TRANSPORTATION SECRETARY PETERS? MEETING WITH

UNCLAS SECTION 01 OF 03 BEIJING 002786

SIPDIS

SIPDIS
SENSITIVE

STATE ALSO FOR EB/TRA/AN ENGLE AND HORWITZ
STATE ALSO FOR CA/VO
STATE PASS USTR FOR STRATFORD, ALTBACH, CELICO
TRANSPORTATION FOR X1, X40
TRANSPORTATION FOR OFFICE OF INTERNATIONAL AVIATION ?
OPPLER AND GLANTZ
USDOC FOR ITA/OCEA/MCQUEEN
USDOC FOR ITA DAS KASOFF
NSC FOR TONG, SHRIER
TREASURY FOR OASIA/ISA ? HAARSAGER, WINSHIP, CUSHMAN
TREASURY FOR DEPUTY CHIEF OF STAFF SMITH
TREASURY FOR AMBASSADOR HOLMER, DANIEL WRIGHT
MONTREAL FOR USICAO

E.O. 12958: N/A
TAGS: EAIR ECON BEXP PGOV OVIP SECRETARY PETERS CH
SUBJECT: TRANSPORTATION SECRETARY PETERS? MEETING WITH
MINISTER OF GENERAL ADMINISTRATION OF CIVIL AVIATION OF
CHINA YANG YUANYUAN


1. (SBU) Summary. Secretary of Transportation Mary

E. Peters discussed a broad range of bilateral
aviation issues during her meeting with General
Administration of Civil Aviation of China (CAAC)
Minister Yang Yuanyuan on April 13, 2007. The
meeting included a signing ceremony for a record of
discussion on economic regulation that will broaden
the scope of the United States-China Aviation
Cooperation Program (ACP) in China. End Summary.

Next Steps in Advancing Aviation Liberalization
Talks
-------------- --------------
-


2. (SBU) Secretary Peters began the meeting by
stating that the first Strategic Economic Dialogue
(SED) included an agreement to further liberalize
air transport between our two countries. Two rounds
of negotiations have been completed since the SED,
but more progress is needed to accomplish the
liberalization goal. Secretary Peters noted that
there is another round of negotiations scheduled for
the end of April. Washington hopes Beijing will
assemble a negotiating team that is fully empowered
to make a deal. Secretary Peters said that
meaningful progress needs to be made this year to
address growing criticism in the United States that
China is dragging its feet on liberalization.


3. (SBU) Minister Yang stated that CAAC is also
under pressure to make progress on further
liberalization. CAAC will empower its delegation to
negotiate accordingly. Minister Yang said that
Beijing has several concerns that it hopes
Washington will keep in mind during the negotiations.
First, there is an imbalance between the development
of the two countries' airline industries; second,
China so far lacks adequate economic regulations to
permit full market liberalization of its domestic
air transport industry; third, China's aviation-
related infrastructure remains immature and needs
further development; and finally, Beijing has safety
concerns given that more than 400 foreign flights
enter China daily. Minister Yang stated that
Beijing recognizes that further liberalization will
help to solve some of these problems, but Beijing
hopes Washington will demonstrate some flexibility
during the negotiations in recognition that these
problems cannot be solved overnight.

Cooperation on Regulations, NGATS and Emissions
Policies
-------------- --


4. (SBU) Secretary Peters thanked Minister Yang for
CAAC's empowerment of its negotiators. Washington
recognizes that China's aviation industry is
concerned about the effects of further
liberalization and that China's economic regulations
are still evolving. Secretary Peters stated that
Washington is willing to share its experience in
deregulating the United States' aviation industry.
United States-China Aviation Cooperation Program
(ACP) would be a good venue to explore this
cooperation. Secretary Peters stated that the use
of United States Government money to fund the
program demonstrates Washington's commitment to the
ACP. Beijing and Washington should discuss

BEIJING 00002786 002 OF 003


expanding the ACP to cover other issues, such as
economic regulation.


5. (SBU) Minister Yang stated that China looks
forward to working with the United States in the
development and implementation of the next
generation air transportation system (NGATS).
Beijing hopes to cooperate with Washington on the
development of the standards and regulations that
will accompany NGATS. Secretary Peters stated that
NGATS is DOT's highest legislative priority in 2007.
The United States and China can help each other and
learn from one another as NGATS is developed and
fielded. Secretary Peters noted that the United
States uses technology as a means to mitigate the
impact of air space limitations, such as those
resulting from military restrictions of certain
airspace. Washington hopes Beijing is making
similar judgments as it manages China's air space.


6. (SBU) Minister Yang stated that another area of
cooperation should be in aviation emissions.
Washington and Beijing collaborate in the
International Civil Aviation Organization (ICAO) to
ensure that appropriate, responsible measures are
taken on this issu. Secretary Peters stated that
Washington is concerned that aviation emission
proposals by the European Union (EU) if enacted
would hurt aviation industry growth. Washington
agrees with Beijing that the ICAO assessment is the
best way forward to address the emissions issue.

Opens Skies Treaty with EU and Doing Business in
China
-------------- --------------
--


7. (SBU) In response to a question from Minister
Yang, Secretary Peters explained that the recent
signing of an Open Skies agreement with the European
Union is a great opportunity for the aviation
industry in the United States and Europe. Airlines
from both sides will have much greater access to one
another's markets. Secretary Peters stated an
important aspect of the agreement is that it will
not be enacted until March 2008. This will allow
the aviation sector and respective governments to
fully prepare for implementation. Secretary Peters
also noted that Washington and Brussels negotiated a
follow-on phase to the initial agreement that will
allow for more liberalization in the future.


8. (SBU) Secretary Peters stated that several United
States companies have expressed concerns about their
business opportunities in China. Motorola would like the
opportunity to bid on airport security projects; Boeing
is looking to expand its aviation sales; Sabre Holdings
would like to operate aviation services; and Mesa
Airlines hopes that Beijing will continue to support its
efforts to offer domestic airline service in China.
Minister Yang stated that Beijing supports Mesa's bid to
start this service, but for now, there are no slots
available in Beijing. CAAC is recommending that Mesa
begin its service in Xian and expand to Beijing in the
future, perhaps through slots that may become available
at military air fields. Minister Yang noted that
Motorola and Boeing are both very famous brands in China
and the Chinese Government supports the expansion of
their respective businesses in China. In fact, CAAC

BEIJING 00002786 003 OF 003


wants to hold a seminar between Boeing and the Chinese
aviation industry on fleet planning requirements beyond

2010.

United States Participants
--------------


9. (U) United States Government attendees at the
Secretary's meeting on April 13 were:

SIPDIS

Secretary of Transportation Mary E. Peters

SIPDIS
Ambassador Clark T. Randt, Jr.
Assistant Secretary for Aviation and International
Affairs Andrew Steinberg
Deputy Chief of Staff Simon Gros
Assistant to the Secretary for Policy Jana Weir
Assistant to the Secretary for Public Affairs Sarah
Echols
Special Assistant to the Secretary for Scheduling and
Advance Brooke Evans
Embassy Special Assistant to the Ambassador Michael Crain
Embassy Economic Section Trade and Investment Policy Unit
Chief Eric Madison
Embassy Economic Officer Brian Jones (note taker)
Embassy Economic Officer Kamal Latham
Embassy Economic Officer Brian Klein
Embassy Economic Officer Michael Pignatello

Chinese Participants
--------------


10. (U) Senior Chinese Government attendees included:

Minister of General Administration of Civil Aviation of
China YANG Yuanyuan
CAAC Vice Minister YANG Guoqing
CAAC Director General of International Affairs and
Cooperation LI Jiangmin


11. (U) Secretary Peters? delegation has cleared this
report.

RANDT