Paulson Demands Action as China, US Trade Talks Begin

Posted 14 December 2006 @ 09:21 am EET     Print     Reprint     E-Mail     Comments

BEIJING (AP) - US Treasury Secretary Henry Paulson has urged China to come up with "tangible" action on its currency regime and other trade disputes or risk fueling protectionist anger in Washington.

Speaking at the opening of the first "strategic dialogue" that aims to ease deep trade tensions between the two nations, Paulson warned China that talk was no longer enough to quell growing anger in the United States.

Paulson listed China's management of its currency, the yuan, at the top of a list of concerns the United States wants addressed to narrow a bilateral trade deficit that threatens to hit a record 240 billion dollars this year.

"There is skepticism that this dialogue will accomplish anything of substance," Paulson said, referring to protectionist voices in the United States.

"Therefore it is incumbent upon us ... to produce tangible results on the most important issues facing our two nations."

Paulson, who conceived the idea of twice-yearly "strategic dialogues", brought six other members of US President George W. Bush's cabinet, plus Federal Reserve Chairman Ben Bernanke, to the two-day forum.

The delegation is the highest-profile trade mission the United States has ever sent to China and the officials are under heavy pressure to return home with concrete commitments from Beijing.

The political landscape changed dramatically in Washington after the Democrats, who are pushing for much tougher trade action against China, recorded their stunning wins in the November mid-term elections.

The new Democrat-majority Congress will take office in January and a host of new bills aimed at narrowing the trade deficit with China are in the pipeline unless Beijing takes concrete steps to address US concerns.

At the top of the ageda is the belief in the United States that the yuan is being kept dramatically undervalued, making Chinese exports unfairly cheap and US industries uncompetitive.

In his opening remarks to the forum, which is being held at the Great Hall of the People in Beijing, Paulson again called for more currency flexibility from China in the short-term and a freely tradable yuan in the medium-term.

Paulson also referred to other hot-button issues, such as rampant Chinese abuse of copyright, as well as the importance of China continuing to open up its markets and ensuring regulatory transparency.

Chinese Vice Premier Wu Yi, who is leading Beijing's team, emphasized in her opening remarks to the forum that China had made great efforts in adhering to its commitments to the World Trade Organization since joining five years ago.

She offered encouraging words, but did not go into any specifics, about addressing US concerns.

"China is unceasingly increasing imports to offset the trade surplus and striving for a rough balance between imports and exports," Wu said, while also referring to the particularly contentious copyright issue. "China will continue to intensify IPR (intellectual property rights) protection in a responsible manner."

However, in an indication of the general feeling among China's policy makers, the official Xinhua news agency published a report to coincide with the start of the forum rejecting US criticism of the nation's trade policies.

Quoting an expert from China's commerce ministry, Xinhua said US complaints about piracy, protectionism and export subsidies were not "objective".

Among the Chinese delegation were Commerce Minister Bo Xilai and central bank governor Zhou Xiaochuan. The US entourage will also have an audience with President Hu Jintao and Premier Wen Jiabao on Friday.