the next decades. And the WTO accession, together with permanent NTR,
will have a substantial impact on the future of China and our relationship with
China.
When we look at our relationship with China today, we see a
number of serious differences. In these cases, we have and will continue to
assert our values and interests with candor and firmness -- as we have recently
done at the UN Human Rights Commission in Geneva. At the same time, however, we
also see a responsibility to develop a stable, mutually beneficial relationship
in which we and China act upon areas of shared benefit and mutual interest.
China's WTO accession, together with permanent NTR, is an example of just such
shared interest and benefit.
- By opening the Chinese economy to U.S.
goods, services and agricultural products, the WTO accession and
PNTR will create significant new opportunities for American
businesses, farmers and working people; and it will help to reform and improve a
deeply imbalanced existing trade relationship. By helping to open and liberalize
China's economy, WTO accession will create new economic freedoms for Chinese
citizens and promote the rule of law in many fields now dominated by state power
and control. A number of leading Chinese and Hong Kong advocates of democracy
thus endorse WTO membership not only for its economic value, but as a foundation
for broader future reforms. And by integrating China more firmly into the
Pacific and world economies, WTO accession will give China a greater stake in
regional stability and prosperity. Together with our military presence in the
Asia-Pacific and our alliances with Japan, South Korea and other Pacific
democracies, it will thus be a factor in favor of long-term regional peace.
AMERICA AND THE TRADING SYSTEM
Let me now turn to a detailed
review of our bilateral agreement on WTO accession, beginning with the historic
context in which we should view this event.
The World Trade Organization
has its roots in the General Agreement on Trade and Tariffs, or GATT. Its
creation in 1948 reflected the personal experience of President Truman and his
European counterparts in Depression and war. They had seen the Smoot-Hawley Act
in America and similar protectionist policies overseas deepen the Depression and
contribute to the political upheavals of the 1930s. Fifteen years later, they
believed that by reopening world markets they could promote growth and raise
living standards; and that, in tandem with a strong and confident security
policy, as open markets gave nations greater stakes in stability and prosperity
beyond their borders, a fragile peace would strengthen.
The work they
began has now continued for over fifty years, and the faith they placed in open
markets and the rule of law has been abundantly vindicated. Through eight Rounds
of negotiations, and as 113 new members joined the 23 founders of the GATT, we
abandoned the closed markets of the Depression era and helped to foster a
fifty-year economic boom. America, as the world's largest importer and exporter,
benefits perhaps most of all: the efficiency of our industries and the high
living standards of our families reflect both the gains we receive from open
markets abroad, and the benefits of our own open- market policies at home.
But the development of the trading system has had equally important
effects worldwide. As it has developed over the past fifty years, the world
economy has grown six-fold; per capita income nearly tripled; and hundreds of
millions of families escaped from poverty. And perhaps the best testimony to
this success is that many of the new applicants to join the WTO are nations
which are abandoning the postwar experiment in communist central planning.
CHINA FROM REVOLUTION TO REFORM
This brings me to China.
With the Communist revolution, China set out upon a very different road.
After 1949, it shut doors it had once opened to the world. Among its new
leaders' first steps were to expel foreign businesses from China and bar direct
economic contact between Chinese citizens and the outside world. Inside China
were similar policies: destruction of private internal trading networks linking
Chinese cities and villages, abolition of private property and land ownership,
and of course suppression of the right to object to these policies.
In
essence, one cannot separate postwar China's deepening isolation from the
outside world from its steadily increasing internal repression and diminishing
space for individual life and freedom. Likewise, China's economic isolation had
severe consequences for regional peace and stability: Asia's largest nation had
little stake in prosperity and stability -- in fact, saw advantage in warfare
and revolution -- beyond its borders. Every Pacific nation felt the consequences
not only in economics and trade but in peace and security.
China's
domestic reforms since 1978 have helped to undo this isolation, integrating
China into the Pacific regional economy as they opened opportunities for Chinese
at home. The results have been profoundly positive: as China's people regained
the right to farm their own land, open businesses and choose their own places of
employment, they have found new opportunities both to raise their living
standards and determine their own futures. At the same time, China has moved
gradually from a revolutionary role in the region to a willingness to play a
positive and stabilizing role on issues as various as the maintenance of peace
on the Korean peninsula and the Asian financial crisis.
And as China has
opened its economy to the world, it has become a more integrated, responsible
member of the Pacific community. To choose a specific example, in 1997, South
Korea and the ASEAN states were the market for $22.3 billion
worth of Chinese semiconductors, video CD players, rice, apparel and other
goods. Setting Hong Kong aside, that is one dollar in six of China's exports to
the world. These countries were also the source of $6 billion
in foreign direct investment in China, meaning (again with Hong Kong excepted) a
seventh of the FDI China received that year.
This has implications not
only for China's economy, but to our own vital interest in a peaceful and stable
region - because 1997 was, of course, the year of the financial crisis. A
generation ago, China might have seen the event as a revolutionary opportunity.
In 1997 its reaction was entirely different: the crisis was a threat to the
export markets that support Chinese factories and farm income, and to the Asian
investment that creates jobs and growth.
The constructive and
stabilizing policies China adopted, through currency stability and contribution
to IMF-led recovery programs, thus reflected basic self-interest. But in
historic context, they enabled us to deal with the crisis primarily as an
economic and humanitarian disaster, rather than a security crisis. And they are
thus evidence of a change in China's view of its own regional interests and role
whose importance for our national security cannot be overstated.
THE
ROLE OF U.S. TRADE POLICY
A bipartisan U.S. trade policy over the past
thirty years has contributed to these positive trends.
Broadly speaking,
our goals have been to support Chinese domestic economic reform, integrate China
into the Pacific regional economy, through a variety of means including
commercially meaningful agreements that open opportunities for Americans. This
has extended from the lifting of the trade embargo in 1972, to our Bilateral
Commercial Agreement in 1980, more specific agreements in the 1980s; and then a
series of recent and highly focused agreements including: Intellectual Property
- In the early 1990's, China's failure to protect intellectual property rights
was one of the most problematic aspects in our trading relationship. Piracy of
films, software, CDs, and other intellectual property-based products cost our
industry hundreds of millions of dollars and led to trade confrontations with
China, including invocation of sanctions on two occasions. The United States
ultimately negotiated agreements in 1995, and then won further commitments in
1996 that led China to close over 70 pirate production facilities; cease the
export of pirated products and significantly improve enforcement - the principal
focus of the agreements. Textiles - Likewise, textile transshipment and market
access barriers have historically been a problem in our textile trade
relationship with China. While problems remain, two separate agreements, in 1994
and 1997, combined with sustained enforcement efforts by the U.S. Customs
Service and the Administration, as well as imposition of triple charge
penalties, have helped to mitigate these problems. The 1997 agreement, in fact,
committed China for the first time to significantly reduce its textile import
restrictions. Agriculture - Most recently, our Agreement on Agricultural
Cooperation in April of 1999 lifted long-standing bans on exports of American
citrus, meats and Pacific Northwest wheat, which were imposed due to China's
unscientific sanitary and phytosanitary measures. As in the cases of
intellectual property and textiles, we continue to hold frequent consultations
with the Chinese authorities charged with implementing the agreement, and have
seen very significant results in the first shipments of Pacific Northwest wheat,
California and Florida citrus, and U.S. meats to China.
Taken as a
whole, this work has helped to open the Chinese economy; created a series of new
opportunities for Americans; and given the Chinese public a much broader array
of contacts with the outside world than at any time since the late 1940s. But
the work is only partly done.
China's trade barriers remain very high; a
number of policies dating from the 1950s are still unchanged; and China's
integration with the world economy remains insecure. Likewise, China's neighbors
continue to face barriers to an economy which -- like Japan's -- could be a much
greater engine of growth for the region. One index of this is our relatively low
export levels to China. Since we extended Normal Trade Relations (formerly MFN
status) to China in 1980, our exports to China have only grown from
$3.8 billion to $13.1 billion last year. This
$10 billion in growth is far less than our export growth to
almost any other major trading partner -- Europe, Japan, South Korea, ASEAN,
Canada, Mexico, Taiwan or the Caribbean Basin countries -- over the same period.
II. CHINA'S WTO ACCESSION, PNTR, AND U.S. TRADE
INTERESTS
The WTO accession agreement therefore builds upon thirty years
of work, to reach a detailed, specific and enforceable series of commitments
covering the range of American trade priorities in China. As China has looked to
WTO accession to create jobs and foster sustainable growth through economic
reform, we have won commercially meaningful and enforceable commitments that
help Americans on the farm and on the job export to China by addressing the many
layers of trade barriers and policies which limit access; strengthen guarantees
of fair trade; and give us additional tools for enforcement and compliance.
Thus, in all respects, this bilateral agreement meets the high standards
President Clinton set years ago. Let me now offer an overview of the agreement,
and then turn to its specific features.
OVERVIEW
First, our
bilateral agreement is comprehensive. It will reduce Chinese trade barriers
across the range of goods, services and agricultural products; eliminate or
sharply reduce restrictions on freedom to import and distribute goods within
China; address industrial policies intended to draw jobs and technology to
China; and strengthen our guarantees of fair trade practices. All these reflect
the ideas, advice and guidance we have received over years of negotiations from
Members of the Committee and Congress as a whole.
Second, it is fully
enforceable. China's commitments in all areas are specific and include
timetables and final dates for full implementation. These commitments are
enforceable through our trade laws, WTO dispute settlement and other special
mechanisms including periodic multilateral review of China's implementation and
compliance.
These will, of course, require vigilance and constant
commitment to enforcement by the United States as well as by China's other
trading partners in the WTO. We are committed to vigorous monitoring and
enforcement, and are already preparing for this through a number of different
means: for example, the President's budget this year requests a tripling of the
Commerce Department's budget for China trade enforcement, and an additional
full-time China officer at USTR.
And third, its results will be rapid.
On accession to the WTO, China will begin opening its market from day one in
virtually every sector. The phase-in of further concessions will be limited to
five years in almost all cases, and in many cases one to three years.
I
will now turn to a review of the details in each major sector.
AGRICULTURE
American farm and ranch families will be among the
principal beneficiaries of this agreement. Across the spectrum of commodities,
China will make substantial reductions in tariffs both on accession to the WTO
and over time. It will adopt tariff-rate quotas that provide significant market
access for bulk commodities of special importance to American farmers. It will
agree to apply science-based sanitary and phytosanitary standards including in
grains, meats and fruits, to reduce trade-distorting domestic supports and
eliminate export subsidies. Notable achievements here include:
Tariffs -
China's agricultural tariffs will fall from 31% to 14% for our priority items,
extending from meats to dairy, citrus, tree nuts, seafood, wine and beer, and
other products. All cuts occur over a maximum of four years, and will be bound
at the applied levels. To cite a few examples:
Current Level Under the
Agreement
Beef 45% 12% Pork 20% 12% Poultry 20% 10% Citrus 40% 12%
Grapes 40% 13% Apples 30% 10% Almonds 30% 10% Cheese 50% 12% Ice Cream 45% 19%
Crayfish 30% 15% Lobster 30% 15% Wine 65% 20% Beer 70% 0%
TRQs - China
will liberalize its purchase of key bulk agricultural commodities like wheat,
corn, rice, cotton and soybean oil, through tariff-rate quotas - that is,
application of very low tariffs (1% for bulk commodities) on a set volume of
commodities. We include in this portion of the agreement provisions to maximize
the likelihood that these TRQs are filled. In particular, a portion of each TRQ
is reserved for importation through private traders, and TRQs which have not
been filled by a set date will be redistributed to other end-users with an
interest in importing on a first-come, first-served basis. Some salient examples
include:
1998 Total Imports Initial TRQ 2004 TRQ Private Share
Cotton 200,000 mt 743,000 mt 894,000 mt 67% Wheat 2,000,000 mt 7,300,000
mt 9,636,000 mt 10% Corn 250,000 mt 4,500,000 mt 7,200,000 mt 25% grows to 40%
Rice total 250,000 mt 2,660,000 mt 5,320,000 mt .... short/med grain 1,330,000
mt 2,660,000 mt 50% long grain 1,330,000 mt 2,660,000 mt 10%
Export
Subsidies - China will eliminate agricultural export subsidies. This is an
important achievement in its own right, and a step toward our goal of totally
eliminating export subsidies worldwide.
Domestic Support - China has
committed to cap and reduce trade- distorting domestic subsidies. China also
committed to provide greater transparency to make its domestic support measures
more predictable.
Sanitary & Phytosanitary Standards - China will
agree to apply sanitary and phytosanitary standards based on science. Among
other things, this will give us additional means of enforcing the Agreement on
Agricultural Cooperation and its commitment to lift long-standing bans on
American meats, citrus fruit and Pacific Northwest wheat.
SERVICES
China's commitments in other sectors are equally comprehensive.
In services, China will open markets across the spectrum of distribution
services, financial services, telecommunications including the Internet,
professional, business and computer services, motion pictures, environmental
services, and other industries. In some fields, such as audiovisual services,
China will be one of only a very few WTO members with specific and binding
commitments. China will also participate in both of the WTO's newest services
agreements - the Agreement on Basic Telecommunications and the Agreement on
Financial Services.
Specific commitments in the services industries
include the following:
Grandfathering - China will protect the existing
activities and market access of all service providers operating in China at the
time of accession. This includes financial services.
Distribution -
China now generally prohibits firms from distributing products other than those
they make in China, or from controlling their own distribution networks. Under
the Agreement, China has agreed to liberalize wholesaling and retailing services
for most products, including imported goods, throughout China within three
years. This will remove all restrictions on wholesaling, retailing, maintenance
and repair, marketing, customer service and transportation, along with
restrictions on auxiliary services including trucking and air express delivery,
air courier, rental and leasing, storage and warehousing, advertising and
others. This is of immense importance in its own right, and as noted below, will
help our exporters of industrial goods and farm products to do business more
easily in China.
Telecommunications - China now prohibits foreign
investment in telecommunications. With WTO accession, it will join the Basic
Telecommunications Agreement, implementing regulatory principles including
interconnection rights and regulatory rules. It will end geographic restrictions
for paging and value-added services such as the Internet within two years,
mobile and cellular within five years, and domestic wireline and closed user
groups in six. It will also end its ban on foreign direct investment in
telecommunications services, allowing 49% foreign investment in all services and
50% foreign ownership for value-added and paging services in two years.
Insurance - Currently only two U.S. insurers are operating in China's
market. With WTO accession, China agrees to award licenses solely on the basis
of prudential criteria, with no economic-needs test or quantitative limits on
the number of licenses issued; progressively eliminate geographic limitations
within three years, and permit internal branching consistent with the
elimination of these restrictions; over five years expand the scope of
activities for foreign insurers to include group, health and pension lines of
insurance. For non-life insurance, branch and joint-ventures at 51 percent
equity share are permitted on accession, and wholly-owned subsidiary permitted
within two years from date of accession. For life insurance, joint ventures are
permitted with the partner of choice at 50 percent equity share upon accession.
Banking - Currently foreign banks are not permitted to do local currency
business with Chinese clients, and only a few can engage in local currency
business with their foreign clients. China also imposes severe geographic
restrictions on the establishment of foreign banks. With this agreement, China
commits to full market access in five years for U.S. banks. China will allow
internal branching and provide national treatment for all newly permitted
activities. It will also allow auto financing on accession, and allow local
currency business with Chinese enterprises starting two years after accession,
and allow local currency business with Chinese individuals from five years after
accession. Both geographic and customer restrictions will be removed in five
years.
Securities - China will permit minority foreign owned joint
ventures to engage in fund management on the same terms as Chinese firms.
Minority joint ventures will be allowed to underwrite domestic equity issues and
underwrite and trade other securities (debt and equity).
As the scope of
business expands for Chinese firms, foreign joint venture securities companies
will enjoy the same expansion in scope of business. China has also agreed to
hold regular consultations with the U.S. Treasury Department under the auspices
of our Joint Economic Commission with China. The purpose of this is to exchange
information and assist the development of China's financial and capital market.
Audiovisual - China does not now allow foreign participation in
distribution of sound recordings. Under the agreement, China will allow 49%
foreign equity for the distribution of video and sound recordings, majority
ownership in three years for construction and ownership and operation of
cinemas. China has also agreed to allow the importation of 20 films per year on
a revenue-sharing basis.
Travel and Tourism - U.S. travel agencies will
now be able to provide a full range of services for Americans in China, such as
access to government resorts and major tourist centers.Other - Also covered is a
broad range of other services. In the professions, China has made a full range
of commitments for architecture, engineering, accounting, and legal services.
Likewise, new opportunities will open in computer and business services, with
China making commitments on hardware installation, data processing and
tabulation services, and time- sharing services software implementation
services, systems and software consulting services, systems analysis services,
systems design services, programming services, systems maintenance services,
data processing services, input preparation services. Other fields include
management consulting, environmental services, franchising, express delivery and
many more. In each, China has made specific, enforceable commitments that open
markets and offer competitive American industries important new opportunities.
INDUSTRY
In industrial goods, China will cut tariffs from an
average of 24.6% in 1997 to 9.4% by 2005 and bind them at these new, lower
levels. It will eliminate quotas and other numerical restrictions. And it will
allow American firms to import and distribute their products freely in China.
This is essential, as American companies, farmers and workers need the ability
to import, export and distribute goods in China to compete effectively -- rights
currently denied but which will be permitted under the agreement, allowing our
businesses to export to China from here at home, and to have their own
distribution networks in China, rather than being forced to set up factories
there to sell products through Chinese partners. Some highlights include:
Trading Rights - China will grant American companies, over a three- year
phase-in period, rights to import and export most products without Chinese
middlemen. Currently, the right to engage in trade (importing and exporting) is
strictly limited; only companies that receive specific authorization or who
import goods to be used in production have such rights. This limits not only the
ability of U.S. companies to do business in China, but in particular has limited
U.S. exports.
Fertilizer - As an addendum to our November 1999 bilateral
agreement, we have reached an agreement with China that will effectively provide
market access for U.S. fertilizer. The agreement sets up a TRQ system for
importation of fertilizer products of priority interest to the United States
that is similar to the system we negotiated for agricultural products.
Distribution - As in the case of trading rights, the right to distribute
products is critical to our ability to export successfully to China. After
accession, China will allow American firms to market, wholesale, retail, repair
and transport their products -- whether produced in China or imported. At
present, China generally prohibits companies from distributing imported products
or providing related distribution services such as repair and maintenance
services. China will permit enterprises to engage in the full range of
distribution services over a three-year phase-in period for almost all products.
Tariffs - China will make substantial tariff cuts on accession with
further cuts phased in, two-thirds of which will be completed in three years and
almost all of which will be completed within five years. On U.S. priority
industrial items, tariffs will drop on average to 7.1% a figure comparable to
those of most major U.S. trading partners. As in agriculture, China will bind
tariffs at these low levels. Some specific examples include:
Information
Technology Agreement - China will participate in the Information Technology
Agreement (ITA), eliminating all tariffs on such information technology products
as semiconductors, telecommunications equipment, computer and computer equipment
and other items by 2003 in most cases and 2005 in a few others.
Autos -
China will reduce tariffs on autos from rates of 80%-100% today to 25% in 2006,
and on auto parts to an average of 10% from an average of over 23%.
Wood
and Paper Products - China will reduce high tariffs on wood and paper to levels
generally about 5% and 7.5% respectively. As noted below, China will also
implement any sectoral APEC Accelerated Tariff Liberalization initiative adopted
by the WTO in this sector.
Chemicals - China will commit to the vast
bulk of chemical harmonizations, reducing tariffs from present rates between
10%-35% to an average rate of 6.9%. These reductions include reductions on all
priority U.S. chemical exports.
Furniture - China will reduce its
current average tariff rate of 22% to 0% on all furniture items covered by the
Uruguay Round sectoral initiative, by 2005.
Accelerated Tariff
Liberalization -- China has agreed to implement the Accelerated Tariff
Liberalization initiative of APEC now under consideration in the WTO, when
consensus is achieved. This would eliminate tariffs on forest products,
environmental goods and services, energy and energy equipment, fish, toys, gems
and jewelry, medical equipment and scientific instruments, and also includes
chemical harmonization.
Non-Tariff Barriers - China will eliminate
quotas and other quantitative restrictions upon accession for top U.S.
priorities, including certain fertilizers and fiber-optic cable.
PROTOCOL ISSUES
Finally, our bilateral agreement deals,
appropriately, with the special and unusual characteristics of the Chinese
economy. These include the high degree of state participation in the Chinese
economy; and industrial policy measures intended to draw jobs and technology
from the U.S. and other trading partners to China, such as local content, offset
and export performance requirements as well as forced technology transfer. In
addition, we have negotiated special measures to address import surges from
China and unfair export practices like dumping.Altogether, no agreement on WTO
accession has ever contained stronger measures to strengthen guarantees of fair
trade and to address practices that distort trade and investment. China's major
commitments in this regard include:
Import Surge Protection - China has
agreed to a twelve-year product- specific safeguard provision, which ensures
that the U.S. can take effective action in case of increased imports from China
which cause market disruption in the United States. This provision applies to
all industries, permits us to act based on lower showing of injury, and act
specifically against imports from China.
Non-Market Economy Dumping
Methodology - China's WTO entry will guarantee our right to continue using our
current "non-market economy" methodology in anti-dumping cases for fifteen years
after China's accession to the WTO.
Subsidies - Likewise, when we apply
our countervailing duty law to China, we will be able to take the special
characteristics of China's economy into account. Specifically, where government
benefits are provided to an industry sector and state-owned enterprises are the
predominant recipients or receive a disproportionate share of those benefits,
the United States could take action under our unfair trade laws. The agreement
also establishes that the U.S. can determine whether government benefits, such
as equity infusions or soft loans, have been provided to an industry using
market-based criteria rather than Chinese government benchmarks.
Investment Reforms - China will reform a large number of policies
intended to draw jobs and technology away from China's trading partners.
It will, for example, implement the WTO's Agreement on Trade-Related
Investment Measures agreement on accession; eliminate mandated offsets, local
content and export performance requirements and refuse to enforce contracts
containing these requirements; and not condition investment licenses on
performance requirements of any kind. All of this will make it significantly
easier for Americans to export to China from home, rather than seeing companies
forced to set up in China in order to sell products there.
Technology
Transfer - China will abolish requirements for technology transfer for U.S.
companies to export or invest in China. This will better protect our
competitiveness and the results of U.S. research and development.
State-Owned and State-Invested Companies - China commits that state-
owned companies and state-invested enterprises will make purchases and sales
solely on commercial terms, specify that purchases by these companies for
commercial and non-governmental purposes are not government procurements and
thus are not subject to any special or different rules that could undercut basic
WTO commitments, and provide U.S. firms the opportunity to compete for sales and
purchases on non- discriminatory terms and conditions.
Textiles - Under
our agreement, quotas will remain in effect for Chinese textiles as for those of
other WTO members until 2005. Moreover, until January of 2009, we will have a
special safeguard enabling us to address market-disrupting import surges from
China in the textile sector. This is in addition to the broader product-
specific safeguard noted above.
COMPLIANCE AND ENFORCEMENT
Of
course, trade commitments require full implementation and enforcement to be
meaningful in practice. Our previous successes -- improving intellectual
property rights, enforcing textile commitments, and most recently the April 1999
agricultural agreement -demonstrate how crucial constant oversight, monitoring,
and strict enforcement are in the case of China, and our trading partners in
general. And with China's WTO membership, we will gain a number of advantages in
enforcement we do not now enjoy.
First is the WTO dispute mechanism
itself. In no previous agreement has China agreed to subject its decisions to
impartial review, judgment and ultimately imposition of sanctions if necessary.
Second, of course, is our continued right to use the full range of
American trade laws, including Section 301, Special 301, and our countervailing
duty and anti-dumping laws.
Third, we gain substantial new leverage by
creating the product- specific safeguard, as well as guaranteeing our right to
use non- market economy antidumping methodologies. These features of the
accession will significantly strengthen our ability to ensure fair trading
practices.
Fourth, and very significant, we strengthen our enforcement
capabilities through the multilateral nature of the WTO. The accession, to begin
with, will create a multilateral review mechanism to monitor all of China's
implementation closely. And as these commitments come into effect, China will be
subject to enforcement by all 136 WTO members, significantly diminishing China's
ability to play its trading partners off against one another. In all previous
disputes over Chinese compliance with agreements, notably those over
intellectual property, the United States had to act alone. With China in the
WTO, we will be able to work with 135 other members, many of whom will be
concerned about the same issues we raise and all of whom will have the legal
right to enforce China's commitments.
Fifth, the specificity of China's
commitments in this bilateral agreement will help us ensure that China complies.
Experience shows that agreements with China are implemented and enforced most
satisfactorily when obligations are concrete, specific, and open to monitoring.
Our bilateral agreement therefore includes highly specific commitments in all
areas, clear timetables for implementation, and firm end-dates for full
compliance. These allow us carefully to monitor China's compliance and present
clear evidence of failure to comply.
Finally, however, enforcement (as
in any agreement) depends on U.S. commitment. We will relentlessly monitor and
enforce China's compliance with its Protocol of Accession and all of the WTO
agreements. We are already preparing for an increased monitoring and enforcement
effort through President Clinton's request for $22 million in
new enforcement and compliance resources for USTR, the Commerce Department,
USDA, and the State Department. The President has requested resources for the
largest monitoring and enforcement effort for any agreement ever, covering
China's obligations in the WTO and strong enforcement of our trade laws.
The additional resources sought for the Office of the U.S. Trade
Representative in the FY 2001 budget would create new positions in four areas of
expertise -- legal, economic, geographic, and sectoral to be devoted to
negotiating, monitoring, and enforcing trade agreements; and would almost double
the number of USTR staff dedicated to China trade compliance. President
Clinton's initiative also would triple resources at the Department of Commerce
dedicated to China - including administration of our antidumping and
countervailing duty laws.
The Administration will be monitoring China's
compliance on three fronts: (1) on-the ground in China, where State, Commerce
and Agriculture officers will seek to resolve U.S. business complaints and
prevent compliance problems before they arise; (2) here in Washington, where
special interagency teams of government experts will be created to examine
China's implementation of each of the 20 WTO agreements as well as WTO
commitments unique to China; and (3) at the WTO in Geneva, where the United
States will join 135 other WTO members in the multilateral review mechanism
designed especially for China.
USTR will create a special interagency
structure that coordinates these initiatives to ensure that China fully complies
with the commitments it has made. This will bring together our government's
experts on both China and the subject matter of each of the 20 WTO agreements,
to regularly and vigorously monitor China's compliance with all of the WTO
agreements. These interagency teams will monitor everything from China's
implementation of its tariff-rate quota commitments to the grant of insurance
licenses and trading rights. Where they find noncompliance, we will use all the
tools available to us -- under our trade laws, the WTO dispute settlement
mechanism, the various WTO committees, and the special WTO transitional review
mechanism -- to ensure implementation. In addition, we will create two new
interagency committees to oversee two unique features of this historic
agreement: one dedicated to U.S. participation in the multilateral review
mechanism, and one to implement the product- specific safeguard mechanism to
address import surges.
These interagency groups will base their work on
information gathered from the American Embassy in Beijing, the Foreign
Agricultural Service and Foreign Commercial Service; advice received from the
business community, the agricultural community, trade associations, organized
labor, and other non-governmental organizations; and information received from
the public, including information received in response to requests for comment,
via agency Web sites, and the Department of Commerce's domestic district office
network.
The Administration will continue to work with Congress and
American workers, farmers, and businesses to ensure effective monitoring and
quick responses to non-compliance. At the same time, we will seek to prevent or
reduce problems by working with the Chinese, including through technical
assistance where appropriate, to ensure they fully understand their new
obligations. WTO rules will require real and meaningful changes in China's
application of trade rules and policies, and consultation and training will help
head off problems before they arise.
PERMANENT NORMAL TRADE RELATIONS By
contrast to this comprehensive set of Chinese commitments, the U.S. commitment
is merely to continue our present policies. Thus, the United States: Makes no
changes in our current market access policies. Preserves our right to withdraw
market access for China in the event of a national security emergency. Requires
no changes in our laws controlling the export of sensitive technology. Amends
none of our trade laws.
Our sole obligation is to grant China permanent
NTR. This is, in terms of our policy toward China, no real change.
NTR
is simply the tariff status we have given China since our Bilateral Commercial
Agreement and normalization of diplomatic relations in 1979; which Congress has
reviewed every year since, and found to be in our fundamental national interest.
Under the legislation President Clinton sent to Congress on March 8th,
permanent NTR would only be available to China when the President certifies that
China has entered the WTO on the basis of the commitments we reached in our
bilateral agreement.
Thus permanent NTR represents little real change in
practice. But the legislative grant of permanent NTR is critical, as without
permanent NTR we risk losing the full benefits of the agreement we negotiated,
including broad market access, special import protections, and rights to enforce
China's commitments through WTO dispute settlement. All WTO members, including
ourselves, pledge to give one another permanent NTR to enjoy the benefits
available in one another's markets. To refuse to grant permanent NTR, therefore,
would enable our trade competitors throughout the world to reap these benefits;
but American farmers and businesses would be left behind.
TAIWAN'S WTO
ACCESSION
Finally, China's entry will facilitate Taiwan's entry into the
WTO. This will have substantial trade benefits, as Taiwan is already a larger
export market for us than China. And the opening of both economies, while we
have no guarantees, may ultimately play some part in easing the tensions in the
Strait. It should thus be no surprise that Taiwan's new leadership supports both
China's WTO membership and normalized trade between China and the United States.
III. WTO ACCESSION, PNTR, AND BROADER U.S. INTERESTS
Let me now turn from the specific trade policy changes China's WTO
accession and PNTR will make, to their implications for issues
separate from trade, but central to the broader US-China relationship.
U.S. trade policy, ever since the Second World War, has been one element
in a larger response, conceived under Franklin Roosevelt and developed into
concrete policies and institutions under President Truman, to the lessons of the
Depression and the Second World War. These included collective security,
reflected by the United Nations, NATO, the Rio Treaty and our alliances with the
Pacific democracies; commitment to human rights, embodied by the Universal
Declaration on Human Rights and then a series of more recent Conventions; and
the fostering of open markets and economic stability, with the creation of the
IMF and World Bank on the one hand, and the GATT on the other.
Each
element in this set of policies and institutions, over the years, has had its
own intrinsic benefit, but also helped to support and strengthen the others. And
this will also be true with China's WTO accession and permanent NTR.
HUMAN RIGHTS AND THE RULE OF LAW
With respect to reform within
China, WTO accession represents a potentially profound and historic shift,
building upon but going much further than China's domestic reforms to date.
China's domestic reforms have reversed the most damaging policies of the
Cultural Revolution and Great Leap Forward. WTO accession will accelerate and
deepen this process, altering policies which date to the earliest years of the
communist era. As it enters the WTO, China will: Permit foreigners and all
Chinese businesses to import most goods into China; Reduce, and in some cases
remove entirely, state control over internal distribution of goods and the
provision of services; Enable foreign businesses to participate in information
industries such as telecommunications including the Internet; and Subject its
decisions in all areas covered by the WTO to enforcement, including through
formal dispute settlement when necessary.
These commitments are a
remarkable victory for economic reformers in China. They will give China's
people more access to information, and weaken the ability of hardliners in
government to isolate China's public from outside influences and ideas. More
deeply, they reflect a judgment that prosperity, security and international
respect will not come from the static nationalism, state power and state control
over the economy China adopted after the war, but that China's own interests are
best served by the advancing economic freedom, engagement with the world, and
ultimately development of the rule of law inherent in the initiative President
Truman began in 1948 with the founding of the GATT.
The WTO accession,
therefore, has potential beyond economics and trade: as a means to advance the
rule of law in China, and a precedent for willingness to accept international
standards of behavior in other fields. That is why many Hong Kong and Chinese
activists for democracy and human rights - Martin Lee, the leader of Hong Kong's
Democratic Party who visited Washington this week to restate his support for
PNTR; Bao Tong, the reformer jailed for seven years after
Tiananmen Square, whose appeal to the UN Human Rights Commission in March drew
worldwide sympathy - support PNTR and see WTO accession as
China's most important step toward reform in twenty years. And it is why our
support for WTO accession rests on a broader long-term commitment to human
rights and freedoms, as well as new opportunities and strengthened guarantees of
fairness for Americans.
WTO ACCESSION AND AMERICAN NATIONAL SECURITY
Perhaps still more important, the PNTR decision is a
test of our ability to develop the type of stable, mutually beneficial
relationship with China that will be critical to peace and stability in the
Pacific region in the years to come.
Our relationship with China remains
marked by substantial disagreements. When we disagree with China, to quote
Theodore Roosevelt, speaking about the Open Door Policy to China in the first
years of the 20th century:
"We must insist firmly on our rights; and
China must beware of persisting in a course of conduct to which we cannot
honorably submit. But we in our turn must recognize our duties exactly as we
insist upon our rights."
In this spirit, we recognize how important a
stable and peaceful relationship with China is -- for the Chinese, for the
world, and for America -- and how fundamental is our responsibility to act upon
areas of shared interest and benefit. We saw this responsibility clearly in the
Asian financial crisis. We see it in the environmental problems of the
Asia-Pacific; and for nearly three decades, we have seen it in trade.
Neither this WTO accession agreement, nor any trade agreement will ever
solve all our differences. However, the WTO accession, together with
PNTR, will address a number of them; and moreover, it will do
so through a set of one-way concessions by China. I believe that if we turn down
a comprehensive set of one-way concessions, we make a very dark statement about
the future possibility of a stable, mutually beneficial relationship with the
world's largest country.
Such a statement would threaten our work on all
the specific issues in our China policy agenda today -- from non-proliferation
and arms control, to reducing tensions in Korea and South Asia. It would
complicate for the foreseeable future our existing Pacific alliances, as all of
our Asian friends and allies would view rejection of PNTR as an
unnecessary rejection of stable and constructive relations with their largest
neighbor; and a turn away from the open, confident vision we have held for the
Pacific over the years.
Over the long term, and perhaps most important,
China -- seeing no economic reason for our decision -- would become more likely
to read hostile intent into our every move; and this in turn would raise the
prospect that our present disagreements and tensions will escalate into a
broader confrontation of great consequence for every Pacific nation and for
ourselves.
CONCLUSION
That is the ultimate and most significant
point at stake in Congress' decision this spring. To reject
PNTR would be to severely damage American trade interests; to
set back the cause of reform in China; and to risk, without cause, a fundamental
deterioration in our relationship with the world's largest country.
But
if we have the wisdom and confidence to make the right choice, the WTO accession
and PNTR offer us a remarkable opportunity.
Over three
decades, trade policy has strengthened China's stake in prosperity and stability
throughout Asia. Together with our Pacific alliances and military commitments;
in tandem with our advocacy of human rights; and in the best tradition of
postwar American leadership; it has helped us build a relationship with the
world's largest nation which strengthens guarantees of peace and security for us
and for the world. And WTO accession, together with permanent Normal Trade
Relations, will be the most significant step in this process in many years.
That is the opportunity before us. These are the stakes in this debate.
And that is why this Administration - together with every living former
Secretary of State; 47 State and Territorial Governors; the former U.S. Trade
Representatives and Secretaries of Commerce, Agriculture, and the Treasury; and
former Presidents of both parties - is committed to permanent NTR on the basis
of this historic agreement.
Thank you very much.
END
LOAD-DATE: May 18, 2000 
