(From BusinessWeek.Com, By Mark Drajem )
(Bloomberg) China needs to honor pledges to drop barriers for foreign investment and trade, said Commerce Secretary Gary Locke, the second U.S. official challenging the nation a week before President Hu Jintao visits Washington.
The administration is ramping up criticism that China’s currency is weak, piracy of copyrighted software and movies is widespread and domestically developed technology gets an unfair advantage, ahead of meetings Jan. 18 and 19 between Hu and President Barack Obama.
“We are at a turning point in the U.S.-China economic partnership,” Locke said at the U.S.-China Business Council today in Washington. “The policies and practices that have shaped our relations over the past few decades will not suffice.”
The U.S. is China’s top national export market, and China ranks third behind Canada and Mexico in shipments of U.S. products. In the past 20 years, U.S. exports to China have increased 12-fold, while imports from China have climbed more than 30-fold, Locke said.
Commercial tensions between the two nations have increased amid a decline in U.S manufacturing employment since 2001 and the contraction of the economy in the recession.
“The debt-fueled consumption binge in developed countries like America is over,” Locke said. “Countries like China are beginning to realize that there are limits to purely export- driven growth.”
Geithner, Yuan
Treasury Secretary Timothy F. Geithner yesterday told China it must strengthen its “substantially undervalued” yuan. The currency has climbed about 3 percent against the dollar since the nation in June scrapped a peg that had been in place since the global financial crisis.
“This is a pace of about 6 percent a year in nominal terms, but significantly faster in real terms because inflation in China is much higher than in the United States,” Geithner said.
Locke said today that for a decade, China had large trade surpluses that helped provide low-cost consumer goods for Americans. The status quo must change given that nation’s growing economic power and the financial woes of many American consumers, he said.
On issues such as combating widespread theft of products with trademark or copyright protection, China often fails to carry through with its pledges, or undercuts them by adopting policies that also discriminate against the U.S., he said.
‘Lax Enforcement’
“Perhaps an agreement is made, but it never becomes binding,” he said. “Or perhaps there’s a well-written law or regulation at the national level, but there’s lax enforcement at the provincial or city level.”
China needs to take five distinct steps to make sure a pledge results in progress, he said. “When it comes to indigenous innovation, intellectual property or a variety of other market-access issues, an enduring frustration is that in too many cases only the easiest steps are taken, but not all five,” Locke said.
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