Shayerah Ilias
Analyst in International Trade and Finance
The Export-Import Bank (Ex-Im Bank, EXIM Bank, or the Bank), a self-sustaining agency, is the official U.S. export credit agency (ECA). It operates under a renewable charter, the Export-Import Bank Act of 1945, as amended. Ex-Im Bank’s most recent reauthorization (P.L. 109-438) was in 2006, when Congress extended the Bank’s authority through FY2011. Since its inception, Ex-Im Bank programs have supported more than $400 billion in U.S. exports.
The Bank’s charter expires on September 30, 2011. Potential issues for the 112th Congress as it examines reauthorization of Ex-Im Bank include the following:
- The economic rationale for the Bank, including the role of the federal government in export promotion and finance;
- Specific Bank policies, such as those relating to content, shipping, economic and environmental impact analysis, and tied aid, including how these policies balance U.S. export and other policy interests;
- Statutory requirements directing Ex-Im Bank to support certain types of exports, such as exports of small businesses and “green” technology, including the tension that such requirements can create between desiring to support specific economic sectors and allowing Ex-Im Bank flexibility to fulfill its mission to support U.S. exports and jobs; and
- International developments that may affect the Bank’s work, such as the growing role of emerging economies’ ECAs and the sufficiency of the Organization for Economic Cooperation and Development (OECD) Arrangement on Officially Supported Export Credits to “level the playing field” for U.S. exporters.
Potential options for Congress include, but are not limited to, the following areas:
- Structure of the Bank. Congress could maintain Ex-Im Bank as an independent agency, reorganize or privatize the functions of the Bank, or terminate the Bank.
- Length of reauthorization. Congress could extend the Bank’s authority for a few years at a time (as in previous reauthorizations), for a longer period of time, or permanently reauthorize the Bank.
- Bank’s policies. Congress could maintain the status quo, or revise the Bank’s policies, such as those related to the requirements and limitations on Ex-Im Bank’s credit and insurance activities.
- International ECA context. Congress could seek to enhance international regulation of official export credit activity through the OECD or other mechanisms, or enhance Ex-Im Bank’s understanding of international export credit activity and trends.
H.R. 2072, the Securing American Jobs Through Exports Act of 2011, was introduced and referred to the House Financial Services Committee on June 1, 2011. H.R. 2072 would extend Ex-Im Bank’s authority through September 30, 2015, among other provisions. On June 22, 2011, the House Financial Services Committee approved the bill and ordered it to be reported favorably to the full House.
Date of Report: June 23, 2011
Number of Pages: 28
Order Number: R41829
Price: $29.95
Follow us on TWITTER at http://www.twitter.com/alertsPHP or #CRSreports
Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.
Dick K. Nanto, Coordinator
Specialist in Industry and Trade
William H. Cooper
Specialist in International Trade and Finance
J. Michael Donnelly
Information Research Specialist
Renée Johnson
Specialist in Agricultural Policy
The March 11, 2011, earthquake and tsunami that occurred in Japan followed by the nuclear crisis are having a large negative impact on the economy of Japan but a lesser effect on world trade and financial markets. Japan has lost considerable physical and human capital. Physical damage has been estimated to be from $195 billion to as much as $305 billion. (Greece’s GDP is $330 billion.) In excess of 23,000 persons in Japan are killed or missing, and more than 400,000 homes and other buildings have been totally or partially damaged. The negative effects of the earthquake and tsunami have been compounded by the continuing crisis at the Fukushima nuclear reactors; the resulting evacuations, radioactive contamination, and shortages of electricity; continuing aftershocks; and the extensive damage to infrastructure, homes, manufacturing plants, and other buildings.
The earthquake-related events in Japan are still unfolding, but each round of economic assessments seems more and more pessimistic. Early data indicate that the economic damage is quite severe. Japan’s economy has contracted for two quarters and essentially is in recession, but it may begin to expand later in the year because of rebuilding activity. Much depends on whether the damage from the nuclear plant can be contained, the speed at which electrical capacity can be restored, and how quickly Japan’s industrial base can recover. As the third-largest economy in the world, Japan’s GDP at $5.5 trillion accounts for 8.7% of global GDP. The net impact of the disaster on global GDP is that it is expected to shave about a half percentage point off global economic growth with about half of that effect confined to Japan, itself.
Congressional interest on the economic side centers on humanitarian concerns, radioactive fallout reaching the United States, the impact on U.S. citizens and American companies in Japan, the effects on trade and supply chain disruptions, and increased volatility in Japanese and U.S. financial markets, interest rates, and the yen-dollar exchange rate.
The impact on U.S. imports from and exports to Japan is expected to be modest as a proportion of overall trade, but particular sectors or companies may be affected considerably. The United States already has banned imports of certain vegetables and milk from the vicinity of the damaged nuclear reactors and is monitoring other foods for radiation. Japan plays a major role in global supply chains both as a supplier of parts and as a producer of final products. In this age of just-intime production processes, even a small disruption in the provision of a single component can wreak havoc on an entire product line. Japan’s production of automobiles, semiconductors, and electronics is likely to be affected the most, but companies in the United States that rely on Japan for critical components such as electronic parts and batteries or transmissions for electrical vehicles also will be affected. Tourist travel both into and out of Japan also has been falling.
There also is concern over speculation in currency markets and repatriation of assets back to Japan that raised the value of the yen before the G-7 monetary authorities in March intervened to weaken it. Another concern is that Japan’s national debt, already at 200% of GDP, will rise significantly as the government borrows to finance reconstruction. This may raise interest rates in Japan and further complicate recovery efforts or, in the worst case, trigger a sovereign debt crisis and loss of confidence in Japanese government bonds.
Legislation: H.Res. 172, S.Res. 101.
Date of Report: June 8, 2011
Number of Pages: 28
Order Number: R41702
Price: $29.95
Follow us on TWITTER at http://www.twitter.com/alertsPHP or #CRSreports
Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.
William H. Cooper
Specialist in International Trade and Finance
Remy Jurenas
Specialist in Agricultural Policy
Michaela D. Platzer
Specialist in Industrial Organization and Business
Mark E. Manyin
Specialist in Asian Affairs
On October 6, 2010, the 27 member European Union (EU) and South Korea signed a bilateral free trade agreement (FTA). The South Korean National Assembly and the EU Parliament have ratified the agreement. The agreement is expected to go into effect on July 1, 2011. The South Korea-EU FTA (KOREU FTA) is the largest FTA in terms of market size that South Korea has entered into. The KOREU FTA reflects the EU and South Korean trade strategies to use FTAs to strengthen economic ties outside their home regions. It also builds upon the surge in trade and investment flows between South Korea and the EU over the past decade. This agreement has possible implications for U.S. trade with South Korea and congressional action on the proposed U.S.-South Korea FTA (KORUS FTA).
The KOREU FTA is very comprehensive. It would reduce and eliminate tariffs and other trade barriers in manufactured goods, agricultural products and services and would also cover such trade-related activities as government procurement, intellectual property rights, labor rights and environmental issues.
Most studies done on the potential impact of the KOREU FTA estimate that the agreement will have a small but positive effect on the economies of the EU and South Korea as a whole and that the larger relative impact would be on the South Korean economy. The greatest economic impact of the KOREU FTA would be on specific sectors in each economy. EU services providers would be expected to experience gains from the agreement, especially in the areas of retail and wholesale trade, transportation services, financial services, and business services. In terms of trade in goods, EU exporters of pharmaceuticals, auto parts, industrial machinery, electronics parts, and some agricultural goods and processed foods would be expected to gain from the KOREU FTA’s implementation. At the same time, South Korean manufacturers of cars, ships, wireless telecommunications devices, chemical products, and imaging equipment would be expected to increase their exports to the EU market.
The KOREU FTA is similar to the proposed KORUS FTA in many respects. Both agreements are comprehensive and both would eliminate tariffs on most trade in goods soon after they enter into force. However, they differ in other respects. Phase-out periods for tariffs on some manufactured goods differ. In addition, the KOREU FTA does not cover investment protection. Unlike the KORUS FTA, the KOREU FTA would not allow trade sanctions to be applied where violations of the workers’ rights, and environment provisions have been deemed to occur. In addition, the KORUS FTA would cover a broader range of trade in services than would the KOREU FTA. It is not clear whether these differences in the structures of the FTAs would result in appreciable differences in outcomes in terms of economic gains and losses.
U.S. and European firms are close competitors in a number of sectors and industries, particularly autos. Some business representatives argue that enactment of the KOREU FTA before enactment of the KORUS FTA would give European competitors commercial first mover advantages, since EU firms, such as those in the auto industry or the services sector, could gain greater market opportunities in South Korea not afforded to U.S. firms. On the other hand, other factors could also mitigate such advantages. For example, U.S. multinational firms operating in the EU could benefit from the KOREU FTA. Nevertheless, the content and fate of the KOREU FTA could influence the pace and tone of any debate in the United States on the KORUS FTA in the 112th Congress.
Date of Report: June 16, 2011
Number of Pages: 31
Order Number: R41534
Price: $29.95
Follow us on TWITTER at http://www.twitter.com/alertsPHP or #CRSreports
Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.
William H. Cooper
Specialist in International Trade and Finance
The change in Russia’s trade status will require legislation to lift the restrictions currently applied to Russia under Title IV of the Trade Act of 1974, which includes the “freedom-of-emigration” requirements of the Jackson-Vanik amendment. The process for Russia’s accession to the World Trade Organization (WTO) is proceeding and may be completed soon. As a result, Members may confront the issue of whether to grant Russia permanent normal trade relations (PNTR) status during the 112th Congress.
Date of Report: June 16, 2011
Number of Pages: 9
Order Number: RS21123
Price: $19.95
Follow us on TWITTER at http://www.twitter.com/alertsPHP or #CRSreports
Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.
Mary Jane Bolle
Specialist in International Trade and Finance
James K. Jackson
Specialist in International Trade and Finance
Remy Jurenas
Specialist in Agricultural Policy
Michaela D. Platzer
Specialist in Industrial Organization and Business
In February 2011, the United States and South Korea finalized negotiations on a bilateral free trade agreement. As a result, the Obama Administration is expected to submit implementing legislation to the 112th Congress on the proposed U.S.-South Korea Free Trade Agreement (KORUS FTA). This report addresses congressional interest in the effects of this agreement on exports by state to South Korea by using two sets of data. Data developed by the U.S. International Trade Commission (USITC) are used to identify the possible direction of trade change for 40 industries at the national level. These results are paired with lists of each state’s top 10 exports which provide a guide to the possible direction of trade for various state industries as a result of tariff elimination and tariff rate quota reductions under the proposed KORUS FTA. Improved access for services, liberalized investment regimes, and elimination of non-tariff barriers for a few goods and agricultural products are not captured in this analysis.
Estimating the trade effects of a potential FTA, however, is highly sensitive to the assumptions used and to important limitations of the available data. Such estimates are especially problematic at the state level. As a result, the data in this report should be viewed as providing a general sense of the possible impact of the proposed FTA on state level exports. Over the full implementation period of the agreement, a broad range of economic factors can overwhelm the potential effects of tariff and tariff rate quota provisions. Whether a state’s exports are higher as a result of the KORUS FTA will depend significantly on whether firms that now export take advantage of the market openings (e.g., declining or eliminated tariffs, expanding or phased out quotas) negotiated in this trade agreement. In addition, the extent to which state exports change in the same pattern as projected by the USITC estimates, will depend on the extent to which they echo the makeup of the respective industry at the national level.
While South Korea is the United States’ seventh largest trading partner, it accounts for less than 3% of all U.S. trade. It has a population one-sixth that of the United States. By comparison, Canada and Mexico, the United States’ first and third largest trading partners, with whom the United States also has a trade agreement (the North American Free Trade Agreement (NAFTA)), accounted for 16% and 12% respectively of total U.S. trade in 2010.
The impact of the KORUS FTA on the exports of individual states reflects both projected national effects on industrial sectors and the composition of industries within each state. Manufactured products currently dominate U.S.-South Korea trade, and the dollar value of exports in virtually all industries is expected to be higher than without a trade agreement. However, the greatest sectoral growth rate in trade is expected to come from agricultural exports, in states with large agricultural sectors. Higher imports in some industries, particularly auto and parts production, are not expected to affect gross exports, but could affect net exports.
The discussion in this report is limited to presenting the effects of the KORUS FTA on U.S. exports to South Korea on a national level with possible implications at the state level. It does not present data on U.S. imports from South Korea at the state level because of data issues. Nevertheless, increases in imports in some sectors and in some states could be higher than increases in exports as a consequence of the FTA.
Date of Report: June 20, 2011
Number of Pages: 69
Order Number: R41879
Price: $29.95
Follow us on TWITTER at http://www.twitter.com/alertsPHP or #CRSreports
Document available via e-mail as a pdf file or in paper form.
To order, e-mail Penny Hill Press or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.
Posts
