UNCLAS SECTION 01 OF 03 SHANGHAI 000220

SIPDIS

SENSITIVE
SIPDIS

TREASURY FOR AMB. HOLMER, WRIGHT, TSMITH, AND OASIA - DOHNER,
HAARSAGER, CUSHMAN
USDOC FOR ITA MAC DAS KASOFF, MELCHER, MCQUEEN
NSC FOR TONG

E.O. 12958: N/A
TAGS: EAIR ELTN ECPS ETRD OVIP CH
SUBJECT: DOT SECRETARY PETER'S APRIL 11-12 VISIT TO SHANGHAI

REF: A) 4/12 TARNOWKA-STEINBERG EMAIL

This cable is Sensitive But Unclassified (SBU) and for official
use only. Not for transmission outside USG channels.


1. (U) Summary. During her April 11-12 visit to Shanghai,
Transportation Secretary Mary Peters attended a signing ceremony
for the creation of the United Parcel Service (UPS)
International Air Hub at the Shanghai Pudong International
Airport (PVG) (to be reported septel); expressed concerns of
U.S. express delivery companies about new daytime trucking
regulations in a meeting with local hosts from the Bureau of
Communications and Construction; discussed transportation sector
industry concerns at an AmCham-U.S. China Business Council
roundtable; held press interviews with Western and Chinese
business press; visited the UPS hub site and participated in a
photo op featuring Oshkosh firefighting trucks used at PVG; and
rode Shanghai's Maglev train. Shanghai transportation officials
assured the Secretary that they would take concerns of
international express delivery companies into account in
drafting the new regulations. Roundtable participants engaged
the Secretary on how the Strategic Economic Dialogue (SED) could
be used to promote liberalization of China's transportation
sector and create a better regulatory environment, and expressed
concerns both about inadequate port capacity in Los Angeles/Long
Beach, as well as at China's commodity ports. The Wall Street
Journal published an April 13 article about the Secretary's
China trip priorities and there was considerable local press
coverage of the UPS signing. End summary.

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AMCHAM-USCBC Business Roundtable
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2. (SBU) At a lunch co-hosted by the American Chamber of
Commerce in Shanghai(AmCham) and the United States-China
Business Council (USCBC), the Secretary met with Shanghai-based

representatives of U.S. companies involved in the shipping;
logistics, express delivery, rail, auto, truck and motorcycle
sector in China, as well as two major users of U.S.-China cargo
services, Cargill and Tysons. The Secretary explained that,
under the SED process, she would urge greater liberalization of
China's transportation sector, particularly movement towards
"open skies," to support the growing bilateral trade
relationship. She agreed that some of the cross-cutting
regulatory issues raised by the companies also could be good
topics for the SED forum, and, in response to their concerns,
said DOT was working with California and other U.S. port
authorities to improve U.S. port capacity and efficiency. A
more detailed summary of company concerns was provided in Ref A.
The major themes discussed are summarized below:

- Increased Liberalization of Transportation Sector: All U.S.
companies in China relied on Chinese transportation networks,
and advocated increased liberalization of China's air
passenger/cargo networks and road/rail networks. This would
support China's continued trade and economic development,
facilitate travel to China for the 2008 Beijing Olympics and
World Expo, and benefit the U.S. travel and hospitality industry
as well as U.S. businesses operating in China.

- Regulatory Environment: China's regulatory environment was
characterized by a lack of transparency, inconsistent
enforcement, and general unpredictability. One area for
improvement cited by several attendees was a desire to either
persuade China to accept international standards or to simplify
the approval process for its China Compulsory Certification
(CCC) mark.

- Port Infrastructure: In China, port capacity to handle
container shipping had grown rapidly, but development of port
capacity to handle China's massive imports of commodities had
not kept pace. Several U.S. company representatives expressed
concern that U.S. ports, particularly LA/Long Beach, did not

SHANGHAI 00000220 002 OF 003


have the capacity to efficiently handle the increased volume of
trade from China. An additional concern was uncertainty about
the status of the LA/Long Beach labor contracts that were due to
expire in 2008, and a desire to avoid the slowdowns and work
stoppages that occurred in 2002.


3. (SBU) In addition to the main themes, Ford China VP Keith
Davey said that the U.S. automotive industry in China had four
major concerns: (1) Protecting intellectual property rights
(IPR); (2) Promoting Chinese government interest and awareness
in energy sustainability and alternative/renewable fuels; (3)
Advocating road and vehicle safety; and (4) Dealing with
increased nationalism in China that made access more difficult
for foreign companies.


4. (SBU) FedEx China Region Senior VP Eddy Chan suggested that
DOT pursue a U.S.-China land transportation forum for
government-industry discussions modeled along the lines of the
highly successful Aviation Cooperation Program (ACP).


5. (SBU) Tyson Foods VP James Rice, as an AmCham Board member,
discussed a recent AmCham survey about U.S.-aviation companies
in Shanghai's concerns. U.S. aviation-related companies in
Shanghai sought: (1) more passenger flights between China and
the U.S. to support business travel; (2) increased access to
landing slots; 3) greater fairness and transparency in landing
fees; and (4) fair pricing for jet fuel.

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Meeting with Bureau of Construction and Communications
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6. (SBU) During her April 11 meeting with Shanghai Bureau of
Construction and Communications (BOCC) Deputy Director Shen
Xiaoshu, Ministry of Communications (MOC) Department Head Ren
Weiming, from Beijing, Shanghai Port Administration Deputy
Director General Zhu Jianhua and BOCC Department Head Shi
Zhengwei, the Secretary noted that her trip on the Maglev
provided an excellent introduction to Shanghai's modern
transportation system. She said she had come to China to meet
with senior Chinese officials to discuss areas of mutually
beneficial cooperation in advance of the May SED. Shanghai's
ports and "tremendous cargo handling capacity" represented an
important contribution to the bilateral trade relationship.
U.S. terminal operators had shown great interest in and were
being encouraged to participate in the construction and
operation of Phase-3 of the port's development.


7. (SBU) Deputy Director Shen said that Shanghai had embraced
its role as an international shipping hub and transportation
routes to the United States represented an important proportion
of Shanghai's total trade. There were more that 180 flights
from Shanghai to the United States every month. A record was
set in October 2006, with 191 trips. Shanghai was busy preparing
its infrastructure for the estimated 70-80 million visitors it
expected would attend the 2010 World Expo. This would mean more
than 400,000 additional people per day traveling in the downtown
area. To meet these needs, Shanghai would expand its 145
kilometer (95 mile) subway and light rail system to 400
kilometers by 2010. Shanghai planned to open 100 new subway
stations and 100 kilometers (60 miles) of new track in 2007.


8. (SBU) Secretary Peters said she understood concerns about
congestion, but requested that the concerns of international
express delivery companies be taken into account in the drafting
of new Shanghai regulations on daytime access to downtown areas
by trucks and cargo vans to ensure that Shanghai-based
businesses received the express delivery services they needed.
Deputy Director Shen assured the Secretary that Shanghai
recognized that as an international logistics, shipping and
financial center, it needed to be cognizant of the needs of
international express delivery companies and the Shanghai
government would "strongly support" such companies. He said

SHANGHAI 00000220 003 OF 003


that BOCC Department Head Shi was the individual in charge of
this planning. Following the meeting, Shi told Pol/Econ Chief
that his office had been in touch with the international express
delivery companies already and would continue to consult with
them as the draft regulations moved forward.

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Press
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9. (SBU) Among Secretary Peters' activities in Shanghai were two
PAS-arranged media events, one with the Wall Street Journal and
one a roundtable with representatives of four of China's most
prominent business publications. In the two interviews,
Secretary Peters set the stage for her subsequent meetings with

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her Chinese government counterparts in Beijing by laying out the
arguments for complete liberalization of aviation between the
U.S. and China, saying that "the market, not governments, should
decide who flies where and what the prices are." The Wall
Street Journal carried an article on the interview with
Secretary Peters in its April 13 edition. The April 16 issue of

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China Business News (Government-owned business daily, circ
400,000) published a half-page article entitled, "Expect Chinese
Direct Flights to Anywhere in the U.S.," which focused on
Secretary Peters' efforts to expand the scope of the 2004 Air

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Services Agreement between the U.S. and China, the benefits of
such liberalization, and U.S.-China cooperation in other
transportation sectors, including vehicular safety. The
Secretary's participation in the UPS hub announcement garnered

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photographic coverage in the China Daily (English language,
circ. 60,000), International Finance News (circ. 20,000) and the
Shanghai Daily (English language, circ. 50,000). Both the
Shanghai Daily and the International Herald Tribune carried
articles on the UPS hub.


10. (U) The DOT delegation cleared on this cable.
JARRETT