US looking to ease China trade tensions

AP Photo: Chinese Vice Premier Wu Yi, right, is greeted by Treasury Department special envoy for China...

WASHINGTON - The United States and China opened a new round of high-level economic talks on Tuesday with the Bush administration pushing for concrete results and China saying efforts to politicize trade disagreements would be a mistake.

Breakthroughs were expected in the areas of boosting sales of American energy technology and banking services in China. Both sides were also scheduled to review the issue of food safety, highlighted by the deaths of pets after eating pet food made with tainted wheat gluten that had been imported from China.

Speaking in an ornate auditorium decked out with flags from both nations, Chinese Vice Premier Wu Yi said it was important to resist "trade protectionism of all kinds." She said that attempts to "politicize" the economic relationship between the two nations would be "absolutely unacceptable."

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

Treasury Secretary Henry Paulson called the second round of meetings under the Strategic Economic Dialogue historic because of the number of Cabinet officials from both sides who are participating.

"Never before have so many ministers from China gathered in one place in the United States. ... We both realize how critical it is for our countries that we get our long-term economic relationship right," Paulson said.

He said it was important for the two countries to work toward "near-term agreements that build confidence on both sides."

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

The Chinese are expected to announce that they are cutting tariffs on the imports of energy services and technologies, which would boost the market for U.S. products. The Chinese are also expected to increase the stake U.S. and other foreign companies can own in Chinese banks. That ownership level is currently capped at 25 percent.

The administration also hopes to reach a deal expanding opportunities for U.S. airlines in China.

Former Secretary of State Henry Kissinger, who conducted the behind-the-scenes negotiations that led to President Richard Nixon's historic trip to China in February 1972, told the assembled diplomats that "our two countries can set a standard and a framework for the rest of the globalized community."

Paulson was leading a U.S. delegation that includes top officials from 11 Cabinet-level agencies and Federal Reserve Chairman Ben Bernanke. Wu's team includes 14 Cabinet-level ministers.

Under an agreement announced last fall, the two countries plan to meet twice a year to discuss a wide range of economic issues.

The two sides were scheduled to dine Tuesday night at the State Department, and the Chinese delegation was scheduled to meet with President Bush during the visit and to have closed-door talks with key members of Congress.

Unhappiness about America's growing trade deficit with China is threatening to provoke a protectionist backlash in Congress. Lawmakers are expressing outrage over a trade gap that last year hit $232.5 billion, the largest deficit ever recorded with a single country and one-third of America's record overall deficit of $765.3 billion.

Members of Congress are promoting a number of bills that would slam penalty tariffs on Chinese products unless China does more to halt what U.S. critics see as unfair trade practices such as China's currency system and the rampant piracy of American products.

Last week, a bipartisan group of 42 House members petitioned the Bush administration to bring a trade case against China on the currency issue. Lawmakers said they were not impressed by China's announcement on Friday that it was slightly widening the daily trading range for the yuan, a move that could allow the currency to rise in value more quickly.

Sen. Charles Schumer (news, bio, voting record), D-N.Y. and a leading critic of China, called the currency action a "nice gesture, but in the past, most of their gestures have not produced any concrete change."

There were reports that China seriously 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 two cases against China before the World Trade Organization.

But 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 LP, the second-largest U.S. private equity firm.