House panel votes 39-0 for Peru trade deal

By Doug Palmer

WASHINGTON (Reuters) - A free-trade pact with Peru that has been stalled for nearly two years moved a step closer to final approval on Wednesday after a key committee in the U.S. House of Representatives unanimously backed the deal.

The House Ways and Means Committee voted 39-0 in favor of the pact, which was modified earlier this year to include groundbreaking labor and environmental provisions demanded by Democrats after they captured Congress last year.

The panel vote sets the stage for the full House to vote on the pact next week. The Senate is also expected to approve the deal in coming weeks. The Senate Finance Committee voted on Oct 4 in favor of the trade deal.

House Ways and Means Committee Chairman Charles Rangel hailed the pact as "the first child" of a more bipartisan approach to trade deals that he forged with U.S. Trade Representative Susan Schwab earlier this year.

"I'm very happy we have broken a deadlock that we have had for over a decade," Rangel said, referring to a long-running battle between Democrats and Republicans on trade.

"I look forward to an overwhelming bipartisan vote by the full House in favor of this agreement," Schwab said in a statement welcoming the committee action.

However, Rangel told reporters he did not expect Congress to vote on other free-trade agreements with Panama, Colombia and South Korea until at least next year. Each of those pacts has problems that will take time to resolve, he said.

The deal locks in Peru's duty-free access to the U.S. market under a long-standing U.S. trade-preference program, creating a more favorable environment for foreign investment the Andean country wants to help create jobs.

"With the free trade pact, our economy could grow around 10 percent a year in the coming years, surpassing the current pace of 8 percent," Peru's President Alan Garcia said. He is pushing for other free trade deals and on Tuesday asked the European Union to start direct trade talks with his negotiators.

For U.S. business, the deal immediately eliminates duties on 80 percent of industrial and consumer product exports to Peru and more than two-thirds of farm exports. Most other duties will be phased out over 10 to 15 years.

LABOR, ENVIRONMENTAL PROVISIONS

The fate of the deal was in doubt after Democrats took charge of Congress in January. To salvage the pact, the Bush administration and Peru agreed to changes that strengthen the agreement's labor and environmental provisions.

The pact boosts protections for workers in both countries by requiring the two trading partners to adopt, maintain and enforce core international labor standards, such as the right to bargain collectively and go on strike.

The United States is already in compliance with that obligation, and Peru enacted a number of labor reforms in recent months to prepare for its entry into the pact.

The environmental provisions requires the United States and Peru to effectively enforce their domestic environmental laws and to honor international environmental obligations.