The Bush administration is willing to negotiate with China to avert a trade war, U.S. Commerce Secretary Carlos M. Gutierrez said here on Thursday, signaling the possibility of compromise on limits the United States imposed last month on surging shipments of Chinese-made textiles.
"President Bush understands that no one wins a trade war," Gutierrez said during an afternoon speech to the American Chamber of Commerce in Beijing. "We believe that what we did on textiles was very much our right to do under the [World Trade Organization] agreements. Our Chinese partners don't agree, and we'll have to sit down and look at the language. That's negotiable. It's subject to interpretation."
But on the first day of a three-day visit to China, Gutierrez annunciated a tough line on the issue of pirated goods, which are made and sold widely here, and are increasingly exported around the world. He emphasized that the Bush administration will not negotiate its demands for strict enforcement against the trade, which Washington says costs U.S. companies tens of billions of dollars a year in lost sales.
"Intellectual property rights violations are a crime," Gutierrez said, likening sales of illegally copied software and Hollywood movies to the passing of counterfeit money. "We don't consider it proper to negotiate crimes with our trading partners. Everything else is up for negotiation."
The commerce secretary's comments here, on his first official visit to China since assuming his post in February, underscored how the Bush administration is caught in the middle on the issue of trade relations with the world's fastest-growing major economy. U.S.-based multinational companies such as Wal-Mart Stores Inc. and Dell Inc. have netted vast profits by shifting manufacturing to low-cost factories in China, while supplying U.S. consumers with cheap goods. But labor interests and an increasingly invigorated swath of Congress accuse the administration of selling out American workers, pointing to China's $160 billion trade surplus with the United States as evidence of foul play.
In his speech, Gutierrez emphasized that his government favors free trade and is predisposed against protectionism. But in an apparent nod to legislation working its way through Congress that would impose across-the-board tariffs on Chinese-made goods, he said China must help the administration fend off calls for trade barriers by cracking down on the theft of intellectual property, which is part of the normal course of business here.
"The slow pace of progress risks a protectionist backlash in the United States," Gutierrez said. "The absence of results only empowers those within the U.S. political sphere who are pushing an American retreat from the global economy. We need some help here."
His audience -- a hotel ballroom full of American and Chinese business people -- praised the tenor of his comments, which some said could soothe what has been a sharply deteriorating relationship between the two trading powers.
"An escalation would hurt everybody," said Emory Williams, chairman of the American Chamber of Commerce in Beijing. "Anytime there's dialogue and negotiation, that means we're on the way to improvement."
Chinese officials greeted the talk of negotiation as a hopeful sign.
"We welcome any steps or policies that show American goodwill," said Wang Yu, secretary general of the China Chamber of Commerce for Import and Export of Textiles. "We hope the negotiations can succeed."
Gutierrez later clarified that he does not plan to conduct negotiations on the textile conflict himself. He is scheduled to meet on Saturday with his Chinese counterpart, Commerce Minister Bo Xilai.
"I'm not going to negotiate with Bo Xilai," he told a gathering of students at Tsinghua University. "We're going to explain. Negotiations will happen at a point later in the future." He said they would be handled primarily by U.S. Trade Representative Rob Portman, who is due here on Saturday for a half-day visit after a trip to South Korea.
Gutierrez arrived in China in the midst of conflict over widening volumes of Chinese-made clothes reaching the United States. For four decades, China's textile exports were restrained by a system that limited how much clothing any one country could ship to the United States and Europe. But that system expired at the beginning of the year. Since then, China's textile exports to the United States have jumped by more than half, with some goods, such as cotton pants and shirts, leaping by more than 1,000 percent.
Last month, the United States imposed so-called safeguard limits on seven Chinese textile products, limiting their growth to 7.5 percent this year. Washington has the right to employ safeguard limits in response to a "market disruption" under the terms of the agreement that brought China into the World Trade Organization three years. The safeguard limits last for a single year, though Washington can renew them twice before they expire completely in 2008.
China accuses the Bush administration of imposing the safeguard quotas arbitrarily and unfairly, asserting that Washington has yet to prove the existence of a market disruption. China last month offered to increase tariffs it applies to textile exports to limit its shipments in what it portrayed as a goodwill gesture. Beijing abruptly revoked those tariffs last week to protest the American limits.
Gutierrez received a tutorial on the intensity of Chinese emotions on the issue during his visit to Tsinghua University, one of the most prestigious campuses in China. He sat at a conference table with a panel of business and economics students, who grilled him relentlessly on the particulars of U.S. trade policy -- an experience all but unknown to China's leaders. The students accused the Bush administration of hypocritically advocating free trade while employing protectionism that now threatens the livelihoods of roughly 19 million people who work in the Chinese textile trade.
"The basic spirit of the WTO is free trade," said Cui Wenzhi, an undergraduate economics major, during a long exchange with Gutierrez. "The U.S. government action destroyed this basic spirit."
Gutierrez, who was born in Cuba and once worked as a sales representative at the Kellogg Co. before eventually climbing to head the company, appeared to enjoy the exchange, seeking to assuage fears about American intentions while promoting the benefits of the U.S.-China trade relationship.
He stressed that the safeguards are temporary and aimed at giving the U.S. industry a chance to adjust ahead of what has become inevitable -- China's domination of the global textile market.
"You're being too dramatic," he told Cui. "You are fortunate to have access to the greatest market in the world. For a short time, we're closing the doors. After that, our doors are open. China and the U.S. are bigger than textile safeguards for one year. We'll get over this."
Special correspondent Jason Cai contributed to this report.