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TRADE WARS
Landmark Swiss-China free-trade deal comes into force
by Staff Writers
Basel, Switzerland (AFP) July 01, 2014


Lew says China's currency still undervalued
Washington (AFP) July 01, 2014 - US Treasury Secretary Jacob Lew on Tuesday said China's yuan currency remains undervalued, a longstanding sore point that will be raised at next week's high-level bilateral negotiations in Beijing.

Lew said that the yuan, or renminbi, has appreciated 14 percent since 2010, when China began taking small steps to allow its currency to trade more freely.

"It still needs to appreciate more. It's undervalued," said Lew, who will lead the US economic team at the US-China Strategic and Economic Dialogue (SED) in Beijing next Monday and Tuesday.

The value of the yuan is a highly sensitive political issue in relations between the world's two largest economies. The United States, while not branding China a currency manipulator, which could entail sanctions, has long insisted the weak yuan gives China an unfair trade advantage.

Lew reiterated the US push for China to allow the yuan to trade at a market-determined foreign exchange rate.

"It's fundamentally not fair in terms of trading practices," Lew said at an event in Washington sponsored by the US-China Business Council.

Economic reforms set out in China's third plenum reflect US concerns "at a conceptual level" but have been slow to be implemented, he said.

Lew said he was "frustrated at the pace of change" and that if China dragged its heels in reforming for five or 10 years, it was "potentially disruptive" to the global economy.

The US needs confidence that the Chinese government is not intervening in the forex market to benefit trade. "Transparency will be a very important first step," he said.

Lew and US Secretary of State John Kerry will lead the US delegation to the sixth meeting of the SED.

The two men will be joined by their Chinese co-chairs State Councilor Yang Jiechi and Vice Premier Wang Yang.

The State Department said the talks will address "the challenges and opportunities that both countries face on a wide range of bilateral, regional and global areas."

A watershed free-trade deal between China and Switzerland came into force on Tuesday, the first such accord between the Asian giant and a mainland European economy.

Marking the start of the Free Trade Agreement (FTA), Swiss Economy Minister Johann Schneider-Ammann and Chinese trade envoy Yu Jianhua presided over a ceremony in the northern city of Basel.

"This is a real chance for Swiss and Chinese businesses alike," Schneider-Amman told reporters.

"Our economy needs access to markets for its goods and services. The Swiss domestic market alone is too small for our economy and our labour market to prosper, and this is the consideration which shapes our foreign economic policy," he said.

"I am convinced that both sides will benefit from this agreement," he added, noting that Swiss industrial and farm goods would benefit from Chinese tariff cuts, while China's industrial products would have duty-free access to Switzerland.

The deal also bolsters intellectual property protection for Swiss goods -- a persistent concern for Western firms on the Chinese market, though Beijing has stepped up its battle against the pirates.

Yu, a key FTA negotiator and China's ambassador to the World Trade Organization (WTO), echoed Schneider-Ammann's remarks.

"This FTA is a historic step that will cement our economies," Yu said.

"It will also further help the process of reform and opening," he added.

As the two officials looked on, a crane hauled a shipping container marked "Switzerland-China FTA" from a barge on the River Rhine, symbolising Chinese imports, and loaded another in honour of Swiss exports.

The Rhine has long been landlocked Switzerland's link to maritime commerce, with Basel still accounting for 40 percent of Swiss exports and 12 percent of imports.

The FTA was signed in Beijing July 2013, capping two years of talks between China and Switzerland.

- 'Small is beautiful' -

The deal is China's second with a European country after Beijing signed an FTA with economic crisis casualty Iceland in April 2013.

Neither Iceland nor Switzerland -- whose prosperous economy emerged relatively undented by the crisis -- is a member of the European Union.

Beijing has been pressing Brussels for a similar FTA, but efforts on that front are more complicated because China would need to find agreement with the entire 28-nation bloc, and the two sides are locked in a series of tit-for-tat trade disputes.

The EU is China's top export market, while China is second to the United States as a destination for EU exports.

But the balance is heavily in China's favour.

While EU exports to China reached a record 148.1 billion euros ($191.8 billion) in 2013, Chinese exports to the EU were worth 279.9 billion euros ($382.4 billion).

Switzerland has a relatively narrow trade deficit with China, its third-ranked partner after the EU and the United States.

In 2013, its exports to China were worth 8.8 billion Swiss francs (7.2 billion euros, $9.9 billion), and Chinese imports, 11.4 billion francs (9.38 billion euros, $12.8 billion).

Switzerland's top exports to China are precision machinery, pharmaceuticals and chemicals and watches, while machinery and textiles head the list of imported Chinese goods.

With their strong Swiss franc and high labour costs making it hard to beat rivals on price, Swiss firms have long made quality their selling point.

The nation of eight million people is dwarfed by behemoth China, but Yu said the deal represented an equal partnership.

"Switzerland is small. But small is beautiful. The small country is looking for a big market, but the big market, China, we are looking for the quality of the economy. We are upgrading our economy, we are looking for a partnership of quality," he said.

FTAs, including a planned EU-US accord and a proposed trans-Pacific agreement, are solidly in focus as the 160-nation WTO struggles to craft a global treaty on liberalising international commerce, a process launched in 2001.

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TRADE WARS
Lew says China's currency still undervalued
Washington (AFP) July 01, 2014
US Treasury Secretary Jacob Lew on Tuesday said China's yuan currency remains undervalued, a longstanding sore point that will be raised at next week's high-level bilateral negotiations in Beijing. Lew said that the yuan, or renminbi, has appreciated 14 percent since 2010, when China began taking small steps to allow its currency to trade more freely. "It still needs to appreciate more. ... read more


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