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25 April 2000

Transcript: White House April 25 Briefing on China Trade Issues

(Administration officials, U.S. economists support PNTR, WTO) (7440)
Permanent Normal Trade Relations (PNTR) with China and China's entry
into the World Trade Organization (WTO) will benefit both the United
States and China, say Clinton Administration officials and American
economists.
At an April 25 White House press briefing, they discussed the issues
behind a letter from the nation's top economists that supports China's
integration into the world economy.
Treasury Secretary Lawrence Summers said that given the role of the
United States in the world economy, "participation of the United
States in the WTO agreement with China is important for that
agreement's ability to bring about and to support the reform process
within China."
The United States, Summers also said, "would be sacrificing a very
important opportunity to advance American national interests within
China" by not supporting PNTR.
Gene Sperling, director of the National Economic Council, said that
within China "there are clearly people who are pushing forward for
economic reform who are willing to take enormous risks in moving
towards market liberalization at the risk of significant political and
economic dislocation. Many of these people have staked their
credibility on not just the entry into the WTO, but normalization of
trade relationships between the U.S. and China.
"Were we to rebuke China at this point," he said, "I think there is no
question that we would be strengthening the forces of resistance and
the status quo within China, and weakening the hands of those who are
taking the leadership in this type of reform."
Sperling said the greater presence of American companies in China
would speed the pace of competition, development, and exchange of
ideas.
Noting that China represents a market of more than a billion people,
Robert Solow, professor emeritus at Massachusetts of Institute of
Technology, said that although most Chinese are now relatively poor,
"there is no doubt in anyone's mind, inside or outside the economics
profession, that China will be a large market, needing an awful lot of
stuff for a very long time."
Solow acknowledged that a more open Chinese market might result
initially in the movement of jobs and capital flow from the United
States to China. But that, he said, is "the standard politics of free
trade."
"Opening of trade always hurts some small number of people, and hurts
them appreciably. It benefits the whole population, but each of them
by a relatively small amount. Added up, over the total, it is very
large, as history has always shown." The benefits to American workers,
however, will, over the long term, far outweigh the initial drawbacks,
Solow said.
Following is the White House transcript of the briefing:
(begin transcript)
THE WHITE HOUSE
Office of the Press Secretary
April 25, 2000
PRESS BRIEFING BY GENE SPERLING, DIRECTOR OF THE NATIONAL ECONOMIC
COUNCIL,
MARTIN BAILEY, CHAIRMAN, COUNCIL OF ECONOMIC ADVISORS,
LAWRENCE SUMMERS, SECRETARY OF THE TREASURY, AND
ROBERT M. SOLOW, PROFESSOR EMERITUS AT MASSACHUSETTS INSTITUTE OF
TECHNOLOGY
The James S. Brady Briefing Room
10:53 A.M. EDT
MR. SIEWERT: Here to brief on a letter from economists supporting
permanent normal trade relations with China: Our National Economic
Council Director, Mr. Gene Sperling; Chair of the Council of Economic
Advisors Martin Bailey; The Secretary of Treasury Larry Summers, and
Nobel Laureate Professor Robert Solow.
Gene will introduce.
MR. SPERLING: We're here to put out this letter by the Nobel Economist
and others. We'll have -- Martin Bailey will speak first, and then
we're very happy to have with us Professor Solow, who is Emeritus
Professor at MIT, Nobel Prize winner and a true giant in his field in
a variety of ranges, from productivity onward.
Then Larry Summers and myself will make brief comments, and then we
will be available to take whatever questions you have. And so with
that, let me just turn it over to Martin.
MR. BAILEY:  Thank you, Gene.
Americans have an interest in promoting free trade and a rules-based
international trading system. China will also benefit from
participating in such a trading system. Economic openness, which has
been greatly promoted through the actions of the World Trade
Organization and its members makes Americans more prosperous.
The freedom of our firms to choose from a wider range of inputs and of
our consumers to chose from a wider range of products, improve
efficiency, promotes innovation in technology and management,
encourages the transfer of technology and otherwise enhances
productivity growth.
China's accession to the World Trade Organization will enhance the
process of reform that began there two decades ago. These reforms,
which have emphasized reliance on markets and openness to trade and
foreign investment and have helped to raise the standard of living of
the average Chinese citizen nearly five-fold since 1979.
Accordingly, the Council of Economic Advisors has contacted and worked
with a broad range of American economists outside the administration
in order to formulate an open letter to the American people in support
of China's entry into the World Trade Organization, and we are
releasing that letter today.
My CA colleague, Robert Lawrence, and I, have been heartened by the
broad support for this open letter from economists with widely
differing views on other issues. Thirteen U.S. Nobel Prize winners,
including Kenneth Arrow, Paul Samuelson, Milton Friedman, and Robert
Lucas have signed; 10 former chairs of the CEA have signed, including
Laura Tyson and Martin Feldstein. A total of 149 economists have
signed this letter.
We're very fortunate, as Gene said, to have with us today one of the
signatories of this letter, Nobel Prize winner, Robert Solow of MIT.
It's my pleasure to introduce Bob Solow.
PROFESSOR SOLOW: Well, as Martin said, an awful lot of the
intellectual power of the economics profession has signed this letter.
And it's such a simple proposition it doesn't really require that. You
could not generate a hard exam question out of the material here.
Just as economics, the U.S. stands to gain far more from China's
accession to the WTO and full entry into the world trade community. We
stand to gain far more than the U.S. risks losing. China already has
perfectly good access to U.S. markets because we are and have been,
have a long tradition of being an open economy.
Accession by China to the World Trade Organization gives us -- gives
American business -- and indirectly, of course, American workers
access to a market of -- I don't know what it is -- a billion and a
quarter people -- the six or seventh or eighth largest economy in the
world. It's a poor economy; income per head is not high in China, but
it's growing very fast. And there is no doubt in anyone's mind, inside
or outside the economics profession, that China will be a large
market, needing an awful lot of stuff for a very long time.
The down side, the possible down side that you hear about, of course,
is the possible movement of jobs and capital flow from the U.S. to
China. Some of that will happen. There is no doubt about it. But,
equally, there is no doubt where the balance of advantages lies. It's
not even close.
What you have here is a good example of the standard politics of free
trade. Opening of trade always hurts some small number of people, and
hurts them appreciably. It benefits the whole population, but each of
them by a relatively small amount. Added up, over the total, it is
very large, as history has always shown. There is no question that the
benefit to American workers, to all American workers from having free
access to a market the size of China has to be important -- far more
important.
The same fear of loss of jobs and outflow of capital has been
expressed over the years with respect to other Third World countries,
to other poor countries, and here we are in the U.S. now with the
lowest unemployment rate in God knows how long. China will compete for
some low-wage jobs with Americans. And their market will provide jobs
for higher wage, more skilled people. And that's a bargain for us.
There are two fundamental truths about economic life that really bear
on this that are not related to China and the WTO but are -- tell you
something about the way economies work. One of the things we have
learned is that in the long run the standard of living of the people
of a country like the U.S. depends primarily, fundamentally on their
own productivity. We will live at the standard that our own
productivity will support. Access of China to the international
trading community will not hurt our productivity, and it may even help
it by allowing larger markets to American industries that will profit
from economies of scale.
On the whole it's better for us when our trading partners are rich
than when our trading partners are poor; and for China to keep growing
in economic terms is an advantage for us.
The second fundamental truth -- again, as we've learned from recent
experience -- is that our ability, the U.S.'s ability to maintain high
employment depends fundamentally on our behavior, our policies, our
entrepreneurship. We can maintain high employment probably more easily
with greater availability of foreign markets, including the Chinese
market.
There is, of course, a lot of political argument about China and the
WTO that has nothing to do with the economics in particular. I have
opinions about that. I'm not sure why you should listen to them -- but
since I've got you here, let me take a chance. (Laughter.) I think
that the progress of human rights and the expansion of democracy in
China would be better served by China's economic development, by China
being drawn into relationships with other part of the world -- will be
far better served by that than it will be served by annual speeches,
either from the President or from members of the Senate or House.
As it happens, just about the time of the Gorbachev period in the
Soviet Union -- the then-Soviet Union -- I happened to have, for
completely extraneous reasons, occasion to spend a couple of months in
Finland, in Helsinki. China then -- Russia then, the Soviet Union then
had very close trade relationships with Finland. In fact, they had a
deal whereby Finland bought all of its oil at the world price from the
USSR, and the Russians spent the proceeds on Finnish manufactures.
This was good for both of them. Helsinki in those days was full of
little knots of Russians. You could always tell them from their hats,
walking around the street, looking, pointing, talking.
And there is no doubt in my mind what they were saying to each other.
These were people on Russian trade missions, buying up manufactures
from Finland and that were saying, oh, boy, did we do something wrong.
Here is Finland, which used to be the poorest part of Northeastern
Europe, and now it's like Sweden; it's fantastically richer than the
USSR.
The lesson that walking around Helsinki must have taught Russian
bureaucrats and factory managers and whatnot, is worth any number of
speeches, and I think that much the same thing will happen here. China
may be a tougher nut to crack, but I think that there is no political
loss for the U.S. in drawing everyday Chinese into relationships in
which they and we can improve our economic well-being. Thanks.
Q:  Do you don't think that labor's opposition was valid?
PROFESSOR SOLOW: No, I don't. The labor movement has always had a
protectionist side to it. I have read statements that this time, it's
not protectionist. Last time it was. But in fact, I think the labor
movement is subject to the political bind that I mentioned. If some
group of workers will find themselves in stiffer competition, danger
of losing their jobs to Chinese producers, they make a lot of noise.
But the 90 percent or whatever the fraction is, of union members, of
AFL-CIO members who won't ever see, won't ever be able to identify
that this hour of work that I might not have had, or this wage
increase that I might not have done is actually contributed to by the
fact that my employer and I now have access to a bigger growing
market; that will never be noticed.
So I think that the labor movement is subject to exactly that
political pressure. It's amazing, you know, I oft think that the
miracle is not that there is always some latent protectionism out
there, but that in spite of it, we and much of the industrial
capitalist world have managed over the last 50 or 60 years,
progressively, to open trade. I think that's sort of a political
miracle.
MR. SPERLING: Why don't we finish off, and then we can open things up
for questions.
SECRETARY SUMMERS: You've just seen why Martin Bailey and I both found
Professor Solow to be such a persuasive and interesting teacher; and
we take consolation in the fact that he's a retired professor now, and
so we won't get grades on our performance.
Let me first say that the President has said that this is a
once-in-a-generation vote because of its importance. And I would say,
as a member of the economics profession, that it is a
once-in-a-generation event that Bob Solow and Milton Friedman, Paul
Samuelson and Merton Miller, Ken Arrow and Robert Lucas are signing a
letter on the same side of a major public policy issue.
That reflects what I think is both the importance of the public policy
issue and the clarity of the merits. Let me highlight four points on
the merits. First, it is good economics. Our economic strategy, which
has led to this expansion, has been based on an approach of export
promotion and an approach of open markets, which have been a safety
valve in a high-pressure economy. Without that strategy our economy
would be much less healthy today. And without a continued commitment
to an open-markets strategy, our prosperity will be less successful in
the years ahead.
Second, it is -- this agreement is not only good economics, but is
good mercantilism, as well. One looks at the matter solely from the
perspective of trade promoted. The worst mistake that we could make as
a country would be to negotiate a highly successful agreement with
China that provides for major tariff reductions of 25 percent,
reductions from 25 percent to nine percent in average tariffs,
reductions in the automobile sector from the 80 to 100 percent range
to the 25 percent range. To negotiate such an arrangement and then
ensure that the only beneficiaries were our major competitors in
Europe and Japan, and that we were not beneficiaries -- and yet that
would be the consequence of our not entering into this agreement.
Third, this reinforces all the things we want to encourage in China --
whether it is belief in markets, whether it is the freer flow of
information; whether it is the Internet, which has the power to
transform societies. You know, people used to judge how free countries
were by looking at the ratio of TVs to telephones, and in free
countries there were a lot more telephones than TVs; and in communist
countries there were a lot more TVs than telephones, because TVs went
only one way. If we want to be part of changing that in China, then
openness to telecommunications, openness to the Internet is a central
piece of that.
On the other hand, if we want to repudiate all of those who are
working in that direction, repudiate all of those who have worked out,
reached out in favor of markets, then not taking the PNTR step is the
way to do that.
The final reason why this is important lies at the intersection of
economics and politics. And that is that economic history teaches us
that major changes in the balance of global economies are often
associated with profound conflicts. Going back to Assyria and Sparta,
looking a number of times both in Europe before the first World War
and in the Pacific before the Second World War. And our prospects of
maintaining collective security in the Pacific region in the decades
ahead will be much greater with this agreement than without it.
For all these reasons and with all respect to all the other issues we
work on, I believe this is the only vote the Congress will take this
year that is likely to appear in a prominent way in history books 25
or 50 years from now. And my hope and expectation is that it will
appear as a significant step forward in American's global economic
relations.
MR. SPERLING: I just want to emphasize that in this letter, economists
letter, to look at the words in there that, one, promotes economic
freedom; two, individual liberty in China; three -- these are the
words in the letter -- giving China's citizens greater choice; and,
four, advancing the rule of law. These economists have -- wide-ranging
economists have rendered their judgment not just on the economic
benefits, and certainly not at the economic benefits at the expense of
economic freedoms in China, but because they feel that having China
come into the WTO and having the United States pass permanent NTR will
further this process.
One has to ask yourself: what is the vision of those who oppose this,
how freezing in the status quo, how preventing the American companies
from being over there, as Professor Solow exchanged, weakening the
forces of reform in China, how that will actually strengthen the
situation that we seek to improve.
And as Larry pointed out, if you have a situation, which we will have,
in which we will open up the largest-growing market in the world to
our competitors, but then go out of our way to deny those benefits to
ourselves, that has to be the closest thing to unilateral economic
disarmament possible. And we feel very encouraged by the wide-ranging
number of professors, economists here, many who have been used to
validate issues on both sides of the political aisle in the past, have
come together on this.
With that, we're happy to take questions.
Q: The last time you people produced a Nobel Prize-winning letter was
on the nuclear test ban, and it didn't work. Will it work this time?
How many votes do you have?
MR. SPERLING: Actually, the first time we did was with six Nobel
Prize-winning economists supporting President Clinton's plan to cut
the deficit and invest more in people in 1992 --
Q:  I stand corrected.  (Laughter.)
MR. SPERLING: -- that Professor Solow was part of. And that turned out
to be a fairly good endorsement that we think worked out fairly well.
(Laughter.)
Q:  I'm not knocking Nobels, I'm just saying, are the effective --
SECRETARY SUMMERS: Helen, at the risk of disciplinary chauvinism,
those were not Nobel Prize-winners in economics. (Laughter.)
Q:  When is the vote?  I mean, how do you look in the Senate?
MR. SPERLING:  In the House, you mean?
Q:  In the House.
MR. SPERLING: In the House. We've always thought this would be a tough
battle. We still think it will be tough. But we're still optimistic
that, in the end, the votes will come together and that we will
prevail.
Q: Gene, let me ask you about the Microsoft briefing today. Is the
President going to take part in this briefing today? Why does it come
at this late date? Why is the White House perking up its ears at this
point in the Microsoft case? And does this suggest that the White
House is going to get involved and has a voice and wants to say
something about the Microsoft case?
MR. SPERLING: Answer to your first question, the President will not be
involved in this briefing today. Secondly, this is a strictly
informational briefing of representatives of the economic team in the
Counsel's Office, so this is a strictly informational briefing. And,
third, we received an informational briefing at the beginning of this
process during the liability stage. We did not feel that that was
appropriate in that stage of the law enforcement process.
We felt at the remedy stage that it was appropriate for
representatives of the economic team and the Counsel's Office to
receive an informational briefing.
Q: Excuse me, if I could just -- does the White House have an opinion
here that it wants to inject itself? Does it have something to say? Or
are you going to stay out of it?
MR. SPERLING: This is an informational briefing today and we're not
going to -- we're not going to answer hypothetical questions. I think
what I've said is as much as we're going to say.
Q: You won't say whether or not the President wants to do something
here?
MR. SPERLING: This is a strictly informational briefing and we're not
getting into hypotheticals.
Q: A lot of the concerns of members of Congress on the PNTR issue are
possibly going to be addressed in side legislation that there is some
negotiation on. Can you give us a -- tell us where we are on that and
how many Democrats you think that you can get with the side
legislation that's being crafted?
MR. SPERLING: Well, clearly, we believe that the agreement for all the
reasons listed, is a strong agreement in and of itself. There have
also been ideas that have been discussed by members of Congress of
both parties about ways that parallel to this vote on China-WTO
accession.
We could do more good ideas in terms of keeping the spotlight on human
rights and other issues, and members of Congress, like Sandy Levin and
others, have worked hard on those and they are conferring with other
members of Congress right now, both Democrats and Republican, to see
how strong the support is for these measures, to see if there can be
greater consensus around some of these.
We feel that many of these are very good ideas, and the stage we're at
right now is that members of Congress are appropriately talking among
themselves about which ideas could gain stronger support and could
help broaden support for the PNTR vote.
Q:  What ideas do you think should be in there?
MR. SPERLING: I think that if we did not have any PNTR vote at all, if
that didn't even exist, we as a country should be doing what is
possible to highlight our beliefs in human rights, in labor rights and
religious rights. We do so through a variety of forums. We do not
believe that it should be done in a way that is WTO inconsistent or
would be conditional on a trade agreement like China.
But if there are good ideas about ways that we can keep the spotlight
on any country which we think has a poor human rights or labor rights,
religious rights record, I think that's positive. And so I think we
certainly have heard, we think, some interesting ideas in the human
rights area that Congressman Levin and others have talked about. But
what you're seeing now is that members are talking among themselves
and seeing what ideas other members have and what is possible of
strengthening overall support for PNTR.
Q: Secretary Summers, on this Microsoft meeting today, sir, what
signal do you send with your involvement, at your level, in this
meeting? And how do you, if you want to, avoid the specter of
interference in the sensitive stage of the legal process?
SECRETARY SUMMERS: I've got nothing to add to what Gene said. This is
a briefing of the economic team on an economic issue, and we believe
it's appropriate to have such an -- to have such an informational
briefing. And as a member of the economic team, who is also an
economist, I'm going to participate.
Q: When is the last time, sir, you attended a briefing on a legal case
of this magnitude at this sensitive of a stage in that process?
SECRETARY SUMMERS: I've certainly participated in other briefings on a
range of microeconomic matters in the trade area, in the technology
policy area, in the competition policy area during my time in the
government, both as -- just which ones took place during my time as
Deputy Secretary and which ones took place since I've become
Secretary, I don't recall. But this is a --
Q:  Were they anti-trust cases?
SECRETARY SUMMERS: These were cases -- as I said, these were
microeconomic. Whether any of them were specific anti-trust cases, I
don't recall. But these were issues of competition policy and issues
of trade policy.
Q: Is it reasonable to assume that the administration, however, might
want to have information about the possible economic impact of the
breakup of Microsoft on the national economy?
SECRETARY SUMMERS: I think it's reasonable to assume that the members
of the economic team believe that it is appropriate to receive a
briefing on an economic issue, as we do from a very wide range of
agencies and components of the government, both those that are within
the Executive Branch, and in certain cases from regulatory agencies on
matters within their purview that have an economic impact, and I think
you should not see it as anything more than it is, an information
briefing.
Q: Given the current situation with Cuba and the arguments that have
been made for opening China to more trade and increasing bilateral
relations with the Chinese people, is there any effort or any thought
to applying the same arguments to Cuba and perhaps softening our stand
on economic reform?
SECRETARY SUMMERS: I would just refer you to others who have
responsibility for policy in the Cuba area.
Q:  Professor Solow, what do you think?  (Laughter.)
PROFESSOR SOLOW: I have a license to discuss anything. I don't
actually know whether Cuba has any relation to the WTO, for instance,
or not. But I think that if -- from my point of view, if an occasion
should arise in which there were a chance for Cuba to accede to the
WTO and allow --
Q:  Cuba is a member of the WTO.
PROFESSOR SOLOW: It is. Then I think that it would be a good idea to
exploit the possibility of --
MR. SPERLING: Let me be clear: there is no change in our economic
position and our policies on Cuba. (Laughter.)
Q: Gene, a couple questions. People in the labor movement and Senator
Fritz Hollings have both made the point that your argument is premised
on the fact that China will abide by the agreements. Now, China does
not have a good record of abiding by international agreements, and I
realize you're talking about unprecedented enforcement action, but
Hollings then referred to the fact that we've been working for decades
to open up the Japanese market, and the Japanese are our Western ally.
How do you respond to that point?
MR. SPERLING: I think it goes back to a point I made earlier, which
is, what is the vision of those who oppose PNTR. I think China has had
a mixed record on enforcement. There's clearly been some progress in
intellectual property in areas, and there has been some
disappointments. But the question is, what's the vision of those who
oppose it? To keep in the status quo, to deny the United States the
ability to WTO dispute settlement processes? I don't understand how
that would make things better.
What you will have in the WTO is instead of one country, each country
having to deal bilaterally with China without any clear enforcement
mechanisms, you will have the pressure of 134 countries pressuring
China with clear dispute settlement.
Now, in cases that we've had where countries have not complied, we
have been able to get significant compensation because they have been
part of the WTO process. So I think that the record is that when China
has become part of international organizations, they have moved
towards complying with their norms. Secondly, we will have greater
international pressure by having all the countries. Third, we will
have the benefits of the WTO dispute settlement and enforcement
proceedings. And then fourth and finally, again, what is the vision of
those who oppose it?
Any policy issue that you deal with, you have to ask yourself what is
likely to improve the situation, what is likely to make things worse.
China does not have a good human rights record; nobody disagrees with
that. The difference is, do you think opening China -- and for all the
reasons Professor Solow said -- is more likely to move the ball
forward or move it backwards?
My question is, do you think it is more likely that China, already
having access to our market, is more likely to become better at
compliant if we just freeze in the status quo, or do you think it will
be better if we bring them into the WTO, enforcement mechanisms,
dispute settlement and under the pressure, the global pressure of 135
countries together as opposed to one individually without a clear
international rule of law guiding that.
Q: This letter, as far as I can tell, doesn't mention PNTR; it just
talks about support for China's entry into the WTO, which can be done,
as you have said -- which likely will be done whether PNTR is passed
or not. Why doesn't the letter mention support for PNTR?
MR. BAILEY: This letter was about support for China entering the WTO
and becoming a full trading member. This is not about a matter
currently before Congress.
Q: So what's the significance of it, then, if it's not about the
legislation itself? I mean, Gephardt could support this. He said he
wants China to go into the WTO, but with certain conditions.
MR. BAILEY: We believe that the support that this group of economists
is giving, in terms of the letter that's there, that you have in front
of you, certainly contributes to the public debate that's going on now
about the role of China and our relationship to China.
Q: Could we restate the question: why is the PNTR issue not in the
letter?
MR. BAILEY: Just as a legal matter, it is not something that we can do
to talk specifically about the matter before Congress, and so we have
not done that, as a matter of the legal structure of this letter.
Q: You're talking about it now. What do you mean, "legal structure"?
MR. SPERLING: We are not allowed to -- just to play things safe, not
allowed to encourage others to lobby on a specific matter before --
and so to play things as carefully as possible with that, that is how
that is done. We are obviously allowed, each of us in our own
capacities, to speak out on why we believe passage of PNTR is in the
best interest. But look, if you want to know -- if there's any
question, if you have any question whether these people who signed
this are for passage of PNTR, I recommend if anybody has any doubt, I
encourage you to poll them one by one, and you will find that, I would
guess, overwhelmingly all support a yes vote on PNTR. And you have one
you can ask right here.
PROFESSOR SOLOW: Wait, let me just say that. When we circulated this
letter, we did want it to bear on the fundamental principles of open
trade -- and the issue that seemed most appropriate at the time was
accession to WTO. If you were to ask me as an individual economist, do
I favor permanent, normalized trading relationships with China, the
answer is yes, of course, I do. I think to balk at that is pointless.
If you were to ask me about the 140-some odd academic and professional
economists who signed that letter, I feel certain that the
overwhelming majority of them would feel the same way. There would be
some on that list, I imagine, whose interest in party politics is very
great and would want to be cautious about what they say yes to and
what they say no to, in terms of the narrow party political
implications. But I would think that 80 or 90 percent of the
signatories of that would say, of course, if we can have normal
trading relationships with China, it's a good thing; and that the
Congress ought to vote for it.
Q: Professor, since you appear to have license to comment on some
other things that -- (laughter) -- to talk about, would it be wise for
government officials to assess the impact of breaking up a company
like Microsoft before taking such a significant step -- as an
economist, sir? (Laughter.)
PROFESSOR SOLOW: As an economist, I would say that the people in the
administration who are themselves professional economists, whose beat
is economics, they must occasionally think about what the implications
of any particular major economic event would be. And I can't believe
that they haven't, before sleep overcomes them at night, wondered
about how this would -- how alternative rulings in the Microsoft case
would play out. I suspect a lot of you, some of whom probably don't
have Ph.Ds in economics occasionally think about that, too.
I mean, I don't --
Q:  What do you think?
Q:  Is breaking up -- is it good economic policy?
PROFESSOR SOLOW: I have not studied the Microsoft case in enough
detail. I'm a macroeconomist by trade. I have to obey by my own union
rules. (Laughter.) And so I have not -- I have vague opinions. I even
have strong opinions, but they are not based on anything that would
allow me to tell them to you.
Q: Secretary Summers, you said that it was inappropriate for you to
have this informational briefing during the liability phase; why is it
appropriate now during the remedy phase?
SECRETARY SUMMERS: Actually Gene was the one who said that.
(Laughter.) I don't know -- let me just say that at this point what is
being discussed is an economic issue. And I think there's a feeling
that it's appropriate to have a briefing on issues that clearly have
important economic ramifications. We did not receive a briefing at a
moment when the primary issues went to a set of adjudicatory questions
involving various aspects of conduct, where the relevant issues of
discussion were not primarily economic in nature.
Q: Is it good economic policy to divide Microsoft up into an
applications company and an operations --
SECRETARY SUMMERS: We haven't received any briefings, so I don't have
anything for you at all on that. We don't have anything further for
you on Microsoft.
Q: What would you do with this information when you hear it? Would you
just listen to it and --
SECRETARY SUMMERS: We're going to receive a briefing, and we don't
have anything for you -- anything beyond that.
Q:  Will you after the briefing?
SECRETARY SUMMERS:  That's a hypothetical question at this point.
Q: Back on China, some Democrats on the Hill who support you have
questioned why you are having this vote now, before the EU has signed
on, before all of the parties are signed on, and why not put it off
until next year when the political pressures are different and when
there are other signatories have joined on so that you can better put
pressure to bear on balking members of Congress who have been saying,
why are we signing on now when so many others haven't --
SECRETARY SUMMERS: Let me say it is the terms of the way the WTO
operates, that the commitments that China has made to us are
irrevocable and are extended to others on an MFN basis. In the event
that they make further trade liberalization commitments to the EU,
those will be extended to us on an MFN basis. And so from this point
forward, it can only get better.
We believe that in terms of what this ought to be about, which is the
pursuit of U.S. interests, reaching this agreement as possible,
reducing uncertainties, and allowing American workers and firms to
realize the substantial commercial benefits of this agreement,
starting as rapidly as possible, is very much in the national
interest. And that's why we've moved to want to see this take place as
soon as possible.
Q: Gene, I was going to ask you, Professor Solow said that unions are
often protectionist in their trade policy. Is that a position you
agree with? And how much trouble does union opposition to this present
to the party as it tries to win back Congress next year?
MR. SPERLING: I don't think there is any question that we have had
good-faith, honorable disagreements with many people, union leaders
who, on many issues we have found more common ground. I think that we
agree on the diagnosis of the problems in China on human rights and
labor rights. I think that we just disagree very much on what the
remedy is. And we feel that opening China up to more of our ideas,
more of our information -- as Larry said, right now have 12 percent of
Chinese citizens have access to the phone; less than 2 percent to the
Internet.
Our feeling is that opening China and, yes, allowing U.S. companies
with the practices of U.S. companies and the values of U.S. companies
and the competition that that will help bring into the telecom,
Internet, all of these areas, we believe, will move the ball forward
on trade -- excuse me, on bringing economic reform to China.
I think that our President still believes that there is hope in the
future for bringing people more towards a new consensus on trade. And
our aspiration is one -- a trade policy that is vigorously open
market, that vigorously believes in the benefits towards innovation
and growth and low inflation from an open-market policy, both in terms
of exports and imports; but one that also through a variety of
measures ensures that what we're doing is lifting all standards and
not a race to the bottom.
And many of the things that we are involved in are efforts against
child labor -- the efforts that Larry Summers and others have been so
involved in in terms of dealing with infectious diseases in third
world countries -- all of these, these are all -- I am going to a
conference tomorrow in Africa about what we are doing globally to try
to bring universal literacy and get kids out of factories and into
schools. All of these are efforts that can be part of a new consensus
in which one is strongly open-market but is taking other steps to make
sure we're not having a race to the bottom; that we are lifting
standards everywhere. I think this is the new consensus that we have
to go forward with. And I think we are still hopeful that -- and this
President has been hopeful -- that that can still be reached in the
future. And the reason that I think he has spoken out on this issue in
Geneva at Davos is that beyond passing PNTR for China and the Africa
CBI bill, and even the possibility of relaunching a new WTO round, I
think this President would very much like to lay a framework for
people to come together on this issue in the future.
Q: If you would imagine a situation in which Congress does not pass
PNTR, isn't it likely that many of the benefits that you've been
talking about today in terms of reforming China --
MR. SPERLING: If you were a sports announcer, would you be one of
these guys who kind of go up to somebody and say, now if you get
eliminated in the first round of NBA playoffs -- you know, this is a
tough vote, and we're planning on prevailing ultimately.
Q: But if -- in that situation, isn't it likely that a lot of the
benefits that you've been laying out in terms of reforming China,
building respect for rule of law, expanding the Internet, increasing
private enterprise in China, those things would happen anyway,
wouldn't they? And that China would be in the WTO -- there would be
European and Japanese companies in there doing the things that you've
been talking about --
MR. SPERLING: Let me make a couple of points. Within China, there are
clearly people who are pushing forward for economic reform who are
willing to take enormous risks in moving towards market liberalization
at the risk of significant political and economic dislocation. Many of
these people have staked their credibility on not just the entry into
the WTO, but normalization of trade relationships between the U.S. and
China. Were we to rebuke China at this point, I think there is no
question that we would be strengthening the forces of resistance and
the status quo within China, and weakening the hands of those who are
taking the leadership in this type of reform. So I think that it would
be a very serious setback for reform.
Secondly, we believe that American companies and their influence will
not only speed the pace of competition and development in telecom and
Internet particularly, which are the areas that are maybe most
important in bringing more economic freedom, greater development of
ideas and exchange of ideas. And to keep American companies out of
that would not only, as I said, be economic unilateral disarmament,
but would also again, I think, be a further setback for the progress
we're trying to achieve.
But I do think that if those -- I think if opponents should come
forward and say at least what their argument is, that they are willing
to support a situation in which all of our competitors, in which we
will participate in a WTO process that opens China's markets and that
lets our competitors get a competitive advantage over us -- we will
take -- that they want to take a specific vote that will say to every
American industry at the cutting edge of the world economy, that we
want to take a unilateral step to give our foreign competitors a leg
up and an advantage in the fastest growing market in the world. Tell
me how that will be good for American prosperity, good for American
jobs, good for American competition and for American innovation.
SECRETARY SUMMERS: Can I just add something? I think you've raised a
very important question, and I think there are two parts to the
answer. One is that for the United States and U.S. business to be
excluded from a reforming China would be overwhelmingly not in
America's national interest in terms of job creation, in terms of our
capacity to influence the way in which China evolves.
The second is that because of our role in the global economy, because
of our success as a major economy, the participation of the United
States in the WTO agreement with China is important for that
agreement's ability to bring about and to support the reform process
within China. When I visited with Zhu Rongji in October of last year,
we discussed WTO accession. And our discussion didn't focus on the
details of the negotiation. That was Charlene's purview. We focused on
what this meant for the relationship between our two economies. And he
stressed that what was important to him was the role of WTO and
American participation within it in providing a framework and in
providing reinforcement and providing a ratchet under the reform
process in China.
And so, for both reasons, I think we would be sacrificing a very
important opportunity to advance American national interests within
China and American national interests in what happens to China if PNTR
were not to pass this year.
Q: Any plans for an Oval Office address or a joint address to
Congress, Gene? Any discussion --
Q:  You're not going to address --
MR. SPERLING:  Many options are on the table.
(end transcript)
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