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Tuesday, July 31, 2012

Why Certain Trade Agreements Are Approved as Congressional-Executive Agreements Rather Than as Treaties


Jeanne J. Grimmett
Legislative Attorney

U.S. trade agreements such as the North American Free Trade Agreement (NAFTA), World Trade Organization agreements, and bilateral free trade agreements (FTAs) have been approved by majority vote of each house rather than by two-thirds vote of the Senate—that is, they have been treated as congressional-executive agreements rather than as treaties. The congressional-executive agreement has been the vehicle for implementing Congress’s long-standing policy of seeking trade benefits for the United States through reciprocal trade negotiations. In a succession of statutes, Congress has authorized the President to negotiate and enter into tariff and nontariff barrier (NTB) agreements for limited periods, while permitting NTB and free trade agreements negotiated under this authority to enter into force for the United States only if they are approved by both houses in a bill enacted into public law and other statutory conditions are met; implementing bills are also accorded expedited consideration under the scheme.

Congress most recently granted the President temporary trade negotiating authority utilizing this approach in the Bipartisan Trade Promotion Authority Act of 2002 (BTPAA), contained in Title XXI of the Trade Act of 2002, P.L. 107-210. Although the authority expired during the 110th Congress, agreements entered into before July 1, 2007, remained eligible for congressional consideration under the expedited procedure. The President had entered into free trade agreements with Colombia, Korea, and Panama before this date, each of which awaited congressional approval at the time. In October 2011, Congress approved the three pending agreements, making a total of 11 free trade agreements approved under the BTPAA process.

In addition, the United States Trade Representative (USTR), on behalf of the President, notified the House and Senate in December 2009 by letter that the President intended to enter into negotiations aimed at a regional, Asia-Pacific trade agreement, called the Trans-Pacific Partnership (TPP). Notwithstanding the expiration of BTPAA authorities, the USTR stated that the Administration would be observing the relevant procedures of the act with respect to notifying and consulting with Congress regarding these negotiations.

A federal appeals court held in 2001 that the issue of whether the NAFTA should have been approved as a treaty was a nonjusticiable political question (Made in the USA Foundation v. United States, 242 F.3d 1300 (11th Cir. 2001)). The U.S. Supreme Court denied review in the case. 

S. 98
(Portman) would amend Section 2103 of the BTPAA, 19 U.S.C. Section 3803, to authorize the President to enter into trade agreements with foreign countries on or after the date the bill is enacted into law and before July 1, 2016, with a possible extension of this authority through June 30, 2018. The bill would in effect permit implementing legislation for agreements covered by the bill to be considered under expedited legislative procedures. S.Amdt. 626 (McConnell), an amendment to H.R. 2832, would have amended the BTPAA to provide trade promotion authority for the Trans-Pacific Partnership agreement and other trade agreements entered into before June 1, 2013, extendable to December 31, 2013. While H.R. 2832 was enacted into law (P.L. 112-40), the proposed amendment was not adopted.


Date of Report: July 13, 2012
Number of Pages: 10
Order Number: 97-896
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Friday, July 27, 2012

Permanent Normal Trade Relations (PNTR) Status for Russia and U.S.-Russian Economic Ties

William H. Cooper
Specialist in International Trade and Finance

U.S.-Russian trade is governed by Title IV of the Trade Act of 1974, which sets conditions Russia’s normal trade relations (NTR), or nondiscriminatory, status, including the “freedom-ofemigration” requirements of the Jackson-Vanik amendment (section 402). Changing Russia’s trade status to unconditional NTR or “permanent normal trade relations status (PNTR)” requires legislation to lift the restrictions of Title IV as they apply to Russia and authorize the President to grant Russia PNTR by proclamation. On July 18, 2012, the Senate Finance Committee marked-up and favorably reported S. 3406 to remove the application of Title IV to trade with Russia. On July 19, House Ways and Means Committee Chairman Dave Camp introduced H.R. 6156 for the same purpose. S. 3406 also includes the text of S. 1039 —the Sergei Magnitsky Rule of Law Accountability Act of 2011—which had been reported out by the Senate Foreign Relations Committee on June 26, 2012.

PNTR for Russia has become an issue for the 112th Congress because, on December 16, 2011, the members of the World Trade Organization (WTO) invited Russia to join the organization, after Russia completed an 18-year accession process. The WTO requires each member to accord newly acceding members “immediate and unconditional” most-favored-nation (MFN) status, or PNTR. Russia is expected to formally join the WTO in late August. In order to comply with WTO rules, the United States would have to extend PNTR to Russia, or invoke the non-application provision of the WTO.


Date of Report: July 20, 2012
Number of Pages: 9
Order Number: RS21123
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Wednesday, July 25, 2012

The Proposed Anti-Counterfeiting Trade Agreement: Background and Key Issues


Shayerah Ilias
Analyst in International Trade and Finance

The proposed Anti-Counterfeiting Trade Agreement (ACTA) is a new agreement for combating intellectual property rights (IPR) infringement. The ACTA negotiation concluded in October 2010, nearly three years after it began, and negotiating parties released a final text of the agreement in May 2011. Negotiated by the United States, Australia, Canada, the European Union and its 27 member states, Japan, South Korea, Mexico, Morocco, New Zealand, Singapore, and Switzerland, the ACTA is intended to build on the IPR protection and enforcement obligations set forth in the 1995 World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). It also is intended to address emerging IPR issues believed to be not addressed adequately in the TRIPS Agreement, such as IPR infringement in the digital environment. The ACTA, which was negotiated outside of the WTO, focuses primarily on trademark and copyright enforcement. It establishes a legal framework for IPR enforcement, which contains provisions on civil enforcement, border measures, criminal enforcement in cases of willful trademark counterfeiting or copyright piracy on a commercial scale, and enforcement in the digital environment for infringement of copyrights or related rights. It also provides for enhanced enforcement best practices and increased international cooperation.

The ratification (“formal approval”) of the ACTA is in a state of uncertainty, despite the fact that most negotiating parties (Australia, Canada, the EU and 22 of its member states, Japan, South Korea, Mexico, Morocco, New Zealand, Singapore, and the United States) have signed the proposed agreement. Following months of controversy over the ACTA in the EU, on July 4, 2011, the European Parliament voted against the ACTA, meaning that neither the EU nor its individual member states can join the agreement in its current form. The ACTA would enter into force after the sixth instrument of ratification, acceptance, or approval is deposited by ACTA negotiating parties. No party has submitted a formal instrument of approval to date.

The Bush Administration began, and the Obama Administration continued, negotiation of the ACTA as an executive agreement, meaning that the ACTA would not be subject to congressional approval, unless it were to require statutory changes to U.S. law. The U.S. Trade Representative maintains that the ACTA is consistent with existing U.S. law and does not require the enactment of implementing legislation. Congress could play an oversight role in the implementation of the agreement. Some Members and other groups have debated whether implementation of the ACTA without congressional approval would raise constitutionality issues.

The U.S. government has made the enforcement of IPR a top priority in its trade policy, due to the importance of IPR to the U.S. economy and the potentially negative commercial, health and safety, and security consequences associated with counterfeiting and piracy. Policymakers face a challenge of finding an appropriate balance between protecting private rights and promoting broader economic and social welfare. The ACTA negotiation has spurred various policy debates. While governments involved in the negotiation and IPR-based industries have voiced strong support for the ACTA, other groups have expressed concern about the ACTA’s potential impact on trade in legitimate goods, consumer privacy, the free flow of information, and public health. There also have been concerns about the negotiation’s scope, transparency, and inclusiveness. Some have questioned the rationale behind creating a new IPR agreement and have advocated, instead, for better enforcement of existing agreements, such as the WTO TRIPS Agreement.


Date of Report: July 13, 2012
Number of Pages: 27
Order Number: R41107
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Friday, July 13, 2012

Mexico’s Free Trade Agreements


M. Angeles Villarreal
Specialist in International Trade and Finance

Mexico has had a growing commitment to trade integration and liberalization through the formation of free trade agreements (FTAs) since the 1990s and its trade policy is among the most open in the world. On June 18, 2012, President Barack Obama announced that an invitation was extended to Mexico to join the ongoing negotiations for the Trans-Pacific Partnership (TPP), a proposed free trade agreement involving the United States and eight other countries. Canada was also invited to join the negotiations. Mexico’s pursuit of FTAs with other countries not only provides economic benefits, but could also potentially reduce its economic dependence on the United States. The United States is, by far, Mexico’s most significant trading partner. Almost 80% of Mexico’s exports go to the United States and about 50% of Mexico’s imports are supplied by the United States. In an effort to increase trade with other countries, Mexico has a total of 12 free trade agreements involving 44 countries. These include agreements with most countries in the Western Hemisphere including the United States and Canada under the North American Free Trade Agreement (NAFTA), Chile, Colombia, Costa Rica, Nicaragua, Peru, Guatemala, El Salvador, and Honduras. In addition, Mexico has negotiated FTAs outside of the Western Hemisphere and entered into agreements with Israel, Japan, and the European Union.

Economic motivations are generally the major driving force for the formation of free trade agreements among countries, but there are other reasons countries enter into FTAs, including political and security factors. One of Mexico’s primary motivations for its unilateral trade liberalization efforts of the late 1980s and early 1990s was to improve economic conditions in the country, which policymakers hoped would lead to greater investor confidence, attract more foreign investment, and create jobs. Mexico could also have other reasons for entering into FTAs, such as expanding market access and decreasing its reliance on the United States as an export market. The slow progress in multilateral trade negotiations may also contribute to the increasing interest throughout the world in bilateral and regional free trade agreements under the World Trade Organization (WTO). Some countries may see smaller trade arrangements as “building blocks” for multilateral agreements.

Since Mexico began trade liberalization in the early 1990s, its trade with the world has risen rapidly, with exports increasing more rapidly than imports. Mexico’s exports to all countries increased 475% between 1994 and 2011, from $60.8 billion to $349.6 billion. Although the 2009 economic downturn resulted in a decline in exports, the value of Mexican exports has since recovered, increasing in both 2010 and 2011. Total imports also increased rapidly, from $79.3 billion in 1994 to $350.9 billion in 2011, an increase of 342%. Mexico’s top five exports in 2011 were crude petroleum oil, passenger motor vehicles, flat panel screen TVs, mobile telephones, and vehicles for the transportation of goods. Mexico’s top five imports were gasoline, parts for flat panel screen TVs, mobile telephones, and passenger motor vehicles.

In the 112
th Congress, issues of concern related to the trade and economic relationship with Mexico have involved mostly economic conditions in Mexico, issues related to the North American Free Trade Agreement (NAFTA), the effect of NAFTA, and Mexican migration to the United States. This report provides an overview of Mexico’s free trade agreements, its motivations for trade liberalization and entering into free trade agreements, and some of the issues Mexico faces in addressing its economic challenges.


Date of Report: July 3, 2012
Number of Pages: 25
Order Number: R40784
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Thursday, July 12, 2012

Country-of-Origin Labeling for Foods and the WTO Trade Dispute on Meat Labeling


Remy Jurenas
Specialist in Agricultural Policy

Joel L. Greene
Analyst in Agricultural Policy

Most retail food stores are now required to inform consumers about the country of origin of fresh fruits and vegetables, fish, shellfish, peanuts, pecans, macadamia nuts, ginseng, and ground and muscle cuts of beef, pork, lamb, chicken, and goat. The rules are required by the 2002 farm bill (P.L. 107-171) as amended by the 2008 farm bill (P.L. 110-246). Other U.S. laws have required such labeling, but only for imported food products already pre-packaged for consumers. The final rule to implement COOL took effect on March 16, 2009.

Both the authorization and implementation of country-of-origin labeling (COOL) by the U.S. Department of Agriculture’s Agricultural Marketing Service have been controversial. Much attention has focused on the labeling rules that now apply to meat and meat products. A number of livestock and food industry groups continue to oppose COOL as costly and unnecessary. They and the main livestock exporters to the United States—Canada and Mexico—view the requirement as trade-distorting. Others, including some cattle and consumer groups, maintain that Americans want and deserve to know the origin of their foods, and point out that many U.S. trading partners have their own import labeling requirements.

Less than one year after the COOL rules took effect, Canada and Mexico used the World Trade Organization’s (WTO’s) trade dispute resolution process to challenge some features that apply to labeling meat. Both countries argued that COOL has a trade-distorting impact by reducing the value and number of cattle and hogs shipped to the U.S. market. For this reason, they argued that COOL violates WTO trade commitments agreed to by the United States. On November 18, 2011, a WTO dispute settlement (DS) panel found that (1) COOL treats imported livestock less favorably than like U.S. livestock (particularly in the labeling of beef and pork muscle cuts), and (2) COOL does not meet its objective to provide complete information to consumers on the origin of meat products. The panel reached these conclusions by examining the economic effects of the measures taken by U.S. livestock producers and meat processors to implement COOL, and by accepting arguments that the way meat is labeled to indicate where the multiple steps of livestock birth, raising, and slaughtering occurred is confusing.

On March 23, 2012, the United States appealed the panel report to the WTO Appellate Body (AB). On June 29, 2012, the AB upheld the DS panel’s finding that the COOL measure treats imported Canadian cattle and hogs, and imported Mexican cattle, less favorably than like domestic livestock, because of its record-keeping and verification requirements. The AB, however, reversed the panel’s finding that COOL does not fulfill its legitimate objective to provide consumers with information on origin. The Obama Administration welcomed the AB’s affirmation of the U.S. right to adopt labeling requirements to inform consumers on the origin of the meat they purchase, but did not signal what steps might be considered to address the ‘less favorable treatment’ finding. Participants in the U.S. livestock sector had mixed reactions, reflecting the heated debate on COOL that occurred over the last decade. Two consumer groups expressed concern that this WTO decision further undermines U.S. consumer protections.

If the United States decides to bring COOL into compliance with the AB finding, WTO rules call for that to occur within a reasonable period of time. Options would be to consider regulatory and/or statutory changes to the COOL regulations and/or law. If the United States does not comply, Canada and Mexico would have the right to seek compensation or retaliate against imports from the United States.


Date of Report: July 3, 2012
Number of Pages: 35
Order Number: RS22955
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Monday, July 9, 2012

U.S. Trade and Investment Relations with sub-Saharan Africa and the African Growth and Opportunity Act


Vivian C. Jones
Specialist in International Trade and Finance

Brock R. Williams
Analyst in International Trade and Finance

Following the end of the apartheid era in South Africa in the early 1990s, the United States sought to increase economic relations with sub-Saharan Africa (SSA). President Clinton instituted several measures that dealt with investment, debt relief, and trade. Congress passed legislation that required the President to develop a trade and development policy for Africa.

Between 1960 and 1973, Africa’s economic growth was relatively strong, followed by a period of stagnation and decline for the subsequent two decades in many SSA countries. Current perspectives, however, indicate that many of the fastest-growing countries in the world are on the African continent, and the International Monetary Fund (IMF) projects that the SSA region will grow in terms of real GDP by 5.4% in 2012 and 5.3% in 2013.

In 2000, Congress approved new U.S. trade and investment legislation for SSA in the African Growth and Opportunity Act (AGOA; Title I, P.L. 106-200). According to U.S. trade statistics, U.S. trade with SSA has comprised 1% to 2% of U.S. total trade with the world. AGOA extends preferential treatment to U.S. imports from eligible countries that are pursuing market reform measures. Data show that U.S. imports under AGOA are mostly energy products, but imports of other products have grown significantly. AGOA mandated that U.S. officials meet regularly with their counterparts in sub-Saharan Africa, and 11 of these meetings have been held to date. The 11th AGOA Forum was held from June 14 to June 15, 2012, in Washington, DC.

AGOA also directed the President to provide U.S. government technical assistance and trade capacity support to AGOA beneficiary countries. Government agencies that have roles in this effort include the U.S. Agency for International Development, the Assistant U.S. Trade Representative for Africa (established by statute under AGOA), the Overseas Private Investment Corporation, the Export-Import Bank, the U.S. and Foreign Commercial Service, and the Trade and Development Agency. In AGOA, Congress declared that free-trade agreements should be negotiated, where feasible, with interested sub-Saharan African countries. Related to this provision, negotiations on a free-trade agreement with the Southern African Customs Union (SACU), which includes South Africa and four other countries, began in June 2003, but were suspended in April 2006.

Several topics may be important to the 112th Congress in the oversight of AGOA and in potential legislation amending the act. First, an AGOA provision allowing apparel made in lesserdeveloped countries to be made of yarns and fabrics from any country, subject to a cap, expires on September 30, 2012. H.R. 2493 and its companion bill in the Senate, S. 2007, seek to extend the third-country fabric provision until 2015, and to include the Republic of South Sudan (which became independent from Sudan in July 2011) in the list of countries included in the definition of sub-Saharan Africa in the act. Second, H.R. 4221 and S. 2215 seek to increase U.S. exports to Africa, in part, through strategies aimed at developing relationships between the United States and African countries on a government-to-government level, as well as fostering private sector U.S.-African ties. Third, H.R. 656 would create at the State Department a Special Representative for United States-Africa Trade, Development, and Diaspora Affairs that would also promote U.S. trade and investment with Africa.


Date of Report: June 26, 2012
Number of Pages: 45
Order Number: RL31772
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Monday, July 2, 2012

U.S.-Vietnam Economic and Trade Relations: Issues for the 112th Congress

Michael F. Martin
Specialist in Asian Affairs

Since the resumption of trade relations in the 1990s, Vietnam has rapidly risen to become a significant trading partner for the United States. Along with the growth of bilateral trade, a number of issues of common concern, and sometimes disagreement, have emerged between the two nations. Congress may play a direct role in the U.S. policy on some of these issues.

Bilateral trade has grown from about $220 million in 1994 to $21.86 billion in 2011, transforming Vietnam into the 30th largest trading partner for the United States. Vietnam is the second-largest source of U.S. clothing imports, and a major source for footwear, furniture, and electrical machinery. Much of this rapid growth in bilateral trade can be attributed to U.S. extension of normal trade relations (NTR) status to Vietnam. Another major contributing factor is over 20 years of rapid economic growth in Vietnam, ushered in by a 1986 shift to a more market-oriented economic system.

Bilateral trade may increase if both nations become members of the Trans-Pacific Strategic Economic Partnership Agreement (TPP). The United States and Vietnam are among the nine countries negotiating the terms of expansion of the trade association. Vietnam’s incentive to join the TPP is largely contingent on greater market access in the United States, particularly for agricultural goods, aquacultural goods, clothing, and footwear. Vietnam is also a party to negotiations to form a larger pan-Asian regional trade association based on the Association of Southeast Asian Nations (ASEAN) that could exclude the United States and prove to be an alternative to the TPP.

The growth in bilateral trade has not been without its accompanying issues and problems. Vietnam has applied for acceptance into the U.S. Generalized System of Preferences (GSP) program and is participating in negotiations of a Bilateral Investment Treaty (BIT) with the United States. Vietnam also would like to be officially recognized as a market economy.

There have also been problems with U.S. imports of specific products from Vietnam, particularly catfish-like fish known as basa or tra. In 2008, the 110th Congress passed legislation that transferred the regulation of catfish from the Food and Drug Administration to the U.S. Department of Agriculture (USDA) and authorized the Secretary of Agriculture to determine if basa and tra are to be considered catfish. The Vietnamese government strongly protested the law as a protectionist measure. On February 24, 2011, the USDA released proposed new catfish regulations, which did not resolve the status of Vietnam’s basa and tra exports.

An examination of recent trends in bilateral trade reveals that other product categories—such as footwear, furniture, and electrical machinery—could generate future tension between the United States and Vietnam. Observers of Vietnam’s economic development have also been critical of Vietnam’s protection of workers’ rights, its enforcement of intellectual property rights laws and regulations, and the country’s exchange rate policies.

The 112th Congress may play an important role in one or more of these issues, as have past Congresses. The 112th Congress would have to consider implementing legislation if a TPP agreement is concluded. Congressional action on key legislation, such as the Agriculture Reform, Food, and Jobs Act of 2012 (S. 3240), could have an impact on the TPP negotiations. This report will be updated as circumstances require.



Date of Report: June 11, 2012
Number of Pages: 26
Order Number: R41550
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