U.S. to press China on trade as Beijing eyes "fiscal cliff"

WASHINGTON Mon Dec 17, 2012 6:39am IST

Polluted waters of China

Polluted waters of China

Growing cities, overuse of fertilizers, and factory wastewater have degraded China's water supplies to the extent that half the nation's rivers and lakes are severely polluted.  Slideshow 

WASHINGTON (Reuters) - The United States will press senior Chinese officials this week for action on longstanding trade problems, and may face a rebuke from Beijing over the haphazard way it is managing its finances.

A Chinese delegation led by Vice Premier Wang Qishan will be in Washington on Tuesday and Wednesday for talks with U.S. Trade Representative Ron Kirk, acting U.S. Commerce Secretary Rebecca Blank and U.S. Agriculture Secretary Tom Vilsack.

"I don't think we should be expecting sweeping changes, but I do think we will see tangible progress on some specific issues," said John Frisbie, president of the U.S.-China Business Council. "China is definitely prioritizing its U.S. relations and they are also discussing economic reforms back at home that could impact some of the issues that matter to U.S. companies."

Kirk and his colleagues have said they are pushing China to drop restrictions on U.S. livestock and farm products, to take stronger action to stop counterfeiting and piracy of U.S. goods and to reduce pressure on U.S. companies to transfer valuable technology to do business in China.

Wang in turn is expected to convey Beijing's strong interest in a deal in Washington to avoid the $600 billion in spending cuts and tax hikes set to take hold at the start of the year, widely known as the "fiscal cliff.

Economists warn that failure to avert that outcome could send the United States back in recession, which would threaten growth in China and around the world. President Barack Obama and Republican leaders have so far made little visible progress toward a deal.

Given that China is the United States' largest creditor, it has a deep interest in Washington's management of its budget.

Chinese officials are also expected to press on a range of other issues - from concerns about U.S. anti-dumping measures on their exports, to restrictions on China's ability to import U.S. high-technology products and the often strong political resistance to Chinese investment in the United States.

TRANSITION TIME

The annual U.S.-China Joint Commission on Commerce and Trade meeting comes during a transition for both governments.

Obama is expected to bring in a new economic team for his second term. Chinese Vice President Xi Jinping took helm of the Chinese Communist party in November and will take over as head of state in March at the annual parliament meeting.

"We're either going to get nothing, meaning just details, or we might get a change," said Derek Scissors, a senior research fellow at the Heritage Foundation in Washington.

One reason to be optimistic that concrete progress could be made is a trip Xi made last week to southern Guangdong, where he echoed calls for market reforms and strengthening the rule of law that reformist senior Chinese leader Deng Xiaoping made 20 years ago in the same province.

Outgoing Chinese President Hu Jintao's ten-year tenure is generally associated with a retreat from market liberalization and the rise of Chinese "state capitalism" that favored domestic national champions over foreign firms.

In that sense, this week's JCCT meeting could mark the start of the Xi era in U.S-China relations, but there remains a lot of uncertainty about how much reform the new Chinese administration will pursue, Frisbie said.

Wang is seen as a reform advocate and has been promoted to a new senior Communist party position, but he also will be giving up his responsibility for economic policies to head up an anti-corruption campaign.

Wang's sensitive new party position means he won't say much that is bold, so "what I'm hoping is that he brings his successor" even though one hasn't been named, Scissors said.

One U.S. business official, speaking on condition he not be identified, said he was hoping for progress on troublesome "indigenous innovation" policies that put pressure on U.S. companies that want to do business in China to transfer technology to Chinese partners.

U.S. companies are also increasingly concerned about Chinese cyberattacks and other attempts to steal trade secrets, he said.

(Reporting by Doug Palmer; additional reporting by Paul Eckert; editing by Todd Eastham)

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