Paulson says strategic dialogue produced tangible results, tensions seem to persist

The US Treasury Secretary Henry Paulson, concluding a meeting with China’s top level delegation, said the negotiations have produced ‘tangible results’ that will help build confidence in bilateral trade ties. Paulson said that the agreement had been reached on ‘significant items in financial services, energy and the environment and civil aviation.’ However, Chinese to economic leaders visiting Washington for the strategic economic dialogue pointedly expressed their discontent over recent US trade sanctions and stringent US controls on the export of high-technology goods. On the other hand, American hosts countered these accusations with attacks on Chinese piracy, government subsidies and poisoned pet-food ingredients. Interestingly, Paulson refrained from mentioning any progress on achieving a stronger exchange rate for China’s yuan, the main objective of US lawmakers and bone of contention between these two countries. This time around, Democrat-controlled congress seems to be headstrong to move ahead with sanctions on Chinese imports unless the yuan escalates faster than its 8 percent gain since July 2005. Democratic Representative Sander Levin of Michigan, who heads the trade panel of the House Ways and Means Committee, has reportedly said yesterday that the yuan is undervalued by as much as 40 percent. Recently, Chinese authorities have decided to increase the extent it will allow its currency to fluctuate in a day to 0.5 percent from 0.3 percent. In conjunction with the ongoing dialogue, a lobby group of Chinese firms has signed more than $20 billion of trade deals this month, Vice Trade Minister Ma Xiuhong told reporters in Washington. In addition to it, six Chinese manufacturing groups representing 208 companies are visiting 25 US cities on a tour ending May 25. However, US officials have said that they appreciated the purchases of $30 billion worth of US goods by Chinese business group, but they lost no time to remind that the number is outsized by the $288 billion worth of goods the US imports from China in a year. On the other hand, US Trade Representative Susan C Schwab’s office has filed complaints at the World Trade Organization against China over what it argues are illegal government subsidies and piracy. After this incident, the Commerce Department in April imposed sanctions on high-gloss paper from China. These recent trade related activities have been widely perceived as in China as unwarranted and an exhibition of showmanship for the Bush administration to gain political scores. Moreover, the fact sheet of the wrapped up dialogue suggests China is urging frustrated US officials to be patient as the two powers work to manage a sensitive trade relationship. The US, by contrast, is pushing for quick action. However,, Wu Yi, vice-premier, responded that any US attempt to put pressure on China ‘can only make the situation more complex’. Image Read

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