USTR/DOC DELEGATION MEETING WITH VFM YANG JIECHI

C O N F I D E N T I A L BEIJING 010421


PASS USTR FOR SHINER/FREEMAN

E.O. 12958: DECL: 06/27/2015
TAGS: ECON ETRD PREL KIPR CH
SUBJECT: USTR/DOC DELEGATION MEETING WITH VFM YANG JIECHI

Classified By: Economic Minister Counselor Robert Wang. Reasons 1.4 (b
/d).

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Summary
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1. (C) During a June 23 meeting with Vice Foreign Minister
Yang Jiechi, Deputy USTR Josette Shiner and Acting
Undersecretary of Commerce Tim Hauser stressed U.S. desire to
address the trade deficit and intellectual property rights
(IPR) though cooperation. They emphasized that the United
States must now demonstrate considerable progress with
respect to IPR and the ability to increase U.S. exports to
China in order to ensure a successful Joint Commission on
Commerce and Trade (JCCT) meeting, and indeed holding a JCCT
that did not demonstrate such results would be difficult to
justify. Yang said China is committed to buy American
products in order to help lower the U.S. trade deficit.
China is also committed to IPR enforcement but needs time.
DUSTR Shiner said the JCCT talks will primarily focus on
trade and IPR, with the intention of getting a good "package"
that can persuade a skeptical U.S. Congress that the
U.S.-China trade relationship is manageable. DUSTR Shiner
suggested the PRC Embassy in Washington should have an IPR
representative to help small- and medium-sized enterprises
address their concerns. End summary.

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Cooperation Is the Best Overall Strategy
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2. (C) Deputy USTR Josette Shiner and Acting Undersecretary
of Commerce Tim Hauser, accompanied by Charge, met June 23
with Vice Foreign Minister Yang Jiechi. DUSTR Shiner said
the preliminary meetings leading up to the next Joint
Commission on Commerce and Trade (JCCT) are coming at a
crucial time for the United States. The United States is
convinced that maintaining our commitment to a strategy of
cooperation rather than confrontation with China is the best
approach to resolve disagreements on trade. DUSTR Shiner
told VFM Yang that the United States has decided that the
best way to deal with the bilateral trade deficit is to
increase U.S. exports to China rather than apply sanctions.
She noted the Administration's rejection of a number of 301
trade petitions to illustrate this point. The United States
has also improved the visa regime, increasing the number of
issuances and now granting multiple entry visas. DUSTR
Shiner also cited progress in the area of export controls and
end-user inspections as well.


3. (C) DUSTR Shiner stressed that the United States must now
demonstrate considerable progress with respect to
intellectual property rights (IPR) and the ability to
increase U.S. exports to China because there is strong
Congressional pressure to take action against Beijing. If
this round of talks cannot produce a good "package," she
warned that it would be better to postpone the JCCT rather
than have it proceed without prospects for credible results.
U/S Hauser added that a successful JCCT should be able to
yield eight substantial points in IPR and ten on market
access to demonstrate the kind of progress that Congress
seeks.

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China Committed to Buy American, Lower Trade Deficit
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4. (C) Yang commended the United States for its desire to
work cooperatively with China. He said the relationship
between the United States and China is extremely important
and will continue to improve because such progress is in both
sides' best interests. He thanked the United States for
rejecting the 301 petitions and for facilitating visa
issuances, both of which help further mutual economic
exchange.


5. (C) Yang said China has a considerable trade surplus with
the United States now and emphasized that China will make a
concerted effort to buy as much from the United States as it
can to help minimize that surplus. Noting China's purchases
of Boeing aircraft as well as soybeans, Yang said China has a
market economy, so market demand would determine the kinds of
goods that China buys. If the United States would lift its
restrictions on hi-tech products to China, this could
certainly help expand the range of potential U.S. imports to
China and help lower the U.S. trade deficit, he argued.

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China Committed to IPR Enforcement, But Needs Time
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6. (C) Yang said Beijing is committed to addressing IPR
violations in China. Yang noted that China already has
extensive laws in place but also acknowledged that
enforcement is still lacking. China is trying to do its
best, he said, hoping the United States would appreciate PRC
efforts. IPR enforcement is an ongoing process that requires
time and a sustained commitment, Yang insisted. Adding that
it is in China's interests to tap into its people's
creativity and create incentives to produce, Yang cited a
recent People's Daily article that scathingly attacked
counterfeiting and urged people not to violate IPR, noting
the U.S. side should pay special attention to this piece.

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JCCT Talks Will Focus on Trade and IPR
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7. (C) DUSTR Shiner said that there is a national affinity
between the United States and China, with Chinese exchange
students winning honors in U.S. history studies, Chinese
companies such as Lenovo and Haier purchasing U.S.
enterprises such as IBM's PC division and Maytag and general
U.S. appreciation for Chinese goods. However, she stressed
that this is not enough to overcome growing concerns about
the trade deficit. DUSTR Shiner emphasized the importance of
showing that the trade deficit is not the result of hostile
actions directed against U.S. companies.


8. (C) DUSTR Shiner said recent PRC actions appear to limit
U.S. imports in areas where the United States should have an
advantage, such as software, films, and auto parts. The
United States also has concerns about U.S. companies'
distribution rights and direct sales, insisting that U.S.
products should be able to move easily onto store shelves.
IPR continues to be a pressing concern, stated DUSTR Shiner,
even though China has demonstrated its increasing commitment
and changing attitudes. She told Yang that the U.S.
challenge is to find demonstrable cases where China has
reslved IPR problems.

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Suggests China Embassy Shoul Have IPR Rep
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9. (C) Shiner said small- and meium-sized enterprises (SMEs)
have registered their rights in China but lack resources to
have a permanent office in China and follow through on
protecting those rights. She said China could signal its
commitment to IPR by placing an IPR representative in its
Embassy in Washington, giving SMEs a person to help them
address their concerns. Such a representative could also
meet with congressional and business leaders to alleviate
their concerns about IPR in China. The U.S. Embassy in
Beijing now has its own IPR attache, she commented. Shiner
acknowledged that China has done much in setting up the
necessary legal framework for IPR enforcement. What the
United States needs now is hard data showing an increase in
the number of convictions and prosecutions that can help
persuade skeptics that China is seriously committed to IPR
enforcement.

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China Sees Trade As Complementary
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10. (C) Yang said the current U.S.-China trade relationship
is complementary rather than competitive, with 50 percent of
China's exports coming from foreign joint ventures set up in
China. China's overall trade situation reveals huge trade
deficits with East Asian countries. He once again expressed
China's great willingness to buy as much as possible from the
United States and hoped that the United States would do its
part to lessen its restrictions on hi-tech products to China.
He acknowledged that many blame China for U.S. unemployment,
but suggested that China should not be a scapegoat for
natural trends in technology. China has lost tens of
millions of factory jobs and is doing its best to absorb
these laid-off workers into the economy.


11. (C) Yang noted that the MFA is using U.S. software and he
believed the United States will continue to find a market in
areas where it has an advantage. He said China is sending
more people to jail now for IPR violations and claimed that
China's increased enforcement is felt on the street. He
agreed that an IPR representative at China's embassy in
Washington deserved serious consideration and noted that he
had discussions with MOFCOM on this subject. He hoped in the
end that the U.S.-China talks did not leave the impression of
a pending trade war, and he urged the United States to
declare China a market economy.

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Participants
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12. (U) Participants:

USG

Josette Shiner, Deputy USTR and Ambassador
Tim Hauser, Acting Undersecretary of Commerce
David Sedney, Charge d'Affairs
Charles Freeman, Assistant USTR for China
Robert Wang, Minister-Counselor for Economic Affairs
Craig Allen, Minister Counselor for Commercial Affairs
Henry Levine, Deputy Assistant Secretary of Commerce
Christopher Moore, Special Assistant to DUSTR Shiner
Bruce Blakeman, Special Advisor to the Secretary of Commerce
Lois Boland, Director, Office of International Relations,
U.S. Patent and Trademark Office
Amy Celico, Acting Director, Trade Facilitation Office
Jim Loi, Senior Trade Policy Officer
Notetaker

China

Yang Jiechi, Vice Minister, Ministry of Foreign Affairs
Xie Feng, Deputy Director General, MFA Department of North
America and Oceania Affairs
Ouyang Yongfu, Deputy Director, MFA Division of North America
and Oceania Affairs
You Weijun, First Secretary, MFA Division of North America
and Oceania Affairs
Shi Yuanqiang, MFA Division of North America and Oceania
Affairs


13. (U) AUSTR Freeman and Acting U/S Hauser cleared this
cable.


SEDNEY