Paulson Urges China To Scrap Pollution Tariffs CHINA: April 4, 2008 BEIJING - China should drop the barriers it maintains against foreign-made anti-pollution equipment as a means of quickly cleaning up its dirty air and water, US Treasury Secretary Henry Paulson said on Thursday. In prepared remarks for delivery to the Chinese Academy of Sciences in which he praised the value of a "strategic economic dialogue" between the two countries, Paulson also welcomed China's action in letting the yuan rise in value. The Chinese currency has risen about 4 percent against the dollar so far this year, taking its cumulative gain since July 2005 to 18 percent. "Although the process of adjustment is not complete, the accelerated pace of appreciation is significant and welcome, and should continue," Paulson said. He again urged China to develop more efficient capital markets that would generate higher investment returns, thus encouraging people to reduce their precautionary saving and increase their spending to the benefit of the global economy. The Treasury chief was on the second day of a two-day visit to Beijing that includes a meeting later on Thursday with Premier Wen Jiabao. After talks on Wednesday with President Hu Jintao and other senior government leaders, Paulson acknowledged that current turmoil in US markets was likely to give China "pause" about the pace of financial liberalisation. PAYING FOR POLLUTION Although China's economy is only one-sixth the size of America's, it is about to be come the No. 1 source of greenhouse gas emissions, Paulson noted. China is also the world's largest coal producer and consumer, a significant cause of the smog that regularly blankets Beijing and other cities. China can afford to buy the advanced energy-saving and environmental control equipment it needs to reduce emissions and pollutants, yet it levies tariffs against such imports, Paulson said. "A high priority should be given to eliminating tariffs and non-tariff barriers on products, goods and services that can improve the health and welfare of the Chinese people," he said. He described China's pollution problems as "daunting" and noted that 16 of world's 20 most polluted cities were in China. Paulson warned Chinese policy makers that maintaining price controls on fuel was likely only to lead to persistent gasoline and diesel shortages. "The consequences of these policies also extend to the power sector, where price caps on electricity and fuel contributed to nationwide power outages during snowstorms this past January and February," he said. Paulson advocated the US system of using tradeable credits so that polluters who reduce emissions most cheaply can sell them to others who find it more expensive. This market mechanism had helped reduce emissions of sulphur dioxide and nitrogen oxide that produce acid rain and was far preferable to price controls, Paulson suggested. (Reporting by Glenn Somerville; Editing by Alan Wheatley) Story by Glenn Somerville REUTERS NEWS SERVICE