U.S. Direct Investment Abroad: Trends and Current Issues

James K. Jackson
Specialist in International Trade and Finance

The United States is the largest investor abroad and the largest recipient of direct investment in the world. For some Americans, the national gains attributed to investing overseas are offset by such perceived losses as displaced U.S. workers and lower wages. Some observers believe U.S. firms invest abroad to avoid U.S. labor unions or high U.S. wages, however, 70% of U.S. foreign direct investment is concentrated in high income developed countries. Even more striking is the fact that the share of investment going to developing countries has fallen in recent years. Most economists conclude that direct investment abroad does not lead to fewer jobs or lower incomes overall for Americans and that the majority of jobs lost among U.S. manufacturing firms over the past decade reflect a broad restructuring of U.S. manufacturing industries.


Date of Report: May 17, 2013
Number of Pages: 10
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Bangladesh Apparel Factory Collapse: Background in Brief

Mary Jane Bolle
Specialist in International Trade and Finance

The April 24, 2013, collapse of an eight-story garment factory, called Rana Plaza, in Dhaka, Bangladesh, resulted in the deaths of more than 1,100 workers. It is reportedly now considered the deadliest accident in the history of the apparel industry. Congress has had a long-standing interest in supporting internationally recognized worker rights in developing countries, and the building collapse has raised concerns about worker conditions in Bangladesh.

Rana Plaza was allegedly structurally unsound and poorly maintained for apparel production. Apparel production is generally known as an industry under threat of fire, and one where workers need easy access to rapid escape routes. Issues relating to workers’ inability to effectively exercise their rights to organize, bargain collectively, and work in a safe workplace may have contributed to the tragedy. For example, workers reportedly noticed cracks in the building and resisted entering, and were told that if they did not report to their jobs, they would not be paid. The factory collapse brought international focus to those parts of global supply chains that may not meet basic safety and health standards.

The U.S. government supports internationally recognized worker rights through various policies and programs. These include U.S. trade preference programs, free trade agreements, foreign assistance, and Department of Labor initiatives.

Congressional and U.S. efforts in this regard are part of an international worker rights support structure in place to offer technical assistance and support to countries—especially developing countries. Other major parts of this structure include international organizations, such as the International Labor Organization (ILO), founded in 1919; and corporate codes of conduct, which have arisen from a broader movement of corporate social responsibility that gained strength in the 1980s and 1990s.

Early analysis of the causes of the Bangladesh tragedy raises questions about what went wrong and about what can be done to help Bangladesh to improve working conditions at factories. Efforts to make changes in Bangladesh are already underway, and developments on this issue are evolving.

This report provides an overview of the recent tragedy in Bangladesh and the Bangladesh economic environment and culture. It also notes the responses to the tragedy, to date, from Congress, the Administration, the ILO, the Bangladesh government, and the private sector. Finally, it raises some possible issues for Congress.


Date of Report: May 23, 2013
Number of Pages: 13
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U.S.-Chinese Motor Vehicle Trade: Overview and Issues

Bill Canis 
Specialist in Industrial Organization and Business 

Wayne M. Morrison 
Specialist in Asian Trade and Finance

The U.S. auto industry employs nearly 800,000 workers and is a major employer in certain parts of the country. International competition is fierce, with many automakers and thousands of parts makers vying for market share. Because of the industry’s importance to the U.S. economy, the rapid rise of China’s auto assembly and auto parts industries in recent years has raised concerns among some Members of Congress.

In 2009, China overtook the United States to become both the world’s largest producer of and market for motor vehicles. In 2012, assemblers in China sold 19 million vehicles, and forecasts project more than 30 million vehicles will be sold there in 2020. China’s increasing importance in this industry presents a unique set of opportunities and challenges for the United States. On the one hand, China is in some respects a relatively open market; it was the fourth-largest export market for U.S. autos and auto parts in 2012 at $7.3 billion ($5.7 billion for autos and $1.6 billion for auto parts), and has welcomed foreign direct investment by U.S.-based auto and auto parts manufacturers. Every year since 2010, General Motors has sold more cars in China (through exports and its joint ventures there) than in the United States.

On the other hand, China maintains a number of trade and investment barriers that affect trade flows in autos and auto parts. Foreign automakers can produce autos in China only through 50/50 joint ventures with Chinese partners. In addition, U.S. and other foreign auto firms have reportedly faced pressures relating to transfer of technology, export performance, and domestic content requirements. Although the United States imports few vehicles from China, China has become the fourth-largest source of U.S. auto parts imports, with shipments of $14.5 billion in 2012.

The Chinese government has made the development of its auto and auto parts industries, including “new energy vehicles,” a major economic priority, and has implemented a number of industrial policies to promote and protect Chinese auto firms with the long-term goal of making them globally competitive. As a result, auto and auto parts trade has become a source of conflict between the United States and China, most recently in 2012, when the Obama Administration asked the World Trade Organization (WTO) to consider whether alleged Chinese subsidies of auto and auto parts manufacturers violate international rules.

China’s demand for motor vehicles is likely to continue growing rapidly because its population of 1.3 billion is just beginning to have the financial resources to purchase automobiles. For the United States, this will mean many new opportunities and challenges. Unlike some other markets, such as Korea, China’s large internal demand may well shape the industry for many years, with exporting a secondary interest. China’s rising investments in U.S. parts makers such as Nexteer and B456 Systems may help develop a U.S. technology lead in fuel-efficient, low-emission vehicles. But the prevalence of state and municipal ownership of many Chinese auto and auto parts companies may also cause friction. Many in Congress have called on the Obama Administration to take a tougher stand against China’s industrial policies that may favor Chinese automakers over foreign automakers.


Date of Report: May 13, 2013
Number of Pages: 26
Order Number: R43071
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Japan’s Possible Entry Into the Trans-Pacific Partnership and Its Implications

William H. Cooper
Specialist in International Trade and Finance

Mark E. Manyin
Specialist in Asian Affairs

On March 15, 2013, Prime Minister Abe announced that Japan would formally seek to participate in the negotiations to establish the Trans-Pacific Partnership (TPP). Japan’s membership in the TPP with the United States would constitute a de facto U.S.-Japan FTA. On April 12, 2013, the United States announced its support for Japan’s participation in the TPP. The announcement comes after a series of discussions on conditions for U.S. support and outstanding bilateral issues. As a result of the discussions the two sides agreed on measures to address these issues during and in parallel with the main TPP negotiations. On April 20, the 11 TPP countries formally invited Japan to participate in the negotiations. On April 24, Acting USTR Demetrios Marantis notified Congress of the United States to begin negotiations with Japan as part of the TPP thus beginning a 90-calendar-day consultation period with Congress. Japan wants to be able to participate in the negotiations beginning with an anticipated round in July.

The TPP would be a free trade agreement (FTA) among at least the current 11 participants— Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. The United States and its TPP partners envision the agreement as “a comprehensive, next-generation regional agreement that liberalizes trade and investment and addresses new and traditional trade issues and 21st century challenges.”

Congress has a direct and oversight role in the issue of U.S. participation in the TPP. It must approve implementing legislation, if the TPP is to apply to the United States. Some Members of Congress have already weighed in on whether Japan should be allowed to participate in the TPP and under what conditions. More may do so as the process proceeds.

The TPP is the leading U.S. trade policy initiative of the Obama Administration and a core component of Administration efforts to “rebalance” U.S. foreign policy priorities toward the Asia- Pacific region by playing a more active role in shaping the region’s rules and norms. As the second-largest economy in Asia, the third-largest economy in the world, and a key link in global supply/production chains, Japan’s participation would be pivotal to enhancing the credibility and viability of the TPP as a regional free trade arrangement.

A large segment of the U.S. business community has expressed support for Japanese participation in the TPP, if Japan can resolve long-standing issues on access to its markets for U.S. goods and services. However, the Detroit-based U.S. auto industry and the UAW union have expressed strong opposition to Japan participating in the TPP negotiations.

The TPP issue presents both risks and opportunities for the United States and Japan. On the one hand, if successful, it could reinvigorate an economic relationship that has remained steady but stagnant, by forcing the two countries to address long-standing, difficult issues, and allowing them to raise their relationship to a higher level. On the other hand, failure to do so could indicate that the underlying problems are too fundamental to overcome and could set back the relationship. It could signify the failure of the United States and/or Japan to deal with domestic opposition to a more open trade relationship.

In moving to enter the TPP talks, Prime Minister Abe has had to confront influential domestic interests that argued against the move. Among the most vocal have been Japanese farmers, especially rice farmers, and their representatives. In his March 15 statement, Prime Minister Abe acknowledged these domestic sensitivities, but also insisted that Japan needed to take advantage of “this last window of opportunity” to enter the negotiations, if it is to grow economically. Other Japanese business interests, including manufacturers, strongly support the TPP.


Date of Report: May 16, 2013
Number of Pages: 23
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U.S. Trade Deficit and the Impact of Changing Oil Prices

James K. Jackson
Specialist in International Trade and Finance

Petroleum prices rose sharply between January 2012 and April 2012, at times reaching more than $109 per barrel of crude oil. Although this is still below the $140 per barrel price reached in 2008, the rising cost of energy was one factor that helped to dampen the rate of growth in the economy during the second half of 2011 and the first half of 2012. Since June 2012, oil prices have hovered around $95 per barrel. As the price of oil rose, the volume of oil imports, or the amount of oil imported, decreased slightly from the comparable period in 2011. In general, market demand for oil remains highly resistant to changes in oil prices and reflects the unique nature of the demand for energy-related imports. In addition, sustained demand for crude oil in the face of higher prices reflected an increase in economic activity that occurred following the worst part of the economic recession in 2009. Turmoil in the Middle East was an important factor that caused petroleum prices to rise sharply in early 2011 and in 2012. Although prices for imported crude oil fluctuated somewhat throughout 2011, they averaged 30% higher than in 2010 and added about $100 billion to the total U.S. trade deficit in 2011. On average, energy import prices in 2012 were slightly higher than they were in 2011, pushing up the price of energy to consumers. During the same period, the total amount of petroleum products imported by the United States in 2012 fell below that imported in 2011, reducing the overall cost of imported energy to the economy and the overall trade deficit. Oil futures markets in April 2013 indicated that oil traders expected prices to trend downward from the average per barrel price of $95 recorded in December 2012 to around $90 per barrel by the fall of 2013. At times, some elements of the public pressured Congress to provide relief to households that are struggling to meet their current expenses. This report provides an estimate of the initial impact of the changing oil prices on the nation’s merchandise trade balance.


Date of Report: May 9, 2013
Number of Pages: 13
Order Number: RS22204
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