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US, China set for talks to address economic concerns
2008-06-15
WASHINGTON (AFP) - With their economies in crisis, top policy makers from the United States and China hold talks this week in a bid to ease currency concerns, counter protectionist pressures and boost energy security. The cabinet-level talks led by US Treasury Secretary Henry Paulson and Chinese Vice Premier Wang Qishan take place as the world's richest and most rapidly growing economies grapple with rocketing oil and food prices, higher inflation and financial market instability. The two-day "strategic economic dialogue" will begin Tuesday at the Naval Academy in Annapolis, east of Washington. This is the first time ex-banker Wang, who took over in March from the long-serving Wu Yi as point person for managing complex US-China ties, is attending the twice-yearly dialogue, launched by US President George W. Bush and Chinese leader Hu Jintao in 2006. "It is clear that our strategy for robust engagement with China -- intensive dialogue but with resort to World Trade Organization dispute settlement and WTO-sanctioned trade remedies if needed -- is more productive than protectionist policies or legislation," Paulson said ahead of the talks. Both the United States and China have expressed concern over protectionism amid their economic difficulties, and the talks are expected to address ways to promote and protect bilateral investment and counter protectionist pressures. American companies charge that China's investment rules are opaque and designed to favor China's "national champions," while Beijing questions US moves to impose high farm subsidies and planned US limits on foreign investments. "If this tendency of protectionism grows unchecked, it may become a threat to the global trade and the multilateral trading system," said Sun Zhenyu, China's ambassador to the WTO. Adding to the concerns is the prospect of a US rollback of market opening measures under a Democratic president, amid concerns over the US trade deficit with China, which ballooned to a record 256.2 billion dollars last year. Democratic White House candidate Barack Obama has promised to review US free trade policies if he wins the presidential election in November. As the Chinese may be reluctant to sign on to policies that could be revamped by any new US president, the Bush administration is pushing for breakthroughs in energy security in upcoming talks, experts say. The United States and China are the world's top two polluters as well as net importers of oil, but are not part of the Kyoto Protocol which limits emissions. "The one thing the next administration will sign on to is progress on climate change and anything to do with climate change, which means energy cooperation," said Woo Wing Thye, an East Asian expert at The Brookings Institution in Washington. "It's win-win for both." At last December's talks, the United States and China announced the beginning of 10 years of cooperation on energy and environmental issues and have since been adding details to this framework. Results of these initial efforts will be unveiled at the Annapolis talks, Paulson said, without providing details. Washington is pushing Beijing to remove tariff and non-tariff barriers on environmental technology that it says can increase China's energy efficiency and reduce the emissions of greenhouse gases and harmful pollutants. The two countries are also to address currency woes at the talks, in which US Federal Reserve Chairman Ben Bernanke will be a notable participant. Washington thinks the Chinese currency, which has risen about 20 percent against the dollar over the last three years, should appreciate further as part of exchange rate reforms that could also be helpful to control inflation, a politically sensitive issue in China where half of family incomes go for food. Beijing, on the other hand, is concerned about the shrinking US dollar as its mountain of foreign reserves is mostly dollar-denominated. "As a major currency for international reserve, the dramatic depreciation of the dollar has led to shrinking national reserve of many countries and reduced social welfare," Sun said. Some experts predict greater yuan appreciation, unless the US economy sinks deeper in turmoil and Chinese exports decline. "In the absence of an unexpectedly large global slowdown, I think the Chinese currency will continue to appreciate due to domestic inflation," Woo said.
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