The China "challenge" was the main focus of the first meeting Friday of the Transatlantic Economic Council created at the US-EU summit in April, said European Commission Vice President Gunter Verheugen, who co-chaired the meeting with US President George W. Bush's economic advisor Allan Hubbard.

The debate, Verheugen told reporters, focused on "how does it affect our economies, how does it affect our consumers. How do we react if and when we recognize that China does not fully respect the rules, to put it very mildly?"

"Would a joint effort to convince China that it is in China's interest to fully respect the rules be more useful than individual approaches which we have used? That is the kind of question that we have discussed," the EU official added.

Hubbard said how China deals with international trade has wide-ranging effects.

China's trade attitude has global effects

"When China does not follow intellectual property rules and regulations, that affects not only the US; it affects Europe. When China is an export-oriented economy, an economy that encourages local consumption, domestic consumption, that affects both our economies. When they peg their currency, that affects both economies," he said.

Also attending the breakfast meeting were US Treasury Secretary Henry Paulson, US Commerce Secretary Carlos Gutierrez, US Trade Representative Susan Schwab, EU Commissioner for Trade Peter Mandelson, and EU Commissioner in charge of the Internal Market and Services Charlie McCreevy.