01 April 1999
TRANSCRIPT: DALEY SAYS NEW CONTRACTS IMPROVE U.S.-SINO TIES
(100 American-style houses to be built in Shanghai) (4240) Shanghai -- Recent trade agreements in air traffic control, telecommunications, housing, automotive and hotel services will have a positive impact on the commercial and economic relationship between the United States and China, says U.S. Commerce Secretary William Daley. "It clearly shows progress and China's efforts on economic reform," Daley said March 31 during a news conference in Shanghai. Daley and a delegation of U.S. government and private business leaders were in Shanghai and other Chinese cities to sign contracts for a number of new developments from building 100 American-style houses to plants that will manufacture environmental and emission control equipment for automobiles. Earlier American Telephone & Telegraph Co. signed a contract to provide internet and other high technology telecommunications services to the Pudong area in Shanghai, Daley said. His presidential infrastructure trade mission to China and South Korea began March 28 and ends April 1. Daley told Chinese reporters that the contract signings in and of themselves will not make accession into the World Trade Organization (WTO) easier, but "the openness and the economic reforms that have allowed these contracts to move forward would bode well for the possible entry into the WTO." Following is the transcript of Daley's news conference: (begin transcript) [U.S. Department of Commerce Secretary of Commerce William Daley Press Conference Grand Hyatt Hotel, Shanghai March 31, 1999] SECRETARY DALEY: I appreciate your being here. This presidential business mission to China began in Beijing and will continue later this afternoon and tomorrow in Guangzhou. The business development delegation is comprised of American companies looking to further expand and develop China's infrastructure in areas where they have proven know-how and expertise to make both a positive and significant contribution. My visit to Shanghai, though brief, has been productive. I've just witnessed the signing of several business contracts between U.S. firms and Chinese counterparts. These achievements in areas of air traffic control, telecommunications, housing, automotive and hotel services will have a positive impact on the commercial and economic relationships between our countries. It clearly shows progress and China's efforts on economic reform. I was also pleased to participate today at a groundbreaking ceremony for a Corning plant that will be built in the Pudong area of Shanghai. This new plant will make products that will help manufacturers comply with new environmental regulations now requiring emission control equipment be installed in automobiles by the end of 2000. In just a few minutes, we will be off to another groundbreaking ceremony and this is with Dessen International. Dessen International is a U.S. home building company offering design materials and construction services. They signed an agreement earlier today, which I witnessed with Shanghai Ching Chu Property Development Company, to bring about a hundred high quality American style homes to a new housing development in Shanghai. As I stood with my counterparts earlier today, I was struck by the great impact that these contracts will have in advancing the goals of greater market access in China which will benefit both the communities and people of our nations -- the real significance of our signings today and throughout this trip. I also want to recognize my colleagues from the U.S. Departments of Housing and Urban Development, Energy, Transportation, and, of course, the Export/Import Bank. I want to also thank Mayor Xu for his gracious hospitality and welcoming our delegation last evening. And to all the people that I met with today in this brief, but significant visit to Shanghai. Thank you very much, and at this point, I open up to questions. Q: Could you give some details about the agreement with AT&T, what telecom services will they be providing? A: Internet services, my understanding is to Pudong, this is a contract that was signed about five years ago, or was, at least initially given, five years ago, but what is expected to be a final agreement. It is offering, at this point basically, high quality, high level communications and Internet service. That's where, I believe, AT&T sees great opportunity especially in the Pudong area -- in the financial services. Q: Do you think that any of these signings have contributed to the possibility that China will be able to accede to the WTO? A: I don't think the signings in and of themselves contribute to China's entering into the WTO. I think that each of the signings, you could say, show that the economic reforms and the economic change that's going on in China, which has benefited the Chinese people and the Chinese economy, and obviously have benefited the rest of the world, are positive steps and that is what WTO is all about -- trying to open a system that has historically been closed -- and to give the Chinese enterprises and the Chinese people the opportunity to participate in the global economy in a rules-based organization. So, in and of themselves, I don't think one would say that it would make it easier. But I think behind them, the openness and the economic reforms that have allowed these contracts to move forward would bode well for the possible entry into the WTO. Q: Two questions on telecommunications: first of all, the press release we were just handed describes the deal that was just signed with AT&T as being the first foreign service-providing deal. As we know, there has been a ban on that in China up until this point. Under what exception did your counterparts in the Chinese government provide for this agreement, which seems to go against all their rules, if you know? And second of all, I wanted to ask -- there are also some reports in the last few days in various newspapers about CDMA. You mentioned this morning that CDMA had been given a green light to that entering the country generally speaking, but there have also been reports that there have been agreements with specific companies like Great Wall and China Unicom to provide these services. Are you aware of these deals or are they part of your trip? A: First of all, on the first question, I don't know what it is that changed the ministry. I think the local government in Shanghai and the businesses in Shanghai are desirous of this AT&T contract and have been for awhile. So I guess you would have to ask the ministry what it is that motivated them to change what may have been their policy. As far as CDMA, when we met with Premier Zhu Rongji, he indicated to us, and it had been indicated by State Councilor Wu Yi, that, as you may know, there have been three pilot projects on CDMA going on in China. They have proven very successful over the last couple of years. So the advocacy that we and many other businesses we have been doing for quite a while is for this technology to be allowed to be used beyond those three projects. That approval seems to have been given. At least that is the impression that we directly had from the Premier and from State Counselor Wu Yi. The expansion of existing pilot projects, some of the contracts that you are speaking of, I've read the same sort of speculation about those contracts possibly being expanded. But at this point, I don't have any more details about exactly who the parties are or whether they will be. Obviously if CDMA as a technology is allowed to be used throughout the country as the telecommunications systems of China develop and improve, that is very good, first of all, for U.S. companies, that is very good for Chinese users of these telecommunications systems, cause they are more reliable, clearer and better service. So, the expansion of CDMA would be a very positive thing for the Chinese and for the American businesses and I would imagine, a few other businesses from other countries around the world. Q: You mentioned about the trade deficit of one billion every week between China and the United States. What difference does this contract, signed in China, make on the current trade deficit? Can you see China overtaking Japan as the biggest trade deficit? A: Well, it's about a billion, the trade deficit itself is about $58 billion, so it's a little over a billion dollars a week in excess. So it's larger right now than Japan. These contracts, in theory, would have an ability to impact the deficit, but at a very, very minor point. The fact of the matter is, and there is a disagreement between the Chinese and the U.S. on the amount of the deficit, but there is no disagreement on the trends. U.S. exports today to China are about two percent of our global exports. Twenty years ago, when the first Secretary of Commerce came to China, China represented two percent of the global exports of the U.S. There has been no change in spite of the fact that all of the expansion of China, opening of China, and the economic growth of China. The U.S. represents about twenty percent of all Chinese exports that go to the United States. That is a market for Chinese companies and Chinese goods that is, I believe, unparalleled any place in the world. So the U.S. market is extremely important to the Chinese enterprises and workers. Q: [inaudible] A. Well, there needs to be a decline in the deficit. The way you will do that is to have the economy of China stay strong and drop barriers and open this market. That's one of the main motivators for the WTO entry. There are certain requirements under the WTO that would require this market to be open, not only for U.S. products, but products from other parts of the world, as opposed to being basically a closed market, which is what China has historically been. Q: [inaudible] A. Well, it's not just the U.S. demands of an open market. In order to be in the WTO, you have to have open markets. That's what every other member of the organization has agreed to before they have come into the WTO. So it's not as though this is something that the U.S. alone is demanding. In order to be a member of the WTO, you have to comply with what everyone else has complied with, under different terms, individually, because every economy is different, and transitions, number of years as to certain levels of tariff reduction or market access. No one would expect that all barriers would be down by the end of the year if China came into the WTO. Obviously, there has to be transitions. But there has to be a strong commitment and a strong indication that the goal of open markets is there and it's on a schedule that is agreeable by the members of the WTO. And let me remind you, an open market helps the economy of China. This is not opening the market for the good of the U.S. economy. Our economy is very strong, thank you. If the Chinese economy wants to grow -- you want to have competition that helps this economy grow -- then you have to open this market. Q: I understand from a colleague of mine in Beijing that during a press interview you gave yesterday, you said that there is a possibility that the U.S. may start seriously considering bilateral negotiations about the trade deficit with China. What sort of negotiations would those be? What sort of issues are being looked at? A: Well, my comment was in the context of -- if WTO does not move forward -- then I think we are at the point that we need to begin to discuss certain bilateral issues, whether they are agriculture, or other market access issues. Many of these issues obviously have been discussed in the context of WTO, so if we get an agreement and move forward on that, they will be addressed, and there will be no need for separate bilaterals. But if we don't reach agreement on the WTO, I do believe that we are getting to the point soon that we should sit down and have discussions on a bilateral basis as to some of our concerns, and, I believe, the Chinese government has concerns about some of the bilateral trade issues. So it's not just things we may want to talk about. I believe they may have some. Q: [inaudible] A: Well, that's a long way down the road. So, I would rather be a little more optimistic that if we did go to bilateral discussions, we would be able to come to some agreements. Q: In your discussions in Beijing, did you talk at all about how the political atmosphere in the United States is making it more difficult for American business in China, especially in anticipation of the Cox Report coming out, and concerns about technology transfers? The second part of the question is, do you sense that there is a souring of American interests in China because of delayed returns? A: I think the issue that you mentioned about the political climate in the United States as a result of the Cox Report and some other allegations and information as to the possible transfer of certain technology, of sensitive material, has caused concern amongst many people. There is no question about that. This administration is very committed to the engagement policy that we have had. At the same time, when we have differences, whether it is on that issue or whether it's on the issue of human rights -- as we have filed a resolution in Geneva -- whether it's on issues of labor or other issues, we will raise them in the context of, not confrontation, but in the context of cooperation and engagement. That is what engagement is about. It is not about ignoring the differences and just dealing on the positives, and that has occurred over the last number of weeks. I think it is important that we continue that engagement, that we continue to move forward and my sense is that that's where the American people are. Premier Zhu Rongji's visit next week will be very important in that process. It will be important for the American people to hear from him about some of these issues, representing the Chinese people, how they view some of these issues. We have heard from time to time from U.S. business people, on the second half of your question, that U.S. companies have been here for a very long time. Some have made money. Some have not done well. Some have been frustrated by the processes. The story that we told -- Arco -- which is one of the companies on our trip, has been successful, but they took about seventeen years to go from getting an agreement to bring oil, to getting the actual oil, seeing the oil flowing. So these are long processes. And in today's business climate, if you can't move quickly, -- and this is a challenge for any government, but especially a government that has historically been closed, -- if you can't move quickly in today's business world, you don't last very long. Most businesses that can't move quickly, don't last long in today's world. Q: In your talks with the Chinese officials, did you have any sense of what their motivation was behind this seemingly renewed interest in joining WTO? Some things that we have heard is that they are hoping to find some common ground with the U.S. now that other areas of contention have increased? Did you find this to be the case, and if so, are you troubled by it? A: I don't think the interest by the Chinese in joining the WTO is a result of trying to counter other problems and differences that they are having with us. I think in order to see this economic reform continue, to see the economic expansion continue, or to occur again -- there was a little slowdown last year -- the sort of things that would be required by joining the WTO, which are, again, good for the economy of China, I think some people would like to see that locked in. I think there is also a desire, I would assume, to be at the table in November when the WTO Ministerial occurs and possibly a new round of negotiations begins in early 2000. I would imagine that that is a motivator -- to be at the table and not be out of the organization when a new round possibly happens. In order to have the influence and bring to bear the opinions of China, they will have to be at the table. The only way to get to the table is to come up with a commercially meaningful deal. Q: As I can see from the press release, there are many people from the infrastructure companies in the U.S. joining your delegation. So, I want to know, it is quite a coincidence that the Chinese government invests much more money in such fields. Do such things happen at the same time? My second question is what kind of cooperation arrangements has been made and your approach? A: First of all, I think on the issue of infrastructure, Premier Zhu Rongji, two weeks ago at the National Peoples' Congress, spoke about the need for infrastructure building and improvement. It is imperative for economic growth that the infrastructure be improved in telecommunications, in roads, other transportation systems, airports, and energy. So I think that acknowledgement of the importance of infrastructure, that's why we have this group of businesses with us. We believe that U.S. companies that are on this trip, as a whole number of others, can bring tremendous expertise into China, into these developments, into these projects, which are very complicated and very difficult at times to build. But they can bring their expertise that they have from other projects around the world. Q: My question is recently, some Americans are raising human rights cases against China. Do you think these issues will influence the balance of trade between these two countries? A: It impacts the relationship. Americans feel very strongly about human rights. Our country is based upon the premise of individual rights. We take that seriously. So it's not an issue that you can separate out from others. In a relationship between the countries - peoples -- aren't just business relationships. That's a piece of it. Strategic relationships, human rights issues, labor issues, cultural issues, cultural differences, there's whole host of things that one looks at when they determine or not there is a true relationship as opposed to just a business deal. Business deals come and go. Business deals generally last a few years, based upon the terms of the agreement, but very few business deals last forever. If you are looking to be long-term, you've got to go beyond just that. The values, ideas, ideals of people -- that's what we have to understand about each other. So the human rights issue, even though one is not dependent on the other in the sense of totally connected, but they do get intertwined when you look at a total relationship of peoples, and not just governments. Q: The Wall Street Journal said yesterday in a story that you had cancelled a plan to attend a signing ceremony between Motorola, Lucent and Great Wall, because Great Wall is affiliated with the PLA. I was wondering, first, if that's true, but also whether companies like Lucent and Motorola are at risk of having export licenses cancelled if they try to export CDMA to China? A: First of all, it's not true that anything has been cancelled. It hasn't been firmed up yet. Second of all, we will take those license applications where they are needed on a one-to-one basis. I don't believe just the CDMA technology itself is something that needs a license. There may be certain types of technologies or equipment that might need, but the CDMA technology, in and of itself, does not necessitate licensing. But as of this point, we have not had any applications, obviously, and we are still waiting to hear an official announcement that CDMA would be allowed nationwide, or at least beyond the three cities where they have had pilot projects. Q: [inaudible] A: That hasn't been determined yet, whether there will be any signing ceremonies, of any of the expansions of the existing pilot projects. Q: Shanghai Broadcasting Network. I'd like to know the market value of the concrete contracts, like those export contracts, you have witnessed during your China trip, say in Beijing, here in Shanghai and also prior to Guangzhou? A: I don't have an exact amount, to be frank with you, off the top of my head that you could add it up to. We can try to get you that. But what is more important than just the dollar amounts is the fact that, take yesterday in Beijing, we witnessed some signings of purchases of medical diagnostic equipment from the U.S. for hospitals and medical facilities in Beijing -- three or four major purchases of medical diagnostic equipment. Even beyond the amount of money involved, the important message is that American companies are able to bring certain technologies that are going to help Chinese people, help the medical industry, help treat people, help people, hopefully, diagnosis illnesses before they get beyond the ability to help the patient. So, that's as important as the dollar amounts. What is the quality of the goods? What is behind some of these contracts? But I don't have an exact amount. We will try to add up if you'd like and have someone from the Consulate or the Embassy get a hold of you and give you a range. Some of them are memorandums of understanding that they hope will be a project down the road. So I wouldn't have an amount at this point. Q: So will the U.S. government continue to encourage those high tech businesses to export or expand their operations here in China? A: U.S. high tech industries are the premier companies of the world and they have been exporting all over the world and exporting into China also - and some locating facilities in China. We have always encouraged that and will continue to encourage that. Q: [inaudible] A: I think that there is a commitment and an understanding that opening this market is good for the potential economic growth of this market. I think there is a concern, as there should be among all of us in every part of the world, whether we can keep our growth going, whether our economies can stay strong. There is speculation that the Chinese economy may not be as strong in 1999 as in 1998. So people are looking for ways to stimulate the economy. One way to definitely stimulate an economy is to open it up more, bring in more competition, and bring in more investment. Investment is not going to come if there isn't a real opportunity to make money. I think some of the initial investment that came, and has been waiting for a long time to see a return, has possibly begun to stymie some additional investment, fresh new investment -- cause some people don't want to wait five, eight, ten years for a return -- not in today's global economy. They will go somewhere else to look for a short-term return. It's fine, if you want to have a fifty-year program, maybe a wait, but today, most companies don't have that. Q: [inaudible] A: For their entry into the WTO, I think the negotiations that have taken place over the last number of weeks, including Ambassador Barshefsky's visit yesterday with the Premier, have been all very positive. We are down to some of the final, most difficult issues. I would be cautiously optimistic. But again, as I've stated since Sunday when I arrived in Beijing, the Premier is in the U.S. next week. I think the opportunity to do something this week -- it is very difficult to see that being done this week. That's my personal opinion. I think it's tough because of the issues. I think it's tough. But remember, this is not something you do and then renegotiate three months from now. When you do it, -- for both countries and for the World Trade Organization, -- it better be done right, because people make commitments, and then they have to live up to them. This is not something that you can just sign on the back of an envelope, then walk away from. So whether it's done this week or it's done in two weeks, or a month or three months, the important thing is for China to enter the WTO. That's important. But it's also important that, if they don't, the economic reforms, the economic progress, economic growth, the change in the dynamic economy that is going on here in a positive way and China's involvement with the rest of the World Trade Organization and the trading countries and their engagement on trade issues with the rest of the world, will continue. That's a fact. Thank you very much. (end transcript)
Join the GlobalSecurity.org mailing list
