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 You are in: Under Secretary for Economic, Energy and Agricultural Affairs > Bureau of Economic, Energy and Business Affairs > All Remarks and Releases > Remarks > 2005

U.S. Economic Policy in Asia

Frank Mermoud, Special Representative for Commercial and Business Affairs
Remarks for the Annual Meeting of the Asia Pacific American Chambers of Commerce
Guangzhou, China
March 16, 2005

(As prepared for delivery)

Thank you for your introduction and thank you for inviting me today. It is a great pleasure for me to speak to such a distinguished audience, which clearly represents some of the most influential U.S. businesses, investors and Chambers in Asia.

This afternoon, I would like to discuss the goals of our economic policy toward Asia, and then, against that backdrop, say a few words about our economic relations with China. Before I do that, however, I would like to acknowledge the extraordinary outpouring of help and goodwill extended by the international business community in response to the tsunami disaster. Authoritative accounts have put the U.S. private sector response at over $1 billion – and counting. I know that many of the companies represented here today take much gratification in knowing that they have been able to help so many in a time of great need. Your work is one of the best examples we have of public-private partnerships in support of the international good.

Asia is home to some of the world’s most dynamic and productive economies. Its markets account for nearly one-fifth of U.S. exports and over one-quarter of our imports, and, directly or indirectly, for millions of American jobs. Trans-Pacific trade now totals some three-quarters of a trillion dollars a year – that’s greater than our trade with the European Union. The bottom line is, Asia matters greatly to the world economy and to the United States. Secretary of State Condoleezza Rice's current trip to the region -- where she will be visiting many of the countries where APCAC is present -- underscores the continent's vitality and centrality to the U.S. foreign policy perspective and global interests. In this sense, Asia is central to President Bush’s vision. As President Bush has said, “We seek a region with strong institutions of economic and political cooperation that is open to trade and investment on a global scale. A region in which people and capital and information can move freely, breaking down barriers and creating bonds of progress, ties of culture and momentum toward democracy.” (President Bush to Japanese Diet, 2/16/02)

It's important to recognize in this context that America's competitiveness in global commerce is a core component of national security. The position of the United States in world affairs, including the achievement of our broader policy aims, rests firmly on the foundation of a healthy U.S and world economy. And in this light, we can see that American business successes abroad directly benefit the U.S. economy and can contribute to these broader interests. In his discussions on Asia, the Middle East, Africa, and even Latin America during his recent Senate confirmation hearing, our new Deputy Secretary of State Robert Zoellick, a good friend to the business community, returned several times to President’s basic theme that "economic freedom is linked to political freedom." The Deputy Secretary also stressed to the U.S. Senate that "open markets and trade" play a critically positive role in the context of the broader War on Terror and our efforts to help emerging democracies.

Recognizing the key role Asia plays today and the role it can play in the future, our economic approach to the region builds on these broader premises by seeking to achieve four key goals:

  • first, to open markets for U.S. goods and services; this is fundamental not only to our economic well being, but to our national security as well;
  • second, to improve the region’s overall business environment;
  • third, to maintain a stable macro-climate favoring open trade and growth;
  • and fourth, to encourage regional cooperation.
Finally, I would like to recognize and welcome the positive role that you -- the American businesses actively working, trading, and investing in the region -- can play in support of this policy agenda. As Secretary Rice stated in a recent meeting at the State Department, the U.S. business community can be a "force multiplier" for the U.S. government's diplomacy. In fact, I am happy to say that we at the State Department -- working with the other U.S. government agencies that promote U.S. exports and work to open markets and promote economic growth -- view our relationship with U.S. business as a partnership. As the Department's Special Representative for commercial and business affairs, my own role encompasses both engaging with U.S. business leaders on international issues affecting them, while also working with our Ambassadors overseas to champion U.S. business interests overseas, including through commercial diplomacy and market access support.

Now, let me turn first to opening markets for U.S. goods and services. This is economic priority number one. As President Bush has stressed during his speech to the National Security Council in April 2003:
“Free trade and free markets have proven their ability to lift whole societies out of poverty-so the United States will work with individual nations, entire regions, and the entire global trading community to build a world that trades in freedom and therefore grows in prosperity.”

We have worked hard to level the playing field for U.S. companies and to put the once-wobbly Doha Development Agenda back on track. We have taken a three-tiered approach to opening trade, working at the multilateral, regional, and bilateral levels. The work this Administration has undertaken on this front will yield significant benefits to American producers and producers around the world for years to come.

We are also reducing trade barriers across a wide range of sectors through free trade agreements, or FTAs, which create new opportunities for American business, and benefit American consumers by ensuring more competitive prices on the goods and services covered by the agreements. We have recently concluded an FTA with Australia, we have entered into FTA talks with Thailand, and the U.S.-Singapore FTA entered into force on January 1 of 2004. Our FTAs with Australia and Singapore are the “gold standards” that are setting the pace for comprehensiveness and trade creation. We also have Trade and Investment Framework Agreements with Indonesia, the Philippines, Brunei and Malaysia.

Alongside the U.S. Trade Representative's Office and the Commerce Department, we are working with several Asian economies to help them meet their WTO obligations and with others on their WTO accessions. I should point out what you already know – these are not one-sided agreements, there is give and take, but I can assure you that we make every effort to ensure that the end result is market opening which benefits U.S. business, services, farmers and consumers.

But let’s not get lost in the talk about the WTO, FTAs, and the like. Opening markets also stimulates free enterprise, which creates opportunity, prosperity, and, ultimately, hope for the people of this region. And that too is an important objective in its own right.

Second, open markets are truly meaningful to the business community in the context of a favorable business environment. We are helping improve the business environment in Asia by helping to develop and secure transportation links, open up the Asian civil aviation and telecommunications industries, improve intellectual property rights protection, and combat corruption.

As just one example, the USG concluded in July 2004 a landmark liberal air agreement with China, with generous cargo rights and a five-fold increase in passenger capacity. We also concluded an Open Skies Agreement with Indonesia and initialed one with India earlier this year. In December 2003, we signed a first-ever, liberal new aviation accord with Vietnam. We also initialized Open Skies this January with India, and signed in July 2004 an Open Skies Agreement with Indonesia, adding to our bilateral and multilateral Open Skies partnerships with Brunei, Malaysia, Taiwan. New Zealand, Samoa, and Tonga. With Australia, we have Open Skies for cargo. We will negotiate in April with Hong Kong for enhanced rights, and are presently encouraging Thailand to negotiate a full Open Skies agreement, following on the cargo-only Opens Skies deal completed in October 2003.

And, you can’t really trade unless you can deliver the goods, and increasingly that means you have to confront the question of the security of transportation, as we have done. We are working through the International Civil Aviation Organization, the International Maritime Organization, and bilaterally with these countries individually to make air and maritime services more secure for passengers and cargo alike. The U.S. Container Security Initiative now includes 25 ports worldwide, including many major ports in Asia – Hong Kong, Singapore, Thailand, China, and India. In APEC, the United States is helping economies bring their ports up to these new security standards.

Telecommunications is integral to the modern global economy, and we are steadfastly promoting the principle that telecommunications carriers should have maximum flexibility in the technology they choose, unencumbered by government interference. Through negotiations, consultations, and, where warranted, litigation, we are pressing to eliminate market access barriers in this sector and to encourage fair market access for U.S. firms. We have also encouraged open and transparent international collaboration in the development of standards for new generations of information and communications technologies.

I don’t have to tell this audience how serious the problem of protecting intellectual property rights is in Asia. The United States is working bilaterally and multilaterally, to improve IPR protection for U.S. producers. In China, for example, we have sought prompt government accession to the Internet treaties of the World Intellectual Property Organization and expanded market access for U.S. films and other video products. In Thailand, the Philippines, Indonesia, Malaysia, Taiwan, and India, we are seeking stronger law enforcement against piracy and counterfeiting. In Korea, which has the deepest broadband penetration in the world, we are calling on the government to strengthen its IPR enforcement protection regime and to stamp out online piracy and illegal downloading that costs U.S. copyright holders hundreds of millions of dollars, if not billions.

We insist on strong IPR protection in all our Free Trade Agreements, and we fund training and technical assistance programs for foreign officials engaged in IPR protection and law enforcement, including in multilateral fora, such as APEC and ASEAN.

We are also pleased to have an excellent dialogue on energy issues in the region through the APEC energy working group, which is meeting this week in Vietnam. Asia and the U.S. are now about tied as the world’s largest energy consumers. Many recent articles have suggested a growing competition between Asia and North America for oil. But in many ways, as Asia’s role in energy increases, we also have more and more in common. We have a shared interest in oil market stability, and a shared interest in working with major producers to assure that they provide the markets greater transparency, and increased access so that foreign investors can help grow their oil sectors and meet the world’s growing need for oil. This will remain an important theme of our discussions in the region. OPEC ministers are, in fact, meeting today. While the U.S. does not take a position on particular OPEC meetings, we know that our friends in the region share our belief that ample amounts of oil are needed to sustain world economic growth.

Maintaining a stable macroeconomic climate is the third element of our approach to Asia. The region has come a long way since the financial crisis of 1997-1998, when regional economies went in a tailspin and many despaired over the prospects for a recovery. We are encouraging more prudent and sustainable fiscal policies, monetary policies focused on price stability, and increased openness to international trade and capital flows. As a result, interest rate spreads are down; there are no major foreign exchange or balance of payments crises; “contagion” is less prevalent; and, among those economies with flexible exchange rates, volatility has decreased. Looking at the biggest economies, Japan is showing strong signs of recovery, and China is maintaining a strong rate of growth. In addition, India has had several consecutive years of strong economic growth, and will likely continue that trend in the future.

Our economic development agenda also supports a stable macro-environment. Core principles in U.S. development policy include

  • increasing financial assistance to the poorest countries;
  • providing more assistance in the form of grants;
  • measuring the results of our assistance efforts rigorously; and
  • targeting its support to countries that pursue pro-growth strategies.

We work within the Asian Development Bank, as well as other international financial institutions, to implement these principles.

Through the Millennium Challenge Account the U.S. will provide development assistance to nations with a proven record of governing justly, investing in their people, and encouraging economic freedom. Congress approved $1 billion in start-up funding in 2004, $1.5 billion in 2005, and the administration has requested $ 3 billion for FY 2006. Seventeen countries have been selected for the first year of the program.

It is our good fortune that Asia is home to a rich network of regional organizations that contribute to this agenda. APEC, ASEAN, and the ASEAN Regional Forum form the institutional foundation for our broad cooperation with the region on such issues as trade liberalization and facilitation, environmental protection, transport security, trafficking in persons, contagious diseases, and transnational crime. In APEC this year, for example, we have four key objectives:

  • one, to increase the prosperity of the region through strong support for trade liberalization and the WTO process;
  • two, to strengthen the security of the region by continuing to implement the Bangkok Security Commitments and improving the security of trade and travel in the APEC region;
  • three, to deepen the groundbreaking work APEC has already done to increase transparency and combat corruption in the region; and
  • and four, to enhance the protection and enforcement of intellectual property rights.
In the wake of the tsunami crisis, disaster preparedness will also have a prominent place on the APEC agenda

We are also implementing our ASEAN Cooperation Plan to strengthen U.S. relations with ASEAN and enhance cooperation on transnational issues ranging from protection of intellectual property, to disaster management, to counter-terrorism. In addition, we are working to enhance the effectiveness of the ASEAN Regional Forum (ARF), which is the region’s leading multilateral forum for consideration of security issues. We actively support ARF’s increasing activism on important non-traditional security issues such as terrorism, maritime security, and the proliferation of weapons of mass destruction.

Now, let me turn briefly to the vitally important U.S.-China economic relationship, a topic of obvious importance to this group. Let me offer a personal observation here. I have been extremely impressed with China’s economic development and policy priorities during my two trips here. And I’ve been impressed with the openness of China’s political leaders and private business to American ways of doing things, especially American best practices, which have led to the formation of some independent unions in some of the foreign-owned factories in South China.

It’s easy to understand why China matters to the United States: China, is now our third largest trading partner and our fifth largest export market. U.S. firms have invested over US$ 48 billion dollars in China through 2004. This trade and investment brings jobs and technology to China, delivering growth to the economy.

And, we can’t forget U.S. agricultural exports to China. After long-term Administration engagement, China issued final safety certificates for biotech soybeans, cotton, corn and canola oil, assuring that China’s quick-growing multi-billion dollar market for these U.S. agricultural products will remain open to U.S. farmers. To cite an example of the progress – U.S. cotton sales to China have increased from US $51 million in 2001 when China entered the WTO to over US$ 1.4 billion in 2004 – that’s a 25-fold increase. Cotton exports to China were up 82% last year alone.

Of course, free trade also means job losses in some industrial sectors in the developed world; a recent AFL-CIO report calculates about 1.5 million U.S. jobs being lost because of China; you can dispute that these were “lost” because of China or because the comparative advantages of outsourcing just made it economically more attractive – “rational” – to do so. But new jobs are being created in America as our workforce changes and workers are reeducated. American workers have, for the most part, benefited from the open trading system, where the jobs are higher paying, whether for technical and financial services or for American agricultural goods.

I am sure you could point to examples of how we all benefit from open trade in the context of China and other countries in the region. By no means am I implying, however, that our work is done. As our relationship with a rising China evolves, it is only natural that we encounter bumps along the way. We have a lot of work to do together, in China, and elsewhere in the region to accomplish a truly open trading and investment environment.

But we are committed to working together to address such differences through discussion and negotiation, and Secretary Rice’s trip to Beijing next week, and her meetings with senior Chinese officials, will further that objective – in fact, her current Asia trip, which includes Japan and Korea, as well as India, Pakistan, and Afghanistan, will show that the U.S. intends to stay engaged in the Asia-Pacific for the long term and that we recognize Asia is a key locus of global dynamism. On these stops, she will discuss our global and regional cooperation such as the actions we are taking to support democracy in Iraq and Afghanistan.

Coming back to China, our discussions on the economic front have included full implementation of China’s WTO commitments. Although China’s efforts to fulfill its WTO commitments are impressive, and have been recognized by U.S. companies in China as contributing significantly to their ability to trade and do business here, they are far from complete and have not always been satisfactory.

Most seriously, China’s implementation of its WTO commitments has lagged in many areas of U.S. competitive advantage, particularly where innovation or technology play a key role. The areas of particular concern to the United States are intellectual property rights, services, agriculture, industrial policies/standards, and transparency. We are also concerned about China’s draft regulations on government procurement of software, direct sales, and distribution rights.

The United States hopes that China will take strong measures in these areas and I hope that China will join with us in making the current WTO round – the Doha Development Round – a success, especially as we deal with agriculture trade and services and regulatory practices. I look forward to China’s taking a leadership role with the U.S. as we approach the WTO Ministerial in Hong Kong in December.

Protection of intellectual property is one of our most important concerns. We will continue to press China to improve their legal framework and more aggressively enforce their own laws across the board. While there have been encouraging recent developments on IPR as a result of our persistent engagement, for example new lower thresholds for criminal prosecutions of IPR cases, we need to see actual reductions in piracy and counterfeiting rates and more consistent, vigorous prosecutions of IPR violators. Chinese authorities need to consistently destroy confiscated IPR-violating goods as well as destroy production machinery used in these activities. We also want to see stronger border enforcement to stop counterfeit and pirated goods from being exported.

We also look to China to quickly begin to move toward a flexible, market-based exchange rate. A market-determined exchange rate would remove suspicions of unfair trade based on distortions of an artificially under-valued currency; it would bring to an end Congressional concerns that absent punitive tariffs, the U.S. can’t get a fair shake in trade with China. Chinese policy-makers have assured us both publicly and privately that a more flexible, market-based exchange rate is a top goal; we await action.
So, we still have work to do and we look to you in the audience to help us accomplish our goals here in China and across Asia.

As a final note, I would like to again highlight that this Administration is committed to working with you wherever you need us -- as your partners in doing business in Asia, and around the world. My own Office at the State Department, the Office of Commercial and Business Affairs, is at the forefront of encouraging partnerships with American companies to promote not only our business products and services, but also our business practices, which are vital – if less tangible – asset.

Through the Secretary’s Award for Corporate Excellence (ACE), we aim to spotlight the important role U.S. business can play abroad to advance ethical practices and democratic values by recognizing their exemplary conduct in overseas operations. This premier award for corporate stewardship recognizes companies’ achievements in one or more of the following areas: Corporate citizen; Work health and safety; Employment practices; Environmental stewardship; Rule of Law; and Local economic development. Companies are nominated by our U.S. Ambassadors overseas and include both large corporations and small and medium sized enterprises (SMEs).

For example, a recent winner right here in China was the SME Chindex International, which was recognized two years ago for its outstanding corporate citizenship, innovation, and exemplary international business practices in delivering healthcare products and services in China.

In April we will launch the call for nominations to all our U.S. Ambassadors for the 2005 ACE.

Before closing, I would also like to touch briefly on the progress of recent initiatives to facilitate visa applications for business visitors. A key objective here is to make better information accessible to visa applicants. We recently launched a “Business Visa Center” for Chinese cases, which dedicates personnel in the Visa Office to answer inquiries from American companies interested in the getting visas for Chinese travelers -- either Chinese employees of the American firms, Chinese partners, or Chinese customers. You can reach the China Business Visa Center by writing to Businessvisa@state.gov.

And, we have asked our embassies and Consulates around the world to take an activist approach to business facilitation. We’ve also made efforts to increase transparency in the visa business process by prominently displaying visa processing times and other visa data on their consular websites. Over 400 companies that are members of the AmCham have been accepted into the Business Visa Program managed by Embassy Beijing. In 2004, the first year of the program, the consular section in Beijing processed more than 6,000 applications for business visas through this channel. Our consulates in Shanghai and Guangzhou have made similar efforts.

All of our posts have post-specific business facilitation initiatives, with significant efforts in India, Singapore, and Seoul. Information is available on www.travel.state.gov.

Let me conclude with a few parting thoughts. By pursuing this broad economic agenda, through our negotiations at the World Trade Organization, completion of free trade agreements in nearly every region, as well as our work on investment and other economic agreements, we are advancing a more open economic and trading system and the rule of law, which in turn promotes economic growth, transparency, and democracy, all basic tenets of U.S. foreign policy. Prosperity generates opportunity; it gives individuals a stake in the system and hope for a better tomorrow. And let’s not forget that opportunity and hope are formidable foes of terrorism.

Asia is an area of enormous economic importance to the United States and the world, and one where the United States is fully and productively engaged – not least, by providing open markets for Asian goods and welcoming millions of Asian students, some of whom have gone on to lead their countries and societies. I am confident that, working together with our Asian partners, including China, and with you in the business community, we will succeed in creating prosperity for our countries and the region. I would like to commend APCAC and AmCham Guangzhou for all their efforts for improving the competitiveness of U.S. business in the Asia-Pacific region.

Released on March 21, 2005

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