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U.S. Department of State

Department Seal Alan Larson, Under Secretary of State
for Economic, Business, and Agricultural Affairs

Remarks,World Affairs Council Executive Luncheon
San Francisco, CA, March 30, 2000
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The Case for Normal Trade Relations with China

Thank you very much for inviting me. It's great to be back in the beautiful Bay Area. And I can't think of a more appropriate city than San Francisco -- America's gateway to the Pacific Rim -- to talk about the importance of Permanent Normal Trade Relations status (PNTR) for China. I've come a long way for a short visit to deliver an urgent message. In the next 2 months it is likely that Congress will cast an historic vote on the future of our trade relationship with China. Making the right choice will bring very important benefits for business, farmers and workers in California and throughout the country and will help move China in the right direction. Making the wrong choice would hurt American business, farmers and workers and risk putting our relations with China on the wrong path. No American can afford to be uninformed or complacent about this vote.

California: Gateway to the World

California drives the U.S. economy and our economy drives the world. Like the IT industry it has spawned, this state is the hub of America's engagement with the rest of the planet. But the reverse is true as well: What happens in the rest of the world is vitally important to California.

Luckily, Californians like you understand the benefits of being engaged with the world. Simply consider how many languages are heard in your streets. It's no coincidence that our most diverse state is also our most creative state and the country's leading exporter.

No state has been engaged longer or more intensively with China than California. Fully 48% of the passengers in the U.S.-China aviation market are concentrated in California. I mention aviation because transportation and communications are respectively the circulatory and nervous systems of the global economy. The Departments of State and Transportation have supported San Francisco's emergence as a major center for traffic to Asia. Since the mid-1990s we have negotiated Open Skies agreements with Singapore, New Zealand, Brunei, Malaysia, Taiwan, and Korea; an all-cargo Open Skies agreement with Australia; and important market-opening agreements with Japan and China.

San Francisco benefited directly from these efforts. Between 1995 and 1999, the number of scheduled passenger flights to Asia from San Francisco grew by 77%. Inbound passengers increased 47% from 1995 to 1999, with cargo arrivals up by 49%.

International traffic at San Francisco's airport generates 54,000 direct jobs in the Bay Area alone. An aviation agreement negotiated last year by my team at the State Department will allow United Airlines to launch next week the first and only non-stop service between California and China operated by a U.S. carrier. Non-stop service between San Francisco and Shanghai will provide connections for California's high-tech companies and Shanghai's growing high-tech industry. It is one more example of how our efforts to open markets can bring new jobs, new investment, and increased trade and tourism for communities on both sides of the Pacific.

It is precisely because of these Pacific connections that President Clinton, Secretary Albright and the rest of the cabinet are making an all-out campaign to win passage of PNTR. The Secretary has been at the forefront of explaining how our decades-long, bipartisan policy of principled and purposeful engagement advances our national security and prosperity.

The National Debates on China: Ours and Theirs

Today we face an issue of truly historic dimensions: whether to grant China PNTR. Our answer will affect our national security and economic prosperity for many years to come. As a Pacific nation, America's future is tethered to that of Asia. That's why we've played such a vigorous regional role over the past 50 years, to maintain stability and foster the increasing levels of trade that have allowed so many Asian economies to flourish.

In my lifetime, an earlier Chinese leadership sought to block connections with the global economy and believed the path to national strength was through self-sufficiency and backyard steel furnaces. Now China has chosen a different course; it seeks to develop by making sweeping changes in the way it conducts business, opening its markets to foreign products and investments and committing itself to abide by WTO trade rules. The landmark Agreement we signed with China last November is a good deal for all Americans. This deal also pushes China in the direction we want it to go -- toward a more open society, expanded rule of law, and further integration into the community of nations.

Make no bones about it; China will enter the WTO. The Chinese have made their intentions clear and China's entry is not the issue Congress will debate. Our only issue is whether to say "yes" to the economic benefits China's WTO accession would bring us. If we say "no", not only will we pass up on the benefits we've fought to secure for 13 years, but we'll also give the cold shoulder to China's move in the right direction.

The Details of the Deal

Allow me to elaborate on the deal. Within 5 years, China's average industrial tariffs will drop from 24.6% to 9.4%; the figures for U.S. priority agriculture from 31% to 14%. Other import barriers will either be eliminated or greatly reduced. The strong intellectual property protections so important for California's knowledge-based industries will be enforceable through WTO dispute settlement; safeguards against unfair trade practices will be put in place.

This deal eliminates tariffs on all information technology products by 2005. China's IT equipment market is growing by 20% to 40% annually. Each year China installs enough phone lines to replace networks the size of Pacific Bell.

The agreement substantially reduces tariffs on agricultural products like vegetables, fresh citrus, and nuts by 2004. It will open up a whole range of sectors where California companies are acknowledged world leaders such as motion pictures, software, tourism, financial services and environmental services.

What do we have to give up in return for these market-opening benefits? Little or nothing. Our tariffs don't change, our laws are not weakened, and we only extend to China the very same type of normal trade relations we already give to the WTO's other 135 members.

To repeat, once China completes its agreements with other WTO countries, it will join the WTO. The U.S. decision on PNTR will not change this. But only by passing PNTR will we ensure that America receives the full benefits of the market-opening measures we negotiated. Absent PNTR, China would not be obligated to extend to American companies and workers all the benefits and safeguards we have negotiated. The companies and workers of other WTO members, however, will enjoy the fruits of American negotiators' hard work.

Let me give some concrete examples of the difference PNTR makes for U.S. businesses, workers, and farmers:

  • Without PNTR, U.S. exporters will not gain the right to establish their own distribution services.
  • Without PNTR, our high tech firms will not compete on the same terms as the Nokias, Ericssons, and Alcatels.
  • Without PNTR, China could impose unfair conditions such as local content requirements, offsets, and forced technology transfer -- provisions that could drain U.S. jobs and technology.
  • Without PNTR, U.S. farmers -- including the California citrus farmers who as of last week are now allowed to export their produce to China -- will have little recourse if a dispute arises over China's commitments.
  • Without PNTR we will not be able to enforce the agreement through the WTO dispute settlement mechanism.
On the other hand, under WTO rules, our hands aren't tied. We can continue to block imports of goods made with prison labor, we can maintain our export controls on sensitive goods and technologies and we can use our trade laws to protect our interests. In fact, no WTO accession agreement has ever contained stronger measures to guarantee protection from import surges, dumping and unfair practices like forced technology transfer, mandated offsets and local content requirements. And in the worse case scenario -- a national security emergency -- we could withdraw NTR itself. Let me assure you the Administration -- working with our private sector, its WTO partners and Congress -- will actively monitor and vigorously enforce this agreement. We will commit the needed resources to ensure Chinese compliance, and we are seeking $22 million in new enforcement resources in the FY2001 budget.

PNTR is Good for Taiwan

As important as the economic stakes are, the foreign policy and national security implications of the PNTR vote are even more important. Democracy is alive and well in Taiwan. We look forward to continuing constructive unofficial relations with Taiwan under the leadership of Mr. Chen Shui-bian. I am encouraged by Mr. Chen's comments that he wants to reduce tensions between the PRC and Taiwan. And -- friends of Taiwan take note -- Mr. Chen also voiced his support both for PRC accession to the WTO and also for normalized trade relations between China and the U.S. The reasons are clear: Taiwan does a lot of business in and with China; many Taiwan-invested enterprises on the mainland export to the U.S., so Taiwan businesses will benefit from PNTR for the PRC. PNTR eliminates potential obstacles that might impede or delay Taiwan's own accession to the WTO. Finally, WTO accession of the PRC and Taiwan can improve cross-Strait economic ties in a way that promotes regional security.

Holding China Accountable to International Standards on Human Rights

Secretary of State Albright has made it very clear that granting PNTR in no way is an endorsement of China's human rights record. We will not pull our punches on human rights. Last year the Secretary designated China as a "country of particular concern" for severe violations of religious freedom. In February she drew international attention to China's disappointing performance when the State Department released its annual Human Rights Reports. And exactly one week ago she was in Geneva personally making the case for a resolution on China's poor record before the UN Commission on Human Rights. Shining the spotlight on the abuses taking place in China is something we intend to keep on doing until we see significant improvement.

PNTR is an integral part of our policy of principled engagement that pushes China toward more openness and greater acceptance of the rule of law. We will hold China's leaders accountable to international standards of behavior in all the arenas that are important to the U.S., including human rights, the environment, nonproliferation, and trade. China's accession to the WTO and our granting of PNTR increases the chances of positive change in China as the government increasingly removes itself from people's economic lives and is held accountable to international obligations. In the information age, opening the economy to competing products inevitably means opening the society to competing ideas. Simply imagine the potential for expanding the flow of information and ideas that the Internet will have when China joins the WTO.

As President Clinton has said, bringing China into the WTO doesn't guarantee political reform, but by accelerating the process of economic change China will be forced to confront that choice sooner, and China's stake in making the right choice will be even higher. That's why people like Martin Lee, Chairman of Hong Kong's Democratic Party and an advocate of democracy on the mainland, support China's WTO accession, and why we should, too.

Human rights and Taiwan are not the only issues where a "no" vote on PNTR would be likely to hurt U.S. foreign policy interests. Without PNTR, it would be much harder to gain China's cooperation on other issues, from maintaining stability on the Korean peninsula and in South Asia to preventing the proliferation of weapons of mass destruction and combating global environmental threats. These are vital U.S. interests, and China -- because of its size, its permanent seat on the UN Security Council, and its leadership role among developing countries -- can make a big difference.

American Leadership in the World

And this leads to my final point. A "no" vote on PNTR would be a serious blow to U.S. global leadership. I can say, without a doubt, that our friends around the world want to see an America that is confident and engaged in building a safer, more prosperous, and more principled world. Our PNTR vote is a litmus test of how the U.S. views its role at the dawn of the 21st Century. Will we continue to be the principled champion of a rules-based international order that brings countries closer together?

Before closing, I would like briefly to address another issue that is a high priority for Secretary Albright. We do not have international affairs tools or resources that adequately reflect America's stake in the world. Only one penny out of every federal dollar goes to the international affairs budget, yet this budget affects the bottom line of every American in this room.

When we open Japan and China's civil aviation markets, when we draw on World Bank resources to restore stability and growth in Asia, when we promote recovery in the Balkans, when we combat narcotics trafficking in Colombia, when we promote respect for human rights and religious freedom in China and around the world, and when we contribute to economic development in Africa, the Middle East, and Russia, we are not doing so primarily to help foreigners. We are doing so to protect American values and interests, to expand exports and to build new partners and markets for the future. We need the resources to do the job right.

In closing, let me simply say that we need your help. PNTR is a vital issue and an historic choice. It must be a well-informed choice and those who understand the stakes have a special responsibility to ensure that their voices are heard.

Thank you.

For more information on China go to: Bureau of East Asian and Pacific Affairs.

[end of document]

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