U.S. International Trade: Trends and Forecasts

Dick K. Nanto
Specialist in Industry and Trade

J. Michael Donnelly
Information Research Specialist

The U.S. trade deficit was shrinking through June 2009 because of the global financial crisis but has begun to increase again. The crisis caused U.S. imports to drop faster than U.S. exports. The global simultaneous recession, however, implies that exporting countries cannot rely on increased foreign demand to make up for slack demand at home. Even though U.S. imports are down considerably from 2008, companies competing with imports still face diminishing demand as the domestic economy has been hit by recession. These conditions imply that the political forces to protect domestic industry from imports are likely to intensify both in the United States and abroad. 

In 2009, the trade deficit in goods reached $517.0 billion on a balance of payments (BoP) basis, less than the $840.3 in 2008 and $831 billion in 2007. The 2008 deficit on merchandise trade with China was $227 billion (Census basis), with the European Union was $60.5 billion, with Canada was $20.2 billion, with Japan was $44.8 billion, with Mexico was $47.5 billion, and with the Asian Newly Industrialized Countries (Hong Kong, South Korea, Singapore, and Taiwan) moved from a deficit of $5.5 billion in 2007 to a surplus of $2.2 billion in 2008 and a surplus again in 2009 of $3.6 billion. Imports of goods of $1,562.6 billion decreased by $554.7 billion, 26.2% over 2008. Exports of goods of $1,045.5 billion fell by $231.5 billion, 18.1%. The overall merchandise trade deficit for 2009 improved, or rose, by $323.2 billion, or roughly 38.5%. In the fourth quarter of 2008, as the U.S. recession worsened, imports declined faster than exports resulting in monthly trade deficits declining from August 2008 through February 2009. In 2009 goods imports reached their lowest recent level in May, at $119.2 billion. In 2009 goods exports fluctuated near $82 billion through May when they began to increase at about two billion monthly, reaching $99.1 billion in December. 

Trade deficits are a concern for Congress because they may generate trade friction and pressures for the government to do more to open foreign markets, to shield U.S. producers from foreign competition, or to assist U.S. industries to become more competitive. Overall U.S. trade deficits reflect excess spending (a shortage of savings) in the domestic economy and a reliance on capital imports to finance that shortfall. Capital inflows serve to offset the outflow of dollars used to pay for imports. Movements in the exchange rate help to balance trade. The rising trade deficit (when not matched by capital inflows) places downward pressure on the value of the dollar which, in turn, helps to shrink the deficit by making U.S. exports cheaper and imports more expensive. Central banks in countries such as China, however, have intervened in foreign exchange markets to keep the value of their currencies from rising too fast. Bills in the 111th Congress relating to trade include: H.R. 3012/S. 2821, H.R. 496/S. 1466, H.R. 1875, S. 3103, S. 3134, S. 1254, S. 1027, H.R. 2378, H.Res. 934, H.Res. 987, and H.Res. 1124. 

The balance on current account includes merchandise trade plus trade in services and unilateral transfers. In 2009, the deficit on current account fell to $419.9 billion from $706.1 billion in 2008 and $726.6 billion in 2007. IHS Global Insight forecasts higher deficits on current account for 2010, at $552.2 billion, and 2011, at $625.9. In trade in advanced technology products, the U.S. balance improved from a deficit of -$61 billion in 2008 to -$56 billion in 2009. In trade in motor vehicles and parts, the $106.6 billion U.S. deficit in 2008 was mainly with Japan, Mexico, and Germany


Date of Report: May 7, 2010
Number of Pages: 41
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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 in the first half of 2008, at one time reaching more than $140 per barrel of crude oil. After July 2008, however, petroleum prices and import volumes fell at a historically rapid pace; in January 2009, prices of crude oil fell below $40 per barrel. Since then, crude oil prices have nearly doubled, while the average monthly volume of imports of energyrelated petroleum products has fallen nearly 10% year over year. Despite the drop in the volume of crude oil imports, the rise in the cost of energy imports through 2009 and early 2010 could add more than $100 billion to the nation's trade deficit in 2010 over that experienced in 2009. The strength of the U.S. economic recovery in the second half of 2010 could increase both the volume of energy imports and the price of those imports. This report provides an estimate of the initial impact of the changing oil prices on the nation's merchandise trade deficit. 


Date of Report: May 13, 2010
Number of Pages: 10
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International Trade: Rules of Origin

Vivian C. Jones
Specialist in International Trade and Finance

Michael F. Martin
Analyst in Asian Trade and Finance

Determining the country of origin of a product is important for properly assessing tariffs, enforcing trade remedies (such as antidumping and countervailing duties) or quantitative restrictions (tariff quotas), and statistical purposes. Other commercial trade policies are also linked with origin determinations, such as country of origin labeling and government procurement regulations. 

Rules of origin (ROO) can be very simple, noncontroversial tools of international trade as long as all of the parts of a product are manufactured and assembled primarily in one country. However, when a finished product's component parts originate in many countries—as is often the case in today's global trading environment—determining origin can be a very complex, sometimes subjective, and time-consuming process. 

U.S. Customs and Border Protection (CBP) is the agency responsible for determining country of origin using various ROO schemes. Non-preferential rules of origin are used to determine the origin of goods imported from countries with which the United States has most-favored-nation (MFN) status. Preferential rules are used to determine the eligibility of imported goods from certain U.S. free trade agreement (FTA) partners and certain developing country beneficiaries to receive duty-free or reduced tariff benefits under bilateral or regional FTAs and trade preference programs. Preferential rules of origin are generally specific to each FTA, or preference, meaning that they vary from agreement to agreement and preference to preference. 

CBP has periodically proposed implementing a more uniform system of ROO as an alternative to the "substantial transformation" rule that is currently in place. On July 25, 2008, CBP's latest proposal suggested that a system known as the North American Free Trade Agreement (NAFTA) rules system "has proven to be more objective and transparent and provide greater predictability in determining the country of origin of imported merchandise than the system of case-by-case adjudication they would replace." The NAFTA scheme that would be applied has already been used for several years to determine the origin of imports under the NAFTA, and for most textile and apparel imports (about 40% of U.S. imports). The CBP proposed to apply the NAFTA rules to all country of origin determinations made by CBP, unless otherwise specified (e.g., unless the import enters under a preferential ROO scheme already in place). Such changes in rules of origin requirements are often opposed by some importers due to costs involved in transitioning to new rules, or because they believe that certain imported products might be at a disadvantage under new ROO methodology. As of this writing, the proposal has not been implemented. 

This report deals with ROO in three parts. First, we describe in more detail the reasons that country of origin rules are important and briefly describe U.S. laws and methods that provide direction in making these determinations. Second, we discuss briefly some of the more controversial issues involving rules of origin, including the apparently subjective nature of some CBP origin determinations, and the effects of the global manufacturing process on ROO. Third, we conclude with some alternatives and options that Congress could consider that might assist in simplifying the process. .


Date of Report: May 14, 2010
Number of Pages: 21
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Frequently Asked Questions about IMF Involvement in the Eurozone Debt Crisis

Rebecca M. Nelson, Coordinator
Analyst in International Trade and Finance

Dick K. Nanto
Specialist in Industry and Trade

Jonathan E. Sanford
Specialist in International Trade and Finance

Martin A. Weiss
Specialist in International Trade and Finance

On May 2, 2010, the Eurozone member states and the International Monetary Fund (IMF) announced an unprecedented €110 billion (about $145 billion) financial assistance package for Greece. The following week, on May 9, 2010, EU leaders announced that they would make an additional €500 billion (about $636 billion) in financial assistance available to vulnerable European countries, and suggested that the IMF could contribute up to an additional €220 billion to €250 billion (about $280 billion to $318 billion). This report answers frequently asked questions about IMF involvement in the Eurozone debt crisis. For more information on the Greek debt crisis, see CRS Report R41167, Greece's Debt Crisis: Overview, Policy Responses, and Implications, coordinated by Rebecca M. Nelson.


Date of Report: May 17, 2010
Number of Pages: 19
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Greece’s Debt Crisis: Overview, Policy Responses, and Implications

Rebecca M. Nelson, Coordinator
Analyst in International Trade and Finance

Paul Belkin
Analyst in European Affairs

Derek E. Mix
Analyst in European Affairs

Buildup of Greece's Public Debt: Over the past decade, Greece borrowed heavily in international capital markets to fund government budget and current account deficits. The profligacy of the government, weak revenue collection, and structural rigidities in Greece's economy are typically cited as major factors behind Greece's accumulation of debt. Access to capital at low interest rates after adopting the euro and weak enforcement of EU rules concerning debt and deficit ceilings may also have played a role. 

Outbreak of Greece's Debt Crisis: Reliance on financing from international capital markets left Greece highly vulnerable to shifts in investor confidence. Investors became jittery in October 2009, when the newly-elected Greek government revised the estimate of the government budget deficit to nearly double the original number. Over the next months, the government announced several austerity packages and had successful rounds of bond sales on international capital markets to raise needed funds. In late April, when Eurostat, the European Union (EU)'s statistical agency, further revised the estimate of Greece's 2009 deficit upwards, Greek bond spreads spiked and two major credit rating agencies downgraded Greek bonds. 

Eurozone/IMF Financial Assistance: The Greek government formally requested financial assistance from the 16 member states of the Eurozone and the International Monetary Fund (IMF), and a €110 billion (about $145 billion) package was announced on May 2, 2010. The package aims to prevent Greece from defaulting on its debt obligations and to stem contagion of Greece's crisis to other European countries, including Portugal, Spain, Ireland, and Italy. Despite the substantial size of the package, some economists are concerned that the Eurozone/IMF package might not be enough to prevent Greece from defaulting on, or restructuring, its debt, or even from leaving the Eurozone. Greece's debt crisis threatened to widen across Europe, as bond spreads for several European countries spiked and depreciation of the euro began to accelerate. 

On Sunday, May 9, 2010, EU leaders announced that they would make an additional €500 billion ($636 billion) in financial assistance available to vulnerable European countries, with the IMF contributing up to an additional €220 billion (about $280 billion) to €250 billion (about $318 billion). The same day, the European Central Bank (ECB) announced it could start buying European bonds, and the U.S. Federal Reserved also announced it would reopen currency swap lines with other major central banks, including the ECB, to help ease economic pressure. When markets opened on Monday, May 10, 2010, bond spreads in Europe dropped and the euro began to strengthen, suggesting that the package was successful in stemming the spread of Greece's crisis. 

Implications for the United States: Greece's debt crisis could have several implications for the United States. First, falling investor confidence in the Eurozone has weakened the euro, which, in turn, could widen the U.S. trade deficit. Second, given the strong economic ties between the United States and the EU, financial instability in the EU could impact the U.S. economy. Third, $16.6 billion of Greece's debt is held by U.S. banks, and a Greek default would likely have ramifications for these creditors. Fourth, some have suggested that Greece's current debt crisis foreshadows what the United States could face in the future. Others argue that the analogy is weak, because the United States, unlike Greece, has a floating exchange rate and a national currency that is an international reserve currency. Fifth, the debate about imbalances within the Eurozone is similar to the debates about U.S.-China imbalances, and reiterates how, in a globalized economy, the economic policies of one country impact other countries' economies.


Date of Report: May 14, 2010
Number of Pages: 29
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U.S.-Vietnam Economic and Trade Relations: Issues for the 111th Congress

Michael F. Martin
Specialist in Asian Affairs

After more than two decades of virtually no economic contact, the United States and Vietnam reestablished trade relations during the 1990s. Since then, Vietnam has rapidly risen to become a significant trading partner for the United States. Bilateral trade has risen from about $220 million in 1994 to $15.4 billion in 2009. Vietnam is the second-largest source of U.S. clothing imports, and a major source for footwear, furniture, and electrical machinery. Much of this rapid growth in bilateral trade can be attributed to U.S. extension of normal trade relations (NTR) status to Vietnam. Another major contributing factor is over 20 years of rapid economic growth in Vietnam, ushered in by a 1986 shift to a more market-oriented economic system. 

Bilateral trade may increase if both nations become members of the Trans-Pacific Strategic Economic Partnership Agreement (TPP). The United States and Vietnam are among the eight countries negotiating the terms of expansion of the trade association. The Obama Administration envisions an expanded TPP as a "21st Century free trade agreement" that will become the cornerstone for a trans-Pacific regional trade association. Vietnam is also a party to negotiations to form a larger pan-Asian regional trade association based on the Association of Southeast Asian Nations (ASEAN) that could exclude the United States and could prove to be an alternative to the TPP and the U.S. vision for regional economic integration in Asia. 

The growth in bilateral trade has not been without its accompanying issues and problems. Vietnam has applied for acceptance into the U.S. Generalized System of Preferences (GSP) program and is participating in negotiations of a Bilateral Investment Treaty (BIT) with the United States. Both the Bush and the Obama Administrations have shown some hesitance in accepting Vietnam as a GSP beneficiary country and in concluding a BIT with Vietnam. Vietnam would like to have the United States officially recognize it as a market economy. 

There have also been problems with U.S. imports of specific products from Vietnam. In 2003, the United States began collecting antidumping duties on certain fish imports from Vietnam. From 2007 to 2009, the United States implemented a controversial monitoring program for selected clothing imports from Vietnam. In 2008, the 110th Congress passed legislation that transferred the regulation of catfish from the Food and Drug Administration to the U.S. Department of Agriculture. The Vietnamese government strongly protested these actions as largely protectionist measures. An examination of recent trends in bilateral trade reveals that other product categories—such as footwear, furniture, and electrical machinery—could generate future tension between the United States and Vietnam. Observers of Vietnam's economic development have also been critical of Vietnam's protection of workers' rights, its enforcement of intellectual property rights laws and regulations, and the country's exchange rate policies. 

The 111th Congress may play an important role in one or more of these issues, as have past Congresses. The GSP program is scheduled to expire on December 31, 2010, and if Congress should take up GSP renewal, it may also consider Vietnam's pending application. The 111th Congress may also weigh in on clothing and fish imports from Vietnam, or its designation as a market or non-market economy. Finally, if current growth trends continue, Congress may be asked to act on the rising amount of footwear, furniture, and/or electrical machinery being imported from Vietnam. This report will be updated as circumstances require.


Date of Report: May 3, 2010
Number of Pages: 24
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United States-Canada Trade and Economic Relationship: Prospects and Challenges

Ian F. Fergusson
Specialist in International Trade and Finance

The United States and Canada conduct the world's largest bilateral trade relationship, with total merchandise trade (exports and imports) exceeding $429.7 billion in 2009. The U.S.-Canadian relationship revolves around the themes of integration and asymmetry: integration from successive trade liberalization from the U.S.-Canada Auto Pact of 1965 leading to North American Free Trade Agreement (NAFTA), and asymmetry resulting from Canadian dependence on the U.S. market and from the disparate size of the two economies. 

The economies of the United States and Canada are highly integrated, a process that has been accelerated by the bilateral U.S.-Canada free trade agreement (FTA) of 1988 and the NAFTA of 1994. Both are affluent industrialized economies, with similar standards of living and industrial structure. However, the two economies diverge in size, per capita income, productivity and net savings.` 

Canada is the largest single-country trading partner of the United States. In 2009, total merchandise trade with Canada consisted of $224.9billion in imports and $204.7 billion in exports. In 2007, China displaced Canada as the largest source for U.S. imports for the first time, a trend that has continued since then. While Canada is an important trading partner for the United States, the United States is the dominant trade partner for Canada, and trade is a dominant feature of the Canadian economy. Automobiles and auto parts, a sector which has become highly integrated due to free trade, make up the largest sector of traded products. Canada is also the largest exporter of energy to the United States. Like the United States, the Canadian economy is affected by the transformation of China into an economic superpower. The United States and Canada also have significant stakes in each other's economy through foreign direct investment. 

Both countries are members of the World Trade Organization (WTO) and both are partners with Mexico in the NAFTA. While most trade is conducted smoothly, several disputes remain contentious. Disputes concerning the 2006 softwood lumber agreement are under arbitration and Canada has sought WTO consultations over country-of-origin-labeling requirements. In addition, the United States has placed Canada on its Special 301 priority watch list over intellectual property rights enforcement issues. Canada has also vigorously protested the implementation of the 'Buy American' provisions of the economic stimulus package. 

The terrorist attacks of 2001 focused attention on the U.S.-Canadian border. Several bilateral initiatives have been undertaken to minimize disruption to commerce from added border security. The focus on the border has renewed interest in some quarters in greater economic integration, either through incremental measures such as greater regulatory cooperation or potentially larger goals such as a customs or monetary union. Congressional interest has focused mostly on trade disputes, and also on the ability of the two nations to continue their traditional volume of trade with heightened security on the border.


Date of Report: May 3, 2010
Number of Pages: 27
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Canada-U.S. Relations

Carl Ek, Coordinator
Specialist in International Relations

Ian F. Fergusson, Coordinator
Specialist in International Trade and Finance

Relations between the United States and Canada, though generally close, have undergone changes in tenor over the past three decades. During the 1980s, the two countries generally enjoyed very good relations. The early 1990s brought new governments to Ottawa and Washington, and although Canada's Liberal Party emphasized its determination to act independently of the United States when necessary, relations continued to be cordial. In early 2006, a minority Conservative government assumed power in Ottawa. It was regarded as being more philosophically in tune with the George W. Bush Administration than the Liberals were; some observers believe that this compatibility has helped facilitate bilateral cooperation. The election of President Obama November 2008 signaled a new chapter in U.S.-Canada relations; unlike President Bush, Obama is quite popular in Canada. 

The two North American countries continue to cooperate widely in international security and political issues, both bilaterally and through numerous international organizations. Canada's foreign and defense policies are usually in harmony with those of the United States. Areas of contention are relatively few, but sometimes sharp, as was the case in policy toward Iraq. Since September 11, the United States and Canada have cooperated extensively on efforts to strengthen border security and to combat terrorism, particularly in Afghanistan. 

The United States and Canada maintain the world's largest trading relationship, one that has been strengthened over the past two decades by the approval of two bilateral free trade agreements. Although commercial disputes may not be quite as prominent now as they have been in the past, the two countries in recent years have engaged in difficult negotiations over items in several trade sectors, including natural resources, agricultural commodities, and the cultural/entertainment industry. The most recent dispute has centered around the Buy America provision of the 2009 economic stimulus law. However, these disputes affect but a small percentage of the total goods and services exchanged. In recent years, energy has increasingly emerged as a key component of the trade relationship. In addition, the United States and Canada work together closely on environmental matters, including monitoring air quality and solid waste transfers, and protecting and maintaining the quality of border waterways. 

Many Members of Congress follow U.S.-Canada environmental, trade, and transborder issues that affect their states and districts. In addition, because the countries are similar in many ways, lawmakers in both countries study solutions proposed in the other to such issues as federal fiscal policy and federal-provincial power sharing. 

This report begins with a short overview of Canada's political scene, its economic conditions, and its recent security and foreign policy, focusing particularly on issues that may be relevant to U.S. policymakers. This country survey is followed by several summaries of current bilateral issues in the political, international security, trade, and environmental arenas. The questions following each summary are designed as potential inquiries to Canadian officials to promote thought and discussion among policymakers.


Date of Report: May 4, 2010
Number of Pages:76
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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 in a formal offer on April 30, 2010. Argentina expects to complete the process in 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 to 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 28, 2010
Number of Pages: 17
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The Export Administration Act: Evolution, Provisions, and Debate

Ian F. Fergusson
Specialist in International Trade and Finance

The 111th Congress may consider legislation to renew, modify, or reauthorize the Export Administration Act (EAA). On July 31, 2009, Representative Sherman introduced the Export Control Improvements Act (H.R. 3515), co-sponsored by Representative Manzullo and Representative A. Smith, that contains provisions on export controls enforcement, integration of export control data in the AES, and diversion control. The House Foreign Affairs Committee is also reportedly working to produce as comprehensive rewrite of the EAA. As part of the Administration's export control review, Defense Secretary Robert M. Gates has proposed creating a unified export control structure merging the dual-use and munitions export control regimes, some aspects of which may require legislative consent. 

Through the EAA, Congress delegates to the executive branch its express constitutional authority to regulate foreign commerce by controlling exports. The EAA provides the statutory authority for export controls on sensitive dual-use goods and technologies: items that have both civilian and military applications, including those items that can contribute to the proliferation of nuclear, biological, and chemical weaponry. The EAA, which originally expired in 1989, periodically has been reauthorized for short periods of time, with the last incremental extension expiring in August 2001. At other times and currently, the export licensing system created under the authority of EAA has been continued by the invocation of the International Emergency Economic Powers Act (IEEPA). EAA confers upon the President the power to control exports for national security, foreign policy or short supply purposes. It also authorizes the President to establish export licensing mechanisms for items detailed on the Commerce Control List (CCL), and it provides some guidance and places certain limits on that authority. The CCL currently provides detailed specifications about dual-use items including equipment, materials, software, and technology (including data and know-how) likely requiring some type of export license from the Commerce Department's Bureau of Industry and Security (BIS). BIS administers the Export Administration Regulations (EAR), which, in addition to the CCL, describe licensing policy and procedures such as commodity classification, licensing, and interagency dispute resolution procedures. 

In debates on export administration legislation, parties often fall into two camps: those who primarily want to liberalize controls in order to promote exports, and those who believe that further liberalization may compromise national security goals. While it is widely agreed that exports of some goods and technologies can adversely affect U.S. national security and foreign policy, some believe that current export controls can be detrimental to U.S. businesses and to the U.S. economy. According to this view, the resultant loss of competitiveness, market share, and jobs can harm the U.S. economy, and that harm to particular U.S. industries and to the economy itself can negatively impact U.S. security. Others believe that security concerns must be paramount in the U.S. export control system and that export controls can be an effective method to thwart proliferators, terrorist states, and countries that can threaten U.S. national security interests. Controversies have arisen with regard to particular exports such as high performance computers, encryption technology, stealth materials, satellites, machine tools, "hot-section" aerospace technology, and the issue of "deemed exports." The competing perspectives on export controls have clearly been manifested in the debate over foreign availability and the control of technology, the efficacy of multilateral control regimes, the licensing process and organization of the export control system, and the economic effects of U.S. export controls.


Date of Report: April 26, 2010
Number of Pages: 31
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The Proposed U.S.-Colombia Free Trade Agreement: Economic and Political Implications

M. Angeles Villarreal
Specialist in International Trade and Finance

Implementing legislation for a U.S.-Colombia Free Trade Agreement (CFTA) (H.R. 5724/S. 2830) was introduced in the 110th Congress on April 8, 2008 under Title XXI (Bipartisan Trade Promotion Authority Act of 2002) of the Trade Act of 2002 (P.L. 107-210). The House leadership took the position that the President had submitted the legislation to implement the agreement without adequately fulfilling the requirements of Trade Promotion Authority. On April 10 the House voted 224-195 to make certain provisions in § 151 of the Trade Act of 1974 (P.L. 93-618), the provisions establishing expedited procedures, inapplicable to the CFTA implementing legislation (H.Res. 1092). It is currently unclear whether or how the 111th Congress will consider implementing legislation for the pending U.S.-Colombia FTA. 

The agreement would immediately eliminate duties on 80% of U.S. exports of consumer and industrial products to Colombia. An additional 7% of U.S. exports would receive duty-free treatment within five years of implementation and most remaining tariffs would be eliminated within ten years of implementation. The agreement also contains provisions for market access to U.S. firms in most services sectors; protection of U.S. foreign direct investment in Colombia; intellectual property rights protections for U.S. companies; and enforceable labor and environmental provisions. 

The United States is Colombia's leading trade partner. Colombia accounts for a very small percentage of U.S. trade (0.8% in 2009), ranking 22nd among U.S. export markets and 27th as a source of U.S. imports. About 90% of U.S. imports from Colombia enter the United States duty free, while U.S. exports to Colombia face duties of up to 20%. Economic studies on the impact of a U.S.-Colombia free trade agreement (FTA) have found that, upon full implementation of an agreement, the impact on the United States would be positive but very small because the size of the Colombian economy is very small when compared to that of the United States (about 1.6%). 

Numerous Members of Congress oppose the CFTA because of concerns about the violence against labor union activists in Colombia. President Bush's Administration believed that Colombia had made significant advances to combat violence and instability and views the pending trade agreement as a national security issue in that it would strengthen a key democratic ally in South America. 

President Barack Obama met with Colombian President Alvaro Uribe at the White House on June 29, 2009. After the meeting, President Obama stated that he had asked the United States Trade Representative (USTR) to work closely with Colombian government representatives to see how the two countries could move forward on the pending agreement. President Obama commended Colombia for its progress in addressing the violence against labor union leaders. In March 2010, USTR Ron Kirk stated that the Obama Administration is working on developing a finite list of proposals to give to Colombia to resolve the issues that blocked congressional approval of a free trade agreement with the United States and that the proposals would likely be related to worker rights protection and the issue of persecution in Colombia. The Obama Administration also stated in March 2010 that the pending FTAs with Colombia, Korea, and Panama are important to U.S. national security, each for different reasons, because national security depends on economic security and U.S. competitiveness. For Colombia, a free trade agreement with the United States is part of its overall economic development strategy.


Date of Report: April 16, 2010
Number of Pages: 31
Order Number: RL34470
Price: $29.95

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What’s the Difference?—Comparing U.S. and Chinese Trade Data

Michael F. Martin
Specialist in Asian Affairs

There is a large and growing difference between the official trade statistics released by the United States and the People's Republic of China. According to the United States, the 2009 bilateral trade deficit with China was $226.8 billion. According to China, its trade surplus with the United States was $143.3 billion—$83.5 billion less. 

This paper examines the differences in the trade data from the two nations in two ways. First, it compares the trade figures at the two digit level using the Harmonized System to discern any patterns in the discrepancies between the U.S. and Chinese data. This comparison reveals that over two-thirds of the difference in the value of China's exports to the United States is attributable to five types of goods. Those five types of goods, in order of the size of the discrepancy are electrical machinery; toys and sporting goods; machinery; footwear; and furniture. 

The second approach to examining the differing trade data involves a review of the existing literature on the technical and non-technical sources of the trade data discrepancies, including an October 2009 joint China-U.S. report on statistical discrepancies in merchandise trade data. The literature reveals that the main sources of the discrepancies are differences in the list value of shipments when they leave China and when they enter the United States, and differing attributions of origin and destination of Chinese exports that are transshipped through a third location (such as Hong Kong) before arriving in the United States. 

The size of the U.S. bilateral trade deficit with China has been and continues to be an important issue in bilateral trade relations. Some Members of Congress view the deficit as a sign of unfair economic policies in China, and have introduced legislation seeking to redress the perceived competitive disadvantage China's policies have created for U.S. exporters.


Date of Report: April 21, 2010
Number of Pages: 10
Order Number: RS22640
Price: $29.95

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Iran’s Economic Conditions: U.S. Policy Issues

Shayerah Ilias
Analyst in International Trade and Finance

The Islamic Republic of Iran, a resource-rich and labor-rich country in the Middle East, is a central focus of U.S. national security policy. The United States asserts that Iran is a state sponsor of terrorism and that Iran's uranium enrichment activities are for the development of nuclear weapons. To the extent that U.S. sanctions and other efforts to change Iranian state policy target aspects of Iran's economy as a means of influence, it is important to evaluate Iran's economic structure, strengths, and vulnerabilities. 

Since 2000, Iran has enjoyed broad-based economic growth. However, strong economic performance has been hindered by high levels of inflation and unemployment and low levels of foreign investment. Some contend that President Ahmadinejad's expansionary monetary and fiscal policies have worsened unemployment, inflation, and poverty in Iran. With the onset of the global economic downturn, Iran's economic growth was expected to slow in 2009 and through 2010. 

Iran has long been subject to U.S. economic sanctions and more recently, to United Nations sanctions, over its uranium enrichment program and purported support for terror activities. Such sanctions are believed by some analysts to contribute to Iran's growing international trade and financial isolation. 

Iran's economy is highly dependent on the production and export of crude oil to finance government spending, and consequently is vulnerable to fluctuations in international oil prices. Although Iran has vast petroleum reserves, the country lacks adequate refining capacity and imports gasoline to meet domestic energy needs. Iran is seeking foreign investment to develop its petroleum sector. While some deals have been finalized, reputational and financial risks may have limited other foreign companies' willingness to finalize deals. 

While Iran-U.S. economic relations are limited, the United States has a key interest in Iran's relations with other countries. As some European countries have curbed trade and investment dealings with Iran, other countries, such as China and Russia, have emerged as increasingly important economic partners. Iran also has focused more heavily on regional trade opportunities, such as with the United Arab Emirates. 

High oil prices have increased Iran's leverage in dealing with international issues, but the country's dependence on oil and other weak spots in the economy have to come to light by the 2008 international financial crisis, which may portend a slowing down of Iran's economy. 

Members of Congress are divided about the proper course of action in respect to Iran. Some advocate a hard line, while others contend that sanctions are ineffective at promoting policy change in Iran and hurt the U.S. economy. In the 110th Congress, several bills were introduced that reflect both perspectives. Policies toward Iran remain a key issue for the 111th Congress.


Date of Report: April 22, 2010
Number of Pages: 41
Order Number: RL34525
Price: $29.95

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