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Wednesday, June 30, 2010

Trade Remedies: A Primer

Vivian C. Jones
Specialist in International Trade and Finance


The United States and many of its trading partners use laws known as trade remedies to mitigate the adverse impact of various trade practices on domestic industries and workers. 

U.S. antidumping (AD) laws (19 U.S.C. § 1673 et seq.) authorize the imposition of duties if (1) the International Trade Administration (ITA) of the Department of Commerce determines that foreign merchandise is being, or likely to be sold in the United States at less than fair value, and (2) the U.S. International Trade Commission (ITC) determines that an industry in the United States is materially injured or threatened with material injury, or that the establishment of an industry is materially retarded, due to imports of that merchandise. A similar statute (19 U.S.C. § 1671 et seq.) authorizes the imposition of countervailing duties (CVD) if the ITA finds that the government of a country or any public entity has provided a subsidy on the manufacture, production, or export of the merchandise, and the ITC determines injury. U.S. safeguard laws (19 U.S.C. § 2251 et seq.) authorize the President to provide import relief from injurious surges of imports resulting from fairly competitive trade from all countries. Other safeguard laws authorize relief for import surges from communist countries (19 U.S.C. § 2436) and from China (19 U.S.C. § 2451). In each case, the ITC conducts an investigation, forwards recommendations to the President, and the President may act on the recommendation, modify it, or do nothing. 

On September 11, 2009, President Obama announced that he had determined to provide import relief under a China-specific safeguard provision with respect to certain tires from China. Effective September 26, 2009, the Obama administration imposed additional duty on these tires for a three-year period, beginning at 35% ad valorem the first year, declining to 30% the second year, and 25% the third year. This China-specific safeguard measure, a provision in the law that granted China permanent normal trade relations status (P.L. 106-386), gives relief to U.S. producers of like or competitive products from import surges of goods that cause, or threaten to cause, market disruption. 

In the 111th Congress, legislation has been introduced seeking to amend trade remedy statutes (H.R. 496, H.R. 3012, and S. 2821) and to address issues regarding the applicability of these laws to China and other nonmarket economy countries and/or to currency misalignment (H.R. 499, H.R. 2378, S. 1027, S. 1254). S. 3080 seeks to allow for judicial determination of injury. In addition, the American Recovery and Reinvestment Act of 2009 (P.L. 111-5) expanded the application of Trade Adjustment Assistance (TAA), making workers found to be adversely affected by trade that results in a final AD, CVD, or safeguard determination by the ITC eligible to apply for Trade Adjustment Assistance. 

In World Trade Organization (WTO) negotiations, work continues in the Negotiating Committee on Rules on suggested revisions to the Antidumping Agreement and the Agreement on Subsidies and Countervailing Measures should an agreement be reached in the Doha Development Round (DDA). 

This report explains, first, U.S. antidumping and countervailing duty statutes and investigations. Second, it describes safeguard statutes and investigative procedures. Third, it briefly presents trade-remedy related legislation in the 110th Congress. Finally, the Appendix provides a brief chart outlining U.S. trade remedy statutes, major actors, and the effects of these laws. 
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Date of Report: June 14, 2010
Number of Pages: 38
Order Number: RL32371
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China-U.S. Trade Issues

Wayne M. Morrison
Specialist in Asian Trade and Finance


U.S.-China economic ties have expanded substantially over the past three decades. Total U.S.- China trade rose from $5 billion in 1980 to $409 billion in 2008. Although commercial ties were sharply affected by the global economic crisis in 2009 (total U.S. trade with China dropped by 10.5% to $366 billion), China remained the second-largest U.S. trading partner, its third-largest export market, and its biggest source of imports. With a large population and a rapidly expanding economy, China is a huge market for U.S. exporters and investors. However, bilateral economic relations have become strained over a number of issues, including large U.S. annual trade deficits with China (the deficit was $266 billion in 2008, but fell to $227 billion in 2009), China's mixed record on implementing its World Trade Organization (WTO) commitments, its resistance to international calls to reform its pegged (and undervalued) currency system, its relatively poor record on enforcing intellectual property rights (IPR), and its extensive use of industrial policies and discriminatory government procurement policies (such as proposed "indigenous innovation" certification regulations) to promote domestic Chinese firms over foreign companies. Some observers contend that the business climate in China has worsened over the past few years. 

Further complicating the U.S.-China bilateral relationship is the growing level of economic integration and mutual commercial dependency between to two economies. U.S. economic ties with China benefit many U.S. groups, such as consumers (through low-cost imports from China) and certain business interests (such as firms who use China as a center for their supply chain operations to assemble inputs into finished products). However, other U.S. groups, primarily U.S. domestic firms and workers that compete with low-cost imported Chinese products, see growing economic ties as damaging to U.S. economic interests, largely because of "unfair" Chinese trading practices. Such groups have urged the U.S. government to take a more assertive trade policy to force China to eliminate unfair economic policies in order to help achieve a level trading field for U.S. firms and workers. Other analysts counter that, although many trade problems exist, the overall economic relationship benefits both sides, and warn that unilateral trade action by either side would harm both economies. They support using high-level talks, such as the Strategic and Economic Dialogue (S&ED), to address long-term bilateral and global economic issues. 

Another example of the complex bilateral economic relationship is China's large holdings of U.S. Treasury securities, which totaled $900 billion as of April 2010, making it the largest foreign holder of such securities. Some U.S. analysts welcome China's purchases of U.S. debt, which enable the federal government to fund its budget deficit and help to keep U.S. interest rates relatively low. Others have expressed concerns that China's large holdings of U.S. debt could give it significant leverage over the United States. For China, a growing and stable U.S. economy is an important component to its own economic growth. Chinese officials have expressed concerns over the "safety" of their U.S. debt holdings. 

Many economists contend that global imbalances, particularly in the United States and China, were a major factor behind the global financial crisis. Until very recently, U.S. domestic savings were very low relative to its investment needs, consumption was the dominant source of economic growth, and the United States had to borrow heavily from abroad, including from China, which helped fuel U.S. demand for imports. China, until recently, had a very high savings rate, a low rate of consumption, and was heavily dependent on its trade sector for economic growth. Both countries contend that they are now seeking to implement policies to rebalance the sources of their economic growth.



Date of Report: June 21, 2010
Number of Pages: 43
Order Number: RL33536
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U.S.-Latin America Trade: Recent Trends and Policy Issues

J. F. Hornbeck
Specialist in International Trade and Finance

Trade is one of the more enduring issues in contemporary U.S.-Latin America relations. Latin America is far from the largest U.S. regional trade partner, but historically is the fastest growing one. Between 1998 and 2009, total U.S. merchandise trade (exports plus imports) with Latin America grew by 82% compared to 72% for Asia (driven largely by China), 51% for the European Union, 221% for Africa, and 64% for the world. Mexico composed 11.7% of total U.S. merchandise trade in 2009 and is the largest Latin American trade partner, accounting for 58% of the region's trade with the United States, the result of a long history of economic integration between the two countries. By contrast, the rest of Latin America together makes up only 8.3% of U.S. trade, leaving significant room for growth. 

Latin American countries have made noted progress in trade liberalization, reducing tariffs significantly and entering into their own regional agreements. This development presented an opportunity for the United States, which has supported deeper regional integration, in part because it has been widely viewed as beneficial for both economic and foreign policy reasons. The United States has implemented comprehensive bilateral or plurilateral reciprocal trade agreements with most of its important trade partners in Latin America. These include the North American Free Trade Agreement (NAFTA), the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR), and bilateral FTAs with Chile and Peru. FTAs with Panama and Colombia have been signed but not implemented, pending congressional action. 

Many of the largest economies in South America, however, are not part of U.S. FTAs and have resisted a region-wide agreement, the Free Trade Areas of the Americas (FTAA), in part because it represented an extension of the same trade model used by the United States in bilateral agreements. Countries south of the Caribbean Basin have been reluctant to enter into such a deal because it does not meet their primary negotiation objectives. Brazil, Argentina, and Venezuela are less compelled to capitulate to U.S. demands because they are far less dependent on the U.S. economy than countries in the Caribbean Basin, do not rely on previously existing unilateral preferential arrangements, and would have to redefine their subregional trade pacts. 

The result in the Western Hemisphere has been an expansive system of disparate bilateral and plurilateral agreements, which are widely understood to be a second best solution for reaping the benefits of trade liberalization. Alternatives to a new round of currently unpopular FTAs are being debated. It has been suggested, for example, that FTAs be revised, enhancing controversial environment, labor, and other chapters. The response in Latin, however, has been tepid. Another option is to move incrementally toward harmonization or convergence of the vast array of trade arrangements in the Western Hemisphere by adopting administrative solutions where possible, without renegotiation. One example is to expand rules of origin and cumulation provisions. 

With respect to FTA implementation, another critical issue is the provision of trade capacity building and other technical assistance to address supply-side constraints in areas such as port and customs operations modernization, infrastructure investment, technology enhancement, and development of common standards in general. These are often major constraints to the more fluid movement of goods in Latin American countries. It is uncertain what the next step in Western Hemisphere economic integration may be, and these alternatives may be difficult to implement and monitor. But at the margin, they could provide benefits in light of the apparent hiatus in moving ahead with either a multilateral or hemispheric trade accord.


Date of Report: June 25, 2010
Number of Pages: 13
Order Number: 98-840
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Tuesday, June 29, 2010

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 second round of discussions among the eight countries took place in San Francisco, during the week of June 14, 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: June 25, 2010
Number of Pages: 19
Order Number: R40502
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Monday, June 28, 2010

Sunday, June 27, 2010

Intellectual Property Rights and Access to Medicines: International Trade Issues

Shayerah Ilias
Analyst in International Trade and Finance


A patent, which is a form of intellectual property right (IPR), is a legal, exclusive right granted for the invention of a new product, process, organism, design, and plant. It allows the right holder to exclude others from making, using, or selling the protected invention for a period of 20 years. Patents constitute the most common method for governments to encourage research and development (R&D) in order to find pharmaceutical treatments and cures for diseases and other illnesses. 

IPR protection and enforcement have evolved from an area primarily of national concern to an area of international trade policy. The World Trade Organization (WTO) Agreement on Trade- Related Aspects of Intellectual Property Rights (TRIPS) established minimum standards for IPR protection and enforcement. 

The U.S. government considers the protection and enforcement of international IPR standards, including those for patents, to be an important goal of U.S. trade policy for economic, health and safety, and national security reasons. As such, the United States has pursued strong IPR regimes through multilateral, regional, and bilateral free trade agreement (FTA) negotiations and unilateral trade policy tools, namely the Special 301 process and the Generalized System of Preferences (GSP). 

IPR provisions in trade policies are among the range of social, economic, and political factors that may affect public health, including the ability of countries to deliver health services to their populations. Patents, through their possible impact on innovation and drug prices, may affect access to existing medicines and the development of new medicines. According to the World Health Organization (WHO), about one-third of the world's population, primarily those residing in poorer parts of Africa and Asia, lacks regular access to essential medicines. 

While the United States places priority on promoting a strong international IPR regime, some Members of Congress have expressed concern over how to balance the goals of providing longterm incentives for innovation through patents and addressing the short-term need to provide affordable access to medicines. 

This report focuses on the relationship between IPR provisions in international and U.S. trade policy and access to medicines. This issue represents one component of a broader debate about the relationship between trade policy and public health. Possible issues of interest for Congress include incorporating public health concerns into the U.S. trade policy advisory process, developing new U.S. trade policy guidance on public health, considering the implications of the U.S. strategy on IPRs and trade for U.S. access to medicines, and reviewing the range of options utilized for expanding global access to medicines.



Date of Report: June 14, 2010
Number of Pages: 33
Order Number: R40607
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Thursday, June 24, 2010

U.S. Trade Policy and the Caribbean: From Trade Preferences to Free Trade Agreements

J. F. Hornbeck
Specialist in International Trade and Finance


For over 40 years, the United States has relied on unilateral trade preferences to promote exportled development in poor countries. Congressionally authorized trade preferences give market access to selected developing country goods, duty free or at tariffs below normal rates, without requiring reciprocal trade concessions, although their extension is conditioned on extensive eligibility criteria and the use of U.S. inputs in many cases. The Caribbean Basin has benefitted from multiple preferential trade arrangements, the first being the Caribbean Basin Initiative (CBI), passed by Congress in the Caribbean Basin Economic Recovery Act of 1983. Other programs include the Caribbean Basin Trade Partnership Act (CBTPA) of 2000, which provides tariff preferences for imports of apparel products, and the Haiti HOPE Act of 2006 (amended in 2008 and 2010), which gives even more generous preferences to imports of Haitian apparel. 

Since the preferences have been implemented, U.S.-Caribbean trade has grown, but evaluations of the early programs suggest that their effects were not as robust as originally hoped. Benefits tended to be concentrated in a few countries and products, limiting export promotion and deterring product diversification. Over time, benefits have been "eroded" by multilateral trade liberalization and other regional U.S. preference programs. Bilateral free trade agreements, particularly the CAFTA-DR, have actually replaced unilateral preferences with permanent, more attractive tariff reductions and trade rules for former CBI countries such as the Dominican Republic and Central American countries. As the main exporters of apparel in the Caribbean Basin, they were among the primary beneficiaries of the Caribbean trade preference programs. 

In recent years, Congress had leaned toward short-term extensions of the Caribbean and other preference programs. A number of Members seek a comprehensive review of these programs with an eye on harmonizing and revamping their various provisions. Congressional concern over eligibility criteria, simplifying rules of origin, targeting the least developed countries, and standardizing benefits are among a number of broad issues being debated as part of the preference reform agenda. In the 111th Congress, the discussion of extending the Caribbean programs has been part of a broader reauthorization effort for all preference arrangements. In addition, there are a number of issues and circumstances converging that may suggest the need for reorienting U.S. trade policy in the Caribbean region. 

The most effective trade preferences appear to be the apparel provisions provided under the CBTPA and the HOPE Act, as amended. Both were extended through September 30, 2020, in the Haiti Economic Lift Program (HELP) Act of 2010 (P.L. 111-171). These provisions, however, are not well suited to the services- and energy-based economies of the smaller Eastern Caribbean countries. Also, there is a reluctance by these countries to make the transition to an FTA without some guarantee of a "development component" to the agreement. These concerns persist, despite the promise of permanent market access and increased investment that an FTA holds out. The Caribbean countries, long involved in dependent economic relationships, appear content to take a cautious path toward any new trade arrangement with the United States. 

For U.S. trade policy, any thoughts of achieving broader regional integration are challenged by these circumstances. Broader integration may be difficult to reconcile with the needs of very small developing countries, which are highly vulnerable to the vicissitudes of global economic trends and may require new and creative solutions, particularly if U.S. policy is still driven by the historical focus on development and regional security issues in addition to trade liberalization. In the context of continuing with trade preferences in similar or altered form, or opting for an FTA, the solution is not immediately obvious.



Date of Report: June 17, 2010
Number of Pages: 26
Order Number: RL33951
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Wednesday, June 23, 2010

World Trade Organization (WTO): Issues in the Debate on Continued U.S. Participation

Raymond J. Ahearn
Specialist in International Trade and Finance

Ian F. Fergusson
Specialist in International Trade and Finance


Following World War II, the United States led efforts to establish an open and nondiscriminatory trading system with the expressed goal of raising the economic well-being of all countries and bolstering world peace. These efforts culminated in the creation of the General Agreement on Tariffs and Trade (GATT) in 1948, a provisional agreement on tariffs and trade rules that governed world trade for 47 years. The World Trade Organization (WTO) succeeded the GATT in 1995 and today serves as a permanent body that administers the rules and agreements negotiated and signed by 153 participating parties, as well as a forum for dispute settlement and negotiations. 

Section 125 of the Uruguay Round Agreements (P.L. 103-465), which is the law that approved and implemented the agreements reached during the Uruguay Round of multilateral trade negotiations, provided that the U.S. Trade Representative (USTR) must submit to Congress every five years a report that analyzes the costs and benefits of continued U.S. participation in the WTO. The USTR submitted its report to Congress on March 1, 2010, triggering a 90 legislative day timetable in which any Member of Congress may introduce a privileged joint resolution withdrawing congressional approval of the WTO Agreement (to date no withdrawal resolution has been introduced in the 111th Congress). 

Most observers maintain that U.S. withdrawal from the WTO is at best highly unlikely for both substantive and procedural reasons. Substantively, the withdrawal of U.S. participation could undermine a multilateral system of trade rules and practices, formulated and implemented under U.S. leadership, that on balance has contributed to increased economic prosperity and security at home and abroad. Procedurally, a withdrawal resolution would have to pass both the House and Senate and then surmount a likely Presidential veto via an override with a two-thirds majority vote. Nevertheless, such a resolution provides an opportunity for Members of Congress periodically to debate "whether the WTO is an effective organization" and ways it could better serve U.S. interests. 

The purpose of this report is to analyze some of the main issues in any debate on U.S. participation in the WTO and to address some of the criticisms leveled at the organization. Academic studies indicate that the United States benefits from broad reductions in trade barriers worldwide, but some workers and industries might not share in those gains. Decisions in the WTO are made by member governments, which determine their negotiating positions, file dispute challenges, and implement their decisions. However, some argue that smaller countries are left out of decision-making and that governments tend to represent the interests of large corporations disproportionately. 

The United States has been a frequent participant in WTO dispute proceedings, both as a complainant and as a respondent. There have been complaints that countries do not adhere to decisions and that U.S. trade remedy laws have not been judged properly. It is also argued that this multilateral dispute settlement process is unique and that the United States has successfully used the process to advance its economic interests. 

Certain advocates for the environment, food safety, labor, development, and financial regulation have criticized the WTO. Much of the criticism is based on interpretations of various WTO agreements or rulings that have been controversial. An appendix sets out the legislative procedures for the WTO withdrawal resolution.



Date of Report: June 16, 2010
Number of Pages: 41
Order Number: R41291
Price: $29.95

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Trade Remedies and the WTO Rules Negotiations

Vivian C. Jones
Specialist in International Trade and Finance


At the November 2001 Ministerial meeting of the World Trade Organization (WTO) in Doha, Qatar, member countries launched a new round of trade talks known as the Doha Development Agenda (DDA). Discussions continue, although negotiations at this time seem to be at an impasse. 

One of the negotiating objectives in the DDA called for "clarifying and improving disciplines" under the WTO Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (Antidumping Agreement or ADA) and the WTO Agreement on Subsidies and Countervailing Measures (Subsidies Agreement or ASCM). The frequent use of trade remedies by the United States and other developed nations—and increasingly, developing countries—has come under criticism by some WTO members as being protectionist. In a March 2010 report, the chairman of the rules negotiations mentioned that consensus had been reached on many technical issues, but that there was no agreement on the larger "political" issues. 

Some in Congress cite U.S. use of trade remedies as necessary to protect U.S. firms and workers from unfair competition. Some also credit the existence of trade remedies with helping to increase public support for additional trade liberalization measures. These groups would like increased trade enforcement of trade remedies and intellectual property laws. Others in Congress, especially those who represent U.S. importers, manufacturers, and export-oriented businesses, tend to support liberalizing the ADA and ASCM, in ways that could make use of U.S. trade remedy laws less frequent and relief harder to obtain. For example, there is support in Congress for legislation that would require administering authorities to determine whether or not a trade remedy action is in the overall public interest before such a measure can be imposed. 

DDA negotiations involve Congress because any trade agreement made by the United States must be implemented by legislation, thus Congress also has an important oversight role in trade negotiations. For example, preserving "the ability of the United States to enforce rigorously its trade laws" was included as a principal negotiating objective in legislation granting presidential Trade Promotion Authority—the Trade Act of 2002 (P.L. 107-210). 

In the WTO talks, the positions of major players in trade remedy talks are well-documented by position papers written by WTO members that are circulated through the WTO Negotiating Group on Rules. Major themes that have emerged include limiting the use of trade remedy actions in favor of "price undertakings," reducing the level of duties assessed per action by ending mandatory offsets (also known as "zeroing"), or limiting the duration of trade remedy measures through mandatory "sunset" reviews. Some members also support placing more restrictions on the ability of officials to grant relief to domestic industries through the use of economic interest tests and other administrative procedures and "special and differential treatment" for developing countries. Some countries see revision of the ADA and ASCM and other WTO disciplines on trade remedies as a "make or break" issue if the Doha Development Agenda is to succeed. This report examines trade remedy issues in DDA in three parts. The first part provides background information and contextual analysis. The second section focuses on how these issues fit into the DDA. A third section provides a more specific overview of major reform proposals that are being considered.



Date of Report: June 7, 2010
Number of Pages: 44
Order Number: R40606
Price: $29.95

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Tuesday, June 22, 2010

Tariff Modifications: Miscellaneous Tariff Bills

Vivian C. Jones
Specialist in International Trade and Finance

Importers often request that Members of Congress introduce bills seeking to suspend or reduce tariffs on certain imports on their behalf. The vast majority of these commodities are chemicals, raw materials, or other components used as inputs in the manufacturing process. The rationale for these requests, in general, is that they help domestic producers of the downstream goods reduce costs, thus making their products more competitive. In turn, these cost reductions can be passed on to the consumer. 

In recent congressional practice, House Ways and Means and Senate Finance Committees, the committees of jurisdiction over tariffs, have combined these duty suspension bills and other technical trade provisions into larger pieces of legislation known as miscellaneous tariff bills (MTBs). Before inclusion in an MTB, the individual legislative proposals introduced by Members are reviewed by trade subcommittee staff and several executive branch agencies to ensure that they are noncontroversial (generally, that no domestic producer objects) and relatively revenueneutral (revenue loss of no more than $500,000 per item). 

Late in the 109th Congress, the last time that MTB legislation was passed, the House passed H.R. 6406, a trade package that included suspension of duties on about 380 products until December 31, 2009. The legislation was inserted into H.R. 6111, a previously House-passed tax extension package. The Senate approved H.R. 6111, including the duty suspensions, and the bill was signed by the President on December 20, 2006 (P.L. 109-432). Tariff suspensions on about 300 other products were previously inserted into H.R. 4, The Pension Protection Act of 2006 (P.L. 109- 280). 

In the 110th Congress, congressional ethics and earmark reform legislation also targeted "limited tariff benefit[s]," defined as "a provision modifying the Harmonized Tariff Schedule of the United States in a manner that benefits 10 or fewer entities." This legislation amended House and Senate rules to make it out of order to consider bills containing earmarks, limited tax benefits, or limited tariff benefits unless certain disclosure and reporting requirements are met by the Member proposing the legislation and the committees of jurisdiction. Even though a November 2007 House Ways and Means Trade Subcommittee advisory called for House Members to submit legislative proposals for inclusion in a proposed MTB by December 14, 2007, no omnibus bill was introduced in either House. 

In the 111th Congress, H.R. 4380, the Miscellaneous Trade and Technical Corrections Act of 2009, was introduced on December 15, 2009. This bill temporarily suspends or reduces for three years duties on over 600 products, many of which renew duty suspension or reductions that were already in place. In the Senate, Senate Finance Committee Chairman Max Baucus and Ranking Member Chuck Grassley requested on October 1, 2009, that Senators introduce miscellaneous tariff measures by the end of October—after an agreement was reached regarding additional disclosure requirements for lobbyists recommending MTB provisions.

Date of Report: June 9, 2010
Number of Pages: 13
Order Number: RL33867
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Friday, June 18, 2010

North American Free Trade Agreement (NAFTA) Implementation: The Future of Commercial Trucking Across the Mexican Border

John Frittelli
Specialist in Transportation Policy


NAFTA set forth a schedule for implementing its trucking provisions that would have opened the border states to cross-border trucking competition in 1995 and all of North America in 2000, but full implementation has been stalled because of concern with the safety of Mexican trucks. Congress first addressed these concerns in the FY2002 Department of Transportation Appropriations Act (P.L. 107-87) which set 22 safety-related preconditions for opening the border to long-haul Mexican trucks. In November 2002, the U.S. Department of Transportation announced that all the preconditions had been met and began processing Mexican applications for U.S. long-haul authority. However, a suit over environmental compliance delayed implementation further. After the suit was resolved, in February 2007, the U.S. and Mexican Secretaries of Transportation announced a demonstration project to implement the NAFTA trucking provisions. The purpose of the project was to demonstrate the ability of Mexico-based motor carriers to operate safely in the United States beyond the border commercial zones. Up to 100 Mexicodomiciled carriers would be allowed to operate throughout the United States for one year and Mexico would allow the same for up to 100 U.S.-based carriers. With passage of the U.S. Troop Readiness, Veteran's Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 (P.L. 110-28), Congress mandated additional requirements before the project could begin. After failing to defund the demonstration project in the FY2008 Consolidated Appropriations Act (P.L. 110-161), Congress succeeded in terminating the demonstration project through a provision in the FY2009 Omnibus Appropriations Act (P.L. 111-8). Subsequently, Mexico announced it would retaliate by increasing import duties on 90 U.S. products. The Obama Administration has indicated it intends to propose a revamped program that will address the concerns of Congress. The FY2010 Consolidated Appropriations Act (P.L. 111-117) passed in December 2009 did not preclude funds from being spent on a long-haul Mexican truck pilot program, provided the terms and conditions stipulated in section 350 of P.L. 107-87 and section 6901 of P.L. 110-28 were satisfied. 

One truck safety statistic, "out-of-service" rates, indicates that Mexican trucks operating in the United States are now safer than they were a decade ago. The data indicate that Mexican trucks and drivers have a comparable safety record to U.S. truckers. Another study indicates that the truck driver is usually the more critical factor in causing accidents than a safety defect with the truck itself. Service characteristics of long-haul trucking suggest that substandard carriers would likely not succeed in this market. As shipment distance increases, the relative cost of trucking compared to rail increases, and thus shippers utilizing long-haul trucking are willing to pay more because they require premium service, such as precise delivery windows or cargo refrigeration. These exacting service requirements would seem to disqualify truckers with unreliable equipment or incompetent drivers. In contrast, the short-haul "drayage" carriers that Mexican long-haul carriers would displace, typically use older equipment because of the many hours spent idling awaiting customs processing at the border. If Mexican carriers do eventually receive long-haul authority, the short term impact is expected to be gradual as Mexican firms deal with a number of stumbling blocks, including lack of prearranged back hauls and higher insurance and capital costs, in addition to the customs processing delays. In the long run, use of drayage companies is likely to decline as they lose part of their market share to Mexican long-haul carriers. The most common trips for these carriers will probably be from the Mexican interior to warehouse facilities on the U.S. side of the border or to nearby cities in the border states. 
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Date of Report: June 1, 2010
Number of Pages: 32
Order Number: RL31738
Price: $29.95

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Monday, June 14, 2010

NAFTA and the Mexican Economy

M. Angeles Villarreal
Specialist in International Trade and Finance


The North American Free Trade Agreement (NAFTA), in effect since January 1994, plays a very strong role in the bilateral economic relationship between Mexico and the United States. The two countries are also closely tied in areas not directly related to trade and investment such as security, environmental, migration, and health issues. The effects of NAFTA on Mexico and the Mexican economic situation have impacts on U.S. economic and political interests. A number of policymakers have raised the issue of revisiting NAFTA and renegotiating parts of the agreement. Some important factors in evaluating NAFTA include the effects of the agreement on Mexico and how these relate to U.S.-Mexico economic relations. In the 111th Congress, major issues of concern are related to U.S.-Mexico trade issues, economic conditions in Mexico, the effect of NAFTA on the United States and Mexico, and Mexican migrant workers in the United States. 

In 1990, Mexico approached the United States with the idea of forming a free trade agreement (FTA). Mexico's main motivation in pursuing an FTA with the United States was to stabilize the Mexican economy and promote economic development by attracting foreign direct investment, increasing exports, and creating jobs. The Mexican economy had experienced many difficulties throughout most of the 1980s with a significant deepening of poverty. The expectation among supporters at the time was that NAFTA would improve investor confidence in Mexico, increase export diversification, create higher-skilled jobs, increase wage rates, and reduce poverty. It was expected that, over time, NAFTA would narrow the income differentials between Mexico and the United States and Canada. 

The effects of NAFTA on the Mexican economy are difficult to isolate from other factors that affect the economy, such as economic cycles in the United States (Mexico's largest trading partner) and currency fluctuations. In addition, Mexico's unilateral trade liberalization measures of the 1980s and the currency crisis of 1995 both affected economic growth, per capita gross domestic product (GDP), and real wages. While NAFTA may have brought economic and social benefits to the Mexican economy as a whole, the benefits have not been evenly distributed throughout the country. The agricultural sector experienced a higher amount of worker displacement after NAFTA, in part because of increased competition from the United States but also because of Mexican domestic agricultural reforms. In terms of regional effects, initial conditions in Mexico appear to have determined which Mexican states experienced stronger economic growth as a result of NAFTA. Some economists argue that while trade liberalization may narrow income disparities over the long run with other countries, it may indirectly lead to larger disparities in income levels within a country. 

Over the last decade, the economic relationship between the United States and Mexico has strengthened significantly and the two countries continue to cooperate on issues of mutual concern. President Barack Obama met with Mexican President Calderón in May 2010 during the Mexican president's official state visit to the United States. The two leaders reaffirmed their commitment to increasing cooperation in a wide range of issues, including enhancing mutual economic growth. A key component for their global competitiveness initiative is to create a border the for the Twenty-First Century that will expand and modernize border facilities for a secure and more efficient border.



Date of Report: June 3, 2010
Number of Pages: 23
Order Number: RL34733
Price: $29.95

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Friday, June 11, 2010

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: June 4, 2010
Number of Pages: 25
Order Number: R41239
Price: $29.95

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Thursday, June 10, 2010

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 a higher deficit on current account for 2010, at $552.2 billion, and 2011, at $625.9 billion. 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 $73.4 billion U.S. deficit in 2009 was mainly with Japan, Mexico, and Germany
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Date of Report: May 26, 2010
Number of Pages: 40
Order Number: RL33577
Price: $29.95

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Tuesday, June 8, 2010

Generalized System of Preferences: Background and Renewal Debate

Vivian C. Jones  
Specialist in International Trade and Finance


The U.S. Generalized System of Preferences (GSP) program provides non-reciprocal, duty-free tariff treatment to certain products imported from designated beneficiary developing countries (BDCs). The United States, the European Union, and other developed countries have implemented similar programs since the 1970s in order to promote economic growth in developing countries by stimulating their exports. The U.S. program was first authorized in Title V of the Trade Act of 1974, and was most recently extended until December 31, 2010, in P.L. 111-124 for all GSP beneficiary countries not covered by the African Growth and Opportunity Act (AGOA). Since GSP will expire at the end of 2010, this and other trade preference programs could continue to be a the focus of congressional attention in the 111th Congress. 

The GSP is one of several trade preference programs that provide non-reciprocal, duty-free access to goods from developing and least-developed beneficiary countries. Other U.S. trade preference programs include the African Growth and Opportunity Act (AGOA), the Andean Trade Preference Act (ATPA), and the Caribbean Basin Initiative (CBI). 

In recent years, renewal of trade preferences programs in general, and of the GSP program in particular, has been somewhat controversial in Congress. Some Members have expressed the view that some of the more advanced BDCs, such as Brazil and India, continue to receive benefits even while they actively contribute to the impasse in multilateral World Trade Organization (WTO) Doha Development Agenda (DDA) talks. Some Members have also questioned whether more "advanced" developing countries should be receiving benefits under unilateral preference programs at all, and propose ending or limiting their benefits in favor of providing a greater share of benefits to least-developed countries (LDCs). Other Members have proposed granting dutyfree, quota-free access (DFQF) to developing countries under the African Growth and Opportunity Act (who are also GSP beneficiaries), which could potentially also be extended to other GSP countries. 

GSP legislation in the 111th Congress include S. 1141 and H.R. 4101 which seek additional preferences for non-African LDCs. Other pieces of legislation referring to GSP include H.R. 1969 and companion bill S. 1159, which would seek to prohibit GSP authority for Vietnam. Some favor comprehensive reform of the GSP and other trade preference programs. One of the groups representing this view is a loose coalition of business and non-profit trade groups. Their plan calls for replacing all existing trade preference programs with a comprehensive, unified program that would offer two tiers of benefits, one for more "advanced" developing countries, and a second, more generous, level providing DFQF access to least-developed countries. 

This report presents, first, a brief history, economic rationale, and legal background leading to the establishment of the GSP. A brief comparison of GSP programs worldwide, especially as they compare to the U.S. system, is also presented. Second, the report presents a discussion of U.S. implementation of the GSP, along with the present debate surrounding its renewal and legislative developments to date. Third, an analysis of the U.S. program's effectiveness and the positions of various stakeholders is presented. Fourth, implications of the expiration of the U.S. program and possible options for Congress are discussed. 
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Date of Report: May 27, 2010
Number of Pages: 36
Order Number: RL33663
Price: $29.95

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