05 December 2008
U.S., China Agree to Coordinated Action to Face Economic Woes
Officials reach agreements on energy and environmental issues
Washington — The United States and China have agreed to coordinated action to contain the global financial meltdown and deal with slower-boiling problems related to energy, the environment and food and product safety.
“We had a robust discussion of the current global financial market turmoil and economic downturn, its implications for both our nations and our efforts to address it," said U.S. Treasury Secretary Henry Paulson December 5 in Beijing.
Paulson led the U.S. delegation to the fifth session of the U.S.-China Strategic Economic Dialogue, which takes place every six months in alternating capitals. Chinese Vice Premier Wang Qishan led the host delegation.
Wang urged the United States “to take all necessary measures to stabilize its financial markets and economy as soon as possible and ensure the safety of China's assets and investments in the U.S.,” according to The Washington Post.
In his closing remarks, the U.S. Treasury chief said he briefed the Chinese on the U.S. government's steps to put its financial house in order. He welcomed China's moves to strengthen domestic demand and thereby reduce its dependence on exports for growth.
Paulson emphasized that China needs a “market-determined” currency to have balanced growth and to contribute to a healthy global economy.
The Chinese government has allowed its currency to appreciate more than 20 percent against the dollar since 2005, which has served to raise the price of Chinese exports and heighten the attractiveness of imported goods in China.
Nevertheless, China's trade surplus continues to soar to record levels, hitting $262 billion with the United States in 2007.
Before the two days of meetings began in Beijing, Paulson said China's currency appreciation is “significant, but it is important that the process continue.”
Paulson welcomed a move by the Chinese government to allow foreign banks to trade bonds on the same terms as Chinese banks. “Strong financial markets will enable healthy economic development across China,” he said.
The two Pacific trading powers voiced a common commitment to oppose protectionism, which becomes more appealing in some quarters in difficult economic times. The United States is determined to avoid a mistake that led to the Great Depression in the 1930s, the Smoot-Hawley Act, which raised tariffs and smothered trade.
“The Chinese economy, like the U.S. economy, depends on global trade,” Paulson said. He said both governments intend to make “meaningful progress” toward completing the Doha round of world trade negotiations before the end of December.
Speaking more concretely, the U.S. Treasury chief welcomed China's participation in the Financial Stability Forum (FSF). At the recent G20 meeting in Washington, countries agreed that membership in the FSF, which was established in 1999 by the G7 countries and which sets standards for cooperation and financial surveillance, should expand to include emerging-market countries. (See “Large World Economies Agree to Boost Growth, Tackle Crisis.”)
The two countries agreed to make available an additional $20 billion through their respective export-import banks to help finance trade for credit-worthy developing countries. This new infusion of credit will raise their contributions to trade financing for developing countries to $38 billion.
To deal with common concerns about energy and the environment, China and the United States signed a 10-year framework agreement to cooperate in those fields. The intent is to involve governments, academia, business and civil society groups to make electricity and transportation cleaner and more efficient and to reduce pollution in water, air, forests and wetlands.
To put some flesh on the framework, the two countries signed seven EcoPartnerships, which deal with energy efficiency, hybrid vehicles, clean air and water conservation.
For example, the Ford Motor Company and the Chang'an Automobile Company Ltd. will work together to build electric and plug-in hybrid vehicles. Another partnership involves cooperation between Greensburg, Kansas, which was flattened by a tornado in 2007, and Mianzhu City in Sichuan province, which was devastated by an earthquake this year. Both cities plan to rebuild using environmentally stable, green businesses.
Through this partnership, Paulson said, the United States and China will develop new industries and construction methods that will conserve energy and preserve the environment.
In the area of food and product safety, Paulson said the health ministries of the two governments will work together more closely to eliminate harmful and defective products and improve consumer confidence.
Outweighing the importance of the specific agreements reached at the meetings, Paulson said, is the value of direct engagement on common issues. By speaking directly to each other, China and the United States help each other manage periods of tension and transition and “build a stronger relationship that benefits our citizens and the global economy.”
A Treasury Department fact sheet on trade finance to emerging markets, a fact sheet on the U.S.-China Strategic Economic Dialogue, and the text of Paulson’s closing statement at the meeting are available on America.gov.
