Mary Jane Bolle
Specialist in International Trade and Finance
Since 1993, the Administration has negotiated and Congress has approved 10 Free Trade Agreements (FTAs) that contain labor provisions with different degrees of enforceability. Three more (with Colombia, Panama, and South Korea) await congressional consideration. This report identifies two types of labor enforcement issues: (1) those that relate to the FTA provisions themselves, including their definitions and their enforceability, and (2) those that relate to executive branch responsibilities, such as resource availability and determining dispute settlement case priorities.
Date of Report: January 7, 2011
Number of Pages: 9
Order Number: RS22823
Price: $19.95
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Dick K. Nanto
Specialist in Industry and Trade
J. Michael Donnelly
Information Research Specialist
The global financial crisis caused the U.S. trade deficit to decrease from August 2008 through May 2009, but since then it has begun to increase again. The financial crisis caused U.S. imports to drop faster than U.S. exports. The global simultaneous recession, however, implies that exporting countries cannot rely on increased foreign demand to make up for slack demand at home. Even though U.S. imports have been down considerably from the first half of 2008, companies competing with imports still face diminishing demand, as the domestic economy has been slow to recover from the recession. These conditions imply that the political forces to protect domestic industry from imports are likely to intensify both in the United States and abroad.
In 2009, the trade deficit in goods reached $506.9 billion on a balance of payments (BoP) basis, less than the $834.7 billion in 2008 and $823.2 billion in 2007. The 2009 deficit on merchandise trade with China was $227 billion (Census basis), with the European Union was $61.1 billion, with Canada was $21.6 billion, with Japan was $44.7 billion, with Mexico was $47.8 billion, and with the Asian Newly Industrialized Countries (Hong Kong, South Korea, Singapore, and Taiwan) moved from a deficit of $5.5 billion in 2007 to a surplus of $2.2 billion in 2008 and a surplus again in 2009 of $3.5 billion. Imports of goods of $1,575.4 billion decreased by $564.1 billion, 26.4% over 2008. Exports of goods of $1,068.5 billion fell by $236.4 billion, 18.1%. The overall merchandise trade deficit for 2009 improved, or decreased in size, by $327.7 billion, or roughly 39%. In the fourth quarter of 2008, as the U.S. recession worsened, imports declined faster than exports, resulting in monthly trade deficits declining from August 2008 through May 2009. In 2009 goods imports reached their lowest recent level in May, at $120.7 billion but generally have been rising since then, reaching $163.7 billion in October 2010. In 2009 goods exports fluctuated near $84 billion through May, when they began to increase at about $2 billion monthly, reaching $112.3 billion in October 2010.
Trade deficits are a concern for Congress because they may generate trade friction and pressures for the government to do more to open foreign markets, to shield U.S. producers from foreign competition, or to assist U.S. industries to become more competitive. Overall U.S. trade deficits reflect excess spending (a shortage of savings) in the domestic economy and a reliance on capital imports to finance that shortfall. Capital inflows serve to offset the outflow of dollars used to pay for imports. Movements in the exchange rate help to balance trade. The rising trade deficit (when not matched by capital inflows) places downward pressure on the value of the dollar, which, in turn, helps to shrink the deficit by making U.S. exports cheaper and imports more expensive. Central banks in countries such as China, however, have intervened in foreign exchange markets to keep the value of their currencies from rising too fast. Bills in the 111th Congress relating to trade include H.R. 3012/S. 2821, H.R. 496/S. 1466, H.R. 1875, S. 3103, S. 3134, S. 1254, S. 1027, H.R. 2378, H.Res. 934, H.Res. 987, and H.Res. 1124. On September 29, 2010, the House passed H.R. 2378, and referred it to the Senate.
The balance on current account includes merchandise trade plus trade in services and unilateral transfers. In 2009, the deficit on current account fell to $378.4 billion from $668.9 billion in 2008 and $718.1 billion in 2007. IHS Global Insight forecasts a higher deficit on current account for 2010, at $552.2 billion, and 2011, at $625.9 billion. In trade in advanced technology products, the U.S. balance improved from a deficit of $61 billion in 2008 to $56 billion in 2009. In trade in motor vehicles and parts, the $73.4 billion U.S. deficit in 2009 was mainly with Japan, Mexico, and Germany.
Date of Report: December 17, 2010
Number of Pages: 41
Order Number: RL33577
Price: $29.95
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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 $2 billion in 1979 to an estimated $459 billion in 2010. China is currently the second-largest U.S. 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 surged, rising from $10 billion in 1990 to an estimated $273 billion in 2010.
The rapid pace of economic integration between China and the United States, while benefiting both sides overall, has made the trade relationship increasingly complex. On the one hand, China’s large population and booming economy have made it a large and growing market for U.S. exporters. Over the past decade, China has been the fastest-growing market for U.S. exports. U.S. imports of low-cost goods from China greatly benefit U.S. consumers by increasing their purchasing power. 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 stood at $907 billion in October 2010) help keep U.S. interest rates relatively low. On the other hand, many analysts argue that growing economic ties with China has exposed U.S. manufacturing firms to greater and what is often perceived to be, “unfair” competition from low-cost Chinese firms. They argue that this has induced many U.S. production facilities to re-locate to China, resulting in the loss of thousands of U.S. manufacturing jobs. Some policymakers have also raised concerns that China’s large holdings of U.S. government debt (which stood at $907 billion as of October 2010) may give China leverage over the United States.
China’s incomplete transition to a free market economy and its use of distortive economic policies have contributed to growing trade friction with the United States over a number of issues, including China’s refusal to allow its currency to appreciate to market levels, 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 and discriminatory government procurement policies to subsidize and protect domestic Chinese firms at the expense of foreign companies. The United States initiated three WTO trade dispute resolution against China in 2010, dealing with such issues as China’s use of subsidies to promote its wind power industries, its use of trade remedy laws to protect domestic industries, and restrictions on electronic payment services. Some members have argued that, given the slow rate of U.S. economic growth and the high rate of unemployment, China’s distortive trade policies can no longer be tolerated and have called for tougher action to be taken against China to induce it to eliminate policies that hurt U.S. economic interests. These trade frictions may intensify in the future as China attempts to implement policies to increase the output of more advanced products.
Numerous bills were introduced in the 111th Congress to address various Chinese economic and trade policies. For example, one bill, which passed the House (but was not taken up by the Senate), would have made certain fundamentally undervalued currencies (such as China’s) actionable under U.S. countervailing duty laws (which address government export subsidies). U.S.-China commercial issues may continue to be a major focus in the 112th Congress. This report provides an overview of U.S.-China trade relations. It describes the trends in commercial ties, indentifies major trade disputes, and surveys legislation that would affect economic relations.
Date of Report: December 27, 2010
Number of Pages: 36
Order Number: RL33536
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Raymond J. Ahearn, Coordinator
Specialist in International Trade and Finance
The 112th Congress faces a full agenda of international trade and finance issues. Early in 2011, the Obama Administration is expected to ask Congress to approve a free trade agreement (FTA) with South Korea and possibly FTAs with Colombia and Panama. The Administration is seeking to conclude the much larger ten year-old World Trade Organization’s (WTO) Doha Round of multilateral trade negotiations, which, if completed, would also require congressional approval. The Administration is also negotiating a Trans-Pacific Partnership (TPP) Agreement, a regional FTA that currently includes nine countries on both sides of the Pacific.
A U.S.-South Korea Free Trade Agreement (KORUS FTA) was first negotiated by President George W. Bush’s Administration and signed on June 30, 2007. The Obama Administration did not submit it for approval in the 111th Congress due to opposition from U.S. automakers and beef producers. In early December 2010, U.S. trade negotiators won further concessions on autos from the South Korean government, which may allow President Obama to decide to submit the agreement to Congress in 2011. Any vote on this proposed agreement would take place under Trade Promotion Authority (TPA), which allows implementing bills for trade agreements to be considered under expedited legislative procedures—limited debate, no amendments, and an up or down vote. While the proposed KORUS FTA is covered by TPA, which expired on July 1, 2007, many experts argue that TPA would have to be renewed if the United States is to be a credible negotiator at the WTO Doha Round and the TPP discussions.
Any trade debate in the 112th Congress will likely revolve around the perceived effects of trade and FTAs on U.S. stakeholders. Proponents are likely to argue that the FTAs will improve access to foreign markets, increase trade, and create jobs. Critics are likely to assert that the agreements favor corporations over workers, and place downward pressure on wages and labor standards.
In addition to trade agreements and negotiations, U.S. export and import policies will play an important role on the congressional trade agenda. On the export side, the 112th Congress may consider the effectiveness of promoting exports through President Obama’s National Export Initiative (NEI), a strategy for doubling U.S. exports by 2015, to help generate new jobs. At the same time, Congress may choose to continue its efforts to review the Administration’s proposal to revamp the U.S. export control system that is intended to keep sensitive security-related items from being sold to selective countries. On the import side, Congress may conduct oversight and/ or consider legislation on a number of issues dealing with trade remedies, trade preferences, border security and trade facilitation, and miscellaneous tariffs.
As in the 111th Congress, many bills are expected to be introduced in the 112th Congress to address concerns over China’s economic policies and boost U.S. exports to China. Legislation encouraging the Administration to take stronger action against China’s alleged currency misalignment passed the House by a large bipartisan margin (348-79), but was not acted on in the Senate. These bills and others may be reintroduced in 2011.
On the finance side, requests to increase contributions to the International Monetary Fund (IMF) and several multilateral development banks, including the World Bank, are likely to enter into discussions of the 112th Congress. Congress may also monitor Europe’s sovereign debt crisis, particularly the budget support the IMF is providing and the related $173 billion exposure of U.S. banks to four heavily indebted European countries—Greece, Ireland, Portugal, and Spain.
Date of Report: December 30, 2010
Number of Pages: 27
Order Number: R41553
Price: $29.95
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William H. Cooper
Specialist in International Trade and Finance
The change in Russia’s trade status will require legislation to lift the restrictions currently applied to Russia under Title IV of the Trade Act of 1974, which includes the “freedom-of-emigration” requirements of the Jackson-Vanik amendment. The process for Russia’s accession to the World Trade Organization (WTO) is proceeding and may be completed soon. As a result, members may confront the issue of whether to grant Russia permanent normal trade relations (PNTR) status during the 112th Congress.
Date of Report: December 22, 2010
Number of Pages: 9
Order Number: RS21123
Price: $19.95
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