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Remarks at American Chamber of Commerce and U.S.-China Busines Council, Bejing, China

Friday, May 19, 2010

Secretary of Commerce Secretary Gary Locke
Remarks at American Chamber of Commerece and U.S.-China Busines Council in Bejing, China


Thank you for that kind introduction.

It is wonderful to be here in Beijing speaking to organizations that have done so much to expand U.S.-China trade over the years.

I'm here on the heels of the announcement of President Obama’s National Export Initiative – which aims to double American exports by 2015 and support 2 million jobs. 

And this week, I am leading the administration’s first Cabinet-level trade mission.

With me are 24 American companies seeking to expand their presence in China.

These are companies of different sizes that operate in different industries.  But together, they represent the best that America has to offer in:

  • clean energy generation;
  • energy efficiency; and
  • electricity storage, transmission and distribution.

We have just arrived from three very productive days in Hong Kong and Shanghai, and I am certain that trend will continue here in Beijing.

This is of course an important commercial opportunity for the businesses with me, and for their prospective partners in China.

But I want to begin by discussing the nature of the energy challenge facing the United States, China and the entire world.

It is the defining challenge of our time. . .

. . . .the one issue, more than any other, that will shape the fate of our planet, our economies and our nations.

But when I think about energy, I don’t necessarily think about it in these grand geopolitical terms. 

Instead, I often think about a trip I took a decade ago with my family to my ancestral village just outside of Jiangmin City in the Toishan area of Guangdong Province.

I remember visiting the small, one-room house where my grandfather and father were born.  

There was little electricity.  No washing machine. No toilets.  No computer.  The cooking was done over a small wood stove.

As I sat in a chair in that room, I felt like I was being transported back 100 years. 

But in the last decade, millions of Chinese from villages like ours have moved into the middle class.  Along the way, they have embraced the energy-hungry amenities of modern life, from automobiles to air conditioning.

This is one of the world's greatest economic success stories, and one that makes the Chinese people justifiably proud.

And this is just the beginning.  China has 700 million rural inhabitants; many of whom will aspire to, and achieve, the comforts of middle-class living in the years ahead. 

It is estimated that in the next decade, we could see one billion people across the globe join the middle class.

When we add the future energy demands of emerging countries with continued economic growth in the more developed ones, we’re left with a stark energy reality staring us in the face.

By mid-century, global energy use is going to double.   

To meet that demand, we’d have to turn on two new 1,000-megawatt power plants every single week for the next 30 years. 

But we’re not looking for any old kind of energy.   

This new energy has to be clean to avoid catastrophic climate change. . .

. . . . it has to be cheap to keep our economies growing.

Meanwhile, we’ll need to do more than just find massive quantities of energy.  In the next few decades, we need to rebuild and reinvent virtually every industrial activity,

  • from power generation and transportation;
  • to manufacturing and construction. . . .

. . . to run efficiently and economically with drastically reduced carbon output.

 The United States and China simply must take the lead in solving this challenge. 

 We are the two largest emitters of “climate change-causing” greenhouse gases in the world.  This alone gives us a responsibility to act.

 And if that sense of responsibility doesn't move us, then pure self-interest should. 

 When climate change starts creating more deserts and less water in northwest China and in the southwest United States, and when rising sea levels submerge parts of Manhattan or Pudong in Shanghai, you had better believe:

  • climate change is going to be bad for business;
  • bad for job creation;
  • and bad for the quality of life of our children and grandchildren.

 That is the very real downside of our energy and climate challenge. 

 But today, I want to focus on how the development of the technologies that we need to curb greenhouse gas emissions could spur one of the greatest economic opportunities of the 21st century.

 And how a growing clean energy partnership between China and the United States could help put millions of both our peoples to work in high-skill, high-wage jobs.

 Worldwide, energy is a $6 trillion market.  And the fastest-growing sector is of the cleaner, greener kind.

 The question, of course, is how do we get from here to this promising energy future?  

 The first step must be immediate and resolute action by our governments.

 I’m proud to say that President Obama has already done more to mitigate climate change and invest in clean energy than any president in U.S. history. 

 In just the last year:

  • He signed a Recovery Act that included $80 billion in clean energy investments; and
  • He implemented tough new efficiency standards for automobiles, appliances and consumer electronics.

 And when you look at China, you see a country that has adopted the most aggressive energy efficiency program in the entire world and is on track to exceed many of their ambitious renewable energy goals.

 Both of our governments have also committed to wide-ranging cooperation on clean energy.  Just last year, the U.S. and China each pledged $15 million for a joint research center where teams of scientists and engineers from the U.S. and China will work together on energy solutions. 

 We’ve also got joint action plans on important issues like electric vehicles and energy efficiency.

 But this is only the beginning of what must be done. Even with these historic efforts, coal and other fossil fuels still provide the majority of American and Chinese energy.

  To get clean energy to scale, we’re going to have to mobilize and incentivize the private sector like never before.

 Government has a critical role to play in shaping the marketplace.  But we must look to entrepreneurs and agile private companies to deliver the disruptive energy innovations we need.

 And while some of these innovations may be months or years away, American companies already have cutting-edge solutions that can make a huge impact right now.

 That’s certainly the case in the area of energy efficiency – which is truly the low-hanging fruit of our global energy challenge. 

 Recently, McKinsey did a study estimating that fully half of global energy demand could be met with efficiency.  And it could be done with existing technologies!

 In China – which creates 40 percent of the world’s new building space every year – there is a glaring need for more efficient residential, commercial and industrial construction.

 American companies have the solutions China needs:

  • ·        from more efficient building materials like drywall, cement and insulation;
  • ·        to more efficient motors and turbines;
  • ·        to more sustainable architectural designs.

 This is not 10 years away.  It is here now and available from many of the companies sitting in this room with me today.

 And when an American energy or efficiency company grows its business in China, it not only makes a big environmental impact, it makes a huge economic impact in both of our countries.

 When I was in Shanghai a few days ago, I attended a signing where an American architectural company was partnering with two Chinese development companies on new sustainable buildings. 

 Now, these construction projects were obviously creating jobs in China.  But they were also supporting design and architectural jobs back in my home state of Washington.

 Or consider the example of what happens when an American company sells wind turbines in China.

 A single commercial wind turbine typically contains more than 8,000 parts, 200 tons of steel and 13 tons of fiberglass.

 Someone has to design those turbines.  Someone has to make and assemble the nuts and bolts, the gear boxes and electric components.  That can, and often is, done in America. 

 Some of the companies with me on this trip produce in the United States over 90 percent of the component parts they eventually export.

 When these American companies find success here in Beijing, it creates economic value throughout the supply chain in China and in manufacturing towns across America.

 That is the definition of a win-win for the United States and for China.

 And it’s why government policies need to focus on:

  • making it as easy as possible for private sector businesses to develop new energy solutions; and
  • bringing them to market.

 In today's global economy – where ideas are just as likely to be discovered in Beijing as Boston – we need to do everything we can to keep markets open and allow for the free flow of capital and ideas across our borders.

 Unfortunately, this is an area where American companies operating in China have substantial concerns.

 As I talk to American business leaders, the overriding concern that I hear is that there is not enough government transparency. Businesses frequently don’t know what the rules are, how they will be enforced or how decisions are made.

 Especially in the energy sector – where upfront capital investments can be in the hundreds of millions of dollars and have multi-decade time horizons – this uncertainty could seriously inhibit foreign corporate investment in China.

 We saw a troubling example of this that occurred late last year.  

 China announced a new indigenous innovation accreditation system, which would give favor in China’s government procurement process to companies that perform their research and development and patent their innovations in China.

 Many U.S. businesses and other businesses around the world were surprised by this policy, which was made with little input from affected businesses and was not subject to any public comment.

 This practice may have the laudable goal of nurturing a stronger innovation ecosystem in China. . . .

 . . . But it could significantly disadvantage foreign companies interested in bidding for contracts worth an estimated $85 billion annually.

And in the long run, it will harm rather than stimulate China's innovation environment. 

Indigenous innovation limits foreign direct investment and imports from abroad that can deliver new products and services to the Chinese people and enhance innovation within Chinese partner companies.

Ultimately, all that the United States seeks is a level playing field for its companies, where the cost and quality of their products and services determine whether or not they win business.

Now, I know I am not the first U.S. official to come to China to speak about the importance of open markets.       

But the truth is that in many areas, and especially in clean energy, the interests of China and the United States are tied together.  And reforms that are good for America will be good for China as well.

Take for example, the issue of intellectual property.

Intellectual property violations are a big concern for America because our businesses lose billions of dollars a year in China from the theft of their ideas and their technologies.

But as China’s companies move up the economic value chain from low-cost manufacturing to higher value-added research and development, they too will count on protections for their innovations.

Admittedly, companies and countries can gain short-term advantages from lax intellectual property rules or measures that restrict foreign competition.

But over time, if innovators fear that their inventions or ideas will be stolen, one of two things will happen: they’ll either stop inventing or they’ll decide to innovate elsewhere and take the jobs they create with them.

This week, I have been discussing these concerns and other issues with my Chinese counterparts in private meetings. 

Those discussions will continue when I am joined by other members of President Obama's Cabinet – including Secretary of State Clinton and Secretary of Treasury Geithner – at the upcoming Strategic & Economic Dialogue. 

But as we consider these areas of disagreement, it is important to put them in context.

In the past 20 years:

  • U.S. exports to China have increased by a factor of 12;
  • Imports from China have increased more than 30-fold. 

 Disagreements between America and China are an inevitable byproduct of the growing and mature trade relationship between our countries.

 Although it’s become something of a sport to portray every trade disagreement between the United States and China as evidence of an impending trade war, such disagreements cover a very small fraction of the trade between our two countries. 

 For example, based on trade data for 2009, less than 3 percent of imports from China were affected by antidumping or countervailing duty orders.

 While the United States and China will not always agree on everything, our economies and our environments are closely linked.  So we have to strive to solve our problems through greater dialogue and cooperation.

 We do our people no favors by pretending otherwise.

 Last year, for example, as international climate talks intensified, some claimed it was unjust to ask nations like China to reduce their carbon emissions, when countries like America have spent 150 years using fossil fuels to grow their economies.

 That's an understandable point – but one of no concern to Mother Nature.

 She doesn’t discriminate between carbon that comes from the United States or China, Europe or India.

 And she will ignore attempts to explain the sins of the future by pointing out sins others made in the past.

 As inhabitants of this planet, we will rise or fall together.

 The best way forward is for us to draw on our respective national strengths to conquer our energy and climate challenge.

 Think of the remarkable contributions the Chinese have made to civilization over thousands of years – from the arts and architecture to philosophy and religion.

 Chinese innovators invented the compass, the clock, paper and the seismograph.

 Now, China has another chance to make its mark on history.  Working together, China and the United States can lead a second industrial revolution, where cleaner and more efficient technologies power the world’s factories, airplanes, cars and homes in the 21st century. 

 In the process, we will create new opportunities for both our peoples.  And we will help lead the world away from the brink of environmental disaster.

 This is our chance to join together to write a glorious new chapter in the world’s story.

 Let us seize the opportunity.

 Thank you.