Treasury Secretary Henry Paulson says the U.S. intends to keep pursuing a policy of "robust engagement" with China that will include filing unfair trade cases as needed and pressuring the Chinese to move more quickly to revalue their currency.
Paulson, delivering a speech outling the goals of a high-level meeting the two countries will hold next week, said that it was important for both nations to resist calls for erecting protectionist barriers.
"It is clear that our strategy for robust engagement with China _ intensive dialogue but with resort to WTO dispute settlement and WTO-sanctioned trade remedies if needed _ is more productive than protectionist policies or legislation," Paulson said Tuesday in his prepared remarks.
The Chinese have complained that the administration has harmed the chances for making progress in the high-level talks by resorting to filing trade cases against China before the World Trade Organization.
However, the administration has dismissed those complaints, arguing that it is pursuing a two-pronged approach that will seek to get China to address contentious trade issues during the twice-a-year meetings but if those efforts fail, it will not hesistate to take cases to the WTO.
The administration is facing rising unhappiness in this country over the soaring trade deficit with China which critics blame in part for the loss of more than 3 million U.S. manufacturing jobs since 2001.
High-level delegations from both countries will meet on June 17-18 in Annapolis, Maryland, for the fourth round of discussions launched in December 2006 known as the Strategic Economic Dialogue.
American manufacturers contend that the biggest trade issue remains China's currency, which they contend is significantly undervalued, making Chinese goods cheaper for U.S. consumers and American products more expensive in China.
Paulson acknolwedged that the Chinese have allowed their currency to rise in value by about 20 percent against the dollar since July 2005 but he said more needed to be done. In addition to helping deal with the trade gap, Paulson said Chinese efforts to reform their currency policies would improve that country's ability to deal with its rising inflation problem.
"Exchange rate reform will be critical in meeting China's short and medium-term challenges," he said in his speech at the Carnegie Endowment for International Peace.
Paulson said that during the two days of discussion next week the two nations will focus on managing current economic challenges including rising energy and food costs in both countries and a credit crisis and housing market slump in the United States.
As part of the effort to encourage a swifter revaluation of the yuan, Paulson said it would be critical for China to increase thge pace of reform for its financial service industry.
The administration wants the Chinese to open their financial system to foreign banks and investment houses including major U.S. institutions as a way of gaining increased needed expertise. However, that effort is likely to meet strong resistance from the Chinese, given the billions of dollars in losses suffered by U.S. financial giants in the credit crisis that erupted last August.
Likewise, a U.S. effort to get China to promote greater energy efficiency as a way of reducing strains on global supplies is unlikely to achieve much success because the Chinese have been moving in the opposite direction, providing ever greater subsidies to keep energy prices low as global prices have surged.
Analysts are not expecting any breakthroughs on the various trade tensions confronting the two countries at present in part because the Chinese are unlikely to want to make major concessions to an administration that will be out of office in just a few months.
The Chinese, however, have announced that they will come to the United States prepared to make major purchases of U.S. products in an effort to ease the political tensions over the rising trade deficit. The government announced Tuesday that the imbalance for April surged by 25.9 percent to $20.2 billion (euro13 billion), the highest level since January as imports of a wide range of Chinese products from toys and games to televisions and clothing jumped sharply.
Sen. Sherrod Brown, a Democrat, said the big jump in the deficit with China showed that more needed to be done on the currency issue.
"China's undervalued currency continues to put American workers and manufacturers at a disadvantage," he said in a statement. "The U.S. trade deficit is simply too large to be sustainable."