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U.S. urges faster China economic reforms
POSTED: 0:04 p.m. EDT, December 9,2006

In advance of sending a high-level U.S. delegation to Beijing, the Bush administration on Friday said China must move faster on reforms addressing America's soaring trade deficit or run the risk of a protectionist backlash.

Treasury Secretary Henry Paulson said the message of the U.S. team will be that China must make quicker progress in economic reforms such as boosting the value of its currency and tearing down barriers to foreign trade.

The administration is pursuing those goals to deal with a U.S. trade deficit expected to top $780 billion this year, with the trade gap with China accounting for over $200 billion of that amount.

Paulson is leading a team that includes Federal Reserve Chairman Ben Bernanke and Cabinet secretaries from the departments of Commerce, Labor, Energy, Health and Human Services as well as the head of the Environmental Protection Agency and U.S. Trade Representative Susan Schwab.

The delegation will meet with Chinese counterparts for two days of discussions Dec. 14-15, capped off with meetings with Chinese President Hu Jintao and Premier Wen Jinbao, under a new process dubbed the Strategic Economic Dialogue.

The hope on the American side is to win support from the highest levels of the Chinese government that the country must:

--Move faster on reforming its currency system.

--Crack down on piracy of American goods.

--Tear down barriers that keep U.S. farm products and other exports out of the Chinese market and make it difficult for U.S. banks and other service firms to do business in China.

"A big part of the dialogue is to persuade the Chinese to accelerate the pace of their reform," Paulson said in an interview Friday on CNBC. "The case we are making to them is that there's more risk in going too slow than in going too fast."

Paulson said that because of the growing size of China's economy, the U.S. and other countries believe China must do more to lower its trade surpluses.

"They're a global economic leader and the rest of the world isn't going to give them a lot more time," Paulson said, citing rising protectionist pressures in many countries.

Paulson's comments came on a day when the Bush administration previewed a report it will send to Congress next week that contends China is failing to live up to a number of the market-opening commitments it made when it joined the World Trade Organization five years ago.

A senior U.S. trade official, who briefed reporters on condition of anonymity because the report will not be sent to Congress until Monday, said the administration had a number of concerns that China was slowing the pace of reforms and in some cases backsliding on its market-opening efforts.

The official said the 100-page report raised concerns in the three broad areas of copyright piracy, Chinese industrial policies that favor domestic companies and a failure by China to fulfill the commitments it made when it joined the WTO five years ago.

Schwab, in an interview with The Associated Press, said the report presented a "mixed" view of China's compliance with its WTO commitments, with progress in some areas but "they are not done yet. They have a ways to go."

Paulson said the goal for the talks was to develop a plan for tackling various issues that will include not just trade tensions but China's rising energy use and the environmental and health problems China is facing.

He did not specify how soon he hoped to see results but other administration officials said some of the issues might be handed off to other bilateral forums once they have been reviewed by the larger panel, which is scheduled to meet twice a year.

Commerce Secretary Carlos Gutierrez said in a separate AP interview that he expected some of the issues would be dealt with by the Joint Commission on Commerce and Trade, which seeks to resolve trade problems between the countries.

The administration is facing pressure to deal with rising trade deficits. Critics blame them in part for the loss of nearly 3 million manufacturing jobs since Bush took office in 2001.

Democrats won control of both the House and Senate in the November elections by using campaigns that blamed the administration for failing to do enough to stop companies from moving manufacturing jobs overseas.

U.S. manufacturing companies have focused on China's currency, which they contend is being undervalued by as much as 40 percent to make Chinese goods cheaper in the United States and U.S. products more expensive in China.

Sen. Christopher Dodd, D-Conn., the incoming chairman of the Senate Banking Committee, said he expects the U.S. team to press China on the currency issue.

"This better be a topic very near the top of what progress they can report when they come back," Dodd said during a meeting with reporters this week.

From:businessweek
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