Press Availability in Beijing, China

Press Availability
John Kerry
Secretary of State
Treasury Secretary Jack Lew
Beijing, China
July 10, 2014

SECRETARY KERRY: Good evening, everybody. Thank you for being patient. We’re delighted to be here. Let me begin by thanking our Chinese hosts for their very warm welcome and for the depth and breadth of the discussions that we had in this year’s Strategic and Economic Dialogue.

During our meetings with President Xi and Prime Minister Li, Secretary Lew and I discussed a number of important bilateral, regional, and global issues. And we have addressed those issues in great depth with our counterparts over the course of the last two days.

The United States and China are committed to a new model of relations based on practical cooperation but also constructive management of differences. And we recognize the need to avoid falling into the trap of a zero-sum competition, and that recognition is now driving our partnership on issues from climate change to wildlife trafficking to Afghanistan to peacefully resolving the Iranian nuclear issue.

This week’s Strategic and Economic Dialogue was an opportunity to take stock of our relationship, and frankly, to be able to build on the progress we’ve made in these last years and move past some of the differences which have accented the relationship in the most recent months, and frankly, to push for practical action, joint action that will make a difference, and that in the end defines the relationship.

During our joint session on climate change, I spoke with our Chinese counterparts on how we can work together to address one of the defining threats of our time, and one where the United States and China have a unique role to play together. We agreed to adopt stronger fuel efficiency standards for heavy and light-duty vehicles, and for greenhouse gas emissions standards that will have enormous impact on reducing emissions and improving air quality. We launched four carbon capture utilization and storage demonstration projects and four smart grid demonstration projects that will help to provide for the foundation of a clean energy future which we believe is within reach – which we both believe, I might add, is within reach.

We also took the important step of launching a new initiative on climate change and forests. Secretary Lew and I held in-depth discussions with our Chinese counterparts on key economic issues. And together, we made progress on ensuring that American workers and businesses compete on a level playing field, driving each other to even greater innovation and problem solving. And we explored practical ways to encourage greater Chinese integration into the rules-based international economic and trading system that has helped both of our countries to prosper.

Close U.S.-China cooperation is essential for meeting common regional challenges, and we held in-depth discussions on our military-to-military cooperation, particularly on early warning and communications structures. And we will continue that strategic mil-to-mil relationship, including with additional exercises, additional visits, additional communication in the near term.

The United States and China agreed on the importance and urgency of achieving a denuclearized, stable, and prosperous Korean Peninsula. China shares the same strategic goal, and we discussed the importance of enforcing UN Security Council resolutions that impose sanctions on North Korea’s weapons of mass destruction and its ballistic missile program. We talked about specific ways in which we intend to work together in order to further our ability to achieve this goal and try and change the dynamic that has existed for the last several years.

China has also strengthened its own sanctions enforcement, but there’s more that each of us can do, and we agreed that there is more that we can do in order to bring North Korea into compliance with its international obligations. And obviously, we believe that China has a unique role in this regard.

As part of the S&ED, the United States and China released a joint outcomes document that highlights the breadth and depth of our countries’ cooperation. In recognition of our shared interest in regional and global security, we agreed to form a working group on the shared challenges posed by the proliferation of weapons of mass destruction. We also took steps to make it easier for millions of Chinese and Americans – tourists, students, business leaders – to be able to travel between our two countries.

The United States and China demonstrated over the course of these two days our serious commitment to addressing challenges facing the international community. We committed to work together on a detailed study of ways to reduce the CO2 emissions of industrial boilers by transitioning from coal-burning boilers to natural gas boilers. And our two countries also issued a strong statement to support humanitarian assistance for Syrian refugees and an opposition to the proliferation of and use of chemical weapons.

I also had a productive session with Vice Premier Liu in the Consultation on People-to-People Exchange. We discussed our shared commitment to develop additional exchanges as a foundation for our bilateral relationship going forward. And we were particularly pleased today to hear about China’s commitment to grant 1,000 scholarships to students from historically black colleges and universities.

I also took part in a signing ceremony for six new eco-partnerships that will harness the ingenuity and innovation of the private sector in order to promote economic growth, energy security, and environmental sustainability. And this year’s new EcoPartnerships, we are convinced, will drive change in bio-fuels, battery storage, and other clean technologies.

Even as we sought common ground with China building on areas of common interest, we also had frank discussions about those areas where we have differences.

We continued our conversation on cyber security and cyber theft. And the loss of intellectual property through cyber means has a very chilling effect on innovation and investment. I emphasize that incidents of cyber theft have harmed our businesses and threatened our nation’s competitiveness. And we believe it is essential to continue the discussions in this area.

I also reaffirmed that the United States will continue to stand up for our values and promote universal human rights and freedoms that all people should enjoy. These rights and freedoms are vital to stability and prosperity. And I raised our concerns about some of the recent detentions and arrests of journalists, lawyers, and activists.

We also discussed with our Chinese counterparts the rise of tensions between China and many of its neighbors over maritime disputes. Chinese actions in the South China Sea and the East China Sea have generated concerns. And while the United States does not take sides on the sovereignty questions underlying these territorial disputes, we do believe that claimants should exercise restraint – all claimants – and adhere to peaceful and diplomatic ways of dealing with their disagreements. Throughout our meetings, we emphasized the critical importance of maintaining a rules-based international order, including such principles as freedom of navigation, unimpeded lawful commerce, and respect for international law.

So as you can see, we had an enormous agenda. We spent a great deal of time, perhaps more on some than others, but all of these subjects and more were covered. And from our dialogue on trade and investment to intellectual property to maritime security to human rights, we are committed to working through the difficult issues, including through important mechanisms like the S&ED.

So meetings such as these, I think we all came away reinforced in the value of them, in the importance of the dialogue that took place. And I think everybody here left with a sense that this was really constructive. I want to thank our hosts. The Chinese clearly put great effort into this. Their welcome was generous. Their focus was disciplined and comprehensive. And from my position, it was one of the better international meetings of its kind that I have attended. It had a seriousness of purpose and intent, and I think all of us were pleased with the outcome.

So we’d be happy to take a few questions after Secretary Lew has made his statement.

SECRETARY LEW: Thank you very much, and thank you all for being here and for – we apologize for the delay, but the benefit of having good and productive meetings is that they sometimes also run a little bit long, and that’s why we were a little delayed.

Our discussions with our Chinese counterparts over the past two days were focused on key issues of interest to both of our countries and to the global economy, including ways to boost sustainable growth and create jobs through increased trade and investment and by leveling the playing field. Through our engagement in the Strategic and Economic Dialogue this year, we secured key commitments from China that will further implement China’s reforms. These commitments will create new opportunities and deliver concrete benefits to both of our citizens – both our citizens and level the playing field for American workers and firms.

We held discussions on a wide-ranging set of issues and made a number of commitments that help further create a more open and fair economic relationship. I want to briefly highlight a few key areas and the concrete progress that we’ve made that will deliver results for American workers and firms.

Today, China committed to reduce market intervention as conditions permit. It is making preparations to provide greater transparency, including on foreign exchange. This commitment will help accelerate the move to a more market-determined exchange rate and is central to creating a level playing field. This also reflects the increasing role and responsibility China has in promoting balance and strong growth in the global economy.

As the fastest-growing major economy, China offers substantial opportunities for U.S. businesses and workers. Addressing practices that distort trade and impede investment will help the United States further access growing markets and create jobs at home. To this end, China committed to further open up to foreign investment in the services sector, including the financial sector, and will accelerate the revision of its foreign investment catalog.

Building on last year’s announcement, we also agreed this week to intensify negotiations toward a high-standard bilateral investment treaty and begin the process of negotiating China’s negative list in early 2015. China also made new commitments to further reform its state-owned enterprises, which will help provide a level playing field for the U.S. companies that compete here, including significantly increasing the amount of dividend payments that go to the government budget to support social welfare, taking measures to improve their corporate governance structures and providing greater transparency.

We also took steps together to open energy markets to enhance energy security and promote a clean energy future for both our nations and the world. The United States and China reached an agreement on the parameters for their fossil fuel subsidies peer reviews and to provide an update to the G20 in November. The United States and China also signed a memorandum of understanding to increase cooperation in exchanges on transparency, data quality, and policies of China’s strategic petroleum reserve. This commitment will help manage uncertainty in global energy markets, respond to future supply disruptions, and reduce oil price volatility.

We also worked together on expanding opportunities for U.S. firms through promoting a more open and market-oriented financial system by expanding opportunities for U.S. financial service providers and investors, strengthening financial regulatory cooperation, and continuing the development of China’s financial markets.

We also discussed the importance of strengthening the protection and enforcement of intellectual property, which is critical to promoting innovation and fair competition and addressing trade secret theft. China committed to vigorously investigate and prosecute trade secret theft cases, to publish civil and criminal judgments, and to protect trade secrets submitted in regulatory, administrative, and other proceedings.

We welcome the important commitments China made during the dialogue. While these commitments represent real progress for the United States, for China, and the global economy, we still have a lot more work to do. These discussions will continue over the next few months and for many years to come as we continue to strengthen the relationship between our two economic powers. And I join Secretary Kerry in thanking our Chinese colleagues, Vice Premier Wang and Councilor Yang, for the efforts that they and their team put in and for the efforts of our team working together to make the progress that we’re reporting to you tonight.

And with that, we will be happy to take your questions.

MR. RATHKE: The first question tonight goes to Brad Klapper of AP.

QUESTION: Thank you, Secretaries. Secretary Kerry, in the two days you’ve been here, a lot’s happened in the world. I’ll only ask you about a couple of places. In Afghanistan, which you mentioned, there still seems no clear resolution in sight for the post-election – for the election results. Presidential candidate Abdullah mentioned today that he expects you in the Afghan capital tomorrow. Are you going, and what would you hope to accomplish there?

And then secondly, on the situation in Israel and the Gaza Strip, are you worried that the situation is getting so out of hand so quickly that it’s going to be hard for both sides to pull back from the violence? Talking about a few dozen dead now in Gaza, and attacks continuing on Israel, including missiles even aimed at an Israeli nuclear reactor the other day. I mean, is this getting out of hand and does there have to be a resolution quickly? Thank you.

SECRETARY KERRY: Thank you very much, Brad. With respect to Afghanistan, we are working very closely with all of the stakeholders in Afghanistan with enormous concern, obviously, for the restoration of credibility to the process, the election, either through the Independent Election Commission’s efforts to conduct an audit and to further verify the balloting, or through the joint efforts of the candidates themselves to take steps in order to provide for future leadership in the country. And I’ve been in touch several times with both candidates as well as with President Karzai.

We would encourage both of them to not raise expectations with their supporters, to publicly demonstrate respect for the audit process and the accountability process, and also to show critical statesmanship and leadership at a time when Afghanistan obviously needs it. This is a critical moment for the transition, which is essential to the future governance of the country and the capacity of the ISAF 50-nation-plus support group to be able to continue to be supportive and to be able to carry out the mission which so many have sacrificed so much to achieve.

So it’s our hope very much that over the course of these next days, very soon a way forward can be found that will provide the foundation for Afghanistan to grab a hold of the future that so many millions of voters came out to express their will about just a short time ago. So we’re very hopeful about that and we’ll see what happens over the course of the next days.

QUESTION: And on Gaza and (inaudible)?

SECRETARY KERRY: Oh, I’m sorry. Well, the situation on the ground in Israel, in the West Bank and Gaza is obviously not only tense, but it’s very, very dangerous for Israelis and for Palestinians in the aftermath of the deaths of the Israeli and Palestinian youth. And no country, no country can accept rocket fire aimed at civilians, and we support completely Israel’s right to defend itself against these vicious attacks.

But de-escalation ultimately is in the interests of all parties – in the interest of the region, in the interests of Israel and the Palestinians.

And I’ve been in touch with both Prime Minister Netanyahu, with President Abbas, and with others in the region in order to try and see whether or not there is some capacity to be able to restore the status-quo ante with respect to a ceasefire. But clearly that is complicated because the residents of southern Israel who have been forced to live under this rocket fire have been subjected to this conflict because of Hamas’s decision.

Hamas has refused against all movement and trends in the region, against all urging of the Arab community in the region, against all indicators of the Arab Peace Initiative, against all efforts of peace, stubbornly refused to even accept the Quartet principles and to disavow violence as a means of finding a negotiated way forward. A negotiated way forward is the only way, ultimately, to resolve the problems and actually establish a Palestinian state and put in place the security measures and other things necessary.

At this moment, that obviously is not the topic of conversation. At this moment, it is one of saving lives, protecting Israel, exercising the right of self-defense, and trying to de-escalate in a way that accomplishes all of those goals of protecting Israel while at the same time not seeing innocent people brought into the line of fire.

So it’s a dangerous moment, and we will do everything in our power. I’ve made it clear that the United States of America is available to do everything possible, and we are already engaged in trying to see if it is possible to bring an end to the violence and find a different way forward.

MODERATOR: We’ll take another question. Ian Katz, Bloomberg. Right here, thanks.

QUESTION: Thank you. For either Secretary Lew or Secretary Kerry: There is a report out in the last day about Chinese hackers getting into files of the Office of Personnel Management and getting some information of people applying for high-security government jobs. Did either of you discuss that with your Chinese counterparts, and if so, in what form and what was their response?

And I also just have a separate question for Secretary Lew on the Chinese pledges to reduce currency intervention. Can you explain a little bit about what it is they pledged to do, and is there a timetable? What specifically are they going to do, and how does it compare with what you would like to see them do?

And lastly, on the currency. You’ve been pushing for a stronger yuan. Does that imply or mean that you’d like to see a weaker dollar?

SECRETARY KERRY: I’ll just take the cyber thing quickly and then turn it over to Secretary Lew. We were both notified about this alleged incident only minutes, literally, before we came out here. So we did not raise it in the specific term; we raised the subject, obviously. But what we have learned is that apparently this story relates to an attempted intrusion that is still being investigated by the appropriate U.S. authorities. And at this point in time, it does not appear to have compromised any sensitive material. And I’m not going to get into any of the specifics of that ongoing investigation, but we’ve been very clear for some time with our counterparts here that this is in larger terms an issue of concern.

SECRETARY LEW: Ian, on the question of the exchange rate, I think it’s important to go back to the first principles: Why do we raise the issue and make it such an important one? It’s fundamentally about the fairness of the trading system and the opportunity of U.S. workers and firms to compete fairly and for Chinese consumers to have the purchasing power that goes with a fairly valued currency.

We have, I think, successfully gotten an agreement that reflects the decisions made by China’s government to move towards a market-determined exchange rate. By putting in the statement today the commitment to gradually reduce interventions and to limit interventions to what are really extraordinary circumstances, that’s a big change. By indicating publicly that the process of gaining greater transparency on interventions, that’s also a major change. I think that we still have a process ahead of us because the experience of the next few months will tell us a lot about what the real impact is, but it is a very important issue that there be clarity on and that there be an understanding that it is just a basic tenet of moving towards a more market-determined economy that the exchange rate has to move as well to a more market-determined level.

I think that when we think of this in U.S. terms, it is about having there be a level playing field and fair rules of engagement. Market conditions will determine whether rates go up or down, but if they’re increasingly driven by the market with less and less intervention, that’s a good thing. And I think the document today reflects that, and we will now move forward working on the issue and continuing to monitor closely what we see in the coming months.

MR. RATHKE: Next question is Chen Huihui from CCTV.

QUESTION: Thank you. My question is for Secretary. Some American analysts believe that the new type of major power relationship that China proposes is a trap, and it means unilateral U.S. accommodation of China’s core interests and therefore the U.S. should not accept that idea. So what is your comment on such a kind of view? Thank you.

SECRETARY KERRY: Well, President Obama has made it clear that the United States of America welcomes the rise of a peaceful and prosperous and stable China, and one that plays a constructive role in the region and in the world, that works by a rules-based structure in concert with other partners. We plan to work together and the U.S. is not, as we have said many times, in a rivalry competition with China in terms of trying to contain it or otherwise.

So we don’t see a problem in defining a great power relationship in the 21st century that is a new model for countries, but it’s not going to be defined by talking about it. It’s not going to be defined by us carving up areas and suggesting there are spheres of influence. It’s going to be defined by our mutual embrace of standards of global behavior and activity that protect the values and the interests that we have long worked by – the norms of international behavior. And that means not engaging in unilateral actions to enforce a particular assertion of sovereignty or otherwise. It means working within the rules-based system.

We don’t take a position on those sovereignty issues, but we do take the position that they ought to be resolved through the legal structures that exist for a resolution of those kinds of disputes. And we certainly had a discussion about those kinds of things.

So we agreed – really, what I think is important about what took place here over the course of these last two days is that China and the United States were able to talk reasonably and cordially, respectfully, even as we differed about some of these kinds of issues.

At the same time, we found there was much more that we agree on and much more where there was a common interest – in having a denuclearized North Korea; in making sure that the region is free to navigation and open for respect for the rule of law; in finding that we share concerns about Afghanistan; that we are working together cooperatively in the P5+1, and China is an important partner in the nonproliferation activity and in the enforcement of the P5+1 efforts; that we agree on Middle East peace and the dangers of the region; that we agree on counterterrorism, and the need to work together in order to reduce threat to all of us. And I could find – I mean, there’s more where we have – on climate change – very serious agreement where we are making breakthrough choices, agreements that were articulated by Secretary Lew on the need to reform economic measures, access to markets, and other things.

So I think that, all in all, when you read the summary of outcomes, you will see that there’s a high level of cooperation, but a respect for the fact that we do differ on certain things, and we will. But managing those differences is a critical component of this new great power relationship.

MODERATOR: Great. We’ll take one last question. Ling Wang with Caixin.

QUESTION: Thank you. Well, I have questions for both tracks. For Secretary Lew, concerning the BIT negotiations, so far what are the difficulties and problems encountered in the first phase? And is China SOE the – your biggest concern in the next phase and --

SECRETARY LEW: Sorry, I couldn’t hear the last part.

QUESTION: I’m sorry. For the first question or the second question?

SECRETARY LEW: It was -- the last thing you said.

QUESTION: Is Chinese SOE, state-owned enterprise, your biggest concern in next phase?

And for the strategic track, Secretary Kerry, if there is one thing that you would like to highlight for this year’s dialogue, what is it? And how do you see the economic track and the strategic track affected each other in the past two days’ dialogue? Thank you.

SECRETARY KERRY: Say the last part again? How did I see the --

QUESTION: How do you see the two tracks affected each other in the last two days?

SECRETARY KERRY: The economic?


SECRETARY KERRY: Absolutely. Sure.

QUESTION: Thank you.

SECRETARY LEW: So let me begin with the question about the bilateral investment treaty. And let me take a step back, because I think the importance of the agreement we reached last year where China agreed to basically flip its presumption from its markets being closed to its markets being open was a very dramatic one, and it was one that reflected the mutual interest we had in promoting a strong U.S. and Chinese economy and to promoting more cooperation.

Just as Secretary Kerry was saying a moment ago on the strategic side, so too on the economic side there is – we have a vested interest in each other’s success, and there’s much that we agreed on. Now obviously the process that China’s going through is a very substantial one. The presumption is markets are open, unless there are specific items that are excepted from it. China’s now going through the process of coming up with its list of exceptions, and then, as we agreed to in the summary of outcomes, we will next year begin negotiating that list of exceptions between our two countries.

I think that the process of reaching an agreement on a bilateral investment treaty is always a difficult and complicated one. And I think the ground covered since last year has been substantial. A lot of progress has been made, and we’re now cued up in the beginning of next year to go into the next round of very serious negotiations.

Along the way to an agreement on a full BIT, there are a number of other issues that are very significant. The items reflected in the summary of areas where we were able to agree reflects opening of some financial markets. We continued to have very productive discussions about a technology agreement. I think even before there’s a BIT, we have things we can do along the way that will open markets, build confidence, and build a sense that the value of reaching a BIT is as great as it was when last year’s S&ED reached the point of commencing the process.

So I think it takes a little bit of patience because it is a long process, but there is real progress being made, and I think that the provisions that are reflected in today’s document show that even in this round we have some real points of progress to show. And we will look forward to engaging at the beginning of next year and going through the next phase of negotiation.

SECRETARY KERRY: You asked me to highlight the one thing that might stand out, and I think I did. But I’ll take advantage of the question, to bear down on one part of that. I said that the level of cooperation overall on major issues of global concern is significant. And the capacity that I think we saw to manage our disagreements about certain things but still remain focused on those areas of agreement is critical, and it’s very important.

But bearing down on that, let me just pick climate change as an example. I’ve been involved in the issue of climate change for more than 25 years – even longer. But in the Senate, for many years, it was incomprehensible that the United States and China would find cooperation on climate change. As recently as two years ago, no one would’ve thought that that was possible or expected it. And last year, when President Xi signed onto this idea that it was important to work with the United States and find ways forward, because China was increasingly finding certain challenges domestically with respect to air quality and pollution and other things, but also learning more about the challenge of the science, as the consensus began to grow that we needed to take action, we found some common ground.

And already this year with our eco-partnerships, with our mutual targets with respect to fuel and trucks and fuel changing and fuel switching, and the idea of working together to try to figure out what are appropriate targets going forward into next year’s global negotiation on this subject, this is important. Because together, China and the United States represent about 45 to 48 percent of all global greenhouse gas emissions. We are the world’s two largest economies. And therefore to come together in this way at this moment in time is very significant.

Now the true significance will be determined by what is agreed upon hopefully between the presidents, and we intend – and President Xi was very clear today that he looks forward to this work continuing, he looks forward to talking to President Obama and working up towards the APEC summit, and it’s our hope that this will actually be given greater meat on the bones than it has today. But at this point in time, this is an improbable act being played out, and we hope that ultimately it’s – it will be well received and be fruitful.

MR. RATHKE: Okay. Thanks everyone. Good night.

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