E-Commerce Crucial to China’s WTO Bid

U.S. Secretary of Commerce William Daley is treading a fine line between respecting China’s approach to trade and telling the Communist country’s leaders to copy the United States’ successful e-commerce policy in order to gain entry into the World Trade Organization (WTO).

Capping a week-long trip to Beijing to promote better trade relations between the United States and China — despite their continually strained political relationship — Daley took a stern tone Friday in urging China’s leaders to wake up to the Internet’s cross-border power to drive a country’s economy.

Daley’s visit concluded as Senator John McCain (R-Arizona) prepared to hold a hearing on that effort Tuesday morning before the Senate Commerce Committee. Congress plans to vote the week of May 22nd on whether America should grant China permanent normal trade relations instead of continuing the current policy of reviewing relations each year.

Dogged Pursuit

A vote in favor of permanent relations would enable China to join the World Trade Organization, a membership that China has sought aggressively for several months. Daley noted that he plans to lead a Congressional delegation back to China this Friday to further discuss normalizing trade relations between the two countries.

“To be honest, the members I will bring here are uncertain how they will vote,” Daley said. “No question, they all want to strengthen the ties between our nations. But they are uncertain if this is the best way, or time, to do it.”

“They want to know that our business relationship is improving and that businesses in their districts back home can increase exports,” Daley added.

Growth Potential Home and Abroad

As has been his habit, Daley proclaimed proudly that e-commerce has helped bring the U.S. economy sustained growth for a record number of months. “Many economists believe our economy can grow an additional one percent a year on a sustained basis,” he said. “It is because productivity gains from these [information] technologies have rippled through to the entire economy.”

China, with its low penetration of home computers, could see similar benefits from e-commerce, Daley argued. Only 10 percent of homes in Beijing have computers, and penetration rates in non-urban areas are far lower.

“I believe as the Internet gives people all kinds of possibilities beyond their borders, the world needs the billion people of China in the world trading system. And the Chinese people need to be part of the system, so they can fully enjoy the benefits of an Internet-driven economy.”

The key to getting the other 90 percent of Beijing families and their rural neighbors connected is making communications hardware and technology cheaper and better, Daley said, predicting China will be the second largest market in the world for PCs next year.

United States as Role Model

The U.S. government does “not think China has to do everything the way America does things,” Daley noted, “but obviously there are things we can learn from each other — especially when it comes to the Internet.” The United States’ strong e-commerce economy, Daley said, has benefited from three factors: efficient capital markets, minimal government regulation and “a very innovative, and risk taking business culture.”

The U.S. has seen hundreds of companies sprout up on the Internet in recent years, largely because when people get new ideas, they move forward, he said, starting companies and finding venture capitalists to fund them.

Pointing to last week’s roller coaster rides on both the New York Stock Exchange and the Nasdaq, Daley acknowledged that “the stock market is a very tough place.” But, he added, we have found there is no more efficient way of allocating capital to people who will use it profitably that the public markets.”

The government’s role is as a facilitator for these ideas and these new companies, Daley argued. “Too much government interference is counterproductive. What makes the Internet the Internet is its ability to change rapidly and its borderless nature. Both are totally foreign to government bureaucracy, whose entire existence is based on borders,” he said.

Sticking Point

Though free exchange of information has been a particular sticking point for the regimented Chinese government, Daley suggested even that Communist society could find ways to encourage this give-and-take without risking national security.

There are always a few who will abuse the Internet’s power of information exchange, Daley said, but “Most people — including, I am sure, most Chinese people — will use the tremendous power of the Internet to create new products and new services that will benefit themselves and their clients. Government should encourage this empowerment, not try to limit it.”

The value of innovative business development, on the other hand, should be less difficult for the Chinese government to grasp, Daley said, since the United States has witnessed firsthand the efforts of Chinese American entrepreneurs.

“Many Americans — including Chinese Americans — want to share their experience and invest their capital in China,” he said. “Some Chinese think it would be better for China to develop its own technology, than for us to bring ours over. My answer is that China should not spend time trying to copy technologies that already exist. It would be far better off devoting its considerable talents to developing the next generation of technologies.”