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Geithner to press China on trade barriers, yuan

By Laura Myers

TACOMA, Washington (Reuters) - U.S. Treasury Secretary Timothy Geithner said on Tuesday that a stronger Chinese yuan would help level the playing field for American exporters, but he would focus mainly on reducing trade barriers in talks with Beijing next week.

Geithner said he was confident China would determine that a more flexible exchange rate regime was in its interests. He was speaking at the Port of Tacoma to highlight growing U.S. exports to China.

"China moving again toward reforming its exchange rate regime will allow the exchange rate to reflect market forces. This is a very important part of our efforts to make sure our firms are placed on a level playing field," Geithner told a news conference.

Asked if he needed a contractual agreement with China on the yuan to show progress, he said: "I don't think we do. I think China needs to just demonstrate to the world that it's able to take actions that are enormously in their interest."

After a rain-soaked tour of stacked shipping containers, Genie port cranes and Caterpillar tractors ready for export, Geithner said he was concerned about a new Chinese industrial policy that could discriminate against U.S. companies.

"INDIGENOUS INNOVATION" CRITICIZED

He said China's new "indigenous innovation" program would provide preferential treatment to some domestic companies and products in government procurements, and he was concerned that this would put U.S. exporters at a competitive disadvantage.

"American companies are very concerned that this approach has the potential to discriminate against foreign-made products and could disadvantage American exporters and investors as they compete with Chinese firms," Geithner said. "We share these concerns."

He said the Chinese government had taken some steps to address these concerns, "but we have some more work to do in this area."

Geithner and several Obama administration officials, including Secretary of State Hillary Clinton, Commerce Secretary Gary Locke and U.S. Trade Representative Ron Kirk are due to meet their Chinese counterparts on May 24-25 for the bilateral Strategic and Economic Dialogue talks.

Geithner's comments echoed those of Kirk, who said in Washington earlier that he would use the talks to pressure China to step back from preferences for local companies and press for stronger protection of intellectual property.

Geithner said the Obama administration would press China to reduce subsidies and other preferences to domestic companies.

"We want China to give American firms the same opportunities to compete in China that Chinese firms face in the United States. This is a simple principle of fairness," he said.

Geithner said the U.S. economy was "getting stronger" and that Main Street was starting to experience a recovery, due in part to growing exports.

China's rapid growth was important to keeping U.S. exports growing he said, noting that in the first quarter exports to China grew by nearly 50 percent over the same period of 2009 and rose by 20 percent to the rest of the world.

China also was buying more U.S. exports because of a shift in its economy toward more domestic consumption and less reliance on exports. At the same time, the United States is saving more and shifting away from consumption-led growth.

"We want to make sure they're growing rapidly, and therefore able to expand opportunities for American companies. And how they grow matters," he said.

(Reporting by David Lawder)

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