Treasury secretary polls industry leaders before China trip


By Eoin Callan
Financial Times, London
Sunday, December 3, 2006

Hank Paulson, US treasury secretary, will on Monday begin a series of discussions with industry leaders to hammer out the Bush administration's policy towards China ahead of a high-level delegation to Beijing next week.

The former head of Goldman Sachs, an investment bank, will on Monday meet executives from manufacturing companies, including Procter & Gamble, before on Wednesday sitting down with financial services companies -- including Citigroup -- as well as those from other sectors.

A Treasury official said Mr Paulson was "reaching out on his China agenda" before heading to Beijing for a "strategic economic dialogue" that will include top-ranking cabinet officials and Ben Bernanke, Federal Reserve chairman.

The delegation will press for greater currency flexibility, but Mr Paulson also wants to cultivate an intimate discourse about long-term economic goals with the Beijing leadership, many of whom he knows personally from his time at Goldman.

Mr Paulson's negotiating tactics will on Monday be questioned by impatient manufacturers, who blame China for fuelling a record US trade deficit of more than $200bn by maintaining a cheap currency.

Frank Vargo, from the National Association of Manufacturers, said executives would "make sure he understands how frustrated manufacturers are over China's currency", suggesting there would be a "pretty vocal back-and-forth discussion".

Mr Vargo praised the Treasury secretary as "a guy who exudes confidence he can get the job done", but said there was demand for "action early next year" from key figures such as Doug Oberhelman, head of Caterpillar, and John Surma, president of US Steel.

Some manufacturers are understood to be ready to throw their political and financial weight behind Democratic lawmakers who are threatening to initiate punitive sanctions against China in the wake of the mid-term elections.

But among financial services groups there is support for Mr Paulson's patient pursuit of reforms that would give them access to sectors such as pensions, insurance, and broking.

Jeremie Waterman, a director at the US Chamber of Commerce, said the goal of the dialogue for business was to "institute practices to allow mergers and acquisitions, allow trade and allow capital to flow freely." He said there was widespread corporate backing for Mr Paulson.

Susan Schwab, the US trade representative, will also meet business leaders this week as she prepares for the China visit and holds separate talks with South Korea in Montana in a frantic bid to reach a free-trade deal.

The five-day negotiations with South Korea are seen as the last chance to agree the outline of a bilateral trade pact before President George W. Bush's special fast-track trade promotion authority expires this summer.

A US trade official said: "We need to move the ball down the field this week to have a realistic chance of completing a deal in time."

Negotiators were downbeat about the prospect of a breakthrough despite signs of US concessions on the most politically-sensitive issues for Seoul, where there have been mass protests against the deal.

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