Vice Minister Li, Distinguished Guests, Ladies and Gentlemen:
I am delighted to be here today with our partners from the National Development and Reform Commission, with other Chinese government officials, and with representatives of U.S. and Chinese companies to open this important conference. I particularly want to thank the NDRC for its outstanding efforts in supporting this event.
This is an important conference for several reasons. First, logistics and distribution lie at the heart of economic growth and market opportunity. This conference, therefore, is an excellent forum for U.S. business leaders and government officials to meet with our counterparts in China to exchange ideas on these issues. Second, this conference is clear evidence of the commitment of our two countries to the agreement last year between U.S. Secretary of Commerce Donald Evans and NDRC Chairman Ma Kai to establish a strong dialogue between our two agencies. Indeed, this conference is consistent with the desire of our most senior leaders to foster a candid, cooperative, and constructive relationship between our two countries.
This conference is also important because it deals with issues that are critical to the development of both of our economies. As this audience well knows, logistics involves the integration of different modes of transportation in such a way as to best serve the needs of customers. It lies at the heart of contemporary manufacturing processes, and it is integral to the efficient functioning of cargo transportation systems. It is of enormous importance to the U.S.-China trade relationship as both countries develop increasingly integrated processes to turn inputs into finished products and then get those products from the manufacturing plants to businesses and homes.
It was not too long ago that the terms “transportation logistics,” “just-in-time delivery,” “supply chain management,” “harmonized systems,” and “electronic data interchange” were mainly used in academic circles by professors without being central to global business. Today, the situation is quite different. With deeper integration of national economies and the explosive growth in global sourcing at all levels of production, these concepts are central to a company’s efforts to participate in and enjoy the maximum benefits of globalization.
In fact, these ideas are at the heart of the evolution from traditional “push-logistics” systems to the “pull-logistics” systems that are a key contributor to the increases we see around the world in manufacturing productivity. Creating an environment that facilitates the growth of such cutting-edge practices is the focus of this conference.
Since China joined the World Trade Organization in 2001, bilateral trade between our two countries has grown in value by almost 50 percent, making China the third largest trading partner of the United States. However, as our two economies have grown closer, we are only beginning to address some of the logistical challenges of modern trade – such as how to move products securely across great distances, in the shortest amount of time, and in rapid response to changes in customer demand. Within each of our countries as well, we continue to seek ways to increase efficiency, reduce delays and costs in our logistics systems, and, at the same time, enhance the security of the international trading system. No one benefits from the inefficiencies associated with railroad bottlenecks, poor port facilities, arbitrary government regulations, and inadequate security.
Indeed, in order for logistics systems to work, transportation systems must operate efficiently and securely, with as little distortion as possible by governmental interference and regulation. In the United States, we have learned this lesson by seeing the tremendous growth in logistics-driven efficiencies that resulted from the deregulation of our trucking, rail, and aviation markets over the past several decades. We have learned that logistics works best when each mode of transportation is able to respond freely to market needs and opportunities.
In this regard, it is important to note that the U.S.-China transportation relationship, which underlies the logistics that facilitates trade between our two countries, is undergoing significant and potentially very positive change. Most recently, at the very successful meeting of the Joint Commission on Commerce and Trade that occurred last month in Washington, D.C., the United States and China put into effect a landmark maritime agreement that will increase the freedom enjoyed by U.S. and Chinese maritime companies.
The United States and China are also hard at work on a new aviation agreement that would significantly liberalize air services between the two countries – again facilitating logistics and trade. The new aviation agreement now under discussion would permit the entry of additional airlines into U.S.-China routes and would allow the airlines to increase the number of weekly flights that may be operated. A new agreement would also remove restrictions on routes to permit greater operating flexibility and service to cities not now receiving direct U.S.-China air services. And perhaps of greatest interest to logistics providers, a new agreement would afford cargo carriers substantial new flexibility to set up hubs that could service the burgeoning trade in high-value items between our two countries that typically gets transported by air. Thus, if our aviation talks are successful – and we hope that will be the case in the near future – then U.S. and Chinese passenger and cargo airlines will have much more flexibility to tailor their services to respond to the needs of travelers and shippers, all of which will benefit each country’s economy.
In short, in the area of transportation – which lies at the heart of logistics – the U.S. and Chinese governments are working hard together to develop the efficient and secure infrastructure needed to support a growing U.S.-China trade relationship.
Finally, as you proceed through the next two days of discussions at this conference, I would like to commend your attention to the important relationship between governmental and private sector interests in the field of logistics. In the United States, our federal government sets broad minimum standards in areas such as safety, the environment, and security. This “framework” is necessary to ensure the safety of workers, the healthy development of industry, and the security of our country. However, we work hard to keep these regulations to the minimum level necessary because we have discovered that the real driving force in creating efficient logistics systems comes from the efforts of private sector companies reacting to competitive pressures.
Over the course of our history, we have found that too much government regulation reduces competition and slows industry development. It is critical, instead, that government and the private sector work together to identify and address the regulatory, infrastructure, operational, and security needs in the logistics sector. This conference is an excellent example of that kind of cooperation.
In closing, I would like to reiterate my thanks to China’s National Development and Reform Commission, whose efforts have been essential to our being here today to share innovative ideas. I would also like to thank the U.S.-China Business Council and the Coalition of Service Industries, our U.S. partners, for their commitment of energy, ideas, and resources to this event.
This program is important in its own right. But it also bodes well for the future vitality of U.S.-China trade relations. We look forward to further such joint efforts between our two countries.