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April 1998

Talk of Linking China to Latin Trade Pact

New York Times
June 8, 2005
By ELIZABETH BECKER

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WASHINGTON, June 7 - Representative Bill Thomas, chairman of the House Ways and Means Committee, said on Tuesday that the House leadership was willing to sponsor legislation aimed at pressing China to obey trade laws if such a measure would help win passage of the Central American Free Trade Agreement.

"It's difficult to vote on any trade agreement without getting any movement on China," Mr. Thomas said at a speech before the United States Chamber of Commerce.

Anger at China has become the recurring theme of much of this year's Congressional debate over globalization, outsourcing and trade. The country's economic behavior has faced increased scrutiny, whether the issue is the flood of textile exports or the violation of intellectual property rights including piracy of movies, software and luxury goods.

Mr. Thomas said the legislation he would support would require China to let its currency fluctuate, a problem that has risen to the forefront.

The United States trade deficit with China reached $162 billion last year, the largest imbalance ever recorded by the United States with a single country. It led first Democrats, and now some Republicans, to ask the administration to push China to revalue its currency, which is blamed for the poor performance of American exports.

But Democratic leaders who favor free trade but oppose Cafta say that promoting a remedy for China's currency will not change their minds.

Instead, Representative Benjamin L. Cardin of Maryland, the ranking Democrat on the Subcommittee on Trade of the House Ways and Means Committee, said any link between Cafta and China would weaken the United States position.

"We should have had remedies for China's currency problem before now, but legally you can't link it to Cafta," he said. "And it will only weaken our position with China."

With Congress moving closer to enacting some legislation on China, the White House said that such action was unnecessary since the administration was committed to ensuring that China followed trade laws.

Scott McClellan, the White House spokesman, said the administration thought the best approach was to let Rob Portman, the United States trade representative, and other members of the administration make "it clear to China what our concerns are."

"We're also going to continue acting to make sure that the playing field is level for our farmers and for our producers and for our businesses," Mr. McClellan said. Republicans and Democrats agree that the administration does not have the votes to pass Cafta, the centerpiece of its trade agenda. Mr. Thomas said he also wanted to add money to the legislation to help the five Central American countries and the Dominican Republic better enforce and monitor the pact's labor provisions.

Democrats are unusually united in their opposition to the pact with Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua and the Dominican Republic, and many cite the labor provisions as too weak.

Mr. Thomas said that on the contrary, the labor provisions were the best of any United States trade agreement. Moreover, he said, the United States needs "to have low-cost labor" in nearby countries.

What will persuade China to change its currency was debated in at a separate hearing on Tuesday by the Banking Subcommittee on International Trade and Finance.

Randal Quarles, the acting under secretary of Treasury for international affairs, told the subcommittee that the administration thought that its discussions with China about its exchange rates had been fruitful and that China was preparing to move on the issue.

But C. Fred Bergsten, the director of the Institute for International Economics, disagreed and said that it was time for the International Monetary Fund to step in and enforce international rules prohibiting manipulation of currency.

Mr. Bergsten said that the United States trade deficit would decrease by as much as $60 billion by raising the value of the Chinese currency by 25 percent.

But there is serious debate about the economic impact of China's increasing the value of its currency and Mr. Thomas deplored the fact that China has become the all-purpose scapegoat.

The Senate is expected to vote next month on a bill that would impose tariffs of up to 27.5 percent on all Chinese imports if China fails to let its currency float more freely. The measure, which was sponsored by Senator Charles E. Schumer, Democrat of New York, and Senator Lindsey O. Graham, Republican of South Carolina, reflected what its sponsors said was the depth of anxiety over China's trade practices.

Mr. Thomas said the House could come up with its own bill on currency.

Surveying the economic legislation facing Congress this summer - the energy bill, Social Security, the highway bill and Cafta - Mr. Thomas raised the issue of heath care.

He argued that the problems in health care were a direct result of the comprehensive benefit plans that emerged after World War II, which insulated the consumer from the cost of services.

He said that such plans had created "ignorant consumers" with few incentives to ask "what are you doing to me and how much does it cost," but rather, "does my insurance cover it."

He said he would work to "empower consumers" with more information, and new incentives through devices like health savings accounts.

Robin Toner contributed reporting for this article.

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