WASHINGTON - Treasury Secretary Henry Paulson said Wednesday he intends to put U.S. lawmakers face-to-face with top Chinese officials later this month to discuss their differences over soaring trade deficits.
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Speaking to the Peterson Institute for International Economics, Paulson suggested the experience would benefit both sides by driving home the degree of U.S. unhappiness over a deficit with China that widened to a record $233 billion last year.
"There is a clear sense of frustration with China in political circles and in a number of industries throughout America," Paulson acknowledged ahead of May 22-24 talks scheduled with a delegation that will be led by Chinese Vice Premier Wu Yi.
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Paulson is being pushed by members of Congress, who have threatened legislative action to force China to let its currency rise in value in hope that will slow imports and told by Beijing that it cannot move faster for fear of destabilizing its economy.
In a sign of the pressure Paulson faces, three subcommittees in the House of Representatives announced plans for a joint hearing on May 9 to examine foreign currency manipulation. The panels said they would focus on China and Japan, although they did not announce a witness list.
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"Currency manipulation places American workers, farmers and businesses at a competitive disadvantage and this Congress will work with the administration to hold trading partners accountable to the rules of trade," House Trade Subcommittee Chairman Sander Levin said in a statement.
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Paulson, a former Goldman Sachs chief, said he personally thought there was limited gain to be made in shrinking the trade deficit through currency reform and that it made more sense to concentrate on boosting U.S. exports.
SPEED IT UP
But Paulson said China should move more rapidly toward the broader set of reforms that are needed to allow market forces to play a greater role in setting the value of its yuan currency, also called the renminbi, rather than managing its value against the dollar as Beijing now does.
The upcoming Washington talks are the second round of a so-called strategic economic dialogue initiated in Beijing in December.
Pressure is also building on Paulson , who has made China his No. 1 priority, to show results and he evidently wants to expose Chinese officials to the source of it.
"I happen to think it's a big positive that the Chinese will be here when Congress is in full session," Paulson said, because it will provide an opportunity for Vice Premier Wu to visit Capitol Hill.
"Wu Yi is a very persuasive woman, she's a force of nature," Paulson said, adding she could "go up and behind closed doors talk with some of the key committees and leaders up there."
PUSHING FOR CHANGE
The United States has launched two cases at the World Trade Organization claiming that Beijing was not doing enough to punish those trafficking illegal copies of films and music and that its restrictions on entertainment imports violated trade rules.
Paulson noted that both Washington and Beijing want "tangible results" from their talks that can serve as "signposts" for progress.
It is anticipated that China will place orders for billions of dollars worth of U.S. goods in coming weeks, but Paulson said he thinks U.S. lawmakers will not be easily placated unless China allows its currency to appreciate.
"Clearly there is not just a possibility but the likelihood of legislation," he said, making clear that he opposed such action. "I believe that legislation that makes it more difficult for people to trade with us actually hurts us."
Paulson also said China has "recognized the principle of flexibility" for its currency and said it has been "appreciating very slowly," but added it should speed up the move while its economy is booming because it will be easier to do so in that situation.
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