U.S., China vow cooperation on Doha, bilateral trade

WASHINGTON (Reuters) - The United States and China said on Tuesday they would push for a successful conclusion to long-running world trade talks, while working to reduce a huge imbalance in bilateral trade.

U.S. Treasury Secretary Timothy Geithner said the two sides agreed during two days of high-level talks dubbed the Strategic and Economic Dialogue on a four-point framework to lay the "foundation for more sustainable and balanced growth." [ID:nN28403534] [ID:nN28186772]

A key feature of that was the need for both countries to avoid protectionism and to work for a successful outcome of the Doha round of world trade talks, launched nearly eight years ago in the capital of Qatar, Geithner said.

Chinese Vice Premier Wang Qishan echoed those comments, adding that both sides supported the "early conclusion of the Doha round on the basis of locking up the existing achievements."

Almost exactly one year ago in Geneva, countries came close to a deal in the talks, only to fail in the end.

The G8 leading industrialized countries, plus five leading developing countries, recently set a new goal to finish the Doha round by the end of 2010. But so far, that has not translated into visible progress in the talks.

RECORD TRADE GAP

Last year, the U.S. trade deficit with China hit a record $266 billion. Many U.S. lawmakers and manufacturers blame the trade gap on China's exchange rate policy, which they say gives Chinese companies an unfair price advantage by depressing the value of the yuan against the dollar.

Geithner said the two sides agreed to take steps to bring trade more into balance but did not mention currency concerns.

The United States, for its part, will work to boost savings and bring down its huge budget deficit, while China agreed to shift to an economy less dependent on exports for growth and more on domestic demand, he said.

Washington also promised to making it easier for U.S. companies to sell high-technology goods to China and to "step up cooperation ... toward the recognition of China's market economy status," Wang said.

China has long argued that easing U.S. export controls on high-technology would help erase the huge trade imbalance between the two countries.

Beijing also dislikes that it is still considered a "non-market" economy under U.S. trade law.

The largely technical designation affects -- China believes negatively -- how the United States calculates any anti-dumping and countervailing duties it imposes on Chinese goods.

INVESTMENT AND PROCUREMENT

Chinese officials said they hoped for swift U.S. progress on market economy status but said it was unclear whether a formal policy change would come by a second set of high-level talks, known as the U.S.-China Joint Committee on Commerce and Trade, that will take place in Beijing in late October.

China's Vice Commerce Minister Ma Xiuhong said the two sides also want to speed up negotiations on a bilateral investment treaty after five rounds of talks and agreed to foster a non-discriminatory investment climate.

They also pledged to speed up negotiations on China's accession to join the World Trade Organization's government procurement agreement, which would give U.S. firms more access to China's huge public sector market.

Scott Paul, executive director of the Alliance for American Manufacturing, said U.S. companies need to see China move quickly on exchange rate concerns for the Strategic and Economic Dialogue to be considered a success.

"We won't see any fundamental change in our trade balance with China until that core issue gets addressed," Paul said.

But Representative Rick Larsen, co-chair of the U.S.-China Working Group in Congress, said he believed the exchange rate has become a second tier issue in the minds of many lawmakers more focused on domestic concerns.

Larsen said the United States would keep pressing Beijing for reform but it was unlikely Congress would pass punitive legislation as lawmakers threatened to do a few years ago.

China "has gotten the message" that it needs to shift its economy to one depending more on domestic demand rather than exports for growth, Larsen told Reuters Television.

"If they do that, it helps create a broader market for non-Chinese businesses, including obviously here in the United States, that will help feed that demand-led consumption," he said.

(Reporting by Doug Palmer; Editing by John O'Callaghan)