US, China Economic Meetings Produced Limited Results

The US/China Strategic Economic
Dialogue, held in Washington May 22-23, produced some limited results in the areas of financial
services and air travel, but it was pretty much a bust where international trade issues were
concerned. The Chinese delegation of 25 high-level government officials arrived in Washington
protesting recent US trade sanctions, while the US delegation was insisting that something must be
done to reduce the $233 billion Chinese trade deficit. In the end, the Chinese were still
complaining about economic sanctions, and very little, if anything, was done to address the trade

President George W. Bush said the meetings were “very friendly,” and Treasury Secretary
Henry M. Paulson Jr., who headed the US delegation, said there was “wide agreement” on a number of
next steps on financial services, energy and the environment, and civil aviation. He said he
expects talks to continue “in a cooperative spirit.”

With respect to one of the burning issues — China’s alleged currency manipulation — Paulson
said China has taken some steps to increase the flexibility of its currency, but he indicated more
must be done, particularly in the face of complaints by members of Congress and many business
interests, including textiles, that progress is not fast enough. He said the pace of change has
picked up, but added, “I believe it is very much in their interests and the interests of the world
that they move more quickly.”

At the conclusion of the meetings, Secretary of Commerce Carlos M. Gutierrez said protection
of intellectual property rights and market access “remain at the top of our agenda.” He also said
the United States intends to stand by its decision to use countervailing duty laws to combat
illegally subsidized goods from non-market economies such as China, adding, “We have a firm
commitment to use tools at our disposal to enforce fair competition.” When US Trade Representative
Susan C. Schwab was asked about progress on trade issues she simply said, “We had a healthy
exchange of ideas.”

The US Business and Industry Council (USBIC) blasted the dialogue, saying the two sets of
meetings, last December and in May, have produced “no meaningful results,” and it called on
Congress to take control of US/China trade policy. “The failure of the White House’s approach is
now clear, so the ball is clearly in Congress’s court,” said USBIC’s President Kevin L. Kearns. “
With Democrats who have long supported bolder and smarter China trade policies now in charge, there
are no more excuses for continued Congressional inaction.” USBIC is strongly backing legislation
pending in both the House and Senate that would declare currency manipulation an unfair trade
practice, subject to sanctions under US countervailing duty laws.

May 29, 2007