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Remarks by Franklin L. Lavin
Under Secretary of Commerce for International Trade

U.S.-China Aviation Summit
Washington Convention Center, Washington, D.C.
Monday, September 18, 2006, 1:00pm

As prepared

Thank you for having me here today. For those of you who have come all the way from China, thank you for traveling here to be with us.

There is a saying by Confucius: “ three men walking, there must be a teacher among them for me.” Every time I go to China, whether it is to the Zhuhai Air Show, or to visit American companies doing business in China, I always learn something. I believe that in this room there are many teachers, and I look forward to the opportunity for us to learn much from one another.

When we discuss civil aviation, the topic is more than just about airplanes and airports. We are speaking of the movement of people and goods, and you can’t have a successful economy without a successful civil aviation sector.

Technology serves as the backbone for economic development. In the 19 th century, it was the telephone, telegraph and railways. Today, it is the cell phone, the internet and aviation. Aviation will continue to play a critical role in moving China’s economy forward.

As our bilateral economic ties have grown, America is proud to continue to be China’s partner in the growth and development of its civil aviation network.

Many private American companies are playing leading roles both in the sale of commercial aircraft or in improving China’s aviation ground infrastructure--building new runways, terminals, cargo facilities and airports . For example, U.S companies have cooperated in the development of China’s first regional jet, the ARJ 21 by providing important knowledge, expertise and materials.

For Boeing, China’s purchase of the new Dreamliner was so important that they felt it was appropriate to honor their Chinese customers. So they changed the name of the airplane from 7E7 to 787-8 because they know that 8 is an auspicious number in China. Boeing views China as a partner and a substantial amount of work on this plane’s development has been contracted to Chinese companies.

Also, Boeing has recently established another, historic partnership. They will be building a maintenance, repair and overhaul center in Shanghai with Shanghai Airlines and the Shanghai Airports Authority.

On the public side, we are fully committed to the further liberalization envisioned as part of the 2004 bilateral air services agreement. The Department of Commerce welcomes the continued cooperation and participation of our General Administration of Civil Aviation of China (CAAC) partners in the aviation subgroup of the Joint Committee on Commerce and Trade (JCCT), an important forum for developing mutually beneficial trade policies. We are also dedicated to the success of the Aviation Cooperation Program (ACP), a public-private partnership that provides training and assistance on priority development projects identified by the CAAC.

Both the American private and public sector want to help China grow and prosper not just today but also in the long run. We want to be part of China’s success because its healthy, sustainable growth is in everyone’s best interest.

Although there have been many successes, let me also mention a few of the challenges we face :

1) Market access for U.S. airlines in China;

2) The continued right of express delivery services to do business in China;

3) High taxes imposed on light aircraft; and

4) The ability to market travel to the U.S. in China.

First, by allowing foreign airlines to serve and compete in the Chinese marketplace they will help meet the needs of people, businesses and communities. We want every Chinese airline to offer as much service as possible to everyone in the United States, and we want every American airline to be able to offer whatever services they can to everyone in China. This is the way we approach this challenge, a way that benefits consumers in both markets.

Expanding our bilateral aviation relationship provides China substantial economic benefits by increasing air travel capacity, reducing fares and expanding commerce. The market should decide what consumer’s needs are, and regulations should reflect the demands of the market. Although China is the world’s largest exporter, China lags behind when it comes to civil aviation.

President Hu said that the bilateral trade deficit that the U.S. has with China is not healthy for the overall relationship between our two countries. He said that the Chinese side should work hard to close that deficit by finding ways to make more purchases from America. Here is an opportunity. I don’t know about you, but I agree with President Hu. This is a good opportunity to reduce the imbalance.

Second, the development of express delivery service throughout China has become one of the most important business connections between our two countries. Today, more than 20,000 people work in China for express delivery firms.

There is presently draft legislation that would restrict express delivery services in China. This would disrupt what has become a mutually beneficial relationship developed over many years, a relationship that has served an important part in China’s booming economic growth. These restrictions would be a step backwards that we should be careful to avoid.

Third, the creation of a dynamic general aviation community in China has been hampered by high taxes and tariffs, which together add more than 20 percent to the cost of small airplanes. Light aircraft ownership and operation creates a community of pilots, maintenance technicians and engineers that will be in demand as China’s airfreight and passenger needs increase. Light aircraft also can benefit rural areas too small for commercial aircraft. They can serve hospitals and medical facilities, for example.

In fact let me give you two numbers you should think about. In the U.S. there is more than 220,000 registered planes, China has less than 1,500 registered aircraft. America has a robust general aviation culture that is ready to share its know how and experience with China.

Finally, travel and tourism. Although about one million Americans visited China last year, only about a third of that number of Chinese visitors came to the U.S. China has restrictions on group travel to the United States. We need to come up with some kind of cooperative mechanism so that we can work together. This will allow both countries to experience the increased people-to-people contacts that are part of a growing relationship.

China in the past 30 years has come further in its development than any country on earth. It is an extraordinary story. Hundreds of millions of people moved out of poverty, and China has moved to the front rank of nations in terms of its international role.

The way to keep on the path of growth and prosperity is to keep markets open and encourage competition. Civil aviation is at the center of the infrastructure that will help sustain growth, and American industry can help provide the investment, technology, training and products that will be needed. We are serious about your long-term success, and want to be a partner in your development efforts.

Continued market liberalization requires leadership – both in Beijing and here in Washington. I have raised a few issues where we can work together to keep our relationship on the right path. The Bush Administration is committed to free trade, even at the risk of political criticism. The Bush Administration is committed to a very positive relationship with China, even at the risk of political criticism. The best way to move forward is to keep markets open and expand our economic ties. This is in our mutual best interest.

As a friend of China, I give my thoughts to you with the following quotation from the Book of Poetry in mind: “Stones from another mountain can be used to polish your jade.” We should seek to use our wisdom, knowledge and insight to help one another wherever we can. Thank you.