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China urged to address growing U.S. trade gap

The Bush administration said Monday that China must do more to address long-standing trade frictions as a way of dealing with a U.S. trade deficit that has hit an all-time high of $202 billion with the Asian giant.
/ Source: The Associated Press

The Bush administration said Monday that China must do more to address long-standing trade frictions as a way of dealing with a U.S. trade deficit that has hit an all-time high of $202 billion with the Asian giant.

Administration officials said a meeting of top economic policy-makers from the two countries on Tuesday is viewed as critical although they said the announcement of some of China's trade concessions may be delayed until next week when President Hu Jintao will make an official visit to Washington.

"He is coming into a country where there's over a $200 billion trade deficit, and a lot of Americans are wondering where's the equity in trade," President Bush said Monday during a question-and-answer session following a speech on Iraq. "And, therefore, I think he could help the Americans understand the importance of a free-trading world if he were to maybe make a statement on his currency, for example."

Commerce Secretary Carlos Gutierrez and U.S. Trade Representative Rob Portman will head up the U.S. delegation while Vice Premier Wu Yi will lead the Chinese delegation for the 17th annual meeting of the Joint Commission on Commerce and Trade. The panel was created to smooth out trade problems between the two nations.

U.S. trade officials who briefed reporters on Monday said they expected Tuesday's discussions would cover the areas of copyright piracy, where American companies claim they are losing billions of dollars in lost sales; regulatory barriers to the export of various American products and services to China, and China's ban on U.S. beef imports.

The two officials, who spoke on condition of anonymity because the meeting will not occur until Tuesday, said the U.S. side would be pushing China to live up to the market-opening commitments it made when it joined the World Trade Organization in 2001.

"China needs to live up to its responsibilities," one of the officials said.

The Chinese delegation began a 13-state buy-America tour last Thursday in Los Angeles with reports that the Chinese may spend as much as $15 billion in purchasing U.S. products.

Major trade deals are expected to cover the purchase of Boeing jetliners, computer software, auto parts, telecommunication products and farm goods will be signed to show China's desire to deal with the deficit.

Worried that the rising anger against China could hurt Republican chances at the polls in November, the administration has been sounding a tougher line. Last month, it filed an unfair-trade case against China involving U.S. auto parts and pledged more cases to come unless negotiations start showing results.

The daylong discussions Tuesday in Washington are being held in advance of a White House visit on April 20 by Hu.

If progress isn't made over the next two weeks, industry groups are warning there could be a backlash in Congress.

"Checkbook diplomacy is not a bad thing, but it can't take the place of systemic changes that are needed to level the playing field for American companies," said Myron Brilliant, vice president for Asia at the U.S. Chamber of Commerce.

Frank Vargo, vice president for international trade at the National Association of Manufacturers, said China must realize this is a critical time for U.S.-Chinese relations.

"Everything is on pause waiting for these meetings," Vargo said. "They can move the relationship forward in a positive way. But if nothing comes out of them, that can fan the flames of those in Congress who want to take matters into their own hands."

Administration officials said they planned to press China for commitments to boost purchases of American farm products and eliminate barriers that are hampering U.S. service companies trying to do business in China, such as financial institutions and express-delivery firms.

The Chinese supposedly are working on a 14-point plan to show further progress in cracking down the rampant piracy of computer programs, movies and music that is costing U.S. companies billions of dollars in lost sales annually.

A promising sign in that area was an announcement last week that Chinese computer makers will ship their products loaded with legitimate copies of the Windows operating system made by Microsoft Corp.

Unclear is how much progress the administration will make in getting China to move further in allowing its currency, the yuan, to rise in value against the dollar.

American manufacturers contend that China has been artificially depressing the yuan's value by as much as 40 percent, making Chinese products cheaper in the United States and American goods more expensive in China.

China has allowed the yuan to rise in value by only about 3.4 percent over the past year, a tiny amount that U.S. companies say will do nothing to narrow the trade gap.

Treasury Department officials have said they will delay until after Hu's visit a report they must make to Congress on whether China is manipulating its currency. The administration has resisted saying that.

Morris Goldstein, an economist with the Institute for International Economics, said China needs to make real convincing progress in coming weeks to ward off rising congressional sentiment to impose protectionist penalties on the Chinese.

"In the past, China could buy some U.S. airplanes, say they were going to do more and end up doing very little and get by," Goldstein said. "This time it may be different."