US governors, Chinese discuss energy, farm deals
* Agriculture, energy, manufacturing opportunities
* "Are they going to steal our technology?"
By Edith Honan
SALT LAKE CITY, July 17 (Reuters) - With the struggling national economy and the impasse in Washington over the federal debt limit, U.S. governors meeting this weekend in Salt Lake City see at least one reason for optimism: new trade partnerships with China.
Throughout the three-day National Governors Association meeting, more than 20 U.S. governors met with delegations from four Chinese provinces to discuss partnerships in agriculture, energy and manufacturing in the first-ever meeting between the governors association and Chinese provincial leaders.
For China, the partnerships could represent a back-door way into the U.S, market that bypasses Washington, as well as a way to gain allies in any future trade disputes between the two countries.
For U.S. states, the economic opportunity carries hazards, including the risk that job gains could be temporary and that intellectual property could be lost.
"I think some states look at some strategic industries and ask the question: So, the Chinese are going to put some money in here, but are they going to take away our industry and bring it back home? Are they going to steal our technology and put our companies out of business?" said Paul Markowski of Global Strategies-Analysis Group/MES Advisers.
But the states are also thinking "ka-ching," he said, mimicking the sound of a cash register.
U.S. exports to China and Hong Kong totaled $118 billion in 2010, with exports from California, Washington state and Texas each surpassing $10 billion, the U.S.-China Business Council said.
China imported 54.8 million tonnes of U.S. soybeans alone last year, the group said.
"From the perspective of my state, it's a ticket out of the recession," Washington Governor Christine Gregoire, a Democrat and NGA chairwoman, said of trade and China specifically, which this year became the top trading partner of Washington state -- home to Microsoft Corp (MSFT.O).
"Because one of the biggest trading partners for America is China, we wanted to establish this new working relationship at the sub-national level," Gregoire said.
JOBS BOTH SIDES OF THE PACIFIC
Li Xiaolin, executive vice president of the Chinese People's Association for Friendship with Foreign Countries, said the meeting provided a forum for both countries to "exchange views on economic cooperation, education, environmental protection and trade."
She said agreements will bring jobs to both countries.
Governors said there were some exciting opportunities.
"It's huge," Wisconsin Governor Scott Walker, a Republican, said of the possible impact of Chinese investments in agriculture and related technology.
Iowa Governor Terry Branstad said his state is looking to increase exports of meat, corn and soybeans, while Iowa manufacturing and financial firms were hoping to do more business with China.
"We see some real opportunity there and we're also interested in potential reverse investment of Chinese companies investing in Iowa," said Branstad, who will travel to China this fall.
But there are obstacles.
"The hostility from Washington abounds because the Chinese have attempted both front-end and back-end to steal technology. That is the bottom line," Markowski said.
Derek Scissors, a research Fellow at the Heritage Foundation in Washington, said Chinese investment represents more of an opportunity than a danger.
"China wants technology first, arable land second, and mineral resources third," said Scissors.
"The U.S. will not sell them technology but we might be their best opportunity for buying or leasing farmland. States with shale, coal and natural gas will also be interesting options. There will be investments in manufacturing but these run a high risk of eventual plant relocation back to China."
"I don't think it's a back-door so much as genuine learning by Chinese firms," Scissors said of the governors' meeting.
"They have only recently realized that they must deal with states, not just the federal government. They are just in the process of realizing that courting state governments gives them a valuable partner in political disputes in D.C," he said. (Additional reporting by Paul Eckert in Washington; editing by Todd Eastham)
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