VZCZCXRO5758
PP RUEHGH
DE RUEHGZ #0198/01 0440844
ZNR UUUUU ZZH
P 130844Z FEB 07
FM AMCONSUL GUANGZHOU
TO RUCPDOC/USDOC WASHDC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 5780
INFO RUEHBJ/AMEMBASSY BEIJING 5103
RUEHHK/AMCONSUL HONG KONG 8142
RUEHGH/AMCONSUL SHANGHAI 0064

UNCLAS SECTION 01 OF 02 GUANGZHOU 000198 
 
SIPDIS 
 
SIPDIS 
 
STATE PASS USTR FOR ESPINEL, MCCOY, STRATFORD, WINTER, WELLER, 
JMCHALE 
USDOC FOR DAS LEVINE, ITA/MAC/OCEA MCQUEEN 
USDOC FOR ISRAEL 
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, which appeared to be 
driven by business realities.  The challenges facing FEDEX are 
within the transportation regulation and postal laws which 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 
 
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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 
 
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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&G 
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 
comment periods.  Business representatives did agree that most of 
 
GUANGZHOU 00000198  002 OF 002 
 
 
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 Chief of Staff Joel Blank, AUSTR 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 and Economic/Political Section Chief 
accompanied General Counsel Sullivan to a number of his events. 
 
¶8.  (U) General Counsel Sullivan did not clear this cable. 
 
Goldberg