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Friday, February 1, 2013

Trade Primer: Qs and As on Trade Concepts, Performance, and Policy



J. F. Hornbeck, Coordinator
Specialist in International Trade and Finance

Mary Jane Bolle
Specialist in International Trade and Finance

William H. Cooper
Specialist in International Trade and Finance

Craig K. Elwell
Specialist in Macroeconomic Policy

James K. Jackson
Specialist in International Trade and Finance

Vivian C. Jones
Specialist in International Trade and Finance

M. Angeles Villarreal
Specialist in International Trade and Finance


The 113th Congress may have a full legislative and oversight agenda on international trade. This may include consideration of legislation to reauthorize Trade Promotion Authority (TPA) and implementation of a possible Trans-Pacific Partnership (TPP) trade agreement. Congress may also pay close attention to the new negotiation for an International Services Agreement and developments in the Doha Development Round, both under the auspices of the World Trade Organization (WTO). There is also discussion of beginning trade negotiations for a U.S.- European Union free trade agreement (FTA). Other issues might include enhanced enforcement of U.S. trade agreements and trade relations with China. This report provides information and context for these and many other trade topics. It is intended to assist members and staff who may be new to trade issues. For more details on specific trade issues facing the 113th Congress see CRS Report R42882, International Trade and Finance: Key Policy Issues for the 113th Congress, coordinated by Mary A. Irace and J. F. Hornbeck.

This report is divided into four sections in a question-and-answer format: trade concepts; U.S. trade performance; formulation of U.S. trade policy; and trade and investment issues. Additional suggested readings are provided in an appendix.

The first section, “Trade Concepts,” deals with why countries trade, the consequences of trade expansion, and the relationship between globalization and trade. Key questions address the benefits of specialization in production and trade, efforts by governments to influence a country’s comparative advantage, how trade expansion can be costly and disruptive to workers in particular industries and skill categories, and some unique characteristics of trade between developed countries.

The second section, “U.S. Trade Performance,” focuses on the U.S. trade deficit and its impact on industries. Several questions address the causes of trade deficits, the role of foreign trade barriers, and how the trade deficit can be reduced. In terms of business impacts, the questions focus on which U.S. industries appear to be the most and least competitive, and on the relative size of the manufacturing sector.

The third section, “Formulation of U.S. Trade Policy,” deals with the roles played by the executive branch, Congress, the private sector, and the judiciary in the formulation of U.S. trade policy. Information on how trade policy functions are organized in Congress and the executive branch, as well as the respective roles of individual members and the President, is provided. The formal and informal roles of the private sector and the involvement of the judiciary are also covered.

The fourth section, “U.S. Trade and Investment Policy Issues,” asks questions related to trade negotiations and agreements and to imports, exports, and investments. The justification, types, and consequences of trade liberalization agreements, along with the role of the World Trade Organization, are treated in this section. The costs and benefits of imports, exports, and investments are also discussed, including how the government deals with disruption and injury to workers and companies caused by imports and its efforts to both restrict and promote exports. The motivations and consequences of foreign direct investment flows are also discussed.



Date of Report: January 18, 2013
Number of Pages: 35
Order Number: RL33944
Price: $29.95

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