The U.S. Export Control System and the President’s Reform Initiative

Ian F. Fergusson
Specialist in International Trade and Finance

Paul K. Kerr
Analyst in Nonproliferation

The 112th Congress may consider reforms of the U.S. export control system. The balance between
national security and export competitiveness has made the subject of export controls controversial
for decades. Through the Export Administration Act (EAA), the Arms Export Control Act
(AECA), the International Emergency Economic Powers Act (IEEPA), and other authorities, the
United States restricts the export of defense items or munitions; so-called “dual-use” goods and
technology—items with both civilian and military applications; certain nuclear materials and
technology; and items that would assist in the proliferation of nuclear, chemical, and biological
weapons or the missile technology used to deliver them. U.S. export controls are also used to
restrict exports to certain countries on which the United States imposes economic sanctions. At
present, the EAA has expired and dual-use controls are maintained under IEEPA authorities.

The U.S. export control system is diffused among several different licensing and enforcement
agencies. Exports of dual-use goods and technologies are licensed by the Department of
Commerce, munitions are licensed by the Department of State, and restrictions on exports based
on U.S. sanctions are administered by the U.S. Treasury. Enforcement of export controls is
conducted by these agencies as well as by units of the Department of Homeland Security (DHS)
and the Department of Justice (DOJ).

Aspects of the U.S. export control system have long been criticized by exporters, nonproliferation
advocates, and other stakeholders as being too rigorous, insufficiently rigorous,
cumbersome, obsolete, inefficient, or any combination of these descriptions. In August 2009, the
Obama Administration launched a comprehensive review of the U.S. export control system. In
April 2010, Defense Secretary Robert M. Gates proposed an outline of a new system based on
four singularities:

·         a single export control licensing agency for both dual-use and munitions exports,

·         a unified control list,

·         a single enforcement coordination agency, and

·         a single integrated information technology (IT) system.

The creation of a single control list has been the Administration’s focus to date. Interim steps
have also been taken to create a single IT system and to establish an export enforcement
coordination center. No specific proposals have been made concerning the single licensing
agency.

In contrast to the Administration’s approach, legislation has been introduced to reauthorize or
rewrite the EAA in the 112th Congress. The Export Administration Renewal Act of 2011 (H.R.
2122, Ros-Lehtinen) would renew the currently expired Export Administration Act through 2015,
update its penalty and enforcement provisions, and provide stricter foreign policy controls on
countries designated as state sponsors of terrorism. A separate title would amend the Arms Export
Control Act to permit generic parts and components for defense articles to be controlled
differently than sensitive defense articles on the U.S. Munitions List. By contrast, the Technology
Security Act of 2011 (H.R. 2004, Berman) would rewrite the dual-use export control statute by
giving the President the authority to control exports for national security and foreign policy
reasons and to create the mechanisms for doing so. Each bill would, if passed, have implications
for the President’s reform efforts.


Date of Report: February 16, 2012
Number of Pages: 32
Order Number: R41916
Price: $29.95

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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: February 14, 2012
Number of Pages: 22
Order Number: RL32649
Price: $29.95

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Globalization, Worker Insecurity, and Policy Approaches

Raymond J. Ahearn
Specialist in International Trade and Finance

Today’s global economy, or what many call globalization, has a growing impact on the economic futures of American companies, workers, and families. Increasing integration with the world economy makes the U.S. and other economies more productive. For most Americans, this has translated into absolute increases in living standards and real disposable incomes. However, while the U.S. economy as a whole benefits from globalization, it is not always a win-win situation for all Americans. Rising trade with low-wage developing countries not only increases concerns of job loss, but it also leads U.S. workers to fear that employers will lower their wages and benefits in order to compete. Globalization facilitated by the information technology revolution expands international trade in a wider range of services, but also subjects an increasing number of U.S. white collar jobs to outsourcing and international competition. Also, globalization may benefit some groups more than others, leading some to wonder whether the global economy is structured to help the few or the many.

The current wave of globalization is supported by three broad trends. The first is technology, which has sharply reduced the cost of communication and transportation that previously divided markets. The second is a dramatic increase in the world supply of labor engaged in international trade. The third is government policies that have reduced barriers to trade and investment. Whether these trends are creating new vulnerabilities for workers is the subject of increasing research and debate.

Some of the vulnerabilities for workers are underlined by changing employment patterns caused by increased foreign competition, weak wage growth, and rising income inequality. These trends, in turn, have become a source of economic insecurity for many Americans and may be weakening public support for U.S. engagement with the world economy.

To bolster public support for an open world economy, the conventional wisdom is that the legitimate concerns of those who are losing in the contemporary economic environment need to be addressed. To what extent the losers should be compensated and how is a matter of considerable congressional and public debate. Because the relationship between globalization and worker insecurity is complicated and uncertain, a number of different approaches may be considered if the goal is to bolster public support for U.S. trade policies, globalization, and an open world economy. Policies involving adjustment assistance, education, tax, and trade are most commonly proposed.

There appears to be a range of views on the merits of each of these policy approaches and the extent to which they can be designed and implemented in a way that would reduce worker insecurity without undermining the benefits of globalization. In the view of many economists, policies that inhibit the dynamism of labor and capital markets or erect barriers to international trade and investment would not be helpful because technology and trade are critical sources of overall economic growth and increase U.S. living standards. At the same time, identifying the most effective policy approach is made difficult by the variety of factors – trade with developing countries, increases in foreign investment flows, trade and financial liberalization, immigration, and skill-based technological change – that may be generating job and income trends that are increasing worker insecurity.


Date of Report: February 17, 2012
Number of Pages: 16
Order Number: RL34091
Price: $29.95

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Multilateral Development Banks: U.S. Contributions FY2000-FY2013

Rebecca M. Nelson
Analyst in International Trade and Finance

This report shows in tabular form how much the Administration requested and how much Congress appropriated for U.S. payments to the multilateral development banks (MDBs) since 2000. It also provides a brief description of the MDBs and the ways they fund their operations. It will be updated periodically as annual appropriation figures are known. The title of this report will also change annually, as new yearly appropriation figures are added.

For FY2013, the Administration has requested funds for several of the non-concessional lending facilities at the MDBs. Several of the MDBs are in the process of increasing the size of their nonconcessional lending facilities, a process frequently called a “general capital increase” (GCI). GCIs are relatively unusual, particularly for so many institutions at the same time. Contributions to the GCIs are expected to be spread out over a five- to eight-year period, depending on the institution. For most of the institutions, the funds appropriated in FY2012 were the first annual payment. The Administration’s budget request for FY2013 includes the next annual installments for the GCIs. In FY2013, the Administration has also requested funds for several MDB concessional lending facilities and more targeted MDB funds, such as those dedicated to environmental issues.

For further information about the MDBs, the GCIs, and relevant U.S. policy process, 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 R41537, Multilateral Development Banks: How the United States Makes and Implements Policy, by Rebecca M. Nelson and Martin A. Weiss.

Date of Report: February 14, 2012
Number of Pages: 12
Order Number: RS20792
Price: $29.95

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