Monday, April 17, 2006

Bush to Talk Tough on Trade with Chinese Leader

WASHINGTON (AFP) - Despite recent concessions by his government, Chinese President Hu Jintao can still expect a grilling on a host of US trade complaints at long-awaited summit talks this week.

President George W. Bush has made clear his administration's displeasure over rampant copyright theft in China and Beijing's reluctance to throw its currency open to market forces.

In his public remarks ahead of Thursday's White House meeting, Bush has been polite but firm in upbraiding China -- rather more polite than some in Congress, who want nothing less than punitive tariffs slapped on Chinese goods.

"America values China as a trading partner, but we expect China to live up to its commitments," Bush said Thursday in a speech to business leaders here.

"China needs to enforce intellectual property rights. China needs to take additional steps to address the trade imbalance between our countries. And China needs to move to a flexible market-based currency," Bush added.

Seeking to smooth the way for Hu's visit, China has made some gestures to appease US trade concerns.

On Friday, Beijing announced a limited relaxation of controls to make it easier for banks and other financial institutions to invest overseas, and also increased the amount of foreign currency individuals can hold.

Three days earlier, at annual trade talks held in Washington, Vice Premier Wu Yi trumpeted new action against copyright theft and measures to ease market barriers facing US companies.

Ahead of Hu's visit, Chinese businesses have launched a buying spree across the United States, signing 16.2 billion dollars' worth of contracts.

The deals will make a small dent in the US trade deficit with China, which last year exploded to a record-breaking 202 billion dollars.

"President Hu's visit highlights the fact that US trade policy is in crisis. This trade deficit is unsustainable and must be stanched in short order," said Auggie Tantillo, head of the American Manufacturing Trade Action Coalition.

"It is time for the US government to stop coddling China," he said, accusing Beijing of manipulating its currency, doling out billions in unrepayable loans from state banks and running "roughshod" over intellectual property rights.

The US Treasury is under strong pressure to label China a currency "manipulator" in a semi-annual report to Congress. Sparing Chinese blushes, the latest report's publication has been put off until after Hu leaves.

However, Bush knows he also needs China as a partner in tackling strategic headaches such as the nuclear ambitions of Iran and North Korea.

And in any case, many economists say, the near-hysteria in Washington over China's trade policies is misplaced.

"It's bad economics to think that a large revaluation of the yuan would reverse US job losses and reverse the US trade deficit," said Wing Thye Woo, an economics professor at the University of California at Davis.

US importers would shift sourcing to other cheap countries if Chinese goods get too expensive through a revaluation or through tariffs, he said at a Brookings Institution seminar, leaving the overall US deficit just as high.

US policymakers must also take into account the delicate political and economic balancing act faced in Beijing, said Michael Green, Bush's former national security director for Asian affairs.

"I doubt that President Hu can deliver in a concrete way on the currency, so I would look for the words he chooses, the signals that he sends," Green said at the Center for Strategic and International Studies.

"And what he says about the currency will be the result of a collective decision in the Chinese leadership and will have real weight, but the administration will really have to squeeze it out of him."