*/http://www.thewashingtonnote.com/archives/002144.php#more/*
*/The Nelson Report by Chris Nelson, 23 May 2007/*
*//*
It may be that we are cranky because the meds are wearing off from
our root canal this morning (just a swell way to start the workday)
but it doesn't sound like the US-China cabinet level SED "dialogue"
went all that well. In fact, there is some evidence it was a disaster.
So you have to ask if it will end up being the end. Barring some
major breakthroughs at the JCCT, it doesn't sound like there will be
any point in meeting again, as scheduled, in December.
This morning's session was called early. . .the game was stopped in
what would normally have been the 6th inning. As one experienced
China-hand asked, rhetorically, "you telling me Wu Yi came over here
with 14 of her cabinet members and they couldn't find things to talk
with us about?"
"Results", with one or two exceptions, either were minimal, or not
what Secretary Paulson seemed to expect. And at the closing press
conference, the Chinese didn't even pretend they had had a good
time. Madam Wu Yi read her statement, and walked off. No pretence of
a friendly hug for the US side.
At yesterday's press briefing, journalists were urged not to see the
SED as an negotiating "event", but, rather, as a "discussion".
Negotiations and "results", it was argued, are for the JCCT process
chaired by Commerce.
Hummmm.
Today, an impertinent ink-stained scribbler asks, privately, "if
Treasury chairs the SED, and Paulson isn't allowed to press his case
on currency, and to get a Chinese response, what's the point?" In
fact, sources indicate there was some "heated dialogue" on currency.
But the bottom line is the same...after all the US pressure, all it
got was last week's very minimal "float", increasing the maximum
daily trading band by 0.2% to 0.5% total. . .exactly half what
Bretton Woods defines as a "fixed rate".
So you have to wonder if this time, Paulson's patience has worn out,
and the still-delayed Treasury report to Congress on undervalued
currencies will. . .finally. . ."cite" China. Since that would
formally kick-off mandated "negotiations", you have to wonder how
Beijing would react, given its clear public heartburn over the IPR
and other WTO cases.
Finally, you have to wonder how long it will take Ways & Means
chairman Charlie Rangel to decide that maybe moving some China
currency legislation is a small price to pay for Democratic Caucus
approval of his Labor and Environment deal.
One normally hesitates to ascribe too much to the theater of body
language, but here's something that just bashes you right between
the eyes: Paulson, the guy with 72 private trips to China, all that
hands-on experience, he who told the White House, State and USTR not
to worry, that he would be the China Guy in this Administration...at
the closing press conference, Paulson stalked in, well ahead of Wu
Yi, and then started reading his statement before she even reached
the podium.
Excuse me? An American or European would have cold-cocked the
President for such calculated rudeness! In China (Japan, Korea,
etc.) you watch older married couples walk into someplace. . .the
husband is 10 feet in front, and the subservient wife is dutifully
plodding behind. You think for one minute that elderly maiden lady
Wu Yi didn't catch the insult here?
Or, are you telling us Paulson didn't mean it, that he was so
focused on reading his prepared statement he didn't think? NONSENSE.
This was a calculated act of rudeness which told everyone in the
room, and anyone watching on TV, that a major failure had taken place.
Further evidence of a Paulson snit. . .he seemed to go out of his
way to be rude to an Asian journalist, who had to ask him four
times, in very good english, something about the N. Korea/Macao
money problems Treasury is having with State (see separate item in
tonight's Report). Paulson pretended not to be able to understand
what everyone else in the room got the first time.
Is there a less personal problem going on? Perhaps Labor Secretary
Elaine Chao, speaking to reporters last night, sensed today's
result, when she said that from what she'd seen so far, even though
she herself is of Chinese descent, "it's much harder than anyone
thinks for the two countries to communicate". "Maybe", she mused,
"we just have very different styles. . ."
Even if you discount Paulson's rudeness to his alleged friend as
somehow unintentional, witnesses agree that something definitely was
"missing" today. Commented one, privately, "it was as cold as ice in
there. The Chinese just looked like they wanted to get off the stage
quickly. They really didn't bother to put on a show for the cameras
back home."
Maybe that was the point? Certainly, Chinese officials had made very
clear their displeasure at the Administration's decision to start
those three WTO cases at the beginning of April. . .that was a major
point of Wu Yi's "frank" opening remarks yesterday.
And perhaps that explains why Paulson got nothing on something which
he had already, in a sense, "leaked" to the press. . .China lifting
it's 25% foreign ownership cap on domestic bank investment. Nope. .
.not this time.
And even with yesterday's OIE announcement of "controlled risk"
clearance of US beef exports, no one hinted if the US asked China to
at least agree to talk about its continuing ban later on. . .much
less did anyone say something specific today, despite the obvious
political importance for pro-trade/pro-China trade senators like
Finance Chair Max Baucus, and former chair Chuck Grassley.
OK, OK, so Paulson & Co did get a few things. . .the airlines deal
is useful; China said it would remove its moratorium on allowing new
foreign securities firms into the market. . .something it had hinted
about last December; and the Chinese said that US insurance firms
can get into the brokerage and property trading business, as US
companies had been asking (although an insurance source said,
basically, "nice, no big deal").
So. . .step back a few feet. What happened? Is Chao right? Have we
run into a clash of negotiating cultures? Are we discovering that
when China considers itself an equal, does that change the whole
"negotiating game"? Does that mean that when the Administration. .
.finally. . .pulled the trigger on some narrowly drawn WTO cases,
that when it also asked China for "deliverables" at the SED it was
giving self-destructive offense to Beijing?
Somehow you think that by now, Chinese officials and negotiators are
a lot more sophisticated than that. So maybe it was the substance,
and capacity of the US negotiators?
Who knows? But one thing for sure, dressing up this SED as something
which really moved forward the "responsible stakeholder" concept is
delusional.
A final, frankly nasty thought: getting nothing on currency was not
a surprise, of course, given the Chinese movement last week (/Nelson
Report/, May 18). . .but this then raises a rather embarrassing
question for Paulson personally: We noted in our coverage of his
performance at a CSIS/PIIE currency conference (/Nelson Report/)
that when unscripted, he has trouble putting two coherent sentences
together. A friend in Beijing said he noted the same thing when
Paulson was there last December. You have to ask if this guy is
rich, tall, tan. . .and. . .and. . .