U.S. Trade Talks to Host a Bitter Chinese Delegation
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- Date: Sat, 19 May 2007 05:02:50 +0800
U.S. Trade Talks to Host a Bitter Chinese Delegation
By Washington Post
May 18, 2007 - 10:31:56 pm PDT
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SHANGHAI, China -- On the eve of high-level economic talks in Washington next
week, Chinese leaders are increasingly bitter about what they see as bullying
behavior by the United States on trade issues, potentially complicating efforts
to strike deals on a slew of thorny issues.
In the span of three months this year, under the pressure of domestic politics,
Washington moved aggressively against China for trade violations, filing two
lawsuits and imposing steep tariffs on imports. The actions have so incensed
China that Vice Premier Wu Yi, leader of its delegation to next week's talks,
apparently considered boycotting them.
On the surface, the Chinese are likely to play the role of grateful guests.
Friday, in a slight concession to American arguments, they loosened controls on
the value of their currency, the yuan. They're expected to bring with them $4.3
billion in high-technology contracts for American companies.
But U.S. Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke
and the heads of nine Cabinet-level agencies are sure to encounter a more
combative China when they sit down at the table this time. The Chinese are so
mad there was talk for a while that Wu "may not go to America" in order to show
"dissatisfaction and anger," said Xu Mingqi, an international economics
professor at the Shanghai Academy of Social Sciences, a government-affiliated
think tank.
In the end, however, Wu relented, and on Tuesday and Wednesday she will lead a
delegation that includes 14 ministers from Beijing.
This will be the second session of the high-level "strategic economic dialogue"
Paulson and the Chinese launched with fanfare last year. The dialogue was
supposed to be a feel-good forum where leaders could discuss big issues in the
countries' economic relations, moving beyond an intractable debate about the
value of China's currency.
But in recent months, with anti-trade sentiment rising in the United States and
Congress threatening China with sanctions, the talks have taken on a new role,
as perhaps the best forum for averting a trade war. For years, the United States
has opposed China's strict controls on the yuan, which has been allowed to rise
7 percent since July 2005 but which the United States says is still kept
artificially low to give Chinese exports an advantage in the world market. U.S.
officials have blamed the exchange rate for some of the ballooning trade deficit
with China, which was $233 billion last year and $46.4 billion in the most
recent quarter, according to the U.S. Department of Commerce, twice as large as
the same period last year.
Friday, China -- in a move it said will help control runaway economic growth --
widened the band within which the currency can float, permitting a move of as
much as 0.5 percent a day, versus 0.3 percent previously. At a news briefing,
Alan Holmer, the U.S. Treasury Department's special envoy for China, said this
was a "useful step" but that, in general, reforms were "not fast enough as far
as the U.S. administration is concerned." The U.S. government has long pressed
for a large revaluation of the yuan, perhaps 30 or 40 percent.
In the December session in Beijing, both sides walked away with a list of
symbolic cooperative agreements -- such as allowing the New York Stock Exchange
and the Nasdaq Stock Market to open offices in China and promises to work
together on more commercial air routes between the two countries.
There was a hope that broader cooperation was on the way, but a lot has changed
in a few months.
On the American side, with Democrats in control of Congress and a presidential
election gearing up, there's a growing impatience with the pace of economic
reforms in China. A slew of pending anti-Chinese trade bills are attempting to
correct what lawmakers say is an unfair advantage that the weak Chinese currency
gives Chinese companies over American competitors.
This week, 42 members of the House filed a petition calling for the U.S. trade
representative to take "strong action" to end China's currency controls,
threatening that if the Bush administration doesn't resolve the situation,
Congress will.
"We have watched China manipulate its currency at the expense of American
workers, farmers and businesses for too long," House Ways and Means Chairman
Charles Rangel, a New York Democrat, said in a letter accompanying the petition.
The United States in February filed a World Trade Organization case charging
China with providing illegal incentives to Chinese manufacturers of items like
steel. In March, the United States slapped tariffs of up to 20 percent on
high-gloss paper made in China, complaining of subsidies. In April, the United
States sued China in the World Trade Organization over intellectual property
protection. While these actions may make perfect sense in the United States,
where much of the public sees Washington as doing too little to protect American
interests, they have played poorly in China. Economists there describe
themselves as startled by the degree to which the United States is willing to
take action to protect its companies and domestic industries while criticizing
them for doing the same. In short, they perceive hypocrisy.
In the Chinese trade narrative, a prime case in point is China National Offshore
Oil Corp.'s attempt in 2005 to take over Unocal, a U.S. oil company. The
state-owned oil giant withdrew its $18.5 billion offer after Congress threatened
to block the deal. Those events came after the Chinese had spent years listening
to U.S. lectures about how modern economies must be open to foreign investment,
and had opened their own economy to a flood of U.S. capital.
"There are lots of disturbances in U.S.-Sino relations," said Zhao Yumin,
director of the Chinese Academy of International Trade and Economic Cooperation,
a research group affiliated with the Ministry of Commerce. "From China's point
of view, it just wants stable development. But American enterprises have an
anti-Chinese feeling."
In recent months, U.S. and Chinese officials' rhetoric on U.S.-China trade has
grown increasingly hostile.
When the U.S. imposed the tariffs on paper, China put out a statement demanding
that the U.S. "correct" its decision, saying the sanctions violate a pledge to
resolve trade disputes through dialogue. On the intellectual property issue, Wu
responded, "feng pei daodi" -- roughly translated, "If you want a fight, let's
fight."
In next week's talks, the Chinese side is expected to seek fewer restrictions on
technology exports and a recognition that China has become a market economy.
Chinese leaders will look for something more basic, though: a better
understanding of Congress and the role it plays in setting trade policy. To
China's political and economic leaders, accustomed to operating in a government
controlled by the Communist Party, the many-headed American government -- with
its multiple, often-conflicting voices -- is a mystifying creature.
A senior Finance Ministry official said the Chinese side is puzzled by the way
members of Congress focus on a small local issue, such as a factory closure in
their district, even at the expense of the whole relationship between the
countries. "Sometimes it is a question of only 200 jobs lost," he said.
The official, who requested anonymity in order to speak candidly, acknowledged
that China's senior civil servants such as himself have trouble understanding
such concerns, even though they have been told about the U.S. system with its
checks and balances and competing powers. He said each senator thinks he is a
president and each House member thinks he is "at least a vice president."
"This is something we can hardly understand," he added, "and that is why we need
to have the strategic dialogue."
I
-- Correspondent Ed Cody in Beijing and researcher Crissie Ding in Shanghai
contributed to this report.
.
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