Commerce secretary says progress on trade with China a slow, five-step process

But then, the law needs to be "faithfully implemented" by the central government, and then again by local and provincial officials.

"Only after all these things have happened can you arrive at the fifth, final and most important step, which is where this new law or regulation becomes a norm — an accepted way of doing business in China's commercial culture," Locke said. Locke's comments come just days before Chinese President Hu Jintao's Jan. 19-20 visit to the U.S., and just one day after Treasury Secretary Timothy Geithner spoke about the need for China to do more to let its currency appreciate.

Locke acknowledged that China's failure to always take all five steps is an "enduring frustration," and said that in "too many cases," only the earliest steps are taken. He said this has happened on issues such as intellectual property rights enforcement, indigenous innovation (a Chinese plan to promote the development of domestic companies over non-Chinese companies, which has since been tempered), and a range of other issues that the United States thinks thwarts U.S. exports to China. As a result, he said the Obama administration would employ "constant vigilance" to ensure that China lives up to its trade commitments.

In recent years, it has become clear that constant vigilance is not enough for Congress, which has gotten closer to passing legislation dealing with China's currency policy. (Locke did not mention currency in his speech today, since currency issues are being managed by the Treasury Department.)

The House last year passed a bill that would instruct the Commerce Department on how it can apply duties on imports to make up for undervalued currencies. While the Senate did not act on that bill in the lame-duck session, congressional ire could be roused again when the Treasury Department releases its overdue report on foreign currency policies. Treasury delayed the latest report from its Oct. 15 due date, and Treasury officials said today that no date has been set for its release, although most expect it will be released sometime after Hu's visit.

Assuming Treasury again declines to cite China as a currency manipulator, Senate Democrats may well be motivated to pursue legislation again. There is less of a threat in the House, as Republicans in that chamber have indicated they would not move a bill on currency in the 112th Congress, even though there was broad support in the House last year.

Regardless, Treasury appears to be working with China closely on currency again. According to Treasury, Under Secretary of the Treasury for International Affairs Lael Brainard was in Beijing late last week with Vice Premier Wang Qishan, and Brainard was accompanied by other senior-level Treasury officials. Treasury would say only that they discussed "economic issues" in the run-up to Hu's visit.

But the visit has some private industry groups wondering if they are working on the beginning of an agreement that would allow for a faster appreciation of the yuan. Yesterday, Geithner seemed to offer the outline of a possible agreement when he said the U.S. wants movement on currency, while China wants more access to U.S. high-tech products, more investment opportunities in the U.S., and treatment as a market economy, which would likely give Chinese exporters some benefits in anti-dumping cases.

"We are willing to make progress on these issues, but our ability to move on these issues will depend of course on how much progress we see from China," Geithner said yesterday.

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