Tuesday, June 07, 2005


The manner in which China has pegged its currency to the dollar has caused much consternation in American business and political circles. It seems now that the "Yuan" question is even affecting the new CAFTA treaty and its implications for trade with countries in Central America.

NYTIMES: WASHINGTON (Reuters) - Republican leaders in the U.S. House of Representatives may have to back legislation prodding China toward a more flexible exchange rate as part of their efforts to attract votes for a free trade pact with Central America, House Ways and Means Committee Chairman Bill Thomas said on Tuesday.

It's become ``very difficult for (many lawmakers) to vote on a trade package without getting some kind of meaningful response on the issue of China. That needs to be considered as members are looking to commit themselves to an additional trade agreement,'' the California Republican told the U.S. Chamber of Commerce.

The Bush administration has been struggling to drum up votes for the U.S.-Central American Free Trade Agreement, or CAFTA, in the face of stiff opposition from unions, sugar farmers and many textile companies.

The pact would eliminate tariffs on U.S. exports to Costa Rica, El Salvador, Honduras, Guatemala, Nicaragua and the Dominican Republic, while locking in the trade preferences those countries are enjoy in the U.S. market.

Lawmakers are expected to begin work on CAFTA this month, in hopes of winning approval by the end of July.

Concern about the huge U.S. trade deficit with China -- which many lawmakers blame on Beijing's practice of pegging its currency at 8.28 yuan to the dollar -- has contributed to difficult environment in Congress for CAFTA.

Congressial Leader Says Lawmakers May Need to Act on China Currency - New York Times


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