Archive
CRS — Trade Preferences: Economic Issues and Policy Options
Trade Preferences: Economic Issues and Policy Options (PDF)
Source: Congressional Research Service (via OpenCRS)
Since 1974, Congress has created multiple trade preference programs designed to foster economic growth, reform, and development in less developed countries. These programs give temporary, non-reciprocal, duty-free U.S. market access to select exports of eligible countries. Congress has repeatedly revised and extended these programs. The 112th Congress passed extensions to three trade preference programs: (1) the Generalized System of Preferences (GSP) which expired on December 31, 2010 and was renewed retroactively from that date to July 31, 2013 (P.L. 112-40); (2) the Andean Trade Preference Act (ATPA) for Colombia and Ecuador until July 31, 2013 (P.L. 112-42); and (3) a “third-country fabric” provision in the African Growth and Opportunity Act (AGOA) until September 30, 2015 (P.L. 112-163). Since the GSP and ATPA programs were only extended until the end of July 2013, Congress may consider further renewal of these programs in the first session of the 113th Congress, along with possible trade preference reform options. Three bills in the 112th Congress, S. 105, S. 1244, and H.R. 2387, propose a new trade preference program that would provide duty-free and reduced tariff treatment for certain apparel from the Philippines. Other bills in the 112th Congress proposing preference programs include S. 1443, which would provide trade preferences for selected Asian and South Pacific countries.
Congress established five trade preference programs. The GSP applies to all developing countries worldwide. In addition, there are four regional programs including the ATPA; the Caribbean Basin Economic Recovery Act (CBERA); the Caribbean Trade Partnership Act (CBTPA); the African Growth and Opportunity Act (AGOA); and the Haitian Opportunity through Partnership Encouragement (HOPE) Act. In the second session of the 111th Congress, legislation was enacted to extend provisions in the CBPTA and HOPE Act through September 30, 2020, in the Haiti Economic Lift Program Act of 2010 (P.L. 111-171).
Unlike free trade agreements, trade preferences are non-reciprocal, meaning that developing countries do not have to provide equivalent trade benefits to the United States. Countries must meet certain eligibility criteria, however, such as providing adequate protection of intellectual property, operating an open market economy under established multilateral trade rules, and adopting internationally recognized worker rights. Trade preferences are permitted by the World Trade Organization (WTO) under the General Agreement on Tariffs and Trade (GATT) “enabling clause,” which allows members to provide more favorable treatment to developing countries. Other developed countries provide similar preference programs. In the WTO Doha Development Agenda (DDA) round of multilateral trade negotiations, both developed and developing WTO members agreed to provide duty-free, quota-free (DFQF) preferential access to least-developed countries, subject to adoption of the agreement.
Evaluations of the benefits of trade preferences have been mixed. Many developing countries have used tariff preferences to enhance their competitiveness in certain industries, particularly apparel. In other countries, preferences are used to export major commodities such as petroleum products, which may be less supportive of long-term economic diversification and development. Meeting the needs of the least developing countries is a core policy issue that continues to drive the debate over the design of preference programs. Consumers and some U.S. industries and workers benefit from the additional trade, others compete directly with it, therefore, perspectives on trade preferences vary despite their overall costs apparently being small. This report discusses the major U.S. trade preference programs, their possible economic effects, stakeholder interests, and legislative options.
CRS — Chinese Tire Imports: Section 421 Safeguards and the World Trade Organization (WTO)
Chinese Tire Imports: Section 421 Safeguards and the World Trade Organization (WTO) (PDF)
Source: Congressional Research Service (via University of North Texas Digital Library)
On April 20, 2009, the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union filed a petition with the U.S. International Trade Commission (ITC) requesting an investigation under Section 421 of the Trade Act of 1974, 19 U.S.C. §2451, a trade remedy statute addressing import surges from China, to examine whether Chinese passenger vehicle and light truck tires were causing market disruption to U.S. tire producers. Market disruption will be found to occur under Section 421 whenever imports of a Chinese product that is “like or directly competitive with” a domestic product “are increasing rapidly … so as to be a significant cause of material injury, or threat of material injury, to the domestic industry.” The ITC initiated the investigation (TA-421-7) on April 24, 2009.
As a result of its investigation, the ITC in June 2009 voted 4-2 that Chinese tire imports were causing domestic market disruption and recommended that the President impose an added duty on these items for three years at an annually declining rate. The ITC also recommended expedited consideration of trade adjustment assistance (TAA) applications filed by affected firms or workers. On September 11, 2009, President Obama proclaimed increased tariffs on Chinese tires for three years effective September 26, 2009, albeit at lower rates than recommended by the ITC.
The proclaimed increase was 35% ad valorem in the first year, 30% in the second, and 25% in the third year. The President also directed the Secretaries of Labor and Commerce to expedite TAA applications and to provide other assistance to affected workers, firms, and communities. While the President was authorized to review the tariffs after six months and to modify, reduce, or terminate them, he did not take any of these actions. No formal requests have been made to extend the tire tariffs, which are scheduled to expire on September 25, 2012. Six petitions had been previously filed under Section 421, with the ITC finding market disruption in four out of six of its investigations. President Bush decided not to provide import relief in these earlier cases.
Section 421 was enacted as part of an October 2000 statute that also permitted the President to grant most-favored-nation (MFN) tariff treatment to Chinese products upon China’s accession to the World Trade Organization (WTO). Section 421 authorizes the President to impose safeguards—that is, temporary measures such as import surcharges or quotas—on Chinese goods if domestic market disruption is found. The statute implements a China-specific safeguard mechanism in China’s WTO Accession Protocol that may be utilized by WTO members through December 2013. The provision is separate from Article XIX of the General Agreement on Tariffs and Trade (GATT) 1994 and the WTO Agreement on Safeguards, which allow WTO members to respond to injurious import surges but on a stricter basis than under the Protocol. A major difference is that the Protocol allows a safeguard to be applied only to Chinese products while the Safeguards Agreement requires that any safeguard be applied to a product regardless of its source.
China filed a WTO complaint against the United States in September 2009, claiming that the Section 421 tariffs violate U.S. GATT obligations to accord Chinese tires MFN tariff treatment and not to exceed negotiated tariff rates, that the United States imposed tariffs under the safeguard mechanism in China’s Accession Protocol without first attempting to justify them under GATT and WTO safeguard provisions, and that Section 421 and its application in this case violate U.S. obligations under the Protocol. In a December 2010 report, the WTO panel rejected all of China’s claims. China later appealed panel findings related to the Accession Protocol. The WTO Appellate Body upheld the panel, and thus U.S. actions under the Protocol, in a September 2011 report. The panel and Appellate Body reports were adopted by the WTO Dispute Settlement Body on October 5, 2011, ending the WTO dispute.
CRS — The U.S.-Panama Free Trade Agreement
The U.S.-Panama Free Trade Agreement (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
On June 28, 2007, the United States and Panama signed a free trade agreement (FTA) after two and a half years and 10 rounds of negotiations. Negotiations formally concluded on December 16, 2006, with an understanding that changes to labor, environment, and intellectual property rights chapters would be made pursuant to future congressional input. These changes were agreed to and the FTA was signed in time to be considered under Trade Promotion Authority (TPA) legislation, which expired on July 1, 2007. TPA allows Congress to consider certain trade agreement implementing bills under expedited procedures. Panama’s legislature ratified the FTA 58 to 4 on July 11, 2007, but neither the 110th nor the 111th Congress took up the agreement.
Eventually, the 112th Congress considered the FTA implementing bill. On July 7, 2011, the House Ways and Means and Senate Finance Committees held simultaneous “mock markups,” where they informally approved draft implementing bills. On October 3, 2011, the Obama Administration transmitted final implementing legislation and supporting documents to both houses, as required under TPA. Following committee action, on October 12, 2011, the House agreed to the implementing bill (H.R. 3079) 300-129, followed by the Senate 77-22. President Obama signed the implementing bill into law on October 21, 2011 (P.L. 112-43, 125 Stat. 427), but the FTA would not enter into force for another year. Panama required that time to complete changes in law necessary to bring it into compliance with the provisions of the FTA. On October 22, 2012, the United States Trade Representative (USTR) exchanged notes with Panama providing for entry into force of the FTA. President Obama implemented the agreement by proclamation on October 29, 2012, and the FTA entered into force on October 31, 2012.
The U.S.-Panama FTA is a comprehensive and reciprocal trade agreement, replacing U.S. unilateral preferential trade treatment extended under the Caribbean Basin Economic Recovery Act (CBERA), the Caribbean Basin Trade Partnership Act (CBTPA), and the Generalized System of Preferences (GSP). Some 88% of U.S. commercial and industrial exports will become dutyfree upon implementation, with remaining tariffs phased out over a 10-year period. Over 50% of U.S. farm exports to Panama also will achieve immediate duty-free status, with tariffs and tariff rate quotas (TRQs) on select farm products to be phased out by year 17 of the agreement (year 20 for rice). The FTA also consummates understandings on telecommunications, services trade, government procurement, investment, and intellectual property rights.
The final text of the U.S.-Panama FTA incorporates changes based on the bipartisan agreement of May 10, 2007, crafted by the Bush Administration and leadership in the 110th Congress. These include adoption of enforceable labor standards, compulsory membership in multilateral environmental agreements, and an easing of restrictions on developing country access to generic drugs, provisions that go beyond those in previous U.S. bilateral FTAs and multilateral trade rules. Concerns raised in Congress on labor and tax transparency issues were also addressed by Panama in statute and by ratification of a Tax Information and Exchange Agreement (TIEA) with the United States. The TIEA provides greater tax transparency in support of curbing illicit financial transactions associated with money laundering activities.
This report covers issues related to the U.S.-Panama FTA from the beginning of the negotiations in April 2004 until the FTA entered into force on October 31, 2012.
CRS — Trade Preferences: Economic Issues and Policy Options
Trade Preferences: Economic Issues and Policy Options (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
Since 1974, Congress has created multiple trade preference programs designed to foster economic growth, reform, and development in less developed countries. These programs give temporary, non-reciprocal, duty-free U.S. market access to select exports of eligible countries. Congress has repeatedly revised and extended these programs. The112 th Congress passed extensions to three trade preference programs: (1) the Generalized System of Preferences (GSP) which expired on December 31, 2010 and was renewed retroactively from that date to July 31, 2013 (P.L. 112-40); (2) the Andean Trade Preference Act (ATPA) for Colombia and Ecuador until July 31, 2013 (P.L. 112-42); and (3) a “third-country fabric” provision in the African Growth and Opportunity Act (AGOA) until September 30, 2015 (P.L. 112-163). Since the GSP and ATPA programs were only extended until the end of July 2013, Congress may consider further renewal of these programs in the first session of the 113 th Congress, along with possible trade preference reform options. Three bills in the 112 th Congress, S. 105, S. 1244, and H.R. 2387, propose a new trade preference program that would provide duty-free and reduced tariff treatment for certain apparel from the Philippines. Other bills in the 112 th Congress proposing preference programs include S. 1443, which would provide trade preferences for selected Asian and South Pacific countries.
Congress established five trade preference programs. The GSP applies to all developing countries worldwide. In addition, there are four regional programs including the ATPA; the Caribbean Basin Economic Recovery Act (CBERA); the Caribbean Trade Partnership Act (CBTPA); the African Growth and Opportunity Act (AGOA); and the Haitian Opportunity through Partnership Encouragement (HOPE) Act. In the second session of the 111th Congress, legislation was enacted to extend provisions in the CBPTA and HOPE Act through September 30, 2020, in the Haiti Economic Lift Program Act of 2010 (P.L. 111-171).
Unlike free trade agreements, trade preferences are non-reciprocal, meaning that developing countries do not have to provide equivalent trade benefits to the United States. Countries must meet certain eligibility criteria, however, such as providing adequate protection of intellectual property, operating an open market economy under established multilateral trade rules, and adopting internationally recognized worker rights. Trade preferences are permitted by the World Trade Organization (WTO) under the General Agreement on Tariffs and Trade (GATT) “enabling clause,” which allows members to provide more favorable treatment to developing countries. Other developed countries provide similar preference programs. In the WTO Doha Development Agenda (DDA) round of multilateral trade negotiations, both developed and developing WTO members agreed to provide duty-free, quota-free (DFQF) preferential access to least-developed countries, subject to adoption of the agreement.
Evaluations of the benefits of trade preferences have been mixed. Many developing countries have used tariff preferences to enhance their competitiveness in certain industries, particularly apparel. In other countries, preferences are used to export major commodities such as petroleum products, which may be less supportive of long-term economic diversification and development. Meeting the needs of the least developing countries is a core policy issue that continues to drive the debate over the design of preference programs. Consumers and some U.S. industries and workers benefit from the additional trade, others compete directly with it, therefore, perspectives on trade preferences vary despite their overall costs apparently being small. This report discusses the major U.S. trade preference programs, their possible economic effects, stakeholder interests, and legislative options.
CRS — The U.S.-Colombia Free Trade Agreement: Background and Issues
The U.S.-Colombia Free Trade Agreement: Background and Issues (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
The U.S.-Colombia Trade Promotion Agreement entered into force on May 15, 2012. It is a comprehensive free trade agreement (FTA) between the United States and Colombia, which will eventually eliminate tariffs and other barriers in bilateral trade in goods and services. On October 3, 2011, President Barack Obama submitted draft legislation (H.R. 3078/S. 1641) to both houses of Congress to implement the agreement. On October 12, 2011, the House passed H.R. 3078 (262-167) and sent it to the Senate. The Senate passed the implementing legislation (66-33) on the same day. The agreement was signed by both countries almost five years earlier, on November 22, 2006. The Colombian Congress approved it in June 2007 and again in October 2007, after it was modified to include new provisions agreed to in the May 10, 2007 bipartisan understanding between congressional leadership and President George W. Bush.
The United States is Colombia’s leading trade partner. Colombia accounts for a very small percentage of U.S. trade (1.0% in 2011), ranking 22nd among U.S. export markets and 23rd as a supplier of U.S. imports. Economic studies on the impact of a U.S.-Colombia free trade agreement (FTA) have found that, upon full implementation of an agreement, the impact on the United States would be positive but very small due to the small size of the Colombian economy when compared to that of the United States (about 2.2%).
The congressional debate surrounding the CFTA mostly centered on violence, labor, and human rights issues in Colombia. Numerous Members of Congress opposed passage of the agreement because of concerns about alleged targeted violence against union members in Colombia, inadequate efforts to bring perpetrators to justice, and weak protection of worker rights. However, other Members of Congress supported the CFTA and took issue with these charges, stating that Colombia had made great progress over the last ten years to curb violence and enhance security. They also argued that U.S. exporters were losing market share of the Colombian market and that the agreement would open the Colombian market for U.S. goods and services. For Colombia, an FTA with the United States has been part of its overall economic development strategy.
To address the concerns related to labor rights and violence in Colombia, the United States and Colombia agreed upon an “Action Plan Related to Labor Rights” that included specific and concrete steps, with specific timelines, most of which took place in 2011. It includes numerous commitments by the Colombian government to protect union members, end impunity, and improve worker rights. The Colombian government submitted documents to the United States in time to meet various target dates listed in the Action Plan. The USTR reviewed the documents and determined that Colombia had met its major commitments.
The U.S. business community generally supports the FTA with Colombia because it sees it as an opportunity to increase U.S. exports to Colombia. U.S. exporters urged policymakers to move forward with the agreement, arguing that the United States was losing market share of the Colombian market, especially in agriculture, as Colombia entered into FTAs with other countries. Colombia’s FTA with Canada, which was implemented on August 15, 2011, was of particular concern for U.S. agricultural producers. Critics of the agreement expressed concerns about violence against union members and the lack of protection of worker rights in Colombia, especially in labor cooperatives. Labor unions in general remain highly opposed to the agreement. They argue that Colombia’s labor movement is under attack through violence, intimidation, and harassment, as well as legal challenges.
Trade Finance Guide: A Quick Reference for U.S. Exporters
Trade Finance Guide: A Quick Reference for U.S. Exporters
Source: International Trade Administration (U.S. Department of Commerce)
Trade Finance Guide: A Quick Reference for U.S. Exporters is designed to help U.S. companies, especially small and medium-sized enterprises, learn the basics of trade finance so that they can turn their export opportunities into actual sales and achieve the ultimate goal of getting paid—especially on time—for those sales. Concise, two-page chapters offer the basics of numerous financing techniques, from open accounts, to forfaiting, to government assisted foreign-buyer financing.
The current edition of the Trade Finance Guide was published in November 2012.
SEC and Justice Department Release FCPA Guide
SEC and Justice Department Release FCPA Guide
Source: U.S. Securities and Exchange Commission, U.S. Department of Justice
The Securities and Exchange Commission and the Department of Justice today released A Resource Guide to the U.S. Foreign Corrupt Practices Act. The 120-page guide provides a detailed analysis of the U.S. Foreign Corrupt Practices Act (FCPA) and closely examines the SEC and DOJ approach to FCPA enforcement.
The guide provides helpful information to enterprises of all sizes from small businesses doing their first transactions abroad to multi-national corporations with subsidiaries around the world. The guide addresses a wide variety of topics including who and what is covered by the FCPA’s anti-bribery and accounting provisions; the definition of a “foreign official”; what constitute proper and improper gifts, travel, and entertainment expenses; facilitating payments; how successor liability applies in the mergers and acquisitions context; the hallmarks of an effective corporate compliance program; and the different types of civil and criminal resolutions available in the FCPA context. On these and other topics, the guide takes a multi-faceted approach toward setting forth the statute’s requirements and providing insights into SEC and DOJ enforcement practices. It uses hypotheticals, examples of enforcement actions and matters that the SEC and DOJ have declined to pursue, and summaries of applicable case law and DOJ opinion releases.
Hat tip: GDP
CRS — U.S. Textile Manufacturing and the Trans-Pacific Partnership Negotiations
U.S. Textile Manufacturing and the Trans-Pacific Partnership Negotiations (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
Textiles are a major issue in the ongoing Trans-Pacific Partnership (TPP) negotiations to establish a free-trade zone across the Pacific. Because the negotiating parties include Vietnam, a major apparel producer that now mainly sources yarns and fabrics from China and other Asian nations, the agreement has the potential to shift global trading patterns for textiles and demand for U.S. textile exports. Canada and Mexico, both significant regional textile markets for the United States, have also been accepted into the TPP talks.
U.S. textile manufacturers produce yarn, thread, and fabric for apparel, home furnishings, and for various industrial applications. In 2011, the U.S. textile industry generated $53 billion in shipments and directly employed about 238,000 Americans, accounting for 2% of all U.S. factory jobs. Approximately one-third of U.S. textile production is exported, with the bulk of the exports going to Western Hemisphere nations that are members of the North American Free Trade Agreement (NAFTA) or the Central American-Dominican Republic Free Trade Agreement (CAFTA-DR). Both free trade agreements provide that certain exports from member countries may enter the U.S. market duty-free only if they are made from textiles produced in the region. This has encouraged manufacturers in Mexico and Central America to use U.S.-made yarns and fabrics in apparel, home furnishings, and other products. Exports to the NAFTA and CAFTA-DR countries contributed to a U.S. trade surplus of $2.5 billion in yarns and fabrics in 2011.
The TPP has the potential to affect U.S. textile exporters in at least two ways. First, it could enable Asian apparel producers, principally Vietnam, to export clothing to the United States dutyfree. This would eliminate much of the advantage now enjoyed by Western Hemisphere apparel producers in the U.S. market and, because Vietnamese manufacturers make little use of U.S.- made textiles, could reduce demand for U.S. textile exports. Second, if the TPP were to allow Western Hemisphere apparel manufacturers to use yarn and fabric made anywhere in the TPP region and still enjoy preferential access to the U.S. market, an enlarged Vietnamese textile industry could, at some future time, compete with U.S. exporters in Mexico and Central America.
Textile industry trade groups have urged the United States to insist on a “yarn forward” rule, requiring that yarn production, fabric production, and cutting and sewing of the finished garment all occur within the TPP region for the garment to enter the United States duty-free. On the other side, retailers and apparel companies want to be able to import apparel from the lowest-cost producer, regardless of whether U.S. textiles are used; they urge that textiles and apparel be treated like other products in any TPP agreement. Members of Congress have voiced their support for both sides.
The TPP seems likely to have less impact on those segments of the U.S. textile industry that do not supply apparel manufacturing. U.S. manufacturers of household and technical textiles appear to be internationally competitive, and it is not evident that lower-wage countries would have comparative advantage in these highly capital-intensive sectors.
New From the GAO
New GAO Reports
Source: Government Accountability Office
1. Medicare: Higher Use of Advanced Imaging Services by Providers Who Self-Refer Costing Medicare Millions. GAO-12-966, September 28.
http://www.gao.gov/products/GAO-12-966
Highlights – http://www.gao.gov/assets/650/648989.pdf
2. Food Safety: FDA Can Better Oversee Food Imports by Assessing and Leveraging Other Countries’ Oversight Resources. GAO-12-933, September 28.
http://www.gao.gov/products/GAO-12-933
Highlights – http://www.gao.gov/assets/650/649011.pdf
3. Department of Homeland Security: Taking Further Action to Better Determine Causes of Morale Problems Would Assist in Targeting Action Plans. GAO-12-940, September 28.
http://www.gao.gov/products/GAO-12-940
Highlights – http://www.gao.gov/assets/650/648996.pdf
Global Gateways: International Aviation in Metropolitan America
Global Gateways: International Aviation in Metropolitan America
Source: Brookings Institution
As metropolitan economies expand their global reach through trade and investment, international aviation plays a pivotal role: the movement of people across national borders. An important set of metropolitan gateways have become a major source of international passengers and the key facilitators of cross-border travel to other global markets, making these places especially vital within aviation’s contribution to global trade.
However, current federal and local investment policies do not reflect the travel concentrations in these places, nor do current regulations help maximize international passenger levels. To support global trade across all metropolitan markets, federal and local policies must refocus their support on the key metropolitan gateways.
CRS — U.S. International Trade: Trends and Forecasts
U.S. International Trade: Trends and Forecasts (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
The global financial crisis and the U.S. recession, during the 19 months from December 2007 through June 2009, caused the U.S. trade deficit to decrease, or lessen, from August 2008 through May 2009. Since then it has begun to increase again as recovery has commenced. The financial crisis caused U.S. imports to drop faster than U.S. exports, but that trend has reversed as U.S. demand for imports recovers.
Exports of goods of $1,497 billion in 2011 increased from 2010 by $209 billion or 16%, while imports of goods of $2,236 billion in 2011 increased by $302 billion, also 16%, over 2010. Though both exports and imports increased by 16%, this led to an increase in the overall merchandise trade deficit (i.e., the trade balance became more negative) for 2011 of $93 billion or 15% over 2010. Because imports are greater than exports, exports must increase at a greater percentage than imports to maintain the current trade balance.
In 2011, the trade deficit in goods reached $738 billion on a balance of payments (BoP) basis, still lower than the previous peak of $836 billion in 2006, but greater than the deficits in 2009 and 2010 of $506 billion and $645 billion. The 2011 U.S. deficit on merchandise trade (Census basis) with China was $295.4 billion, with the European Union (EU27) was $99.9 billion, with Canada was $34.5 billion, with Japan was $63.2 billion, and with Mexico was $64.5 billion. With the Asian Newly Industrialized Countries (Hong Kong, South Korea, Singapore, and Taiwan), the trade balance moved from a deficit of $5.5 billion in 2007 to surpluses increasing from $2.2 billion in 2008 to $15.4 billion in 2011.
Related to the goods trade balance is the balance on the current account, which includes merchandise and services trade plus investment income and unilateral transfers. The deficit on the current account grew in 2011 to $466 billion from $442 billion in 2010. This smaller increase in the current account deficit ($24 billion), as compared to the increase in the goods trade deficit ($93 billion), reflects an increase in the U.S. surplus in both services trade and investment income.
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. However, interventions in foreign exchange markets by countries such as China and South Korea can keep the value of their currencies from rising too fast, thus keeping the dollar strong and imports cheaper.
Areas to watch in 2012 in international trade include the energy and transportation sectors. In energy, unconventional oil and gas production are increasing U.S. domestic supply, reducing imports, and increasing exports. In transportation, U.S. automakers appear to be exporting well to growth markets such as China.
Note: This report is current through U.S. Department of Commerce annual data revisions, published June 8, 2012, and Bureau of Economic Analysis revisions published June 14, 2012.
CRS — Mexico: Issues for Congress
Mexico: Issues for Congress (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
The United States and Mexico have a close and complex bilateral relationship as neighbors and partners under the North American Free Trade Agreement (NAFTA). Although security issues have recently dominated the U.S. relationship with Mexico, analysts predict that bilateral relations may shift towards economic matters once President-elect Enrique Peña Nieto takes office. Peña Nieto of the Institutional Revolutionary Party (PRI) defeated leftist Party of the Democratic Revolution (PRD) candidate Andrés Manuel López Obrador and Josefina Vázquez Mota of the conservative National Action Party (PAN) in Mexico’s July 1, 2012, presidential election. As a result, the PRI, which controlled Mexico from 1929 to 2000, will retake the presidency on December 1, 2012. Some analysts have raised concerns regarding the PRI’s corrupt past and impending return to power, but President-elect Peña Nieto has pledged to govern democratically and to forge cross-party alliances.
The outgoing PAN government of Felipe Calderón has pursued an aggressive anticrime strategy and increased security cooperation with the United States. These efforts have helped Mexico arrest or kill record numbers of drug kingpins, but more than 55,000 people have died as a result of organized crime-related violence since December 2006. Mexico’s ongoing security challenges have overshadowed some of the Calderón government’s achievements, including its successful economic stewardship during the global financial crisis and expansion of healthcare coverage.
U.S. Policy
In recent years, U.S. policy towards Mexico has been framed by security cooperation under the Mérida Initiative. Congress has provided more than $1.9 billion in Mérida aid since FY2008 to support Mexico’s efforts against drug trafficking and organized crime. Whereas U.S. assistance initially focused on training and equipping Mexican counterdrug forces, it now prioritizes strengthening the rule of law. Along the border, U.S. policymakers have sought to balance security and commercial concerns. The U.S. and Mexican governments resolved a longstanding trade dispute in 2011 involving NAFTA trucking provisions and have sought to improve competitiveness through regulatory cooperation. Bilateral trade surpassed $460 billion in 2011.The February 2012 signing of a Trans-Boundary Hydrocarbons Agreement for managing oil resources in the Gulf of Mexico could create new opportunities for energy cooperation.
Legislative Action
The 112th Congress has maintained an active interest in Mexico. The Obama Administration asked for $269.5 million in assistance for Mexico in its FY2013 budget request. The Senate and House Appropriations Committees’ versions of the FY2013 foreign aid measure, S. 3241 and H.R. 5857, each recommend increases in aid to Mexico, with human rights conditions similar to P.L. 112-74. Congress has held oversight hearings, issued reports, and introduced legislation on how to bolster the Mérida Initiative and on related U.S. domestic efforts to combat gun trafficking, money laundering, and drug demand. A Senate-passed bill, S. 1612, would increase penalties for transnational drug trafficking. Violence in northern Mexico has kept border security on the agenda, with P.L. 112-93 increasing penalties for aviation smuggling, and P.L. 112-127 tightening sentencing guidelines for building border tunnels. Another bill that recently passed both chambers, H.R. 915, provides statutory authority for the bilateral Border Enforcement Security Task Force (BEST) program. A House-Mexico: Issues for Congress Congressional Research Service passed measure, H.R. 1299 would require a new border security strategy, while another, H.R. 6368, would require a study on cross-border violence.
Mexico’s recent accession to negotiations for a Trans-Pacific Partnership (TPP) trade agreement is likely to generate congressional interest. Congressional action may be required in order for the Trans-boundary Hydrocarbons Agreement to take effect. And, as Mexico’s political transition approaches, Congress is likely to monitor the policy positions taken by the incoming Peña Nieto administration.
Also see: CRS Report R42548, Mexico’s 2012 Elections, by Clare Ribando Seelke; CRS Report R41349, U.S.-Mexican Security Cooperation: The Mérida Initiative and Beyond , by Clare Ribando Seelke and Kristin M. Finklea; and CRS Report RL32934, U.S.-Mexico Economic Relations: Trends, Issues, and Implications, by M. Angeles Villarreal.
How to Maintain a Competitive Internet
How to Maintain a Competitive Internet
Source: Brookings Institution
The Internet has become an essential vehicle for communications, electronic commerce, and entrepreneurship. A McKinsey report found that the Internet provided 21 percent of the GDP growth over the past five years in 13 different countries. As enumerated by the Boston Consulting Group, the Internet currently generates 4.1 percent of Gross Domestic Product; in some countries, the percentage is double that. By 2016, analysts estimate that the digital economy will comprise $4.2 trillion among G-20 nations, up from $2.3 trillion in 2010.
The Web offers several features that drive its usefulness for consumers and businesses: interconnectivity, openness, scalability, and efficiency. Interconnectivity is important because the Internet links users across the globe. Americans can order goods from shops in Europe or Asia, and vice versa. The openness and growth possibilities allow entrepreneurs to scale up quickly. And since it offers these benefits in a ubiquitous manner, it is a remarkably efficient vehicle for communications and service delivery.
To protect these virtues, a number of academic experts and business leaders have concluded that the government should be cautious about applying competition law to the Internet market. They argue we should have a “hands-off” competition policy given the rapidly changing nature of digital technology, the complexity of networked industries, the slow pace of government decision-making, the lack of substantive knowledge on the part of regulators, and the globalization of service delivery.
In this paper, we argue that robust competition policy, including the application of law and enforcement, are vital to ensure the continuing benefits of Internet communications and commerce. Competition is good for consumers, and we need to protect against threats to open competition in Internet markets in order to maintain its beneficial features. It is important to have antitrust enforcement and fair, transparent, and non-discriminatory market behavior to gain the full benefits of the Internet. We need public policies that promote consumer choice and encourage innovation without stifling competition.
Although EU leads in energy efficiency and foreign investment, Industrial performance across Member States is not balanced
Source: European Commission
Today the European Commission released a substantial set of proposals to boost industry. It consists of the following three documents: an Industry Communication calling for short term focussed investment in key industry sectors with high growth prospects; the 2012 Scoreboard on the Member States industrial competitiveness performance; and also the 2012 European Competitiveness Report, which identifies opportunities to make European industries more competitive.
According to the scoreboard, several Member States have made good progress in strengthening industry’s sustainability, improving support to small and medium-sized enterprises (SMEs), and reforming public administration. The scoreboard highlights a continued shift towards a more knowledge-based economy, with increased labour productivity and highly-skilled labour. Most of the countries have engaged in reforms to improve business prospects and strengthen their competitiveness.
However, convergence between more and less innovative countries seems to have slowed down in recent years. The innovation gap between Member States risks widening due to the different ways they have responded to the economic crisis. Significant challenges remain in promoting private research and enhancing competition in network industries (energy, telecommunication, and transport). Access to finance has worsened in the majority of Member States, particularly for SMEs.
The annual European Competitiveness Report is designed to contribute to the analysis underpinning the EU’s promotion of competitiveness. Among its key finding, the drop in domestic demand which cannot be fully offset by demand from third counties, the EU leadership in Energy efficiency and in capacity to attract foreign direct investment.
Documents in the News — Investigative Report on the U.S. National Security Issues Posed by Chinese Telecommunications Companies Huawei and ZTE
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Source: U.S. House of Representatives Permanent Select Committee on Intelligence
From press release:
The Chairman and Ranking Member of the House Intelligence Committee, Mike Rogers (R-MI) and C.A. Dutch Ruppersberger (D-MD), today released a report recommending to U.S. companies considering doing business with Chinese telecommunications companies Huawei and ZTE to find another vendor. The report encourages U.S. companies to take into account the long-term security risks associated with either company providing equipment or services to our telecommunications infrastructure. Additionally, the report recommends that U.S. government systems, particularly sensitive systems, exclude Huawei or ZTE equipment or component parts.
The report highlights the interconnectivity of U.S. critical infrastructure systems and warns of the heightened threat of cyber espionage and predatory disruption or destruction of U.S. networks if telecommunications networks are built by companies with known ties to the Chinese state, a country known to aggressively steal valuable trade secrets and other sensitive data from American companies.
Additionally, the report notes that modern critical infrastructure is incredibly connected, everything from electric power grids to banking and finance systems to natural gas, oil, and water systems to rail and shipping channels. All of these entities depend on computerized control systems. The risk is high that a failure or disruption in one system could have a devastating ripple effect throughout many aspects of modern American living.
CRS — Federal Freight Policy: An Overview
Federal Freight Policy: An Overview (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
The U.S. freight system is a complex network including four principal modes of transportation:
- The National Truck Network comprises 209,000 miles of highways that can accommodate large trucks, including the 47,000-mile Interstate Highway System
- Railroads, largely in private ownership, carry freight on 140,000 miles of track.
- Barge and ship lines utilize 12,000 miles of shallow-draft inland waterways and about 3,500 inland and coastal port terminal facilities.
- Air carriers provide cargo service to more than 5,000 public use airports, including more than 100 airports that handle all-cargo aircraft.
About two-fifths of freight within the United States, measured in ton-miles, moves by truck, and another two-fifths moves by rail (Figure 1). About 11% moves by multiple modes. Measured in ton-miles, air transportation is a minor mode because it is expensive to ship goods this way. Goods moving by air tend to be of high value compared to their weight. About three-quarters of U.S. imports and exports, measured by weight, arrive or depart by ship. Most of the rest goes by truck (10%), rail (8%), or pipeline (5%). International air shipments account for less than 1% of U.S. foreign trade by weight, but 37% by value.
New From the GAO
New GAO Reports
Source: Government Accountability Office
1. Warfighter Support: DOD Should Improve Development of Camouflage Uniforms and Enhance Collaboration Among the Services. GAO-12-707, September 28.
http://www.gao.gov/products/GAO-12-707
Highlights – http://www.gao.gov/assets/650/648950.pdf
2. VA and DOD Health Care: Department-Level Actions Needed to Assess Collaboration Performance, Address Barriers, and Identify Opportunities. GAO-12-992, September 28.
http://www.gao.gov/products/GAO-12-992
Highlights – http://www.gao.gov/assets/650/648960.pdf
3. Government Contracting: Federal Efforts to Assist Small Minority Owned Businesses. GAO-12-873. September 28.
http://www.gao.gov/products/GAO-12-873
Highlights – http://www.gao.gov/assets/650/648986.pdf
4. Trade Adjustment Assistance: Changes to the Workers Program Benefited Participants, but Little Is Known about Outcomes. GAO-12-953, September 28
http://www.gao.gov/products/GAO-12-953
Highlights – http://www.gao.gov/assets/650/648979.pdf
5. Trade Adjustment Assistance: Labor Awarded Community College Grants in Accordance with Requirements, but Needs to Improve Its Process. GAO-12-954, September 28.
http://www.gao.gov/products/GAO-12-954
Highlights – http://www.gao.gov/assets/650/649003.pdf
6. Department of Homeland Security: Efforts to Assess Realignment of Its Field Office Structure. GAO-12-185R, September 28.
http://www.gao.gov/products/GAO-12-185R
Hidden Dragon, Crouching Lion: How China’s Advance in Africa is Underestimated and Africa’s Potential Underappreciated
Source: Strategic Studies Institute, U.S. Army War College
The explosive growth of China’s economic interests in Africa—bilateral trade rocketed from $1 billion in 1990 to $150 billion in 2011—may be the most important trend in the continent’s foreign relations since the end of the Cold War. In 2010, China surpassed the United States as Africa’s top trading partner; its quest to build a strategic partnership with Africa on own its terms through tied aid, trade, and development finance is also part of Beijing’s broader aspirations to surpass the United States as the world’s preeminent superpower. Africa and other emerging economies have become attractive partners for China not only for natural resources, but as growing markets. Africa’s rapid growth since 2000 has not just occurred because of higher commodity prices, but more importantly due to other factors including improved governance, economic reforms, and an expanding labor force. China’s rapid and successful expansion in Africa is due to multiple factors, including economic diplomacy that is clearly superior to that of the United States. China’s “no strings attached” approach to development, however, risks undoing decades of Western efforts to promote good governance. Consequently, this monograph examines China’s oil diplomacy, equity investments in strategic minerals, and food policy toward Africa. The official U.S. rhetoric is that China’s rise in Africa should not be seen as a zero-sum game, but areas where real U.S.-China cooperation can help Africa remain elusive, mainly because of Beijing’s hyper-mistrust of Washington. The United States could help itself, and Africa, by improving its own economic diplomacy and adequately funding its own soft-power efforts.
Economic Freedom of the World: 2012 Annual Report
Economic Freedom of the World: 2012 Annual Report
Source: Fraser Institute
The index published in Economic Freedom of the World 2012 measures the degree to which the policies and institutions of countries are supportive of economic freedom. The cornerstones of economic freedom are personal choice, voluntary exchange, freedom to compete, and security of privately owned property. Forty-two variables are used to construct a summary index and to measure the degree of economic freedom in five broad areas: (1) size of government; (2) legal system and property tights; (3) sound money; (4) freedom to trade internationally; and (5) regulation.
Measuring the Costs of the Canada-US Border
Measuring the Costs of the Canada-US Border
Source: Fraser Institute
Key findings
+ After ten years of post-9/11 border innovations, the costs associated with border crossing have not significantly decreased while government spending on border security has markedly increased. In order to develop performance-based and cost-effective border management policies, an outline of costs associated with the border is required.
+ After adding up the lowest values from the estimated ranges for all three types of costs (trade, tourism/travel, and government programs), we find an annual cost of C$19.1 billion in 2010 or nearly 1.5% of Canada’s GDP.
+ Canadian and American governments should provide detailed descriptions of costs and expenditures for specific border programs and new security measures. Furthermore, these costs/expenditures must be linked to expected outcomes and timelines. "Costs and Results" based evaluations should be undertaken on a year-to-year basis, and subsequently made public.
+ In December 2011, the governments of Canada and the United States issued a joint declaration called Beyond the Border: A Shared Vision for Perimeter Security and Economic Competitiveness. While the vision provides specific benchmarks and timelines for measuring progress, it does not tie these guidelines to government expenditures, or reductions in border crossing costs. Either we will continue with incremental and uncoordinated programs, creating some improvements but not lowering the overall cost of the border, or we will begin to create a new border regime.
