The increasingly shrill dialogue between the United States and China over economic issues should sound familiar to many Japanese. A swelling U.S. trade deficit with China has led to demands by Washington for the revaluation of the Chinese currency, threats of trade sanctions from Congress, and angry retorts about U.S. unilateralism from Beijing.

High-level economic talks — the Strategic Economic Dialogue (SED) — held last week revealed growing frustration on both sides. The truth now, as it was a little more than a decade ago, is that both economies have structural problems and fixing them will take time. The key is to avoid mistakes that could have destabilizing consequences for the world.

According to the U.S. government, two-way trade between the two countries reached $343 billion in 2006. The U.S. also marked up a historic $233 billion deficit with China at the same time, prompting U.S. demands that Beijing revalue its currency to trim its surplus. China tried to head off growing anger in Washington — and the calls for protectionist measures to forcibly rebalance the ledger — in July 2005 by ending its currency’s fixed exchange rate against the dollar. China revalued the currency by 2.1 percent and let it float within a limited band against the dollar and other currencies. To the consternation of U.S. officials — but not most economists — the yuan appreciated a mere 6 percent and has had no appreciable effect on the trade balance. Japanese should be feeling a sense of deja vu.

The SED delegation of 15 Cabinet officials — the largest high-ranking Chinese group to ever visit the U.S. — was led by Chinese Vice Premier Wu Yi. The group’s aim was to assuage U.S. concerns and to complain about trade actions taken against China. As part of the pacification strategy, Chinese delegations traveled the U.S. in the weeks before the talks to buy what is expected to be some $30 billion in U.S. goods. Many purchases were made in key congressional districts. Critics note that the sum is still about one-ninth the total value of what China sells to the U.S. each year.

Ms. Wu did not pull any punches when facing off against U.S. officials. While acknowledging the need to “accommodate, as appropriate, hot-spot questions in current China-U.S. economic and trade relations,” she complained that “we should not easily blame the other side for one’s own domestic problems.” In meetings with U.S. Trade Representative Susan Schwab and Commerce Secretary Carlos Guitierrez, Ms. Wu complained about the U.S. decision to file dispute actions against China at the World Trade Organization rather than work them out in forums such as the SED. “Politicizing trade issues is absolutely unacceptable,” she declared.

True enough, but U.S. action was triggered by growing frustration with China’s refusal to take serious steps against pirates or to end government subsidies. And it is far better that Washington — or any government for that matter — resort to the multilateral dispute mechanisms at the WTO rather than take matters into its own hands.

That’s the real danger of China’s failure to take U.S. complaints seriously, and to be fair, complaints of currency manipulation and illegal subsidies do not just come from the U.S. If the administration does not appear to respond, Congress will do something, and punitive tariffs are not beyond reason. To forestall that eventuality, Ms. Wu met with congressional leaders, but that discussion made little headway, as key lawmakers said that they had heard many promises from China before but had seen little real progress.

The SED was not just recriminations. The two countries agreed to an aviation accord that will more than double the number of flights between them by 2012 and China agreed to open its skies for cargo flights by 2011. They agreed to develop up to 15 large-scale coal-mine methane projects in China by the end of 2012. China also agreed to lift a ban on new securities joint ventures. Foreign banks will be allowed to issue local currency credit and debit cards, and the ceiling for investment in domestic financial markets for qualified foreign institutional investors will triple to $30 billion. China did not agree to the U.S. request to let foreign securities firms set up wholly owned subsidiaries and to raise ownership limits on foreign investment in Chinese financial institutions.

Ms. Wu and her U.S. counterpart, Treasury Secretary Henry Paulson, claimed tangible results after the talks. In fact, the real issues will not be settled by incremental adjustments, as Japanese trade negotiators well know. The imbalances in the U.S.-China trade relationship are structural. The U.S. spends too much, while China saves too much. Both need to address these concerns before populists take charge of trade policy and do real damage to each other — and the global economy.

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