GO
Loading...

Chinese Leader Delivers Blunt Warning to U.S. on Trade

AP
Tuesday, 22 May 2007 | 4:44 PM ET

The United States and China opened a new round of high-level economic talks on Tuesday with the leader of China's delegation bluntly saying that any effort to politicize economic differences between the two nations was not acceptable.

The Bush administration was pushing for concrete results to show to an increasingly restive Congress, where lawmakers blame America's soaring trade deficits and the loss of one in six manufacturing jobs since 2000 in part on China's trade practices in such areas as currency manipulation and copyright piracy.

The U.S. delegation also raised the issue of food safety highlighted by such incidents as the deaths of pets that ate pet food made with tainted wheat gluten imported from China.

U.S. Trade Representative Susan Schwab, who briefed reporters on the discussions, said food safety was raised over breakfast by Agriculture Secretary Mike Johanns and Health and Human Services Secretary Michael Leavitt.

"They know this is an issue that concerns us and concerns the American people," said Commerce Secretary Carlos Gutierrez, who said the issue would be addressed more formally in a later session before the talks conclude on Wednesday.

In opening remarks delivered in an ornate government auditorium decked out in flags from both nations, Chinese Vice Premier Wu Yi cautioned the United States against pursuing a blame-game.

"We should not easily blame the other side for our own domestic problems," Wu said, speaking through an interpreter. "Confrontation does no good at all to problem-solving."

Wu, who gained a reputation for tough speaking when she was China's top trade negotiator, said that both sides should "firmly oppose trade protectionism." She said that any effort to "politicize" the economic relationship between the two nations would be "absolutely unacceptable."

China & Piracy
Debating whether the U.S. is doing enough to pressure China when it comes to piracy and intellectual property, with John Taylor, Stanford University Hoover Institution fellow and professor of economics; James Bacchus, Greenberg Traurig global trade practice group chairman and CNBC's Sue Herera

Wu and her delegation were scheduled to meet behind closed doors on Thursday with key leaders of Congress, including House Speaker Nancy Pelosi, who has been a vocal critic of China's human rights policies. Lawmakers are pushing a variety of bills that would impose economic sanctions on China in the wake of a trade deficit with China that last year hit $232.5 billion, accounting for one-third of America's total record deficit of $765.3 billion.

Treasury Secretary Henry Paulson created the Strategic Economic Dialogue last year as a way to get the country's top policymakers together twice a year to achieve results that will ease trade tensions. The first meeting was held in Beijing last December.

Limited Progress Expected

Breakthroughs at this meeting were expected in the area of cutting tariffs on sales of American energy technology products and services in China and increasing U.S. airline passenger and cargo flights to China.

However, success in another area -- getting China to boost the stake that American firms can own in Chinese financial service companies -- seemed less certain. The current cap on foreign ownership of Chinese banks is 25%.

U.S. officials tamped down expectations of any big outcomes, saying the meetings were not meant to be negotiating sessions.

But Gutierrez said there was impatience on the U.S. side. He spoke of the "need to make progress in all areas as soon as possible."

Addressing the rising anger in Congress, Schwab said, "This is not necessarily reflective of more protectionism or anti-Chinese sentiment, but rather that there are concerns there and we need to be responsive."

American manufacturers contend that China is manipulating its currency to keep it undervalued against the dollar by as much as 40%, making Chinese goods cheaper in the U.S. market and American products more expensive in China.

But there was no expectation of further progress in this area after China's surprise announcement last Friday that it was slightly widening the range its currency could move against the dollar in a single day from 0.3% to 0.5%. Critics were unimpressed by the small widening of the currency band.

There were reports that China considered calling off this round of talks after the Bush administration, in an effort to pre-empt tougher actions in Congress, imposed penalty tariffs on Chinese paper products in a fight over government subsidies, and filed cases against China before the World Trade Organization complaining about lax enforcement of copyright protections for American movies, music and other products.

China in recent days has made a number of moves in an effort to defuse American unhappiness. In addition to announcing the slight change in its currency band, China earlier in the month said it would purchase $4.3 billion in American high-technology products and in recent days announced that it would invest $3 billion of its $1.2 trillion in foreign currency reserves in Blackstone Group, the second-largest U.S. private equity firm.

Featured

Contact U.S. News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More

Don't Miss

U.S. Video