London,
November 8, 2005

Media Availability on U.S. China Textile Agreement

Thank you all for being here this morning. We hope you had better luck than we did with the elevator. Minister Bo Xilai and I have had many opportunities to speak together, and to meet together, but never in such close proximity as we just did stuck in an elevator here in the hotel. And while we were stuck in that elevator we made a very important decision.

Seriously, today I’m very pleased to announce that we have concluded the U.S. China Textile Agreement.

I’d like to personally thank Chinese Minister of Commerce Bo Xilai for his very constructive and personal involvement throughout the negotiations. We’ve communicated regularly on this issue and I believe this textile agreement is an example of how the U.S. and China do have the ability to resolve tough trade disputes in a manner that benefits both countries.

This is a comprehensive agreement that results from a significant contribution of time, energy and effort on the part of both countries over the course of the last three months. Much of the credit goes to our teams I want to personally thank our chief textile negotiator David Spooner and Chinese chief textile negotiator Mr. Lu also. I want to thank them for their hard work and their perseverance to get to this point.

In brief, this Agreement lasts through the life of the China WTO Textile Safeguard, through 2008, it covers more than 30 individual products and contains quotas that begin at low levels, but that grow somewhat over the 3 years. The Agreement covers 46 percent of previously regulated China textile exports to the United States. Nineteen of the thirty-four products covered are currently covered by safeguards; fifteen are not.

The U.S. goals in this agreement have been clear from the start. We sought an agreement that achieves the stability and predictability sought by our retailers but also by our textile producers, who understandably found it hard to plan in the face of unpredictable safeguards. Five times we walked away from a deal that didn’t meet this objective.

The Agreement we’ve reached is fair to the industries in both countries. Based on consultations, U.S. manufacturers are pleased with both the product coverage and quota levels. I encourage the press to talk directly to our textile producers in the United States, as well as to the retailers and the associations that represent both.

This is a good example where through hard work and good faith we converge our differences and we can solve tough trade issues between the United States and China. Again I congratulate my colleague Minister BoXilai for his hard work. And now I would like to ask him for his comments.

MINISTER BO XILAI (Translator): After five months and seven rounds of negotiations, China and the United States finally completed an agreement on textiles and this is a result of practical and equal negotiations.

The result of the negotiations actually have provided a stable environment for the industries both in China and the United States and in this sense there is a win-win result.

Despite the huge difference in terms of national conditions between China and the United States these two countries are mutually important trading partners and have a long way to go in terms of future cooperation and therefore this agreement has paved a very good way for that.

When dealing with these trade issues we always hope we can solve these problems more and more through common concerted efforts and consultation and to address these issues in effective and equal manner.

This time we have properly solved this dispute and therefore I have now the confidence and also I am hopeful that in the future in treating similar disputes we can do so in a principal of being rational and calm and wise and also equal to each other.

The current or this textile issue between China and the United States has been the biggest of such kind of disputes over the years and it is indeed a very complicated matter involving both economic issues, social issues and also legal issues and also it's under the attention of the media.

We don't expect that this single achievement can help us to solve all the conflicts or problems between us, but we don't want to see such a small trade obstacle to impede the overall trade and economic cooperation between the two countries.

I appreciate the technical levels of both China and the United States for their professionalism and also their practical spirit in finally solving the issue through various rounds of negotiations. I also appreciate the efforts by Ambassador Portman, U.S. Trade Representative.

It is because of the flexibilities shown by the US side in the sixth and seventh rounds of negotiations that we finally succeeded in concluding the agreement. I would also like to tell our friends from the media that the Chinese side very consciousnly honors and respects their WTO commitments.

Firstly the textile industry actually directly employs 1.9 million people in China and therefore is a highly sensitive industry in China. And these workers in the textile industry are mostly low-income families or low-income populations and through the manufacturing of textiles they will have to make their money and support their families and therefore the textile issue is a very important social issue in China.

The Chinese government always believes that it is entitled to the rights and interests provided by the textile integration which started on January 1st, 2005. Even if China is still a developing country with lots of difficulties waiting for it, we still advocate global free trade and global trade facilitation.

We believe that for developing countries like China which have not easy over the years to have set up and nurtured the textile industries and other industries which are in the lower or medium ends of the manufacturing. Countries in the world should show them some understanding in terms of providing free trade environment. Thank you.

SIGNING OF THE AGREEMENT

QUESTION: (Translator). First of all I would like to offer our congratulations to both of the Ministers for concluding this textile agreement between China and the United States. My first question goes to Minister Bo Xilai, as you know our President is going to land in London in just a few hours, what do you think that today's news, is it going to be very good news for him?

MINISTER BO XILAI (Translator) I believe that the President's visit to Europe is a very important visit. The Chinese government has always been proactively pushing forward the conclusion of the textile agreement between China and the United States and the representatives from both China and the United States has made tremendous efforts for that. I have just praised the professionalism of the technical officials on the two sides.

QUESTION: (In Chinese).

MINISTER BO XILAI (Translator): I believe that the trade agreements, the textile agreements China signed with the EU and the United States are balanced agreements. On June 11, China and the EU signed a textile agreement and the EU side has demonstrated tremendous good faith in signing the agreement. This time these two agreements have created a good environment for the normal and stable trade of textiles between the two sides and this time the agreement between China and the United States is also done on the basis of political and equal equality and therefore I think that this agreement can serve as a good compliment to the existing and former agreement with the EU and I believe that these two agreements can also serve to create a good atmosphere for normal trade.

QUESTION: Good morning, AFP, French News Agency. Mr. Bo Xilai, are you going to accompany Ambassador Portman today to Geneva for talks on the WTO, Doha negotiation? What is your opinion on the talks that took place yesterday in London between Ambassador Portman and four other actors of the WTO?

MINISTER BO XILAI (Translator): First of all the Chinese government attaches great important to the DDA. Even if China is still a developing country, three years ago when we succeeded to the WTO we had already made lots of commitments in opening up our markets and taking serious mergers in that regard. But however, the Chinese side is still holding the proactive and open attitude towards the DDA negotiations, hoping the world can move towards (inaudible) and freight facilitation.

AMBASSADOR PORTMAN: If I can comment and follow up to that. The first time Minister BoXilai and I met which was in Paris five months ago, we discussed DDA and again this morning we discussed DDA. Once we had resolved our main differences on the textile agreement we immediately turned to these World Trade Organization talks and, as I told Mr. Bo Xilai this morning, I do appreciate the way China and the United States have worked together in DDA, because both of us believe that it is very important for world economic growth that we come to a successful conclusion of the Doha round.

QUESTION: Martin Benedyk AP Television. Some American union leaders have said that you have been unnecessarily generous to the Chinese and that your generosity will cost Americans thousands of jobs. What is your response to that?

AMBASSADOR PORTMAN: I like being called generous. I feel just the opposite. What this will do is to enable us to have the predictability and certainty to retain and indeed to be able to add jobs. As I said in my opening remarks, only 19 of the 34 products are currently under safeguard. Fifteen are not even under the safeguards, even for those products that were subject to safeguards there is an unpredictability that is associated with the way in which we involved our safeguards which is done on a maximum on an annual basis. This provides for a three-year predictable and certain environment which will result in work and not less employment in the United States. I also believe that it's a win, win in the sense that it's also good for the Chinese employment picture because they can also be able to plan better. But if you look at the number of products covered, if you look at the base quota, in other words the rate upon which the annual growth rates are determined. And if you look at the growth rates, you will see that our US negotiators were very tough and in end this is a good agreement for American textile manufacturers.

QUESTION: My name is Simon Cox from the Economist. Minster BoXilai praised the flexibility shown by the US in their sixth and seventh rounds of negotiations, I don't know whether they happened in the elevator or before. What were those flexibilities?

AMBASSADOR PORTMAN: Well, I would like to praise China's flexibility in the sixth and seventh rounds too. The truth is we were still fairly far apart with regard to the product coverage and with regard to growth rates which are the two key elements here in addition to what the base quota is. The honest truth is we took our time. We worked out a very careful agreement that we think will avoid any logistical problems. We think it's one that is fair and balanced. We think it's very helpful to American textile manufacturers but is also fair to our retailers and our consumers by adding this predictability and certainty. These are not easy agreements. Both sides were tough and at the end of the day after seven rounds I believe we just came closer and closer again with a carefully thought out agreement that we think will work in both in terms of its practical implementation and in terms of its impact on our economies.

MINISTER BO XILAI (Translator): We believe in the process of the negotiation both sides have faced tremendous pressures from the industries and I believe that this negotiation was a most difficult one which is why we have gone into the seventh round.

On former negotiations we were almost at the edge of the cliff. Speaking of pressures, the US is of course facing pressures from employment of hundreds of thousands of people, but in China we are facing the employment of around 20 million people, that's why we have actually our biggest pressure from the industries.

I know that Ambassador Portman was pressurized by the US industries but it doesn't mean that whoever cries louder is more reasonable. There is an old saying in China that crying baby gets the milk first. Actually as we all know there is a huge economic discrepancy between the US and China the US GDP per capita is forty times that of China's.

If the Chinese government cannot maintain or secure the export interests of the textile workers then lots of people will lose their jobs and this will have a greater impact, much greater than that of the US.

We know that Ambassador Portman has shown some flexibility at the end of the day but I don't think that's enough, actually that's still a far cry from our original expectations.

Our expectation is that Chinese textiles should be entitled to the textile integration starting January 1st, 2005. However, we have this paragraph 242 on which we have signed our names, and China is a credit worthy country and follows and abides all kinds of WTO rules which is why we finally decided to negotiate and have this agreement.

I think that for developed countries and also for our friends from the media you should be acutely aware that the textile integration of the globe is an inevitable trend and to have (inaudible) is not correct for the time. Actually, I was inspired by the question regarding flexibility for Ambassador Portman.

QUESTION: I think the previous cap on textile limits was something like 7.5.%. Can you describe in greater detail how we should compare that 7.5% with the agreement that you've reached today? I also think one of the unresolved issues, if I'm not mistaken, is what happens with textiles that have piled up on US ports. This was a big question in Europe and Mr. Mandelson worked hard to unblock those textiles. I just wonder whether in the same way you have also reached an accord to unblock those shipments to.

AMBASSADOR PORTMAN: As I said earlier, we took our time. We worked though our issues and among other things we created enough flexibility within the agreement to be able to avoid those kinds of logistical problems, that is certainly our anticipation. We also established a start date on January 1st which does provide the importers and exporters a two-month period to prepare. Those two things, the flexibility to avoid the overshipments and the two months to prepare for the agreement going into effect we believe will enable us to avoid those kind of logistical issues. That was certainly one of our intentions in working through this agreement. With regard to the growth rates in the first year which is 2006, the base quota used when combined with the growth rates means that under the safeguards, assuming all these products were covered by safeguards which again 15 were not, you would of actually of had higher growth. In 2007, if you look at the base quota and you look at the percentage increase, it's slightly more than 2008. Overall, as I analyse the agreement, I think there's about a 3% increase as compared to every one of those products having been covered by a safeguard, if that answers your question. And again, as you know, not all these products were covered, 15 of the 34 were not, and in addition there is a certain unpredictability associated with safeguards themselves.

So, frankly speaking this is a very good agreement for the American worker. It is also a good agreement though on the Chinese side because it adds certainty, predictability and stability and Minister Bo Xilai has spoken eloquently about the Chinese textile workers and their concerns. I do have those concerns on the US side, and it's our job to come up with an agreement which addresses those issues, and does so in a responsible and constructive way to provide for again, in this case, the kind of certainty that can help not just with regard with our respective workers but also with respect to our bigger trade relationship. I think that this is an example, as I said at the outset, how China and US can work together, to bridge our differences in a constructive way that's mutually beneficial.