C O N F I D E N T I A L SECTION 01 OF 02 BEIJING 005652

SIPDIS

SIPDIS

E.O. 12958: DECL: 08/27/2032
TAGS: PREL ETRD PGOV PMUC PTER IR SU KN CH
SUBJECT: CODEL SKELTON-FORBES MEETING WITH VFM ZHANG YESUI
ON IRAN, PRODUCT SAFETY, TRADE, IPR, SECURITY COOPERATION

Classified By: Political Minister Counselor Aubrey Carlson. Reasons 1.
4 (b/d).

Summary
--------------


1. (C) CODEL Skelton cited strong constituent concern in
urging Vice Foreign Minister Zhang Yesui on August 27 to
cooperate with efforts to solve the Iran nuclear issue, take
steps to alleviate the American public's worries over the
safety of Chinese exports and the U.S.-China trade deficit
and do more to combat Chinese violations of intellectual
property rights (IPR). VFM Zhang advised giving more time
for negotiations between the Iran and the International
Atomic Energy Agency (IAEA), adding that the United States
and China have no "strategic differences" on the Iran nuclear
issue, but support "different approaches to the same goal."
Zhang emphasized the need for "joint efforts" on issues of
product safety, trade and IPR, suggesting that China is not
solely responsible for problems in these areas. The two
sides also discussed mutual security concerns and shared
interest in collaborating on such issues as Iran, North
Korea, Sudan and the Middle East. End Summary.


2. (U) A delegation led by House Armed Services Committee
Chairman Ike Skelton (D-MO) and including Representatives
Randy Forbes (R-VA), John Spratt (R-SC), Robin Hayes (R-NC),
Jeff Flake (R-AZ), Carol Shea-Porter (D-NH), Delegate
Madeleine Bordallo (D-GU) and Rear Admiral Mark Ferguson met
with Vice Foreign Minister Zhang Yesui at the Foreign
Ministry August 27.

"No Strategic Differences" On Iran, Says Zhang
-------------- -


3. (C) VFM Zhang told the HASC delegation on August 27 that
the United States and China have no "strategic differences"
on the Iran nuclear issue, but rather support "different
approaches to the same goal." He emphasized Iran's right to
peaceful use of nuclear energy, but acknowledged Iran's loss

of the international community's trust. On the topic of UN
sanctions, Zhang said "timing is very important" and Iran
should be allowed time to complete negotiations with the IAEA.


4. (C) VFM Zhang reiterated China's stance on weapons sales
to Iran, maintaining that such trade is "in accordance with
UN Security Council resolutions" and "limited." Chinese law
stipulates that China only sells arms to foreign governments
and forbids buyers from re-selling to third parties, Zhang
added. Asked by Representative Flake (R-AZ) for China's
opinion on potential U.S. sanctions on Iran, VFM Zhang noted
Iran's current cooperation with the IAEA and remarked that
sanctions now would "not be conducive" to resolving the
problem. A new resolution should not affect China's economic
and trade interests vis-a-vis Iran, Zhang added. Zhang noted
that China will send a delegation to the next meeting of
P5-plus-1 talks in Washington.

Product Safety Concerns
--------------


5. (SBU) Representative Forbes (R-VA) pressed VFM Zhang on
what steps China could take to alleviate the American
public's concerns over the safety of Chinese exports. VFM
Zhang replied that the Chinese Government pays close
attention to the issue. For example, he said, Vice-Premier
Wu Yi is heading a Central Government leading group, which
will conduct a nationwide campaign focused on production
procedures, licensing and testing of food and manufactured
products through the rest of the year. This is only a "first
step," he said.


6. (SBU) VFM Zhang claimed that 99 percent of Chinese exports
are safe, a rate better than that of the United States. He
added that even one percent of products being "unsafe" is
unacceptable, and China will continue efforts to improve in
this area. VFM Zhang said producers and importers share
responsibility for product safety, and China and the United
States must work together in this respect. He complained
that the U.S. media sensationalized and politicized the
issue. Representative Forbes called for U.S. companies to be
able to conduct safety inspections "further up the
(production) chain."

Trade Issues: Imbalance, Market Access
--------------


7. (SBU) Representatives Forbes (R-VA), Bordallo (D-GU) and
Spratt (D-SC) challenged China's earnestness in addressing
the U.S. trade deficit with China and in expanding access to
the Chinese market for American companies. Representative

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Forbes pointed out that only twenty American motion pictures
are allowed to be shown in China each year. VFM Zhang stated
that the trade deficit is the result of the present "economic
structure," not China's exchange rate. Zhang noted that the
RMB has appreciated nearly 10 percent against the dollar
since July 2005, but has "not significantly changed" the two
countries' trade imbalance. Zhang also called attention to
United States' hindrance of Chinese investment in the U.S.
economy "for political or security reasons" to highlight the
need for "joint efforts" in addressing the problem. After
Zhang cited China's CNOOC oil company's failed bid in 2005 to
buy Unocal as an example, Representative Hayes responded that
such deals are only a "small component" of greater potential
for Chinese business expansion in the United States. Zhang
also pointed to U.S. export controls as a contributing factor
to the trade deficit.


8. (SBU) Chairman Skelton and Representative Hayes (R-NC)
pressed VFM Zhang on the issue of Chinese restrictions on
imports of U.S. beef. Zhang referred to President Bush's
mention of the issue to Vice Premier Wu Yi in May 2007 and
suggested mad-cow disease concerns as one reason for such
restrictions. China's partial lifting of a ban on American
beef is evidence of China's intentions to build trust, stated
Zhang. Representative Shea-Porter (D-NH) raised the issue of
China's exporting steel at unfairly low prices, a concern VFM
Zhang said he would pass along to the Ministry of Commerce.

Do More to Fight IPR Violations
--------------


9. (SBU) VFM Zhang stressed that the United States and China
must work together to combat intellectual property rights
(IPR) violations, noting that some orders for counterfeit
products come from the United States. Movies that end up
being counterfeited also somehow illegally make their way out
of the United States. Zhang held that the Chinese Government
is resolutely against IPR violations and has made "remarkable
progress," but acknowledged that problems remain.
Representative Forbes noted China's efforts, but reminded VFM
Zhang that "floors" of counterfeit products could be found
"just a short drive away." Representative Flake raised his
concern over case being litigated in China involving a
constituent. Zhang assured Representative Flake that the
case would be handled in accordance with the law.

Security Cooperation
--------------


10. (SBU) Representative Spratt expressed hope that the
United States and China could strengthen cooperation
regarding "common security concerns" and proposed using
security for the 2008 Olympics as a basis for further
collaboration. VFM Zhang "fully agreed" that China and the
United States have "increasingly shared interests," giving
Iran, North Korea, Sudan and the Middle East as examples.


11. (U) The delegation cleared this cable.
Randt