Lobbyists: China trade deficit bears on fast track extension

The Bush administration will be forced to address increasing congressional frustration over the growing trade deficit with China if the White House hopes to get Capitol Hill to back its trade agenda, members of Congress and business lobbyists said this week.

The Bush administration will be forced to address increasing congressional frustration over the growing trade deficit with China if the White House hopes to get Capitol Hill to back its trade agenda, members of Congress and business lobbyists said this week.

Rep. Phil English (R-Pa.) called China a critical component in a deal to extend so-called fast-track authority for the president, which allows the administration to present trade deals to Congress for up-or-down votes. English added that it is “entirely possible” that legislation designed to toughen China trade policies could be wrapped into a bill extending fast track.

Rep. Earl Blumenauer (D-Ore.) said that the “concerns that have been articulated” on China will need to be included, but stopped short of predicting China legislation would be grouped with a fast-track bill. “Anything you’re concerned about with trade, you can probably find an example with China,” said Blumenauer, who mentioned currency manipulation, enforcement of WTO rules and environmental concerns as examples.

“The administration has to understand that we cannot sell the trade policy without people seeing short-term benefits, and without people seeing a strong pattern of enforcement,” said Rep. Artur Davis (D-Ala.), who, like Blumenauer and English, sits on the House Ways and Means panel that oversees trade policy.

Administration officials this week took pains to show Congress they are taking such views seriously. U.S. Trade Representative Susan Schwab highlighted the administration’s decision to take an initial step toward a possible World Trade Organization challenge against Chinese subsidies in an appearance before the House Ways and Means Committee. She suggested the administration would not shy away from WTO litigation with China if negotiations fail to solve disputes.

Separately, Treasury Secretary Henry Paulson this week appointed Reagan administration trade official Alan Holmer as a special envoy to China. Holmer, a former president of the Pharmaceutical Research and Manufacturers of America (PhRMA), was tapped to manage the bilateral economic relationship with China, and Treasury emphasized his trade credentials. PhRMA is one of several trade groups that have called for action against China’s lax enforcement of patents and copyrights.

Members of Congress and business lobbyists, however, expressed doubt that these steps would stem the tide for further action on China. For example, House Speaker Nancy Pelosi (D-Calif.) and other Democratic leaders in a letter to President Bush this week called the step toward challenging China’s subsidies “long overdue.”

The letter went on to demand that within 90 days the administration present a plan for bringing down the trade deficit with China, which the Commerce Department this week announced stood at $232.5 billion in 2006, as well as bilateral deficits with Japan and the European Union. The administration should act aggressively to stop currency manipulation by China and Japan, bring a case targeting intellectual property-rights violations in China and allow countervailing duties to be imposed on Chinese goods that are subsidized, according to the letter.

Davis and English have cosponsored legislation to allow duties to be imposed on subsidized Chinese goods, and Davis said there is a strong chance the bill will be approved this year. Under current U.S. policy, countervailing duties cannot be applied to economies such as China’s that are considered state-run, but Commerce is considering a change to the policy, a move a number of business groups oppose.

More contentious is the debate surrounding legislation reintroduced this year by Reps. Tim Ryan (D-Ohio) and Duncan Hunter (R-Calif.) that would define currency manipulation as a countervailing subsidy. The bill, which targets China, already has drawn 49 sponsors, and a spokesman for Ryan said the congressman is confident there will be movement on the bill in this Congress.

This legislation has split some business groups. For example, after an internal vote by the group’s board, the National Association of Manufacturers opposed the Ryan-Hunter measure in part because it might violate U.S. WTO commitments. Yet many NAM members continue to support the Ryan-Hunter legislation.

NAM does support the Davis-English legislation, and the organization’s vice president of international economic affairs, Frank Vargo, said it is a real possibility that this bill and other China trade legislation could be added to a package that would extend fast track.

In addition to the request for a fast-track extension, the administration is pressing Congress to approve pending free-trade agreements with Peru, Colombia and Panama. It also hopes to submit a free-trade deal with Korea that it is still negotiating, which would be the biggest deal made by the U.S. since the North American Free Trade Agreement.

House Ways and Means Committee Chairman Charles Rangel (D-N.Y.), who signed the Pelosi letter, this week indicated he is getting closer to reaching an agreement with the administration that could allow Congress to take up the deals with Peru, Colombia and Panama, although he said, “We’re not there yet.” Rangel is pressing for language that would impose tougher labor and environmental standards on free-trade agreement partners.

Senate Finance Committee Chairman Max Baucus (D-Mont.), ranking member Chuck Grassley (R-Iowa) and Sens. Charles Schumer (D-N.Y.) and Lindsey Graham (R-S.C.) have said they will work on a China trade bill this year. Schumer and Graham last year supported legislation that would have imposed tariffs on Chinese goods if the country did not stop manipulating its currency, but backed off from previous demands for a vote.