Paulson: Trade tensions 'natural'

U.S. Treasury Secretary Henry Paulson (L) shakes hands with Chinese Vice Premier Wu Yi during a meeting at Beijing airport March 7, 2007. [Reuters]

WASHINGTON - Treasury Secretary Henry Paulson said late Friday he wants to keep the United States' economic relationship with China on an "even keel" amid rising trade tensions between the two nations.

Speaking to reporters on the sidelines of meetings between Group of Seven finance ministers, days after Washington formally lodged a WTO complaint on Chinese copyright piracy, Paulson said it was natural for some trade tensions to occur.

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"When you have trade and strong economic relations there are going to be tensions, we have mechanisms in place to deal with some of those tensions, we have WTO processes," the US treasury chief said.

"My job is to work with my Chinese counterparts and work on this relationship which is multi-faceted. But the economic relationship is going to be very important, we want to keep that on an even keel," the former Goldman Sachs chief stressed.

The US government lodged its complaint before the World Trade Organization in Geneva on Tuesday as fake DVDs and counterfeited luxury goods soured relations between the two trading giants.

Under WTO rules, the two countries have 60 days to try to iron out their differences in bilateral negotiations.

If they do not reach agreement, Washington will have the right to demand WTO arbitration.

The United States could then gain the right to impose retaliatory duties and tariffs on Chinese imports if a WTO settlement panel ultimately rules in its favour.

Paulson appeared to be optimistic that the United States will be able to resolve its trade disputes with Beijing, especially against the backdrop of the two countries' deepening trade relations.

"I tend to look at it as a glass half full rather than a glass half empty," he said, saying that "five years ago we didn't have a lot of trade with China and today we do have a lot of trade, and as far as I'm concerned this benefits both countries."

Earlier Friday, US government figures showed America's politically sensitive trade deficit with China shrunk 13.3 percent from a month earlier to 18.4 billion dollars.

Despite the drop, the US trade gap with China still represents about a third of the overall US deficit with its major trading partners.

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