The ICAS Lectures

No. 99-0507-EBG

American Trade Policy in the Asia-Pacific Region

  Edward B. Gresser

ICAS Spring Symposium
Asia's Challenges Ahead
University of Pennsylvania
May 7, 1999

Institute for Corean-American Studies, Inc.

965 Clover Court, Blue Bell, PA 19422

Tel : (610) 277-9989; (610) 277-0149
Fax: (610) 277-3992




American Trade Policy in the Asia-Pacific Region

Edward Gresser

Policy Advisor
Office of the U.S. Trade Representative

     Thank you very much. I am grateful to the Institute for Corean-American Studies for inviting our participation in this Symposium, and look forward to the discussion of our trade policies in Asia.


     American trade policy in Asia rests on a few basic principles:

  • We are a Pacific nation, and the stability and prosperity of the Pacific region is thus a vital American interest.

  • Our economic philosophy rests on the view that open and competitive markets, under the rule of law, are the best means of creating broad-based prosperity. Likewise, we believe trade and economic exchange help to create sources of mutual interest with other nations, and complement and strengthen security policies intended to ensure peace and stability.

  • We thus maintain an open market at home, with relatively few barriers to trade and investment; and for fifty years we have led in the creation of the world trade system represented by the GATT and WTO, and in the development of a more free and open Asia-Pacific trading community.


     To realize this broad vision, we have four principal tasks:

  • Addressing the financial crisis which began in 1997 and continues to threaten all the Asia- Pacific economies;

  • Strengthening and improving our relationship with Japan, which Asia's largest and most advanced economy and our largest trade partner in the region;

  • Integrating the People's Republic of China, Asia's largest nation and at present Asia's fastest-growing economy, into the trading system;

  • Developing a set of agreements that over the long term create an open Pacific Community, including through bilateral discussions with key trading partners like South Korea, the ASEAN states, Australia and New Zealand; and reaching concrete agreements through the Asia-Pacific Economic Cooperation forum (APEC) which help to open the Asian region and strengthen the WTO as well.


     The most immediate and dangerous challenge is that presented by the Asian financial crisis.

  • This has caused immense suffering throughout Asia. Tens of millions of people have sunk into poverty, millions of jobs have been lost in Southeast Asia, Korea and Hong Kong, and long- term prospects for stability threatened.

  • It is also a direct economic threat to the U.S.. Asia takes about a quarter of U.S. exports ($156 billion in1998, down from $174 billion in 1997). The crisis has thus significantly reduced U.S. exports, damaging American farmers and rural areas and manufacturing exporters; and it has contributed to an import surge in steel that has threatened thousands of jobs. Recovery from this crisis is both a humanitarian goal and an essential American interest.

  • In response, the U.S. begins with a fundamental commitment to retain our own open market policies. We will enforce our anti-dumping and countervailing duty laws, but we are committed to offering our Asian trade partners the open and healthy market necessary for their recovery.

  • The U.S. also supports the recovery programs developed through the International Monetary Fund. We have contributed substantial sums to these, and applaud governments such as those of President Kim in South Korea, Prime Minister Chuan in Thailand, and others who are vigorously implementing the reform programs.

  • And we are working with Japan toward a return to growth Japan's recession has cut the exports of Asian countries to Japan by $20 billion in the past year, harming overall prospects for recovery. And this brings me to the second major point I will make today.


     Our second strategic priority is the strengthening and improvement of our trade relationship with Japan.

  • Japan is Asia's largest and most technologically advanced economy. As such, the alliance symbolized by the US-Japan Security Treaty has been and remains the foundation of peace in the region. Likewise, an improved and strengthened US-Japan trade relationship can be the foundation of growth and prosperity.

  • Japan, however, is a major challenge for trade policy. Formal and informal trade barriers remain very high in many sectors; we thus have an active market-opening and deregulation agenda, combined with the monitoring and enforcement of 37 trade agreements with Japan negotiated since 1993.

  • During Prime Minister Obuchi's visit last week, we made a significant step forward in this work. Through our Enhanced Initiative on Deregulation and Competition Policy, we agreed that Japan will take concrete measures on such issues as:

  • interconnection, liberalized network arrangements and cable TV in telecommunications;

  • performance-based standards, transparency and non-discrimination in housing;

  • regulatory transparency, expedited approvals and acceptance of clinical test data in medical devices and pharmaceuticals;

  • reforms in financial services including eased registration for securities companies, expansion of scope of activities for banks and securities firms;

  • simplification of regulations and harmonization of standards in the energy sector;

  • adoption of nationally applicable guidelines on operation of large-scale retail store laws;

  • use of "Public Comment Procedures" to increase the transparency of policy formulation and implementation; and

  • advocacy of policies throughout the economy that will help create competition.

  • Finally, we agreed to extend the Enhanced Initiative for a third year, to build on our progress and expand it to new areas and sectors of Japan's economy.

  • These are very positive steps. Prime Minister Obuchi and his government deserve credit for them. But much work remains ahead. In areas where we have reached agreement on paper, full and quick implementation is critical. And they are only a few of the issues we must address to ensure the success of economic restructuring and improve market access. We thus expect a very active and full trade dialogue with Japan in the year ahead.


     The third major trade policy priority is the integration of China into the regional and world economies.

  • Since the lifting of the trade embargo in the 1970s, and ever since through our bilateral Commercial Agreement and mutual granting of normal trade relations (MFN status) in 1980; the renewal of normal trade relations every year since; and our market access, textile and intellectual property agreements of the 1990s, the U.S. has seen the integration of China as a step in our economic interest as trade policy, and also as a means of giving China greater interest in peace and stability outside its borders.

  • This policy has succeeded slowly but surely. China's response to the Asian financial crisis may well be evidence where China would once have seen revolutionary opportunity in Korea and Southeast Asia, it now sees a threat to its exports and investment prospects. Thus it has contributed to IMF programs and maintained currency stability, helping to ensure that the financial crisis has remained an economic and humanitarian issue rather than a political/security crisis.

  • The principal task before us now is China's accession to the WTO. The U.S. strongly supports this: China's membership, on commercially meaningful grounds, will open significant export opportunities to Americans, contribute to China's own domestic reform policies, and help to anchor China more securely in the regional and world economies.

  • In the months and weeks leading up to the visit of Premier Zhu Rongji last month, we made significant progress toward completing the bilateral negotiations required in the accession progress. We have substantially completed a market access package on agriculture, industrial goods, and services as well as fair trade rules. While some issues remain unresolved, including certain financial services issues, we have the outlines of an agreement with four major characteristics.

  • It is comprehensive, covering agriculture, industrial goods and services; trade barriers including tariffs, non-tariff measures, transparency and others; unfair practices including export subsidies, forced technology transfer, offsets and local content requirements; and protection against import surges.

  • It grants no special favors. It requires China to reduce its trade barriers to levels comparable to those of major trade partners.

  • It is fully enforceable. China's commitments are specific and will be enforceable through our trade laws, WTO dispute settlement and other mechanisms.

  • And its results will be rapid. China has already lifted import bans on wheat, citrus and meat are now in effect. And on accession to the WTO, China will begin opening its market from day one.

  • The work is not yet done. Some important issues, including in financial services, remain unresolved. As in all accessions, conclusion depends on the acceding government, and China must meet the concerns of other WTO members as well. But we have the prospect of completing the work soon.


     Our final major priority is the work toward construction of a broad regional "Pacific Community," which President Clinton set as a goal during the 1993 APEC Leaders meeting in Vancouver. Here we will work to strengthen our critical trade relationships, address problems which affect the region as a whole, and continue our work toward open trade in APEC.

  • We will begin by strengthening our relations with each of our regional trading partners.

  • We will work closely with the ASEAN nations, which took $48 billion in our goods exports in 1997 -- as much as China, Taiwan and Hong Kong together. This includes bilateral work with ASEAN members, and support for ASEAN's institutional strength we applaud, for example, ASEAN's decision to accelerate the ASEAN Free Trade Area. We are also working toward a broad commercial and trade agreement with Vietnam which would allow us to endorse normal trade relations.

  • We will work to help President Kim in South Korea implement his reform program, as we continue to address our market access issues in South Korea, and we will monitor compliance with IMF reform proposals. As I noted earlier, South Korea's recovery is immensely important to the United States as a matter of both friendship and national interest.

  • We will strengthen our already very close trade relationships with Australia and New Zealand, for example through the negotiation of a Trade and Investment Framework Agreement with Australia.

    • We will also address trade problems that affect the region as a whole. We will, for example, make a special priority of improving protection of intellectual property rights. This will include ensuring full implementation of Uruguay Round IPR commitments for WTO members, enforcing our bilateral agreements with China, Taiwan and most recently Vietnam, and intensifying our fight against pirate production and distribution of newly developing optical media technologies.

    • And we will continue our broad regional effort to achieve free and open trade in the Pacific through the APEC forum. Most immediately, we are working toward a consensus at the WTO on the eight-sector tariff initiative begun at APEC last year, which addresses $1.5 trillion worth of trade in chemicals; energy equipment and services; environmental goods and services; fish and fishery products; gems and jewelry; medical and scientific instruments; toys; and forest products.


         In conclusion, our Asia-Pacific trade agenda rests upon the foundation of our own commitment to an open market, the creation of new opportunities for Asians and Americans alike, and the long-term interest of all Pacific nations in an open, fair and mutually beneficial Pacific trading environment.

         In the year ahead through our response to the crisis, our market-opening and deregulation agenda in Japan, the work toward China's WTO accession, and the initiatives we have underway in APEC, with South Korea and with other key trading partners we can take a long step toward this goal.

         I will leave it there; and again, I thank the Institute for Corean-American Studies for offering us this opportunity to participate.

         Now I will take your questions.


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