Tainted Chinese products causing 'fear and uncertainty'

WASHINGTON -- Treasury Secretary Henry Paulson said Tuesday that the recalls of tainted Chinese products were causing fear among U.S. consumers. He called on China to take bold moves to address that and other economic problems facing the two countries.

He said both countries needed to work together to address safety issues that have been raised about a host of Chinese products. from tainted toothpaste to toys containing lead paint.

"Recent and repeated reports of tainted food and product imports are causing fear and uncertainty in American consumers and harming the 'Made in China' brand here in the United States," Paulson said in a speech to the George H.W. Bush China-U.S. Relations Conference.

He said China needs to refocus its economy, fight off protectionist forces and address the growing concerns about tainted Chinese imports.

Wang Chao, an assistant minister of foreign affairs for China, said the Chinese government was paying great attention to the issues of export quality and safety.

"The Chinese government has carried out thorough investigations and rigorously penalized the offenders," Wang said after Paulson's address.

Paulson said the effectiveness with which China addresses the safety concerns will have long-term implications for U.S.-China trade relations. He cautioned that policymakers in both countries should focus on science-based safety decisions rather than "protectionism or retaliation."

Last year, the administration began a new series of high-level talks with the Chinese aimed at addressing growing trade tensions between the two nations that have been triggered by America's record trade deficits with China. U.S. manufacturers and many members of Congress blame those deficits on unfair trade practices by the Chinese such as keeping the value of China's currency artificially low against the U.S. dollar to gain trade advantages.

Paulson said China should allow its currency to rise at a faster rate against the dollar, a change that he said would make it easier to implement other needed economic reforms in the country and to control rising Chinese inflation.

"Bold structural policies are needed to shift China's growth away from heavy industry, high energy use and dependence on exports towards greater reliance on domestic demand, greater production of services and greater provision of material well-being to China's population," Paulson said.

Paulson said that the needed reforms in China were being resisted by "increasingly influential Chinese businesses."

Even with all the recalls of Chinese imports, the U.S. trade deficit with China is on a pace to exceed last year's record.

U.S. manufacturers contend that the yuan is undervalued by as much as 40 percent, making Chinese goods cheaper for U.S. consumers and American products more expensive in China.

Paulson said that the new Strategic Economic Dialogue with China, which will next meet in Beijing in December, was showing success in such areas as civil aviation, energy and financial services. He said he hoped the next administration would continue the dialogue but that the key to that decision will be "demonstrating that it works."

The strategic dialogue talks will take place in Beijing the week of Dec. 10 following a meeting of the U.S.-China Joint Committee on Commerce and Trade, a discussion the two nations started in 1983 in an effort resolve trade disputes.

Commerce Secretary Carlos Gutierrez said Tuesday that the administration would use this year's JCCT meeting to discuss barriers the Chinese have erected that prevent a variety of American companies from doing business in China. He said that U.S. telecommunications companies are barred from selling basic services while banks, securities firms, insurance companies and direct-sales marketing firms face a variety of obstacles.

"There are whole sectors of the Chinese economy where American companies are restricted from investing, doing business or offering services," Gutierrez said.