By  on July 10, 2007

WASHINGTON — Democrats are brandishing their power over the trade agenda on Capitol Hill this summer, replacing the Bush administration's pro-trade policy with one attuned to reining in China's currency and trade practices, and helping U.S. workers displaced by imports.

As the House and Senate return from a weeklong recess, Democratic leaders, no longer bound by the administration's authority to craft trade pacts without amendments from Congress, are likely to move ahead with legislation that could crack down on China's currency policies, reform trade-remedy laws and expand a program that helps workers who lose their jobs because of foreign competition.

In addition, the fate of pending free trade agreements with Peru, Panama, Colombia and South Korea is uncertain.

House Speaker Nancy Pelosi (D., Calif.) and the Democratic leadership dealt a blow to Bush's trade agenda before the recess, refusing to renew the president's trade promotion authority, which expired June 30, and withdrawing support for free trade pacts with South Korea and Colombia until they are revised.

Pelosi and other House leaders said they would still likely consider trade deals with Peru and Panama, but the new policy statement left many experts skeptical of any move by Democrats toward free trade proposals this year and possibly not until after next year's presidential elections.

"The conversation on trade has shifted from offensive to defensive," said Tim Kane, director of the Center for International Trade & Economics at the Heritage Foundation, a conservative think tank in Washington favoring a pro-trade agenda. "Congress is not talking about how far to move the cart forward. It's talking about how far to move the cart backward."

Kane said the leadership in the House, under Pelosi, was "showing its colors and they are antitrade."

Democrats and labor unions that back them argue that trade agreements have wrought havoc on the U.S. manufacturing base and that the emphasis should shift to helping companies and workers stay competitive.

Eric Dirnbach, deputy director of the strategic affairs department at UNITE HERE, the main apparel and textile union, said while labor groups were encouraged by the Democrats' recent move to put a brake on TPA and trade deals with South Korea and Colombia, most are still perplexed by the House leaders' insistence to move forward with Peru and Panama pacts."One of the issues that animated the public" in the elections last year was a call for a "different trade model," said Dirnbach. "For the Democratic party to deliver essentially the same model is a mistake, though the damage will be much more limited" without trade promotion authority.

Dirnbach said unions are pressing for a wholesale overhaul of trade models and warned that Democrats could face a backlash at the polls next year if they forge ahead with the Peru and Panama accords.

There is a growing consensus that House Ways and Means chairman Charles Rangel (D., N.Y.) will have a difficult time convincing many freshmen Democrats who were elected on "fair trade" platforms last year to support deals that could hurt their constituents.

In the Senate, Democrats hold 49 seats and are having a tough time finding the 60 votes needed to cut off debate and end Republican filibusters on Democratic legislative priorities. Many top trade senators, including Sen. Max Baucus (D., Mont.), chairman of the Senate Finance Committee, share with their counterparts in the House a reluctance to move forward on bilateral trade deals until enforcement and competitiveness issues are addressed.

That's why most industry observers expect Democrats to make a China bill a top priority this summer before there is any move to consider more contentious free trade deals. Lawmakers have introduced a flurry of bills targeting China's currency policies, and many industry lobbyists expect an amalgamation of the various proposals in one piece of legislation.

The Congressional focus on China has been on reforming trade remedy laws that would ease the way for U.S. manufacturers to file currency or subsidy complaints against China and seek sanctions against its imports. Critics charge that China's yuan is undervalued and lowers the price of goods by 15 percent to 40 percent on the world market. They argue that depressing the value of the yuan acts as an export subsidy, putting U.S. companies at a disadvantage and leading to American job losses and a record trade deficit with China that hit $232.5 billion last year.

"What does this new trade agenda mean in reality?" asked Missy Branson, senior vice president of the National Council of Textile Organizations. "Does it mean [Democrats] just pass a bill [they] know will never see the light of day, but feel like it has given members the cover they need, or does it actually mean [they] want something enacted? None of that is clear."Branson said she was hopeful Democrats and "vulnerable" Republicans facing re-election would seek to secure enactment, not just passage, of legislation that addresses what the textile industry sees as major trading problems with China, such as currency and customs enforcement, before they move to bilateral free trade deals.

She said the consensus, however, was that if Congress could not pass any of the four free trade agreements by the end of October, the window of opportunity would pass until after the 2008 election.

Stephen Lamar, executive vice president of the American Apparel & Footwear Association, said, "Obviously, [Democrats] are signaling their lack of interest or their unwillingness to pursue an FTA-driven agenda," with the possible exceptions of accords with Peru and Panama.

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