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Worldwide Locations

Complete Text of U.S. Commerce Secretary Gary Locke's Asia Society Speech on May 4, 2011

At the launch of An American Open Door?, Sec. of Commerce Gary Locke criticizes China's leadership for shutting US investors out of their country. (14 min., 55 sec.)

At the launch of An American Open Door?, Sec. of Commerce Gary Locke criticizes China's leadership for shutting US investors out of their country. (14 min., 55 sec.)

Or look at the issue of intellectual property.

Chinese leaders have condemned intellectual property theft in the strongest terms, and we've seen central government laws and regulations written or amended to reflect that sentiment.

But American and other foreign companies, in industries ranging from pharmaceuticals and biotechnology to entertainment, still lose billions of dollars from counterfeiting and IP theft in China every year. To cite just one example, the Business Software Alliance estimates that nearly 80 percent of the software used on computers in China is counterfeit.

Now, a lack of transparency and lax intellectual property protections all indirectly make it less appealing for foreign companies toinvest in China.

But China has also pursued policies that make investment by foreign companies especially challenging; such as the indigenous innovation policies that shut foreign companies entirely out of some industries or make unacceptable technology transfer provisions a condition of operating in China.

For example, China just released a draft of its Foreign Investment Catalogue, the first revision since 2007. 

The Chinese pledged — at the S&ED two years ago and atlast year's JCCT — that they would lift prohibitions in the revised catalogue on many industries in which U.S. firms are world leaders and have much to offer the Chinese economy.

Well, the new Foreign Investment Catalogue falls far short of that promise. 

China has also recently announced a new review system to vet foreign investments based on vague national security parameters. 

Again, while we must wait for implementation, these measures are very broad and provide another unnecessary hoop to jump through for U.S. companies.   

Even more troubling, the review system allows for competitors and others outside of the Chinese government to influence the process by proposing to the Chinese authorities that a particular transaction be reviewed. 

I am aware of no other country which allows this potentially abusive element in their FDI reviews. 

It is also worth noting that China did not publish for public comment the measure establishing this system.  Perhaps some of these and other shortcomings could have been avoided had China done so.

All of these recent moves by China result in its economy becoming less competitive and less welcoming to foreign direct investment.

The Obama administration understands that making progress onthese issues can be difficult, especially when China has millions of people coming in from the countryside looking for work. It isn't necessarily an easy decision to close down a factory producing counterfeit goods, when that factory is providing badly needed jobs. 

It can be tempting to write regulations in a way that tilts the competitive playing field in favor of domestic companies. 

But this just cannot continue if the United States and China want to capture the full promise of our commercial relationship.

The United States and other foreign nations have every right to seek more meaningful commitment and progress from China in implementing the market-opening policies it agreed to when it joined the WTO in 2001.

The irony is that reforms that are being resisted today would ultimately bring huge benefits to the Chinese people.

China's economy is increasingly moving up the global economic value chain, where growth is created not just by the power of a country's industrial might, but also by the power of its people's ideas andtheir inventions. 

In the long run, economies with poor intellectual property protections and restrictive conditions on the industries that welcome foreign investment will lose out on generating great new ideas and technologies. 

And they'll lose out on the jobs that come with producing new products — jobs critical to an expanding middle class.

Over time, if innovators fear that their inventions or ideas will be stolen or discriminated against, one of two things will happen — they'll either stop inventing, or they'll decide to create or sell their inventions elsewhere.

Ultimately, all that the United States seeks is a level playing field for its companies, where the cost and quality of their products determine whether or not they win business.  

Helping to promote market reforms in China and opening up markets for American companies has been one of my primary focuses as U.S. Commerce Secretary these past few years. 

If I am granted the privilege of serving as our next ambassador to China, this will continue to be a strong focus of mine.

Significant challenges lie ahead. For market reforms to continue, it will take constant vigilance and engagement — not just from the United States, but from all countries and businesses around the world that benefit from rules-based trading.  This includes Chinese business and government leaders, who themselves have a stake in ensuring that China is friendly to global innovation and international competition.  

There are real frustrations within this administration and among business and Congressional leaders about the commercial environment in China.

Andthe U.S. will, of course, also continue to use every legal tool at our disposal to ensure that China makes good on its commitments.

But the fact is we've used bi-lateral discussions with China to resolve major trade disputes in the past.

It's why next week's S&ED and our Joint Commission on Commerce and Trade are so important.

Constructive change takes dialogue. We can't forget that, especially in light of how far China has come and how quickly.

In front of us is the opportunity for China and the United States to lead the world economy in the early 21st century to create a new foundation for sustainable growth for years to come. 

We can't tell exactly what that future will look like. 

But we can be certain that it will be a better future if the Chinese and American governments pursue cooperation over confrontation in the economic sphere.  Cooperation that will put millions of our people to work. Cooperation that will develop technologies to solve the most pressing environmental, economic, and social challenges facing the world today.

This is the great opportunity before China and the United States.  We just have to seize it.

Thank you.