Bush urges keeping trade free, vows to prod China

WASHINGTON, Mar 10 (Reuters) President George W Bush on Friday urged Americans to reject protectionist sentiment but promised to keep the pressure on China to float its currency and take other steps he said would make trade fairer.

''I am worried about isolation and protectionism,'' Bush said in the wake of the collapse of the Dubai ports deal.

''To me it's a lack of confidence in our ability to shape the future and I think it would be wrong economic policy,'' Bush told a group of US newspaper publishers.

The widening US trade deficit, which hit a record 68.5 billion dollars in January, has become a growing political issue in the United States. The bilateral gap with China dwarfs those with all other US trading partners.

The uproar over the failed bid by Dubai Ports World to manage six US ports recalled a bid by China's state-controlled CNOOC Ltd. earlier this year to buy American oil company Unocal. CNOOC abandoned the plan after it generated heated controversy within the United States.

Bush said he has constantly urged the Chinese to improve the trade climate by offering a ''level playing field'' for US manufacturers.

''Intellectual property rights need to be protected. Your currency needs to be floated. Treat our people fairly,'' he said.

Bush's comments came as top officials in his administration, including Treasury Secretary John Snow, have ratcheted up their rhetoric over China's yuan currency.

U.S. manufacturers and lawmakers have been vocal about their concerns on the yuan, which they contend is undervalued, making Chinese goods unfairly cheap.

Although Beijing in July dropped its long-standing US dollar peg and moved to a managed float, the United States has repeatedly urged it to go further.

Bush administration officials have hinted that they are moving closer to formally labeling China a currency manipulator, a step toward trade retaliation.

US officials have made no formal announcement about an expected visit to Washington this year by Chinese President Hu Jintao but many experts believe preparations are being made for a late April meeting between Hu and Bush.

Bush discussed the complexity of the US relationship with China -- not only economically but on the national security front as well -- when he was asked at the newspaper publishers' forum whether Iran, North Korea or China represented the greatest threat.

''It's an amazing country in many ways,'' Bush said of China.

''It's a country that has chosen the path, by and large, of markets and enterprise. They are an economic issue for us, and that's why we've got a huge deficit with them.'' But he said puts China in a different category than Iran and North Korea.

''China is a strategic partner when it comes to trade, for example. And I can't say that about the other two countries,'' Bush said.

Reuters KD VP0050