China-U.S. talks fraught with tension

BEIJING – For more than a year, U.S. Treasury Secretary Henry Paulson has persuaded congressional critics of China to put off punitive action while he conducted wide-ranging talks with Chinese leaders on economic disputes.

But as he heads into a new round of negotiations next week, Paulson is facing growing pressure to wrest results from a dialogue that has produced few breakthroughs. U.S. lawmakers frustrated at China’s huge trade surplus are drafting punitive measures. Meanwhile, Beijing’s support for the contentious talks appears to be waning.

In a sign of China’s ambivalence, the Dec. 12-13 meeting takes place at a convention center 45 miles outside Beijing – far from the Great Hall of the People next to Tiananmen Square where talks opened amid fanfare a year ago. Moreover, Paulson’s chief dialogue partner, Chinese Vice Premier Wu Yi, is retiring soon.

“We see a ‘dialogue fatigue’ on the Chinese side,” said James Zimmerman, president of the American Chamber of Commerce in China.

Few major deals are expected at Paulson’s Strategic Economic Dialogue or another meeting on commercial issues the day before, both which bring together a slew of Cabinet officers from the two sides. The governments are expected to sign agreements on helping Chinese exports of food, drugs and medical devices meet U.S. quality and safety standards, in response to a spate of recalls of China-produced goods and food.

After last year’s talks, China ordered four Westinghouse Corp. nuclear reactors. Even if Beijing makes big-ticket purchases this year, it is not clear that a buying spree would mollify Congress or put a dent in the U.S. trade deficit with China, which hit $232.5 billion last year and is projected to be higher this year.

Once the bedrock of the U.S.-China relationship, economic ties have soured in recent years over disputes on the trade imbalance, the Chinese currency’s value, tax subsidies said to favor Chinese businesses and persisting theft of intellectual property.

Congressmen and senators who agreed to Paulson’s appeal last year to postpone sanctions are at work on measures to punish China, especially if it does not raise the value of its currency, the yuan – which some economists and critics say is undervalued, giving Chinese exporters unfair advantage and driving up the U.S. trade deficit.

“We fully anticipate that the Congress will try to act in the new year,” said Myron Brilliant, the vice president for Asia of the U.S. Chamber of Commerce.

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