NPC CHAIR WU BANGGUO DISCUSSES PRODUCT SAFETY,

C O N F I D E N T I A L SECTION 01 OF 03 BEIJING 005818

SIPDIS

SIPDIS

E.O. 12958: DECL: 08/28/2017
TAGS: PREL PGOV ETRD SNAR KOLY MCAP PTER ECON CH
SUBJECT: NPC CHAIR WU BANGGUO DISCUSSES PRODUCT SAFETY,
TRADE AND MILITARY POLICY WITH CODEL LARSEN-KIRK

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Classified By: Deputy Chief of Mission Dan Piccuta. Reasons 1.4 (B) an
d (D).

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


1. (C) Representatives Rick Larsen (D-WA) and Mark Kirk
(R-IL),accompanied by the Ambassador, emphasized the
importance of food and product safety issues to American
consumers during a meeting with National People's Congress
(NPC) Chairman Wu Bangguo on August 28. Wu Bangguo said we
need to settle safety problems case by case and not make
sweeping generalizations about Chinese products, to which
Rep. Kirk replied that what is needed is an explanation of
changes and reforms that China will implement to address the
problem. Chairman Wu expressed concern about "protectionist"
trade measures currently before Congress, arguing that there
is no relationship between China's RMB exchange rate and the
bilateral trade imbalance. Wu acknowledged the importance of
military-to-military exchanges. Representative Kirk
underscored the importance of security cooperation for the
Beijing Olympics, with Wu replying that China has already put
in place a security plan but will still require international
support. End Summary.

FOOD, PRODUCT SAFETY
--------------


2. (C) Representatives Rick Larsen (D-WA) and Mark Kirk
(R-IL),Co-Chairs of the U.S.-China Working Group, emphasized
the importance of food and product safety issues to American
consumers during a meeting with National People's Congress
(NPC) Chairman Wu Bangguo on August 28. Although the PRC
position is that Chinese products are higher in quality than
those of many other nations, Congressman Kirk stated that
statistics are not the most important element in this debate,
given that toys and pets are involved. What is needed is not
a recitation of figures or current practices but rather an
explanation of changes and reforms that will be implemented
to address the problem. While the NPC may introduce
food/product safety legislation by the end of year,
Congressman Kirk said Congress will likely pass legislation
on this subject by the end of next month.


3. (C) We need to look at the facts of the product safety
issue, keeping things in proper perspective and settling
safety problems case by case, Wu Bangguo replied. Most
Chinese products are up to standard, having only a
one-percent defect rate, lower than that for U.S. exports to
China. According to the Speaker of the Japanese Diet, 99.8
percent of Chinese products entering Japan are up to
standard, higher than the percentage for U.S. or European
goods. Just beause one company misbehaves, or one product
i found to be defective, we should not make generlizations
about China's system or determine that all Chinese products
are bad. ChairmanWu said he had spent a great deal of time
working on product safety issues, having handled this
portfolio while serving as Vice Premier for ight years. He
cited two main challene: one, some Chinese products are
defective, and when they are discovered, China needs to be
responsible to its American and global customers by
responding proactively. Two, our two countries need to
harmonize our different standards of testing. Professor
David M. Lampton suggested to Chairman Wu that to manage this
issue publicly, rather than quoting statistics, it would be
more effective to say that most products are safe, but that
even a defect rate of one percent is unacceptable, so both
sides are working hard to solve the problem.

TRADE IMBALANCE, CURRENCY
--------------


4. (C) Chairman Wu expressed concern about "protectionist"
measures currently before Congress. He argued there is no
relationship between the China's RMB exchange rate and the
bilateral trade imbalance. Nevertheless, since adopting
currency reform, the RMB has appreciated nine percent. A
sudden change in China's exchange rate change would damage
its economy, so Beijing is moving proactively but gradually.
Any downturn in the Chinese economy would have global
consequences given that China now ranks as the world's third
largest trader and fourth largest economy. Turning to the
trade surplus, Wu said an important cause has been the
decision by Japan, South Korea and Taiwan to shift assembly
to the Chinese mainland. Against this backdrop of
globalization, one cannot look simply at the bilateral trade
balance but also must examine the distribution of economic
returns among enterprises and consumers. Given our common
economic interests, we should approach trade problems in a
"fair and objective" manner.


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CHINA'S SECURITY POLICY
--------------


5. (C) Chairman Wu acknowledged the importance of bilateral
military-to-military exchanges, noting that a delegation from
the House Armed Services Committee is in Beijing and had just
met with the Second Artillery and the president of China's
National Defense University, having also visited a Chinese
naval base at Qingdao. Such dialogues enhance transparency,
which increases mutual understanding and clarifies strategic
intentions. Referring to speculation in the U.S. media about
Beijing's strategic intentions, Wu said that even though
China has nuclear weapons, it was the first to declare a "no
first use" policy. As early as the 1970s, China vowed never
to seek hegemony. Were the PRC to try to do so, the whole
world could unite to "bring down China," Wu said.


6. (C) China follows a peaceful development path designed to
raise the living standards of its people, which requires a
stable and peaceful international environment, Wu said.
China's development can only be a force for peace and
stability. The PRC long ago abandoned "international
communism" as advocated by the former USSR and does not seek
to impose its values or social systems on others. China has
no troops stationed overseas other than those serving under
the UN flag. Although it is true that China's defense
capability has increased, China suffered a great deal of
"bullying" in its modern history, which taught it that it
must correct its own backwardness. On Taiwan, China pursues
a peaceful solution but believes that without military
deterrence, a peaceful solution is not possible. Wu, who
said he was once in charge of China's military industrial
sector, commented that the PRC has a long way to go to catch
the United States. Even if China has the technology, it
cannot afford to provide its armed forces with high-tech
equipment.

OLYMPICS SECURITY
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7. (C) Representative Kirk underscored the importance of
bilateral security cooperation for the 2008 Beijing Summer
Olympics, where the U.S. team will be a potential terrorist
target. Chairman Wu said he was "optimistic" about security
preparations for the Games, having just discussed
preparations with International Olympic Commitee President
Jacques Rogge earlier this month. Beijing has already put in
place a security plan but will require international support
to absolute ensure the Games' security.

COUNTERNARCOTICS, COUNTERTERRORISM COOPERATION
-------------- -


8. (C) In advance of the CODEL traveling to Xinjiang to
discuss counternarcotics and counterterrorism,
Representatives Larsen and Kirk raised the need for increased
cooperation on these subjects. Chairman Wu said our
interests on both issues are "convergent," and we already
enjoy good cooperation. China is also a "victim" of
terrorism and narcotics trafficking, which can only be solved
through international cooperation. The United States has
"rich experience" in the area of counternarcotics, so it is
important for our two sides to cooperate. Turning to
counterterrorism, Chairman Wu said he was happy to hear the
CODEL would travel to Xinjiang, where the terrorist
organization ETLO/SHAT (East Turkestan Liberation
Organization) is an important issue. Our bilateral
counterterrorism cooperation will continue. Nevertheless, Wu
said, China does not support "double standards" when it comes
to terrorism. (Note: Wu was almost certainly referring to
the U.S. refusal to recognize ETLO/SHAT as a terrorist
organization.)

WU BANGGUO'S WASHINGTON VISIT
--------------


9. (C) Chairman Wu said he was looking forward to his visit
to Washington at the end of October, underscoring that he
will travel only to the United States on this trip, with his
sole goal being to continue the positive momentum in
U.S.-China relations. Representatives Larsen and Kirk said
they looked forward to seeing Chairman Wu, as does Speaker of
theHouse Pelosi, who wishes to have a "Speaker-to-Speaker"
dialogue in Washington.

U.S.-CHINA WORKING GROUP'S ROLE, BILATERAL RELATIONS
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10. (C) Chairman Wu complimented Represenatives Larsen and
Kirk on the important role played by the U.S.-China Working
Group (USCWG). Representative Larsen related how, when the

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USCWG was created two years ago, there were only 15 members.
Today, there are more than 50, reflecting intense interest in
China among Members of Congress. Chairman Wu noted that this
is the 35th anniversary of President Nixon's visit to China
and the signing of the Shanghai Communique. It would have
been "unimaginable" 35 years ago that our bilateral
relationship would develop to its current level. Last year,
bilateral trade between the United States and China was USD
260 billion. In contrast, China has had diplomatic relations
for more than 80 years with Russia and the former Soviet
Union, yet bilateral trade with Russia last year amounted to
only USD 30 billion. China knows that, as the United States
enters its election year, China issues will be hotly debated.
Nevertheless, no matter which party captures the White
House, China believes the new President will be committed to
expanding U.S.-China relations, which are based on an
ever-growing number of common interests. The growth in our
relationship reflects the will of our two peoples. It is
only natural that we have differences, but through
consultation, we can work through those issues.


11. (U) The delegation did not have an opportunity to clear
this message.
Randt