China May End Some Key Import Tariffs

U.S. Looks Toward Achievements for Economic Talks

The Chinese government agreed to eliminate tariffs, some as high as 16 percent, on the import of energy services and technologies, the U.S. Treasury secretary said yesterday in an interview.

That would not only encourage Chinese companies to buy environmentally friendly technologies, Henry M. Paulson Jr. said, but also would allow American corporations to sell more of their wares to China, helping to reduce the politically contentious trade deficit between the two countries.

As Washington welcomes more than a dozen cabinet-level ministers from China at high-level economic talks that start this morning, U.S. officials are already drafting a list of achievements to be announced at the close of the meeting tomorrow.

The two countries, the world's largest producers of the greenhouses gases blamed for global warming, are expected to announce that they plan to collaborate more closely on "clean coal" research.

Another important achievement, Paulson said, would be in the financial services sector. The countries expect to announce that China plans to increase, from 25 percent to a level still being negotiated, the stake foreign companies can hold in certain Chinese banks.

"I think a number of people will say we haven't made progress" when the talks end, Paulson said in the interview, adding that he believes some of the announcements will be significant.

But the two sides are not expected to make progress on one of the most contentious issues between them: the value of China's currency. The United States has been pushing China to allow market forces to determine the value of the yuan, saying it is grossly undervalued, giving China an unfair advantage on world markets.

China has agreed in principle that the currency is undervalued, but it wants only gradual change. The currency has increased about 8 percent since July 2005, when the Chinese removed the yuan's long-standing peg to the dollar.

In the past few months, Paulson has found himself the unofficial referee in a growing fight between the U.S. Congress and China.

Lawmakers have grown increasingly impatient on the currency issue, even threatening legislation that would impose across-the-board tariffs on Chinese goods. That particular bill was withdrawn, but more than a dozen others are still in the works.

Paulson said he has had to spend considerable time trying to explain the U.S. government to Chinese leaders. "I explained to my Chinese counterparts that Congress legislates on trade, and there's a protectionist sentiment in this country," Paulson said.

The meetings taking place in Washington this week are part of an economic dialogue launched last year by Paulson and his Chinese counterpart, Vice Premier Wu Yi. Most of the achievements so far have been modest.

"When you are talking about rebalancing the economy, the idea that it can be done in a year or two is preposterous," Paulson said.