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US' Paulson-China must recognize global trade role

WASHINGTON - U.S. Treasury Secretary Henry Paulson said on Monday China should accept greater responsibilities for its growing economic influence and he chided Beijing for what he called a protectionist stance in global trade talks.

In an opinion article written for Foreign Affairs magazine, Paulson also said China has made progress on allowing its yuan currency to rise, but further appreciation was needed to help it deal with rising inflation.

"As a country deeply invested in the global economic system, China would benefit from playing an increasingly proactive role in global economic decision-making," Paulson wrote. "And yet it seems to be doing the opposite in the Doha round of international trade negotiations."

"Its insistence on protecting its own industrial development is driving other countries to do the same and has been a major factor in the growing antiglobalization and protectionist sentiment around the world," Paulson said.

Intensive talks to rescue the Doha round of trade talks collapsed last week after the United States and India refused to compromise over a proposal to help poor farmers deal with a potential flood of imports.

China also had supported the "safeguard mechanism" that would have allowed developing countries to raise tariffs if imports of food products reached trigger levels.

In the article, published just days before the Beijing Olympic games begin, Paulson said he believed Chinese trade and investment policies were increasingly geared towards promoting "national champion" Chinese companies.

"China's foreign-investment regulations are opaque and increasingly restrictive, and the government continues to grant major subsidies to key domestic industrial sectors," Paulson wrote. "Heavy lobbying by local authorities and by profitable and powerful Chinese businesses is shaping Beijing's industrial policy."

However, he said progress was being made in developing the U.S.-China economic relationship through a series of high-level dialogue talks called the "strategic economic dialogue." This has helped manage short-term trade tensions and has alleviated some concerns in the U.S. Congress "in a way that has led to a significant appreciation of the renminbi and forestalled dangerous protectionist legislation," he added.

He said the 20 percent increase in the yuan's value against the dollar from July 2005 to mid-June 2008 was an example of the the dialogue yielding results.

"Currency appreciation and greater flexibility in China's exchange rate could limit the impact of rising world oil and commodity prices on prices in China and at the same time allow Chinese monetary policy to be a more effective tool for ensuring stable growth," Paulson said.