US states balance China as both partner and rival (AP)

OLYMPIA, Wash. ? A group of U.S. governors is traveling to China this week to explore new economic relations, even as national political leaders escalate talks of sanctioning the country over trade policy.

Washington Gov. Chris Gregoire, who is leading the delegation in meetings Tuesday, said now is a vital time to be working diplomatically with China instead of intensifying disputes. China is by far the largest destination for Washington state exports, including apples and airplanes, accounting for about $10 billion in product, according to federal data.

"If you start playing around with threats, legislation and so on, then you put things at risk," Gregoire said in an interview. "We can't afford any of that risk. If they shut trade down on us as retribution for this, can you imagine the economic impact on our state?"

It's an issue that's increasingly moved to the forefront of federal politics. In a speech last week at Microsoft's campus in Redmond, Wash., Republican presidential candidate Mitt Romney said he wants American trade authorities to consider China's currency policies as a subsidy on Chinese goods, which would allow the U.S. to counter by placing duties on those imports. He also accused China of stealing American inventions.

A bipartisan group in the U.S. Senate, meanwhile, voted last week to threaten China with higher tariffs because of a dispute surrounding its currency valuation. That drew a rebuke from the Chinese Foreign Ministry, which warned that the measure would impede trade ties.

That bill has stalled in the U.S. House.

The yuan is undervalued against the dollar by 25 to 30 percent, according to most estimates, meaning that Chinese goods sold in the United States have a price advantage. In recent years, U.S. manufacturing jobs have fled overseas while the country's trade deficit with China grew from $10 billion two decades ago to $273 billion last year.

Ohio Sen. Sherrod Brown said in an interview that states need to continue to pursue trade with China, but he hopes that they carry a message: "We want more trade always, but we want you to play fair and we want you to follow the rules."

Brown said states can't fear threats of escalation from China. He noted that China relies heavily on exports to the United States, and he doesn't believe the Chinese would enter a trade war and jeopardize that.

"It's clear that we are too important to them for China to declare a trade war on us," Brown said.

White House officials have not formally opposed the bill but have indicated discomfort with it, citing concerns about legislation that might violate international trade rules.

North Carolina Gov. Beverly Perdue is among the governors in the delegation to China this week, even though her state's manufacturing sector ? particularly furniture ? has suffered for years due to competition from Chinese imports. She sees China as a potential destination for a variety of other state sectors, such as energy, aerospace and pharmaceuticals export destination.

North Carolina's exports to China have tripled over the past five years, making it the second largest destination for the state's exports behind Canada.

"While the furniture market may have gone overseas, the opportunity there is to invest in other sectors and grow jobs," said Perdue spokeswoman Chris Mackey. "There is an opportunity to bring jobs to North Carolina."

The delegation that Gregoire is leading ? including governors from Georgia, North Carolina, Hawaii, Guam and Northern Mariana Islands ? will meet with provincial leaders in China to begin sub-national economic talks. Gregoire said they will largely focus on the logistics of setting up business relationships and getting comfortable with each other.

Gregoire said the links could also provide an opportunity to expand U.S. efforts on issues of fairness, such as protecting intellectual property, though she plans to discuss those issues privately instead of during the public meetings.

Gary Locke, the U.S. ambassador to China and former governor of Washington, is holding a reception for the group. The talks, encouraged by the State Department, will allow state-level leaders to begin coordinating economic development without needing to go through the federal governments in both countries.

"It's hard to get through the maze over there to do business," Gregoire said.

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Mike Baker can be reached at http://twitter.com/MikeBakerAP

Source: http://us.rd.yahoo.com/dailynews/rss/economy/*http%3A//news.yahoo.com/s/ap/20111018/ap_on_re_us/us_governors_china

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