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Last Week

Trade Efforts Left High and Dry

Sunday, April 17, 2005; Page F02

President Bush had hoped that his strong mandate from voters last November, plus a strengthening economy, would give him the political climate necessary to push his free trade agenda through Congress. But events last week suggest his free trade campaign has yet to gain any traction.

It certainly didn't help that the week began with the Commerce Department announcing another record monthly trade deficit. The hope had been that the recent decline in the dollar against the euro and the yen would sufficiently discourage imports, and encourage exports, to begin whittling down the trade imbalance. But the February figures showed exports were flat, while rising oil prices and auto imports and a surge of clothing from China pushed imports higher.

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Administration officials again tried to argue that the big deficit was actually a sign of economic strength, but the International Monetary Fund warned it was unsustainable and dangerous to the global economy. Meanwhile, members of Congress urged a tougher line with China, which they accused of manipulating its currency to keep its export machine growing. Sen. Evan Bayh (D-Ind.) announced he would hold up a vote on the nomination of Rob Portman to be the new U.S. trade representative until the Senate was allowed to vote on a measure that would allow new trade sanctions against Chinese goods. And bipartisan support continued to build for slapping a 27.5 percent tariff on Chinese imports within six months unless China allows the yuan to float rather than keeping it artificially low against the dollar. By week's end, the president and other administration officials were scrambling to get ahead of the issue by stepping up calls for China to move quickly to a new currency regime.

Meanwhile, under pressure from Republicans and Democrats in sugar and cotton-growing states, the administration backed off its proposals to cut back farm subsidies by 5 percent next year and set a $250,000 cap on the subsidy to any one farm. The retreat was seen as an attempt to win backing for a new free trade treaty with Central America that includes a modest loosening of the sugar quota -- and that received a chilly reception from some normally pro-trade senators at a hearing Wednesday. But the White House knows that failure to cut farm subsidies this year will jeopardize U.S. efforts to wrap up negotiations on a new global free trade agreement, which have been deadlocked on agricultural issues.

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