U.S. Trade Chief Urges China to Lower Barriers

By | May 25, 2010

Potential Chinese moves to lower trade barriers could be as important as exchange rate reforms in easing economic strains with the United States, Washington’s top trade negotiator said as the two powers entered a second day of talks.

Senior officials from the world’s biggest and third-biggest economies are in Beijing for a Strategic and Economic Dialogue (S&ED) intended to steady their vast and sometimes rocky relationship, which went into a dive earlier this year.

While strains over Taiwan, Tibet and censorship have receded for now, however, the immense U.S. trade deficit with China remains a sore point that could flare, renewing pressure from Washington for Beijing to loosen the yuan’s tether to the dollar.

The annual U.S. trade deficit with China fell to $226.8 billion in 2009 from a record $268.0 billion in 2008. But the Obama administration is keen to lift exports, and the deficit remains a point of friction with Beijing.

The United States worries that China’s revised proposals to promote homegrown technological innovation may still discriminate against American firms, the U.S. Trade Representative Ron Kirk said on Tuesday.

Any progress from China in intellectual property protection and market access barriers could be more important than its yuan reforms, Kirk told Reuters in an interview on the sidelines of the

S&ED meetings.
“All these could be as valuable, if not more valuable frankly, than whatever we accomplish on the exchange rate,” U.S. Trade Representative Ron Kirk told Reuters during a break in high-level talks on foreign policy and economic challenges.

“But all of those go to our underlying ability to come in and fairly compete in this market,” Kirk added, emphasizing his support for pressure on China to move to a more market-oriented currency exchange rate.

After the stormy start to the year, however, neither side appears willing to risk worrying markets with a renewed war of words, and the talks have swaddled the hard problems between them in soft words.

On Monday, U.S. Secretary of State Hillary Clinton urged Beijing to get behind international condemnation of North Korea, which South Korea has said torpedoed its warship, the Cheonan, in late March, killing 46 sailors.

The U.S. Treasury Secretary Timothy Geithner nudged China to move on the yuan, which the Obama administration says is held too low against the dollar, disadvantaging U.S. producers and distorting global trade flows.

Geithner said the Chinese government was moving in the right direction on the yuan, and that a more market-driven exchange rate would help suppress inflation while also driving private firms to move up the value chain.

In public at least, China has given no real ground on either of these top issues. Chinese officials instead repeated their position that all sides should exercise restraint over the sinking of the South Korean ship and avoided open censure of Pyongyang.

But Chinese President Hu Jintao indicated that he appreciated Washington’s quieter approach on the yuan. Hu told the assembled Chinese and U.S. officials on Monday that his government wanted to boost domestic demand and would reform its yuan exchange rate rules — but only carefully and at a time of its own choosing.

Tensions flared between Beijing and Washington in the first months of 2010, when China denounced U.S. criticism of its Internet censorship, Washington’s arms sales to Taiwan, and President Barack Obama’s meeting with the Dalai Lama, Tibet’s exiled leader.

(Writing by Chris Buckley; Editing by Ken Wills)

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