Congress Seeks to Level Trade Imbalances

Article excerpt

As Congress considers how to tackle America's gaping trade deficit, a central question is this: Will the cure be worse than the problem?

In both the House and Senate, bills are emerging designed to penalize nations - China foremost - that allegedly have promoted their exports by illegal means.

Critics of such measures warn that they create at least the appearance of protectionism and risk reversing a long and beneficial global march toward expanding commerce.

Supporters say Congress needs to act to maintain American living standards at a time when other nations increasingly manufacture cutting-edge products, not just toys and textiles. They argue that a tougher approach to enforcing current laws can help stabilize a global economy that has become dangerously imbalanced.

Those two worldviews are clashing this week in the halls of Congress. Legislation introduced Wednesday, for example, aims to deter other nations from manipulating the value of their currencies to make their exports more competitive in world markets.

The debate isn't about whether trade is good, but about how to best secure America's economic interests in an increasingly global economy.

"It's no longer a matter of free trade versus protection, which is really the old paradigm," says Scott Paul, who heads the Alliance for American Manufacturing, a group lobbying for a tougher approach toward trade-law enforcement. "The momentum [for enforcement] has never been greater than it is now."

The political climate

It's unclear whether the growing momentum will result in new laws regarding trade this year. But analysts say that several reasons factors make it a real possibility:

* Since China joined the World Trade Organization early this decade, its exports to the US have dwarfed its imports from the US. Those Chinese exports approached $300 billion last year, compared with US shipments to China of about $55 billion.

* Many new members of Congress, mostly Democrats, arrived in Washington vowing to level the playing field of global trade.

* Patience with the Bush administration is wearing thin. The President and Treasury Secretary Henry Paulson last year launched a "strategic economic dialogue" with China, but so far it has not borne the kind of quick fruit that many lawmakers hoped it would.

All this explains a flurry of trade-related activity on Capitol Hill at a time when Congress is also busy on matters such as Iraq and immigration. One bill introduced Wednesday is backed by two pairs of prominent Senators that had previously been considering rival bills. Sens. Max Baucus (D) of Montana and Chuck Grassley (R) of Iowa joined Charles Schumer (D) of New York and Lindsey Graham (R) of South Carolina to unveil legislation that would prod China to allow its yuan currency to float higher in value.

Meanwhile, Sens. Chris Dodd (D) of Connecticut and Richard Shelby (R) of Alabama said they plan to introduce their own legislation on the issue. Many economists say China has been spending large sums to hold the yuan's value down to promote exports. …