By  on July 11, 2005

WASHINGTON — Trade in textiles and apparel promises to play a key role in meetings today between U.S. Trade Representative Rob Portman and Commerce Secretary Carlos Gutierrez and their Chinese counterparts.

The meetings in Beijing come at a time of increased tension between the two countries, particularly since Congress has voiced strong opposition to the proposed acquisition of U.S. oil concern Unocal Corp. by the Chinese firm CNOOC. The tensions over oil supply, along with dramatically increasing apparel and textile imports, provides the beat for a delicate diplomatic dance between the two global economic powers, which began again Friday with preliminary talks.

China is expected to push for a comprehensive agreement on textile and apparel imports, which could provide more certainty and replace the safeguard quotas that currently hold $1.31 billion worth of Chinese imports to 7.5 percent growth a year, possibly until the end of 2008. The European Union avoided implementing safeguards by cutting a deal that allows for more growth, but ends earlier.

China's Commerce Minister Bo Xilai has described safeguards as "a move of protectionism" that has met with "strong dissatisfaction" in Beijing.

Chinese leaders today have a better understanding of the West than their forebears, said Gutierrez while updating the Real Estate Roundtable on talks last month.

"What I saw this time at the ministerial level were people educated here in the U.S., in the U.K., very sophisticated…knowledgeable of how business works," he said.

That might not be a benefit to the U.S. at the negotiations, though.

"They understand the system better, so they know the buttons to push," Nicholas Lardy, a senior fellow at the Institute for International Economics, said.

Despite strong philosophical roots, China's negotiators are described as being very pragmatic.

"The Chinese are not particularly ideological during negotiations," said Charlene Barshefsky, U.S. trade representative under former president Clinton who is now an international business attorney. "If a solution can be presented that ensures that China will benefit from its strengths in exporting, while at the same time providing some relief to the U.S., particularly with respect to U.S. political pressure, the Chinese can be expected to react in a more favorable manner."Knowing China's goal is a big first step toward dealing effectively with the country, said Auggie Tantillo, who was deputy assistant secretary of commerce for four years ending in 1993.

"The Chinese are consistent in many things, and one of them is pursuing their interest," said Tantillo, now executive director of the American Manufacturing Trade Action Coalition, a textile industry lobby group pushing for restraints on China. "I would describe them as extremely patient. They know what they want and they're willing to wait until they get it."

With the administration pushing China to strengthen the enforcement of its intellectual property laws and adjust its currency policies, there will be a lot more on the table than just textiles.

"The economic interests of the U.S. are quite different than the political interests," said Ira Kalish, Deloitte Research's global director of consumer business.

The U.S. also has to contend with the varying concerns of domestic textile firms and importers, and with a free-market ideology within the administration that clashes with the views of some Congressional lawmakers whose districts have been hit hard by globalization. The Bush administration is also trying to help push forward the Central American Free Trade Agreement, which faces an uphill battle to pass the House.

"The U.S. has some seriously conflicting goals, where the Chinese just want to have their apparel industry grow," Kalish said.

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