Deal with China Likely to Benefit Delta, UPS; Nations Agree to Expand Air Service

May 24, 2007
Passenger and cargo flights between the U.S. and China will be expanded dramatically in coming years

Washington — Passenger and cargo flights between the United States and China will be expanded dramatically in coming years under a trade deal reached Wednesday, to the potential benefit of both UPS and Delta Air Lines.

The aviation agreement was one of several reached by U.S. and Chinese officials after two days of high-level talks between the two trading partners. But while travel and shipping may become easier, there was little progress on currency policy, which critics say China manipulates to make its exports cheaper.

"Piece by piece, we are making it easier, cheaper, and more convenient to fly people and ship goods between our two countries," Transportation Secretary Mary Peters said at a news conference concluding the second round of the U.S.-China Strategic Economic Dialogue, which began in December in Beijing.

The U.S. delegation of Cabinet officials, led by Treasury Secretary Henry Paulson, met with their Chinese counterparts to discuss several issues. The U.S. goal was to prod the Chinese to significantly reform their policies on currency values, copyright protections, subsidized industries, aviation agreements and more.

Under the aviation agreement, U.S. carriers will be able to operate 23 daily round-trip flights to China by 2012, up from 10 this year. In addition, the United States will be able to designate three additional airlines to fly to China.

Currently, Atlanta-based Delta is the largest U.S. carrier with no access to China. Delta has already planned to apply to fly to Shanghai, and the liberalized deal appears to boost its chances of success.

"We believe Delta is absolutely the best choice to be the next new entrant into China," Delta spokesman Kent Landers said. "An Atlanta-to-Shanghai route would fill a critical void" by linking the Southeast directly with China, he said.

The aviation agreement also allows U.S. air freight companies "virtually unfettered access" to Chinese markets by 2011.

Sandy Springs-based UPS, which is building a hub in Shanghai, applauded the agreement.

"We've been in China for quite some time, and we're certainly looking to expand further," UPS spokesman Malcolm Berkley said.

But U.S. officials failed to make progress on the hottest topic: currency policy. Many U.S. business owners and workers believe China intentionally holds down its currency value by as much as 40 percent to make Chinese goods cheaper in the global marketplace. They have been demanding that Congress impose trade sanctions unless China allows its currency to rise in value.

Although Paulson could point to no breakthroughs on currency, he spoke optimistically about U.S.-Chinese relations as he tried to head off congressional action. The Bush administration fears sanctions could trigger a damaging trade war with China.

"While we have much more work to do, we have tangible results for our efforts thus far," Paulson said. "These results are like signposts on the long-term strategic road, building confidence and encouraging us to continue moving forward together."

China's Vice Premier Wu Yi was far more upbeat, saying through an interpreter that the gathering was "a complete success."

Such assessments angered Kevin Kearns, president of the U.S. Business and Industry Council, representing small and medium-sized manufacturers. The talks were nothing but a "cynical Bush administration exercise in spin and PR," Kearns said in a statement. He urged Congress to pass legislation to stop Beijing's "predatory trade policies."

Agriculture Secretary Mike Johanns said U.S. officials raised questions about food safety, in light of recent reports about tainted Chinese foods and drugs.

The concerns were underscored earlier this year when many U.S. pets died after eating pet food made with tainted wheat gluten imported from China. Johanns did not announce any breakthroughs but said more meetings would be held on the issue.

Paulson said the two countries did make progress on energy, the environment and financial services. Among the agreements announced:

* China agreed to lift a prohibition on brokerage joint ventures and allow foreign banks to offer credit cards. That should help China develop a more consumption-based economy, which would increase their imports from the United States.

* China agreed to allow foreign insurance firms to offer more products there.

* The two countries will cooperate on demonstration projects for capturing methane at coal mines, and will develop "clean coal" technologies. China's widespread use of coal is seen by environmentalists as a major contributor to the rapid buildup of heat-trapping carbon dioxide in the atmosphere.

After meeting with the Cabinet members, Wu and other Chinese ministers headed to Capitol Hill to meet with lawmakers. Paulson predicted the Chinese officials likely would hear "some strong views" from Congress.

Wu also is scheduled to meet with President Bush today.


* By 2012 there will be 23 daily round-trip flights linking the U.S. and China, up from 10 now.

* Three more U.S. airlines will be designated to fly to China.

* Delta Air Lines plans to apply to fly to Shanghai.

* U.S. air freight companies, including Atlanta-based UPS, will have ''virtually unfettered access'' to China by 2011.

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