WASHINGTON (Reuters) - The White House on Monday promised an aggressive push to reach a global trade pact through the Doha round and discussed some benefits for China if it were to move toward a more flexible exchange rate.
“A free and open international trade regime is vital for a stable and growing economy, both here at home and throughout the world,” according to an annual report on the U.S. economy prepared by the White House Council of Economic Advisers.
“The United States will continue to work aggressively toward multilateral trade liberalization through the World Trade Organization’s Doha Development Agenda negotiations,” the report said.
The report waded into the sensitive issue of currency, citing China as an example of a fixed exchange-rate without taking a view on whether that was good economic policy.
The Bush administration has prodded China to loosen its currency policy amid frustration, especially among some on Capitol Hill, that China has not moved more quickly.
The report noted that many countries in recent decades, including the United States, have moved away from fixed exchange rates and instead make interest-rate targeting the focus of their monetary policy.
One benefit to flexible exchange rates, the report said, is they allow more leeway to control domestic inflation.
Pressed on whether this amounted to advice to the Chinese, White House economist Edward Lazear deferred to Treasury on statements about currency policy and said the discussion in the report was merely theoretical.
“We’re trying to remain agnostic” on whether one type of monetary policy is preferable to another, Lazear, who is chairman of the CEA, told reporters.
A bipartisan group of lawmakers led by California Republican Rep. Duncan Hunter and Ohio Democratic Rep. Tim Ryan have introduced a bill that would deem currency manipulation an unfair trade practice and subject to retaliation.
Sen. Charles Schumer, a New York Democrat, is among a group of lawmakers who also have warned they may introduce legislation that would impose duties on China if Beijing does not move more quickly to a more flexible exchange rate.
In an opening statement to the economic report, President George W. Bush urged Congress to renew his fast-track trade negotiating authority.
The so-called trade promotion authority legislation, which the Bush administration needs to conclude the 5-year-old Doha round of world trade talks and other possible trade pacts, expires on July 1. It is also called “fast track” legislation because it puts trade agreements on an expedited path through Congress.
The new Democratic-led Congress is expected to push for stronger labor and environmental provisions in trade agreements and may seek to attach such provisions to fast-track legislation.
Monday’s report was harshly criticized by Schumer, chairman of Congress’s Joint Economic Committee, who faulted the president for ignoring the U.S. trade deficit, which in 2006 is expected to surpass the 2005 record of $717 billion.
Schumer said despite the call for renewal of fast-track authority, the report “does not talk about the kinds of policies that will be necessary to reassure the average American family.”
In the report, the administration said the outlook for the economy is strong, with moderate job growth, relatively tame inflation and steady, robust growth in productivity.
“Productivity growth is projected to average 2.6 percent per year during the six year span of the budget projection — roughly equal to the average annual pace during the past decade,” the report said.