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U.S.-China Talks Focus on Medium-Long-Term Gains

High-Level U.S.-China Talks Focus on Medium-Long-Term Gains
Experts see real gains if politically sensitive issues kept low key

By Andrzej Zwaniecki USINFO Staff Writer

This is the first in a two-part series of articles on the U.S. treasury secretary's trip to China.

Washington - The United States and China can benefit from high-level, bilateral economic contacts as long as they focus on broad medium-term and long-term goals rather than on politically sensitive short-term issues, U.S. officials and experts say.

U.S. Treasury Secretary Henry Paulson will lead a high-level delegation to Beijing December 14-15 for an inaugural meeting of the U.S.-China Strategic Economic Dialogue.

Accompanying him will be Commerce Secretary Carlos Gutierrez, Labor Secretary Elaine Chao, Health and Human Services Secretary Mike Leavitt, Energy Secretary Samuel Bodman, U.S. Trade Representative Susan Schwab, Environmental Protection Agency Administrator Stephen Johnson and the head of the U.S. central bank, Ben Bernanke.

"Rather than going issue by issue, we can look at all the items on the agenda and have conversations that really try to move the ball forward in many different areas," Paulson said December 11 in Washington.

Former Treasury official Albert Keidel told USINFO November 30 that the trip is unlikely to produce any major short-term breakthroughs. But the stature and scope of expected discussions with Chinese officials indicate that Paulson intends to seize an opportunity created by the establishment of the dialogue, said Keidel, a senior associate at the Carnegie Endowment for International Peace.

The U.S. delegation is expected to discuss such issues as trade reform, global current account imbalances, capital market reform, China's growth strategy and exchange-rate policy as well as cooperation on energy and the environment.

Giving the U.S. delegation access to China's highest officials -- President Hu Jintao and Premier Wen Jiabao -- increases the chance for officials from both nations to gain a better understanding of each other's concerns, Keidel said.

Researcher and China expert Nicholas Lardy told USINFO November 30 that designating Vice Premier Wu for the first time as Paulson's counterpart is a "very important breakthrough."

Technical discussions with the People's Bank of China, ministries and other governmental agencies is one thing, but direct involvement of the Chinese leadership is quite another, Lardy, a senior fellow at the Peterson Institute for International Economics, said in a November 30 interview.

Keidel said that Paulson himself has gained much broader powers than his predecessors vis-Ã -vis the Chinese when President Bush gave him authority to cut across bureaucratic turfs, prioritize issues and develop and coordinate Sino-U.S. economic policies broadly among U.S. agencies.

AVOIDING A SHORT-TERM MINDSET Keidel said that the strategic dialogue organized around two high-level meetings each year gives both sides a chance to manage their relationship more efficiently and more broadly with medium- and long-term progress as their primary objective.

Paulson has been very careful not to raise expectations for immediate results, Keidel said. The secretary expressed hope that discussions with the Chinese will lay the "groundwork for important progress down the line."

"The work we do this week and in future meetings should all be with an eye toward building a cooperative relationship for many years," he said.

Paulson acknowledged the impatience in the United States over politically sensitive short-term bilateral issues. Speaking in September, he said that some short-term results are necessary to "establish the confidence on both sides that is going to get us to keep the relationship on track."

"But I don't think many people are going to judge me by what comes out of one visit," Paulson said. "And if they do, heaven help this country."

It is unclear whether limited short-term results will pacify U.S. manufacturers, financial groups and congressional critics that want faster reforms, Keidel said. He warned that the bilateral relationship could unravel under pressure from U.S. domestic interests that want China to move more aggressively on "hot" issues such as trade deficit, exchange-rate policy, intellectual property rights and capital markets.

Given the long-term nature of the relationship, both Keidel and Lardy agree that haggling over "hot-button" issues in Beijing would not be the best use of the meeting.

But Schwab said many of these issues are vital to U.S. businesses. In an editorial published in the December 11 issue of Financial Times, she cautioned against opposing further market liberalization in China and said the U.S. officials will "clearly convey our view that a slowdown in reform hinders China's development and undermines the health of our bilateral ties."

The full text of Paulson's December 11 remarks is available on the Treasury Department's Web site. For additional information on U.S. policy, see The United States and China .


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