Under Secretary of Commerce For International Trade Francisco SÁnchez
U.S.-China Economic and Trade Cooperation Forum
Friday, February 17, 2012
Los Angeles, California
As prepared for delivery
Distinguished guests friends and partners.
Thank you for that kind welcome. My thanks to Lee Zak for that generous introduction.
I also want to express my appreciation to:
- The Chinese Ministry of Commerce for organizing this Forum;
- and to Mayor Villaraigosa — and the City of Los Angeles — for their hospitality.
Also — I want to reiterate the sentiment expressed by so many Americans throughout the week.
It’s an honor to have Vice President Xi in the United States. His visit is yet another sign of how far we’ve come. Remember back in 1971. The big news was that the U.S. – China relationship was beginning to warm up.
For days — this was a top story. And what was the catalyst for it? As we all know — it was Ping-Pong.
Specifically — the Chinese Ping-Pong team invited the American team for a weeklong visit to China to play some exhibition matches. That was considered a big deal back then.
Well — as today shows — we’ve come a long way. And, we in the United States are hopeful that this visit will lead to a deeper and stronger U.S.-China trade and economic relationship.
I want to focus my remarks today on this relationship.
- the changes needed for it to flourish;
- why they are needed;
- and how they would generate economic growth in both countries.
But first — I want to take a step back and look at where we are. As we all know — trade between the U.S. and China has grown significantly over the years.
For example — in 2011— bilateral trade in goods topped $500 billion — up from $457 billion the previous year.
And from our vantage point — as Secretary Bryson noted earlier — U.S. merchandise exports to China have grown by almost 50% over the past 2 years.
American exports exceeded $100 billion for the first time in 2011.
And, this is generating a lot of positive economic activity on both sides of the ocean:
- supporting jobs;
- helping businesses;
- and spurring economic growth.
China is now one of the fastest growing — and most exciting markets in the world.
And it’s been remarkable to see these changes up close
The middle class is growing. Income levels are rising. It’s great news for the people of China.
It’s also great news for American companies that are seeking rapidly growing markets.
That’s because it means more customers for American products and services — which helps U.S. businesses and supports jobs.
So there is a direct link between the prosperity in China and America. Nonetheless, there is considerable tension in the relationship due to a very large trade imbalance.
Last year — the U.S. goods trade deficit with China was $295 billion — an increase of more than $20 billion from the previous year. This makes up 41 percent of our overall trade deficit in goods.
There is plenty of room for growth.
China is anticipated to be one of the fastest growing economies in the world. Growth is forecasted to be 9.5 percent this year according to the IMF. With this growth — China’s demand for imports has soared. China’s merchandise imports from the world have risen from $413 billion in 2003 — to $1.7 trillion just 8 years later.
Yet, the U.S. is only the fifth largest supplier of Chinese imports. We only represent roughly 7 percent of the Chinese import market. There is potential to do so much more. American companies produce many of the world’s best products and services.
They can — and should — play a part in China’s rapid growth through increased U.S. exports and investment in many different industries. However — we must be candid.
American companies face many challenges when they approach the China market.
For example — although China has comprehensive Intellectual Property Rights laws on the books — often — implementation of these laws is lacking.
We are working with our Chinese colleagues to strengthen the IPR institutions that are necessary to create an environment that is conducive to innovation.
Another challenge for American exporters is that China is not yet a member of the WTO’s Government Procurement Agreement.
This creates some uncertainties when bidding for Chinese government projects.
We look forward to China joining the GPA as soon as possible — including Provinces large Municipalities and State Owned Enterprises.
China’s aggressive policy to nurture indigenous innovation raised concerns within the international business community and United States Government.
The expansion of China’s high technology sector through research and development is a good thing.
But, China should embrace global best practices.
It should ensure that foreign invested companies are treated in a fair and transparent manner — so that the playing field is fully level for all market participants.
Let me also note that we hope to see greater openness and transparency in China’s investment approval process over time.
American companies can contribute even more to China’s economic development if they are given an opportunity.
One important step is a firm commitment to transparency. Quite simply — openness is essential for any economy to reach its full potential.
For example — companies know that when they do business in America — their ideas will be protected — and they will have a fair shot to compete. And these are reasons why the United States is the number one destination of foreign direct investment.
Our bilateral partnership will only reach its full potential when the rules are fair and transparent and fairly enforced.
Right now, we are addressing these and other concerns through various dialogues such as:
- the Joint Commission on Commerce and Trade
- and the Strategic and Economic Dialogue.
Earlier this week, Vice President Biden announced progress we made on a bilateral basis to address U.S. concerns.
China announced the opening of its third-party auto insurance sector to foreign companies and made commitments to rebalance its economy and leave technology transfer decisions to private companies.
We won’t stop until the playing-field is level for all firms. The reason we are advocating so hard is because our commitment to China is firm and here to stay. And that extends to all aspects of commercial relations. Just take a look at the Commerce staff we have on the ground.
We now have our largest Commercial Service presence in China.
For those of you who don’t know — our Commercial Service unit is the trade promotion arm of the Department of Commerce. We have staff all over the world including in this room — ready to help U.S. businesses export. Right now we have a presence at five of the six U.S. diplomatic missions in China.
In total — over 120 employees staff the commercial section in China — more than twice as many as at the next-largest Commercial Service post.
Our data shows that with $5.8 billion of foreign direct investment in 2010 — China ranked only 27th among top investors in the U.S.
Clearly, there can be greater collaboration.
And the good news is that the trends are positive.
China is the fastest growing source of FDI in the United States. Between 2005 and 2010 — the stock of FDI in the U.S. from China grew by a compound annual growth rate of 53 percent.
These numbers show that Chinese investors know that America is a good investment.
And, I urge our Chinese friends to invest some more.
If they manage their business well — they will often get solid returns. In turn — these investments will lead to U.S. growth and jobs. And, this benefits both the U.S. and Chinese economies.
In the end — this is the goal we all share.
And a way to achieve it is to increase exports and investment.
As I’ve outlined today — we can accomplish this with:
- a greater commitment to transparency;
- with a balanced trade approach;
- and by addressing concerns like intellectual property rights and indigenous innovation policies.
This will lead to:
- new opportunities in our countries.
- new prosperity in our countries.
- And, new jobs and economic growth in our countries.
Our relationship should be defined by collaboration and mutual interest
Of course our issues aren’t always resolved as quickly as we would like.
But, as the Chinese proverb goes:
“Be not afraid of growing slowly be only afraid of standing still.”
At this moment in history — we can’t stand still.
We must remain committed to taking steps forward — both large and small — that will bring a more prosperous future for both our peoples. This forum is an important step in this effort.
And I thank you once again for allowing me to participate in today’s discussion.
I look forward to our future conversations. Thank you.
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