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[POLITICS] U.S.-China Talks Over Trade

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  • madchinaman
    U.S.-China talks to look at trade tensions Treasury Secretary Henry Paulson is leading a high-profile team in China. Some question the nation s willingness to
    Message 1 of 1 , Dec 18, 2006
      U.S.-China talks to look at trade tensions
      Treasury Secretary Henry Paulson is leading a high-profile team in
      China. Some question the nation's willingness to yield to the U.S.
      By Don Lee, Times Staff Writer
      http://www.latimes.com/business/la-fi-uschina14dec14,1,4704785.story


      SHANGHAI — A high-powered team of U.S. officials arrived Wednesday in
      Beijing to push China to further open its markets and fight piracy,
      but analysts questioned whether the Asian trading giant could grant
      major concessions.

      Treasury Secretary Henry M. Paulson Jr., accompanied by Federal
      Reserve Chairman Ben S. Bernanke and six other Bush Cabinet members,
      is meeting today and Friday with Vice Premier Wu Yi and senior
      Chinese leaders to discuss economic tensions between the two nations.
      The meeting has been heralded as the biggest economic summit between
      the two powers.

      The talks come on the five-year anniversary of China's entry into the
      World Trade Organization and as U.S. officials are facing a record
      trade deficit with China. Analysts say Chinese leaders are worried
      that American public opinion toward China could sour and spur tougher
      action by the new Democratic-controlled Congress.

      Expectations are high that China will relent to key U.S. demands, in
      large part because of the high-level delegation led by Paulson, a
      former chief of Goldman Sachs and an old China hand. Chinese analysts
      say Beijing is most likely to offer a package of "deliverables," if
      only to save face for the Bush team. That could include greater
      access by foreign investors to China's financial markets, better
      enforcement of copyright protections and possibly another round of
      big-ticket purchases of American goods.

      But the two-day meeting isn't likely to secure what many in
      Washington want: a sharp step-up in the value of China's currency.

      "For China, although it will do its best to give ground, the most it
      can do will be no more than some rear-guard actions, far below the
      expectation of the U.S.," said Shi Yinhong, director of the center
      for American Studies at People's University in Beijing.

      Chinese leaders have started to make very gradual changes, fearing
      that dramatic shifts could lead to job losses and destabilization of
      their economy, now the fourth largest in the world.

      "The U.S. understands China's situation too … so it will quit when it
      is ahead," Shi said.

      Although that remains to be seen, Paulson, who has made dozens of
      trips to China over the last decade, has sought to lower expectations
      in public comments in recent days. He has indicated that this
      meeting, the first in the so-called strategic economic dialogue
      between the two nations, will allow the U.S. to begin to address a
      range of key issues involving China and its increasingly influential
      role in the world, including trade, energy and environmental
      protection.

      Members of Congress have repeatedly threatened to slap hefty tariffs
      on Chinese imports unless Beijing significantly strengthens the yuan.
      An artificially undervalued yuan, they say, has made Chinese goods
      cheaper in overseas markets and inflated China's trade surplus with
      the U.S., which this year is on track to exceed last year's record of
      $201.5 billion.

      In asking Bernanke to join him — the Fed chairman will also make a
      speech Friday to a group of scholars — Paulson has sought to convey
      the significance of the currency issue to the Chinese. But U.S.
      business groups say China's exports have saved American consumers
      money and allowed U.S. corporations to operate with lower overhead.

      Analysts say that if a change in currency severely weakens China's
      economy, as some fear, the Asian nation could reduce its demand for
      American goods and sharply cut back on its purchases of U.S. Treasury
      securities, which it buys with dollars earned from exports to the
      United States. Those purchases have helped hold down U.S. long-term
      interest rates, which keeps mortgage rates low for American
      homeowners.

      "Americans are enjoying the benefits from trading with China every
      single day," said Mei Xinyu, a researcher at the Ministry of Commerce.

      How will China probably respond to this latest push on the currency?
      In a familiar manner, said James Zimmerman, chairman-elect of the
      American Chamber of Commerce in China. "No direct action will result
      for this visit and China will move in a direction and at a time that
      is in the best interest of China."

      He said the chamber had not urged the U.S. delegation to focus on any
      particular area but had encouraged the group to stress the need for
      transparency and uniformity in the application of Chinese law.

      China's currency policy drives its trade performance and investment
      boom, which supports jobs and economic development, said Donald
      Straszheim, vice chairman and China specialist at Roth Capital
      Partners in Newport Beach.

      "I think we have little leverage directly with China," he said. "Most
      important, they are convinced they have a winning game."

      The Bush administration, though, this week issued a critical report
      to Congress about China's "decidedly mixed" record of compliance with
      WTO obligations, and made it clear that Washington would file formal
      complaints with the trade body if dialogue failed. The report, by
      U.S. Trade Representative Susan C. Schwab, who is part of the
      delegation, criticized China for restricting market access by foreign
      banks and for failing to crack down effectively on the counterfeiting
      of goods, among other things.

      Chinese officials, meanwhile, marked the five-year anniversary with
      speeches that defended the nation's WTO record and highlighted how
      the nation had lowered tariffs and opened its markets. But Beijing
      also has moved to protect some industries, such as media and energy,
      from foreign competition.

      "Before China entered the WTO, Chinese scholars had profound worries
      about many [domestic] industries being adversely affected, but in
      fact it turned out that the U.S. and EU are the ones worrying about
      whether their industries can undertake challenges from China," said
      Shi at People's University.

      The current trade imbalance is "deep and wide," he added. "We can
      take more initiatives and make some concessions…. But still, such
      changes can't be too fast and will be slower than America's
      expectations."
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