U.S.-China talks take an acrimonious turn
Beijing warns of retaliation if Congress attempts to block imports


Associated Press
Dec. 12, 2007, 8:19PM

XIANGHE, CHINA — A top Chinese trade negotiator warned of retaliation should Congress try to block the nation's imports as U.S. and Chinese officials voiced sharp differences Wednesday over what has led to Beijing's massive trade surplus.

A two-day China-U.S. Strategic Economic Dialogue, held outside Beijing, opened amid rising frustration by Washington over what it sees as unfair trade barriers. China has implied that any protectionist measures from the U.S. would cut both ways.

U.S. officials say China must allow greater access to its markets, while Beijing says it is not to blame for America's hunger for cheap, Chinese-made goods.

Vice Premier Wu Yi, who led the Chinese delegation, insisted that Beijing had not sought large trade surpluses and that the U.S. could boost exports by relaxing restrictions on high-tech goods.

"To address the China-U.S. trade imbalance requires the concerted efforts of both sides," Wu said.

She reiterated Chinese concerns about the roughly 50 China-related trade bills introduced this year in Congress, hinting that China might retaliate if its interests were harmed.

"I need to be quite candid about this: If these bills are adopted, they will severely undermine U.S. business ties with China," Wu said.

Washington's trade deficit with China appears set to surpass last year's record $233 billion, according to U.S. Commerce Department figures. That has amplified calls in Congress for punitive measures on Chinese imports if Beijing fails to let its currency appreciate.

Critics claim that Beijing keeps the yuan undervalued, giving Chinese exports an unfair advantage and inflating the nation's trade surplus. China began allowing a slow rise in the yuan's value in July 2005. Since then, it has appreciated 8.9 percent against the dollar in tightly controlled trading.

U.S. Treasury Secretary Henry Paulson reiterated calls for a faster yuan appreciation, saying it would offer China more effective leverage to battle rising inflation and asset bubbles amid signs that China's economy is overheating.

"A more flexible exchange rate policy is especially important to China now, given these risks," Paulson said.