The House of Representatives approved a free-trade agreement with Peru today, the first such accord passed by Congress since Democrats won control last year.
In a 285 to 132 vote, the House approved the deal to eliminate tariffs and set rules of investment between the world's largest economy and the Andean nation. The measure, which came to a vote only after Democrats got the Bush administration to toughen labor and environmental provisions, now goes to the Senate, which is likely to approve it.
``We have to be concerned about the impact of trade, but we cannot turn our backs on it,'' House Speaker Nancy Pelosi said before the vote. ``I absolutely refuse to have the Democratic Party be viewed as an anti-trade party.''
Still, House Democrats voted 109 to 116 against the Peru agreement, suggesting it will be difficult for the administration to win approval of three additional trade agreements with Colombia, Panama and South Korea, all of which are more controversial than the Peru accord.
``There's less than meets the eye in this vote,'' said Gary Hufbauer, a fellow at the Peterson Institute for International Economics in Washington. For the Peru vote, ``There's a lot of alignment of balls in the air that just doesn't exist for Colombia and Korea.'' Previous accords with Bahrain, Australia and Morocco all garnered more Democratic votes.
After the vote, New York Senator Hillary Clinton, the leading candidate for the Democratic presidential nomination, announced she would support the deal with Peru, but opposes each of the other three agreements. Clinton had earlier said she opposed the South Korean deal and hadn't stated a view on the others.
Trade between the U.S. and Peru, which totaled $8.8 billion last year, will grow by $1.5 billion once the accord is implemented as Peru ships more asparagus and apparel and American producers export more meat and grain, according to the U.S. International Trade Commission.
Peru, which has waited since the end of 2005 for this agreement to be approved, said removing trade barriers to the world's largest economy would allow it to attract new companies to set up factories and spur their booming economy.
``This gives us a new ally for opportunities for business and investment,'' Peru's Foreign Trade Minister Mercedes Araoz said in a telephone interview.
Critics of the agreement said they doubted the Bush administration would enforce the new provisions guaranteeing greater workers' rights. Some Democrats also said trade agreements cost U.S. workers jobs as cheaper products from other nations drive American companies offshore or out of business.
Presidential candidate John Edwards stumped against the Peru pact, as have unions such as The International Brotherhood of Teamsters, International Association of Machinists and United Brotherhood of Carpenters. [Too bad Johnny ain't in office.]
The unions say that changes in the labor and environmental provisions don't fix problems with the accord that will lead manufacturing jobs to be shifted overseas. For many new Democratic lawmakers who won seats in districts in industrial states such as Ohio, Pennsylvania and New York, union support will be crucial to their re-election bids.
``The powerful opposition within the majority party makes clear that this deal was not a good deal for workers and should never have been put forward,'' Teamsters President Jim Hoffa said. ``I hope that the Democratic leadership tells the Bush administration that Congress will now focus on job-creating trade policies and no more of these job-killing agreements.''
The administration and lobbyists from the U.S. Chamber of Commerce, National Foreign Trade Council and other pro-trade groups lobbied hard to secure an overwhelming vote total for the Peru agreement, saying it would clear the way for the other pending deals.
``If you look where this Congress started out'' after Democrats took power last year, ``this vote is historic,'' said Nicole Venable, the U.S. Chamber of Commerce's top trade lobbyist. ``We've got a success under our belt, and we need to build on that momentum.''
Still, the other accords face resistance from Democrats. ``Each of those deals has their own individual hang ups,'' said Peter Hakim, president of the Washington-based independent Inter-American Dialogue.
Panama elected as president of its national assembly a man the U.S. accuses of murdering two American soldiers, which drew objections from both the State Department and lawmakers. South Korea hasn't fully opened its market to American beef, which Senate Finance Committee Chairman Max Baucus says is a prerequisite for considering that accord. Violence against labor leaders in Colombia has led the AFL-CIO, the nation's largest labor organization, and Democratic leaders to oppose that agreement.
While the AFL-CIO didn't oppose the Peru accord, it vows to get accords with Colombia or South Korea voted down. ``The Peru template is far from perfect, and more work needs to be done to address other important concerns,'' AFL-CIO President John Sweeney said in a statement. ``Congress must address these pressing concerns before considering passing any additional agreements.''
Meanwhile, US Treasury Secretary Paulson has spoken about how, you guessed it, China should allow its currency to revalue faster as it would be in its own interests. Ratcheting up the rhetoric, he suggests that China is out of step with the rest of the world [!] Aren't those fighting words from Hammerin' Hank? Although it has largely gone unnoticed, the yuan has gained slightly over 11% against the dollar in nominal terms. Playing devil's advocate, isn't this RMB revaluation a show of good faith on the part of the Chinese?
Treasury Secretary Henry Paulson, ratcheting up pressure on the second-biggest U.S. trading partner, said China is ``out of step'' with the rest of the world's calls to let the yuan appreciate.
China's exchange rate is ``viewed by many countries as a source of unfair competition,'' Paulson said in prepared remarks at the China Institute in New York.
``China is increasingly seen as out of step with international norms and expectations, as evidenced by the growing number of national leaders and multilateral institutions calling for currency appreciation,'' he said.
Finance ministers and central bankers from the Group of Seven last month urged faster gains in the yuan as Europe and Canada joined the U.S. in complaining the currency is undervalued and fueling exports. Paulson has emphasized currency liberalization in the Strategic Economic Dialogue, the twice- annual talks with China he set up last year.
China's economy is likely to expand more than 11 percent this year, the People's Bank of China said today. The country's record trade surpluses are flooding the financial system with cash, accelerating inflation. President Hu Jintao's is seeking to prevent the economy from overheating by increasing interest rates and demanding that banks hold more reserves in a bid to slow lending.
``China's leaders have pledged to carry out the economic reforms necessary to rebalance their economy,'' Paulson said. ``Of course, implementation is the name of the game. To enable market forces to efficiently rebalance the economy and spread prosperity to all the Chinese, China needs more flexible prices, including a much more flexible, market-driven exchange rate.''
The yuan has gained more than 11 percent versus the dollar since a fixed exchange rate ended in July 2005, a pace Chinese officials contend is sufficient.
People's Bank of China Deputy Governor Wu Xiaoling last month said the government won't hurry to alter its currency system, as doing so may hurt the economy.
Chinese imports into the U.S. totaled $205.1 billion through August this year, up 14.6 percent from the year-earlier period, according to U.S. Commerce Department figures. U.S. exports to China during the first eight months of the year totaled $41.2 billion, up 14.2 percent and leaving a $164 billion U.S. trade deficit with China.
China's record trade imbalance with the U.S. has prompted calls from American lawmakers to take a harder line on the currency. The Senate Finance Committee in July approved legislation aimed at pushing China to let the yuan trade more freely.
Paulson said that unless China acts to liberalize its markets, trade friction will rise.
``Frankly, it is easier to keep the U.S. economy open if the American public sees China continuing to open their markets,'' he said. ``By joining efforts, we will be more effective in working against this protectionist tide. Balanced growth - growth that does not generate large trade imbalances - is vital to each of our country's prosperities and to sustained global growth.''