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Wednesday, August 29, 2012

Potential Trade Effects of Adding Vietnam to the Generalized System of Preferences Program


Vivian C. Jones
Specialist in International Trade and Finance

Michael F. Martin
Specialist in Asian Affairs


In May 2008, Vietnam formally requested to be added to the U.S. Generalized System of Preferences (GSP) program as a “developing country.” On June 20, 2008, the office of the U.S. Trade Representative (USTR) announced that it was initiating a formal review of Vietnam’s eligibility for GSP benefits and would accept public comments on the application until August 4, 2008. Vietnam has already been accepted into several other developed-country GSP programs around the world, including Canada, the European Union (EU), and Japan.

The GSP statute provides the President with the authority to designate any country a beneficiary developing country, provided the country complies with various trade and investment policies and labor conditions. Congress does not need to act to approve GSP status for Vietnam. The President is, however, required to notify Congress of his intention. The inclusion of Vietnam into the GSP program is generally viewed as another step in the development of closer bilateral relations.

Most of the public comments submitted to the USTR were supportive of approving Vietnam’s application. However, there were some issues raised that could cause problems in accepting Vietnam into the GSP program—in particular, Vietnam’s record on workers’ rights. A preliminary assessment conducted by the GSP Subcommittee of the Trade Policy Staff Committee (TPSC), an interagency group chaired by the USTR, reportedly contained reservations about Vietnam’s record on worker rights. In addition, Vietnam’s record on human rights may also have an impact on its application, even though the President is not legally required to consider this issue when evaluating Vietnam’s application.

If accepted into the GSP program, up to 3,400 different types of exports from Vietnam could potentially enter into the United States duty-free. While Vietnam’s leading exports to the United States—knitted and non-knitted clothing—are deemed “import sensitive” and therefore excluded from GSP eligibility, some of its fastest growing exports are eligible for duty-free status under the GSP. These exports include electrical machinery, fruits, and coffee preparations. Imports of these commodities would likely increase if Vietnam is granted beneficiary developing country (BDC) status. This could lead to an increase in the U.S. bilateral trade deficit with Vietnam and a shift in the mix of U.S. imports from Vietnam. It might also foster a relocation of some assembly operations from China to Vietnam, thereby reducing the U.S. bilateral trade deficit with China.

The Generalized System of Preferences program was renewed on October 21, 2011, with the passage of P.L. 112-40, extending the program until July 31, 2013.



Date of Report: August 14, 2012
Number of Pages: 17
Order Number: RL34702
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Friday, August 24, 2012

Trade Adjustment Assistance Community College and Career Training Grants


Benjamin Collins
Analyst in Labor Policy

Trade Adjustment Assistance Community College and Career Training (TAACCCT) grants are competitive grants to institutions of higher education for the development and delivery of career training programs that can be completed in two years or less. The program targets and gives enrollment preference to workers who have been adversely affected by international trade, though non-trade-affected workers may also participate in TAACCCT-funded programs.

TAACCCT is administered by the Department of Labor (DOL). It was created by the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5) and is authorized under the Trade Act of 1974, as amended. The Health Care and Education Reconciliation Act of 2011 (HCERA, P.L. 111-152) provided $500 million per fiscal year in mandatory appropriations for TAACCCT for FY2011 through FY2014. During this time, funds equal to at least 0.5% of the total annual appropriation must be awarded to institutions in each state.

TAACCCT grants may be used to design, develop, and deliver career training programs. Allowable uses of funds include personnel as well as materials and other expenses related to content delivery. Under the most recent solicitation for grant applications (SGA), TAACCCT grants provide a 48-month period of performance. This period includes 36 months for the design, development, and delivery of a training program and 12 months for data gathering and evaluation.

Statute requires that grant applications include a description of the proposed project and how it will serve trade-affected workers. Statute further specifies that grants will be judged on the merit of the proposed project and the local employment prospects for individuals who would complete the proposed program.

SGAs have expanded upon statutory criteria. In some cases, the SGAs have elaborated on statutory provisions, and in other cases they have introduced largely new requirements for grant applications. The first SGA was issued in January 2011 and grantees were announced in September of that year. The second SGA was issued in February 2012. As of August 15, 2012, the deadline for applications has passed but grantees have not been announced.



Date of Report: August 15, 2012
Number of Pages: 10
Order Number: R42661
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Thursday, August 23, 2012

Trade Promotion Authority (TPA) and the Role of Congress in Trade Policy


J. F. Hornbeck
Specialist in International Trade and Finance

William H. Cooper
Specialist in International Trade and Finance


On July 1, 2007, Trade Promotion Authority (TPA—previously know as fast track) expired. TPA is the authority Congress grants to the President to enter into certain reciprocal trade agreements, and to have their implementing bills considered under expedited legislative procedures, provided the President observes certain statutory obligations. TPA defines how Congress has chosen to exercise its constitutional authority over a particular aspect of trade policy, while giving the President added leverage to negotiate trade agreements by effectively assuring U.S. trade partners that final agreements will be given timely and unamended consideration.

TPA reflects decades of debate, cooperation, and compromise between Congress and the executive branch in finding a pragmatic accommodation to the exercise of each branch’s respective authorities. The expedited legislative procedures have not changed since first enacted into permanent law as sections 151-154 of the Trade Act of 1974. Congress, however, has required that the authority to use TPA be periodically reauthorized, and at times has chosen to revise trade negotiation objectives, the consultative mechanism, and presidential notification requirements. While early versions of fast track/TPA received bipartisan support, more recent renewal efforts have been more controversial. Concerns have grown over the negative effects of trade, and elements of the trade debate have become increasingly split along party lines, culminating in a largely partisan vote on the 2002 TPA renewal. Future debates on TPA renewal may center on clarifying key aspects of the congressional role in influencing and approving reciprocal trade agreements; Congress’s oversight of trade negotiations; trade agreement enforcement; and further refinement of trade negotiation objectives, among others.

The 112th Congress exercised TPA authority and procedures in passing three implementing bills for reciprocal free trade agreements (FTAs) with Colombia, Panama, and South Korea on October 12, 2012, concluding action on the last FTAs signed prior to the expiration of trade promotion authority in 2007. There are two other trade negotiations in progress that could result in agreements that would likely require TPA. The first is the 11-year-old multilateral Doha Development Round of the World Trade Organization (WTO), which is widely considered unlikely to be completed in its current form. The second is the proposed Trans-Pacific Partnership (TPP) FTA, for which negotiations are in progress.

TPA renewal may become a pressing issue in the 113th Congress, particularly if congressional interest focuses on supporting current trade negotiations. Technically, TPA is not necessary to begin or even conclude trade negotiations, but it is widely understood to be a key element of passing trade agreement implementing legislation, and therefore, its renewal can be construed as signaling serious congressional support for moving ahead with trade negotiations. Congressional action on TPA may also depend on whether Congress wishes to take up a broad recasting of the trade agreements authority, or a more simplified extension for a particular agreement, such as the TPP. In either case, addressing congressional concerns over the operation of TPA may be part of the debate.

Should Congress decide to consider reauthorizing TPA, it has many options including, but not limited to: (1) taking no action; (2) extending temporarily; (3) revising and renewing; or (4) granting permanent authority. How this issue evolves also depends on a host of political and economic variables, including congressional action on reinvigorating a “political compact” that sits at the center of a well-functioning TPA process.



Date of Report: August 9, 2012
Number of Pages: 27
Order Number: RL33743
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Wednesday, August 22, 2012

U.S.-Mexico Economic Relations: Trends, Issues, and Implications


M. Angeles Villarreal
Specialist in International Trade and Finance

In the remainder of the 112th Congress, policymakers will likely maintain an active interest in Mexico on issues related to cross-border trade between the two countries, Mexico’s participation in the Trans-Pacific Partnership (TPP) agreement negotiations, economic conditions in Mexico, migration, and border issues. Congress also will likely take an interest in the economic policies of Mexican President-elect Enrique Peña Nieto who is expected to enter into office for a six-year term on December 1, 2012. During his campaign, Peña Nieto advocated a 10-point economic plan that includes, among other measures, implementing recently passed legislation to counter monopolistic practices, passing fiscal reform, opening up the oil sector to private investment, making farmers more productive, and doubling infrastructure investments.

The bilateral economic and trade relationship with Mexico is of interest to U.S. policymakers because of Mexico’s proximity to the United States, the high level of bilateral trade, and the strong cultural and economic ties that connect the two countries. Also, it is of national interest for the United States to have a prosperous and democratic Mexico as a neighboring country. Mexico is the United States’ third-largest trading partner, while the United States is, by far, Mexico’s largest trading partner. Mexico ranks third as a source of U.S. imports, after China and Canada, and second, after Canada, as an export market for U.S. goods and services. The United States is the largest source of foreign direct investment (FDI) in Mexico.

The United States and Mexico have strong economic ties through the North American Free Trade Agreement (NAFTA), which has been in effect since 1994. Prior to NAFTA, Mexico had followed a strong protectionist policy for decades until it began to unilaterally liberalize its trade regime in the late 1980s. Not all trade-related job gains and losses since NAFTA can be entirely attributed to the agreement because of the numerous factors that affect trade, such as Mexico’s trade liberalization efforts, economic conditions, and currency fluctuations. NAFTA may have accelerated the ongoing trade and investment trends that were already taking place at the time. Most studies show that the net economic effects of NAFTA on both countries have been small but positive, though there have been adjustment costs to some sectors within both countries.

In June 2012, President Barack Obama announced that the nine countries involved in the TPP negotiations had extended an invitation to Mexico and Canada to join negotiations for the proposed multilateral free trade agreement. The proposed TPP would likely enhance the economic links Mexico already has with the United States and Canada under NAFTA. This could include further reduction of barriers to trade and the negotiation of key issues in areas such as agriculture, intellectual property rights protection, government procurement, regulatory cohesion, and others.

The United States, Mexico, and Canada have made efforts since 2005 to increase cooperation on economic and security issues through various endeavors, most notably by participating the North American Leaders Summits. The most recent Summit was hosted by President Obama on April 2, 2012 in Washington DC. The three leaders discussed issues on the economic well-being, safety, and security of North America and issued a joint statement renewing their commitment to regulatory cooperation in key areas or interest.



Date of Report: August 9, 2012
Number of Pages: 33
Order Number: RL32934
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Multilateral Development Banks: How the United States Makes and Implements Policy


Rebecca M. Nelson
Analyst in International Trade and Finance

Martin A. Weiss
Specialist in International Trade and Finance


This report analyzes how the United States makes policy towards the multilateral development banks (MDBs) and identifies ways by which Congress can shape U.S. policy and influence the activities of the banks themselves.

The executive branch and Congress share responsibility for U.S. policy towards the MDBs and each has primary control over a different part of the policy process. The Administration is responsible for negotiating with other countries and for managing day-to-day U.S. participation in the MDBs. Congress has ultimate authority over the level of U.S. financial commitments and the criteria that govern U.S. participation in these institutions. Congress has authorized the President to direct U.S. participation in the MDBs, and the President has delegated that authority to the Secretary of the Treasury. Other agencies also have reasons for being concerned about U.S. policy and the MDBs. The Administration created a new process, starting in 2009, to help coordinate interagency views on MDB issues.

Authorizing legislation is managed by the House Financial Services Committee and Senate Foreign Relations Committee. The House and Senate Appropriations Subcommittees on State, Foreign Operations, and Related Programs handle the appropriations. Since 1981, MDB legislation has become law through the regular legislative process only once. Usually it is enacted as a rider to other legislation.

Congress exercises its influence over MDB policy through its control over authorizations and appropriations and through oversight. The authorizing committees have included in MDB authorizing legislation many directives which affect the goal and direction of U.S. policy. Congress has also used its control over the funding process—its “power of the purse”—to set priorities and encourage the Administration and MDBs to consider changes in their policies or procedures. Congress has used hearings and required reports to get information about U.S. policy and the MDBs onto the public record and to draw the Treasury Department’s attention to issues of pressing concern. Since the Administration knows it must come to Congress for future authorizations and MDB funding, the views expressed by Congress through hearings have often had an impact on the focus and direction of U.S. policy regarding particular concerns.

For more information the MDBs, see:

• CRS Report R41170, Multilateral Development Banks: Overview and Issues for Congress, by Rebecca M. Nelson;

• CRS Report R41672, Multilateral Development Banks: General Capital Increases, by Martin A. Weiss; and

• CRS Report RS20792, Multilateral Development Banks: U.S. Contributions FY2000-FY2013, by Rebecca M. Nelson.



Date of Report: August 7, 2012
Number of Pages: 15
Order Number: R41537
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