- The Washington Times - Monday, July 27, 2009

With the global economy mired in recession, the United States and China begin talks Monday to seek a solution together despite tensions over currencies, the U.S. budget deficit and the huge U.S. trade gap with China.

Ultimately, how well the U.S. efforts succeed could help determine how fast the economy recovers and how many U.S. jobs might be created once it does.

Other issues, such as climate control and North Korean nuclear ambitions, also will command attention. Few expect the talks to bridge the sharp differences between Beijing and Washington. But both governments want to use the occasion to help build a less confrontational relationship.

Secretary of State Hillary Rodham Clinton, who along with Treasury Secretary Timothy F. Geithner will be leading the U.S. delegation, praised China for being “extremely positive and productive” in pressuring North Korea to abandon its nuclear program.

“On North Korea, we’ve been extremely gratified by their forward-leaning commitment to sanctions and the private messages that they have conveyed to the North Koreans,” Mrs. Clinton said Sunday on NBC’s “Meet the Press.”

Three years ago, Henry M. Paulson Jr., then Treasury secretary, used the U.S.-China talks to press Beijing to let its currency, the yuan, rise in value against the dollar, to make it cheaper for Chinese to buy U.S. goods. U.S. manufacturers blame an undervalued yuan for record U.S. trade deficits with China - and, in part, for a decline in U.S. jobs.

The U.S. efforts have yielded only mixed results. The yuan, after rising in value about 22 percent since 2005, has scarcely budged in the past year. Beijing had begun to fear that a stronger yuan could threaten its exports. Chinese exports already were under pressure from the global recession.

But the Obama administration intends to remain focused on the trade gap. It plans to stress at the talks Monday and Tuesday that China can’t rely on U.S. consumers to pull the global economy out of recession this time. In part, that’s because U.S. household savings rates are rising, shrinking consumer spending in this country.

“Perhaps the most important message we are going to have for the Chinese is that there has been a fundamental change in the U.S. economy,” said a senior administration official, who briefed reporters on the meetings under rules that did not permit use of his name. “The U.S. economy is going to recover, but it is going to be a different type of recovery than what the Chinese have seen in the past.”

That change will mean that the Chinese won’t be able to rely on booming U.S. demand for Chinese goods to lift their economy. Instead, they will have to shift from an export-led economy to growth that’s fueled in large part by rising Chinese spending.

For the United States, suffering from a 9.5 percent unemployment rate, the ultimate goal is to help put more Americans to work.

“All of this ultimately gets back to jobs in the United States,” the U.S. official said. “If the Chinese can increase their domestic consumption and reduce their trade surplus, that will mean more U.S. jobs.”

The official said the United States also will seek assurances that Beijing won’t resort to what Washington considers protectionist trade steps. Some in Congress want to punish China for what they see as unfair trade practices that have cost Americans manufacturing jobs.

The Obama administration has filed its first unfair-trade case against China over its restrictions on exports that U.S. manufacturers need to produce steel and other products. U.S. officials said they also will raise complaints about how China handles its government contracts, a process that U.S. manufacturers say discriminates against them.

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