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TRANSCRIPT: Press Conference on WTO Case Against China Over Export Restraints on Raw Materials

Ambassador Kirk: Good morning. Thank you all for joining us. Forgive me for being a few minutes late.

Before I begin my remarks about the subject of our press conference, the mayor in me has to take a moment and express our thoughts and prayers to the families of those who were killed in the horrible train accident yesterday and extend our support to Mayor Fenty and his team as they struggle to work through this tragedy and make some sense of it and learn from it. So our thoughts and prayers are with all those who lost their lives and those who may have been injured.

This morning I have an opportunity to talk to you about a matter that is critically important not just to our mission here at the United States Trade Representative's Office, but also, we believe, to all the businesses that are involved in helping keep America strong by being in the export business which allows them to create important and good jobs here at home.

Now more than ever, trade is essential to keeping America's economy afloat. We know that as a result of the decline in global trade over the last 18 months or so, to its lowest levels since World War II, and we've seen the effect that's had not only on our economy but on economies around the world.

More significantly, 97 percent of America's exporters are small and medium sized businesses that employ millions upon millions of citizens. Many of them are subcontractors to some of the larger companies with whom you may be more familiar.

And jobs dependent on trade in many cases are better-paying jobs that Americans want and desperately need - with salaries that can range from 13 to 18 percent higher than the national average.

Thus access to markets around the world that help us retain and create good-paying jobs are the kind of trade that Americans can support and that President Obama believes is a critical part of our economic recovery.

Thus barriers to trade can slow our ability to recover from this current economic crisis.

The Obama Administration has been clear with our trading partners that we wish to work together to keep global trade flowing and provide economic opportunities for all of our citizens. But we will always, and that's always, expect our trading partners to play by the rules.

Now, our preferred tools of engagement are direct dialogue and discussions to resolve differences as quickly as possible so that we can keep trade flowing efficiently. But there are instances when our talks don't work as well as we would like for them to, and we've always reserved the right to take action. We will enforce the rights of American manufacturers, farmers, ranchers, our services providers, and our workers through the rules-based global trading system at the World Trade Organization.

So today the Obama administration is insisting on the rights of American businesses and workers to a level playing field. Thus we are initiating formal consultations with China in the World Trade Organization, because we see a major problem in one particular area.

The United States believes that China is unfairly restricting exports of raw materials. These actions are hurting American steel, aluminum and chemical manufacturers, among other industries, that desperately need these materials to make their products. These actions also endanger thousands of jobs in America for those employed in these important sectors.

USTR is very concerned that China appears to be restricting these export materials at the expense of U.S. industries that need these materials for their production. And this appears to be occurring despite very strong and clear WTO rules designed to discipline export restraints.

And we are most troubled that this appears to be a conscious policy to create unfair preferences for Chinese industries by making raw materials cheaper for China's companies to get, and goods more economical for them to produce.

These export restrictions by China skew the playing field against American workers and businesses, but also other industries around the world dependent on these raw materials. And they unfairly advantage Chinese producers.

Under WTO rules, such distortion of the playing field on trade is simply not allowed. It is not okay in specific cases like the one that we raised today. It is certainly not okay as an underpinning of a country's overall industrial policy regime.

Now, more than ever, we must fight against this kind of domestic favoritism.

Earlier this month, I had an opportunity to speak to the US-China Business Council and I made it clear that the United States and our office seek a productive, cooperative relationship with China to advance our mutual economic relationship. This is particularly true in the field of trade.

But I also made it equally clear that the United States will not yield on enforcing the right of American businesses and exporters to compete on a level playing field with China.

And I made it plain that if we can do it by trade diplomacy, that we would do so where we had problems that arise. But if we have to file cases at the WTO, then we would do so.

So after more than two years of urging China to lift these unfair restrictions with no result, we are filing at the WTO today.

Now before many of you run off and write stories that we're escalating tension between the U.S. and China, I want to remind you of one thing. The WTO is a wonderful mechanism for resolving trade disputes that inevitably occur in mature relationships. It's been less than ten years, if you think about it, since China has been admitted to the World Trade Organization. During that time the United States has brought seven cases against China and China has brought four cases against us. And in many of those cases we have been able to resolve them by mutual understanding through Memorandum of Agreements before these cases go from the consultation stage to the appellate body.

So at this stage what we are simply doing is initiating this process by requesting formal consultations with China in a further attempt to find a negotiated solution to this problem. It is very much our hope that we will not have to proceed to the next stage which is requesting a WTO panel to examine this matter.

This is not a step that we have taken lightly, but we are taking it deliberately and it is a necessary step to enforce the rights of America's manufacturers.

It's also the fulfillment of a promise. One that I made during my confirmation hearings to Members of the House and Senate, and it's one that President Obama promised in his 2009 Trade Policy Agenda, that one of the highest priorities of our trade policy would be our standing up for the rights of American workers and businesses in the rules-based global trading system.

President Obama and I are of the firm belief that given a level playing field, American workers and businesses can compete with the best of those anywhere in the world, and we can win.

China's policies on these raw materials seem to put a giant thumb on the scale in favor of Chinese producers. It's our job to make sure we remove that thumb from the scale.

Today's action is proof of our commitment to level the playing field in this area. It is our hope that this dispute is resolved speedily and to the fair benefit of U.S. industries and workers and other industries around the world as well.

Our steelworkers, our aluminum producers, and workers in countless other industries deserve the chance to compete fairly with their Chinese counterparts. This case is simply designed to give them that chance.

I'll be happy to take your questions, and I would remind you after our questions and answers, that our China team and lawyers will be available for a more detailed briefing for you if you have specific questions.

Question: Jim Berger, Washington Trade Daily.

I assume you meet with the Chinese Minister later in the week in Paris. Did you find it to be of no purpose to bring this dispute up then for settlement? Or is it just off the table?

Ambassador Kirk: I do hope to have an opportunity to visit with my counterpart. I'm not sure of my final schedule, Jim, when I attend the OECD. But we believe that after two years of discussion and dialogue with no resolution it was well past the time to take this step at this particular time.

This also, frankly, may give me an opportunity to have a more fruitful conversation with my colleagues with us having taken this first step.

Question: Thank you, Mr. Ambassador, Zengxin Li from Caijing Magazine.

We all know that China is right now highly dependent on investments [inaudible]. [Inaudible] consider the risk of Chinese economy collapsing and endanger the world recovery and even U.S. jobs? Thank you.

Ambassador Kirk: Our first priority is making sure that the United States economy is restored and as part of that economic recovery we believe that trade can become a much more central part of that. But in order for that to happen, trade has to be fair.

One of the reasons the United States made I think the right decision and a wise decision to support China's admission to the WTO was so that we would have a forum to address these types of problems. And I'll be honest, I can't imagine that our resolving trade disputes in a manner that is consistent with commitments that China made when it was admitted to the WTO and it expressly made the commitment that it would not engage in this type of behavior. We think that asking our trading partners to play by the rules that we agreed to will in no way endanger their economy. And we think asking Chinese exporters, frankly, to compete with us on an even playing field will make them stronger and not weaker.

So it's not only good for American manufacturers, we think it will be good for China's economy in the long run.

Question: Dan Neumann, Inside U.S. Trade.

You talked about how these discussions have been going on for over two years. It was our understanding that the Bush administration considered filing a case on this problem at the end of its time in office but declined to.

What changed that calculation for the Obama administration? Was it simply a fact that the talks have gone on for two years? Or is this an example of the Obama administration being tougher on China?

Ambassador Kirk: Well Dan, in Texas we say that's not a question, that's an answer. I don't mean to be --

Question: What would you say in Washington?

Ambassador Kirk: I'd remind you that I'm not standing here as the third Trade Representative of the Bush administration, but as the first Trade Representative for President Obama. And we made a commitment that we would revisit our trade policy in every aspect. President Obama and I both believe that trade can play and should play a role in our overall economic recovery. But we were equally concerned that more and more Americans have become cynical about trade, and one of the reasons is that they believe that the United States has either lack of will or the resources to force our trading partners to play by the rules.

So we think that a critical step, first of all, is restoring America's confidence in our trade policy, and that we have to take the fairly pragmatic step of asking our partners to do what they committed to do. So it's not necessarily an indictment of the previous administration, but we believe if we're going to ask Americans to believe in our trade policy that we have to have our trading partners play by the rules.

Question: Jim Puzzanghera with the LA Times.

Given that this is the first filing by the Obama administration, and following up what you just said, what message do you hope this sends to other trading partners beyond China about the administration's intent to handle trade policy?

Ambassador Kirk: Hopefully all of our partners will realize that we're serious about this.

Secondly, for all of our economies, all of us have parroted the words that we don't want to engage in anti-protectionism, but we have to give real meaning to that. In order to keep global trade flowing and to keep trade liberalization an important part of all of our economic future, we have to engage in behavior that's consistent with the commitments that we made, whether it's through the WTO, or through any of our other Free Trade Agreements.

I want them to know, first of all, the United States is still open for business. We believe that trade can be a critical part of our economic and other countries' economic revival, but if you're going to do business with the United States you're going to have to play by the rules.

Question: Jose Lopez of the Mexican News Agency.

You said you support China's accession to the WTO to have a body to resolve these disputes. However, in March you tried to block the installation of a plant due to the complaint of Buy Mexico and the tuna dolphin safe label. Is there a double standard here?

Ambassador Kirk: No.

Question: Can you explain, please?

Ambassador Kirk: Yes. Listen, the whole purpose of entering, whether it's a Free Trade Agreement or the WTO is we make certain commitments about how we will conduct ourselves with respect to trade. We also set up a body and a framework for how we will resolve disputes. In the case of the tuna dolphin matter between the U.S. and Mexico, that is a matter that clearly should be resolved within the context of NAFTA and that dispute resolution mechanism.

In this case Mexico and the United States which have an extraordinarily close relationship culturally, trade, geographically. Mexico believes that the proper forum should have been the WTO. We have a firm belief that it should be within NAFTA. I don't see any inherent conflict in us insisting or at least pursuing the resolution of that through NAFTA which we think is the more appropriate forum.

Question: Sam Gilston with Washington Tariff and Trade Letter.

I'm trying to understand this. Despite all the complaints about the U.S. trade deficit with China and the antidumping and countervailing duty complaints against Chinese steel and chemicals, you're now saying that China's not exporting enough to the United States. I'm trying to get that in my mind to understand that. Can you clarify what specific products are not being exported that we want more exports from China now?

Ambassador Kirk: Sam, it does seem a bit counter-intuitive, but let me see if I can do it this way.

One, what we want is a non-distorted market between the United States and China. However that may occur, we will work to remove that distortion.

In the case of antidumping and those issues, that tends to be where we have a business that unfairly dumps an excessive amount of material or supplies of products into the United States over and above what we anticipated.

In this particular case we have China, we think, through the exercise of export restraints and other means unfairly restricting the flow of raw materials that are critical to the steel, aluminum and other chemical industries that causes two things. One, it limits our access to supplies that we have to have to make steel. SO it increases the cost of our supplies for American manufacturers. It increases the availability of those materials within China and reduces their costs which then can distort the market.

I'll give you one example. There is a product that's essential to making steel tubes that we call coke. In 2008 China produced 336 million metric tons of coke around the world. By putting export restraints on coke, the amount of exports dropped to 12 million metric tons. You can pretty quickly figure out the impact that had on manufacturers and producers outside of China and the competitive advantage that it gave to China's domestic producers.

So in this case the distortion of the market is caused by the export restraints, not the excess of products that are being shipped. But in every case our goal is clear. We want a market that is not distorted by either unfair tariffs, other non-tariff barriers, or export restraints.

Thank you all for coming.

Again, we have Claire Reade, Tim Stratford, members of our legal team that are happy to go through and give you a much more technical explanation of what we've done. We will give you the complete list of raw materials that are involved. We appreciate your time and attention this morning.

Thank you.