MOFCOM DELIVERS LETTER FROM VICE-PREMIER WU YI FOR

UNCLAS BEIJING 018558

SIPDIS

SENSITIVE
SIPDIS

USDOC FOR 532/BIS/MFOULON
USDOC FOR 3132/OIO/WZARIT/ADESARRAN
SECSTATE FOR EAP/CM
SECSTATE FOR EB
SECSTATE FOR T AND ISN

E.O. 12958: N/A
TAGS: BEXP CH ETRD ETTC OTRA PREL
SUBJECT: MOFCOM DELIVERS LETTER FROM VICE-PREMIER WU YI FOR
SECRETARY GUTIERREZ; ASSAILS PROPOSED "CHINA RULE" AND


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CHANGES TO U.S. EXPORT CONTROL REGULATIONS TOWARDS CHINA

REF: BEIJING 16813


1. (U) Embassy's Commercial MinisteruCounselor (SCO) and
Export Control Officer (ECO) were summoned to a hasty meeting
with Mdme. WANG Qinhua, Director-General, Department of
Mechanical, Electronic and High Technology Industries,
Ministry of Commmerce (MOFCOM). The purpose of this meeting
was for DG WANG to deliver a letter from Vice-Premier WU Yi
to U.S. Department of Commerce Secretary Gutierrez,
expressing her concerns regarding a proposed new regulation,
which was published for public comment on July 6, 2006. This
proposed regulation would impose export licensing
requirements on certain dual-use commodities when destined
for military end-uses in China, establish a new Verified End
User (VEU) program that would eliminate the need for export
licenses to authorised end-users and expand an existing
requirement for U.S. exporters to obtain MOFCOM End-User
Certificates. SCO and ECO met with DG WANG several weeks ago
to receive MOFCOM's preliminary views on this proposed
regulation (see reftel). (END SUMMARY)


2. (SBU) DG WANG presented SCO and ECO with a letter from
Vice Premier WU Yi and asked that COMMOFFS transfer this
letter to U.S. Commerce Secretary Gutierrez at the earliest
opportunity. DG WANG characterized this as a "personal
letter" from Vice Premier WU to Secretary Gutierrez and took
pains to clarify that this letter should not to be construed
as China's official position on the proposed "China rule".
DG WANG noted that MOFCOM has expended a great deal of
resources on analyzing the proposed regulation and further
stated that MOFCOM continues to study this closely. As
before, DG WANG did not rule out a formal response by MOFCOM
to this proposed "China rule", but indicated that it remains
under consideration.


3. (SBU) Embassy translation of the letter follows:

(BEGIN TEXT) Respected Secretary Gutierrez: I note that the
US Department of Commerce recently published a draft "Rule of
Revisions and Clarification of Export and Re-Export Controls
for the People's Republic of China; New Authorization
Validated End-User". This new regulation, which has increased
the items subject to export controls for China, unilaterally
expanded the scope that requires issuance of end-user
certificates by the Chinese Ministry of Commerce, and added
to the commercial burden of enterprises of both countries, is
bound to exert an adverse influence on the normal development
of Sino-US economic and trade relations. This step backwards
in policy has led to questions and opposition from business
sectors in both countries.

The trade imbalance is an issue of priority concern to the US
side in Sino-US economic and trade relations, the proper
handling of which requires joint efforts from both sides. In
recent years, China has adopted a series of positive measures
in order to expand imports from the US, including purchases
by the Chinese business delegation that accompanied me during
my visit to the US in April this year. At the same time
however, the US side is violating the cooperative spirit by
restricting exports to China. This is not only harmful to the
US in terms of its comparative advantage in the bilateral
trade, but will also send to the business communities in both
countries a wrong signal that US policy toward China has
retrogressed. I hereby express my strong dissatisfaction with
regard to these actions of the US side.

I hope that the US side will earnestly attach importance to
the concerns of the Chinese side, correct mistakes in a
timely manner, take positive measures, promote Sino-US
economic and trade cooperation, boost the confidence of
Chinese and US businesses in pursuing high-tech trade, expand
US high-tech exports to China, and do things that are
beneficial to achieving a balance in bilateral trade. Mr.
Secretary, I hope that you will be able to use your wisdom

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and influence to promote an early and proper resolution of
this issue. Complimentary closing, Wu Yi, Vice Premier of
the State Council, People's Republic of China (END TEXT)

NOTE: COMMOFFS will transmit original letter including
courtesy translation by MOFCOM and Embassy translation to the
Bureau of Industry and Security, US Department of Commerce.

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LOOKING AHEAD TO THE WORKING GROUP



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4. (SBU) DG WANG raised the upcoming first meeting of the
U.S. - China Strategic Trade and High Technology Working
Group, slated for September 26 through 28, 2006, in
Washington, D.C., and expressed high hopes that this meeting
will be productive.


5. (SBU) ECO noted that other MOFCOM officials have suggested
that Vice Minister WEI Jianguo may lead the MOFCOM delegation
to the Working Group meeting and asked if this has been
confirmed. DG WANG responded that this was "highly likely",
and stressed again that the important work of this group must
continue regardless of whether VM WEI attends. In
particular, DG WANG stated that she looked forward to meeting
her counterpart, Mark Foulon, Deputy Under Secretary for the
Bureau of Industry and Security, and engaging fully in all
three days of meetings at the Department of Commerce. She
further noted that ECO and her counterpart, JIANG Qianliang,
Chief of Export Control Division I, have been engaged in
working out details of a joint statement of principles.


6. (SBU) COMMENT: Post understands that planning for the High
Technology and Strategic Trade Working Group is well underway
and that the Chinese delegation will be afforded ample
opportunity to share their views and seek further
clarification on specific aspects of the proposed "China
rule" during this meeting.
SEDNEY






SEDNEY