The Trans-Pacific Partnership Negotiations and Issues for Congress

Ian F. Fergusson, Coordinator
Specialist in International Trade and Finance

William H. Cooper
Specialist in International Trade and Finance

Remy Jurenas
Specialist in Agricultural Policy

Brock R. Williams
Analyst in International Trade and Finance

The Trans-Pacific Partnership (TPP) is a proposed regional free trade agreement (FTA) being negotiated among the United States, Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. On March 15, 2013, Japanese Prime Minister Shinzo Abe announced that Japan would seek to participate in the TPP negotiations. U.S. negotiators and others describe and envision the TPP as a “comprehensive and high-standard” FTA that aims to liberalize trade in nearly all goods and services and include commitments beyond those currently established in the World Trade Organization (WTO). The broad outline of an agreement was announced on the sidelines of the Asia-Pacific Economic Cooperation (APEC) ministerial in November 2011, in Honolulu, HI. If concluded as envisioned, the TPP potentially could eliminate tariff and non-tariff barriers to trade and investment among the parties and could serve as a template for a future trade pact among APEC members and potentially other countries. Congress has a direct interest in the negotiations, both through influencing U.S. negotiating positions with the executive branch, and by passing legislation to implement any resulting agreement.

The 16th round of negotiations concluded in Singapore on March 14, 2013, and the 17th round is scheduled to be held in Lima, Peru in May 2013. The current goal is to reach an agreement in time for the October 2013 APEC summit in Indonesia. For this deadline to be achieved, outstanding negotiating positions may need to be tabled soon in order for political decisions to be made. The negotiating dynamic itself is complex: decisions on key market access issues such as dairy, sugar, and textiles and apparel may be dependent on the outcome of controversial rules negotiations such as intellectual property rights or state-owned enterprises.

Twenty-nine chapters in the agreement are under discussion. The United States is negotiating market access for goods, services, and agriculture with countries with which it does not currently have FTAs: Brunei, Malaysia, New Zealand, and Vietnam. Negotiations are also being conducted on disciplines to intellectual property rights, trade in services, government procurement, investment, rules of origin, competition, labor, and environmental standards and other issues. In many cases, the rules being negotiated are intended to be more rigorous than comparable rules found in the WTO. Some topics, such as state-owned enterprises, regulatory coherence, and supply chain competitiveness, break new ground in FTA negotiations. As the countries that make up the TPP negotiating partners include advanced industrialized, middle income, and developing economies, the TPP, if implemented, may involve substantial restructuring of the economies of some participants.

The TPP serves several strategic goals in U.S. trade policy. First, it is the leading trade policy initiative of the Obama Administration, and is a manifestation of the Administration’s “pivot” to Asia. If concluded, it may serve to shape the economic architecture of the Asia-Pacific region by harmonizing existing agreements with U.S. FTA partners, attracting new participants, and establishing regional rules on new policy issues facing the global economy—possibly providing impetus to future multilateral liberalization under the WTO.

As the negotiations proceed, a number of issues important to Congress are emerging. One is whether the United States can balance its vision of creating a “comprehensive and high standard” agreement with a large and expanding group of countries, while not insisting on terms that other countries will reject. Another issue is how Congress will consider the TPP, if concluded. The present negotiations are not being conducted under the auspices of formal trade promotion authority (TPA)—the latest TPA expired on July 1, 2007—although the Administration informally
is following the procedures of the former TPA. If TPP implementing legislation is brought to Congress, TPA may need to be considered if the legislation is not to be subject to potentially debilitating amendments or rejection. Finally, Congress may seek to weigh in on the addition of new members to the negotiations, before or after the negotiations conclude.

Date of Report: March 19, 2013
Number of Pages: 62
Order Number: R42694
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China-U.S. Trade Issues

Wayne M. Morrison
Specialist in Asian Trade and Finance

U.S.-China economic ties have expanded substantially over the past three decades. Total U.S.- China trade rose from $5 billion in 1981 to $536 billion in 2012. China is currently the United States’ second-largest trading partner, its third-largest export market, and its biggest source of imports. According to one estimate, China is currently a $250 billion market for U.S. firms (i.e., U.S. exports to China plus sales by U.S.-invested firms in China). China’s large population and booming economy have made it a large and growing market for U.S. exporters and investors. Many U.S. firms view participation in China’s market as critical to staying globally competitive. General Motors (GM), for example, which has invested heavily in China, sold more cars in China than in the United States from 2010 to 2012. In addition, U.S. imports of low-cost goods from China greatly benefit U.S. consumers, and U.S. firms that use China as the final point of assembly for their products, or use Chinese-made inputs for production in the United States, are able to lower costs and become more globally competitive. China is the largest foreign holder of U.S. Treasury securities (which totaled over $1.2 trillion at the end of 2012). China’s purchases of U.S. government debt help keep U.S. interest rates low.

Despite growing commercial ties, the bilateral economic relationship has become increasingly complex and often fraught with tension. From the U.S. perspective, many trade tensions stem from China’s incomplete transition to a free market economy. While China has significantly liberalized it’s economic and trade regimes over the past three decades, it continues to maintain, (or has recently imposed) a number state-directed policies that appear to distort trade and investment flows. Major areas of concern expressed by U.S. policymakers and stakeholders include China’s efforts to maintain an undervalued currency, its mixed record on implementing its World Trade Organization (WTO) obligations, its relatively poor record of protecting intellectual property rights (IPR), alleged widespread cyber espionage against U.S. firms, and its extensive use of industrial policies (such as financial support of state-owned firms, discriminatory government regulations, pressure on foreign-invested firms in China to transfer technology, and export restrictions on raw materials) to promote Chinese firms and sectors favored by the government. Many U.S. policymakers argue that such policies are harmful to U.S. economic interests and have contributed to U.S job losses. For example, one U.S. government study estimated that IPR infringement in China cost U.S. IPR-intensive firms $48 billion in 2009. Some U.S. policymakers have expressed concern that China’s large holdings of U.S. public debt could give it leverage against the United States.

Some Members of Congress advocate a more assertive U.S. trade policy towards China, such as increasing the number of dispute settlement cases brought against China in the WTO, where the United States has prevailed on a number of issues. During his State of the Union Address in January 2012, President Obama announced plans to create a new Trade Enforcement Unit “charged with investigating unfair trade practices in countries like China.” Some analysts caution that taking a more aggressive stance against China over its trade policies could induce it to retaliate against U.S. exports to, and investment in, China. They further contend that major economic disputes should be dealt with through established high-level bilateral dialogues, such as the Strategic & Economic Dialogue (S&ED) and the U.S.-China Joint Commission on Commerce and Trade (JCCT). Many trade observers contend that the United States should also continue to press China to rebalance its economic growth model by boosting domestic consumption and decreasing the country’s reliance on exports for its economic growth, which could significantly boost Chinese imports. This report provides an overview of U.S.-China trade ties and major issues.


Date of Report: March 13, 2013
Number of Pages: 51
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What’s the Difference?—Comparing U.S. and Chinese Trade Data

Michael F. Martin
Specialist in Asian Affairs

The size of the U.S. bilateral trade deficit with China has been and continues to be an important issue in bilateral trade relations. Some Members of Congress view the deficit as a sign of unfair economic policies in China, and have introduced legislation seeking to redress the perceived competitive disadvantage China’s policies have created for U.S. exporters.

There is a large and growing difference between the official trade statistics released by the United States and the People’s Republic of China. According to the United States, the 2012 bilateral trade deficit with China was $315.1 billion. According to China, its trade surplus with the United States was $224.1 billion—$91.0 billion less.

This paper examines the differences in the trade data from the two nations in two ways. First, it compares the trade figures at the two digit level using the Harmonized System to discern any patterns in the discrepancies between the U.S. and Chinese data. This comparison reveals that over three-quarters of the difference in the value of China’s exports to the United States in 2012 was attributable to five types of goods. Those five types of goods, in order of the size of the discrepancy, were electrical machinery; machinery; toys and sporting goods; footwear; and woven apparel.

The second approach to examining the differing trade data involves a review of the existing literature on the technical and non-technical sources of the trade data discrepancies, including two joint China-U.S. reports on statistical discrepancies in merchandise trade data. The literature reveals that the main sources of the discrepancies are differences in the list value of shipments when they leave China and when they enter the United States, and differing attributions of origin and destination of Chinese exports that are transshipped through a third location (such as Hong Kong) before arriving in the United States.

Because of the differences in the official bilateral merchandise trade data, the U.S.-China Joint Commission on Commerce and Trade (JCCT) established a statistical working group. The working group has released two reconciliation studies to identify the causes of the statistical discrepancies. The adjustments contained in the two studies are not meant to imply errors in the official statistics of either country.

This report is updated annually, after the release of official trade data by China and the United States.


Date of Report: February 25, 2013
Number of Pages: 11
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The U.S.-South Korea Free Trade Agreement (KORUS FTA): Provisions and Implications

William H. Cooper, Coordinator
Specialist in International Trade and Finance

Mark E. Manyin
Specialist in Asian Affairs

Remy Jurenas
Specialist in Agricultural Policy

Michaela D. Platzer
Specialist in Industrial Organization and Business

On October 3, 2011, President Obama submitted draft legislation (H.R. 3080/S. 1642) to implement the U.S.-South Korea Free Trade Agreement (KORUS FTA) to both houses of Congress. On October 6, the House Ways and Means Committee reported out H.R. 3080 (H.Rept. 112-239). The Senate Finance Committee reported out S. 1642 (without written report). On October 12, the House passed H.R. 3080 (278-151) and sent it to the Senate which passed it (83-15). The President signed the legislation on October 21, 2011 (P.L. 112-41). In South Korea, after a contentious battle, the Korean National Assembly passed the agreement on November 22. On March 15, 2012, the KORUS FTA entered into force.

The KORUS FTA is the second-largest U.S. FTA (next to NAFTA). South Korea is the seventhlargest trading partner of the United States, and the United States is South Korea’s third-largest trading partner. The KORUS FTA covers a wide range of trade and investment issues and, therefore, could have substantial economic implications for both the United States and South Korea.

Congress approved the KORUS FTA implementing legislation using expedited procedures authorized by the Trade Promotion Authority (TPA). Under TPA, the President had the discretion on when to submit the implementing legislation to Congress. The KORUS FTA was negotiated and signed on June 30, 2007, by President George W. Bush. However, President Bush did not submit the legislation because of differences with the Democratic leadership over treatment of autos and beef, among other issues. On December 3, 2010, after a series of arduous negotiations, President Obama and President Lee announced that they had reached an agreement on addressing the outstanding issues related to the KORUS FTA. As a result, U.S. and South Korean negotiators agreed, in the form of an exchange of letters and agreed minutes, to modifications to the commitments made in the 2007 agreement. These modifications included changes in phase-out periods for tariffs on autos and pork, a new safeguard provision on autos, and concessions by South Korea on allowing a larger number of U.S. cars into South Korea under U.S. safety standards than was the case under the original KORUS FTA provisions. The modifications were included in the implementing legislation.

A broad swath of the U.S. business community supported the KORUS FTA. With the modifications in the commitments reached in December 2010, this group also included the three Detroit-based auto manufacturers and the United Auto Workers (UAW) union. It still faced opposition from some labor unions and other groups, including Public Citizen. Many U.S. supporters view the KORUS FTA as important to secure new opportunities in the South Korean market, while opponents claimed that the KORUS FTA does not go far enough to break down South Korean trade barriers or that the agreement will encourage U.S. companies to move their production offshore at the expense of U.S. workers. Other observers suggested the KORUS FTA could have implications for the U.S.-South Korean alliance as a whole, as well as on U.S. Asia policy and U.S. trade policy.


Date of Report: March 7, 2013
Number of Pages: 55
Order Number: RL34330
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Arab League Boycott of Israel

Martin A. Weiss
Specialist in International Trade and Finance

The Arab League, an umbrella organization comprising 22 Middle Eastern and African countries and entities, has maintained an official boycott of Israeli companies and Israeli-made goods since the founding of Israel in 1948. The boycott is administered by the Damascus-based Central Boycott Office, a specialized bureau of the Arab League.

The boycott has three tiers. The primary boycott prohibits citizens of an Arab League member from buying from, selling to, or entering into a business contract with either the Israeli government or an Israeli citizen. The secondary boycott extends the primary boycott to any entity world-wide that does business in Israel. A blacklist of global firms that engage in business with Israel is maintained by the Central Boycott Office, and disseminated to Arab League members. The tertiary boycott prohibits an Arab League member and its nationals from doing business with a company that deals with companies that have been blacklisted by the Arab League.

Since the boycott is sporadically applied and ambiguously enforced, its impact, measured by capital or revenue denied to Israel by companies adhering to the boycott, is difficult to measure. The effect of the primary boycott appears limited since intra-regional trade and investment are small. Enforcement of the secondary and tertiary boycotts has decreased over time, reducing their effect. Thus, it appears that since intra-regional trade is small, and that the secondary and tertiary boycotts are not aggressively enforced, the boycott may not currently have an extensive effect on the Israeli economy.

Despite the lack of economic impact on either Israeli or Arab economies, the boycott remains of strong symbolic importance to all parties. The U.S. government has often been at the forefront of international efforts to end the boycott and its enforcement. Despite U.S. efforts, however, many Arab League countries continue to support the boycott’s enforcement. U.S. legislative action related to the boycott dates from 1959 and includes multiple statutory provisions expressing U.S. opposition to the boycott, usually in foreign assistance legislation. In 1977, Congress passed laws making it illegal for U.S. companies to cooperate with the boycott and authorizing the imposition of civil and criminal penalties against U.S. violators. U.S. companies are required to report to the Department of Commerce any requests to comply with the Arab League Boycott.

The current list of countries that request U.S. companies to participate or agree to participate in boycotts prohibited under U.S. law includes Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, United Arab Emirates, and Yemen.

This report provides background information on the boycott and U.S. efforts to end its enforcement. More information on Israel is contained in CRS Report RL33476, Israel: Background and U.S. Relations, by Jim Zanotti.


Date of Report: March 5, 2013
Number of Pages: 10
Order Number: RL33961
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