From Trade Talks, A Lesson About Checks, Balances
Chinese Find Mixed Results With Divided Government

By Nell Henderson and Ariana Eunjung Cha
Washington Post Staff Writers
Friday, May 25, 2007

Chinese government officials who came to Washington this week for economic talks got an extra lesson over the past two days in the complexities of America's divided government.

Their conversation with President Bush was "very friendly," and the meetings with his Cabinet members were a "great success," Chinese officials told reporters yesterday.

But they didn't exactly brim with joy as they described their discussions on Capitol Hill, where many lawmakers have threatened to impose economic sanctions on China if it does not do more to address U.S. concerns about a host of trade issues.

The Chinese delegation's discussions Wednesday with House Majority Leader Nancy Pelosi (D-Calif.) were "frank and honest," and the talks with members of the House Ways and Means Committee were "very constructive," China's Assistant Finance Minister Zhu Guangyao said.

Brrrrrrr.

The Chinese group of 25 high-level government officials, the largest ever to visit Washington, had come for the second session of a semiannual "strategic economic dialogue" between the two governments. The first meetings, in Beijing last year, launched discussions on a variety of nettlesome economic issues.

U.S. Treasury Secretary Henry M. Paulson Jr. said in a statement Wednesday that the talks this week had yielded "tangible results" including agreements on air travel and financial services.

But Bush and congressional leaders emphasized yesterday that they want to see more progress on the contentious issue of China's currency, the yuan. U.S. critics say Beijing's policy of pegging the yuan to a basket of currencies holds its value too low against the U.S. dollar, giving China an unfair trade advantage that has cost American jobs and caused the U.S. trade deficit with China to swell to record levels.

The Bush administration has urged China to let its currency rise in value, which would make U.S. goods cheaper in China and Chinese exports more expensive for American consumers. China has allowed the yuan to creep slightly higher in recent years, but it has largely rejected U.S. pressure to let it rise further.

Bush welcomed the ranking Chinese official, Vice Premier Wu Yi, to the Oval Office yesterday to thank her for bringing her delegation. But Bush also said he emphasized to Wu that "we're watching very carefully" for signs China will let its currency appreciate. "And that's all in the context of making it clear to China that we value our relationship, but the $233 billion trade deficit must be addressed," the president said.

The president also mentioned a particular concern: "One area where I've been disappointed is beef. They need to be eating U.S. beef. It's good for them. They'll like it. And so we're working hard to get that beef market opened up." China and other Asian countries banned U.S. beef imports in 2003 after a case of mad cow disease was discovered in the United States.

Many Capitol Hill lawmakers have threatened to impose punitive tariffs on Chinese goods if Beijing does not let its currency appreciate more rapidly.

Such legislation went nowhere when Republicans controlled Congress and has not gone much further since the Democrats took back both houses this year.

"There do seem to be more complaints voiced by Congress about the state of U.S.-China trade relations, but we're still seeing no significant action," said Alan Tonelson, a research fellow with the U.S. Business and Industry Council, which represents businesses that say they are being hurt by China's currency policy.

Trade issues divide both parties but are particularly difficult for Democrats. Many lawmakers support free trade in principle but are feeling pressure to do more for workers who have lost jobs because of accelerating globalization and technological change. The Democrats also rely more on labor support and hold a razor-thin majority in the Senate.

The Chinese got an earful on other issues. Pelosi said in a statement that she and other House members raised various concerns, including human rights in China and Tibet and China's lax enforcement of intellectual-property rights. "I believe that the Chinese government can do more in each of these areas."

Sen. Charles E. Grassley (R-Iowa) said in a statement after one meeting that its "value was for the Chinese delegation to hear directly from a branch of our federal government that's equal to the executive branch and has constitutional authority over trade."

When asked at a news briefing how the Chinese would respond to legislation, Zhu, the assistant finance minister, did not say so explicitly but implied that the Chinese still hoped that it could be avoided.

"We hope their side will have a correct understanding of the importance and significance of economic and trade relations between the two countries and will bear in mind the overall state interest of the U.S. and view this issue of legislation from this perspective," Zhu said.