U.S. lawmakers urge action after China meeting

WASHINGTON (Reuters) - Lawmakers on Friday urged the U.S. and Chinese governments to follow two days of high-level talks on trade and economic concerns with concrete action.

"Dialogue and action must go hand-in-hand. For example, greater flexibility for China's currency is overdue. Postponing further reform not only endangers our bilateral economic relationship, but also put's China's prosperity at risk," incoming Senate Finance Committee Chairman Max Baucus, a Montana Democrat, said in a statement.

The U.S. trade deficit with China could reach a record $240 billion this year, fueling the belief in Congress that Beijing is deliberately undervaluing its currency by 15 to 40 percent to give Chinese exporters an advantage in world trade.

U.S. Treasury Secretary Henry Paulson told reporters the two countries had agreed during the meetings in Beijing to bring more balance to the U.S.-China trade relationship.

U.S. officials also told their Chinese counterparts "in the clearest possible terms" that China needs to move toward a more flexible currency exchange rate policy, Paulson said.

But Sen. Charles Schumer, a New York Democrat who is one of China's harshest critics in Congress, said he expected Beijing to continue dragging its feet on much-needed reform.

"Every few years, with a lot of fanfare, the Chinese say they will begin a new round of serious discussions and drag the process out for a long time. At best, we end up with crumbs. The Chinese economy is advanced and sophisticated enough that they could start playing by the rules right away if they really wanted to," Schumer said.

While Baucus and Schumer focused their remarks on the need for China to act on U.S. trade concerns, Rep. Sander Levin, a Michigan Democrat, said Congress and the Bush administration need to take several steps.

Democrats will again ask the U.S. Trade Representative's office to formally challenge China's currency practices at the World Trade Organization even though USTR has rejected that request a number times in the past, Levin said.

Lawmakers will also reintroduce legislation requiring the Commerce Department to consider China's "currency manipulation" as a subsidy under U.S. trade laws so companies can apply for countervailing duties to offset it, Levin said.

Levin also urged the Treasury Department to formally label China as a currency manipulator in a semiannual report that is now two months overdue.

Many U.S. financial services group applauded this week's talks as an important step forward to Chinese reform, but some other industry associations were less impressed.

Kevin Kearns, president of the U.S. Industry and Business Council, said Paulson and a U.S. delegation that included Federal Reserve Chairman Ben Bernanke and U.S. Trade Representative Susan Schwab were "content to engage in idle diplomatic chitchat" when stronger action was needed.

"Since the Bush administration won't respond effectively to China's currency manipulation, illegal subsidies, intellectual property theft and other transgressions, Congress needs to seize control over China's trade policy," Kearns said.