BEIJING, June 8 -- 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.

    While the White House has been pressing Beijing to loosen its exchange rate, congressional voices might be needed, Thomas said.

    "We have to let China know, probably from a legislative position, that the administration's recent exhortations are supported by the Congress and that China ... has to continue to make changes as it modernizes itself," Thomas said.

    Thomas dodged reporter questions about exactly what kind of legislation he might support regarding China, although his comments suggested a more measured approach than Senate legislation that would give China six months to revalue its currency or face the threat of U.S. retaliation.

    "The all-purpose scapegoat for anyone's problem is currently China," Thomas said. "The problem is, China could free (its exchange rate) and I don't think you'd see that significant a change" in overall U.S. trade, he said.

    Thomas argued Japan manipulated its yen currency more than China did and Beijing's immediate priority should be to take action on interest rates to keep its economy from overheating.

    Congress may also have to look at certain immigration issues as part of its consideration of CAFTA, as well as provide more money to help the Central America countries enforce their labor laws, Thomas said.

    (source: China Daily/Agencies))