VZCZCXRO9810
PP RUEHGH
DE RUEHGZ #0224/01 0470736
ZNR UUUUU ZZH
P 160736Z FEB 07
FM AMCONSUL GUANGZHOU
TO RUCPDOC/USDOC WASHDC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 5812
INFO RUEHBJ/AMEMBASSY BEIJING 5120
RUEHHK/AMCONSUL HONG KONG 8147
RUEHGH/AMCONSUL SHANGHAI 0067
UNCLAS SECTION 01 OF 02 GUANGZHOU 000224
SIPDIS
SIPDIS
STATE PASS USTR FOR ESPINEL, MCCOY, STRATFORD, WINTER, WELLER,
JMCHALE
USDOC FOR DAS KASOFF, ITA/MAC/OCEA MCQUEEN
USDOC FOR ISRAEL HERNANDEZ
PASS USPTO FOR DUDAS, BOLAND, BROWNING, WU, ANTHONY, NESS
STATE FOR EB/TPP/IPC, EAP/CM
USDOJ FOR SHARRIN
DHS FOR CBP/PIZZECK
STATE PASS FTC FOR BLUMENTHAL
E.O.12958: N/A
TAGS: ETRD BEXP ECON WTRO KIPR CH OCEA
SUBJECT: General Counsel Sullivan Visits South China to Promote
Transparency
1. (U) Summary: During a three day visit to South China, the U.S.
Department of Commerce's General Counsel John Sullivan met with
senior representatives of Guangdong Province, legal representatives
and U.S. business representatives, raising U.S. concerns regarding
transparency, legal processes, and Guangdong's evolving open
government policy. At a meeting with senior provincial officials
and at a roundtable discussion with legal representatives and U.S.
business representatives, the General Counsel stressed a need for a
stronger Chinese engagement - with greater emphasis on transparency
- in order to move the SED forward. End summary.
2. (U) General Counsel Sullivan began his visit to South China by
visiting the FEDEX Headquarters and discussing its march toward
establishing its Asian Headquarters in Guangzhou. GM Alex Yim and
South China's regional manager Robert Chu outlined their program and
benchmarks leading to 2012, the scheduled completion date. FEDEX
officials stated that the Guangdong government was "progressive"
(avoiding the use of the word "transparent") in its response to
change but the company still faced hurdles with rules and
regulations that were not always clear. The FEDEX officials stated
that they were generally pleased with the CAAC (General
Administration of Civil Aviation of China), which appeared to be
driven by business realities. The challenges facing FEDEX are
within the transportation regulation and postal laws that prohibit
them from sending express mail delivery into the city. Acquiring
all of the shares of its joint venture partner DTW in March should
solve this issue (See septel for fuller readout).
3. (U) In his introductory meeting with provincial officials,
General Counsel Sullivan met with Secretary General XU SHANG WU, the
Secretary General of the province and the senior official
SIPDIS
responsible for legislative affairs. During the meeting General
Counsel
Sullivan stressed the importance of U.S. and Chinese ties and
praised Guangzhou's dynamic economic growth. Growth and economic
development, the Chinese side recognized, created even more
challenges. The General Counsel outlined his visit with senior
Chinese officials in Beijing and Shanghai; he reviewed the SED
proposals and goals and focused on how transparency is essential for
dealing with real economic situations. Mr. Sullivan used the FEDEX
history of cooperation as a good example for mutual benefit.
Secretary General Xu responded positively and stressed the need for
SIPDIS
educational exchanges and specifically a student exchange program
(Note: Secretary General Xu's staff stated that this was his only
meeting with visitors as the government was extremely busy with
elections for local offices and as well as electing representatives
to attend the National Congress. End note.).
4. (U) At a roundtable discussion, General Counsel Sullivan held
frank discussions regarding market access, IPR protection and
enforcement with members of the American Chamber of Commerce, South
China, business representatives, and members of several legal firms.
AmCham members and others stressed the importance of uniformity of
rules and regulations. Almost all emphasized that rules and
regulations vary at the national and the provincial levels and again
at the local level. Business representatives cited the purchase of
land use rights as an example of the unpredictability and lack in
uniformity of local regulations. Administrative transparency is
often lacking. While there may be consistency and uniformity
nationally in laws and regulations, local interpretations of laws,
rules, and regulations differ greatly. Additionally, the "laws and
regulations" (fagui) cited by a local office may only reflect the
policy within an office and not actually exist legally. P
executives cited the laws and regulations governing the advertising
and cosmetics industries as examples of local implementation and
interpretation not matching national-level laws, in essence blocking
free and fair trade. Business representatives noted that there
remains a big difference between the treatment of foreign firms and
Chinese firms, with Chinese firms having more flexibility for their
scope of activity and fewer restrictions under local interpretations
of the laws and regulations. Attendees complained that licenses
remain a problem. It is unclear which agencies have responsibility,
where one can find out about the procedures, and guidance on how to
move the process forward when it stalls. They asked that the USG
continue to pressure the central and provincial governments to speed
up licensing procedures and processing.
5. (U) Although new transparency laws have been passed in Guangzhou
requiring public comment on draft laws, some draft laws do not have
GUANGZHOU 00000224 002 OF 002
comment periods. Business representatives did agree that most of
the laws could be found on the Guangzhou government website. One
lawyer commented that many laws and regulations are promulgated but
not implemented. One law they expect to be implemented is the new
labor law, which U.S. businesses expect to disadvantage them due to
the virtual elimination of temporary workers and their integration
into a company's regular workforce. Attendees complained that none
of the U.S. business suggestions appear to have had an impact on the
draft law. Finally, business representatives noted that developing
a relationship with regulators and officials in government agencies
- while not the best way to do business - remains the critical
reality they face when trying to make a deal.
6. (U) During the transparency roundtable session, dinner at the
Consul General, and at a larger AmCham reception for
the General Counsel, business representatives emphasized the
importance of more high-level visitors from the United States to
advance U.S. commercial interests. This would not only improve
market access and but also expand opportunities for American
enterprises in areas such as medical and environmental equipment,
educational services, and many more. They all expressed great
appreciation for Mr. Sullivan's visit.
7. (U) Throughout the trip, the General Counsel was accompanied by
his Attorney-Advisor Joel Blank, DAUSTR Audrey Winter, Trade
Facilitation Office Director Ira Belkin, U.S. State Department
Economic Officer Jim Loi, and Principal Commercial Officer Mike
Murphy. The Consul General, Economic/Political Section Chief and
FCS head all accompanied General Counsel Sullivan to a number of his
events.
8. (U) Attorney-Advisor Blank of General Counsel Sullivan's office
has cleared this cable.
GOLDBERG