Paulson: Food safety a top issue for U.S.-China talks

By Glenn Somerville

WASHINGTON (Reuters) - High-level talks in China next week will focus on down-to-earth issues like food and product safety, Treasury Secretary Henry Paulson said on Friday, even if currency issues are on participants' minds.

In a series of television appearances ahead of the next round of so-called "strategic economic talks" next Wednesday and Thursday, Paulson conceded the forum's bid to keep economic relations "on an even keel" has taken an unexpected turn.

"When we set this up last September ... I don't think anyone of us at that time saw product safety, food safety, the whole integrity of trade as being the key issue that it is today," he said on CNBC Television.

Nonetheless, "I would think that would be the top agenda item that we have" next week, he added. The discovery of tainted food items and dangerous children's toys imported from China fanned U.S. consumer anger earlier this year.

One of the United States' initial goals in setting up the talks was to push China to let its currency rise further, and Paulson uses every opportunity to call for faster currency reform, but controversy over food safety has partly overshadowed other issues.

"China has recognized the need to appreciate their currency and for greater currency flexibility," Paulson said on Bloomberg Television.

SPEED IT UP

"I don't want to use the word rapidly, but the pace of change has accelerated, they've moved it (the yuan) about 6 percent over the last year, they need to move it more quickly," he added.

Paulson said there was "growing awareness around the world" that China needed to adopt a more flexible currency to replace the current system of tightly managing its value.

European officials just finished a visit to Beijing to press their case that China's yuan, also called the renminbi, should rise further in value, but analysts said the countries representing China's export markets should join forces to make their case.

"Having the Europeans visit China one week, the Americans going the following week, is far from productive and it would make more sense to have all parties at the table at one time," said Domenico Lombardi, president of the Oxford Institute for Economic Policy and senior scholar at Washington's Brookings Institution.

Like American manufacturers have been doing for years, European producers increasingly protest they cannot compete with Chinese imports because they are unfairly cheaply priced.

SHARE THE BLAME

China's response is that Europe should complain to the Bush administration because the sagging U.S. dollar is a key reason for the euro's soaring value.

Next week's talks, at a convention center outside Beijing, will be the third round of discussions since the U.S. and China initiated the SED process last year.

Paulson is leading a delegation that includes Commerce Secretary Carlos Gutierrez, Health and Human Services Secretary Mike Leavitt. U.S. Trade Representative Susan Schwab and Environmental Protection Agency Administrator Stephen Johnson.

The talks take place right after another set of bilateral discussions, called the Joint Commission on Commerce and Trade or JCCT talks, that occur in Beijing on Tuesday.

Leavitt already has said that two agreements will be signed with China next week to ensure that food, animal feed, drugs and medical devices that China exports to the United States meet U.S. safety standards.

Food safety has become a specially sensitive issue as China accounts for a growing share of the food on Americans' plates.

Chinese food exports to the United States have grown rapidly in recent years, with the single biggest category, seafood, more than doubling since 2001 to nearly $1.93 billion in 2006. In addition, imports of animal feeds and food grains from China hit $195 million last year, more than six times the 2001 total.

(additional reporting by Doug Palmer and Mark Felsenthal)

(Reporting by Glenn Somerville)