Remarks by Secretary of Commerce William M. Daley

U.S.-China Business Council

January 26, 2000

Washington, DC

[As Prepared For Delivery]

I know a number of you represent companies that worked with us a few years ago on NAFTA. So for me this effort on China feels like deja vu

Frankly, I see a lot of irony in all this. I have met with officials and business people in 45 nations in my three years as Commerce Secretary. I've been to China several times. I plan to be there again this spring. And time and time again, they tell you how America's economy -- and our democracy -- has served as their model.

So here we are, with a booming economy that is about to become the longest expansion in U.S. history, and we are battling over a trade opening agreement with China. This is a deal with the largest nation on earth -- more than a billion people.

It is a win-win for both countries because it is good for the American people and good for the Chinese people, in terms of long term economic benefits. And to be honest, it is one-sided -- in our favor. All China really wants in exchange is to have normal trade relations with us -- on a permanent basis, and to become a member of the World Trade Organization.

Obviously, that would be good for the global economy, also, because China -- for the first time -- would have to abide by WTO rules for doing business. Another irony I see, is that in all these trade fights, usually the same thing happens.

There are two camps -- and they are miles apart. On one extreme, there are the free traders who want absolutely no controls. They probably never spent a day on a shop floor. They never worked in a mill, worrying that steel imports will put them out of a job.

Then there are protectionists. They want to throw up a fortress around America. They would have America go back 70 years, when we had tariffs of more than 50 percent. President Clinton believes it is time we found common ground -- a place somewhere in between the two.

You will hear the President talk about this tomorrow night in his State of the Union. You will hear him make the case for why America needs to get behind this deal with China.

The fact is, in this global economy, you can't be an absolute free trader. And you can't be an absolute protectionist -- not when jobs can go anywhere, whether you have a trade deal or not. By the way, if you were planning on getting to bed early tomorrow night, forget it. This is the President's last State of the Union, and it may be his longest!

I don't have to tell you what a good deal this is -- but a few points are worth underscoring. First, this is a one-way deal. We don't give anything up. In fact, we gain tremendous access to a market with vast potential for our farmers and many of our most competitive industries. These include autos, telecommunications, computers, the Internet, and financial services.

Average tariffs on farm products over the next three years will drop to 14 percent -- from 31 percent. In four years, industrial tariffs will fall to nearly 9 percent -- from 25 percent. And tariffs on Internet technology will fall to zero in 2005.

We get all this by simply granting China normal trade relations. Giving them the same access they have had to our markets since 1980, but on a permanent basis instead of renewing it every year.

I know Congress wants to have some continued say over our relations with China. Obviously this is because of its track record on human rights, and for national security reasons. This Administration is committed to protecting our national security and to promoting human rights. And we think denying China permanent trade relations will do nothing for either of these issues.

I say the fastest way to advance democracy in China is by bringing them into the WTO. The reforms they will undertake will move them dramatically toward a market economy. Let me give you one example. Can you imagine a better way to allow for the free flow of ideas than for a billion people to be connected to the Internet?

The second point I want to make is this. We have the strongest economy in our history, and people want to keep our prosperity going. One way to do that is to engage China so we can sell goods made by American workers there.

This is a deal that is good for our economy, but also includes strong protection for our workers. No agreement on allowing a nation to join WTO has ever included stronger measures against unfair trade. There are safeguards to stop import surges in particular industries. This is a key issue raised by Democrats and Republicans on Capitol Hill.

And we keep our powers, tostop cheap imports from being dumped on our shores. And for the first time, we will be able to use WTO rules to combat unfair trade and investment practices, such as local content requirements. WTO rules -- even with permanent trade relations -- allowfor social justice and national security concerns. They permit us to block imports of goods made with prison labor, and keep our export control policies intact.

This is a good deal, nodoubt, but let me be realistic. This will be a tough battle. And it will tough for a lot of reasons. We have this huge -- $60billion-plus -- trade deficit with China, second only to Japan. We did not have red ink like that with Mexico or Canada when we did NAFTA.

And we did not have the kind of overall trade deficit back then, that we have now, which members of Congress don't like. Let me say, people may want to use the trade deficit as an excuse. But the fact is, it's an example of how open our economy is. This deal opens their economy.

It will be tough, because, we don't know how well the opposition will be organized -- but Seattle is a strong indication of how tough it could be. We have some timing issues that make it tough.

We have to wait and see the deals that China closes with the Europeans, and a critical mass of other countries. We welcome the progress made by Brazil and China. Until that happens, which optimistically will be in mid-April, Congress probably won't want to take a look at these things. I see the window on this as mid-April until July.

Of course, we're ready to go tomorrow, if Congress is willing!

The [November] election is another obstacle. The fact of the matter is, thelonger we wait, the politics gets harder. I think there is a consensus in both parties to get this done early on. And the election is an obstacle in that the American public is focused on that, rather than this -- although maybe that's good!

But in spite of the obstacles, President Clinton is extremely committed to do this. The first question I always get asked is, is he really extremely committed. Is this really important to him? We can sit here all day and go back and forth, but the answer is: Yes. Absolutely. The President will be aggressively involved. And it's very important to me personally, that I help the President on this.

The next question I get is: Is this winnable? Yes. I believe we can answer any questions that members of Congress, or the public have.

Our strategy to pass this is very straight-forward. The President has asked Steve Ricchetti, his deputy chief of staff, and me to lead the effort. Secretaries Albright, Summers, and Glickman ... Amb. Barshefsky ... GeneSperling, and Sandy Berger are the other members of the team. We're meeting regularly. We're good friends now, andwe'll be best friends before this is over.

Obviously, we're reaching out to Congress. We're going to meet with every lawmaker, look them in the eye, tell them why we need their support, until I hope they will be all sick of seeing us. To kick it off, two days ago, the President sent a letter to every member of Congress to outline his position and urge Congress to move ahead quickly.

Secretary Bentsen, when he helped the President pass NAFTA, would spend so much time on the Hill, he called himself the lowest paid lobbyist in town. We have the lowest paid lobbying firm in town. We'll be speaking loudly, andoften, about how important this deal is to America's economic future.

But -- and this is important -- the key to our strategy is taking the story outside of Washington. And we don't have the luxury of time on our side. This is not going to get done if we make it an inside-the-beltway, Uncle Sam.com kind of effort.

I don't care if Wall Street loves this deal -- what matters is that Main Street loves it. This must be a grass roots campaign. This is what I've been telling business. Workers and local officials need to know why this deal with China is so critical to their pocketbooks. They need to see paystubs like Farmland Industries puts out that says: (and I quote) "China will account for nearly 40percent of the future growth of U.S. agricultural exports."

Last year, I went on a trade education tour around the country. And the problem is, that so many people in Washington paint this rosy picture. That's what elitists do. We need to paint the full picture. We need to talk about the positives of trade -- but we can't ignore the negatives.

And I won't let the critics get away without answering the question: what would they do instead? This is a public referendum on two different futures: One, do we bring China into the world; Or, two, do we keep them as a global outcast?

And let me say, I believe winning this fight is more than just about getting 10 more votes, or counting votes. It's about Americans understanding where the economy is going in the new century. And how important it will be to the workers of Coke, and Motorola, and General Motors, and Aetna, and thousands of small companies that make up a third of our exports to China.

My mother is 92 years old. She knows more about the old century than anyone I know. She often talks about the depression, and the war, and the great challenges they faced. The new century is the digitalcentury, where trade is done electronically across borders. I hope that the great challenges we face, aren't how to fight countries, but how to compete, so workers around the world have opportunities to benefit.

I will end on this: I have a famous quote of Teddy Roosevelt framed in my office. It's the quote, where he says "it's not the critic who counts, not the man who points out how the strong man stumbled, orwhere the doer of deeds could have done better. The credit belong to the man who is actually in the arena."

We may take our hits. We may stumble. But we will be in the arena. This thing is winnable. It is absolutely doable. And I am very confident that with your help, we'll get this thing through Congress, and America will be better for it.

Thank you very much.