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