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US, China wrapping up high-level economic talks
2008-06-18
ANNAPOLIS, Md. - The United States and China have agreed to begin negotiations on an investment treaty which could greatly expand opportunities for U.S. companies in the fast-growing Chinese economy, U.S. officials said Wednesday. The announcement came as the two nations ended two days of high-level talks aimed at defusing simmering economic tensions between the two. Treasury Secretary Henry Paulson and Chinese Vice Premier Wang Qishan and their large delegations posed for photographers before the start of the final round of talks at the U.S. Naval Academy. The Chinese delegation was also to meet with President Bush and hold a closing news conference with Paulson at the Treasury Department. The decision to pursue an investment treaty with China offers the prospect of dismantling a multitude of barriers that U.S. companies now face in their efforts to do business in China. However, administration officials, who briefed reporters on the decision, stressed that the negotiations were expected to be lengthy and intense. It took 17 months of preliminary discussions to begin the negotiations. "This agreement will have very clear rules about the treatment of investors and China's need to comply with those rules with respect to transparency and the rule of law," said one administration official. The officials briefed on condition of anonymity because they were speaking before the formal announcement at the closing news conference. The two countries were also announcing other agreements in such areas as boosting energy security, lowering global pollution and expanding food monitoring in the aftermath of a series of high-profile recalls of Chinese products over the past year. However, critics complained that the Bush administration was failing to push the Chinese hard enough to stop manipulating its currency to gain unfair trade advantages. American manufacturers contend that the Chinese yuan is undervalued by as much as 40 percent, even though it has risen in value by 20 percent against the dollar since July 2006. "The unfair price advantage that the undervalued (Chinese currency) gives Chinese firms has forced many American companies to declare bankruptcy or even go out of business, harming our workers, families and middle class," said a letter sent to the administration by a bipartisan group of 11 senators including Democrats Barack Obama, Debbie Stabenow and Chuck Schumer and Republicans Jim Bunning, Olympia Snowe and Elizabeth Dole. The critics contend that China's soaring trade deficit, which last year reached an all-time high of $256 billion, is the result of unfair trade practices, including currency manipulation, and has contributed to the loss of 3 million manufacturing jobs since 2001. Even with modest accomplishments, it was clear the talks, known as the Strategic Economic Dialogue, would leave both nations far apart on many contentious subjects, including U.S. unhappiness over the slow pace of China's economic reforms. Paulson was hoping the discussions would produce enough results to persuade the next administration to continue the meetings, and Wang said in his opening comments Tuesday said that "no matter what happens, it's necessary to continue using this important platform." The twice-a-year discussions, alternating between Beijing and Washington, began in 2006 at Paulson's urging. Wang on Tuesday urged patience going forward as China implements necessary reforms. He cautioned that the two countries must avoid "complicating and politicizing economic issues." The Chinese have grown concerned about a number of bills introduced in Congress that would impose economic sanctions on China unless it moves more quickly to let its currency rise in value against the dollar. The talks also included Federal Reserve Chairman Ben Bernanke and Zhou Xiachuan, the head of China's central bank. Zhou said the Chinese were interested in learning from Bernanke's presentation the regulatory mistakes that had contributed to the subprime mortgage crisis. The Bush administration wants the Chinese to open their financial system to foreign banks and investment houses. But the Chinese are strongly resisting that, given the billions of dollars in losses suffered by U.S. financial giants in the credit crisis that erupted last August. One area the administration is touting as a success is in food safety, where the United States used the dialogue to press the Chinese to strengthen inspections after a series of high-profile recalls last year. Health and Human Services Secretary Michael Leavitt said Tuesday that the United States expects to have food and drug inspectors placed in three Chinese cities -- Beijing, Shanghai and Guangzhou -- by the end of this year. But Chinese officials said the approval is being delayed until the U.S. grants a Chinese request for increased Chinese inspectors in the United States.
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