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U.S. Wants Forceful Action on Trade, China Warns Against Pushing

Treasury Secretary Henry Paulson said on Tuesday the United States was impatient for forceful Chinese action to cut trade deficits but Chinese Vice Premier Wu Yi said Beijing would not yield to pressure.

"There is growing skepticism in each country about the other's intentions," Paulson said at the start of two days of talks with a top-level Chinese delegation and amid growing anger in the U.S. Congress over China's huge trade surplus.

"Unfortunately, in America this is manifesting itself as anti-China sentiment as China becomes a symbol of the real and imagined downside of global competition," Paulson said.

Wu said politicizing differences over trade issues would only make matters worse -- a shot across the bows of U.S. lawmakers who threaten to restrict Chinese imports unless China's yuan currency appreciates.

While early signs suggested the talks would not produce much of substance, U.S. officials said they were nonetheless important for advancing a dialogue between two countries that accounted for half of global economic growth in recent years.

"These are not negotiating sessions," U.S. Commerce Secretary Carlos Gutierrez told reporters. "This is not intended to walk out with specific short-term deliverables."

A U.S. document prepared for the talks and obtained by Reuters said there had "as yet been no agreements to take any concrete steps" on expanding foreign ownership in China's financial services sector, one of Paulson's principal goals.

Shopping Spree

On energy and environment issues, however, signs of tangible progress seemed likely. The head of the White House Council on Environmental Quality said discussions in those areas might be "particularly strong in terms of outcomes."

It is possible the talks could lead to deals for U.S. companies that make the "scrubbing" equipment to reduce pollutants from coal, which China relies on heavily. There were also discussions on other power sources, like nuclear energy and ethanol where U.S. firms have products to sell.

China used the talks -- the second round of a "strategic economic dialogue" kicked off in Beijing in December -- to express a readiness to buy more U.S.-made goods. "We're willing to take effective measures together with the U.S. side to address bilateral trade imbalances," Wu said.

A skilled trade negotiator who is leading a delegation that includes 15 Cabinet-level officials, Wu cautioned against a tendency to "blame the other side for our own domestic problems" or trying to win points through confrontation.

Ma Xiuhong, China's vice commerce minister, said a group representing more than 200 Chinese firms will have signed at least $20 billion in deals with American companies when it wraps up a two-week 24-state tour on May 24.

But even a spate of contracts was unlikely to tamp down anger in the U.S. Congress over what many see as the artificially low value of the yuan, which they argue gives an unfair price advantage to Chinese exports.

"Direct Exchange"

A Bush administration official said the United States told China it should move faster to allow greater yuan flexibility, saying the two sides had a "direct exchange of views."

China offered a gift of sorts last week, widening the band within which the yuan trades. But the measure failed to satisfy Washington legislators upset at the U.S. trade deficit with China that hit a record $233 billion last year.

Paulson, a former Goldman Sachs chief with long-standing business ties with the communist giant, will take Wu to Capitol Hill on Wednesday and Thursday to give her a first-hand taste of lawmakers' frustrations.

One congressman who will meet Wu, House Trade Subcommittee Chairman Sander Levin, a Michigan Democrat, said legislators were disgruntled with a go-softly approach to Beijing.

"There's been a difference of opinion with Secretary Paulson. He's essentially relied on structural changes within the Chinese government and we say we can't wait," Levin said.

Wu is expected to meet President George W. Bush on Thursday and will visit a Boeing plant in Seattle after the summit ends, although it was unclear whether she will announce any deals.

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