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Wednesday, January 5, 2011

International Trade and Finance: Key Policy Issues for the 112th Congress

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 ten year-old World Trade Organization’s (WTO) 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 111
th 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 112
th 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 112
th 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 111
th Congress, many bills are expected to be introduced in the 112th Congress to address concerns over China’s economic policies and boost U.S. exports to China. 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 112
th 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: December 30, 2010
Number of Pages: 27
Order Number: R41553
Price: $29.95

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