WASHINGTON — The chairman of the House Ways and Means Committee said Congress might need to play the China card to get enough votes to pass the Central American Free Trade Agreement.
Rep. Bill Thomas (R., Calif.), addressing the U.S. Chamber of Commerce on Tuesday, said the House should consider taking legislative action against China’s currency policy as a way to prod China into adopting a more flexible exchange rate and to sway key textile-state lawmakers into the CAFTA camp.
“It is very difficult for someone to vote on a trade package without getting some kind of a meaningful response on the question of China,” Thomas said. “That needs to be considered as members are looking to commit themselves to an additional trade agreement.”
But Rep. Benjamin Cardin (D., Md.), ranking member of the House trade subcommittee, said in an interview there should be no linkage between CAFTA and China.
“I think we have a serious problem with China in terms of currency manipulation and it needs to be dealt with straight up on its own,” Cardin said. “The problems with CAFTA have nothing to do with China and have everything to do with the failure of the administration to make progress in raising the bar toward international labor standards.”
He said it would send the wrong signal to China if the U.S. linked its concerns about currency to CAFTA. Cardin said he is still undecided on CAFTA and is looking for the Bush administration to address concerns about labor and environmental provisions.
Lawmakers have grown louder in recent months in calling for the administration to get tough on China’s trade practices, including a fixed exchange rate that critics say artificially lowers the prices of Chinese goods by as much as 40 percent. China has pegged the yuan at a fixed rate of 8.28 yuan to the dollar since 1994.
There are several currency-related bills pending in Congress. Sens. Charles Schumer (D., N.Y.) and Lindsey Graham (R., S.C.) introduced a measure that would apply a 27.5 percent tariff to all imports from China in an effort to lower the growing U.S. trade deficit with China. The legislation intends to offset the competitive advantage that Chinese exporters get from their country’s fixed exchange rate and give U.S. apparel and textile companies a more level playing field.
The Bush administration’s policy has been to negotiate with China to improve its record instead of imposing mandates, but Republican and Democratic lawmakers have recently called for a more aggressive approach. Treasury Secretary John Snow last month warned China that failing to reform its monetary policy could lead it to be labeled a “manipulator” of currency, which could lead to World Trade Organization involvement and potential sanctions.
President Bush has not sent CAFTA to Congress because of staunch opposition from Democrats opposed to the accord’s “weak” labor and environmental standards and large blocs of Republican lawmakers representing textile and sugar producers who argue it will hurt those industries.
The Senate Finance Committee has targeted next Tuesday for initial procedural action, known as a “mock markup” on the bill, which will be followed by similar action by the House Ways and Means Committee. The administration recently imposed safeguard quotas on seven apparel and textile categories worth $1.31 billion and many experts saw that as a move to garner support for CAFTA from textile-state lawmakers.