Two years ago, the U.S. Treasury secretary, Henry Paulson Jr., left Goldman Sachs and joined the Bush administration while hoping to use his expertise and contacts to ease economic tensions with China. His other goal was to stop Congress from passing legislation that might make tensions worse.
Today, the administration of George W. Bush has won only limited concessions from China. But it is also breathing a bit easier about retaliation by Congress.
Legislation aimed at punishing China over its currency practices, which have kept the price of Chinese exports artificially low, seemed to have gained momentum early this year. But in the months before Congress shut down for the summer break, lawmakers and their aides say the prospects are low.
Paulson, meanwhile, will be leading a delegation of Cabinet members to meet with their Chinese counterparts in Annapolis, Maryland, next week at what could be the last round of high-level economic talks under the so-called strategic economic dialogue started in 2006.
U.S. officials say that while a number of specific trade issues have been resolved over the past two years, they are increasingly concerned that China is backtracking by using regulations, standards and other means to favor Chinese industry and shut out foreign competition
Paulson said Tuesday that he would press for a more open Chinese economy and convey "the concerns of American companies that China's investment regulations are opaque and seem in many ways to be designed to favor China's 'national champions."'
Overall, Paulson said from the Carnegie Endowment for International Peace, the United States-China relationship is "growing in a positive direction."
Some United States lawmakers may not share that view, but several factors appear to have taken the steam out of their willingness to act.
First, the recent devastating Chinese earthquake and the global response to helping its victims make this an inappropriate time in the eyes of some to be punishing China over its trade practices.
Second, although Congressional ire remains focused on China's intervention in the currency markets, the yuan has appreciated nearly 20 percent since mid-2005.
As a result, the growth of exports to China is now outstripping the growth of imports from China, and the China-United States trade deficit is heading slightly downward from its record level of $256 billion last year.
There is also a stubborn dispute in Congress between the approaches of two competing bills, one passed by the Senate Finance Committee and the other by the Senate Banking Committee, to punish China if it does not do more to let its currency appreciate.
Attempts are being made to resolve the differences, but the prospects are doubtful with a Congress caught up in other business and with the election campaign beckoning.
During the height of the Democratic primaries, the candidates expressed skepticism toward free trade in general. But now business leaders opposing trade sanctions say they are pleasantly surprised that an anti-China measure may not materialize.
"We're seeing a greater appreciation that exchange rates are complicated things," John Frisbie, president of the U.S.-China Business Council, said.
"There's also a growing recognition that China is now our third largest export market and that punitive measures to get China to move probably aren't going to get you to whatever the goal is."
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