Argentina’s Defaulted Sovereign Debt: Dealing with the “Holdouts”

J. F. Hornbeck
Specialist in International Trade and Finance

In December 2001, following an extended period of economic and political instability, Argentina suffered a severe financial crisis, leading to the largest default on sovereign debt in history. It was widely recognized that Argentina faced an untenable debt situation that was in need of restructuring. In 2005, after prolonged, contentious, and unsuccessful attempts to find a mutually acceptable solution with its creditors, Argentina abandoned the negotiation process and made a one-time unilateral offer on terms highly unfavorable to the creditors. Although 76% of creditors accepted the offer, a diverse group of "holdouts" opted instead for litigation in hopes of achieving a better settlement in the future. Although Argentina succeeded in reducing much of its sovereign debt, its unorthodox methods left it ostracized from international credit markets for nearly a decade and triggered legislative action and sanctions in the United States. 

Argentina still owes private creditors $20 billion in defaulted debt and $10 billion in past-due interest, as well as $6.2 billion to Paris Club countries. Of the disputed privately held debt, U.S. investors hold approximately $3 billion. The more activist investor groups have lobbied Congress to pressure Argentina to reopen debt negotiations. Some Members of Congress have introduced punitive legislation in both the 110th and 111th Congress, but to date it has not received any legislative action. Nearly five years after the original debt workout, however, a confluence of circumstances has persuaded Argentina to restructure the holdout debt, particularly the need to secure long-term public financing. 

On April 15, 2010, Argentina announced the key features of the proposed bond deal, which will be made formal in a final prospectus to be released after approval is given from the European authorities, presumably around April 26, 2010. Argentina expects to complete the process by early June 2010. Two offers are proposed, one for retail (small) investors, the other for institutional (large) investors. Retail investors will receive replacement bonds for the full face value of the defaulted bonds they currently hold. Past due interest will be paid in cash. Institutional investors will receive a discount bond equal to a 66.3% reduction in the face value of the defaulted debt they currently hold (the so-called "haircut"). Past due interest will be covered by a separate seven-year "Global" bond. Interest rates vary depending on the bond. Both groups of investors will receive a GDP-linked security called a warrant that provides for additional payments should the Argentine economy grow at rates higher that anticipated and stipulated in the final prospectus. Analysts value the deal at between 48 and 51 cents on the dollar, compared to 60 cents for the 2005 exchange. 

For Argentina, a successful restructuring requires a sufficiently large participation rate that will eliminate most of the existing judgments and attachment orders. Argentina expects, with no guarantee, that such an outcome will lead to renewed access to the international credit markets. Historically, sovereign debt workouts with at least a 90% participation rate have achieved this goal. Since holdouts compose 24% of the original bondholders, a 60% participation rate of this group would allow for the total participation rate to reach the 90% threshold, including the 2005 exchange. If the exchange succeeds, Argentina will have completed a sovereign debt restructuring with the deepest write-off of principal in history. Many original bondholders were severely hurt by this deal, as was Argentina by the crisis. Secondary market participants may see a sizable profit. If there is a legacy to the Argentine case, it may be in the changes to bond contracts that seek to improve outcomes for creditors. One option is the use of collective action clauses (CACs), now standard for sovereign debt, which require all creditors to bargain collectively, with a compulsory majority decision applicable to all bondholders.


Date of Report: April 23, 2010
Number of Pages: 17
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The Trans-Pacific Partnership Agreement

Ian F. Fergusson
Specialist in International Trade and Finance

Bruce Vaughn
Specialist in Asian Affairs

The economic and strategic architectures of Asia are evolving. One part of this evolving architecture is the Trans-Pacific Partnership Agreement (TPP), a free trade agreement that includes nations on both sides of the Pacific. The existing TPP, which originally came into effect in 2006, consists of Brunei, Chile, New Zealand, and Singapore. The United States, Australia, Peru, and Vietnam have committed themselves to joining and expanding this group. The first discussions among the eight countries took place in Melbourne, Australia, during the week of March 15, 2010. 

Other architectures, such as the Association of South East Asian Nations (ASEAN), Asia-Pacific Economic Cooperation (APEC) forum, Australian Prime Minister Kevin Rudd's Asia-Pacific community initiative, and the East Asia Summit (EAS) have both economic and strategic aspects. They can be grouped into two categories: (1) groupings that are Asia-centric in approach and exclude the United States, and (2) those that are Trans-Pacific in nature and that include, or would include, the United States and other Western Hemispheric nations. The TPP is one vehicle that could be used to shape the U.S. agenda with the region. 

Asia is viewed as of vital importance to U.S. trade and security interests. According to the U.S. Trade Representative, the Asia-Pacific region is a key driver of global economic growth and accounts for nearly 60% of global GDP and roughly 50% of international trade. Since 1990, Asia- Pacific goods trade has increased 300% while there has been a 400% increase in global investment in the region. The United States has pursued its regional trade interests both bilaterally and through multilateral groupings such as APEC, which has linked the Western Hemisphere with Asia. There appears to be a correlation between increasing intra-regional economic activity and increasing intra-regional political and diplomatic cooperation. Many observers view the more recent intra-Asian Association of Southeast Asian States (ASEAN) plus three—China, Japan, South Korea—and the ASEAN plus six (also known as the East Asia Summit)—China, Japan, South Korea, India, Australia, New Zealand—groups as having attracted more interest within the region in recent years. The United States is not a member of either the EAS or the ASEAN plus three group. President Obama has stated that the United States looks forward to engaging with the East Asia Summit more formally. 

China's rapidly expanding economy and Japan's developed economy have made them attractive trading partners to many Asian nations. Many regional states also view the United States as having been distracted by events in Iraq and Afghanistan in recent years. This has led some to increasingly look to China and Japan as key partners. China's approach to the region has also shifted dramatically in recent decades as it now pursues its interests with the region in a relatively accommodative manner. 

U.S. participation in the TPP would involve the negotiation of FTAs with New Zealand, Brunei, and, potentially, Vietnam. The United States currently has FTAs in force with Chile, Singapore, Australia, and Peru. Bilateral negotiations with New Zealand may focus on agricultural goods such as beef and dairy products. The possible inclusion of Vietnam may prove controversial from the standpoint of certain U.S. industry groups, such as textiles and apparel, as well as those concerned with labor, human rights and intellectual property issues. The involvement of Vietnam could add a higher level of difficulty, yet is illustrative of the challenges associated with developing a truly Asia-Pacific-wide trade grouping. All the potential parties may face complex negotiations in integrating the myriad FTAs that already exist between some TPP parties.


Date of Report: April 14, 2010
Number of Pages: 19
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Outsourcing and Insourcing Jobs in theU.S. Economy: An Overview of Evidence Based on Foreign Investment Data

James K. Jackson
Specialist in International Trade and Finance

Foreign direct investment is sparking a national debate. Local communities compete for investment projects, while many of the residents of those communities fear losing their jobs to foreign outsourcing. Some opponents argue that such job losses have a disproportionately negative impact on local communities. Economists generally argue that free and unimpeded international capital flows have a positive impact on both domestic and foreign economies. This issue is complicated by the fact that broad, comprehensive data on U.S. multinational companies was not developed to address the issue of jobs outsourcing. This report provides an overview of CRS Report RL32461, Outsourcing and Insourcing Jobs in the U.S. Economy: Evidence Based on Foreign Investment Data, that analyzes the extent of direct investment into and out of the economy and the relationship between direct investment and the broader economic changes that are occurring in the U.S. economy.

 

Date of Report: April 15, 2010
Number of Pages: 9
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Trade in Services: The Doha Development Agenda Negotiations and U.S. Goals

William H. Cooper
Specialist in International Trade and Finance

The United States and the other 153 members of the World Trade Organization (WTO) have been conducting a set or "round" of negotiations called the Doha Development Agenda (DDA) since the end of 2001. The DDA's main objective is to refine and expand the rules by which WTO members conduct foreign trade with one another. A critical element of the DDA round is the negotiations pertaining to foreign trade in services. Trade in services has been covered under multilateral rules only since 1995 with the entry into force of the General Agreement on Trade in Services (GATS) and of the Uruguay Round Agreements creating the WTO. 

The negotiations on services in the DDA round have two fundamental objectives. One objective is to reform the current GATS rules and principles. The second objective is for each member country to open more of its service sectors to foreign competition. The WTO services negotiations have been going on for more than 10 years. However, as with the negotiations in agriculture and non-agriculture market access, the services negotiations have proceeded slowly with missed deadlines and few results. 

The prospects for the negotiations are difficult to evaluate at this point. It is not unusual for negotiations to lag as participants wait to place their best negotiating positions on the table until just before crucial deadlines are reached. In July 2006, WTO Director-General Pascal Lamy suspended the DDA negotiations, including the services negotiations, because major WTO members could not agree on the terms or modalities for negotiations in agriculture and nonagriculture market access. He resumed the negotiations in 2007. In 2009, negotiators from major groups of developed and developing countries have worked to nail down the basic elements of a draft text; however, they failed so far to reach a consensus on the basic negotiating modalities. 

Several factors will determine if and when the services negotiations will be completed. One factor is the political will the WTO members can muster to overcome the obstacles that hamper the negotiations. Another factor is to what degree the various participants are willing to compromise on goals in order to reach agreements. And a third factor is how quickly the issues in agriculture and non-agriculture market access are resolved; the sooner they are resolved the sooner negotiators can devote their attention to the services negotiations. This report will be updated as events warrant. Many Members of Congress consider the services negotiations to be a critical part, if not the most critical part, of the DDA round. These Members require strong commitments from U.S. trading partners to remove barriers in trade in services as part of an overall trade agreement they could support.. The DDA negotiations, including the negotiations on services, could be the subject of oversight during the 111th Congress.


Date of Report: April 7, 2010
Number of Pages: 21
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Brazil’s WTO Case Against the U.S. Cotton Program

Randy Schnepf
Specialist in Agricultural Policy

On April 5, 2010, Brazil's Foreign Trade Council (CAMEX) approved a resolution that would postpone until April 22 the implementation of WTO-approved countermeasures by Brazil against U.S. imports in relation to a long-running dispute over U.S. cotton subsidies. Earlier, on March 10, 2010, Brazil had released a list of 102 goods of U.S. origin valued at $561 million that would be subject to import tariffs of up to 100% within 30 days unless a last-minute agreement was reached. Five days later, on March 15, Brazil released a preliminary list of U.S. patents and intellectual property rights it could restrict, barring a joint settlement. In light of the temporary suspension of countermeasures, negotiations between the United States and Brazil on a proposed settlement continue. If preliminary objectives (discussed in the report) are achieved, it may result in the permanent suspension of any countermeasures related to this case. 

This trade dispute had its origins in 2002, when Brazil—a major cotton export competitor— expressed its growing concerns about U.S. cotton subsidies by initiating a World Trade Organization (WTO) dispute settlement case (DS267) against specific provisions of the U.S. cotton program. On September 8, 2004, a WTO dispute settlement panel ruled against the United States on several key issues. It found both (1) prohibited U.S. export subsidies (related to Step 2 program payments and export credit guarantees under the GSM-102 program) and (2) actionable U.S. domestic support measures (i.e., marketing loan benefits and counter-cyclical program payments) that resulted in adverse effects against Brazil's commercial interests. 

The United States appealed the ruling, but on March 3, 2005, a WTO Appellate Body upheld the panel's ruling and provided specific deadlines for removal or modification of the offending U.S. subsidies. Shortly after the March 2005 ruling, the United States made several changes to its cotton programs in an attempt to bring them into compliance with the WTO recommendations. However, Brazil argued that the U.S. response was inadequate, and requested the establishment of a WTO compliance panel in August 2006 to review whether the United States had fully complied with the previous rulings. The compliance panel ruled against the United States in December 2007, and the ruling was upheld on appeal in June 2008. 

On August 31, 2009, a WTO arbitration panel (reviewing Brazil's retaliation proposal of nearly $3 billion) released its decision, generally finding in favor of Brazil's retaliation requests but at levels substantially reduced from those requested by Brazil. However, in a key decision, the panel ruled that Brazil would be entitled to cross-retaliation if the overall retaliation amount exceeded a formula-based variable annual threshold. Cross-retaliation involves countermeasures in sectors outside of the trade in goods, most notably in the area of U.S. copyrights and patents. 

On December 21, 2009, Brazil announced that it was authorized by the WTO to impose trade retaliation against up to $829.3 million in U.S. goods in 2010 (based on 2008 data). The countermeasure included a fixed annual amount of $147.3 million, reflecting the adverse effects from U.S. price-contingent subsidies, and a balance related to the volume of U.S. export credit guarantees, which may vary annually. The WTO also established a threshold value (related to the value of Brazil's consumer goods imports from the United States) for determining the extent of permissible cross-retaliatory countermeasures. The threshold varies annually based on changes in Brazil's total imports from the United States, but is currently estimated at $561 million, yielding a remaining value of $268.3 million ($829.3 million - $561 million) in eligible cross-retaliatory countermeasures.


Date of Report: April 6, 2010
Number of Pages: 41
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Dispute Settlement in the World Trade Organization (WTO): An Overview

Jeanne J. Grimmett
Legislative Attorney

Dispute settlement in the World Trade Organization (WTO) is carried out under the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). In effect since January 1995, the DSU provides for consultations between disputing parties, panels and appeals, and possible retaliation if a defending party fails to comply with a WTO decision by an established deadline. Automatic establishment of panels, adoption of panel and appellate reports, and authorization of requests to retaliate, along with deadlines and improved multilateral oversight of compliance, are aimed at producing a more expeditious and effective system than had existed under the General Agreement on Tariffs and Trade (GATT). To date, 405 complaints have been filed, approximately half involving the United States as complainant or defendant. 

Expressing dissatisfaction with WTO dispute settlement results in the trade remedy area, Congress, in the Trade Act of 2002, directed the executive branch to address dispute settlement in WTO negotiations. WTO Members have been negotiating DSU revisions in the currently stalled Doha Development Round of trade negotiations but no final agreement on the DSU has been reached. Use of the DSU has revealed procedural gaps, particularly affecting the compliance phase of a dispute. These include a failure to coordinate procedures for requesting retaliation with procedures for tasking a WTO panel with determining whether a defending Member has complied in a case and the absence of a procedure for withdrawing trade sanctions imposed by a complaining Member where the defending Member believes it has fulfilled its WTO obligations. As a result, disputing Members have entered into bilateral agreements permitting retaliation and compliance panel processes to progress on an agreed schedule and have initiated new dispute proceedings aimed at removing retaliatory measures. 

Where a U.S. law or regulation is at issue in a WTO case, the adoption by the WTO of a panel or Appellate Body report finding that the measure violates a WTO agreement does not give the report direct legal effect in this country; thus federal law is not affected until Congress or the executive branch, as the case may be, takes action to remove the offending measure. Where a restrictive foreign trade practice is at issue, Section 301 of the Trade Act of 1974 provides a mechanism by which the United States Trade Representative (USTR) may challenge the measure in a WTO dispute settlement proceeding and authorizes the USTR to take retaliatory action if the defending Member has not complied with the resulting WTO decision. Although Section 301 was challenged in the WTO on the ground that it requires the USTR to act unilaterally in WTO-related trade disputes in violation of DSU provisions requiring resort to multilateral WTO dispute settlement, the United States was ultimately found not to be in violation of its DSU obligations. 

H.R. 496 (Rangel) would create an Office of the Congressional Trade Enforcer that would, inter alia, investigate restrictive foreign trade practices in light of WTO obligations and call on the USTR to pursue WTO cases where alleged violations are found; express congressional dissatisfaction with WTO decisions; and restrict implementation of a revised methodology for calculating dumping margins adopted by the Commerce Department in 2007 in response to adverse WTO decisions. S. 363 (Snowe) would grant the U.S. Court of International Trade exclusive jurisdiction to review de novo certain USTR determinations under Section 301 of the Trade Act of 1974, which may in some cases involve the initiation and conduct of WTO disputes, and would amend various Section 301 authorities themselves. S. 1466 (Stabenow) and S. 1982 (Brown) would establish mechanisms under the Trade Act of 1974 requiring the USTR to identify particularly harmful foreign trade practices and, where appropriate, to initiate WTO cases to remedy these practices.


Date of Report: April 8, 2010
Number of Pages: 15
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Multilateral Development Banks: Overview and Issues for Congress

Rebecca M. Nelson
Analyst in International Trade and Finance

Overview: The multilateral development banks (MDBs) include the World Bank and four smaller regional development banks: the African Development Bank (AfDB), the Asian Development Bank (AsDB), the European Bank for Reconstruction and Development (EBRD), and the Inter- American Development Bank (IDB). The United States is a member of each of the MDBs. The MDBs provide financial assistance to developing countries to promote economic and social development. They primarily fund large infrastructure and other development projects and, increasingly, provide loans tied to policy reforms by the government. Most of the MDBs have two facilities from which they make loans (loan windows): a non-concessional lending window that provides loans to middle-income countries at market-based interest rates, and a concessional lending window that provides loans at below-market interest rates and grants to low-income countries. 

Debate over the effectiveness of MDB financial assistance is contentious. Critics argue that the MDBs focus on "getting money out the door" (rather than delivering results in developing countries), are not transparent, and lack a clear division of labor. They also argue that providing aid multilaterally relinquishes U.S. control over where and how the money is spent. Proponents argue that providing aid to poor countries is the "right" thing to do and has been successful in helping developing countries make strides in health and education over the past four decades. They also argue that providing foreign aid to the MDBs is important for leveraging funds from other donors, tying policy reforms to financial assistance, and enhancing U.S. leadership. Most U.S. aid for economic and social development is provided directly to projects and programs in developing countries (bilateral aid) rather than to multilateral organizations, like the MDBs (multilateral aid). 

Issues for Congress: Congressional legislation is required for U.S. financial contributions to the MDBs. Replenishments of the concessional windows occur regularly; capital increases for the non-concessional windows happen more infrequently. Unusually, all the MDBs have currently requested capital increases, generally because MDB lending has increased following the global financial crisis. Any U.S. participation in capital increases are likely to be included in the FY2011 (for the AsDB) and FY2012 (for the other MDBs) budgets. See also CRS Report RS20792, Multilateral Development Banks: U.S. Contributions FY1998-FY2009<, by Jonathan E. Sanford.  In addition to congressional hearings on the MDBs, Congress exercises oversight over U.S. participation in the MDBs through legislative mandates. These mandates direct the U.S. Executive Directors to the MDBs to advocate certain policies and how they should vote at the MDBs on various issues. Congress also issues reporting requirements for the Treasury Department on issues related to MDB activities. Finally, Congress can withhold funding for the MDBs unless certain institutional reforms are met ("power of the purse").  More than $30 billion in contracts are awarded each year to complete projects financed by the MDBs. Some of these contracts are awarded to U.S. companies. Major changes are underway at the World Bank, the biggest MDB, that would alter how companies bid on World Bank projects. The World Bank argues that these changes will strengthen national institutions, while opponents argue that they will weaken existing procurement standards. Finally, the G-20 has proposed voting reform at the World Bank to reflect the increased role of emerging-markets in the world economy. While the voting power of the United States is unlikely to be affected, these proposals are likely to be a focus of discussion about the World Bank moving forward.


Date of Report: April 9, 2010
Number of Pages: 37
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U.S.-Mexico Economic Relations: Trends, Issues, and Implications

M. Angeles Villarreal
Specialist in International Trade and Finance

Mexico has a population of about 111 million people, making it the most populous Spanishspeaking country in the world and the third-most populous country in the Western Hemisphere. Based on a gross domestic product (GDP) of $875 billion in 2009 (about 6% of U.S. GDP), Mexico has a free market economy with a strong export sector. Economic conditions in Mexico are important to the United States because of the proximity of Mexico to the United States, the close trade and investment interactions, and other social and political issues that are affected by the economic relationship between the two countries. 

The United States and Mexico have strong economic ties through the North American Free Trade Agreement (NAFTA), which has been in effect since 1994. In terms of total trade, Mexico is the United States' third-largest trading partner, while the United States ranks first among Mexico's trading partners. In U.S. imports, Mexico ranks third among U.S. trading partners, after China and Canada, while in exports Mexico ranks second, after Canada. The United States is the largest source of foreign direct investment (FDI) in Mexico. These links are critical to many U.S. industries and border communities. 

In 2009, 12% of total U.S. merchandise exports were destined for Mexico and 11% of U.S. merchandise imports came from Mexico. After increasing 10% in 2008, U.S. exports to Mexico decreased 19.6% in 2009 as a result of the global financial crisis and the effect on the U.S. economy. Imports from Mexico decreased 18.5% in 2009, after a 3% increase in 2008. For Mexico, the United States is a much more significant trading partner. Over 80% of Mexico's exports go to the United States and 48% of Mexico's imports come from the United States. The stock of U.S. FDI in Mexico totaled $95.6 billion in 2008. The overall effect of NAFTA on the U.S. economy has been relatively small, primarily because two-way trade with Mexico amounts to less than 3% of U.S. GDP. Major trade issues between Mexico and the United States since NAFTA have involved the access of Mexican trucks to the United States; the access of Mexican sugar and tuna to the U.S. market; and the access of U.S. sweeteners to the Mexican market. 

Over the last decade, the economic relationship between the United States and Mexico has strengthened significantly. The two countries continue to cooperate on issues of mutual concern. President Barack Obama met with Mexican President Calderón and Canadian Prime Minister Harper at the North American Leaders' Summit in Guadalajara, Mexico, in August 2009 to discuss key issues that affect the three countries. They agreed to continue cooperation in North American competitiveness and security.


Date of Report: March 31, 2010
Number of Pages: 29
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The Global Economic Crisis: Impact on Sub-Saharan Africa and Global Policy Responses

Alexis Arieff
Analyst in African Affairs

Martin A. Weiss
Specialist in International Trade and Finance

Vivian C. Jones
Specialist in International Trade and Finance

Sub-Saharan Africa has been strongly affected by the global recession, despite initial optimism that the global financial system would have few spillover effects on the continent. The International Monetary Fund (IMF) estimated in 2009 that average economic growth in Africa would slow to 1%, from an annual average of over 6% to 1% over the previous five years, before rebounding to 4% in 2010. As a region, Africa is not thought to have undergone a recession in 2009. However, most African countries are thought to require high rates of economic growth in order to outpace population growth and make progress in alleviating poverty. 

The mechanisms through which the crisis has affected Africa include a contraction in global trade and a related collapse in primary commodity exports, on which many countries are dependent. Foreign investment and migrant worker remittances are also expected to decrease significantly, and some analysts predict cuts in foreign aid in the medium term if the crisis persists. Africa's most powerful economies have proven particularly vulnerable to the downturn: South Africa has experienced a recession for the first time in nearly two decades, and Nigeria and Angola have reported revenue shortfalls due to the fall in global oil prices. Several countries seen as having solid macroeconomic governance, notably Botswana, have sought international financial assistance to cope with the impact of the crisis. At the same time, a number of low-income African countries are projected to experience relatively robust growth in 2009 and 2010, leading some economists to talk of Africa's underlying economic resilience. 

The 111th Congress has monitored the impact of the global economic crisis worldwide. The Supplemental Appropriations Act, 2009 (P.L. 111-32), provided $255.6 million for assistance to vulnerable populations in developing countries affected by the crisis. While an initial House report indicated several countries, including five in Africa, should receive priority consideration, the subsequent conference report did not specify recipients. In August 2009, the Obama Administration notified Congress that four African countries—Ghana, Liberia, Tanzania, and Zambia—would benefit from the funds appropriated in the supplemental. More broadly, U.S. policy responses to the impact of the crisis overseas have focused on supporting the policies of multilateral organizations, including the IMF, the World Bank, and the African Development Bank (AfDB). These organizations have increased their lending commitments and created new facilities to help mitigate the impact of the global crisis on emerging market and developing countries worldwide. 

This report analyzes Africa's vulnerability to the global crisis and potential implications for economic growth, poverty alleviation, fiscal balances, and political stability. The report describes channels through which the crisis is affecting Africa, and provides information on international efforts to address the impact, including U.S. policies and those of multilateral institutions in which the United States plays a major role. For further background and analysis, see CRS Report RL34742, The Global Financial Crisis: Analysis and Policy Implications, coordinated by Dick K. Nanto.

 

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Date of Report: April 6, 2010
Number of Pages: 34
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The Future of U.S. Trade Policy: An Analysis of Issues and Options for the 111th Congress

William H. Cooper
Specialist in International Trade and Finance

U.S. trade policy is at a cross-roads as the Obama Administration and the 111th Congress face a range of policy issues and challenges. The future direction of trade policy and how the issues will be addressed are unclear at this time and the subject of sharp debate within Congress, the Administration, and the trade policy community at large. While a number of issues are related to trade policy, the fundamental question that is the subject of this debate is which trade policy, if any, will maximize the benefits of trade and boost U.S. living standards. 

Among the trade issues facing Congress and the Administration are pending free trade agreements (FTAs) and negotiations on new FTAs; the stalled Doha Development Agenda (DDA) multilateral trade negotiations; the possible renewal of trade promotion authority (TPA); the review and reauthorization of trade preference programs for developing countries; the enforcement of U.S. trade laws and rights under existing trade agreements; the role of export promotion in the U.S. economic recovery; and the growing link between foreign direct investment and trade and, with it, the increasing use of bilateral investment treaties (BITs) and investment provisions in trade agreements. 

The current trade policy environment is affected by a number of political and economic forces. The political forces involve the opinions of the American public, including major stakeholders— business, labor, agriculture, and non-government organizations—on trade; congressional perspectives; presidential perspectives; and tension in the congressional/executive relationship as the two branches play their respective trade policy roles. The economic forces include the global economic downturn; the rise of developing countries, including the emerging markets of Brazil, China, and India as major trading powers; the growth of global production networks; the proliferation of free trade agreements and other preferential trade arrangements; the inherent limitations of trade policy as a tool in economic policy; the growth of "behind the border" trade barriers; and the long-standing U.S. trade deficits. 

The debate on trade is framed by three groups of views. One group, who might be called "trade liberalizers," assert that on a net basis the benefits to the United States of trade liberalization are greater than the costs and, therefore, should be encouraged through trade barrier reductions. A second group—"fair traders"—acknowledge the benefits of trade liberalization but assert that U.S. firms and workers are often forced to compete under unfair conditions. They support trade agreements, but only if the agreements provide for a "level playing field." A third group—"trade skeptics"—tends to argue that the costs of trade liberalization outweigh the benefits for the United States, and therefore, reject unrestricted trade liberalization. Where policymakers fit on this continuum of views could help to determine how they decide to address the outstanding and emerging trade issues before Congress 

In many cases, the trade policy positions of policymakers and other experts cannot be readily categorized as belonging to one group or another, but the categories provide a mechanism to analyze the major concepts in trade policy and their potential implications.


Date of Report: March 24, 2010
Number of Pages: 24
Order Number:R41145
Price: $29.95

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