Thank you. Thank you very much and good afternoon. I want to thank President Li for that very generous and very kind introduction. I notice a lot of you don't have headphones. That means a lot of you speak English, and that's a very important trait. I congratulate you for that.
It's my privilege to be in Chongqing. I have visited China many times before, twice as Commerce Secretary. This is my first trip to Chongqing. So I want to thank you for your kind welcome and for being here today and for taking the interest and the time.
We've come to Chongqing because of the great potential that is here. This is the commercial, industrial and transportation hub of Southwest China.
Your industrial center is growing at very fast rates. You have outstanding universities and technical schools. And this historic city is rapidly becoming a significant tourist destination.
I met with members of the American business community here this morning. We talked about the transformation that's been taking place--the new highways, the hi-tech industries and the foreign investment.
These American companies tell me they see great possibilities for further expanding commerce between our countries if the business environment is right.
That's what I would like to talk to you about today. I understand that we will have time for questions at the end. So, I look forward to hearing from you and answering questions and having a stimulating discussion.
As current and future leaders, you can help shape the business environment in your country. You can help China become a key player, a key responsible stakeholder of the world community--not just Asia, but the whole world.
I have a business background myself. I spent all of my career in the private sector. And as you well know, when a company reaches an agreement with another company--and all of you will be reaching many agreements, I hope, in your lifetimes, and doing many deals and doing many transactions--three things come into play.
The first is trust. Both parties expect the other to live up to the commitments agreed upon. You will find that, in the world of business, there is nothing more important than trusting your partner.
The second is the knowledge that the rule of law will prevail.
And the third is that the terms are mutually beneficial to both parties.
These same factors apply when dealing between governments.
We see open and fair trade as one of the most efficient tools for spreading prosperity around the world. Countries that trade grow. Countries that don't trade and isolate themselves do not grow. That's one thing that we've seen over long periods of time. That's one of the reasons why China is growing so fast--because you have had, and your leaders have had, the foresight and the courage to trade with the outside world.
Trade generates economic growth. It creates jobs. It offers consumers wider choices. It promotes peace and it promotes stability.
We strongly supported Chinese entry into the rules-based World Trade Organization in 2001.
We welcomed Chinese entry into the global economy, and we are a great advocate of Chinese participation in the world economy.
Exports now supply 40 percent of China's gross domestic product. So, 40 percent of your GDP is represented by exports.
Trade between our countries has been growing at a very rapid rate.
This has been a great benefit to the United States, and, as the numbers show, we believe, an even greater benefit to China.
Last year, U.S. exports to China totaled over $40 billion U.S. dollars. China's exports to the United States totaled over $240 billion. And the United States is China's number one customer. We are your single largest nation customer that you have anywhere in the world.
We know that American companies are creating some of the most competitive goods and services in the world. We're very proud of our companies, and we know that they are eager to enter the Chinese market. Rockwell Automation is right here on this campus, training students in Rockwell-equipped labs. I understand that Microsoft is a short drive away.
We know that free and fair trade is a win-win proposition for both trading partners. Many people in China and around the world are familiar with famous brands like Rockwell and Microsoft and others, which are leaders in their sectors. And I'd like to say a few words about the business environment in the U.S. that has supported the development of such companies. I feel like I have the opportunity to tell you about what we've learned about business in the formal business world because we've been doing it for over 200 years. I'm sure you've had experiences as well as a country, and you may have started recently to open up trade and open up business.
In my experience, there are several key elements that make an economy grow, and make an economy successful, and make a company successful.
One is competition. Competition is good for companies. Competition drives individuals and it motivates companies to excel and to ensure that you're always improving. Without competition, there is no pressure. Everything is easy. But it's the pressure, it's the competition that makes you better, that makes you better as a country and that makes you better as a company.
A culture of innovation is also important. I was very impressed to see that in the new five-year plan, your leaders have identified innovation as a key objective. And the vision is to make China an innovation society. That is the right objective for this time. That is the right objective for this era. This is a time period where the companies and the countries that innovate will be more successful than those that do not innovate. So having a culture where people can take risk, and where people can be rewarded for taking risk, is very important, because innovation is always, always high-risk. You will fail very often if you are pursuing innovation, but if you have one good innovation in five or ten tries, you can be extremely successful. But the culture has to be able to reward risk and motivate risk and incentivize people to take enormous risks. That's what is required for a culture of innovation.
And finally, transparency and predictability in the rule of law. Businesspeople like to have predictability. It's OK that things are risky as long as we know what the environment is going to be. Business people take big risks, and business people invest a lot of capital. But what they want is to know what the rules are going to be five years from now or ten years from now, so that they understand how to play the game.
Most of those items I listed are functions carried out in the U.S. by the private sector. So if that's what the private sector does, then what is the role of government? We believe that the role of government is to provide a set of fair, effective and transparent rules to ensure that risk-takers can benefit. We believe that government sets the environment. Government sets the states, but then it's the private sector that comes in and invests and creates jobs and invents new products and innovates. It's the private sector that, over a long period of time, will provide the energy and the vitality to a society and to a country.
One of the key elements of a strong private sector in an innovation society is intellectual property. Another is a transparent and fair judicial system which allows disputes to be decided on their merits and not on the basis of personal relationships. Another is a regulatory system that supports market-driven technical standards. In other words, in our system, the government does not pick winners and losers. In our system, and this is the way our system works--you can believe or feel that your system works better for you--but in our system, the government doesn't pick winners or losers. The government doesn't pick industries. The people who pick the industries--the people who decide who will win and who will lose--are the customers. They're the ones who have the real power in a market-driven society. It is the market, not government, that can best decide what are the best and most efficient products and services. This system was the basis of the development of Silicon Valley in the United States. It is the foundation of the dynamism of our economy.
Some of the elements I have described are present in China. Others are not. You are better able than I to analyze the situation and to decide what is best for China. I can only tell you what has worked in the United States.
I would like to say a few words regarding the protection of intellectual property, an issue that has become a major source of focus, and a major source of concern in our economic relations with China.
As you know, sometimes you can find pirated American movies and music for sale on the streets of China. I know that no one here has ever bought any, but I have had the experience when I was here last time--I actually bought a copy of the Star Wars movie for one dollar, before it was showing in the United States. That, of course, is what worries manufacturers and producers about the environment in China. And I want to be very honest and candid with you that that worries business people.
Two years ago, 18 out of 20 copies of software installed on PCs in China were pirated. Those thefts alone cost U.S. companies more than one billion dollars.
IPR protection is not just for U.S. companies. There is an element of safety involved in the sale of fake baby formula, automotive parts and electrical goods. Even more disturbing is the estimate that some 10 percent--10 percent--of the world's medicines are counterfeit.
Additionally, intellectual piracy takes a toll on China's economy. So, ironically, it is China that is most affected by violations of intellectual property rights.
Let me tell you why that is.
One study projects that if China cut its software piracy rate down from 90 percent to 80 percent by 2009, it would generate the equivalent of six and one-half billion American dollars in taxes, in tax revenues that could be reinvested back in society.
And it would create over two and one-half million new jobs.
But perhaps, over the long run, just as important is the fact that the biggest impact may be on China's ability to develop innovative, world-class companies, since, without effective intellectual property protection, China's intellectual property and China's inventions will be the target of illicit enterprises. They will be the target of intellectual property violations.
So if China is to become an innovation society--and I believe that China can become an innovation society, and I believe that China can become one of the great innovation societies in the world--then China will have to deal with intellectual property rights violations because they will affect China's ability to become an innovation society. So it is to China's benefit to stamp out intellectual property violations.
Last year, one million new patent and trademark applications were filed in China. And for the first time, there were more from Chinese companies than from foreign companies. So, in China, Chinese companies are innovating more than foreign companies. So you have a bigger stake in intellectual property here than even foreign companies do.
China has undergone a remarkable economic transformation over the past 25 years.
One of my goals as Commerce Secretary of the United States is to preside over a period of progress between the United States and China. China's economic development is good for the United States and we believe that a strong United States economy is good for China.
We would like to see China continue to move forward in creating a transparent business environment--including the strongest possible protection for Chinese and foreign intellectual property--an environment that can support China's continued economic development and strong U.S.-China economic relations.
Enterprising entrepreneurs and scholars like you are writing the next chapter in China's five-thousand year history. We hope that chapter will be one of open markets, rule of law, economic cooperation and mutual prosperity for both of our countries.
I think as students, all of you are at the right place at the right time. You are going to school in a great university, one of the world's best universities, and you are doing it at a time when your country is seeing unparalleled growth. There has never been a country in the history of the world that has grown so much, so rapidly as what China has done. So you have the opportunity to take it to the next level. You are very fortunate. You have very good fortune to be here and to have the ability to make a lasting impact on your country and on the world.
And I want to tell you on behalf of President Bush, on behalf of the American people, that we value our relationship and our friendship with China very much, and we look forward to many, many, many years of mutual prosperity.
Thank you for having me today. It's been a pleasure.
Source: U.S. Department of Commerce
