"U.S.-China Commercial Relations and the New American Government," Remarks by Thomas J. Donohue

Address by Thomas J. Donohue
President and CEO, U.S. Chamber of Commerce

American Chamber of Commerce in China
Beijing, China
January 13, 2009

As Prepared for Delivery

Introduction

Thank you very much, John [Watkins, chairman, AmCham-China], and good afternoon everyone.

Let me express my appreciation to you, John, and to the staff at AmCham-China for giving me this opportunity today.

In recent years, we have watched AmCham-China make enormous strides in its capacity to represent American companies throughout this critical market.

We have worked hard to establish a close working relationship between our organizations. Given the range of complex challenges here and in Washington, this is absolutely essential.

John, you, the AmCham board, and the staff deserve a lot of the credit for this and we thank you for all your leadership.

Purpose of Trip

Some may be wondering what I am doing in China when there is so much going on back in Washington. A new Congress convened last week. A new president will take office next week. So why am I here?

The reason is simple. Nearly half of the global economy has shifted to the Asia-Pacific region.

A strong and vital partnership on all levels— between the United States and the most significant countries in Asia—is absolutely critical to global growth, prosperity, and security.

So in the midst of the changes going on in the United States, we're bringing a message to government leaders here that the American business community remains totally committed to strong and deep commercial and strategic relationships across Asia.

And while we do not represent or speak for the new U.S. government, we will share our insights on what might lie ahead—and on how we can work together to achieve continuity and progress in our relations.

We also hope this visit sends a message to our own new government. Amidst all the other domestic and international challenges they face, they cannot afford to overlook our critical ties in Asia.

And we have a message for our members and all the companies that make commerce between our countries really work - the U.S. Chamber is committed to working with all of you to reduce barriers and advance business opportunities across the Pacific.

Later this week, I'll be meeting with the President of Korea and the Prime Minister of Japan during stops in those countries. But it was important to come to China first.

Strengthening and deepening the U.S.-China relationship is vital to the future of both countries and the worldwide economy.

This week, China and the United States are observing the 30th anniversary of the opening of our relations.

It's an anniversary well worth celebrating, because it reminds us all how far we have come and how much potential there is for the future.

I'll come back to this subject in a minute, but first let me make a few comments about how we plan to deal with the new Congress and administration as well as the prospects for economic recovery in the United States.

U.S. Domestic Update

It's not exactly breaking news to say that the state of the American economy right now is not very good. In fact, for millions of our workers, families, companies, and investors, these are very difficult times.

When the reports come in for the fourth quarter of 2008, we think they will show a GDP decline of at least 5%. We're looking at another 3% drop in the first quarter of this year.

The U.S. economy could hit the bottom of the recession by the middle of the year, providing there are no more major shocks to the economic system.

What we're doing at the Chamber is trying to focus our leaders' attention on taking immediate steps to jump-start the American economy.

Last week, the president-elect outlined his priorities for a major economic recovery package. We applaud many of the things he is proposing-particularly tax cuts to stimulate consumption and business investment. We are also very positive about his emphasis on infrastructure.

We'll work hard to help pass a recovery program that jolts the world's largest economy back to life.

At the same time, we are taking the strongest possible stand against the rise of protectionism-in the United States or anywhere in the world.

While some may say this is a bad time to try to get a Doha deal done, I say this is the best time.

Completing the Doha Round would provide a tremendous boost of confidence to the global economic and trading system.

We're also going to convince our nation's leaders to begin enacting broad and deep reforms to address the most critical problems facing our country.

I never go anywhere overseas and start talking about other countries' problems until I talk about our own-and we've got plenty in the United States.

We must stop the epidemic of frivolous lawsuits, and modernize the regulations governing our capital markets without choking off the innovation and reasonable risk-taking that are so important to capital formation.

We need to produce more domestic energy in the United States from all sources—and find ways to address climate change through new technology, and not by shutting down economic activity.

And we know that once the current crisis has passed and economic growth has been re-started, we must put the United States back on a course of fiscal and budgetary responsibility.

We see good opportunities to work constructively with the new administration on these and other important issues.

We know and respect many of the President-elect's key appointees - especially General Jim Jones who later this week, will leave his post at the U.S. Chamber to become President Obama's National Security Advisor.

Even so, we will not hesitate to vigorously fight wrong-headed proposals when necessary - especially when it comes to protectionist measures that would shut off trade.

Prospects for U.S.-China Relations

That brings me back to the U.S.-China relationship.

More than 30 years of strong U.S.-China engagement have brought immense benefits to the people of the United States and China.
Many are now wondering, however, whether the new Congress and administration will embark on a more confrontational posture towards China.

We know that President Obama will face strong protectionist pressures from the larger Democratic majorities in the new Congress.

He will face political pressures from organized labor and other activist groups that strongly supported his election.

These factors alone create a new, more challenging environment for U.S.-China relations.

Yet we believe that President-elect Obama understands the value of this relationship.

We trust that once he is faced with all the burdens of the Oval Office, he will appreciate the importance of working with China as a partner on many global challenges.

Both countries could benefit greatly if China were to reach out and help the new American president address those challenges.

The people that President-elect Obama has appointed to his economic, foreign policy, and security teams are serious internationalists.

There is reason to believe they will emphasize continuity, pragmatism, and partnership in their approaches to China.

Still there are bound to be bumps along the road just as there have always been. It's possible that from time-to-time, statements will be made or positions taken that generate friction and heat.

It's important not to over-react to these episodes and instead focus on the overall direction of our relations - and ensure that the direction is positive.

Communication is critical. That's why we must continue high-level dialogues, such as the U.S.-China Strategic Economic Dialogue.

We are urging the Obama administration to work with the Chinese government to build upon the successes of the SED.

Further progress on the commercial issues identified by both countries will be essential.

The new administration will have little tolerance for policies that put U.S. workers and businesses at a disadvantage - such as discriminatory industrial policies, lax enforcement of intellectual property rights, or actions that are perceived to subsidize exports.

Steps to Improve Commercial Relations

So what should the business community and our Chambers do to keep U.S.-China commercial relations on a constructive and positive path?

We must underscore to both governments the fundamental importance of a strong U.S.-China relationship.

We should counsel both sides to engage constructively, to resolve disputes without punitive measures, and to embrace the many opportunities that exist to expand our commercial, strategic, and friendship ties.

The Chamber will lead an effort of education, dialogue, persuasion, and grassroots lobbying in the United States to make certain that U.S.-China relations move in a positive direction.

We intend to provide a critical counterbalance to the pressures our new government will feel from anti-trade or anti-China constituencies.

You have our firm commitment on that.

At the same time, we are going to be looking for help and cooperation from China.

Our efforts in the United States to preserve and strengthen this relationship will be helped greatly by China taking positive steps in several key areas.

Restoring Global Economic Growth

First, we welcome China's efforts to promote domestic consumption, and we urge the country to continue on this path.

The stimulus package announced late last year was positive and well-received. We hope American firms have an opportunity to fairly participate in the procurement opportunities stemming from this program.

At the same time, Chinese companies should be able to participate in opportunities generated by stimulus measures in the United States.

China's timely accession to the WTO's Government Procurement Agreement on commercially viable terms would help make such participation possible.

Continued economic growth is essential for the Chinese society, and we understand this.

We also recognize that in response to the financial crisis, actions have been taken in our own country that are being scrutinized by our trading partners.

The Chamber, along with many Americans, will work hard to ensure that such measures are temporary, and that our nation's commitment to open markets and a level playing field remains strong.

America's long-term growth depends on positive global trading relationships as well as a strong, mature, and well-balanced domestic market. The same is for China.

Fighting Trade and Investment Protectionism

That's why resisting protectionism in all its forms, even during challenging times, is a responsibility both countries share.

We applaud President Hu Jintao's call at the G20 meeting last November to reject protectionism.

Nothing would send a stronger message than for China and the United States to combine forces to champion the successful completion of the Doha Round.

China should also reduce in-country barriers that increasingly establish one set of rules for domestic firms and another set of rules for U.S. and other foreign businesses.

Enhancing participation by U.S. firms in sectors such as financial services, telecommunications, distribution and logistics, and direct-to-consumer services would help China achieve its goal of moving away from export-led growth, and toward consumption-led growth.

A high-quality bilateral investment treaty would be a positive step for business in both countries, and we fully support the negotiations.

There will also continue to be a focus on the exchange rate by members of Congress as well as some in the American business community.

The appreciation of the Chinese currency against the dollar since 2006 has been welcome.

The movement of the currency to its market-based value should continue in a prudent, evolutionary way.

Let me emphasize that China has taken positive steps to open its market and improve the business climate for foreign companies in many important areas.

Yet, further progress would greatly benefit China, and send a clear and positive signal to the new U.S. government and the international community.

Innovation and IP

Another mater we must continue to address is innovation, and the intellectual property that drives it.

China has correctly recognized the importance of intellectual property through its National IPR Strategy and its amended patent law.

It has recently taken important steps to fight counterfeiting, piracy, and the theft of IP.

Yet the scale of these crimes remains severe, and it is in China's interests to stop them.

New and coordinated measures are needed to address the growing problem associated with Internet piracy, as well as Web sites that promote global sales of counterfeit goods.

We believe that compulsory licensing measures under the amended patent law should be very limited.

Most important, we hope China's leaders share our vision that innovation is best fostered by government policies that promote robust protection and enforcement of intellectual property rights, strengthen transparency, and provide for competition in open markets.

The U.S. Chamber is committed to working constructively with the Chinese government and its business leaders on IP and innovation issues.

We are facilitating information exchanges, sharing best practices, and encouraging cooperation among Chinese and foreign companies and organizations.

We also recognize that there is much that Americans must do to combat these crimes at home and create conditions that promote entrepreneurship and innovation.

If we fail, we will lose our edge as an innovation leader-if China fails, it will lose its opportunity to become one.

Energy and the Environment

Energy and environmental challenges are also a critical part of our overall relationship and another area where we must work together as global leaders.

Both countries face the twin challenges of securing affordable and abundant energy for growing economies, while protecting the environment.

Fortunately, we have a strong basis on which to build. The Ten-Year Energy and Environment Cooperation Framework establishes clear goals and shared objectives, including energy security, lower greenhouse gas emissions, clean water, clean air, and the preservation of wild and natural places.

One area where we should accelerate our cooperative efforts is on clean coal.

Both the United States and China derive a large portion of their energy from coal—and will continue to do so even as alternative energies are developed.

Finding ways to use this abundant natural resource more cleanly should be a top priority, and a shared priority.

Conclusion

Let me conclude by underscoring again the importance of the relationship between the United States and China-not just to our own countries and people, but to the entire world.

Think about how far we have come. In 1971, when the first American officials arrived in Beijing prior to normalization, there was virtually no contact, no bilateral commerce, and neither side knew how to treat the other.

Today, the U.S. and Chinese economies are interdependent. The flow of goods, services, capital, tourists, students, ideas, and expertise between us are rich and deep.

Our relationship has been defined by pragmatism, and it has served us well. It allows us to bridge ideological differences and work together despite periods of tension and areas of disagreement.

The Chamber has been a champion of U.S.-China commercial engagement for many years, and so has AmCham-China.

I know you believe, as we do, that despite current economic challenges, American business will continue to show great interest in China's extraordinary market-as long as the opportunities are real, the rules are fair, and the barriers are low.

Together, our organizations must educate and persuade both governments and both peoples to deepen this critical relationship and move it forward in a positive direction.

I am optimistic we will prevail. The cost of failure is too high-and the reward for success is more than we could ever imagine.

Thank you very much.