U.S. Treasury Secretary Henry Paulson said Thursday that China ismoving too slowly to overhaul its currency system and to crack down on copyright piracy, two factors that American businesses blame for the soaring trade deficit with China.
Paulson said the administration would continue to push China to move more quickly, but he cautioned that any protectionist backlash in this country would end up harming the U.S. economy.
"We must not heed the siren song of protectionism, trying to reduce the losses of the present by sacrificing the opportunities of the future," Paulson said in a speech on trade delivered to the Economic Club of Washington.
Paulson, who next week will make his third trip to China since joining President Bush's Cabinet, said that the administration would keep pressing China through a new Strategic Economic Dialogue that the two countries initiated in December.
"We're dissatisfied with the speed with which China is appreciating its currency, the value of which is not market determined, and with China's intellectual property protections," Paulson said.
He said that China must also move more quickly to open its economy to U.S. products and services.
"In my judgment, the greatest risk to the economic well-being of our two nations is not that China will move too quickly, but that they will move too slowly in reforming their economy," Paulson said.
The administration is coming under increasing pressure to deal with America's soaring trade deficit, which hit $763.6 billion in 2006, the fifth straight year of a record deficit.
The imbalance with China climbed to a new record as well, hitting $232.5 billion, the highest trade gap ever recorded with a single country.
Democrats took control of the House and Senate in last fall's elections in part with campaigns accusing the Bush administration of doing too little to protect American workers from unfair foreign trade practices.
But Paulson said it would be wrong to erect protectionist barriers in this country, saying this would harm American consumers and make the United States less competitive.
"Raising protectionist barriers and isolating ourselves from the gains of trade would hurt our economy," he said. "The long-term cost of protectionism -- for us and for the rest of the world -- is lost jobs and lost opportunity."