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 risen slightly, year over year, reflecting the positive, albeit slow, growth in the rate of economic activity. In addition to the slight rise in the volume of crude oil imports, the rise in the cost of energy imports through eleven months of 2010 could add more than $80 billion to the nation’s trade deficit in 2010 over that experienced in 2009. The increase in energy import prices is pushing up the price of energy to consumers and could spur some elements of the public to pressure the 112th Congress to provide relief to households that are struggling to meet their current expenses. With oil prices rising to over $90 per barrel in early 2011, the International Energy Agency cautioned that the rising price of oil was becoming a threat to the global economic recovery. This report provides an estimate of the initial impact of the changing oil prices on the nation’s merchandise trade deficit.
Date of Report: January 13, 2011
Number of Pages: 10
Order Number: RS22204
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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 original TPP, an agreement among Brunei, Chile, New Zealand, and Singapore, came into effect in 2006. The United States, Australia, Peru, Malaysia, and Vietnam have committed themselves to joining and expanding this group. The fourth round of discussions among the nine countries took place in Auckland, New Zealand, during the week of December 6, 2010.
Other architectures, such as the Association of South East Asian Nations (ASEAN), Asia-Pacific Economic Cooperation (APEC) forum, 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 or origins 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. The United States, by signaling its intention to join the EAS and by working to elevate its relationship with ASEAN to a more strategic level, appears to be shaping regional architectures in a way that will be more inclusive and trans-Pacific in nature.
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. China’s rapidly expanding economy and Japan’s developed economy have made them attractive trading partners to many Asian nations. Until recently, many regional states also viewed the United States as having been distracted by events in Iraq and Afghanistan. This had led some to increasingly look to China and Japan as key partners. China may be shifting to a more assertive posture in the region, which may affect relations in the region. Secretary of State Clinton attended the East Asia Summit in Hanoi in October 2010 and President Obama stated he plans to attended the 2011 East Asia Summit in Jakarta.
U.S. participation in the TPP involves the negotiation of FTAs with New Zealand, Brunei, Malaysia, and Vietnam. The United States currently has FTAs in force with Chile, Singapore, Australia, and Peru, although these agreements may be reopened depending on the outcome of the negotiations. Bilateral negotiations with New Zealand may focus on agricultural goods such as beef and dairy products. The possible inclusion of Vietnam has proven 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: January 10, 2011
Number of Pages: 22
Order Number: R40502
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Carolyn C. Smith
Information Research Specialist
This report profiles significant legislation, including floor votes, that authorized the use of presidential Trade Promotion Authority (TPA)—previously known as fast-track trade negotiating authority—since its inception in 1974. The report also includes a list of floor votes since 1979 on implementing legislation for trade agreements that were passed under TPA fast-track procedures. Although TPA expired on July 1, 2007, four free trade agreements (FTAs) were signed in time to be considered under TPA expedited procedures in the 110th Congress. The U.S.-Peru Trade Promotion Agreement Implementation Act was passed by Congress (H.R. 3688) and signed into law as P.L. 110-138 on December 14, 2007. The legislative future of three proposed U.S FTAs (with Colombia, Panama, and South Korea) is uncertain. For further discussions of TPA or fasttrack legislative activity, the report lists CRS reports and Internet resources.
Date of Report: January 12, 2011
Number of Pages: 9
Order Number: RS21004
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Raymond J. Ahearn, Coordinator
Specialist in International Trade and Finance
The 112th Congress faces a full agenda of international trade and finance issues. Early in 2011, the Obama Administration is expected to ask Congress to approve a free trade agreement (FTA) with South Korea and possibly FTAs with Colombia and Panama. The Administration is seeking to conclude the much larger 10-year-old World Trade Organization’s (WTO’s) Doha Round of multilateral trade negotiations, which, if completed, would also require congressional approval. The Administration is also negotiating a Trans-Pacific Partnership (TPP) Agreement, a regional FTA that currently includes nine countries on both sides of the Pacific.
A U.S.-South Korea Free Trade Agreement (KORUS FTA) was first negotiated by President George W. Bush’s Administration and signed on June 30, 2007. The Obama Administration did not submit it for approval in the 111th Congress due to opposition from U.S. automakers and beef producers. In early December 2010, U.S. trade negotiators won further concessions on autos from the South Korean government, which may allow President Obama to decide to submit the agreement to Congress in 2011. Any vote on this proposed agreement would take place under Trade Promotion Authority (TPA), which allows implementing bills for trade agreements to be considered under expedited legislative procedures—limited debate, no amendments, and an up or down vote. While the proposed KORUS FTA is covered by TPA, which expired on July 1, 2007, many experts argue that TPA would have to be renewed if the United States is to be a credible negotiator at the WTO Doha Round and the TPP discussions.
Any trade debate in the 112th Congress will likely revolve around the perceived effects of trade and FTAs on U.S. stakeholders. Proponents are likely to argue that the FTAs will improve access to foreign markets, increase trade, and create jobs. Critics are likely to assert that the agreements favor corporations over workers, and place downward pressure on wages and labor standards.
In addition to trade agreements and negotiations, U.S. export and import policies will play an important role on the congressional trade agenda. On the export side, the 112th Congress may consider the effectiveness of promoting exports through President Obama’s National Export Initiative (NEI), a strategy for doubling U.S. exports by 2015, to help generate new jobs. At the same time, Congress may choose to continue its efforts to review the Administration’s proposal to revamp the U.S. export control system that is intended to keep sensitive security-related items from being sold to selective countries. On the import side, Congress may conduct oversight and/or consider legislation on a number of issues dealing with trade remedies, trade preferences, border security and trade facilitation, and miscellaneous tariffs.
As in the 111th Congress, many bills are expected to be introduced in the 112th Congress to help boost U.S. exports to China and to address concerns over Chinese policies that are deemed to negatively affect U.S. economic interests. Legislation encouraging the Administration to take stronger action against China’s alleged currency misalignment passed the House by a large bipartisan margin (348-79), but was not acted on in the Senate. These bills and others may be reintroduced in 2011.
On the finance side, requests to increase contributions to the International Monetary Fund (IMF) and several multilateral development banks, including the World Bank, are likely to enter into discussions of the 112th Congress. Congress may also monitor Europe’s sovereign debt crisis, particularly the budget support the IMF is providing and the related $173 billion exposure of U.S. banks to four heavily indebted European countries—Greece, Ireland, Portugal, and Spain.
Date of Report: January 21, 2011
Number of Pages: 28
Order Number: R41553
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Remy Jurenas
Specialist in Agricultural Policy
The Trade Adjustment Assistance for Farmers (TAAF) program provides technical assistance and cash benefits to producers of agricultural commodities and fishermen who experience adverse economic impacts caused by increased imports. Congress first authorized this program in 2002, and made significant changes to it in the 2009 economic stimulus package (P.L. 111-5). The 2009 revisions were intended to make it easier for commodity producers and fishermen to qualify for program benefits. It also provided over $200 million in funding through year-end 2010. The 2010 omnibus trade measure (P.L. 111-344) temporarily extended the program through February 12, 2011, and authorized an additional $10.4 million.
The U.S. Department of Agriculture (USDA) is required to follow a two-step process in administering TAAF program benefits. First, a group of producers must be certified eligible to apply. Second, a producer in a certified group must meet specified requirements to be approved to receive technical assistance and cash payments.
To be certified, a group must show that imports were a significant cause for at least a 15% decline in one of the following factors: the price of the commodity, the quantity of the commodity produced, or the production value of the commodity.
Once a producer group is certified, an individual producer within that group must meet three requirements to be approved for program benefits. These include technical assistance with a training component, and financial assistance. A producer must show that (1) the commodity was produced in the current and also in one recent previous year, (2) the quantity of the commodity produced decreased compared to that in a previous year, or the price received for the commodity decreased compared to a preceding three-year average price, and (3) no benefits were received under any other trade adjustment assistance program. The training component is intended to help the producer become more competitive in producing the same or another commodity. Financial assistance (capped at $12,000 over a three-year period) is to be used by the producer to develop and implement a business adjustment plan designed to address the impact of import competition.
Since 2009, USDA has certified 11 of the 30 petitions filed by various commodity groups and fishermen (e.g., producers of shrimp, catfish, asparagus, lobster, and blueberries). USDA already has approved about 4,500 agricultural producers for training and cash assistance under the three FY2010 certifications. USDA in early 2011 will approve producers under the eight FY2011 certified petitions. Most of the program benefits in both years are expected to flow to shrimp producers.
Because TAAF funding expires on February 12, 2011, the 112th Congress may consider proposals to provide funding after this date. Such calls for funding TAAF may, as before, be included in bills that deal with trade preference programs and other trade issues.
Date of Report: January 13, 2011
Number of Pages: 12
Order Number: R40206
Price: $29.95
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