Order Code RL33577
CRS Report for Congress
Received through the CRS Web
U.S. International Trade:
Trends and Forecasts
Updated November 22, 2006
Dick K. Nanto
Specialist in Industry and Trade
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

U.S. International Trade:
Trends and Forecasts
Summary
This report provides an overview of the current status, trends, and forecasts for
U.S. international trade. The purpose of this report is to provide current data and
brief explanations for the various types of trade flows along with a short discussion
of particular trends and points of contention related to trade policy.
The United States is now running record level deficits in its trade with other
nations. In 2005 the U.S. merchandise trade deficit reached $766 billion on a census
basis and $783 billion on a balance-of-payments basis (BoP). A surplus in services
trade of $66 billion gave a deficit of $717 billion on goods and services for the year
— up $105 billion or 17.2% from the $611 billion deficit in 2004. While U.S.
exports are highly competitive in world markets, these sales abroad are
overshadowed by the huge demand by Americans for imported products. In 2005,
U.S. exports of goods and services totaled $1.275 trillion, while U.S. imports reached
$1.992 trillion (BoP). Since 1976, the United States has incurred continual
merchandise trade deficits with annual amounts fluctuating around an upward trend.
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. As the deficit increases, the risk also rises of a precipitous drop
in the value of the dollar and disruption in financial markets.
Overall U.S. trade deficits reflect 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 stable.
The broadest measure of U.S. international economic transactions is the balance
on current account. In addition to merchandise trade, it includes trade in services and
unilateral transfers. In 2005, the current account deficit rose to $791.5 billion from
$665.3 billion in 2004. In trade in advanced technology products, the U.S. balance
dropped from a surplus of $32.2 billion in 1997 to a deficit of $44.4 billion in 2005.
In trade in passenger automobiles, the $93 billion U.S. deficit was mainly with
Canada, Germany, Korea, Japan, and Mexico. In imports of crude oil, major sources
of the $176 billion in imports were Venezuela, Saudi Arabia, Canada, Mexico, and
Nigeria.
This report replaces CRS Issue Brief IB96038, U.S. International Trade: Data
and Forecasts, by Dick K. Nanto and Thomas Lum, and will be updated periodically.

Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The U.S. Deficit in International Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Savings Shortfalls and the Trade Deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Implications of the Trade Deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Types of Trade Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
U.S. Merchandise Trade Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Merchandise Trade Balance in Volume Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Current Account Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Forecasts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
U.S. Trade with Selected Nations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Advanced Technology, Autos, and Oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Some Common Perceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Outsourcing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Is the Trade Deficit at a Dangerous Level? . . . . . . . . . . . . . . . . . . . . . . . . . 22
Is Trade with China Merely Replacing that with Southeast Asia? . . . . . . . 23
List of Figures
Figure 1. U.S. Balances of Trade in Goods and Services by Month,
2005 and 2006 (in current dollars) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Figure 2. U.S. Merchandise Exports, Imports, Trade Balance, and Real
Effective Dollar Exchange Rate Index, 1982-2005 . . . . . . . . . . . . . . . . . . . . 6
Figure 3. Annual Growth in U.S. Merchandise Exports and Imports,
1982-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Figure 4. Real U.S. Imports, Exports, and Trade Balance of Goods
(chained 2000 dollars), 1990-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Figure 5. U.S. Current Account and Merchandise Trade Balances,
1982-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Figure 6. U.S. Merchandise Trade and Current Account Deficits1997-2008
(forecast, in current dollars) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Figure 7. U.S. Merchandise Trade Balances with Selected Nations, 2005 . . . . . 14
Figure 8. Shares of U.S. Imports of Manufactures by Affiliation of
Foreign Producer, 1982-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Figure 9. The U.S. Current Account Deficit as a Percent of Gross Domestic
Product, 1985-2008 (forecast) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

List of Tables
Table 1. U.S. Exports, Imports, and Merchandise Trade Balances,
1982-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Table 2. U.S. Merchandise Trade in Volume Terms, 2001-2005 . . . . . . . . . . . . 10
Table 3. U.S. Current Account Balances: 1985-2005 . . . . . . . . . . . . . . . . . . . . 11
Table 4. U.S. Merchandise and Current Account Trade 2002 to 2008
(forecast) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Table 5. U.S. Merchandise Trade Balances with Selected Nations:
2000-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Table 6. Top U.S. Merchandise Deficit Trading Partners, 2005 . . . . . . . . . . . . . 16
Table 7. Top U.S. Trading Partners Ranked by Total Merchandise
Trade in 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Table 8. U.S. Current Account Balances With Selected U.S. Trading
Partners, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Table 9. U.S. Trade in Advanced Technology Products . . . . . . . . . . . . . . . . . . . 19
Table 10. U.S. Trade in Passenger Automobiles by Selected Countries, 2005 . 20
Table 11. U.S. Imports of Crude Oil by Selected Countries, 2005 . . . . . . . . . . . 20

U.S. International Trade:
Trends and Forecasts
Most Recent Developments
In 2005, the trade deficit in goods at a record $782.7 billion (balance of
payments [BoP] basis), was 17.5% higher than in 2004. The 2005 deficit on goods
trade with China was $201.6 billion (Census basis), with the European Union (EU-
15) was $122.4 billion, with Japan was $82.7 billion, with Canada was $76.5 billion,
with Mexico was $50.1 billion, and with the Asian Newly Industrialized Countries
(Hong Kong, South Korea, Singapore, and Taiwan) was $15.9 billion. Merchandise
imports of $1,677.4 billion increased by 12% — particularly of crude oil (up $43.8
billion), capital goods except automotive (up $36.1 billion), automotive vehicles and
parts (up $11.7 billion), and consumer goods (up $34.1 billion). Merchandise
exports of $894.6 billion rose by 11%, particularly of industrial supplies (up $27.8
billion), capital goods except automotive (up $30.3 billion), automotive vehicles and
parts (up $8.5 billion), and consumer goods (up $12.4 billion), but this was not
enough to narrow the trade deficit.
Figure 1. U.S. Balances of Trade in Goods and Services by Month,
2005 and 2006 (in current dollars)
$Billions
20
Services 2006
Services 2005
$
$
$
$
$
$
$
$
$
0
-20
-40
Goods 2005
-60
$
$
$
$
$
$
$
$
Goods 2006
$
-80
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Month
Source: CRS with Data from the U.S. Department of Commerce

CRS-2
Year-to-date (January-September 2006), the U.S. trade deficit in goods and
services, at $586.2 billion, was 12% higher compared to the same period in 2005.
The year-to-date deficit on goods trade with China (Census basis) was $166.3 billion,
with Japan was $64.8 billion, with OPEC was $63.2 billion, with the European
Union was $70.6 billion, with Canada was $56.6 billion, and with Mexico was $48.5
billion. As can be seen in Figure 1, the U.S. merchandise trade deficit has increased
over the corresponding month in 2005, while the services balance has remained
steady with a small surplus.
For 2005, the trade deficit on goods and services reached a record $717 billion
or 5.7% of gross domestic product. This upward trend is expected to continue into
2006. U.S. consumer demand remains strong and continues to pull in imports at a
rapid pace. The rest of the world is not growing fast enough to generate the vigorous
export growth needed to hold the deficit steady — let alone reduce it.
The U.S. Deficit in International Trade
International trade in goods and services along with flows of financial capital
affect virtually every person living in the United States. Whether buying imported
clothes, gasoline, computers or cars or working in an industry that competes with
imports or sells products abroad, the influence of international trade on economic
activity is ubiquitous.
The United States in now running record deficits in its trade with other nations.
In 2005 the U.S. merchandise trade deficit reached $766 billion on a census basis and
$783 billion on a balance-of-payments basis (BoP). A surplus in services trade of
$66 billion produced a deficit of $717 billion on goods and services for the year —
up $105 billion or 17.2% from the $611 billion deficit in 2004. While U.S. exports
are highly competitive in world markets, U.S. sales abroad are overshadowed by the
huge demand by Americans for imported products. In 2005, U.S. exports of goods
and services totaled $1.275 trillion, while U.S. imports reached $1.992 trillion (BoP).
Since 1976, the United States has incurred continual merchandise trade deficits with
annual amounts fluctuating around an upward trend.
For the Congress, the trade deficit and other aspects of international trade enter
into public policy considerations through many portals. At the macroeconomic level,
trade deficits are a concern because they affect U.S. economic growth, interest rates,
labor, and the debt load of the economy. As the trade deficit rises relative to the total
economy, the risk increases that the dollar will weaken, raise prices, disrupt financial
markets, and reduce the economic well being of the population. On the strategic
level, trade ties often lead to a deepening of bilateral relations with other nations that
can develop into formal free trade agreements or political and security arrangements.
Trade also can be used as a tool to accomplish strategic objectives — particularly
through providing preferential trading arrangements or by imposing trade sanctions.
On the microeconomic side, imports of specific products can generate trade
friction and pressures from constituent interests for the government to shield U.S.

CRS-3
producers from foreign competition, provide adjustment assistance, open foreign
markets, or assist U.S. industries to become more competitive.
This report provides an overview of the current status, trends, and forecasts for
U.S. import and export flows as well as certain balances. The purpose of this report
is to provide current data and brief explanations for the various types of trade flows
along with a brief discussion of trends that may require attention or point to the need
for policy changes. The use of trade policy as an economic or strategic tool is beyond
the scope of this report but can be found in various other CRS reports.1 Further detail
on trade in specific commodities, with particular countries or regions, or for different
time periods, can be obtained from the Department of Commerce,2 U.S. International
Trade Commission,3 or by contacting the author of this report.
Savings Shortfalls and the Trade Deficit
Overall U.S. trade deficits reflect a shortage of savings in the domestic economy
and a reliance on capital imports to finance that shortfall. A savings shortfall is the
analogue of excessive spending that is financed by borrowing. Households borrow
for consumption; businesses borrow to invest; and the government borrows to cover
its budget deficit. At the international transaction level, the savings shortfall is
manifest when the United States imports capital to pay for its excess of imports (trade
deficit).
Whether this foreign borrowing is beneficial for the U.S. economy depends on
how the imports of capital are used. If they are used to finance investments that
generate a future return at a sufficiently high rate (they raise future output and
productivity), then they may increase the well being of current and future generations.
However, if the imports are used only for current consumption, the net effect of the
borrowing will be to shift the burden of repayment to future generations without a
corresponding benefit to them.
Implications of the Trade Deficit
U.S. trade balances are macroeconomic variables that may or may not indicate
underlying problems with the competitiveness of particular industries or what some
refer to as the competitiveness of a nation. The reason is that overall trade flows are
determined, within the framework of institutional barriers to trade and the activities
of individual industries, primarily by macroeconomic factors such as rates of growth,
1 See, for example, CRS Report RL31832, The Export Administration Act: Evolution,
Provisions, and Debate
, by Ian F. Fergusson; CRS Report RS22183, Trade Preferences for
Developing Countries and the WTO
, by Jeanne J. Grimmett; CRS Report RL33463, Trade
Negotiations During the 109th Congress
, by Ian F. Fergusson; CRS Report RL32371, Trade
Remedies: A Primer
, by Vivian C. Jones; CRS Report RS20889, Textile and Apparel Quota
Phaseout: Some Economic Implications
, by Bernard A. Gelb; CRS Report RL31910, China:
Economic Sanctions
, by Dianne E. Rennack; or CRS Report RL32493, The North Korean
Economy: Background and Policy Analysis
, by Dick K. Nanto and Emma Chanlett-Avery.
2 Commerce Department data are available at [http://www.bea.gov/bea/di1.htm].
3 U.S. International Trade Commission data are available at [http://dataweb.usitc.gov/].

CRS-4
savings and investment behavior (including government budget deficits/surpluses),
international capital flows, and exchange rates.4
Increases in trade deficits may diminish economic growth, since net exports
(exports minus imports) are a component of gross domestic product. In the late
1980s and early 1990s, export growth was an important element in overall U.S.
economic growth. In 1999, merchandise exports accounted for about 8.5% of GDP,
compared with 5.9% in 1990. Recently, however, rising trade deficits have reduced
total domestic demand in the economy, but the weakness in the trade sector has been
offset by strong consumer, business, and government demand.
Many economists fear that the rising U.S. trade and current account5 deficits
could lead to a large drop in the value of the U.S. dollar. The current account deficit
now exceeds 6% of GDP and is placing downward pressure on the dollar. If foreign
investors stop offsetting the deficit by buying dollar-denominated assets, the value
of the dollar could drop — possibly precipitously. In that case, U.S. interest rates
would have to rise to attract more foreign investment; financial markets could be
disrupted; and inflationary pressures could increase. In the International Monetary
Fund’s May 2006 consultation with the United States, for example, its directors
reiterated their long-standing concerns about the large U.S. current account deficit.
They stated that “there is broad agreement that the large U.S. current account deficit
... cannot be sustained indefinitely. Although a gradual adjustment is the most likely
outcome, delaying progress increases the risk of fanning protectionist sentiment or
disorderly foreign exchange market conditions.”6
Currently, foreign investment in dollar assets along with purchases of securities
by central banks of countries, such China and Japan, have been sufficient to keep the
value of the dollar from falling too far. These central banks have intervened in
currency markets to keep their exchange rates relatively stable with respect to the
dollar, although Japan claims not to have intervened since spring of 2004. This
intervention adds to the foreign currency reserves held by these countries. Japan’s
central bank held $858 billion in foreign currency reserves (end of August 2006), and
the Bank of China held $941 billion (end of June 2006). In U.S. Treasury securities,
as of July 2006, Japan held $637 billion and China $333 billion.7 On July 21, 2005,
China announced a 2.1% revaluation of its currency, but the value of the renminbi
has appreciated only slightly since then (indicating that China may still be
intervening in currency markets).8
4 For further information on trade deficits and the macroeconomy, see CRS Report
RL31032, The U.S. Trade Deficit: Causes, Consequences, and Cures, by Craig K. Elwell.
5 U.S. trade in goods and services plus net flows of investment income and remittances.
6 IMF, 2005 Article IV Consultation with the United States of America. Concluding
Statement of the IMF Mission. May 31, 2006.
7 For further information, see CRS Report RS22331, Foreign Holdings of Federal Debt, by
Justin Murray and Marc Labonte.
8 For further information, see CRS Report RL32165, China’s Currency: Economic Issues
and Options for U.S. Trade Policy
, by Wayne M. Morrison and Marc Labonte.

CRS-5
How long can the United States keep running trade deficits? U.S. deficits in
trade can continue for as long as foreign investors are willing to buy and hold U.S.
assets, particularly government securities and other financial assets.9 Their
willingness depends on a complicated array of factors including the perception of the
United States as a safe haven for capital, relative rates of return on investments,
interest rates on U.S. financial assets, actions by foreign central banks, and the
savings and investment decisions of businesses, governments, and households. The
policy levers that influence these factors affecting the trade deficit are held by the
Federal Reserve10 (interest rates) as well as both Congress and the Administration
(government budget deficits and trade policy), and their counterpart institutions
abroad.
Types of Trade Data
The U.S. government compiles trade data in four different ways. The data on
goods trade are first compiled on a census basis. Bilateral and sectoral data are
reported only on a census basis. The census numbers are then adjusted and reported
monthly on a balance of payments (BoP) basis that includes adjustments for
valuation, coverage, and timing and excludes military transactions. The data are
finally reported in terms of national income and product accounts (NIPA). The NIPA
data also can be further adjusted to include correcting for inflation to gauge
movement in trade volumes as distinct from trade values. Conceptually, this
procedure is analogous to adjusting macroeconomic data from nominal to real values.
The Census Bureau also reports imports on a c.i.f. (cost-insurance-freight) basis
which includes the value of insurance, international shipping, and other charges
incurred in bringing merchandise to U.S. ports of entry. The customs (or f.a.s. —
free-alongside-ship) data do not include these supplementary costs. U.S. import data
are reported on a customs basis with insurance and freight charges counted in U.S.
services trade. Other countries, however, commonly report merchandise import
figures that include insurance and freight charges. This tends to overstate their
imports and understate their trade surpluses with the United States.
U.S. Merchandise Trade Balance
The merchandise (goods) trade balance is the most widely known and frequently
used indicator of U.S. international economic activity (see Figure 2). In 2005, total
U.S. merchandise trade on a balance of payments (BoP) basis amounted to $2.67
trillion, with exports of $895 billion and imports of $1,677 billion. The U.S.
merchandise trade deficit rose 17% in 2005 to $783 billion following a 22% rise in
2004. Prior to 1992, the deficit had decreased for four consecutive years, from a
previous peak of $159.6 billion in 1987 to $76.9 billion in 1991. The increase in the
9 See Mann, Catherine L. Is the U.S. Trade Deficit Sustainable? Washington, Institute for
International Economics, 1999. 224 p. See also: CRS Report RS21409, The Budget Deficit
and the Trade Deficit: What Is Their Relationship?
by Marc Labonte and Gail Makinen.
10 For details, see CRS Report RS20826, Structure and Functions of The Federal Reserve
System
, by Pauline Smale.

CRS-6
trade deficit in recent years has been due largely to sluggish demand for U.S. exports
and rising demand for imports caused primarily by capital inflows into the U.S.
market, slow economic recoveries in other countries, and faster economic growth in
the United States. As a share of gross domestic product (GDP), the deficit on goods
trade rose from 1.9% in 1990 to 5.1% in 2003 and 6.3% in 2005.
Figure 2. U.S. Merchandise Exports, Imports, Trade
Balance, and Real Effective Dollar Exchange Rate
Index, 1982-2005
$ Billions
Exchange Rate Index
1600
300
1400
Real Effective Dollar
1200
Exchange Rate (Right Scale)
Exports
1000
Imports
200
800
, ,
, ,
, ,
600
,
,
,
,
, ,
, ,
, , , , ,
, , , , , ,
100
400
200
0
0
-200
Trade Balance
-400
-100
-600
-800
-1000
-200
81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Year
Sources: U.S. Department ofCommerce; IMF. Note: For Exchange Rate, 1995= 100
As for U.S. merchandise exports (as shown in Table 1 and Figure 2), they
decreased in 2001 and 2002 in response to the global slowdown, but they generally
have been increasing each year. As shown in Figure 3, the growth of imports has
also been steady, although they too fell by 4.4% in 2001 before recovering in 2002.
In 2003, import growth was nearly double export growth, although in 2004, export
growth almost caught up with that of imports, and in 2005, both dropped slightly
(11% for exports and 14% for imports). Since U.S. imports are about 88% greater
than U.S. exports, exports must grow 88% faster than imports just for the deficit to
remain constant.

CRS-7
Figure 3. Annual Growth in U.S. Merchandise Exports
and Imports, 1982-2005
Percent
30
25
Import
Growth

20
Export Growth
15
10
5
0
-5
-10
-15
82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Year
Source: Underlying data from U.S. Department of Commerce

CRS-8
Table 1. U.S. Exports, Imports, and Merchandise Trade
Balances, 1982-2005
(billions of U.S. dollars)
Census basis
Balance of payments basis
Exports
Imports
Trade
Exports
Imports
Trade
Year
(f.a.s.a)
(customs b)
Balance
(f.a.s.a)
(customs b)
Balance
1982
212.3
243.9
-31.6
211.2
247.6
-36.4
1983
201.7
261.7
-60.0
201.8
268.9
-67.1
1984
218.7
330.5
-111.8
219.9
332.4
-112.5
1985
212.6
336.4
-123.8
215.9
338.1
-122.2
1986
226.4
365.7
-139.3
223.3
368.4
-145.1
1987
253.9
406.3
-152.4
250.2
409.8
-159.6
1988
323.3
441.9
-118.6
320.2
447.2
-127.0
1989
362.9
473.4
-110.5
359.9
477.7
-117.8
1990
392.9
495.2
-102.3
387.4
498.4
-111.0
1991
421.8
487.1
-65.3
414.1
491.0
-76.9
1992
448.2
532.6
-84.4
439.6
536.5
-96.9
1993
464.8
580.5
-115.7
456.9
589.4
-132.5
1994
512.6
663.2
-150.6
502.9
668.7
-165.8
1995
584.7
743.5
-158.8
575.2
749.4
-174.2
1996
625.1
795.3
-170.2
612.1
803.1
-191.0
1997
689.2
869.7
-180.5
678.4
876.5
-198.1
1998
682.1
911.9
-229.8
670.4
917.1
-246.7
1999
695.8
1,024.6
-328.8
684.0
1,030.0
-346.0
2000
781.9
1,218.0
-436.1
772.0
1,224.4
-452.4
2001
730.9
1,142.3
-411.4
718.7
1,145.9
-427.2
2002
693.5
1,163.6
-470.1
681.8
1,164.7
-482.9
2003
724.8
1,257.1
-532.3
713.1
1,260.7
-547.6
2004
818.8
1,469.7
-650.9
807.5
1,472.9
-665.4
2005
906.0
1,673.5
-767.5
894.6
1,677.4
-782.8
Source: U.S. Department of Commerce, Bureau of Economic Analysis, U.S. International
Transactions Accounts Data.
Note: Goods on a Census basis are adjusted to a Balance of Payments basis to include changes in
ownership that occur without goods passing into or out of the customs territory of the United States,
to eliminate duplication, and to value transactions according to a standard definition. Export
adjustments include counting military sales as services not goods, adding private gift parcels, and
foreign official gold sales from U.S. private dealers. Import adjustments include adding in inland
freight in Canada and foreign official gold sales to U.S. private dealers, and subtracting imports by
U.S. military agencies.
a. Exports are valued on the f.a.s. basis, which refers to the free-alongside-ship value at the port of
export and generally includes inland freight, insurance, and other charges incurred in placing
the goods alongside the carrier at the port of exportation.
b. Imports are valued as reported by the U.S. Customs Service and excludes import duties, the cost
of freight, insurance, and other charges incurred in bringing merchandise to the United States.

CRS-9
Merchandise Trade Balance in Volume Terms
Like other economic variables, exports and imports, reported in terms of their
values, can change merely because prices change. Trade data, therefore, can be
adjusted for inflation by dividing by a chained price index (chained price indexes are
weighted by two-year averages) to generate real or volume data (some trade
commodities actually are reported in volume terms [e.g., tons of wheat]). The real
data provide a more accurate picture of how the underlying flows of merchandise are
changing. As with the nominal trade deficit, the real deficit continues to widen.
Figure 4. Real U.S. Imports, Exports, and Trade
Balance of Goods (chained 2000 dollars), 1990-
2005
$ Billions
2000
1750
U.S. Exports
1500
1250
U.S. Imports
1000
750
500
250
0
-250
-500
-750
Trade Balance
-1000
90
91
92
93
94
95
96
97
98
99
0
1
2
3
4
5
Year
Source: CRS with data from U.S. Bureau of Economic Analysis
As shown in Table 2 and Figure 4, the constant-dollar value, or physical
volume, of merchandise exports increased by 7.3% in 2005, down slightly from 8.8%
in 2004 but up from 2.6% in 2003, -4.5% in 2002, and 6.3% in 2001. The physical
volume of imports rose by 6.9% in 2005, down from 10.8% in 2004 but up from
5.4% in 2003, 3.4% in 2002, and a fall of 3.6% in 2001. Because the growth of
merchandise imports is higher than the growth of exports and because imports exceed
exports by more than 80% on a physical volume basis, exports would have to grow
more than 80% faster than imports just for the U.S. trade deficit in terms of volume
to remain constant. In 2005, export growth actually exceeded import growth, but the
deficit still increased. In recent years, the deficit in volume terms has varied relative
to the deficit in value terms partly because of fluctuations in oil import prices (when
oil prices rise, the deficit in value rises relative to that in volume terms).

CRS-10
Table 2. U.S. Merchandise Trade in Volume Terms, 2001-2005
(billions of chained 2000 dollars)
Export
Import
Net
Year
Exports
Growth
Imports
Growth
Exports
2001
736.3
-6.1
1,204.1
-3.2
-467.8
2002
707.0
-4.0
1,248.2
3.7
-541.2
2003
719.7
1.8
1,309.2
4.9
-589.5
2004
783.6
8.9
1,452.7
11.0
-669.1
2005
841.1
7.3
1,553.0
6.9
-711.9
Source: Bureau of Economic Analysis, National Income and Products Accounts Table.
Current Account Balance
The current account provides a broader measure of U.S. trade because it
includes services, investment income, and unilateral transfers in addition to
merchandise trade. (See Figure 5.) The balance on services includes travel,
transportation, fees and royalties, insurance payments, and other government and
private services. The balance on investment income includes income received on
U.S. assets abroad minus income paid on foreign assets in the United States.
Unilateral transfers are international transfers of funds for which there is no quid pro
quo
. These include private gifts, remittances, pension payments, and government
grants (foreign aid). Data on the current account lag those on trade by several
months.
Figure 5. U.S. Current Account and Merchandise
Trade Balances, 1982-2005
$Billions
200
0
-200
-400
Current Account Balance
Merchandise Trade
Balance
-600
-800
-1000
82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5
Year
Source: CRS with data from U.S. Bureau of Economic Analysis
Table 3 summarizes the components of the U.S. current account. In 2005, the
U.S. deficit on current account increased to $791.5 billion from $665.3 billion in
2004. In 2006, it is forecast to rise to about $884 billion. As a share of U.S. GDP,
this deficit rose to 6.3% in 2005 — considerably above the caution level used by the
International Monetary Fund of 5%. Historically, the current account deficit fell
from a then record-high $160.7 billion in 1987 to $79.0 billion in 1990, and switched
to a $3.7 billion surplus in 1991 (primarily because of payments to fund the Gulf War

CRS-11
by Japan and other nations). However, since 1992, the current account deficit has
been increasing significantly except for a slight dip in 2001 because of the U.S.
recession.
Since the merchandise trade balance comprises the greater part of the current
account, the two tend to track each other. Unlike the merchandise trade balance,
however, the services account has been in surplus since 1975. In 2005, the United
States surplus in its services trade was $66.0 billion. Since Americans are such large
investors in foreign economies, the United States traditionally also has had a surplus
in its investment income. This surplus on income from investments, which reached
a high of $89.8 billion in 1997, dropped to $52.5 billion in 2003, rebounded in 2004,
and rose further to $66.0 billion in 2005. The deficit in unilateral transfers (primarily
dollars sent abroad by foreign workers and recent immigrants) at $86.1 billion in
2005 reflects a rising trend and is more than double the level of the late-1980s. This
largely offsets the U.S. surplus in services and investment income.
Table 3. U.S. Current Account Balances: 1985-2005
(billions of U.S. dollars)
Merchandise
Investment
Net
Current
Calendar
Trade
Services
Income
Unilateral
Account
Year
Balance a
Balance b
Balance c
Transfers d
Balance e
1985
-122.2
0.3
25.7
-22.0
-118.2
1986
-145.1
6.5
15.5
-24.1
-147.2
1987
-159.6
7.9
14.3
-23.3
-160.7
1988
-127.0
12.4
18.7
-25.3
-121.2
1989
-117.7
24.6
19.8
-26.2
- 99.5
1990
-111.0
30.2
28.6
-26.7
-79.0
1991
-76.9
45.8
24.1
10.8
3.7
1992
-96.9
57.8
24.2
-33.1
-48.0
1993
-132.5
62.3
25.3
-37.1
-82.0
1994
-165.8
67.4
17.1
-36.8
-118.0
1995
-174.2
77.9
20.9
-34.1
-109.5
1996
-191.0
87.1
22.3
-38.6
-120.2
1997
-198.1
89.8
12.6
-45.2
-140.9
1998
-246.7
81.7
4.3
-53.2
-214.9
1999
-346.0
82.6
13.9
-50.6
-300.1
2000
-452.4
74.1
21.0
-58.8
-416.4
2001
-427.2
64.5
25.2
-51.9
-389.4
2002
-482.9
61.1
10.0
-64.0
-475.2
2003
-547.3
52.5
46.3
-71.2
-519.7
2004
-665.3
54.1
27.6
-81.6
-665.3
2005
-782.7
66.0
11.3
-86.1
-791.5
Source: U.S. Bureau of Economic Analysis, U.S. International Transactions. On Internet at
[http://www.bea.gov/bea/international/bp_web/list.cfm?anon=71].
a. On a balance-of-payments basis.
b. Includes travel, transportation, fees and royalties, insurance payments, other government and
private services, and investment income.
c. Income receipts on U.S. assets abroad minus income payments on foreign assets in the U.S.
d. International transfers of funds, such as private gifts, pension payments, and government grants for
which there is no quid pro quo.
e. The trade balance plus the service balance plus investment income balance plus net unilateral
transfers, although conceptually equal to the current account balance, may differ slightly as a
result of rounding.

CRS-12
Forecasts
According to Global Insight, Inc., a leading U.S. economic forecasting firm, in
2006 the U.S. merchandise (goods) trade deficit is projected to increase to about
$855 billion on a balance-of-payments basis. In 2007, this deficit is expected to rise
to about $861 billion before declining somewhat in 2008 (see Table 4 and Figure
6
). The U.S. current account deficit likewise is projected to from $792 billion in
2005 to $884 billion in 2006 and further to $894 billion in 2007 and then decline
somewhat in 2008.
Table 4. U.S. Merchandise and Current Account Trade
2002 to 2008 (forecast)
(billions of U.S. dollars)
Forecast
2002
2003
2004
2005
2006
2007
2008
Merchandise Trade
Exports
Actual
682.4
713.4
807.5
894.6



Global Insight



— 1,038.5 1,162.2 1,273.2
Imports
Actual
1164.7
1260.7 1472.9 1,677.4



Global Insight



— 1,896.7 2,034.8 2,128.5
Trade Balance
Actual
-482.3
-547.3
-665.4
-782.7



Global Insight




-844.0
-858.7
-841.8
Services Trade Balance
Actual
61.1
52.5
54.1
66.0



Global Insight




71.6
98.1
127.9
Current Account Balance
Actual
-475.2
-519.7
-665.3
-791.5


Global Insight



-863.1
-877.7
-855.9
Sources: U.S. Bureau of Economic Analysis, December 2005; Global Insight, Interim Annual
Forecast
, September 2006. Balance-of-payments basis.
Note: Global Insight was created through the 2002 merger of Standard & Poor’s Data Resources Inc.
(DRI) and Wharton Econometric Forecasting Associates (WEFA).

CRS-13
Figure 6. U.S. Merchandise Trade and Current Account Deficits
1997-2008 (forecast, in current dollars)
$Billions
200
Actual
Forecast
0
-200
-400
Goods Trade
-600
-800
Current Account
-1000
97
98
99
2000
01
02
03
04
05
06
07
08
Source: See Table 4.
Year
U.S. Trade with Selected Nations
The overall U.S. merchandise trade balance consists of deficits or surpluses with
all trading partners. Many economists view the overall figure as more significant
than bilateral trade balances, since rising deficits with some nations are often offset
by declining deficits or growing surpluses with others. Nonetheless, abnormally
large or rapidly increasing trade deficits with particular countries are often viewed
as indicators that underlying problems may exist with market access, the
competitiveness of particular industries, currency misalignment, or macroeconomic
adjustment. Figure 7 and Table 5 show U.S. trade balances with selected nations.

CRS-14
Figure 7. U.S. Merchandise Trade Balances with Selected Nations,
2005
Country
China
-202
Japan
-82
Canada
-76
Germany
-50
Mexico
-50
Venezuela
-27
Malaysia
-23
Nigeria
-22
Saudi Arabia
-20
Deficit
Italy
-19
Ireland
-19
South Korea
-16
Taiwan
-12
Thailand
-12
United Kingdom
-12
France
-11
Russia
-11
India
-10
Sweden
-10
Singapore
5
Belgium
5
United Arab Emirates
7
Hong Kong
Surplus
7
Australia
8
Netherlands
11
-250
-200
-150
-100
-50
0
50
$ Billions
Source: CRS with data from the U.S. Department of Commerce
Most of the U.S. trade deficit can be accounted for by trade with China, Japan,
Canada, Mexico, and Germany. Trade with the oil exporting countries, particularly
Venezuela, Nigeria, and Saudi Arabia, also is in deficit. U.S. trade surpluses occur
in trade with the Netherlands, Australia, Hong Kong, and the United Arab Emirates.
The U.S. trade deficit with China has soared over the past decade. From $32
billion in 1995 to $100 billion in 2000 and $202 billion in 2005, the negative net
balance in trade with China has grown to account for 26% of the total U.S. trade
deficit.11 The U.S. trade deficit with China exceeded that with Japan for the first time
in the year 2000 and now is more than twice as large.
China claims that its trade is less imbalanced than U.S. data indicate. Chinese
trade data differ from those of the United States primarily because of the treatment
of Hong Kong as an entrepot. Since Hong Kong is a separate customs area from
mainland China, Beijing counts Hong Kong as the destination for its exports sent
there, even though the goods may be transshipped to other markets. For example,
China would count a laptop computer that is assembled in Shanghai but shipped
through Hong Kong before being exported to the United States as a sale to Hong
Kong. By contrast, the United States and many of China’s other trading partners
count Chinese exports that are transshipped through Hong Kong as products from
11 For details and policy discussion, see CRS Report RL31403, China’s Trade with the
United States and the World
, by Thomas Lum and Dick K. Nanto, or CRS Report RL33536,
China-U.S. Trade Issues, by Wayne M. Morrison.

CRS-15
China not Hong Kong, including goods that contain Hong Kong components or
involve final packaging in Hong Kong. The United States also counts Hong Kong
as the destination of U.S. products sent there, even those that are then reexported to
China. However, the PRC counts many of such reexported goods as U.S. exports to
China. So by U.S. figures, U.S. exports to China tend to be understated, while by
Chinese figures, Chinese exports to the U.S. tend to be understated. The net result
is that China’s reported trade surplus with the United States at $114 billion in 2005
is slightly more than half the reported U.S. deficit with China of $202 billion.
Table 5. U.S. Merchandise Trade Balances with Selected
Nations: 2000-2005
(millions of U.S. dollars, census basis)
Country
2001
2002
2003
2004
2005
Total
-411,389
-470,104
-535,699
-651,521
-766,561
North America
-83,190
-86,920
-95,012
-110,832
-126,671
Canada
-53,266
-49,760
-54,396
-65,765
-76,522
Mexico
-29,924
-37,202
-40,616
-45,068
-50,149
Western Europe
-63,985
-89,218
-101,325
-114,077
-144,065
European Union
-60,856
-82,368
-94,262
-104,510
-122,427
United Kingdom
-599
-7,617
-8,772
-10,442
-12,435
Germany
-29,037
-35,852
-39,199
-45,855
-50,663
France
-10,400
-9,389
-12,153
-10,574
-11,445
Italy
-13,908
-14,201
-14,867
-17,378
-19,496
Netherlands
10,024
8,471
9,731
11,682
11,634
Russia
-3,548
-4,473
-6,170
-8,930
-11,336
Pacific Rim Countries
-194,393
-215,005
-229,968
-282,534
-328,567
Japan
-68,962
-70,055
-65,965
-75,194
-82,682
China
-83,045
-103,115
-123,961
-161,978
-201,626
Newly Industrialized
-21,093
-22,073
-20,867
-21,925
-15,939
Countries (NICS)
Singapore
2,712
1,429
1,418
4,295
5,529
Hong Kong
4,423
3,283
4,692
6,496
7,429
Taiwan
-15,240
-13,805
-14,122
-12,886
-12,788
Republic of Korea
-12,988
-12,979
-12,865
-19,829
-16,109
South/Central American
-38,982
-17,902
-26,821
-37,323
-50,691
Countries
Argentina
913
-1,595
-734
-359
-472
Brazil
1,466
-3,403
-6,666
-7,294
-9,091
Colombia
-2,091
-2,018
-2,631
-2,785
-3,431
OPEC
-39,688
-34,482
-51,037
-71,867
-92,732
Venezuela
-9,552
-10,662
-14,305
-20,181
-27,556
Indonesia -7,605
-7,063
-7,000
-8,142
-8,971
Saudi Arabia
-7,363
-8,364
-13,473
-15,678
-20,398
Nigeria
-7,829
-4,907
-9,365
-14,694
-22,573
Sources: United States Census Bureau, Foreign Trade Statistics. For other countries and further
detail, see U.S. International Trade in Goods and Services, December 2005, FT 900 (05-12), released
February 10, 2006.
Note: Trade Balance equals Total Exports (f.a.s. value) minus General Imports (Customs value).

CRS-16
Table 6 lists the U.S. top deficit trading partners (merchandise trade). In 2000,
China overtook Japan as the top U.S. deficit trading partner. The next highest deficit
trading partners are Japan, Canada, Germany, Mexico, and Venezuela.
Table 6. Top U.S. Merchandise Deficit Trading Partners, 2005
(Billions of U.S. Dollars)
Balance
Exports
Imports
Total U.S.
-766.8
904.3
1,671.1
China
-201.6
41.8
243.5
Japan
-82.7
55.4
138.1
Canada
-76.5
211.3
287.9
Germany
-50.7
34.1
84.8
Mexico
-50.1
120.0
170.2
Venezuela
-27.6
6.4
34.0
Malaysia
-23.3
10.5
33.7
Nigeria
-22.6
1.6
24.2
Saudi Arabia
-20.4
6.8
27.2
Italy
-19.5
11.5
31.0
Ireland
-19.3
9.3
28.6
Korea
-16.1
27.7
43.8
Taiwan
-12.8
22.1
34.8
Thailand
-12.7
7.2
19.9
United Kingdom
-12.4
38.6
51.1
France
-11.4
22.4
33.8
Russia
-11.3
3.9
15.3
India
-10.8
8.0
18.8
Source: U.S. Department of Commerce.
Note: Data are on a census basis. Imports are on a Customs basis.
In 2005, Canada was America’s largest merchandise trading partner, followed
by Mexico, China, Japan, and Germany (China overtook Japan for third place in
2003). Table 7 lists the United States’ top trading partners ranked by trade turnover.
Trade with Canada accounts for 20% of total U.S. trade. By far, Canada is the largest
supplier of U.S. imports and the top purchaser of U.S. exports. Trade with Mexico
accounts for 12%, and trade with China at 10% now exceeds that with Japan at 8%.

CRS-17
Table 7. Top U.S. Trading Partners Ranked by Total
Merchandise Trade in 2005
(Billions of U.S. dollars, customs basis)
U.S.
U.S.
Rank
Country/Group
Balance
Exports
Imports
Total Trade
— Total, all countries
-766.4
904.4
1,670.7
2,575.1
— Total, top 15 countries
-601.5
653.1
1,254.6
1,907.6
1
Canada
-76.6
211.3 287.9
499.2
2
Mexico
-50.2
120 170.2
290.2
3
China
-201.7
41.8 243.5
285.3
4
Japan
-82.7
55.4 138.1
193.5
5
Germany
-50.7
34.1 84.8
119.0
6
United Kingdom
-12.5
38.6
51.1
89.7
7
Korea, South
-16.1
27.7
43.8
71.4
8
Taiwan
-12.8
22.0 34.8
56.9
9
France
-11.4
22.4 33.8
56.2
10
Malaysia
-23.3
10.5 33.7
44.2
11
Italy
-19.5
11.5 31.0
42.5
12
Netherlands
11.6
26.5 14.9
41.4
13
Venezuela
-27.6
6.4 34.0
40.4
14
Brazil
-9.1
15.3 24.4
39.8
15
Ireland
-19.3
9.3 28.6
38.0
Source: U.S. Department of Commerce.
Note: Data are on a census basis. Imports are on a Customs basis.
Table 8 lists trade balances on goods, services, and income, net unilateral
transfers and current account balances for selected U.S. trading partners. While trade
in services, flows of income from investments, and remittances home by foreign
workers are considerably smaller than merchandise flows, as the economy has
become more globalized and service oriented, these components of the current
account have become more important. In many cases, the bilateral current account
balances are quite different from bilateral balances on merchandise trade only.

CRS-18
Table 8. U.S. Current Account Balances With
Selected U.S. Trading Partners, 2005
(billions of U.S. dollars)
Merchandise
Investment
Net
Current
Trade
Services
Income
Unilateral
Account
Country
Balance a
Balance b
Balance c
Transfers d
Balance e
All Countries
-782.7
66.0
11.3
-86.1
-791.5
Mexico
-51.8 5.6
0.6
-11.0
-56.5
Canada
-81.1
10.2
19.4
0.0
-51.5
Asia/Pacific
-369.6
30.0
-35.9
-13.7
-389.2
Japan
-84.7
18.7
-33.3
0.7
-98.7
China
-201.7
2.6
-19.0
-1.9
-220.1
S. Korea
-16.6
3.1
-0.7
-0.6
-14.8
European Union
-124.4
12.2
-25.4
-3.8
-141.5
Germany
-51.0
-5.3
-1.7
-0.9
-58.9
United Kingdom
-13.0
8.9
-21.1
4.2
-20.9
Latin America
-102.5
1.7
12.3
-26.7
-115.3
Source: U.S. Bureau of Economic Analysis, International Transactions Account Data.
a. On a balance-of-payments basis.
b. Includes travel, transportation, fees and royalties, insurance payments, other government and
private services, and investment income.
c. Income receipts on U.S. assets abroad minus income payments on foreign assets in the United
States.
d. International transfers of funds, such as private gifts, pension payments, and government grants for
which there is no quid pro quo.
e. The trade balance plus the service balance plus investment income balance plus net unilateral
transfers, although equal to the current account balance, may differ as a result of rounding.
For example, since Japan has invested considerable amounts in securities and
stocks, and in factories in the United States, it had a surplus of investment income
from the United States in 2005 of $33 billion. This more than offset the $18 billion
in U.S. net exports of services to Japan. As a result, the current account deficit with
Japan of $99.2 billion in 2005 exceeded the merchandise trade deficit of $84.8
billion. A similar situation exists with the European Union. In 2005, the United
States accrued a $32.5 billion deficit in investment income with the EU, and the
current account deficit with the EU of $141.5 billion exceeded the deficit in
merchandise trade of $124.4 billion. The opposite is the case with Canada where the
United States received $20 billion more in investment income than it paid to
Canadians. While the current account deficit with Canada was $51.5 billion, the
merchandise trade deficit was $81.1 billion.
The rising deficit with many countries in investment income reflects the
accumulating debt relative to the world of the United States. Inflows of capital to
compensate for the U.S. trade deficit and low U.S. savings rate help to maintain the
value of the dollar, but interest paid and other income that accrues to that capital is
often repatriated to the home countries. That means more capital must be invested
in the United States or the United States must export more to compensate for the
outflows of investment income. Currently, the United States still has a $11 billion
surplus in investment income overall, but the deficit in investment income with
certain countries has been growing and could become a problem in the future.

CRS-19
Advanced Technology, Autos, and Oil
Table 9 shows U.S. trade in advanced technology products. This includes about
500 commodity codes representing products whose technology is from a recognized
high technology field (e.g., biotechnology) or that represent the leading technology
in a field. The United States long ran a surplus in these products, but that surplus
dropped sharply in 2000 and turned into a deficit in 2002. In 2003, the deficit in U.S.
trade in advanced technology products jumped 65% to $27.4 billion, again rose in
2004, and in 2005 was $44.4 billion. This does not necessarily imply the United
States is losing the high technology race; many of the high technology imports are
from U.S. companies (particularly electronics manufacturers) who assemble the
products overseas. However, this growing deficit may warrant closer policy scrutiny.
Table 9. U.S. Trade in Advanced Technology Products
(billions of U.S. dollars)
Year
U.S. Exports
U.S. Imports
Trade Balance
1990
93.4
59.3
34.1
1995
138.4
124.8
13.6
1996
154.9
130.4
24.5
1997
179.5
147.3
32.2
1998
186.4
156.8
29.6
1999
200.3
181.2
19.1
2000
227.4
222.1
5.3
2001
200.1
195.3
4.8
2002
178.6
195.2
-16.6
2003
180.2
207.0
-26.8
2004
201.4
238.3
-36.9
2005
215.6
260.0
-44.4
January-Sept 2005
184.5
211.3
-26.8
January-Sept 2006
157.9
188.8
-30.9
Source: U.S. Bureau of the Census. U.S. International Trade in Goods and Services. FT-900, issued
monthly. Includes about 500 of some 22,000 commodity classification codes that meet the following
criteria: (1) contains products whose technology is from a recognized high technology field (e.g.,
biotechnology), (2) represent leading edge technology in that field, and (3) constitute a significant part
of all items covered in the selected classification code.
Table 10 provides data on trade in passenger cars with major automobile
producing nations for 2003. This does not include foreign cars assembled in the
United States. The United States incurs the largest deficits in this trade with Japan,
Canada, Germany, Mexico, and South Korea.12
12 For information on the automobile industry, see CRS Report RL32883, U.S. Automotive
Industry: Recent History and Issues
, by Stephen Cooney and Brent D. Yacobucci.

CRS-20
Table 10. U.S. Trade in Passenger Automobiles by
Selected Countries, 2005
(millions of U.S. dollars)
Trading Partner
U.S. Exports
U.S. Imports
Trade Balance
Total World
30,410
123,644
-93,234
Japan
536
35,139
-34,603
Canada
12,038
36,330
-24,292
Germany
3,701
20,308
-16,607
Korea
115
8,769
-8,654
Mexico
3,374
10,826
-7,452
United Kingdom
844
5,701
-4,857
Source: U.S. Bureau of the Census, U.S. International Trade in Goods and Services, FT-900, issued
monthly.
Table 11 show imports of crude petroleum by major country source. Roughly
half comes from the Organization of Petroleum Exporting Countries (OPEC) with
Saudi Arabia, Venezuela, and Nigeria the predominant suppliers. Half, however,
comes from non-OPEC sources, such as Canada, Mexico, and Angola.13
Table 11. U.S. Imports of Crude Oil by Selected Countries, 2005
(Quantity and Customs Value)
Quantity
Customs Value
Country
(Thousand barrels)
($million)
Total World
3,753,088
175,563
OPEC Total
1,818,357
88,303
Saudi Arabia
524,129
24,739
Venezuela
535,718
24,074
Nigeria
396,918
21,904
Kuwait
80,396
3,702
Algeria
82,383
4,670
Other OPEC
198,813
9,214
Non-OPEC Total
1,934,732
87,260
Canada
567,676
24,148
Mexico
552,076
23,096
Angola
161,507
8,161
Ecuador
99,128
4,223
Norway
43,107
1,947
Gabon
55,792
2,759
Other Non-OPEC
455,446
22,926
Source: U.S. Census Bureau, U.S. International Trade in Goods and Services, FT-900, issued
monthly.
13 For detail, see CRS Report RS22204, U.S. Trade Deficit and the Impact of Rising Oil
Prices
, by James K. Jackson.

CRS-21
Some Common Perceptions
This section of the report addresses a few common perceptions about trade that
can be validated by data.
Outsourcing
A common perception is that an increasing amount of U.S. imports are actually
goods manufactured overseas by U.S. affiliated companies. U.S. manufacturers have
moved production abroad in search of lower production costs or other economic
advantages and are sending their product back to the American market.
Figure 9 shows the percentage of U.S. imported manufactured products by
affiliation of the foreign producer. The total value of such imports from foreign
affiliates of U.S. parent companies rose from $39.3 billion in 1982 to $191.9 billion
in 2003, but the percentage of total U.S. imports accounted for by these imports has
been fairly constant at around 16%. In 1982, such imports accounted for 15.9% of
total imports, while in 2008 they accounted for 16.3% of the total. These are
products such as American branded computers assembled in China in a subsidiary
affiliated with a U.S. company.
The share of imports from foreign parent companies with affiliates in the United
States has been rising somewhat — from 21.0% in 1982 to 25.5% in 2003. These
reflect the growing foreign direct investment in the United States and include imports
such as transmissions from a Japanese automaker for use in its assembly plant
located in the United States.
Imports from unaffiliated foreigners accounts for about 60% of all imported
goods. Their share has fallen somewhat from 63.2% in 1982 to 58.2% in 2003.

CRS-22
Figure 8. Shares of U.S. Imports of Manufactures by Affiliation
of Foreign Producer, 1982-2003
Percent
100%
From Foreign Parents of U.S. Affiliates
80%
From Foreign Affiliates of U.S. Parents
60%
40%
From Unaffiliated Foreigners
20%
0%
1982
84
86
88
90
92
94
96
98
2000
2
3
Year
Source: CRS with Data from U.S. Department of Commerce
Is the Trade Deficit at a Dangerous Level?
The International Monetary Fund has used its experience with currency and
exchange rate crises to say that caution should be exercised when a nation’s current
account deficit reaches a level of 5% of gross domestic product. At this level,
nations have difficulty borrowing to finance imports and the nation’s exchange rate
may come under severe downward pressure. The United States is a special case,
since the dollar is a secondary medium of exchange (one can use dollars in many
foreign countries without exchanging them for local currency) and dollars are used
extensively as an official reserve currency by national banks. Still, the IMF has been
warning that the size of the U.S. current account deficit could cause a large
depreciation of the dollar and disrupt financial markets.
Figure 9 shows the U.S. current account balance as a percent of U.S. gross
domestic product. It grew in magnitude from near zero in 1980 to 3.4% in 1987,
dropped into negative in 1991 and rose to 6.3% in 2005 (exceeding the 5% level
considered to warrant caution by the International Monetary Fund). Rising energy
costs are expected to push the current account deficit to about 6.6% of GDP in 2006
before it then begins to decline slightly. This indicates that downward pressures on
the value of the dollar are likely to arise. Congress may consider measures to bring
the size of the current account deficit relative to GDP to less than 5%.

CRS-23
Figure 9. The U.S. Current Account Deficit as a Percent
of Gross Domestic Product, 1985-2008 (forecast)
Percent
8
Actual
Forecast
7
6.6
6.3
6.4
6
6
5.7
IMF Caution Level
5
4.7
4.5
4.2
3.8
4
3.3 3.4
3.2
2.8
3
2.4
2.4
1.8
2
1.7 1.5 1.5 1.5
1.3
1.2
0.8
1
0
-0.1
-1
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
Year
Source: Data from U.S. Department of Commerce. Forecasts by Global Insight, Inc.
Is Trade with China Merely Replacing that with Southeast
Asia?

Some observers claim that the rising U.S. imports from China are merely
displacing those from other East Asian nations. Labor intensive industries, such as
apparel, shoes, and consumer electronics, that produce for export to the United States
and other industrialized nations are simply moving to China from Southeast Asian
nations, South Korea, and Taiwan. The overall level of imports from Asia is not
changing. Its composition is just shifting toward China.
For specific industries, the shift in imports from traditional Asian exporting
nations to China is clear. In woven apparel (HS 62), for example, in 1990, Hong
Kong, South Korea, and Taiwan accounted for 33.4% of U.S. imports as compared
to China with a 14.7% share. By 2005, China accounted for 27.3% of such imports
as compared with 6.3% for Hong Kong, South Korea, and Taiwan.
In terms of overall imports, however, U.S. imports from Hong Kong, Taiwan,
and South Korea rose from $50.6 billion (10.2% of total U.S. imports) in 1990 to
$87.5 billion (5.2% of total) in 2005, while imports from China rose from $15.2
billion (3.3% of total) in 1990 to $243.5 billion (14.6% of total) in 2005.14 Clearly,
the share of U.S. imports from Hong Kong, Taiwan, and South Korea has been
falling, while the share of imports from China is rising. The value of U.S. imports
14 The numbers are comparable for all Asian countries.

CRS-24
from both, however, continues to rise, and the value of those from China is rising
faster.
The large U.S. trade deficit with China, moreover, is not just a transfer of the
deficit from other Asian nations to China. The U.S. trade deficit with Hong Kong,
Taiwan, and South Korea has gone from $17.9 billion (17.5% of the total U.S.
deficit) in 1990 to $21.3 billion (2.8% of the total) in 2005. U.S. trade with Hong
Kong actually went from a deficit to a surplus. The U.S. trade deficit with China,
meanwhile, went from $41.1 billion (10.2% of the total U.S. trade deficit) in 1990
to $201.5 billion (26.3% of the total) in 2005. What actually is happening is that the
U.S. trade deficit is rising with most regions of the world, particularly with Asia
(including China), and it also is rising with Canada and Mexico, the European Union,
and with oil exporting countries.