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Viewing cable 09BEIJING1500, CONGRESSMEN KIRK AND LARSEN'S MEETING WITH MINISTER OF
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Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
09BEIJING1500 | 2009-06-05 04:40 | 2011-08-24 01:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Beijing |
VZCZCXRO1140
OO RUEHCN RUEHGH RUEHVC
DE RUEHBJ #1500/01 1560440
ZNR UUUUU ZZH
O 050440Z JUN 09
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4313
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHBUL/AMEMBASSY KABUL 0606
RUEHGV/USMISSION GENEVA 2492
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHDC
UNCLAS SECTION 01 OF 05 BEIJING 001500
SENSITIVE
SIPDIS
STATE FOR H/BETSY FITZGERALD, EAP/CM SHAWN FLATT,
EEB/TPP ERIK MAGDANZ, SCA/RA JOHN SPILSBURY
STATE PASS USTR FOR TIM STRATFORD, CLAIRE READE,
AUDREY WINTER, TIM WINELAND, TERRY MCCARTIN, ANN
MAIN, JEAN GRIER
DOC FOR IRA KASOFF, NICOLLE MELCHER (5130), MAC
(4420)
TREASURY FOR OASIA/ROBERT DOHNER
USDA FOR FAS OCRA/RADLER SHEPPARD PAULSON
USDOE FOR INTERNATIONAL/JONATHAN SHRIER
GENEVA PASS USTR
E.O. 12958: N/A
TAGS: ETRD EFIN EAGR ECON PREL MCAP WTRO CH AF
SUBJECT: CONGRESSMEN KIRK AND LARSEN'S MEETING WITH MINISTER OF
COMMERCE CHEN DEMING
REFS: A.) Beijing 1434 B.) Beijing 1473
(U) This cable is Sensitive But Unclassified. Please protect
accordingly.
¶1. (SBU) Summary: Congressmen Mark Kirk and Rick Larsen met with
Minister of
Commerce Chen Deming May 31 under the auspices of a National
Committee on U.S.-
China Relations visit. Chen praised the legislators' work as
Co-Chairs of the
Congressional U.S.-China Working Group. Chen observed that the
Global Financial
Crisis heightened the need for both nations to work together to
"recover sooner" and
the crisis also raised the stakes for 2009 Strategic and Economic
Dialogue (S&ED) and
Joint Commission on Commerce and Trade (JCCT) outcomes. Chen
confirmed to
Congressman Kirk that China was considering a U.S. proposal to allow
transit of food
and fuel to Afghanistan via western China to help thwart
narco-terrorism. Chen also
told Kirk that he would consult the Ministry of Industry and
Information Technology
(MIIT) on a longer phase-in period for a new non-PVC regulatory
requirement for
intravenous (IV) bags used in hospitals, which affects Baxter Health
Care in China.
Chen expressed some concern over the U.S. inflation rate and fiscal
policy and
discussed China's rationale for purchasing U.S. Treasury bills and
the global economic
recovery.
¶2. (SBU) Summary Continued: Responding to Congressman Larsen on
China's new
National Postal Law, Chen indicated China was not obliged to open up
domestic
document delivery services to foreign companies under the terms of
its WTO
commitments. With respect to China's ban on U.S. pork imports, Chen
said the policy
is based partly on concerns about animal-animal transmission, but it
could be revised
as new information comes to light. He stated that while China finds
the Section 727
U.S. ban on Chinese cooked poultry imports discriminatory and
unfair, MOFCOM is still
deciding whether to bring a WTO case. Chen urged that the JCCT's
High Technology
Working Group be revived. Embassy will report other delegation
meetings (Ref B and
septel ). End Summary.
Chen Deming: Macro and Micro Issues Raised
¶3. (SBU) After listening to Congressmen Rick Larsen and Mark Kirk's
presentations,
Chen Deming praised their "division of labor". He noted that Larsen
had taken up
primarily "macro issues" -- U.S.-China relations, planning for the
S&ED and JCCT, and
sectoral trade topics including China's new National Postal Law,
China's ban on U.S.
pork imports, status of China's WTO government procurement offer,
and high
technology trade. Meanwhile, Congressman Kirk had covered mainly
"micro issues" --
a U.S. proposal for China to allow transit of food and fuel to
Afghanistan, and a request
BEIJING 00001500 002 OF 005
for longer phase-in time for a new Ministry of Industry and
Information Technology
(MIIT) regulation requiring non-PVC IV bags, which would affect
Baxter Health Care's
operations in China.
Kirk: Afghanistan Supply Proposal, MIIT Regulations on IV Bags
¶4. (SBU) Regarding issues Congressman Kirk raised, Chen said China
would give
"earnest study" to the proposal for China act as a supplier of food
and fuel to
Afghanistan via Western China to help thwart narco-terrorism in the
region. Chen
understood that the Ministry of Foreign Affairs (MFA) had already
provided a
response to the U.S. and was awaiting feedback. Regarding a new
MIIT regulation
concerning IV bags, Chen stated the issue was new to him and Kirk's
mention of it was
the first he had heard of it. He said that while he lacked
requisite technical knowledge,
if additional time for phasing in a new regulation would help
preserve employment in
China and made economic sense, this would seem to be good. Chen
promised to
discuss the issue with MIIT and convey U.S. views contained in a
paper Congressman
Kirk presented. (Note: USG officials have raised this issue at a
sub-Ministerial level in
the past with MOFCOM. End Note.)
Chen: Preparations for S&ED and JCCT On Track
¶5. (SBU) Turning to issues raised by Congressman Larsen, with
respect to the S&ED
and JCCT, Chen agreed that the overall U.S.-China relationship was
more valuable than
just the "sum of its parts". He reported that his recent meetings
with National
Economic Council Chair Summers and Secretary Locke and Ambassador
Kirk in
Washington went well. Chen foresaw the S&ED retaining a "macro and
strategic focus"
while the JCCT should be "concrete and detailed" and said that
Secretary Locke shared
this view. Chen noted with enthusiasm Locke's plans for a visit to
China with Energy
Secretary Chu later this year. He spoke favorably of Chu's status
as a Chinese-
American and Nobel laureate, claiming Chu's family hailed from
Suzhou, where Chen
had once been mayor. Chen hoped the U.S. and China would "not
quarrel" at the
upcoming S&ED and JCCT, but rather identify new areas for
cooperation -- such as
clean energy and responding to climate change. He urged that the
JCCT be scheduled
prior to President Obama's participation in the APEC Leaders Summit
in Singapore in
November.
National Postal Law: China Did Not Agree to Open Domestic Document
Delivery in WTO
Accession
¶6. (SBU) Regarding concerns raised by Congressman Larsen over
China's new National
Postal Law that bars qualified U.S. and foreign firms from offering
domestic document
delivery services, Chen noted that he had relayed U.S. points on
BEIJING 00001500 003 OF 005
this to the NPC.
Looking at China's WTO accession agreement, China had not committed
to open up
this service area to foreign suppliers and no subsequent legislation
or proposals had
been offered to do so. In fact, "domestic delivery of letters" was
just a "tiny part" of
the market with "almost no impact" on the international business of
the foreign
express service providers. At any rate, Chen offered to pass along
Larsen's concerns
to relevant authorities so that they would consider them when
formulating
implementing rules.
Ban on U.S. Pork Imports Aimed at Protecting Humans and Pigs
¶7. (SBU) With respect to China's ban on the import of U.S. pork,
Chen told Larsen that
China had banned not just U.S. pork but also imports from other
H1N1-affected
countries including Mexico and Canada. He asserted that China's ban
affected only
pork imports from U.S. states where H1N1 had been reported. Chen
said Secretary
Locke and Ambassador Kirk had tried unsuccessfully to call him after
his return from
the U.S. in May, but he did receive a call from Canadian
Agriculture Minister Day on
the same topic. He noted that China was acting not just for the
health of China's
human population, but also to protect its population of one billion
pigs. Pig-pig
transmission of H1N1 had occurred; other types of transmission
(animal-human) were
harder to confirm. China's H1N1 policy was always subject to
revision based on
changes in views of experts at the world organization for animal
health (OIE) and the
World Health Organization (WHO) as well as other new sources of
information.
Section 727: Considering WTO Case, "Good Chance" of Winning
¶8. (SBU) Chen assured Larsen and Kirk that China's policy on H1N1
had nothing to do
with retaliation for the U.S. ban on cooked poultry imports
stipulated under Section
727 of the 2009 Omnibus Appropriations Act. Nevertheless, China
strongly disagreed
with Section 727 and found it to be unfair and discriminatory toward
China. "WTO
experts" in Geneva had informed Chen that China had a "very good
chance" of
prevailing at the WTO if a case were brought on the matter. But
since doing so
required 1-2 years of litigation and entailed a significant
financial and resource cost,
Chen was still "thinking about whether [MOFCOM] should do it" or
take some other
route.
Government Procurement: China Has Tabled a Revised Offer
¶9. (SBU) Regarding China's accession to the WTO Government
Procurement
Agreement, Chen stated that China had tabled a new offer to the U.S.
and other GPA
parties but was still waiting for a reply. [Note: Geneva 00400
dated May 29 indicates
that as of the May meeting of the WTO Government Procurement
BEIJING 00001500 004 OF 005
Committee, China
had not yet indicated when it will present a revised GPA offer.] In
any case, Chen
continued, the U.S. should bear in mind during negotiations that
China is still a
developing country and therefore "the bar should not be set too
high". He added that
some U.S. states had still not signed on to the GPA requirements
and/or had taken
exceptions for products including steel.
Export Controls, JCCT High Technology Working Group
¶10. (SBU) Chen emphasized to Larsen that on high-tech trade, much
could be done to
narrow the U.S.-China trade deficit by loosening up U.S. export
control requirements,
a view which he maintained was backed up by AmCham China's White
Paper. In 2007,
the U.S. and China signed a new Verified End User (VEU) Program
administered by the
Department of Commerce to streamline U.S. high tech export controls.
Nevertheless,
there were still only a handful of VEUs approved, and all were
foreign-invested
entities. The situation was unfair to U.S. high tech exporters, as
most items subject to
export controls were easily available to China from other suppliers
(such as France) or
could even be produced in China. Chen agreed with Larsen that the
JCCT High Tech
Working Group, which last met in 2007, should be revived.
Chen's Views on Investing in T-Bills, Global Recovery
¶11. (SBU) Congressman Kirk stated that actions taken by "two
state-owned
enterprises, Fannie Mae and Freddie Mac" had helped spark the
financial crisis in the
U.S. China should not conclude from the crisis that a poorly
regulated U.S. private
sector was the cause. Rather, the crisis was caused by a Congress
that had not acted
to properly regulate these state-owned enterprises. He also stated
that the
Administration's projection of the U.S. budget deficit is well below
what it will really be,
since at year-end Congress will inevitably go beyond the spending
levels already
projected. Finally, he stated that high levels of government
spending in the U.S. and
Europe would likely produce 4-5 years of low growth and
high-inflation, and China
should take this into account when planning its investments,
including in U.S. Treasury
bonds.
¶12. (SBU) In response, Chen offered his views on China's purchase
of U.S. Treasury
bills as a means to invest its U.S. trade surplus. Chen said China
"must" buy U.S.
Treasuries because insufficient depth exists in Japanese yen- and
Euro-denominated
debt. If China were to make larger purchases in these markets, it
might raise their
prices dramatically. In addition, as total worldwide gold
production is only 2400 tons
per year, it would be impossible for China to purchase sufficient
gold reserves. "So the
only way for China is to continue to buy T-bills," he concluded. As
a result, China was
BEIJING 00001500 005 OF 005
interested in matters such as U.S. government spending, the U.S.
inflation outlook,
and the printing of dollars by the Federal Reserve. Chen compared
the current policy
response to the Global Financial Crisis to firefighting -- no time
to study the cause of
the blaze, but it might be useful to do so in the future. In
addition, Chen thought the
current response involving stimulus spending must change if the
crisis proves to be 3-5
years instead of one year. If that happens, countries would need to
rethink what to
do, he felt. We should avoid a "fake dawn" by thinking the crisis
is past before it is
truly over, he concluded.
¶13. (U) Participants:
(U) U.S. Participants:
Honorable Rick Larsen, Co-Chair, U.S.-China Working Group
Honorable Mark Kirk, Co-Chair, U.S.-China Working Group
Stephen Orlins, President, National Committee on U.S.-China
Relations
Scott Kennedy, Associate Professor of Political Science, Indiana
University
Jasper MacSlarrow, Legislative Director for Congressman Larsen
Richard Goldberg, Senior Aide to Congressman Kirk
(U) PRC Participants:
Minister of Commerce Chen Deming
Other MOFCOM officials
¶14. (U) Representatives Kirk and Larsen did not have the
opportunity to clear this
message before departing.
PICCUTA