ANNAPOLIS, Md. – The United States and China must increase their cooperation on energy issues in the face of increased demand and record high oil prices, Treasury Secretary Henry Paulson said Monday as he opened a meeting of high-level economic officials from the two countries.
The session, the fourth in a series, was held on the campus of the U.S. Naval Academy. The Chinese team was being led by a newcomer, Vice Premier Wang Qishan, who took over after the retirement earlier this year of former Vice Premier Wu Yi.
"As the two largest net importers of oil, China and the United States face similar challenges as demand for energy increases," Paulson told the conference.
It was Paulson's fourth time to head a U.S. delegation of Cabinet officials in such a conference. The Chinese team was being led by a newcomer, Vice Premier Wang Qishan, who took over after the retirement earlier this year of former Vice Premier Wu Yi.
In his opening remarks, Wang said that substantial progress had been made in dealing with contentious issues such as currency and the trade deficit and he urged patience going forward. He also said the two countries needed to avoid "complicating and politicizing economic issues."
"Our cooperation is an irreversible and unstoppable current," Wang said. "China needs the United States and the United States needs China."
Paulson led a large U.S. delegation that included a number of Cabinet secretaries including Commerce Secretary Carlos Gutierrez, Labor Secretary Elaine Chao and Health and Human Services Secretary Michael Leavitt.
Paulson came up with the idea for the high-level talks, dubbed the Strategic Economic Dialogue, when he joined the Bush administration in 2006 after leading investment giant Goldman Sachs.
However, hopes that the discussions could produce significant results on a number of contentious trade disputes have not been fulfilled. Paulson, who is hoping that the discussions will be continued by the next administration, said Tuesday that they had produced more results than could have been accomplished absent the twice-a-year meetings. He said it was important for the global economy that the two nations continue talking.
"The United States and China don't always agree on economic issues," he said. "Sometimes we may disagree quite strongly, but we keep talking."
Business groups, which believe the meetings have been beneficial, said it would be wise for the Chinese to produce results as a way of convincing the next occupant of the White House to keep the talks going. But other China experts say the Chinese delegation may believe that it is not worthwhile to offer too many economic concessions to a lame-duck administration when they can wait to negotiate with a new team.
This week's talks are being held at a time when the U.S. trade deficit with China has jumped to an all-time high of $256.2 billion, the largest deficit ever recorded with a single country and an amount equal to nearly one-third of America's total trade deficit of $700.3 billion last year.
The two days of talks are expected to focus on the challenges both countries face with rising energy and food costs. China is the world's biggest consumer and producer of coal. Pollution from its coal-fired industries is believed to be a major factor in global warming.
But a U.S. effort to get China to promote greater energy efficiency as a way of reducing strains on global supplies is unlikely to achieve much success. That's because the Chinese have been moving in the opposite direction, providing ever greater subsidies to keep energy prices low as global prices have surged.
The soaring trade deficit with China is blamed by critics as a major contributing factor in the loss of more than 3 million U.S. manufacturing jobs since 2001. U.S. executives say the undervalued yuan makes Chinese goods cheaper in this country and U.S. products more expensive in China.
The Bush administration acknowledges that the Chinese have allowed their currency to rise in value by about 20 percent against the dollar since July 2005, but U.S. officials contend that more needs to be done.
The administration also wants the Chinese to open their financial system to foreign banks and investment houses, including major U.S. institutions, as a way of gaining needed expertise. However, that effort is meeting strong resistance from the Chinese, given the billions of dollars in losses suffered by U.S. financial giants in the credit crisis that erupted last August.
Major business groups like the National Association of Manufacturers, the U.S. Chamber of Commerce and the Financial Services Forum believe the high-level talks have been worthwhile. But other groups have been more critical, saying the discussions have been a waste of time and Congress should move ahead with legislation to penalize China for its currency policies.