Chinese Commerce Minister Bo Xilai appeared at a press conference hosted by the State Council Information Office at 3:00 p.m. on May 30, 2005 to give updates on the textile issue and take reporters' questions.

 

(Host): Ladies and Gentlemen, good afternoon! The issue of China-US and China-EU textile trade has recently attracted much media attention from both home and abroad. Today we are honored with the presence of Mr. Bo Xilai, Chinese Commerce Minister, who will be briefing you on issues relating to textile trade and taking your questions.

 

This is the very first appearance of Minister Bo at a press conference hosted by the State Council Information Office after taking office. For quite some time, both domestic and foreign media have suggested that we invite Minister Bo over to our office for a meeting. I believe today has been long awaited.

 

At this press conference, we also have with us Assistant Commerce Minister Yi Xiaozhun, Assistant Commerce Minister Fu Ziying and Mr. Lu Jianhua, Director General of the Department of Foreign Trade Administration, Ministry of Commerce (MOFCOM).

 

Now I switch the mike to Minister Bo.

 

 

(Bo Xilai): Dear friends from the press, good afternoon. I feel delighted to have this opportunity to share my views with you. As time is limited today, I will make sure we make the most of it. From the perspective of the Chinese government, we have a lot to say on textile trade and a lot of issues on which we hope for full exchange of views with mainstream media from all countries. Recently, China's textile industry and chamber of commerce for the import and export of textiles have been following these issues with high concern, which are also widely discussed outside China. We've already had some discussions with the US and the EU as well as other countries on the textile trade issue. Now I would like to answer your questions of mutual concern regarding this issue.

 

Now the floor is open to questions.

 

(Bloomberg News reporter):

Mr. Minister, thank you very much for giving us this opportunity to meet with you. We've all been waiting a very long time. First of all, I'd like to ask you, how do you respond to arguments from the US and Europe that the safeguard measures they're planning to impose on textiles are rights that are guaranteed to all WTO members. Are you going to slow any of your WTO market opening in response to the import caps that the US and Europe are threatening to implement? The US government charges that the Yuan's value is artificially low, unfairly making Chinese exports too cheap. Wouldn't a revaluation or a right trading band for the Yuan help not only resolve the textile dispute but also head off other trade disputes? Thank you.

 

 (Bo Xilai): Let me take your first question about China's view on the EU and US adoption of safeguards to restrict China's textile exports. The clause on which their actions are based is the well-known Paragraph 242 written in the Protocol on China's Accession to the WTO. We believe the EU and US using Paragraph 242 against Chinese textiles is groundless and incorrect. We believe any recourse to this Paragraph should be conditioned upon evidence demonstrating the existence of market disruption in the US and the EU as a result of textile imports from China which threatens to impede the orderly development of trade in such products. In other words, there should be a causal link between these two. In addition, compelling evidence must be presented for safeguard actions taken. And if formal consultations are to be requested with China, a detailed factual statement justifying the actions must be presented to China. To put it in another way, there are a few preconditions for using Paragraph 242.

 

(Bo Xilai): First, export growth must be demonstrated, but this is not the sole precondition. Based on this, the existence of market disruption must also be proved. But still it is not enough. It has to be demonstrated that the disruption is threatening to impede the orderly development of trade and there's a causal link between China's export growth and the disruption in the EU and US markets. Apart from that, detailed evidentiary materials must be furnished to China. It's fair to say that many elements are missing in the EU and US cases and their evidence was hardly convincing.

 

As far as the term "market disruption" is concerned, at least three factors must be considered. First, whether there has been rapid growth within a short period? Second, if there has been rapid growth of Chinese textiles exports, have there been notable impacts on prices in the US and EU markets? Third, under these circumstances, has the domestic industry of the importing country been materially injured? In my opinion, neither did the EU nor the US provide China with exhaustive data. They also differ vastly with China both in comprehending these issues and analyzing the specifics and facts. Notwithstanding differences in understandings and views, we should exchange views seriously. However, it is by no means reasonable and scientific that the US and the EU have rashly imposed safeguards on Chinese textiles merely based on preliminary data over a three to fourth-month period.

 

 (Bo Xilai): Take the changes in prices as an example. Arguments in this respect are rife both in Europe and the US. The EU recently imposed safeguards on two Chinese textile products. One is T-shirts on which we have figures showing they were priced at 97 euros per dozen in January 2005 and 101 euros per dozen in March 2005, that is, the market prices for T-shirts have increased rather than decreased and the existence of market disruption is not demonstrable. Plus, those figures were provided by the EU. On the other product, lax yarn, according to EU statistics, its imports of lax yarn grew by 3% in March 2005. Therefore, it is unable to prove that such imports within the given period witnessed a price drop or have affected the local market. The EU and the US imposed safeguards on Chinese textiles mainly on the grounds of a surge in Chinese textile exports, which has been described with so many adjectives and compared to, for example, the eruption of a volcano and a tsunami. However, I believe there's been a lot of exaggeration.

 

(Bo Xilai): We can tell all of you in a responsible manner what China's textile exports have experienced after the textile trade integration on January 1, 2005. Generally speaking, between January and April 2005, China exported altogether 31.2 billion USD worth of textiles, a year-on-year increase of 18.4%. The growth rate was five percentage points lower than that of the same period last year. As you know, Chinese textile exports grew by just over 18% during this period, far slower than the 35% growth rate of China's overall export for the same period.

(Bo Xilai): We are aware, for the same period, Chinese textile exports to the US grew by 70% and by 45% to the EU. However, from the end of 2004 till the beginning of 2005, the Chinese government had been pondering proactively and taking many measures, hoping to enable steady export growth to the US and Europe. It is precisely for that reason that we gladly noted two drops despite the general growth of Chinese exports to the EU and the US between January and April 2005. One is the drop of growth rate month by month. The other is the drop, month by month, of the proportion of textile in overall China-EU and China-US trade.

 

(Bo Xilai): In addition, I'd like to share with you the third fact we've determined, that is, the growth of Chinese textile exports to Europe and the US, which were formerly subject to quotas, was indeed large, representing 250% to the US and 82% to the EU. However, we believe such growth was normal. Why? Because it occurred during the transition of the textile trade from the previously free trade distorting quota regime to an integrated and liberalized system. It is a completely different scenario from an abrupt surge in a given product during a given period in a given year under normal trade conditions. The former is foreseeable and has already been foretold by economic figures years before. Therefore, it was not an unprepared attack on any country, but rather a normal transition. The same growth pattern was also recorded in the past when the quotas on certain products were eliminated. Facing such a situation, before we take a decision, we have to discuss over many factors in accordance with Paragraph 242. It is not justified that within such a short period of time, without providing China with sufficient data, formal consultations are being requested to China and procedures for imposing safeguards are being entered into.

 

About the second question on whether China will voluntarily lower its market access threshold and reduce its exports to cope with the situation, I want to tell you that China is justifiably entitled to its right from the textile trade integration. It took China 15 years to negotiate its way into the WTO. In this process, we on the Chinese side have conducted consultations back and forth with some WTO members. China's accession to the WTO was a result of balanced rights and obligations. Textile is a rightful claim of China. It is a take in return for our gives in other areas of market opening and is thus balanced. Chinese companies are therefore entitled to the benefits of the integration.

 

What about the possible surge of textiles exports in the US and Europe after the textile trade integration? If pursuant to the WTO Agreement on Textile and Clothing (ATC) reached at the Uruguay Round 10 years ago, the developed countries had faithfully and concretely fulfilled their commitments of phasing out quotas in the run-up to the integration, such a possibility would have been averted. However, to our regret, instead of doing so, developed countries retained their quotas till the last minute in the most sensitive and most concerned textile categories in which developing countries enjoyed the greatest export potential. The US kept 90% of such quotas and the EU 70%, till the last moment. As a result, when the transition took place on January 1, 2005, the perception of the outside world was that Chinese textiles suddenly surged. If we have to get to the bottom of all this, the EU and the US should understand, in this long run-up period, they were incompetent and failed to perform their obligations.

 

Despite so, as well as its many difficulties and deep awareness of its entitlement to the benefits of textile trade integration, China, as a large responsible nation, acting upon a sense of responsibility to the smooth transition in the European and US markets, has taken some important decisions at the beginning of this year to voluntarily moderate its textiles exports within a lower growth rate. We have taken ten important measures, among others, lowering the export tax rebate rate, exercising automatic export licensing for textiles, and imposing export duties on certain textile products. It is precisely thanks to the implementation of these ten important measures that a relatively balanced state is being maintained in the US and European markets.

 

The Chinese government attaches great importance to the China-EU and China-US relationships. We hope to continuously foster our friendship and cooperation with the US and EU economic circles on the basis of equality and friendship. To that end, we've taken some special and voluntary policy measures beyond our WTO commitments. I think all fair-minded people should recognize this as a manifestation of the Chinese government's sense of responsibility. We also wish to properly address issues in China-EU and China-US textile trade through serious consultations.

 

As for your question on RMB, I suggest you direct your question to Mr. Zhou Xiaochuan, governor of the People's Bank of China next time you see him.

 

[CCTV News Channel]

What will the Ministry of Commerce do to protect the interests of Chinese textile industry in future negotiations, as the US has already imposed restrictions on its imports of Chinese textiles? Thank you.

 

(Bo Xilai):

Textile industry is a very important industry of China. It is a labor-intensive industry with an overall direct employment of 19 million people, and this number could be even bigger if textile-related industries are factored in. That's why the Chinese government attaches great importance to the textile issue. I read some data showing that behind each textile category subject to the EU and the US restrictions, there are at least one thousand enterprises involved, or even six thousand at the most. Therefore, the textile industry is very important to China, and the government shows great concern over the issue. Among the 19 million people in this industry, as I have just mentioned, a large proportion of them belong to low-income population. Hence the textile issue has a bearing on tens of thousands of families and the employment of a great number of workers, where the Chinese government has a great concern.

 

Recently, Chinese President Hu and Premier Wen both expressed great concern over this issue. Premier Wen has asked about this issue for many times in person, hoping that the enterprises could get over it in a smooth way, and that the production and workers' life could remain stable under the impact of the restrictions. Against this backdrop, the Ministry of Commerce is formulating counter measures, and is having negotiations and consultations with the US and the EU over this issue. However, there is one thing for sure, we will accept neither the overall arrangement proposed by the US at the beginning of the textile integration, nor the Guidelines by the EU, because these are invented on their own after the textile trade integration, rather than a result of joint discussion. Actually, this means the legal rights of China after the integration would be revoked. Therefore we do not agree with the above-mentioned proposals.

 

Not long ago, Vice Premier Wu Yi convened a working meeting specifically on textile issues, attended by relevant industry representatives. The intention was to listen attentively to the views and voices from the industry. Up till now, the China Textile Association and the Chamber of Commerce for the Import and Export of Textiles (CCCT) have thoroughly expressed the views of the industry to the Chinese government. Before the meeting, the Ministry of Commerce also had discussions with representatives from the business community. In fact, not only domestic enterprises, but also many foreign invested enterprises are currently involved in Chinese textile exports. After 20 odd years of reform and opening, the economic pattern of China has changed into an inter-woven and inter-dependent one, which means the interests of Chinese and foreign enterprises cannot be separated. Therefore, we will base ourselves on eloquent evidence, call for justice, and try every possible means to protect the legitimate rights of Chinese enterprises derived from China's WTO accession. The textile integration is one of those important rights, on which the Chinese government puts much weight. The Ministry of Commerce will focus its negotiations on this issue. Thank you.

 

[La Stampa]

In Italy, it is those small and medium sized enterprises that have been mainly affected, and the SMEs do not have the resources to establish joint ventures in China. But they bear most of the impacts by Chinese textile exports. As the Minister of Commerce, do you have any good suggestions for them to overcome the difficulties?

 

Bo Xilai:

I've heard Italy is one of the three countries that are the most supportive of restrictions on Chinese textiles. I am afraid our Italian friends didn't make a smart calculation. The past years have witnessed significant progress in trade and economic relations between Italy and China. That means the relation between the two countries is based on mutual benefits, and Italy businesses are making profits in China. We did export lots of textiles to Italy, but these products are of low added value. Meanwhile, we imported a lot of textile machinery and fabrics form Italy, as this is what Italy is famous for. It's fair to say the value of the Italian textile machinery is much higher than Chinese exports of apparel.

Bo Xilai:

I suggest our Italian friends remake a calculation as for to which country you will be able to export your excellent textile machinery and fabrics in the future. China is probably your biggest market. Moreover, it is utterly unnecessary for Italian textile industry to exaggerate Chinese textile exports to Italy, as the trade in textiles only takes up one-fifth of our total trade volume. Plus China and Italy have great prospects of cooperation in many other areas. On the other hand, Italy has already completed its restructuring of textile industry. Some of your textile products lack competitiveness. Even if you don't import such products form China, you will turn to other countries for them. This will not really solve Italy's problem.

 

Bo Xilai:

I believe we should broaden our horizon and make the business cake even bigger. Your question reminds me of an Italian figure named Marco Polo, who lived hundreds of years before us, but was so far-sighted that he came to China and did business with Chinese people. If he were still alive, and knew that Italy would impose restrictions on Chinese textiles which are of good quality and competitive prices, he would be very surprised or disappointed.

 

[Xinhua News Agency]

I remember Minister Bo mentioned that the EU and the US had adopted double standards on free trade at the Fortune Global Forum. Would you please elaborate on that? Thanks.

 

Bo Xilai:

By double standards, I mean that developed countries like EU members and the US warmly advocate free trade in areas where they are competitive and they ask other countries to open markets. However, in product areas which developing countries could challenge them, they will immediately resort to trade protectionism and close their own markets to those products. I believe this is double standards. In fact, Europe and the US have been advocating free trade for a long time. It was Europe who invented free trade some 200 years ago in the mid 18th century. But in the past, developed countries such as the US and European countries had absolute dominance in most industries, where developing countries were not well-equipped to compete with them. As a developing country, China has come a long way in forming this relatively competitive industry, that is, textiles and apparel.

 

Bo Xilai:

If there had been a unified standard and genuine free trade, I believe developed countries would have tolerated developing countries to demonstrate their capability and to unleash their productivity in the textiles and apparel sector, which was non-injurious to the markets in developed countries. However, regrettably over the past few months, the EU and the US didn't wait a second to exclude from their markets textile and apparel products, which are labor intensive and of low added value, exported by developing countries represented by China. That's why I said double standards. I also feel regretted for those economists in favor of such double standards, because on one hand free trade has been advocated for one or two hundred years, and has been given a very beautiful face. But on the other hand, once some developing countries possess the power to challenge developed countries in certain industries, or even a not-so-much-important industry to them, they couldn't take it. Instead they make up a lot of excuses to contain and restrict these developing countries, even to the degree of quantitative restrictions.

 

Bo Xilai:

Of course, we are now in the process of negotiating with the EU and the US. In the legal perspective, both have made lots of arguments and rationales to support their arguments. There are many argumentative points over the textile issue. So much so, to impose quantitative restrictions on Chinese textiles, under the universally regonzied WTO principle of free trade, is a shame, and is of the nature of trade protectionism. Therefore, we have to speak fairly for the Chinese industry and for other developing countries.

 

To make an analogy, on the land of global trade, textile is a very barren piece of land where developing countries crowdedly inhabit and cultivate. As there are so many of them, the per capita area is very small. By contrast, developed countries are dominating the high and middle-end market, the trade of which could be compared to a very fertile and boundless land. They have a tight grip of trade areas where they enjoy an advantageous position. They further limit others from stepping onto this land. Anyhow, developing countries have to find something to do. So we began to develop our textile and apparel industry. But what happened was that, only 4 months into the textile trade integration on January 1, 2005, developed countries began to impose restrictions on us. Therefore, I believe there are double standards. In free trade, all parties should compete on a level playing field. Once we reach an agreement, it should be honored. If someone do not implement the agreement, or leave some traps in the agreement, I believe that constitutes double standards. Thank you.

 

Spanish TV reporter:

Minister Bo Xilai, today we just received the latest information from the Ministry of Finance that the Chinese government decided to cancel the export duties on 81 Chinese textile products. What is the reason for the Chinese government to do so and what could be the possible consequences? Just now you mentioned that China would continue its great efforts in curbing its rapid export growth. What further efforts you plan to make after the cancellation of the export duties?

 

Bo:

The Chinese government decided to levy duties on textile exports on two occasions. The first decision was made on January 1, 2005 in 148 8-digit tariff lines. The second time was on May 20 of this year when the Tariff Committee of the State Council decided to impose export duties on another 74 10-digit tariff lines. Both are voluntary measures taken by the Chinese side with an aim to stabilize China's exports and encourage Chinese enterprises to transform their mode of export growth. The difference between them is that for the second imposition, we had collected some data of the actual growth of Chinese textile exports to the European and US markets in the first quarter of this year, and had made a scientific and systematic analysis. On that basis, we thought it was necessary to levy export duties on some specific products that were demonstrating rapid export growth so as to rein in their growth. Therefore, the second measure was more selective and targeted, whereas the first measure was more general. It is our view that following the implementation of the export duties, we will effectively control the growth of exports to the EU and the US. For products which are showing a fast export growth rate, we impose a much higher export duty on them at the second time than at the first time.

 

From that you can see how responsible the Chinese government is for the global trade. However, before we introduced the policies, we set forth some preconditions, that is, in the future, if any country imposes restrictions, particularly quantitative ones, on Chinese textiles, we will exclude those restricted textile products from the catalogue of textile products on which export duties are levied. Therefore, there is no doubt that we will not tolerate Chinese textiles being put under double pressure.

 

I have repeatedly suggested the EU and the US representatives think more heavily of this policy, which is a hard-won and effective policy. But regrettably, the EU and the US did not take my point. The US first imposed safeguards on three, then four, categories of Chinese textiles, followed the EU in two Chinese textile products. In fact since you have already decided to impose quantitative restrictions on Chinese textiles, how will it be possible for the Chinese government to further levy export duties on those products? The Chinese government must treat Chinese enterprises fairly and justly when we ask them to think in a wider context. In other words, if the EU and the US do not give due weight to the Chinese measure of imposing export duties and still go ahead with restrictive measures, we will make corresponding policy adjustments. If you put half a kilogram of pressure on our enterprises, we will take away 500 grams of burden from them.

 

I'd like to make an addition. On May 20, the Tariff Committee announced to impose export duties over some other textile products. According to some foreign media, it is a policy that the Chinese government had to adopt facing in the face of mounting pressure from the EU and the US invoking Paragraph 242. I believe this is a total misperception, because the Chinese government started to study how to implement the policy of export duties more effectively as early as several months ago. Any effective policy will need one or two, or two or three months to be carefully conceived. China is a country of principle and fears no pressure. Therefore even when the US started to impose restrictive measures over Chinese textile products, we still rejected the Overall Arrangement proposed by the US. At this moment, the Chinese side is still willing and ready to have consultations with the EU and the US in a bid to properly address our trade frictions over textile products.

 

CCTV Economic Channel

Minister, you have briefed the international background backing the Chinese government's decision to abolish export duties over 81 Chinese textile items as of June 1 this year. Would you please share with us some figures as to the impact on the domestic industry? My second question is, on June 2, US Commerce Secretary will be visiting China and having talks with the Chinese side. What specific requests will the Chinese government put forward to the US Department of Commerce?

 

Bo

Textile is certainly a hot topic in the Sino-US trade relations. We are going to meet the new US Commerce Secretary and the new USTR Mr. Portman. There are many trade highlights between China and the US. We indeed have many arguments and quarrels, but we notice with great delight that two decades of reform and opening-up have witnessed a growing trade volume between us despite these arguments and quarrels. The Ministry of Commerce is well prepared to meet and exchange views with Mr. Portman and Mr. Gutierrez. The two sides are also actively preparing for the next session of the Joint Commission on Commerce and Trade (JCCT). As you know, Vice Premier Wu Yi was in the US last year to co-chair the 15th session of the JCCT with Ambassador Zoelick and Secretary Evans. Dominated by many issues, the last JCCT was a great success and it played an obviously important role in promoting Sino-US commercial and trade ties. We will try to turn this year's JCCT with a very substantive agenda into another success.

 

I believe despite many trade problems between China and the US, we are making progress. Therefore, we are optimistic about Sino-US trade. Someone also mentioned US trade deficit against China. Actually, it is because of our mutual benefit and the win-win results, the trade volume between China and the US has been expanding. The expansion also reflects the rationality and complementarity of the China-US economic and trade relations. Therefore, we are optimistic about our economic and trade ties. We are ready to address existing problems through consultation based on equality and reciprocity.

Bo

We are listening carefully to enterprises, especially those export-oriented enterprises, from various cities and provinces for the difficulties they're facing. The imposition of safeguards by the EU and the US over Chinese textile products has surely suffered us with an immediate loss. For example, the restriction on 7 textile products imposed by the US has in fact affected more than 2 billion USD of Chinese exports and 160,000 jobs in China. The restriction by the EU over two Chinese textiles also affects 300 million USD of Chinese exports and the relevant workforce. Therefore, the Chinese government attaches great importance to the concern of its enterprises, and is actively consulting with the EU and the US. Thank you.

 

Hong Kong Wen Wei Po reporter

Minister Bo, recently in the trade friction over textile between the Chinese mainland and the US and the EU, the Chinese mainland decided to exempt the export duties on textile products under Output Processing Arrangement (OPA) from Hong Kong. What implications will this measure have on the promotion of domestic textile industry? Facing the current pressure by the US and the EU on Chinese textile products, China may shift some of its textile production to Hong Kong in order to avoid risks. What role will Hong Kong play in the current trade situation?

 

Bo:

Here we have two preconditions: First, Hong Kong is a WTO member and is a Separate Customs Territory. Second, the Chinese mainland and Hong Kong established CEPA, or Closer Economic Partnership Arrangement, a free trade agreement signed by the Chinese mainland and Hong Kong, which has been notified to and reviewed by the WTO. According to WTO rules, preferential treatment provided between FTA signatories is an allowed exception of the General System of Preference of the WTO. Therefore, the Chinese government has to provide due support to the production and economic development in Hong Kong within the right legal framework.

 

 

Turkish reporter: I want to know if China will continue to levy export duties on other textile products. If yes, when?

Bo

We decided to impose export duties on some textile products on January 1 and June 1, 2005. Generally speaking, we will continue to implement these decisions. What we will exclude from the list are those textile products already subject to the EU or US restrictions.

 

(People's Daily reporter)

We notice besides the US and the EU, some developing countries are also considering safeguard actions against Chinese textiles. They're also apprehensive about the scale and competitiveness of Chinese textile exports. What's your reading of this? In a separate incident, we recently surveyed some companies and active readers for their views on the issue of textile. There has been a general argument, that is, since the EU and the US practice clearly violate WTO principles and have affected domestic production to such great gravity, why hasn't China turned to the WTO with a well-justified complaint or taken corresponding retaliatory measures? Would you comment on that? Thank you.

 

(Bo Xilai): Thank you. On your question relating to developing countries, I want to say the Chinese government has always attached great importance to developing economic ties with other developing nations, who have been our old friends. China is up to now still a developing country. Its per capita GDP has just gone over 1200 USD. There remains a large low-income population in central and west China. So emotionally we deeply understand the needs and hardships of other developing nations.

 

We actually took some very realistic measures toward textile industries in other developing nations. For example, as of January 19, China had exempted its imports from the 25 least developed African nations from tariffs. During the same period, we have cancelled the debts owed by the governments of some least developed countries to the Chinese government. We have been encouraging Chinese textile companies to go global and working with other developing countries in transforming their old and existing textile companies and sharpening their technological competence and competitiveness.,

 

On your second question, I did hear many voices from Chinese textile companies, including those reflected by China's textile associations, requesting the Chinese government take retaliatory trade measures when Chinese companies are unfairly treated. Personally, I think their acute perception of pressure and their expression of dissatisfaction under such pressure are understandable. But we do not necessarily take the road of retaliation because there're wide-ranging areas in China-US and China-EU trade and economic cooperation. I believe, a sound trading environment is both a blessing to China-EU and China-US relationships but also to the peoples.

 

As a matter of fact, after China's accession to the WTO, China and the EU and China and the US have resolved a large number of trade disputes through consultations and negotiations.

 

However, we also see some countries easily resort to restrictions when faced with trade disputes rather than find appropriate ways to solve the problems. We believe that style is of no good for solving trade disputes. In the international trade arena, some countries are used to always acting on their own. They have decades of rich experience in fighting trade wars, about which they really feel good. Actually their style is darkening their image and disgracing fair trade. What shall we do with these people? As China is a country of courtesy and propriety, our general approach will be to talk them out of doing that and ask them to listen more to others.

 

On your third question about the possibility of bringing the case to the WTO dispute settlement mechanism, let me make three points: First, the DSM is a legitimate right that China is entitled to. We will use this right when it is time to do so. Second, bilateral negotiations have advantages of them own. However, they also easily lead to a situation where each party claims to be right and no solution is possible as there is no judge. Third, sometimes one-to-one talk is less effective than a multilateral mechanism, whereby the public can judge who is right and who is wrong. Furthermore, I'd like to point out that the imposition of safeguards against Chinese products are both WTO-incompatible and discriminatory. We are therefore firmly opposed to it. Of course, whether and when we will resort to the DSM is completely up to the Chinese side.

 

 

Norway National Broadcasting TV Station Journalist:

I have been speaking to a lot of people in the textile industry in China and I give them two choices if they could have either penalizing tariffs from the EU and the United States or the government considers increasing the value of RMB. They said they would rather have the penalizing tariffs. To what extent do you agree with that? By penalizing tariffs, I mean the high tariff rates the EU and the US are going to impose on Chinese textile exports, or quantitative restrictions, such as quotas.

 

Bo: I would like to confirm with you whether by penalizing tariff rates against Chinese products you are referring to the very famous Schumer Amendment. When we try to solve trade disputes with the EU and the US, we must keep a close watch of their attitudes. Our principle is actually very simple: first, we must abide by the WTO rules. We will never ever give up our legitimate rights in the WTO. Therefore we will not accept the EU Guidelines or the US Overall Arrangements. Second, we will try our utmost to safeguard the interests of Chinese companies.

 

The penalizing tariff part of your question brings us back to the very first question raised at this press conference, that is, whether the EU and the US will use Paragraph 242 to impose restrictions on Chinese textiles. With regard to Paragraph 242, we believe it is above all discriminatory. At the time of WTO accession, we agreed to it as a compromise. However China's WTO membership is a balance of rights and obligations and of advances and retreats. In nature, Paragraph 242 targets exclusively China. So we believe it is at the same time discriminatory. However we acknowledge the legal effectiveness of Paragraph 242. We simply emphasize here that the substance and procedures provided by the Paragraph should be strictly followed.

 

To summarize, I believe the imposition of restrictions against Chinese products by the EU and the US according to Paragraph 242 is based on insufficient evidentiary grounds. It's a hasty decision made with unscientific judgments and to a large extent an "impression score" for Chinese textile exports. It is a rather random off-the-head decision based on feelings rather than facts. Under these circumstances, we will naturally have serious consultations with the EU and the US to express our opinions.

As I told you, Governor Zhou Xiaochuan is the right person to answer your question about RMB. In fact, I believe that on the issue of RMB, there is a lot of misunderstanding in the EU and the US. In the US and EU commercial circles, there are clearly opposing opinions on whether the RMB value should appreciate. I think the Chinese government, in making any important decision, first bases its consideration on the need and possibility of China's economic development. In addition, as a large responsible trading nation, China needs to take it into account the stable development of global finance and trade.

 

CCTV China Financial Report Journalist:

The EU and the US are now imposing restrictive measures against Chinese textile exports and China has voluntarily taken measures on its exports, for example, the imposition of export duties to lift the export threshold. Some companies have been affected. Now their major concern is whether the government will take similar steps in similar events, which is unfavorable for them. This is my first question. My second question relates to the elimination of export duties on 81 tariff lines of textile products. My question is what are the remaining tariff lines that are not exempted from the export duty?

 

Bo:

Firstly with regard to the remaining tariff lines, I suggest that you check out the website of MOFCOM where you can find detailed information you are interested in. Secondly about the future possible measures that may be taken by the Chinese government against Chinese textile companies to check their exports, let me put it this way: From the beginning of this year the Chinese government took a series of measures. However it is untrue that the government wanted to increase the burden on textile companies. This should be made clear. Given the current environment of global economy and trade, the government has to balance the pros and cons when it makes decisions because we want to create the best environment for Chinese companies. We like to see orderly exports of textiles because we hope we can help Chinese textile companies avoid the risks in the international market. It is true that some discriminatory things and restraints on us do exist on us in the global trading system, which is a legacy issue. We must face the international economic and trade environment in a sensible way.

Bo: We hope to find for our enterprises a path with few risks and more stable development. Therefore, the Chinese government adopted the above measures in a very responsible manner. In addition, these measures are conducive to the restructuring of our enterprises and the transformation of trade growth mode. Because our enterprises should also keep pace with the time and shall not always produce low added-value products. As regards whether we will adopt further measures, in fact everyone shall be prepared to respond. Such is international trade and commerce that one wave is followed by another. We have to take it easy with such a trade environment.

 

Bo: Generally speaking, the Chinese government cares much for our enterprises. In return, our textile enterprises have made contributions to China's exports, employment and foreign exchange reserves. Therefore, whenever talking about the development of the textile industry, leaders of our country would always sing high praise for them. As a labor intensive industry, it has created a lot of value as well as many job opportunities. We pay our heartfelt tributes to all the employees in textile enterprises. At the same time, MOFCOM, as a service provider, will better serve our textile enterprises. Thank you.

 

Bo: To conclude, I would like to point out that it is not only we Chinese who hold these opinions, many foreign friends with a fair and objective view also share our opinions. For example, the incoming WTO Director General Mr. Lamy pointed out, this paragraph violates the fair and free trade principle as WTO rules should not target one specific country. Many things taking place now did not happen all of a sudden and were not unpredictable. Mr. Rodrigo Rato, Chairman of the IMF, once said that trade rules must be transparent, and there should be no prejudice in trade relations. Mr. Supachai, Director General of the WTO, pointed out that it was wrong to erect a trade protectionist wall against China, and that figures of just a few months could not clearly demonstrate the impacts on trade. The International Herald Tribune of the United States said the market share of Chinese products grew because the Americans and the Europeans wanted so.

 

Bo: Trade Minister of Sweden once cautioned that an ever-expanding and worrisome trend of trade protectionism might impair the competitiveness of the European Union. The UK non-governmental charity, the OXFAM, said that Europe had 10 years to prepare for such a change in trade rules, yet they decided not to do anything, that Europe maintained most of the quotas till the last minute, rather than eliminate them in an orderly and stage-by-stage way, and that China should not be punished for that. Ms. Evenson, President of the American Apparel and Footwear Association (AAFA), said that the value-for-money Chinese products helped create hundreds of thousands of jobs for the retailing sector of US textile products, and that this figure was not lower that the total employment in the US textile sector during its golden age 40 years ago. Washington Post and Wall Street Journal pointed out that the US government had no reason and no necessity to protect its dying textile industry.

 

Bo: IMF Chief Rato also said that it was a big mistake to try to correct global trade imbalance through trade restrictions. The US Association of Importers of Textile and Apparel (USA-ITA) expressed that they wished the Chinese government could bring the case to the WTO. Chairman of the Brussels Foreign Trade Association said that if China levies export duty, we will have to increase the price directly. Chris Patten, a well-know figure to Chinese people, recently said that there is absolutely no reason for the EU and the US to impose restrictions on Chinese textiles.

 

Bo: In addition, I would like to share with you a few remarks by EU Trade Commissioner Mandelson, which I believe are relatively objective. He said something to the effect that China is not to blame for the rapid increase of its textile exports. China has taken into consideration the interests of some vulnerable countries and shown an attitude of responsibility. China has contributed to the growth of the world economy, and has brought benefits to the Europeans. The rise in China's status may make some people suffer, yet in the long run such pressure is constructive and positive. We shall be wiser, rather than maintain the status quo and depend on trade protectionism. Meanwhile, I would also like to say that the US also did a few good jobs last year. The USTR turned down proposals of trade protectionist measure against China on three occasions. President Bush himself also turned down on two occasions proposals to impose restrictions on China.

Bo: The reason why I mentioned all these is to show the world's media one opinion, i.e. China is fact-honoring country. We comment every move by the EU and the US in an objective way. If they are correct, we recognize it; if they are wrong, we criticize them. We hope to resolve trade frictions facing us through correct criticism and self-criticism. In the end, I would like to say that we have spent the whole afternoon talking about textile trade. This issue is of course important to the EU and the US. However it is not that important, as it only accounts for a very limited share, namely less than one tenth, of the bilateral trade between China and the US, and China and the EU.

 

Bo: In fact, China and the US, and the EU have already sorted out their division of labor. The EU and the US are at the higher and middle ends, whereas we are at the lower end. Each party shall be left to do their own job, rather than quarrel with one another over the low-end textile issue. The EU and the US should spend more energy on the development of high-technology, on Airbus and Boeing, rather than quarrel with us on socks and trousers. If you focus on these small, low-added-value products, it will be counterproductive for European and American economic experts and entrepreneurs to do things of greater importance. Thank you.

 

(Host):

That brings us to the end of today's press conference. Thank you Minister Bo, thank you everyone.