Updated 9:50 am, 7/08/2014
Saying that China should focus on “actually opening markets,” US Treasury Secretary Jacob Lew discussed China’s economic reforms, a US-China bilateral investment treaty (BIT), cybersecurity, and other issues central to US- China commercial relations at a US-China Business Council (USCBC)-hosted forum on July 1 in Washington, DC. Moderated by the Wall Street Journal’s Economics Editor Sudeep Reddy, the event highlighted the secretary’s priorities as he heads into this week’s Strategic and Economic Dialogue (S&ED) with his Chinese counterparts.
This year’s S&ED will take place in Beijing from July 9 – 10, where Lew and US Secretary of State John Kerry will lead negotiations on the US side and State Councilor Yang Jiechi and Vice Premier Wang Yang will lead negotiations on the Chinese side.
At the USCBC event, Lew discussed China’s efforts to reform its economy by expanding market access and allowing market-determined allocation of capital. He said Chinese officials increasingly accept these reforms as necessary, but that implementation remains slow. Lew said that while he understands the difficulties of implementing reforms, he is frustrated by the pace of change.
“It is not just a conceptual move to go to an open market,” he said. “You actually have to have the open markets, and that means that it has to be in goods and services, and it has to be that American companies can invest.”
Lew said recent tensions over cybersecurity will not derail the talks, but he emphasized the need for continued engagement.
“[The United States does] not view it as an acceptable practice for governmental entities to participate in the process of…securing trade secrets for the economic benefit of firms in their country,” he said. Lew said the United States had made its position on cyber hacking and intellectual property theft clear, and said he hoped those discussions with the Chinese continued.
Lew said he was optimistic the two sides will continue to make progress on other fronts, including trade in high-technology products. But he also warned that—after last year’s breakthrough on a US-China BIT—a final agreement could be slow in coming. “It’s not realistic to think that there’s going to be a concluded BIT in a couple of weeks,” he said.
The United States will continue pressing Chinese officials for a market-determined exchange rate, Lew said, describing it as “fundamental to the trust between the United States and China.” Lew acknowledged that there has been some progress on the exchange rate, but encouraged China to adopt transparent policies and refrain from intervening.
Lew said the issues discussed in the S&ED are complex and revisited year after year. “I don’t think that you get to an S&ED that kind of ties it up in a bow and says we’re done with major topics of interest and concern. You know, the measure is, are we making progress, are we opening up markets?” he said. “It’s a huge market. One doesn’t go from no access to total access.”
US to push Information Technology Agreement during S&ED talks
Speaking to reporters before the start of this year’s S&ED, US Trade Representative Michael Froman said he is confident the United States and China can “make concrete progress,” during negotiations, especially in the expansion of a global agreement on IT product tariffs. Other priority areas for talks between the two countries include intellectual property rights, technology transfer rules, China’s reform of its state-owned enterprises, and ongoing discussions toward achieving a BIT.
Froman said that China has a “real opportunity” to show leadership in discussions on the World Trade Organization’s Information Technology Agreement (ITA), a 1996 agreement that establishes tariff-free categories for products like semiconductors and telecommunications equipment. The ITA is currently being renegotiated by its more than 50 signatories, including China, which pushed to exclude more than 100 products from the agreement in November. Since then, China has come back with several alternate offers, most recently at an Asia-Pacific Economic Cooperation (APEC) meeting in May.
“I think it’s important to underscore that not just the United States but all ITA participants believe that China’s previous offers have been insufficient,” Froman said. “We came to the APEC ministers’ meeting in May with some creative ideas. We made some progress, but there’s still some distance to go.”
Watch Lew’s full remarks at the USCBC event below. USCBC is the publisher of the China Business Review.