James K. Jackson
Specialist in International Trade and Finance
The Organization for Economic Cooperation and Development (OECD) celebrated its
50th anniversary in 2011, a time when the global economy was struggling to
recover from the financial crisis and slow economic growth. The OECD is an
intergovernmental economic organization in which the 34 member countries
discuss and develop key policy recommendations that often serve as the
basis for international standards and practices. In addition, the OECD members
analyze economic and social policy and share expertise and exchanges with
more than 70 developing and emerging economies. The 34 member countries
include Australia, Austria, Belgium, Canada, Chile, the Czech Republic,
Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland,
Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, The Netherlands,
New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain,
Sweden, Switzerland, Turkey, United Kingdom, and the United States. While
all of the member countries are considered to be economically advanced and
collectively produce 60% of the world’s goods and services, membership is
limited only by a country’s commitment to a market economy and a
pluralistic democracy. The OECD also has extended an invitation to the
Russian Federation for membership, which includes meeting rigorous best
practices relative to anti-bribery and anti-corruption standards. Furthermore,
the OECD works with other potential partners such as Brazil, China, India,
Indonesia, and South Africa with a view toward possible membership.
The member countries rely on the OECD Secretariat in Paris to collect data;
monitor trends; analyze and forecast economic developments; and research
social changes and patterns in trade, environment, agriculture, society,
innovation, corporate and public governance, taxation, sustainable
development, and other areas to inform their discussions and to assist them
in pursuing their efforts to develop common policies and practices. Following
the financial crisis, the OECD played a major role in providing
cross-country analyses of market reforms and programs to stimulate growth.
The United States has sparred periodically with other OECD member countries
over various issues, including U.S. antidumping laws and the size of the
U.S. financial contribution. Karen Kornbluh was appointed in 2009 by
President Obama to serve as the U.S. Ambassador to the OECD. She stepped
down as Ambassador and Daniel W. Yohannes was nominated to serve as the
next U.S. Ambassador to the OECD. Key issues for Congress include OECD
work on coordinating national approaches to curtailing bribery and the illicit
use of tax havens. Congress appropriated about $82.2 million to the OECD
in FY2013; the budget request for FY2014 was $83.2 million.
Date of Report: September 24, 2013
Number of Pages: 16
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Rebecca M. Nelson
Analyst in International Trade and Finance
Exchange rates are important in the international economy, because they affect
the price of every country’s imports and exports, as well as the value of
every overseas investment. Following the global financial crisis of
2008-2009 and ensuing economic recession, disagreements among countries
over exchange rates have become more widespread. Some policy leaders and
analysts contend that there is a “currency war” now underway among certain
countries.
At the heart of current disagreements is whether or not countries are using
exchange rate policies to undermine free markets and intentionally push
down the value of their currency in order to gain a trade advantage at the
expense of other countries. A weak currency makes exports cheaper to
foreigners, which can lead to higher exports and job creation in the export
sector. However, if one country weakens its currency, there can be
implications for other countries. In general, exporters and firms
producing import-sensitive goods may find it harder to compete against countries
with weak currencies. However, consumers and businesses that rely on inputs
from abroad may benefit when other countries have weak currencies, because
imports may become cheaper.
The United States has found itself on both sides of the current debates over
exchange rates. On one hand, some Members of Congress and U.S. policy
experts argue that U.S. exports and U.S. jobs have been adversely affected
by the exchange rate policies adopted by China, Japan, and a number of
other countries. On the other hand, some emerging markets, including Brazil
and Russia, have argued that expansionary monetary policies in the United
States and other developed countries caused the currencies of developed
countries to depreciate, hurting the competitiveness of emerging markets.
More recently, however, emerging-market currencies have started
to depreciate, and now there are concerns about emerging-market currencies
becoming too weak relative to the currencies of some developed
economies.
Through the International Monetary Fund (IMF), countries have committed to
avoid “currency manipulation.” There are also provisions in U.S. law to
address “currency manipulation” by other countries. In the context of
recent disagreements, neither the IMF nor the U.S. Treasury Department has
determined any country to be manipulating its exchange rate. There are
differing views on why. Some argue that countries have not engaged in
policies that violate international commitments on exchange rates or
triggered provisions in U.S. law relating to currency manipulation. Others
argue that currency manipulation has occurred, but that estimating
a currency’s “true” or “fundamental” value is complicated, and that the
current international financial architecture is not effective at responding
to exchange rate disputes.
Policy Options for Congress
Some Members of Congress may consider addressing exchange rate issues because
they are concerned about the impact of other countries’ exchange rate
policies on the competitiveness of U.S. products. Recently, concerns have
been raised about the impact of Japan’s economic policies on the value of
the yen, and the implications for the U.S. economy. However, there are a
number of potential consequences from taking action on exchange rates that
Congress might also want to consider. For example, U.S. imports from
countries with weak currencies may be less expensive than they would be
otherwise; countries may retaliate after being labeled a
currency “manipulator”; and tensions over exchange rates could dissipate
as the global economy strengthens.
If Members did decide to take action, they have a number of options for doing
so. Options could include urging the Administration to address currency
disputes at the IMF and in trade agreements, or passing legislation relating
to countries determined to have undervalued exchange rates, among others.
Two bills have been introduced in the 113th Congress related to exchange rate policies in other countries (H.R.
1276; S. 1114). Representative Levin has also released a proposal for
addressing currency issues in the Trans-Pacific Partnership, a proposed free
trade agreement that the United States is negotiating with Japan and 10
other Asia-Pacific countries.
Date of Report: September 26, 2013
Number of Pages: 32
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Ian F. Fergusson
Specialist in International Trade and Finance
Paul K. Kerr
Analyst in Nonproliferation
The 113th 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—as
well as some military items, 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. Administrative
enforcement of export controls is conducted by these agencies, while criminal enforcement
is carried out by the Department of Commerce, units of the Department of Homeland
Security (DHS) and by the Department of Justice (DOJ).
Aspects of the U.S. export control system have long been criticized by
exporters, nonproliferation advocates, allies, 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 dual-use, munitions exports, and Treasury-administered
embargoes.
• a unified control list,
• a single primary enforcement coordination agency, and
• a single integrated information technology (IT) system.
The rationalization of the two control lists 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,
although elements of a future single system such as the consolidated screening
list and harmonization of certain licensing policies have been achieved.
In contrast to the Administration’s approach, legislation was introduced to
reauthorize or rewrite the EAA in the 112th Congress. The Export
Administration Renewal Act of 2011 (H.R. 2122, Ros- Lehtinen) would have
renewed the currently expired Export Administration Act through 2015, updated
its penalty and enforcement provisions, and provided stricter foreign policy
controls on countries designated as state sponsors of terrorism. A
separate title would have amended 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 S statute by giving the
President the authority to control exports for national security and foreign policy
reasons, require the current system to address homeland security concerns, and
to create the mechanisms for doing so. Each bill would, if passed, have
implications for the President’s reform efforts. In addition, the National
Defense Authorization Act for FY2013 (P.L. 112-239), signed by the
President on January 2, 2013, contains a provision to repeal 1998 legislation
that placed commercial communications satellites (CCS) under munitions
export licensing jurisdiction and to permit the President to determine the
export control jurisdiction of CCS.
In considering the future of the U.S. export control system, Congress may weigh
the merits of a unified export control system—the end result of the
President’s proposal—or the continuation of the present bifurcated system
by reauthorizing the present EAA or writing new legislation. In doing so,
Congress may debate the record of the present dual-use system maintained by emergency
authority, the aims and effectiveness of the present non-proliferation control
regimes, the maintenance of the defense industrial base, and the delicate
balance between the maintenance of economic competitiveness and the
preservation of national security. ecurity Act of
2011 (H.R. 2004, Berman) would have rewritten the dual-use export control
Date of Report: September 20, 2013
Number of Pages: 37
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