Wu Yi pushes back after US trade demands

Chinese Vice Premier pushed back when pressed by US lawmaker for action to cut its trade surplus saying that Washington should ease high-tech export curbs.

world Updated: May 25, 2007 11:27 IST

President George W Bush and US lawmakers on Thursday pressed China for more action to cut its trade surplus but Vice Premier Wu Yi pushed back, saying the Chinese currency was not the main reason for the gap and that Washington should ease high-tech export curbs.

A three-day Washington visit by a top-level Chinese delegation ended with little progress evident on the thorniest points in a troubled trans-Pacific trade relationship. The sticky issue of China's managed currency remained unresolved and some members of Congress threatened action unless Beijing does more to help reduce the US trade deficit.

"This is a complex relationship," Bush said after meeting with Wu and other Chinese officials. "There's a lot of areas we're working together and there's areas where there's friction. And we've just got to work through the friction."

Bush expressed disappointment that a US effort to persuade China to open its capital markets to greater participation by US firms had fallen short and that China had rebuffed pleas to move more quickly in allowing its yuan currency to appreciate.

"We're watching very carefully as to whether or not they will appreciate their currency," Bush said.

Speaking on Thursday evening to US business leaders, Wu said China would continue to promote further flexibility in the yuan but that it would act with caution to avoid major changes that could harm the economy.

"I believe the floating band of the renminbi exchange rate will continue to expand as the market changes in the future," Wu said.

"China's exchange rate reform will be advanced in an orderly way, based on the principles of self-initiative, controllability and gradualism," she said.

Many lawmakers believe China's currency is undervalued by as much as 40 per cent, giving it an unfair price advantage in international trade. The currency issue embodies many of the frustrations lawmakers feel about the huge trade deficit with China, which hit a record $233 billion last year.

Wu went on the offensive in her speech, repeating China's demand that the United States end restrictions on exports of advanced technology goods to China, arguing that ending the curbs would significantly increase US exports there.

Congress threatens to act

Wu, who led a large delegation of Chinese ministers in two days of "strategic economic dialogue" in Washington and met US lawmakers, urged Washington to "contain protectionism that is increasing day by day."

She asserted that China was making progress in abiding by international rules on protecting intellectual property rights, or IPR, and criticised a US decision to lodge two IPR cases against China in the World Trade Organization this year.

Bush also called on China to lift a freeze on importing US beef. "One area where I have been disappointed is beef," he told reporters after meeting Wu.

China stopped importing US beef when mad cow disease surfaced in the United States in 2003. The World Organization for Animal Health announced on Tuesday it now considered the United States as a "controlled risk" country for the feared bovine spongiform encephalopathy, or mad cow, a downgrading of its earlier assessment of the dangers.

The US Senate's top Democrat warned on Thursday that sentiment was growing in Congress to act to stem the record trade gap.

"If China and the Bush administration won't take action to bring about more balance, there is growing sentiment in Congress to act," Senate Majority Leader Harry Reid said in a statement after meeting with Wu.

House and Senate lawmakers said they planned to move forward with legislation. One option is a bill that would allow the Commerce Department to impose duties on Chinese goods to offset the "subsidy" created by China's exchange rate.

Senate Finance Committee Chairman Max Baucus, a Montana Democrat, said whatever bill is passed should be consistent with World Trade Organization rules.

One hot issue, in the wake of reports of poisoned toothpaste and contaminated pet food, was what Beijing is willing to agree to in order to assure Americans they are not physically endangered by Chinese products.

US Health and Human Services Secretary Mike Leavitt on Thursday presented a list of steps Washington wants China to take, possibly to include a registry of Chinese firms permitted to sell food items to Americans, but got no immediate answer on whether China will agree.

(Additional reporting by Glenn Somerville, Missy Ryan and Doug Palmer)

First Published: May 25, 2007 11:11 IST