Congress seeks to level trade imbalances

The White House is also running into congressional opposition as it seeks approval for a newly negotiated free-trade accord with South Korea.

The House of Representatives is considering its own bipartisan currency bill, and the House Committee on Science and Technology held a hearing Tuesday on the "offshoring" of US jobs. The hearing focused on how global companies are increasingly setting up research and development operations – not just production– in developing nations.

Alternatives to protection?

But other trade advocates argue that Congress can take a harder line without pushing the "protectionist" button and putting a damper on global commerce.

"China is actually engaging in illegal currency manipulations," says Robert Scott, an economist at the liberal Economic Policy Institute in Washington. The US, he argues, has every right to enforce existing trade laws with China and other trade partners regarding subsidies and other violations of World Trade Organization rules. "I don't think there's any chance it's going to cause a trade war" with retaliation by other nations, he says. "They're incredibly dependent on us for their exports."

Legislation in Congress could actually help restore needed balance to the global economy. Although a trade deficit is not itself a problem, some economists say that for US imports to exceed exports by such a large amount is unsustainable.

Easing that imbalance may involve some difficult adjustments on all sides. But waiting is not an option, argues Alan Tonelson, a researcher at the US Business and Industry Council, which represents about 1,500 manufacturers. "These trade barriers [and subsidies] have resulted in global trade flows so lopsided ... that the entire international economy is genuinely at risk if they continue."

Whether it's called a trade war or not, the punitive measures against China are a possibility in Europe as well as in the US.

This week, European Union Trade Chief Peter Mandelson warned that "impatience and anger is going to rise" if Beijing is unresponsive.

Amid all the wrangling over trade policy, one challenge for policymakers is that global corporations have made huge commitments to producing goods in China. Many of China's exports are the exports of Fortune 500 firms. While some say this means Congress should tread lightly, others say it calls for a fresh lens on trade.

"In this new era of globalization the interests of companies and countries have diverged," former IBM executive Ralph Gomory told the House panel on offshoring Tuesday. Proposed solutions include not just trade policies but also funding for science education and research to maintain US prowess in innovation. Mr. Gomory, now president of the

Alfred P. Sloan Foundation in New York, adds another proposal: Tax incentives for companies that create high-value jobs at home.

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