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U.S., China agree to negotiate export credit deal

By Doug Palmer

WASHINGTON (Reuters) - The United States and China agreed on Tuesday to open talks on setting guidelines for export-credit financing, an area where Beijing's aggressive practices have raised U.S. concerns.

The White House said the United States and China would establish an international working group that included other major providers of government-backed loan guarantees "with the goal of concluding an agreement by 2014."

The announcement followed a meeting between President Barack Obama and China's leader-in-waiting, Vice President Xi Jinping.

The two sides agreed to make "concrete progress towards a set of international guidelines on the provision of official export financing that, taking into account varying national interests and situations, are consistent with international best practices," the White House said.

The United States, the 27 nations of the European Union, Australia, Canada, Japan, South Korea, New Zealand, Norway and Switzerland already have rules on the use of government export credits under the Organization for Economic Cooperation and Development, a rich nations club.

China is not party to that pact and U.S. companies have complained that its cheap government-backed financing often makes it difficult to conclude sales.

"This is a welcome development, because China is not now under any export financing disciplines at all," said Frank Vargo, vice president for international economic affairs at the National Association of Manufacturers.

"China is outside that (OECD) pact and has been undercutting everyone," Vargo added, although he cautioned the reference in the White House statement to varying national interests and situations creates a "huge loophole" that could render any agreement with China meaningless.

The U.S. Treasury will lead an effort with China and other international partners to develop one set of rules to be followed by all major providers of export financing, a U.S Treasury spokeswoman said.

"UNILATERAL DISARMAMENT"

The move comes as the U.S. Export-Import Bank, the country's official export credit agency, is up for reauthorization in Congress and facing opposition from some Republicans on the grounds that it is "corporate welfare."

That has prompted groups such as the National Association of Manufacturers and the U.S. Chamber of Commerce to launch a major lobbying campaign to get it renewed.

"Failure to reauthorize Ex-Im would amount to unilateral disarmament in the face of other nations' aggressive trade finance programs ... (and) put billions of dollars in U.S. exports and thousands of American jobs at risk," business groups said in a letter on Tuesday to members of Congress.

They said China provides eleven times as much export financing as the United States, Japan more than five times as much and Canada three times as much.

"Frankly, the best thing would be for the United States to match China's terms, as the Eximbank did in the case of supporting U.S. locomotive exports to Pakistan against a Chinese producer," Vargo said.

"If China knows there is nothing to be gained in trying to undercut others, there will be more of an incentive to actually begin following the internationally accepted rules," he said.

(Reporting By Doug Palmer; Editing by Xavier Briand)

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