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US Treasury chief denounces trade protectionism
2006-09-21
US Treasury Secretary Henry Paulson says one of the most serious problems facing global policymakers is resurgent protectionism, a day after launching top-level economic consultations with China. Addressing business students at Beijing's elite Tsinghua University, the former Goldman Sachs boss again lauded the new dialogue with China as a long-term attempt to thrash out trade frictions between the two economic giants. "One of the biggest challenges is to make the case in the United States and around the world for the benefits of trade and openness, because virtually everywhere in the world, we have protectionist sentiment," he said. Paulson noted unease among Americans about globalisation and job losses as emerging countries like China take on an ever-greater share of global production. "But we all have to work harder to get an understanding of the benefits to both sides," he said. The US and Chinese governments announced a "strategic economic dialogue" on Wednesday after talks here between Paulson and Chinese Vice Premier Wu Yi, who will both lead the twice-yearly consultations. The initiative has been personally blessed by Presidents George W. Bush and Hu Jintao, who was to meet Paulson on Friday before the Treasury chief returns to Washington following three days of high-level talks here. In a statement, Bush said: "President Hu and I agree on the importance of maintaining strong and mutually beneficial US-China economic relations, and on the need to establish an overarching bilateral economic framework between our two countries." At the same time, US officials denied that they are abandoning their pressure on immediate irritants such as China's exchange rate, market access and fake goods. Critics in the US Congress argue that the yuan is undervalued by as much as 40 percent against the dollar, giving an artificial boost to Chinese exports at the cost of millions of American jobs. Without meaningful yuan reform, the US Senate could vote as early as next week on a widely backed bill that would slap a punitive tariff on all of China's US-bound goods. But Paulson said that such protectionist retaliation was in nobody's interest, as he reflected on China's stunning progress over recent decades. He recalled to his Tsinghua audience that he first came to China as an investment banker for Goldman Sachs in 1990, a year after army tanks massacred a previous generation of students in Beijing's Tiananmen Square. The confident, booming China of today compared to the deeply troubled country of then was like "day and night", he said. He also reaffirmed his message that for China to sustain its expansion, it must shift away from export-led growth and develop its capital markets to foster domestic demand among its emerging army of consumers. "A healthy, strong financial sector, strong capital markets, strong banking system, are absolutely necessary for long-term economic success," Paulson said. "And I can't think of any country that has a strong financial system that hasn't opened itself up to (foreign) competition."
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