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Thursday, October 28, 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 109
th 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 110
th 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 111
th 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. On July 7, 2010, a manager’s amendment was introduced. The House passed H.R. 4380, the United States Manufacturing Enhancement Act of 2010, by a vote of 378-43 on July 21, 2010. The Senate subsequently passed the bill by unanimous consent on July 27, 2010, and it was signed by the President on August 11, 2010 (P.L. 111-227).


Date of Report: October 20, 2010
Number of Pages: 14
Order Number: RL33867
Price: $29.95

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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 had been decreasing through May 2009 because of the global financial crisis but since then has begun to increase again. The financial 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 have been down considerably from the first half of 2008, companies competing with imports still face diminishing demand as the domestic economy has been slow to recover from the 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 $506.9 billion on a balance of payments (BoP) basis, less than the $834.7 in 2008 and $823.2 billion in 2007. The 2009 deficit on merchandise trade with China was $227 billion (Census basis), with the European Union was $61.1 billion, with Canada was $21.6 billion, with Japan was $44.7 billion, with Mexico was $47.8 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 $3.5 billion. Imports of goods of $1,575.4 billion decreased by $564.1 billion, 26.4% over 2008. Exports of goods of $1,068.5 billion fell by $236.4 billion, 18.1%. The overall merchandise trade deficit for 2009 improved, or decreased in size, by $327.7 billion, or roughly 39%. 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 May 2009. In 2009 goods imports reached their lowest recent level in May, at $120.7 billion but generally have been rising since then. In 2009 goods exports fluctuated near $84 billion through May when they began to increase at about $2 billion monthly, reaching $107.7 billion in August 2010.

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 111
th 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. On September 29, 2010, the House passed H.R. 2378, and referred it to the Senate.

The balance on current account includes merchandise trade plus trade in services and unilateral transfers. In 2009, the deficit on current account fell to $378.4 billion from $668.9 billion in 2008 and $718.1 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: October 15, 2010
Number of Pages: 41
Order Number: RL33577
Price: $29.95

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Tuesday, October 19, 2010

Proposed U.S.-Colombia Free Trade Agreement: Labor Issues


Mary Jane Bolle
Specialist in International Trade and Finance

This report examines three labor issues and arguments related to the pending U.S.-Colombia free trade agreement (CFTA; H.R. 5724 and S. 2830): violence against trade unionists; impunity (accountability for or punishment of the perpetrators); and worker rights protections for Colombians. For general issues relating to the CFTA, see CRS Report RL34470, The Proposed U.S.-Colombia Free Trade Agreement, by M. Angeles Villarreal. For background on Colombia and its political situation and context for the agreement, see CRS Report RL32250, Colombia: Issues for Congress, by June S. Beittel.

Opponents of the pending U.S.-Colombia free trade agreement (CFTA) argue against it on three points: (1) the high rate of violence against trade unionists in Colombia; (2) the lack of adequate punishment for the perpetrators of that violence; and (3) weak Colombian enforcement of International Labor Organization (ILO) core labor standards and labor laws.

Proponents of the agreement argue primarily for the proposed Colombia FTA on the basis of economic and national security benefits. Accordingly, they argue, the CFTA would support increased exports, expand economic growth, create jobs, and open up investment opportunities for the United States. They also argue that it would reinforce the rule of law and spread values of capitalism in Colombia, and anchor hemispheric stability.

Proponents specifically respond to labor complaints of the opponents, that (1) violence against trade unionists has declined dramatically since former President Álvaro Uribe took office in 2002; (2) substantial progress is being made on the impunity issue as the government has undertaken great efforts to find perpetrators and bring them to justice; and (3) the Colombian government is taking steps to improve conditions for workers.

If Congress were to approve the Colombia FTA, it would be the second FTA (after Peru) to have some labor enforcement “teeth.” Labor provisions including the four basic ILO core labor standards would be enforceable through the same dispute settlement procedures as for all other provisions (i.e., primarily those for commercial interests.) Opponents argue that under CFTA, only the concepts of core labor standards, and not the details of the ILO conventions behind them, would be enforceable.

Proponents point to recent Colombian progress in protecting workers on many fronts. They argue that approval of the FTA and the economic growth in Colombia that would result is the best way to protect Colombia’s trade unionists. They also argue that not passing the agreement would not resolve Colombia’s labor issues. In addition, they argue, the United States could lose jobs through trade diversion as Colombia continues to enter into regional trade agreements with other countries.

Opponents argue that delaying approval of the proposed CFTA further would give Colombia more time to keep improving protections for its workers.



Date of Report: October 5, 2010
Number of Pages: 16
Order Number: RL34759
Price: $29.95

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Wednesday, October 13, 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 111
th 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). H.R. 2378, as amended, was approved by the House Ways and Means Committee on September 24, 2010, and is scheduled to be considered by the full House during the week of September 27. 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 110
th Congress. Finally, the Appendix provides a brief chart outlining U.S. trade remedy statutes, major actors, and the effects of these laws.


Date of Report: September 27, 2010
Number of Pages: 38
Order Number: RL32371
Price: $29.95

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Tuesday, October 12, 2010

Currency Manipulation: The IMF and WTO


Jonathan E. Sanford
Specialist in International Trade and Finance

Congress has been concerned, for many years, with the possible impact that currency manipulation has on international trade. The International Monetary Fund (IMF) has jurisdiction for exchange rate questions. The World Trade Organization (WTO) is responsible for the rules governing international trade. The two organizations approach the issue of “currency manipulation” differently. The IMF Articles of Agreement prohibit countries from manipulating their currency for the purpose of gaining unfair trade advantage, but the IMF cannot force a country to change its exchange rate policies. The WTO has rules against subsidies, but these are very narrow and specific and do not seem to encompass currency manipulation. Recently, some have argued that an earlier ruling by a WTO dispute resolution panel might be a way that currency issues could be included in the WTO prohibition against export subsidies. Congress is currently considering legislation to amend U.S. countervailing duty law, based on this precedent, that the proponents believe is consistent with WTO rules. Others disagree as to whether the previous case is a sufficient precedent.

Several options might be considered for addressing this matter in the future, if policymakers deem this a wise course of action. The Articles of Agreement of the IMF or the WTO Agreements could be amended in order to make their treatment of currency manipulation more consistent. Negotiations might be pursued, on a multilateral as well as a bilateral basis, to resolve currency manipulation disputes on a country-by-country basis without changing the IMF or WTO treatment of this concern. Some countries might argue that the actions of another violate WTO rules and seek a favorable decision by a WTO dispute resolution panel. Finally, the IMF and WTO could use their interagency agreement to promote better coordination in their treatment of this concern.



Date of Report: September 27, 2010
Number of Pages: 10
Order Number: RS22658
Price: $29.95

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