Vivian C. Jones
Specialist in International Trade and Finance
Concern regarding the level of low-cost imports from China and other countries and its impact on U.S. firms and workers, combined with China’s limiting of the appreciation of its currency, have led some in Congress to introduce legislation proposing to make countervailing duty laws applicable to China and other nonmarket economy countries.
Countervailing duty laws provide for the assessment of additional duties on imports whose production and/or importation are found to be subsidized by a public entity in their country of origin and are injurious to a U.S. producer of similar merchandise. Antidumping, another kind of trade remedy action, addresses products sold in the United States at less than their fair value (as defined by law) in a similar manner. Although antidumping (AD) and countervailing duty (CVD) laws and procedures generally parallel each other, CVD laws contain no specific provisions for investigations on imports from nonmarket economy (NME) countries, while the AD statute does provide such guidelines.
Initial administrative attempts in 1983 to apply countervailing remedies to allegedly subsidized imports from several NME countries led to determinations by the International Trade Administration (ITA) of the Department of Commerce (the U.S. agency charged with determining the existence and extent of subsidies) that subsidies within the meaning of the countervailing law, cannot be found in nonmarket economies. These ITA determinations were challenged in the U.S. Court of International Trade (CIT), which held that they were “not in accordance with the law,” reversed them, and remanded the cases to the ITA. On appeal, the U.S. Court of Appeals for the Federal Circuit reversed, and reinstated the ITA’s original determinations—thus affirming that the ITA has the discretion not to apply the CVD law to NME countries.
The ITA reevaluated this decision, with respect to China only, during a countervailing investigation on coated free sheet (CFS) paper. On October 18, 2007, the ITA made a final affirmative determination of subsidies in the investigation, finding net countervailable subsidies ranging from 7.40% to 44.25%. Although the International Trade Commission (the U.S. agency charged with determining whether the U.S. industry suffered material injury as a result of the subsidy) made a negative injury determination in the investigation, meaning that no CVD duties were assessed, other industries pursued countervailing investigations as a result of the ITA’s decision. As of this writing, countervailing duties have been placed on 13 products from China, and at least 8 investigations are pending.
Legislation seeking to apply CVD action to NME countries introduced in the 111th Congress includes H.R. 496 and H.R. 499, both introduced on January 14, 2009.
Date of Report: September 15, 2010
Number of Pages: 20
Order Number: RL33550
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Vivian C. Jones, Coordinator
Specialist in International Trade and Finance
J. F. Hornbeck
Specialist in International Trade and Finance
M. Angeles Villarreal
Specialist in International Trade and Finance
Since 1974, Congress has created multiple trade preference programs designed to foster economic growth, reform, and development in less developed countries. These programs give temporary, non-reciprocal, duty-free U.S. market access to select exports of eligible countries. Congress conducts regular oversight of these programs, repeatedly revising and extending them. Two major issues face the 111th Congress: (1) the expiration of two preference programs by December 31, 2010; and (2) possible legislative action on broader reform of the preference programs based on comprehensive reviews in hearings held in both the House and the Senate earlier in this Congress.
Congress established five trade preference programs. The Generalized System of Preferences (GSP) applies to developing countries as a whole. In addition, there are four regional programs established in the Andean Trade Preference Act (APTA), the Caribbean Basin Economic Recovery Act (CBERA); the Caribbean Trade Partnership Act (CBTPA), the African Growth and Opportunity Act (AGOA), and the Haitian Opportunity through Partnership Encouragement (HOPE) Act. Both the GSP and the ATPA are scheduled to expire on December 31, 2010.
Unlike free trade agreements, trade preferences are unilateral, so developing countries do not have to provide reciprocal trade benefits to the United States. To qualify for tariff preferences, however, they must meet certain eligibility criteria, which vary by program. Examples include adopting internationally recognized worker rights, providing adequate protection of intellectual property rights, and operating an open market economy under established multilateral trade rules. In the 111th Congress, the House Ways and Means and Senate Finance Committees have held hearings on the operation and impact of these programs. In the first session, Congress legislatively extended the GSP and ATPA for a one-year, ending December 31, 2010 (P.L. 111- 124). In the second session, it has extended provisions in the CBPTA and HOPE Act through September 30, 2020 in the Haiti Economic Lift Program Act of 2010 (P.L. 111-171). Other bills introduced include H.R. 1837 and S. 1665, which would extend ATPA to additional countries; and S. 1141 and S. 4101, which would expand product coverage for certain least-developed countries.
Trade preferences are permitted by the World Trade Organization (WTO) under the General Agreement on Tariffs and Trade (GATT) “enabling clause,” which allows members to provide more favorable treatment to developing countries. Other developed countries such as Canada, Japan, the European Union (EU), and Australia provide similar preferences. In the WTO Doha Development Agenda (DDA) round of multilateral trade negotiations, both developed and developing WTO members agreed to provide duty-free, quota-free (DFQF) preferential access to least-developed countries, subject to adoption of the agreement.
Evaluations of the benefits of trade preferences have been mixed. Many developing countries have used tariff preferences to enhance their competitiveness in certain industries, particularly apparel. In other countries, preferences are used to export major commodities such as petroleum products, which may be less supportive of long-term economic diversification and development. Meeting the needs of the least developing countries is a core policy issue that continues to drive the debate over the design of preference programs. Consumers and some U.S. industries and workers benefit from the additional trade, others compete directly with it, so perspectives on trade preferences vary despite their overall costs apparently being small.
This report discusses the major U.S. trade preference programs, their possible economic effects, stakeholder interests, and legislative options.
Date of Report: September 24, 2010
Number of Pages: 38
Order Number: R41429
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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. Should the U.S. economic recovery falter in the second half of 2010, it could reduce both the volume of energy imports and the price of those imports compared with earlier estimates. This report provides an estimate of the initial impact of the changing oil prices on the nation’s merchandise trade deficit.
Date of Report: September 14, 2010
Number of Pages: 11
Order Number: RS22204
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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, 411 complaints have been filed, approximately one-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: September 7, 2010
Number of Pages: 15
Order Number: RS20088
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Jeanne J. Grimmett
Legislative Attorney
U.S. trade agreements such as the North American Free Trade Agreement (NAFTA), World Trade Organization agreements, and bilateral free trade agreements (FTAs) have been approved by majority vote of each house rather than by two-thirds vote of the Senate—that is, they have been treated as congressional-executive agreements rather than as treaties. The congressional-executive agreement has been the vehicle for implementing Congress’s long-standing policy of seeking trade benefits for the United States through reciprocal trade negotiations. In a succession of statutes, Congress has authorized the President to negotiate and enter into tariff and nontariff barrier (NTB) agreements for limited periods, while permitting NTB and free trade agreements negotiated under this authority to enter into force for the United States only if they are approved by both houses in a bill enacted into public law and other statutory conditions are met; implementing bills are also accorded expedited consideration under the scheme.
The President was most recently granted temporary trade negotiating authority utilizing this approach in the Bipartisan Trade Promotion Authority Act of 2002 (BTPAA), contained in Title XXI of the Trade Act of 2002, P.L. 107-210. Although the authority expired during the 110th Congress, agreements entered into before July 1, 2007, remain eligible for congressional consideration under the expedited procedure. Implementing bills for eight FTAs were signed into law under the 2002 act; agreements with Colombia, Panama, and South Korea remain pending. Implementing legislation for the U.S.-Colombia agreement was introduced in April 2008 (H.R. 5724, 110th Congress), but House leadership considered that President Bush had submitted the bill without sufficient coordination with Congress, and the House subsequently voted to make key procedural rules for expedited consideration inapplicable to the legislation (H.Res. 1092, 110th Congress). In late June 2010, President Obama announced that, after certain outstanding issues involving the U.S.-Korea FTA are resolved, he intends to present Congress with an implementing bill for the agreement “in the few months” following the G-20 meeting to be held in Seoul in November 2010.
In addition, the United States Trade Representative (USTR), on behalf of the President, notified the House and Senate in December 2009 by letter that the President intends to enter into negotiations aimed at a regional, Asia-Pacific trade agreement, known as the Trans-Pacific Partnership (TPP) Agreement. Although the trade agreement authorities of the BTPAA have expired, the USTR has stated the Administration was observing the relevant procedures of the act with respect to notifying and consulting with Congress regarding these negotiations.
A federal appeals court held in 2001 that the issue of whether the NAFTA should have been approved as a treaty was a nonjusticiable political question (Made in the USA Found. v. United States, 242 F.3d 1300 (11th Cir. 2001)). The U.S. Supreme Court denied review in the case.
Date of Report: September 8, 2010
Number of Pages: 10
Order Number: 97-896
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Luisa Blanchfield
Specialist in International Relations
Marian Leonardo Lawson
Analyst in Foreign Assistance
From September 20 to 22, 2010, heads of state and government will convene at United Nations (U.N.) Headquarters for a High-level Plenary Meeting to review progress towards the U.N. Millennium Development Goals (MDGs). The MDGs are a group of measurable development targets agreed to by 189 U.N. member states—including the United States—as part of the 2000 Millennium Declaration. The MDGs, which governments aim to achieve by 2015, include (1) eradicating extreme hunger and poverty; (2) achieving universal primary education; (3) promoting gender equality and women’s empowerment; (4) reducing the under-five child mortality rate; (5) reducing the maternal mortality rate; (6) combating HIV/AIDS and other diseases; (7) ensuring environmental sustainability; and (8) developing a Global Partnership for Development.
Since 2000, governments have worked to achieve the MDGs with mixed results. Experts generally agree that while some MDGs are on track to be met, the majority of Goals are unlikely to be achieved by 2015. Many have also found that progress toward the Goals is unevenly distributed across regions and countries. India and China, for example, have made considerable progress in achieving the MDGs, while many countries in Africa have failed to meet almost all of the Goals.
President Barack Obama supports the MDGs and is expected to attend the September High-level meeting. In July 2010, the Administration published The United States’ Strategy for Meeting the Millennium Development Goals, which identifies four “imperatives” for achieving the Goals— innovation, sustainability, measuring outcomes, and mutual accountability.
Members of the 111th Congress may be interested in the MDGs and the September High-level meeting from three primary perspectives. First, Congress may wish to consider the MDGs in the context of authorizing and funding broader U.S. development assistance efforts. Second, Members may wish to be aware of any commitments made or opposed by the Obama Administration at the High-level meeting. Additionally, Congress may wish to conduct oversight on international progress towards the MDGs, including U.S. efforts and the future of the Goals.
While evidence of MDG effectiveness in advancing global development is uneven a decade after the Millennium Declaration, the international community—and many policymakers in the United States—continue to use the Goals as a paradigm for development assistance. This raises a number of overarching questions for Congress about the role and future of the MDGs, including:
• In what areas, if any, have the MDGs been successful?
• Are the MDGs practical?
• What is the role of U.S. foreign aid in the MDGs?
• Who is accountable for MDG progress?
Date of Report: September 10, 2010
Number of Pages: 19
Order Number: R41410
Price: $29.95
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