- The Washington Times - Wednesday, December 13, 2006

BEIJING (AP) — U.S. Treasury Secretary Henry Paulson arrived in China yesterday for trade talks, with a new anti-piracy campaign and Beijing’s record trade surplus with the United States providing a backdrop for the negotiations.

American officials are trying to downplay expectations of breakthroughs from the talks led by Mr. Paulson, Washington’s point man on economic ties with Beijing, and ChinesePrime Minister Wu Yi. The talks are billed as the start of a wide-ranging “strategic economic dialogue.”

In a prelude to the visit, Chinese and U.S. companies announced a series of deals, including the purchase by U.S. retailer Home Depot Inc. of a chain of Chinese home-improvement stores and the sale of GE Aviation jet engines to a Shanghai airline.

“Commercial engagement built on fair, effective rules is the foundation of the healthy, strong and continually growing trade relationship that we envision between China and the United States,” said Commerce Secretary Carlos Gutierrez, a member of Mr. Paulson’s delegation, who attended the signing ceremony for the deals.

The anti-piracy campaign announced yesterday will target producers and distributors of illegally copied movies, music and other goods, the official Xinhua News Agency said. It follows a 100-day-long crackdown started in July that targeted vendors.

“The campaign will hunt out producers of pirated movies, books and software, and break their distribution chains,” Xinhua said, citing the government’s anti-piracy agency. “The smuggling of pirating equipment will be severely punished.”

China is thought to be the world’s leading source of pirated goods ranging from Hollywood movies to designer clothes, sports equipment and even medicines. American officials say Chinese piracy costs legitimate producers up to $50 billion a year in lost potential sales.

Washington has warned Beijing that it might face a formal complaint in the World Trade Organization, with the possibility of sanctions, if it fails to stamp out the illicit trade.

Such government campaigns and business deals are frequently announced ahead of U.S.-Chinese meetings as Beijing tries to mollify American critics of its soaring trade surplus with the United States.

American business groups are pressing for quicker action and have appealed to Mr. Paulson to take a hard line with Beijing over its currency controls. They say China’s yuan is undervalued, giving the country’s exporters an unfair price advantage.

U.S. officials say they also want more Chinese action against piracy and more access to the country’s service industries.

Despite the complaints about the trade deficit and piracy, the United States has benefited from growing ties with China.

U.S. imports of low-cost Chinese toys, shoes and other goods have held down consumer prices and added to retailers’ profits. American companies are seeing growing revenue from operations in China to tap the country’s growing consumer market.

On Tuesday, pressure on Washington for action mounted when the Commerce Department reported that the U.S. trade deficit with China rose by 6.1 percent to $24.4 billion.

The U.S. deficit with China is running at an annual rate of $229 billion, far above last year’s $202 billion deficit.

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