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U.S. presses China to honor trade promises

By Walter Brandimarte and Doug Palmer

NEW YORK/WASHINGTON (Reuters) - Commerce Secretary Gary Locke on Wednesday criticized China for failing to honor promises to open its market and said the United States would be pressing Beijing for better results in 2011.

"This type of behavior simply has to change," Locke said in a toughly worded speech just two weeks after Chinese President Hu Jintao met with President Barack Obama and members of Congress in Washington.

Locke said U.S. companies have concerns about China's trade practices in a number of areas but "the fundamental problem often boils down to the distance between the promises of China's government and its actions."

The stern tone reflects the pressure the Obama administration is under to achieve meaningful results on the ground for U.S. companies that have grown increasingly frustrated with business conditions in China.

U.S. officials said Hu made several promises during his January visit, including that China would not discriminate against products made with foreign technology when awarding lucrative government procurement contracts.

U.S. companies have worried that China's use of government procurement preferences to encourage "indigenous innovation" would force them to transfer technology in order to compete in the country's vast public works market.

Locke highlighted a pledge Chinese officials made in December to fight piracy of U.S. business software by increasing budgets for government agencies and large state-owned enterprises to buy legal versions.

"Of course, this dealt with a problem we thought we had solved in 2006, when China issued a regulation requiring government ministries to buy computers with licensed software pre-loaded. They just never put any money behind the commitment," Locke said at a conference organized by Bloomberg News in New York.

Locke, echoing a theme of Obama's State of the Union speech last week, also said the United States needed to do more at home to respond to competitive pressures from China.

"If you look at what China is doing, how they're focusing on core industries, putting all their policy weight and financial resources on specific industries ... they are really moving and getting results," he said.

"We need a similar strategy with respect to U.S. education policy, with respect to clean energy, transportation, you name it," Locke said.

Two senior U.S. trade officials echoed the need for tough monitoring of China's recent trade promises at a briefing for reporters in Washington.

Hu's Washington visit capped a year of progress on Chinese "indigenous innovation" policies that threatened to keep U.S. companies out of that country's huge government procurement market unless they agreed to transfer valuable technology, Deputy U.S. Trade Representative Demetrios Marantis said.

A major challenge in 2011 will be to ensure China actually keeps its promise not to use government purchasing at the central, provincial and municipal level to favor Chinese companies that use home-grown technologies at the expense of U.S. and other foreign firms, he said.

The United States also will be keeping a close eye on China's promises to increase use of legal software, crack down on Internet piracy and to maintain an open market for 3G and 4G telecommunication devices, said Claire Reade, assistant U.S. trade representative for China.

"The follow-up is going to absolutely critical because credibility matters and durability matters," Reade said.

(Writing by Doug Palmer, Editing by Bill Trott)

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