Friday, June 8, 2012
U.S.-Japan Economic Relations: Significance, Prospects, and Policy Options
William H. Cooper
Specialist in International Trade and Finance
Japan and the United States are the two largest economic powers. Together they account for over 30% of world domestic product, for a significant portion of international trade in goods and services, and for a major portion of international investment. This economic clout makes the United States and Japan potentially powerful actors in the world economy. Economic conditions in the United States and Japan have a significant impact on the rest of the world. Furthermore, the U.S.-Japan bilateral economic relationship can influence economic conditions in other countries.
The U.S.-Japan economic relationship is very strong and mutually advantageous. The two economies are highly integrated via trade in goods and services—they are large markets for each other’s exports and important sources of imports. More importantly, Japan and the United States are closely connected via capital flows. Japan is a major foreign source of financing of the U.S. national debt and will likely remain so for the foreseeable future, as the mounting U.S. debt needs to be financed and the stock of U.S. domestic savings remains insufficient to meet the demand. Japan is also a significant source of foreign private portfolio and direct investment in the United States, and the United States is the origin of much of the foreign investment in Japan.
The relative significance of Japan and the United States as each other’s economic partner has diminished with the rise of China as an economic power. For example, China has overtaken Japan and is the largest source of foreign financing of the U.S. national debt. In addition, U.S. economic ties with Canada, Mexico, and China have deepened, further eroding the direct relevance of Japan. Nevertheless, analyses of trade and other economic data suggest that the bilateral relationship remains important, and policy leaders of both countries face the challenge of how to manage it.
During the last decade policy leaders seem to have made a deliberate effort to drastically reduce the friction that prevailed in the economic relationship. On the one hand, this calmer environment has stabilized the bilateral relationship and permitted the two countries to focus their attention on other issues of mutual interest, such as national security. On the other hand, as some have argued, the friendlier environment masks serious problems that require more attention, such as continuing Japanese failure to resolve long-standing market access barriers to U.S. exports. Failure to resolve any of these outstanding issues could cause heightened friction between the two countries.
More generally, other issues regarding U.S.-Japan economic relations may emerge on the agenda of the 112th Congress. U.S. and Japanese leaders have several options on how to manage their relationship, including stronger reliance on the World Trade Organization; special bilateral negotiating frameworks and agreements; or a free trade agreement. On November 11, 2011, Prime Minister Noda announced at a press conference that he decided, after many consultations with potentially affected parties, that “[Japan would] enter into consultations toward participating in the TPP negotiations with the countries concerned on the occasion of the [November 12-13, 2011] APEC Economic Leaders meeting in Honolulu, Hawaii.” Japan’s participation in the TPP will likely be the focal point of U.S.-Japan economic discussion for the foreseeable future.
Date of Report: May 29, 2012
Number of Pages: 22
Order Number: RL32649
Price: $29.95
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EU-U.S. Economic Ties: Framework, Scope, and Magnitude
William H. Cooper
Specialist in International Trade and Finance
The United States and the European Union (EU) economic relationship is the largest in the world—and it is growing. The modern U.S.-European economic relationship has evolved since World War II, broadening as the six-member European Community expanded into the present 27- member European Union. The ties have also become more complex and interdependent, covering a growing number and type of trade and financial activities.
In 2011, $1,466.5 billion flowed between the United States and the EU on the current account, the most comprehensive measure of U.S. trade flows. The EU as a unit is the largest merchandise trading partner of the United States. In 2011, the EU accounted for $268.6 billion of total U.S. exports (or 18.1%) and for $367.8 billion of total U.S. imports (or 16.7%) for a U.S. trade deficit of $99.2 billion. The EU is also the largest U.S. trade partner when trade in services is added to trade in merchandise, accounting for $191.2 billion (or 31.5% of the total in U.S. services exports) and $152.5 billion (or 35.4% of total U.S. services imports) in 2011. In addition, in 2011, a net $176.9 billion flowed from U.S. residents to EU countries into direct investments, while a net $105.1 billion flowed from EU residents to direct investments in the United States.
Policy disputes arise between the United States and the EU, generating tensions which sometimes lead to bilateral trade disputes. Yet, in spite of these disputes, the U.S.-EU economic relationship remains dynamic. It is a relationship that is likely to grow in importance assuming the trends toward globalization and the enlargement of the EU continue, forcing more trade and investment barriers to fall. Economists indicate that an expanded relationship would bring economic benefits to both sides in the form of wider choices of goods and services and greater investment opportunities.
But increasing economic interdependence brings challenges as well as benefits. As the U.S. and EU economies continue to integrate, some sectors or firms will “lose out” to increased competition and will resist the forces of change. Greater economic integration also challenges long-held notions of “sovereignty,” as national or regional policies have extraterritorial impact. Similarly, accepted understandings of “competition,” “markets,” and other economic concepts are tested as national borders dissolve with closer integration of economies.
U.S. and EU policymakers are likely to face the task of how to manage the increasingly complex bilateral economic relationship in ways that maximize benefits and keep frictions to a minimum, including developing new frameworks. For Members during the 112th Congress, it could mean weighing the benefits of greater economic integration against the costs to constituents in the context of overall U.S. national interests.
Date of Report: May 30, 2012
Number of Pages: 11
Order Number: RL30608
Price: $29.95
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Specialist in International Trade and Finance
The United States and the European Union (EU) economic relationship is the largest in the world—and it is growing. The modern U.S.-European economic relationship has evolved since World War II, broadening as the six-member European Community expanded into the present 27- member European Union. The ties have also become more complex and interdependent, covering a growing number and type of trade and financial activities.
In 2011, $1,466.5 billion flowed between the United States and the EU on the current account, the most comprehensive measure of U.S. trade flows. The EU as a unit is the largest merchandise trading partner of the United States. In 2011, the EU accounted for $268.6 billion of total U.S. exports (or 18.1%) and for $367.8 billion of total U.S. imports (or 16.7%) for a U.S. trade deficit of $99.2 billion. The EU is also the largest U.S. trade partner when trade in services is added to trade in merchandise, accounting for $191.2 billion (or 31.5% of the total in U.S. services exports) and $152.5 billion (or 35.4% of total U.S. services imports) in 2011. In addition, in 2011, a net $176.9 billion flowed from U.S. residents to EU countries into direct investments, while a net $105.1 billion flowed from EU residents to direct investments in the United States.
Policy disputes arise between the United States and the EU, generating tensions which sometimes lead to bilateral trade disputes. Yet, in spite of these disputes, the U.S.-EU economic relationship remains dynamic. It is a relationship that is likely to grow in importance assuming the trends toward globalization and the enlargement of the EU continue, forcing more trade and investment barriers to fall. Economists indicate that an expanded relationship would bring economic benefits to both sides in the form of wider choices of goods and services and greater investment opportunities.
But increasing economic interdependence brings challenges as well as benefits. As the U.S. and EU economies continue to integrate, some sectors or firms will “lose out” to increased competition and will resist the forces of change. Greater economic integration also challenges long-held notions of “sovereignty,” as national or regional policies have extraterritorial impact. Similarly, accepted understandings of “competition,” “markets,” and other economic concepts are tested as national borders dissolve with closer integration of economies.
U.S. and EU policymakers are likely to face the task of how to manage the increasingly complex bilateral economic relationship in ways that maximize benefits and keep frictions to a minimum, including developing new frameworks. For Members during the 112th Congress, it could mean weighing the benefits of greater economic integration against the costs to constituents in the context of overall U.S. national interests.
Date of Report: May 30, 2012
Number of Pages: 11
Order Number: RL30608
Price: $29.95
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Document available via e-mail as a pdf file or in paper form.
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Thursday, June 7, 2012
U.S. Trade Remedy Laws and Nonmarket Economies: A Legal Overview
Jeanne J. Grimmett
Legislative Attorney
Two major U.S. trade remedies are antidumping (AD) law, which combats the sale of imported products at less than their fair market value, and countervailing duty (CVD) law, which aims to offset foreign government subsidization of imported goods. If dumped or subsidized imports are found to cause or threaten material injury to a domestic industry, antidumping or countervailing duties will be imposed. Both remedies are available when goods are imported from competitor countries with free market policies. As of 1984, however, only AD law had been applied to goods from nonmarket or “transitional” economies (NMEs). With the continued economic growth of some of these economies, such as China and Vietnam, pressure increased on the U.S. government to use both trade remedies more aggressively against unfair imports from these countries.
AD law has been amended several times since its inception in 1921. With Congress’s continued statutory guidance, the Department of Commerce (DOC) has implemented several different methodologies for applying AD law, including using surrogate country data when the fair market value of a product in the originating country is not readily ascertainable. CVD law had not been used against NMEs, however, since DOC concluded in 1984 that it could not determine subsidization in such situations. In 1986, the U.S. Court of Appeals for the Federal Circuit (CAFC), in Georgetown Steel Corp. v. United States, upheld DOC’s interpretation of the CVD statute as reasonable. While DOC had generally refused to review CVD petitions against NME countries following this determination, it accepted a petition seeking a CVD on imports of coated free-sheet paper from China in 2006. DOC distinguished the current Chinese economy from the Soviet-style economies at issue in Georgetown Steel and found that the imported Chinese paper was subsidized. Although the U.S. International Trade Commission did not make the requisite final affirmative material injury determination in this case, subsequent CVD petitions were successful, resulting in the imposition of 24 CVD orders on NME merchandise.
World Trade Organization (WTO) agreements, together with the WTO Accession Protocols of China and Vietnam, acknowledge that AD and CV duties may be imposed on these countries’ goods, and that surrogate country data may be used to calculate dumping margins or subsidization. In a WTO case brought by China, however, the WTO Appellate Body found in an April 2011 report that the simultaneous imposition by the United States of AD and CV duties on the same Chinese merchandise, where surrogate country data was used to establish the fair market value of the goods in the AD case, remedied the same subsidization twice or “double counted” in violation of U.S. WTO obligations. More broadly, the CAFC held in December 2011 that CVDs may not be imposed on NME goods under any circumstance, finding in GPX Int’l Tire Corp. v. United States that Congress had legislatively ratified DOC’s 1984 statutory interpretation and thus DOC could not interpret the statute to permit such duties. The CAFC affirmed a lower court decision that also prohibited DOC from imposing CVDs on NME goods, but did so because DOC had not eliminated double counting, the practice at issue in the WTO dispute. The Administration asked Congress to enact remedial legislation and, on March 5, 2012, requested that the CAFC rehear the GPX case. Congress responded quickly, enacting P.L. 112-99, signed March 13, 2012, which generally authorizes CVDs for NME goods, makes this authority effective as of November 20, 2006, and prospectively amends AD law to address double counting issues. DOC is preparing WTO-compliant determinations in China’s WTO case and has stated that implementation of the new law will be a factor in this compliance effort. The United States did not fully comply by the April 25 deadline in the case, however, and has agreed to facilitate any WTO compliance review requested by China. On May 9, 2012, the CAFC remanded the GPX case to the lower court to address constitutional issues stemming from the different effective dates in the new law.
Date of Report: May 23, 2012
Number of Pages: 36
Order Number: RL33976
Price: $29.95
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Document available via e-mail as a pdf file or in paper form.
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Legislative Attorney
Two major U.S. trade remedies are antidumping (AD) law, which combats the sale of imported products at less than their fair market value, and countervailing duty (CVD) law, which aims to offset foreign government subsidization of imported goods. If dumped or subsidized imports are found to cause or threaten material injury to a domestic industry, antidumping or countervailing duties will be imposed. Both remedies are available when goods are imported from competitor countries with free market policies. As of 1984, however, only AD law had been applied to goods from nonmarket or “transitional” economies (NMEs). With the continued economic growth of some of these economies, such as China and Vietnam, pressure increased on the U.S. government to use both trade remedies more aggressively against unfair imports from these countries.
AD law has been amended several times since its inception in 1921. With Congress’s continued statutory guidance, the Department of Commerce (DOC) has implemented several different methodologies for applying AD law, including using surrogate country data when the fair market value of a product in the originating country is not readily ascertainable. CVD law had not been used against NMEs, however, since DOC concluded in 1984 that it could not determine subsidization in such situations. In 1986, the U.S. Court of Appeals for the Federal Circuit (CAFC), in Georgetown Steel Corp. v. United States, upheld DOC’s interpretation of the CVD statute as reasonable. While DOC had generally refused to review CVD petitions against NME countries following this determination, it accepted a petition seeking a CVD on imports of coated free-sheet paper from China in 2006. DOC distinguished the current Chinese economy from the Soviet-style economies at issue in Georgetown Steel and found that the imported Chinese paper was subsidized. Although the U.S. International Trade Commission did not make the requisite final affirmative material injury determination in this case, subsequent CVD petitions were successful, resulting in the imposition of 24 CVD orders on NME merchandise.
World Trade Organization (WTO) agreements, together with the WTO Accession Protocols of China and Vietnam, acknowledge that AD and CV duties may be imposed on these countries’ goods, and that surrogate country data may be used to calculate dumping margins or subsidization. In a WTO case brought by China, however, the WTO Appellate Body found in an April 2011 report that the simultaneous imposition by the United States of AD and CV duties on the same Chinese merchandise, where surrogate country data was used to establish the fair market value of the goods in the AD case, remedied the same subsidization twice or “double counted” in violation of U.S. WTO obligations. More broadly, the CAFC held in December 2011 that CVDs may not be imposed on NME goods under any circumstance, finding in GPX Int’l Tire Corp. v. United States that Congress had legislatively ratified DOC’s 1984 statutory interpretation and thus DOC could not interpret the statute to permit such duties. The CAFC affirmed a lower court decision that also prohibited DOC from imposing CVDs on NME goods, but did so because DOC had not eliminated double counting, the practice at issue in the WTO dispute. The Administration asked Congress to enact remedial legislation and, on March 5, 2012, requested that the CAFC rehear the GPX case. Congress responded quickly, enacting P.L. 112-99, signed March 13, 2012, which generally authorizes CVDs for NME goods, makes this authority effective as of November 20, 2006, and prospectively amends AD law to address double counting issues. DOC is preparing WTO-compliant determinations in China’s WTO case and has stated that implementation of the new law will be a factor in this compliance effort. The United States did not fully comply by the April 25 deadline in the case, however, and has agreed to facilitate any WTO compliance review requested by China. On May 9, 2012, the CAFC remanded the GPX case to the lower court to address constitutional issues stemming from the different effective dates in the new law.
Date of Report: May 23, 2012
Number of Pages: 36
Order Number: RL33976
Price: $29.95
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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.
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 $503 billion in 2011. China is currently the United States’ second-largest trading partner, its third-largest export market, and its biggest source of imports. Because U.S. imports from China have risen much more rapidly than U.S. exports to China, the U.S. merchandise trade deficit has grown from $10 billion in 1990 to $296 billion in 2011. The rapid pace of economic integration between China and the United States, while benefiting both sides overall, has made the trade relationship increasingly complex. China’s large population and booming economy have made it a large and growing market for U.S. exporters and investors. According to one estimate, China is currently a $200 billion market for U.S. firms. 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’s purchases of U.S. Treasury securities (which total nearly $1.2 trillion) help keep U.S. interest rates relatively low. On the other hand, many analysts argue that growing commercial ties with China have exposed many U.S. firms to greater competition from low-cost Chinese firms, which they contend has negatively affected wages and employment in a number of U.S. industries.
However, China’s incomplete transition to a free market economy and its use of distortive economic policies have increasingly strained commercial relations with the United States. Major concerns raised 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 on protecting intellectual property rights (IPR), 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). Many analysts 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 Members of Congress advocate a more aggressive 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). They note, for example, that under talks held under these forums, China agreed to eliminate discriminatory government procurement practices linked to the development of “indigenous innovation.” 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 exporting for its economic growth.
This report provides an overview of U.S.-China trade ties and major issues.
Date of Report: May 21, 2012
Number of Pages: 51
Order Number: RL33536
Price: $29.95
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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.
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 $503 billion in 2011. China is currently the United States’ second-largest trading partner, its third-largest export market, and its biggest source of imports. Because U.S. imports from China have risen much more rapidly than U.S. exports to China, the U.S. merchandise trade deficit has grown from $10 billion in 1990 to $296 billion in 2011. The rapid pace of economic integration between China and the United States, while benefiting both sides overall, has made the trade relationship increasingly complex. China’s large population and booming economy have made it a large and growing market for U.S. exporters and investors. According to one estimate, China is currently a $200 billion market for U.S. firms. 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’s purchases of U.S. Treasury securities (which total nearly $1.2 trillion) help keep U.S. interest rates relatively low. On the other hand, many analysts argue that growing commercial ties with China have exposed many U.S. firms to greater competition from low-cost Chinese firms, which they contend has negatively affected wages and employment in a number of U.S. industries.
However, China’s incomplete transition to a free market economy and its use of distortive economic policies have increasingly strained commercial relations with the United States. Major concerns raised 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 on protecting intellectual property rights (IPR), 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). Many analysts 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 Members of Congress advocate a more aggressive 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). They note, for example, that under talks held under these forums, China agreed to eliminate discriminatory government procurement practices linked to the development of “indigenous innovation.” 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 exporting for its economic growth.
This report provides an overview of U.S.-China trade ties and major issues.
Date of Report: May 21, 2012
Number of Pages: 51
Order Number: RL33536
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.
Wednesday, June 6, 2012
Trade Reorganization: Overview and Issues for Congress
Shayerah Ilias
Analyst in International Trade and Finance
On January 13, 2012, President Obama asked Congress for authority to reorganize and consolidate into one department the business- and trade-related functions of six federal entities: Department of Commerce; Export-Import Bank (Ex-Im Bank); Overseas Private Investment Corporation (OPIC); Small Business Administration (SBA); Trade and Development Agency (TDA); and Office of the United States Trade Representative (USTR). U.S. policymakers’ interest in the organizational structure of U.S. government trade functions has grown in recent years, stimulated by congressional and federal efforts to promote U.S. exports and employment, including through the National Export Initiative (NEI). Interest also has been stimulated by national debates on reducing federal spending and the size of the U.S. government.
Reorganization has been a recurring theme in U.S. trade policy. Over the past several decades, Congress, successive Administrations, and other stakeholders have crafted and debated proposals to reorganize the trade functions and structure of the federal government in order to enhance the effectiveness of U.S. trade policy and promotion efforts; improve U.S. trade policy coordination; avoid duplication of functions and activities; boost the international competitiveness of U.S. industries; and for other reasons. Previous proposals have called for a range of actions, including consolidation of all U.S. export- or trade-related programs under one federal agency (such as a “Department of Trade”) to provide a “one-stop-shop” for the trade community; termination or transfer of functions of departments and agencies considered to be duplicative or unnecessary to U.S. trade policy priorities; and strengthening coordination of federal trade-related agencies, such as through the Trade Promotion Coordinating Committee (TPCC).
A central question in public policy debates about the U.S. trade policy structure is whether reorganization would enhance the effectiveness of U.S. trade policy or merely result in bureaucratic reshuffling. On one hand, proponents of reorganization proposals believe that they may eliminate duplication of federal trade functions, provide a more streamlined organizational structure for U.S. trade-related activities and policy based on more clearly defined goals and priorities, and reduce overall government costs. They argue that federal trade policy efforts could be enhanced through a more centralized government body. On the other hand, critics contend that such proposals could result in the creation of a large, costly federal bureaucracy, possibly making certain trade functions and agencies less effective if they are subsumed in a larger bureaucracy. They also assert that the diffusion of trade functions across the federal government helps to advance various aspects of U.S. trade policy, and express concern that a “one-stop” federal source may not be responsive to the unique needs of certain types of exporters. Furthermore, some contend that, while changes to U.S. trade policy—and by extension the policymaking structure— may benefit individual U.S. businesses and workers in the short-run, they have little influence in the long-run on U.S. export and employment levels and trade balances, which relate more closely to macroeconomic factors.
Congress would play a significant role in a trade reorganization debate through its legislative and oversight responsibilities; it could engage in consultations with the Administration, hold hearings, grant reorganizational authority to the President, and/or introduce and enact trade reorganization legislation separate from the President’s plan. In addition to considering possible reorganizational authority for the executive branch, Congress could consider policy alternatives such as to maintain the current trade organizational structure, privatize or terminate certain trade functions, strengthen or revise existing coordination of trade functions, or create a trade reorganization commission to examine the issue further.
Date of Report: May 31, 2012
Number of Pages: 32
Order Number: R42555
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.
Analyst in International Trade and Finance
On January 13, 2012, President Obama asked Congress for authority to reorganize and consolidate into one department the business- and trade-related functions of six federal entities: Department of Commerce; Export-Import Bank (Ex-Im Bank); Overseas Private Investment Corporation (OPIC); Small Business Administration (SBA); Trade and Development Agency (TDA); and Office of the United States Trade Representative (USTR). U.S. policymakers’ interest in the organizational structure of U.S. government trade functions has grown in recent years, stimulated by congressional and federal efforts to promote U.S. exports and employment, including through the National Export Initiative (NEI). Interest also has been stimulated by national debates on reducing federal spending and the size of the U.S. government.
Reorganization has been a recurring theme in U.S. trade policy. Over the past several decades, Congress, successive Administrations, and other stakeholders have crafted and debated proposals to reorganize the trade functions and structure of the federal government in order to enhance the effectiveness of U.S. trade policy and promotion efforts; improve U.S. trade policy coordination; avoid duplication of functions and activities; boost the international competitiveness of U.S. industries; and for other reasons. Previous proposals have called for a range of actions, including consolidation of all U.S. export- or trade-related programs under one federal agency (such as a “Department of Trade”) to provide a “one-stop-shop” for the trade community; termination or transfer of functions of departments and agencies considered to be duplicative or unnecessary to U.S. trade policy priorities; and strengthening coordination of federal trade-related agencies, such as through the Trade Promotion Coordinating Committee (TPCC).
A central question in public policy debates about the U.S. trade policy structure is whether reorganization would enhance the effectiveness of U.S. trade policy or merely result in bureaucratic reshuffling. On one hand, proponents of reorganization proposals believe that they may eliminate duplication of federal trade functions, provide a more streamlined organizational structure for U.S. trade-related activities and policy based on more clearly defined goals and priorities, and reduce overall government costs. They argue that federal trade policy efforts could be enhanced through a more centralized government body. On the other hand, critics contend that such proposals could result in the creation of a large, costly federal bureaucracy, possibly making certain trade functions and agencies less effective if they are subsumed in a larger bureaucracy. They also assert that the diffusion of trade functions across the federal government helps to advance various aspects of U.S. trade policy, and express concern that a “one-stop” federal source may not be responsive to the unique needs of certain types of exporters. Furthermore, some contend that, while changes to U.S. trade policy—and by extension the policymaking structure— may benefit individual U.S. businesses and workers in the short-run, they have little influence in the long-run on U.S. export and employment levels and trade balances, which relate more closely to macroeconomic factors.
Congress would play a significant role in a trade reorganization debate through its legislative and oversight responsibilities; it could engage in consultations with the Administration, hold hearings, grant reorganizational authority to the President, and/or introduce and enact trade reorganization legislation separate from the President’s plan. In addition to considering possible reorganizational authority for the executive branch, Congress could consider policy alternatives such as to maintain the current trade organizational structure, privatize or terminate certain trade functions, strengthen or revise existing coordination of trade functions, or create a trade reorganization commission to examine the issue further.
Date of Report: May 31, 2012
Number of Pages: 32
Order Number: R42555
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.
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