U.S. to press China on innovation policy at meeting

WASHINGTON (Reuters) - The United States is pushing China in the run-up to high-level talks this month in Beijing to roll back controversial technological innovation policies that have raised new concerns about its openness to foreign companies.

The Chinese "understand it needs to be addressed and I think they are considering some of the recommendations that we and others have given them," John Frisbie, president of the U.S.-China Business Council, told Reuters.

But "it's too early to say" whether U.S. discomfort with China's "indigenous innovation" policies can be put to rest when the United States and China meet in two weeks for the annual Strategic and Economic Dialogue, he said.

The issue is driven by China's desire to promote technological innovation and get a bigger share of the world's most valuable trademarks.

U.S. companies say they don't object to that, but are distressed by proposals that erect new barriers to foreign investment and exports in the fast-growing Chinese economy.

Business groups from the United States, Europe and Canada in a joint statement on Monday urged China "not to carry forward" with a plan outlined in November that would give significant government procurement preferences to products containing intellectual property developed and owned in China.

They also called for "an immediate review of all innovation policies to ensure they do not discriminate between foreign and domestic suppliers, and achieve the goal of the opening China's market wider to foreign investment and exports promised by President Hu (Jintao) and Premier Wen (Jiabao)."

Jeremie Waterman, senior director for Greater China at the U.S. Chamber of Commerce, said businesses were concerned Beijing could be retreating from 30 years of more or less steady progress toward increased openness.

"Are we now at an inflection point where China's looking to really drive forward with more harmful import and intellectual property substitution policies that will no question increase tensions with China's trading partners?" Waterman said.

U.S. Treasury Secretary Timothy Geithner already raised the stakes for the May 24-25 talks when he delayed an April 15 decision on whether China was manipulating its currency for an unfair trade advantage.

Many U.S. lawmakers who believe that Beijing deliberately undervalues its currency for an unfair trade advantage are now looking for progress on that issue at the talks.

But U.S. Trade Representative Ron Kirk, who will also be in Beijing for the meeting, said last week that Beijing's undervalued yuan was just one factor affecting trade with China

"I have as many businesses concerned right now about indigenous innovation as I do about currency," Kirk said.

(Reporting by Doug Palmer; Editing by Eric Walsh)