WASHINGTON — President Bush, in his annual economic report to Congress on Thursday, said free-trade agreements will continue to be essential for a healthy U.S. economy.

In the President’s first term, the Bush administration concluded negotiations on free-trade pacts with Singapore, Chile, Morocco, Jordan and Australia, all of which created little controversy and were approved by Congress.

However, the uneven effects of eliminating tariffs with foreign countries remains a hot button on Capitol Hill for  both political parties because of an almost $618 billion U.S. trade deficit last year and declines in manufacturing jobs. The tariff-dropping pacts are often blamed for the inability to compete with low-priced imports in sectors such as textiles.

These issues are expected to be raised when the President, as early as this spring, sends Congress a Central American Free Trade Agreement with Honduras, Guatemala, El Salvador, Nicaragua, Costa Rica and the Dominican Republic. Passage of CAFTA is a priority for U.S. retailer and wholesale apparel importers.

Bush said in the economic report that trade pacts result in a net increase of jobs and other economic benefits.

“I am working to open up markets around the world and make sure that the playing field is level for our workers, farmers, manufacturers and other job creators,” Bush said in a statement accompanying the study, which also touted revamping Social Security and limiting the scope of class-action lawsuits.

Bush also said his policies, including his tax cuts, helped pull the economy out of the 2001 recession.

Still, some lawmakers are apprehensive about expanded trade. An example of that unease is a bipartisan measure that would levy 27.5 percent tariffs on Chinese imports, including apparel, if that country doesn’t stop the alleged undervaluing of its currency, which depresses export prices. The U.S. has a trade deficit approaching $160 billion with China.

Mass merchants on Thursday sent the bill’s sponsors — Sens. Lindsey Graham (R., S.C.), Charles Schumer (D., N.Y.) and Debbie Stabenow (D., Mich.) — a letter in opposition.

“We oppose legislation when its actions would have serious implications for U.S. consumers, importers and manufacturers that rely on inputs to production from China,” wrote Sandy Kennedy, president of the Retail Industry Leaders Association, which includes Wal-Mart and Home Depot.

This story first appeared in the February 18, 2005 issue of WWD. Subscribe Today.

Meanwhile, the Senate Judiciary Committee voted 12-5 to approve bankruptcy reform legislation. The legislation, supported by retailers such as Sears and May Department Stores, would make it more difficult to erase all unsecured debt when filing for bankruptcy.

Bankruptcy reform has been torpedoed several times in recent years because of controversy over amendments unrelated to the bill. Liz Treanor Oesterle, senior director and government relations counsel with the National Retail Federation, said Senate Democrats may move to attach a minimum-wage increase rider to the bankruptcy bill when it’s considered early next month by the full Senate.

“If minimum wage is going to be attached, that might be a problem,” Oesterle said.