Leading senators frustrated by a lack of progress by US President Barack Obama’s administration signaled on Thursday that they were willing to consider retaliatory measures to address China’s policies on trade, currency and intellectual property.
At a Senate Finance Committee hearing, the members suggested that Obama’s strategy of quiet diplomacy was producing limited results.
In testimony to the panel, US Secretary of the Treasury Timothy Geithner could point to only a few accomplishments from the annual bilateral talks he attended in Beijing last month with Secretary of State Hillary Rodham Clinton.
As both the US and China struggle to recover from the recession, longstanding complaints have gotten louder that Beijing gives unfair support to its export-oriented manufacturers, fails to abide by WTO agreements, permits the theft of US intellectual property and protects its domestic industries from competition from abroad.
“We want China to provide a level playing field” Geithner said, vowing, as he and his predecessors had done before, “to engage forcefully with China.”
He said China had published a draft measure to change “some of the troubling aspects” of a new system it uses to accredit products as eligible for government procurement contracts. He also said China had agreed to “a high-level process over the coming weeks and months” to discuss its innovation policies.
China also agreed to submit by July a revised proposal for joining a WTO agreement on government procurement and to ease foreign investment in some areas. He said China would “apply the full arsenal of tools available” to ensure that China met its trading obligations.
The lawmakers did not appear impressed.
“We do not have a strategic, coordinated United States economic policy, that I can determine, with respect to China,” Senator Max Baucus, a Democrat, and chairman of the committee, told him.
Baucus said he was particularly concerned about failure to enforce intellectual property rules. With the goal of promoting “indigenous innovation,” China has set product standards and procurement preferences that are a disadvantage to American workers, companies and technology, many economists believe.
Geithner said some progress on those areas had come out of the bilateral talks, known officially as the US-China Strategic and Economic Dialogue.
When Baucus said the US was process-oriented, while China was focused on results, Geithner replied: “China’s not going to become like the United States overnight.”
“China still has a government that plays an overwhelming role in determining economic activity. As you said, there is still a broad range of practices that China pursues today that is designed to protect China’s workers and firms at the expense of China’s trading partners,” Geithner said.
The committee’s top Republican, Senator Charles Grassley, criticized the administration’s decision to delay the release of a foreign exchange report in which the US could find that China had manipulated the yuan, keeping its value artificially low to stimulate exports.
The Treasury has not made such a finding since 1994.
Grassley also suggested the time had come for the US to consider retaliation in some areas of trade.
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