.

U.S. International Trade: Trends and Forecasts
Dick K. Nanto
Specialist in Industry and Trade
Shayerah Ilias
Analyst in International Trade and Finance
J. Michael Donnelly
Information Research Specialist
December 14, 2009
Congressional Research Service
7-5700
www.crs.gov
RL33577
CRS Report for Congress
P
repared for Members and Committees of Congress
c11173008

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U.S. International Trade: Trends and Forecasts

Summary
The U.S. trade deficit was shrinking through June 2009 because of the global financial crisis but
has begun to increase again. The crisis caused U.S. imports to drop faster than U.S. exports. The
global simultaneous recession, however, implies that exporting countries cannot rely on increased
foreign demand to make up for slack demand at home. Even though U.S. imports are down
considerably from 2008, companies competing with imports still face diminishing demand as the
domestic economy has been hit by recession. These conditions imply that the political forces to
protect domestic industry from imports are likely to intensify both in the United States and
abroad.
In 2008, the trade deficit in goods reached $840.3 billion on a balance of payments (BoP) basis,
greater than the $831 billion in 2007 but less than the $847.3 billion in 2006. The 2008 deficit on
merchandise trade with China was $268 billion (Census basis), with the European Union was
$95.8 billion, with Canada was $78.3 billion, with Japan was $74.1 billion, with Mexico was
$64.7 billion, and with the Asian Newly Industrialized Countries (Hong Kong, South Korea,
Singapore, and Taiwan) moved from a deficit of $5.5 billion in 2007 to a surplus of $2.2 billion.
Imports of goods of $2,117.2 billion increased by $147.9 billion (7.5%) over 2007. Exports of
goods of $1,277 billion rose by $138.6 billion (12.2%). The overall trade deficit for 2008
declined, or worsened, by $9.3 billion, or roughly 1%. In the fourth quarter of 2008, as the U.S.
recession worsened, imports declined faster than exports resulting in monthly trade deficits
declining from July 2008 through February 2009. In 2009 goods imports reached their lowest
recent level in May, at $119.3 billion. In 2009 goods exports fluctuated near $82 billion through
May when they began to increase at about two billion monthly, reaching $93.5 billion in October.
Trade deficits are a concern for Congress because they may generate trade friction and pressures
for the government to do more to open foreign markets, to shield U.S. producers from foreign
competition, or to assist U.S. industries to become more competitive. Overall U.S. trade deficits
reflect excess spending (a shortage of savings) in the domestic economy and a reliance on capital
imports to finance that shortfall. Capital inflows serve to offset the outflow of dollars used to pay
for imports. Movements in the exchange rate help to balance trade. The rising trade deficit (when
not matched by capital inflows) places downward pressure on the value of the dollar which, in
turn, helps to shrink the deficit by making U.S. exports cheaper and imports more expensive.
Central banks in countries such as China, however, have intervened in foreign exchange markets
to keep the value of their currencies from rising too fast.
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.
Over the past three years, the U.S. current account deficit has been becoming smaller. In 2008,
the deficit on current account fell to a revised $706.1 billion from a revised $726.6 billion in 2007
and a revised $803.5 billion in 2006. IHS Global Insight forecasts a considerably smaller deficit
on current account for 2009, at -$445.8 billion. In trade in advanced technology products, the
U.S. balance moved from a deficit of $38 billion in 2006 to a revised $61.9 billion in 2007 and
$61.1 billion in 2008. In trade in motor vehicles and parts, the $106.6 billion U.S. deficit in 2008
was mainly with Japan, Mexico, Germany, and South Korea. In crude oil, major sources of 2008’s
$351 billion in imports were Canada, Saudi Arabia, Venezuela, Mexico, and Nigeria. This report
will be updated periodically.

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U.S. International Trade: Trends and Forecasts

Contents
Most Recent Developments......................................................................................................... 1
Trade in Goods................................................................................................................ 1
Trade in Services............................................................................................................. 2
Trade in Goods and Services ........................................................................................... 2
The U.S. Deficit in International Trade........................................................................................3
Savings Shortfalls and the Trade Deficit ................................................................................ 4
Implications of the Trade Deficit ........................................................................................... 4
Types of Trade Data .............................................................................................................. 9
U.S. Merchandise Trade Balance................................................................................................. 9
Current Account Balance........................................................................................................... 12
Forecasts................................................................................................................................... 15
U.S. Trade with Selected Nations .............................................................................................. 16
Advanced Technology, Autos, and Oil ....................................................................................... 22
Some Common Perceptions ...................................................................................................... 26
Is the Trade Deficit at a Dangerous Level? .......................................................................... 26
Is Trade with China Merely Replacing That with Southeast Asia?.............................................. 28
May Asian Nations Form a Free Trade Agreement Which May Effect U.S. Imports and
Exports to Asian Nations? ...................................................................................................... 30
International Trade Statistics Web Resources............................................................................. 31

Figures
Figure 1. Monthly U.S. Balances of Trade in Goods and Services, 2008 and 2009 ....................... 3
Figure 2. Month-End Trade-Weighted U.S. Dollar Against Broad, Major Currencies, and
Other Important Trading Partner Indices, January 2000-July 2009 ............................................ 6
Figure 3. The Exchange Value of the Chinese Renminbi, Japanese Yen, British Pound,
EU Euro, and Canadian Dollar ................................................................................................. 7
Figure 4. U.S. Merchandise Exports, Imports, and Trade Balance .............................................. 10
Figure 5. Annual Growth in U.S. Merchandise Exports and Imports, 1982-2008....................... 12
Figure 6. U.S. Current Account and Merchandise Trade Balances.............................................. 13
Figure 7. U.S. Merchandise Trade and Current Account Deficits, 1982-2010
(Forecast in Current Dollars).................................................................................................. 16
Figure 8. U.S. Merchandise Trade Balances With Selected Nations, 2008 .................................. 17
Figure 9. 2008 U.S. Automotive Trade by Major Segment ......................................................... 25
Figure 10. The U.S. Current Account Deficit as a Percent of Gross Domestic Product,
1985-2011 (forecast) .............................................................................................................. 28

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Tables
Table 1. U.S. Merchandise Exports, Imports, and Trade Balances .............................................. 11
Table 2. U.S. Current Account Balances .................................................................................... 14
Table 3. U.S. Merchandise and Current Account Trade, 2003 to 2010 (Forecast)....................... 15
Table 4. U.S. Merchandise Trade Balances with Selected Nations and Groups ........................... 18
Table 5. Top U.S. Merchandise Deficit Trading Partners, 2008 .................................................. 19
Table 6. Top U.S. Trading Partners Ranked by Total Merchandise Trade in 2008 ....................... 20
Table 7. U.S. Current Account Balances With Selected U.S. Trading Partners, 2008 ................. 21
Table 8. U.S. Trade in Advanced Technology Products .............................................................. 23
Table 9. U.S. Trade in Motor Vehicles (Passenger Cars, Trucks, and Buses) and Parts................ 24
Table 10. U.S. Imports of Crude Oil from Selected Countries, 2008........................................... 25
Table 11. (quantity and customs value) ...................................................................................... 25
Table 12. Changes in U.S. Merchandise Trade Balances With Selected Countries and
Groups, 2006 and 2007 .......................................................................................................... 29

Contacts
Author Contact Information ...................................................................................................... 32

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Most Recent Developments
As the global financial crisis has worsened and the United States and other countries drop into
recession, the declining U.S. trade deficit is likely to contribute positively to U.S. gross domestic
product. The U.S. recession would be worse without the shrinking U.S. trade deficit. In 2009,
world economic growth is projected to be -2%, although the recession apparently has bottomed
out in North America, Japan, and Europe. China continues to exhibit strong growth. Given the
simultaneous economic recession, a major problem is that exporting countries cannot rely on
increased foreign demand to make up for slack demand at home. There is little prospect that they
can export their way out of this recession. Even though U.S. imports are projected to decline,
companies competing with imports are still likely to face diminishing demand as the domestic
economy continues to stagnate. These conditions imply that the political forces to protect
domestic industry from imports are likely to intensify both in the United States and abroad.
In 2009, the U.S. deficit in merchandise trade is projected to drop by about one-third (relative to
2008) to around $530 billion as the U.S. recession causes imports to decline faster than exports.
Total U.S. trade (exports plus imports of goods and services) also is projected to fall by about
27%. The evidence is that for January through October 2009, U.S. exports to the world have
declined by 21.8%, while U.S. imports from the world have declined 30.4% relative to the same
time period’s 2008 values.
In 2009, imports of energy-related petroleum products are projected to fall by about one-half as
moderating prices for crude oil and weakening domestic demand for gasoline and other petroleum
products cut into the need for imports. For January through October 2009, imports of such
products remain the U.S. top import commodity, despite a decline in total import value of 50%
relative to the same time period in 2008.
Trade in Goods
In 2008, the trade deficit in goods reached $840.3 billion on a balance of payments (BoP) basis,
greater than the $831 billion in 2007 but less than the $847.3 billion in 2006. In Figure 4, the
trade balance appears roughly the same from 2006 through 2008. The 2008 deficit on
merchandise trade with China was $268 billion (Census basis), with the European Union was
$95.8 billion, with Canada was $78.3 billion, with Japan was $74.1 billion, with Mexico was
$64.7 billion, and the Asian Newly Industrialized Countries (Hong Kong, South Korea,
Singapore, and Taiwan) switched from deficit to surplus of $2.2 billion. Imports of goods of
$2,103.6 billion increased by $144.3 billion (7.3%) over 2007. Increases in imports by sector
were: crude oil up $104.8 billion, capital goods except automotive up $9.2 billion, automotive
vehicles and parts down $25.2 billion, and consumer goods up $7.6 billion. Exports of goods of
$1,291.4 billion rose by $142.9 billion (12.4%), particularly in industrial supplies, up $70.9
billion, capital goods except automotive up $22.0 billion, automotive vehicles and parts down
$0.1 billion, and consumer goods up $15.1 billion. Although the overall trade deficit was up, in
the fourth quarter as the U.S. recession worsened, imports declined faster than exports resulting in
a small quarterly trade deficit. U.S. exports and imports of goods began to decline in August
and September 2008. In December 2008, exports of goods were $32.0 billion lower and
imports were $55.1 billion lower than in July 2008. This trend continues in 2009. Exports of
goods for October at $93.5 billion were up from April’s $80.0 billion and back at the mid-
2007 level. Imports of goods for October 2009, at $138.4 billion, reached a high for 2009, but
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were lower than the level of imports in December 2008 ($142.3 billion) or January 2007
($157.6 billion).
Trade in Services
In 2008, total annual imports of services of $405.3 billion and exports of $549.6 billion yielded a
surplus in U.S. services trade of $144.3 billion. The U.S. service industries, particularly, financial
services, tourism, shipping, and insurance, tend to compete well in international markets. U.S.
services exports peaked in June, 2008, at $47.2 billion. U.S. services imports likewise peaked
in August 2008 at $35.7 billion. Both flows have declined through March 2009 and since
have been recovering slightly with exports reaching $43.3 billion and imports reaching
$31.4 billion in October 2009.
Trade in Goods and Services
Since the United States runs a surplus in trade in services, the combined deficit on goods and
services is lower than the deficit on goods alone. In 2008, exports of goods and services of
$1,826.6 and imports of $2,522.5 resulted in a deficit of $695.9 billion, down from the $701.4
billion in 2007 and $760.4 billion in 2006.
For 2008, the annual trade deficit on goods and services amounted to approximately 4.9% of U.S.
gross domestic product (GDP, $14.3 trillion in 2008), down slightly from 5.1% in 2007 and 5.8%
in 2006. A level of 5% for countries is considered to be cautionary by economic observers. At that
level, other countries have experienced problems paying for imports and maintaining the value of
their currency. Given the “safe haven” effect (investors seeking a safe investment) for U.S.
Treasury securities, however, as the global financial crisis worsened, foreign investors flocked to
U.S. securities. As a result, U.S. interest rates remained relatively low, and in combination with
the declining U.S. trade deficit have worked to allay concerns over the ability of the United States
to finance the excess of imports over exports. Toward the end of 2009, however, investors have
slowed their buying of U.S. securities causing the dollar to weaken and raising some concern that
U.S. interest rates may rise.
Figure 1 shows U.S. trade balances in goods and in services by month, for 2008 and 2009. In
2007, the monthly surplus in services gradually rose from $9.2 billion to $13.5 billion. The 2008
monthly services balance began at $12.4 billion, rose through midyear, then dropped to $11.3
billion in December. Monthly services balances for 2009 have averaged close to $11 billion
through May. Total 2008 annual imports of services of $405.3 billion and exports of $549.6
billion yielded a surplus in U.S. services trade of $144.3 billion.1 The January through October
2009 monthly deficits on goods and services, which began in January at $37.0 billion and
trended lower through May’s deficit of $25.8 billion have begun to rise again ($33 billion in
October).
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

1 Monthly trade data are available from the U.S. Bureau of Economic Analysis at http://www.bea.gov/newsreleases/
International/trade/2008/pdf/trad0808.pdf.
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U.S. International Trade: Trends and Forecasts

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.2 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,3 U.S.
International Trade Commission,4 or by contacting the authors of this report.
Figure 1. Monthly U.S. Balances of Trade in Goods and Services, 2008 and 2009
(in Current Dol ars)
$Billions
20
Services 2009
Services 2008
0
-20
-40
-60
Goods 2009
Goods 2008
-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.
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

2 See, for example, CRS Report RL31832, The Export Administration Act: Evolution, Provisions, and Debate, by Ian F.
Fergusson; CRS Report RL33550, Trade Remedy Legislation: Applying Countervailing Action to Nonmarket Economy
Countries, by Vivian C. Jones; CRS Report RL32014, WTO Dispute Settlement: Status of U.S. Compliance in Pending
Cases, by Jeanne J. Grimmett; CRS Report RL33274, Financing the U.S. Trade Deficit, by James K. Jackson; CRS
Report RL33867, Tariff Modifications: Miscellaneous Tariff Bills, by Vivian C. Jones; or CRS Report RL31032, The
U.S. Trade Deficit: Causes, Consequences, and Cures, by Craig K. Elwell.
3 Commerce Department data are available at http://www.bea.gov/.
4 U.S. International Trade Commission data are available at http://dataweb.usitc.gov/.
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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. Although the United States is
one of the three largest exporters in the world (China and Germany are the other two), U.S. sales
abroad are overshadowed by the huge demand by Americans for imported products. Since 1976,
the United States has incurred continual merchandise trade deficits with annual amounts
increasing steadily until the past two years (see Figure 4).
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.
In the current financial crisis, countries may turn inward to rescue their own businesses and
economies even if such actions come at the expense of the international benefit. By necessity, this
may involve seeking national advantage by either protecting domestic industries or promoting
exports.
On the microeconomic side, imports of specific products can generate trade friction and pressures
from constituent interests for the government to shield U.S. producers from foreign competition,
provide adjustment assistance, open foreign markets, or assist U.S. industries to become more
competitive.
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
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macroeconomic factors such as rates of growth, savings and investment behavior (including
government budget deficits/surpluses), international capital flows, and exchange rates.5
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 2008, merchandise exports
accounted for about 9% of GDP, compared with 5.9% in 1990. Recently, however, trade deficits
have declined and provided some help to the ailing economy.
Many economists fear that the rising U.S. trade and current account6 deficits could lead to a large
drop in the value of the U.S. dollar. The current account deficit, while decreasing from 6.2% of
GDP in 2006 to 5.3% of GDP in 2007, and 4.9% in 2008, continues to place downward pressure
on the dollar. A weakened dollar boosts exports by making them cheaper, narrowing the U.S.
trade deficit. Compared to a Federal Reserve index of major currencies weighted by importance
to U.S. trade, the dollar has lost a third of its value since 2002 (see Figure 2). The dollar has
fallen against the euro, yen, British pound, Australian dollar, and Canadian dollar. In fact, the U.S.
dollar fell to parity with the Canadian loonie in September 2007 for the first time in thirty years,
and remains roughly in that range. Between July and November 2008, the U.S. dollar
strengthened against other currencies as the global financial crisis increased “safe haven demand”
for the dollar. Since November, the dollar has lost some value, partly due to the Federal Reserve’s
lowering of interest rates.

5 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, and CRS Report RL33186, Is the U.S. Current Account Deficit
Sustainable?, by Marc Labonte.
6 U.S. trade in goods and services plus net flows of investment income and remittances.
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Figure 2. Month-End Trade-Weighted U.S. Dollar Against Broad, Major Currencies,
and Other Important Trading Partner Indices, January 2000-July 2009
160
Other Important Trading
Partners
140
120
100
80
Major Currencies
60
Broad
40
20
0
Jan -00Jul -00Jan-01 Jul-01Jan-02 Jul-02Jan-03 Jul-03Jan-04 Jul-04Jan-05 Jul-05Jan-06 Jul-06Jan-07 Jul-07Jan -08Jul -08Jan -09Jul -09
Month-Year

Source: Federal Reserve Bank of St. Louis, http://research.stlouisfed.org/.
Notes: Broad Index (January 1997 = 100): Euro Area, Canada, Japan, Mexico, China, United Kingdom,
Taiwan, Korea, Singapore, Hong Kong, Malaysia, Brazil, Switzerland, Thailand, Philippines, Australia, Indonesia,
India, Israel, Saudi Arabia, Russia, Sweden, Argentina, Venezuela, Chile and Colombia.
Major Currencies Index (January 1973 = 100): Euro Area, Canada, Japan, United Kingdom, Switzerland,
Australia, and Sweden.
Other Important Trade Partners Index (January 1997 = 100): Mexico, China, Taiwan, Korea, Singapore,
Hong Kong, Malaysia, Brazil, Thailand, Philippines, Indonesia, India, Israel, Saudi Arabia, Russia, Argentina,
Venezuela, Chile and Colombia.
Although a weakened dollar helps to reduce U.S. trade imbalances, it also may reduce the dollar’s
attractiveness to foreign investors. 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. The global financial crisis first worked to
strengthen the dollar vis-à-vis the EU euro, UK pound, Canadian dollar, and many currencies of
developing nations, however, since mid-2009, the dollar has weakened. The Japanese yen has
appreciated considerably as some investors have invested in yen-denominated assets instead of
those denominated in dollars. During the global financial crisis, the Chinese government kept the
renminbi essentially pegged to the dollar, although it had appreciated somewhat prior to the crisis.
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Figure 3. The Exchange Value of the Chinese Renminbi, Japanese Yen, British Pound,
EU Euro, and Canadian Dollar
PACIFIC Exchange Rate Service




Source: © 2009 by Prof. Werner Antweiler, University of British Columbia, Vancouver BC, Canada.
Permission is granted to reproduce the above image provided that the source and copyright are acknowledged.
Time period shown in diagram: July 1,2008-December 2, 2009.

Currently, foreign investment in dollar assets along with purchases of securities by investors
seeking a safe haven as well as from central banks of countries such as China have bolstered the
value of the dollar. China’s central bank has intervened in currency markets to keep its exchange
rate relatively stable. Japan claims not to have intervened in currency markets since spring of
2004. This intervention adds to the foreign currency reserves held by these countries. As of the
end of June 30, 2009, Japan’s central bank held $988.5 billion in foreign currency reserves,7 and
the Bank of China held $1,946 billion.8 In U.S. Treasury securities, as of April 2009, Japan held

7 Statistics on Japanese international reserves are released on a monthly basis by the Japanese Ministry of Finance and
available at https://www.mof.go.jp/english/.
8 Statistics on Chinese international reserves are available from the Chinability website, a non-profit website that
(continued...)
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$686 billion and China $764 billion.9 On July 21, 2005, China announced a 2.1% revaluation of
its currency, and the value of the renminbi has appreciated steadily from 8.2 to 7.0 renminbi per
dollar (15%). Continuing in that range, on July 14, 2009, the renminbi was trading at 6.8 per
dollar.
A recent development in foreign country holdings of dollars and other reserve currencies is that
some are turning toward creating sovereign wealth funds (SWFs). These are funds owned by
governments that are invested in stocks, bonds, property, and other financial instruments
denominated in dollars, euros, or other hard currency. For China, Japan, South Korea, Russia, and
the oil-exporting nations of the Persian Gulf, the source of capital for these funds is coming from
governmental holdings of foreign exchange. For China and Japan, for example, foreign exchange
reserves have traditionally been invested by their respective central banks primarily in low-
yielding but low-risk government bonds, i.e., U.S. Treasury securities. The purpose of sovereign
wealth funds is to diversify investments and to earn a higher rate of return. For example, in
September 2007, China created a sovereign wealth fund—the China Investment Corporation
(CIC)—with initial capital of $200 billion. Depending on how these funds are managed and what
leverage they acquire, they could affect U.S. interest rates (foreign purchases of U.S. Treasury
securities tend to reduce U.S. interest rates), corporate activities (if funds buy significant voting
shares of companies), and foreign access to technology and raw materials. The U.S. trade deficit
provides some of the foreign exchange that goes to finance these sovereign wealth funds.10
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.11 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 that affect the trade deficit are held by the Federal Reserve12 (interest
rates) as well as both Congress and the Administration (government budget deficits and trade
policy), and their counterpart institutions abroad.
In the 111th Congress, legislation directed at the trade deficit has been taking several strategies.
Some address trade barriers by particular countries, particularly China. Others are aimed at
preventing manipulation of exchange rates or at imposing import duties to compensate for the
arguably undervalued Chinese currency.13 Other bills seek to find domestic substitutes for

(...continued)
provides Chinese economic and business data and analysis, at http://www.chinability.com/.
9 Statistics on foreign holdings of U.S. Treasury securities are available at http://www.treasury.gov/tic/mfh.txt. For
further information, see CRS Report RS22331, Foreign Holdings of Federal Debt, by Justin Murray and Marc Labonte.
10 For more information on sovereign wealth funds, see CRS Report RL34336, Sovereign Wealth Funds: Background
and Policy Issues for Congress, by Martin A. Weiss, CRS Report RL34337, China’s Sovereign Wealth Fund, by
Michael F. Martin.
11 See Mann, Catherine L. Is the U.S. Trade Deficit Sustainable? Washington, Institute for International Economics,
1999. 224 p. See also CRS Report RL33274, Financing the U.S. Trade Deficit, by James K. Jackson and CRS Report
RL31032, The U.S. Trade Deficit: Causes, Consequences, and Cures, by Craig K. Elwell.
12 For details, see CRS Report RS20826, Structure and Functions of The Federal Reserve System, by Pauline Smale.
13 For legislation related to trade with China and the Chinese currency, see CRS Report RL33536, China-U.S. Trade
Issues, by Wayne M. Morrison.
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imported oil, or require the President or a policy group to take certain actions if the trade deficit
exceeded a threshold amount. Legislation is tracked in other CRS reports dealing with trade.
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, and 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 4). In 2008, total U.S. merchandise trade
amounted to $3,391 billion, a 9.2% increase from $3,105 billion in 2007. Merchandise exports in
2008 totaled $1,287 billion, while imports reached $2,104 billion (Census basis). The U.S.
merchandise trade deficit fell slightly from $809 billion in 2007 to $816 billion in 2008 after
rising in 2007 from 2006’s $828 billion. The merchandise deficit increased in double-digit rates
by 23% in 2004 and 18% in 2005. The deficit increase slowed in 2006, increasing by only 9.2%.
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Figure 4. U.S. Merchandise Exports, Imports, and Trade Balance
$ Billions
2500
2250
2000
U.S. Exports
1750
1500
U.S. Imports
1250
1000
750
500
250
0
-250
-500
Trade Balance
-750
-1000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
Year

Source: CRS with Census basis data from U.S. Bureau of Economic Analysis http://www.bea.gov/.
U.S. merchandise exports (as shown in Table 1 and Figure 5), decreased in 2001 and 2002 in
response to the global slowdown, but generally have been increasing each year. As shown in
Figure 5, the growth of imports has also been steady, although they too fell by 6.4% 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, the rate of increase for
both dropped slightly. Growth in exports and imports slowed in 2007 with exports rising by
12.3% and imports by 5.7%. Likewise in 2008, exports grew faster than imports (12.4% vs 7.3%),
but the trade deficit still increased. This is because U.S. imports are about 63% greater than U.S.
exports, so exports must grow about 63% faster than imports just for the deficit to remain
constant.
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Table 1. U.S. Merchandise Exports, Imports, and Trade Balances
(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 -180.5 678.4 876.8 -198.4
1998 682.1 911.9 -229.8 670.4 918.6 -248.2
1999 695.8 1,024.6 -328.8 684.0 1031.8 -347.8
2000 781.9 1,218.0 -436.1 772.0 1226.7 -454.7
2001 729.1 1,141.0 -411.9 718.7 1148.6 -429.9
2002 693.1 1,161.4 -468.3 685.2 1168.0 -482.8
2003 724.8 1,257.1 -532.3 715.8 1264.9 -549.1
2004 818.9 1,469.7 -654.8 806.2 1478.0 -671.8
2005 901.1 1,673.5 -772.4 892.3 1683.2 -790.9
2006
1,026.0 1,853.9
-828.0 1015.8
1863.1 -847.3
2007
1,148.2 1,957.0
-808.8 1138.4
1969.4 -831.0
2008
1,287.4 2,103.6
-816.2 1277.0
2117.2 -840.3
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 BoP 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.
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a. Exports are valued on an f.a.s. basis, which refers to the free alongside ship value at the port of export and
generally include 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, known as Customs basis, and exclude import
duties, the cost of freight, insurance, and other charges incurred in bringing merchandise to the United
States.

Figure 5. Annual Growth in U.S. Merchandise Exports and Imports,
1982-2008
Percent
30
25
Export
Import
Growth
Growth
20
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 06 07 08
Year

Source: Underlying data from U.S. Department of Commerce.
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). 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
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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
are announced several months later than those on trade in goods and services.
Figure 6. U.S. Current Account and Merchandise Trade Balances
$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
09
10
11
Year

Sources: CRS with data from U.S. Bureau of Economic Analysis, U.S. International Transactions Account.
Estimates from IHS Global Insight.
Table 2 summarizes the components of the U.S. current account. In 2008, the U.S. deficit on
current account decreased to $706.1 billion from $726.6 billion in 2007. The 2008 deficit on
current account amounted to 5.3 % of GDP. This remains above the caution level used by the
International Monetary Fund of 5%. Since the dollar is used as an international reserve currency,
however, the United States can run trade deficits without the same downward pressure on the
value of the dollar as other nations. 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 by Japan and other nations).
However, since a slight decline in 1995, the current account deficit has been increasing
significantly except for a slight dip in 2001 because of the U.S. recession and a similar situation
in 2007.
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Table 2. U.S. Current Account Balances
(billions of dollars)
Merchandise
Investment
Net
Current
Calendar
Trade
Services
Income
Unilateral
Account
Year
Balancea
Balanceb
Balancec
Transfersd
Balancee
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
9.9
2.9
1992 -96.9
57.7
24.2
-35.1
-50.1
1993 -132.5 62.1
25.3
-39.8
-84.8
1994 -165.8 67.3
17.1
-40.3
-121.6
1995 -174.2 77.8
20.9
-38.1
-113.6
1996 -191.0 86.9
22.3
-43.0
-124.8
1997 -198.4 90.2
12.6
-45.1
-140.7
1998 -248.2 82.1
4.3
-53.2
-215.1
1999 -347.8 82.7
13.9
-50.4
-301.6
2000 -454.7 74.9
21.1
-58.6
-417.4
2001 -429.5 64.4
31.7
-51.3
-384.7
2002 -485.0 61.2
27.4
-64.9
-461.3
2003 -550.9 54.0
45.3
-71.8
-523.4
2004 -669.6 61.8
67.2
-84.5
-625.0
2005 -790.9 75.6
72.4
-105.8
-748.7
2006 -847.3 86.9
48.1
-91.3
—803.5
2007 -831.0
129.6
90.8
-116.0
-726.6
2008 -840.3
144.3
118.2
-128.4
-706.1
Source: U.S. Bureau of Economic Analysis, U.S. International Transactions.
a. On a BoP 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 conceptually equal to the current account balance, may differ slightly as a result of rounding.

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Because 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
registered a $85.0 billion surplus in 2006 and $119.1 billion surplus in 2007. Since Americans are
such large investors in foreign economies, the United States traditionally also has a surplus in its
investment income ($81.7 billion in 2007), but the deficit in unilateral transfers (primarily dollars
sent abroad by foreign workers and recent immigrants) totaled $92.0 billion in 2006 and $112.7
billion in 2007. Unilateral transfers have now reached more than triple the level of the late 1980s.
Forecasts
According to Global Insight, Inc., a leading U.S. economic forecasting firm, in 2008 the U.S.
merchandise (goods) trade deficit is projected to decline to about $931.9 billion on a balance of
payments basis and to stay at the level for 2009 and 2010 (see Table 3 and Figure 7). The U.S.
current account deficit declined from the peak of $811.5 billion in 2006 to $749.6 billion in 2007.
The current account deficit is forecasted to increase to $763.6 billion 2008 and then to decrease in
2009 and 2010.
Table 3. U.S. Merchandise and Current Account Trade,
2003 to 2010 (Forecast)
(billions of U.S. dollars)

2003 2004 2005 2006 2007 2008 2009 2010
Merchandise Trade
Exports

Actual
724.4 818.3 892.3 1015.8 1138.4 1277.0
—
—

Forecasted — — — — — —
1,020.3
1,145.4
Imports
Actual
1284.0
1499.5
1683.2
1863.1
1969.4
2,117.2
—
—

Forecasted — — — — — —
1,555.3
1,766.3
Trade Balance


Actual
-550.9 -669.6 -790.9 -847.3 -831.0 -840.3
—
—

Forecasted — — — — — —
-541.8
-635.7
Services Trade Balance

Actual
54.0 61.8 75.6 86.9 129.6 144.3 —
—

Forecasted — — — — — —
130.8
141.2
Current Account Balance

Actual
-523.4 -625.0 -748.7 -803.5 -726.6 -706.1
—
—

Forecasted — — — — — —
-445.8
-533.3
Sources: (BoP basis). U.S. Bureau of Economic Analysis; and IHS Global Insight (searched December 2009).

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Figure 7. U.S. Merchandise Trade and Current Account Deficits, 1982-2010
(Forecast in Current Dollars)
$Billions
200
0
-200
Current Account
-400
Balance
Merchandise Trade
Balance
-600
-800
-1000
82
84
86
88
90
92
94
96
98
00
02
04
06
08
10
Year

Sources: U.S. Bureau of Economic Analysis and Global Insight (BoP basis).

U.S. Trade with Selected Nations
The overall U.S. merchandise trade balance consists of deficits or surpluses with each trading
partner. 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 8 and Table 4 show U.S. trade balances with selected nations.

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Figure 8. U.S. Merchandise Trade Balances With Selected Nations, 2008
Country
China
-268
Canada
-78
Japan
-74
Mexico
-65
Germany
-43
Saudi Arabia
-42
Venezuela
-39
Nigeria
-34
Ireland
Deficit
-24
Italy
-21
Algeria
-18
Malaysia
-18
Russia
-17
France
-15
Thailand
-14
Korea
-13
Taiwan
-11
Brazil
2
Egypt
4
Chile
4
Switzerland
4
Belgium
Surplus
12
Australia
12
Singapore
12
Hong Kong
15
Netherlands
19
-300
-250
-200
-150
-100
-50
0
50
$ Billions

Source: CRS with data from the U.S. Department of Commerce (Census basis).
Most of the U.S. trade deficit can be accounted for by trade with China, Japan, Mexico, Canada,
and Germany. Trade with the oil exporting countries, particularly Nigeria, Venezuela, and Saudi
Arabia, also is in deficit. U.S. trade surpluses occur in trade with the Netherlands, Hong Kong,
Australia, 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 $266 billion in 2008, the negative net balance in trade with China has
grown to account for nearly 30% of the total U.S. trade deficit.14 The U.S. trade deficit with
China exceeded that with Japan for the first time in the year 2000 and now is more than three
times 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 China not Hong Kong, including

14 For details and policy discussion, see CRS Report RL33536, China-U.S. Trade Issues, by Wayne M. Morrison.
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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 the trade
surplus with the United States at $102 billion in 2008 that China reported is less than half the U.S.
deficit with China of $266 billion reported by the United States.
Table 4. U.S. Merchandise Trade Balances with Selected Nations and Groups
(millions of U.S. dollars, Census basis)
Country
2003 2004 2005 2006 2007 2008
Total
-532,350
-654,830
-772,373
-827,971
-808,763
-816,199
North America
-92,319 -111,650 -128,347 -136,313
-142,964 -143,063
Canada
-51,671 -66,480 -78,486 -71,782 -68,169 -78,342
Mexico
-40,648 -45,170 -49,861 -64,531 -74,796 -64,722
European Union 27
-98,521 -111,392 -124,395 -119,325
-110,243 -95,807
United
Kingdom
-8,967 -10,372 -12,465 -8,103 -6,876 -4,988
Germany
-39,281 -45,850 -50,567 -47,923 -44,744 -42,991
France
-12,166 -10,688 -11,583 -13,528 -14,877 -15,209
Italy
-14,854 -17,413 -19,485 -20,109 -20,878 -20,674
Netherlands
9,742 11,689 11,606 13,617 14,434 18,597
Russia
-6,171 -8,930 -11,344 -15,128 -12,031 -17,448
Japan
-66,032 -76,237 -83,323 -89,722 -84,304 -74,120
China
-124,068 -162,254 -202,278 -234,101 -258,506 -268,040
Newly Industrialized
Countries (NICS)
-21,217 -22,479 -16,606 -13,234
-5,509 2,184
Singapore 1,422
4,027
5,356
6,057
7,225
11,969
Hong Kong
4,669
6,513
7,459
9,795
12,876
15,015
Taiwan
-14,152 -13,038 -13,211 -15,502 -12,449 -11,400
S.
Korea
-13,157 -19,981 -16,210 -13,584 -13,161 -13,400
South/Central
American Countries
-26,883 -37,268 -50,549 -45,296 -28,035 -23,034
Argentina -732
-357
-462
797
1,369
1,714
Brazil -6,699
-7,273
-9,064
-7,480
-1,472
1,846
Colombia
-2,629 -2,751 -3,387 -2,557
-876 -1,656
OPEC
-56,116 -78,391 -104,650 -121,408 -128,769 -177,699
Venezuela
-14,305 -20,153 -27,557 -28,131 -29,709 -38,814
Saudi
Arabia
-13,473 -15,702 -20,387 -24,049 -25,230 -42,263
Nigeria
-9,377 -14,694 -22,620 -25,630 -29,992 -33,966
Sources: United States Census Bureau, Foreign Trade Statistics. For other countries and further detail, see U.S.
International Trade in Goods and Services Annual Revision for 2008, FT-900 (09-04), released June 10, 2009.

Table 5 lists the U.S. top deficit trading partners in merchandise trade, on a Census basis. In
2000, China overtook Japan as the top U.S. deficit trading partner. After, China, the next highest
deficit trading partners are Japan, Mexico, Canada, Germany, and Nigeria.
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Table 5. Top U.S. Merchandise Deficit Trading Partners, 2008
(millions of U.S. dollars)
U.S.
U.S.
U.S.
Country
Balance
Exports
Imports
China -268,040
69,733
337,773
Canada
-78,342 261,150 339,491
Japan -74,120
65,142
139,262
Mexico
-64,722 151,220 215,942
Germany
-42,991 54,505 97,497
Saudi
Arabia
-42,263 12,484 54,747
Venezuela
-38,814 12,610 51,424
Nigeria -33,966
4,102
38,068
Ireland -23,736
7,611
31,347
Italy
-20,674 15,461 36,135
Iraq -20,010
2,070
22,080
Algeria -18,112
1,243
19,355
Malaysia
-17,787 12,950 30,736
Russia -17,448
9,335
26,783
Angola -16,892
2,019
18,911
France
-15,209 28,840 44,049
Thailand -14,472
9,067
23,538
Korea
-13,400 34,669 48,069
Taiwan
-11,400 24,926 36,326
Indonesia -10,155
5,645
15,799
Vietnam -10,112
2,789
12,901
India
-8,022 17,682 25,704
Israel
-7,849 14,487 22,336
Sweden -7,480
5,018
12,498
Trinidad & Tobago
-6,780
2,250
9,030
Austria
-5,808 2,649 8,457
United
Kingdom -4,988 53,599 58,587
Norway
-4,023 3,292 7,315
South
Africa
-3,458 6,491 9,948
Finland
-2,142 3,761 5,903
Hungary
-1,672 1,431 3,103
Source: U.S. Department of Commerce. U.S. International Trade in Goods and Services, FT 900 (09-04).
Note: Data are on a Census basis. Exports are valued f.a.s.; imports are valued Customs.
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Table 6 lists the United States’ top trading partners ranked by trade turnover, defined as exports
plus imports. As shown in Table 6, in 2008, as in 2007, Canada was America’s largest total
merchandise trading partner. Canada was followed by China, Mexico, Japan, Germany, the
United Kingdom, Korea, Taiwan and France. Malaysia dropped from number 10 in total U.S.
trade in 2006 to number 14 in 2007. Canada was the largest supplier of U.S. imports in 2006 and
before, but in 2007 China surpassed Canada. By far, Canada is the top purchaser of U.S. exports
with Mexico second. In 2007 China passed Japan to become third. Japan is now our fourth-
ranked export market.
Table 6. Top U.S. Trading Partners Ranked by Total Merchandise Trade in 2008
(millions of U.S. dollars)
Rank
Country
Total Trade
U.S. Exports
U.S. Imports
Balance
1
Canada
600,641 261,381 335,555 -74,174
2 China
407,505
71,457
337,790 -266,333
3
Mexico
367,162 151,539 215,915 -64,376
4 Japan
204,404
66,579
139,248
-72,669
5
Germany 152,002 54,732 97,553 -42,821
6
United
Kingdom
112,186 53,775 58,619 -4,844
7
Korea
82,738 34,807 48,076 -13,269
8
France
72,889 29,187 43,997 -14,810
9
Saudi
Arabia 67,232 12,478 54,786 -42,308
10
Venezuela 64,034 12,611 51,401 -38,790
11
Brazil
62,752 32,910 30,459 2,451
12
Taiwan
61,252 25,279 36,327 -11,048
13
Netherlands 60,842 40,223 21,140 19,083
14
Italy
51,596 15,479 36,143 -20,664
15
Belgium
46,212 29,026 17,360 11,666
16
Singapore
43,739 28,810 15,884 12,926
17
Malaysia
43,686 12,963 30,740 -17,777
18
India
43,386 18,667 25,762 -7,095
19 Nigeria
42,170
4,102
38,068
-33,966
20
Switzerland 39,806 22,023 17,786 4,237
21 Ireland
38,957
8,653
31,568
-22,915
22
Israel
36,823 14,487 22,336 -7,849
22 Russia
36,118
9,335
26,775
-17,440
23
Australia
32,807 22,457 10,582 11,875
24 Thailand
32,605
9,067
23,548
-14,481
25
Hong
Kong 27,982 21,633 6,485 15,148
Source: U.S. Department of Commerce. U.S. International Trade in Goods and Services, FT 900 (08-04).
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Notes: Total trade=imports + exports. Data are on a Census basis. Exports are valued f.a.s.; imports are valued
Customs.
Table 7 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.
Table 7. U.S. Current Account Balances With
Selected U.S. Trading Partners, 2008
(billions of U.S. dollars)
Merchandise
Investment
Net
Current
Trade
Services
Income
Unilateral
Account
Country
Balancea
Balanceb
Balancec
Transfersd
Balancee
All
Countries
-840.3 144.3 118.2 -128.4 -706.1
Mexico
-68.7

8.1
-0.3
-13.8
-74.6
Canada
-81.0

21.3
24.4
-1.8
-37.2
Asia and
-403.2
39.0
-41.6
-24.7
-430.5
Pacific
China
-268.4

6.0
-43.2
-2.9
-308.5
Japan
-75.1

15.5
-29.9
1.0
-90.5
S. Korea
-14.1
5.8
0.5
-0.7
-8.6
European
-98.7
44.5
49.7
-7.1
-11.6
Union
Germany
-43.4

-5.8
5.9
-0.7
-44.0
United
-5.0
17.4
-4.5
0.9
8.8
Kingdom
Latin
-92.0
24.9
41.7
-33.9
-59.3
America
Middle East
-58.8
2.8
-2.2
-13.2
-71.4
Source: U.S. Bureau of Economic Analysis, International Transactions Account Data.
a. On a BoP 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.

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Country data for the current account are final for 2007 but not for 2008. Since Japan has invested
considerable amounts in securities, equities, and in factories in the United States, the United
States ran a deficit of $41.2 billion in investment income with that country in 2007. This more
than offset the surplus of $15 billion in trade in services with Japan. As a result, the current
account deficit with Japan of $110.3 billion in 2007 exceeded the bilateral merchandise trade
deficit of $85.1 billion. Likewise with China; the U.S. deficit on investment income of $36.1
billion far overshadowed the U.S. surplus of $5.4 billion in services.
In 2007, a different situation existed with the European Union and Canada. The United States
earned a $39.6 billion surplus in investment income with the EU in 2007, greater than 2006
investment income surplus of $12.6 billion. In 2007, the U.S. surplus in services with the EU
came to $36.7 billion. These two flows offset a merchandise deficit of $113.9 billion to produce a
U.S. current account deficit of $42.4 billion, lower than the 2006 current account deficit of $86.9
billion. From Canada the United States received $16.9 billion in investment income plus a surplus
in services trade of $18.1 billion. Hence, the current account deficit with Canada at $37.3 billion
was lower than the $70.6 billion merchandise trade deficit.
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. In 2007, the overall U.S. balance on
investment income registered a surplus of $81.7 billion, higher than the 2006 balance on
investment income of $57.2 billion. Imbalances in investment income with certain countries have
been growing and could become a problem in the future.
Advanced Technology, Autos, and Oil
Table 8 shows U.S. trade in advanced technology products. This includes about 500 commodity
classification 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. The U.S. trade balance in high technology products was last in
surplus in 2001.
In 2002 to 2005, the U.S. ran a trade deficit in high technology products which grew roughly ten
billion dollars per year, from $16.6 billion to $43.6 billion. In 2006 this deficit dropped to $38.1
billion, but in 2007 resumed its former path of growing ten billion dollars per year, to $52.6
billion, but in 2008, this deficit grew to only $55.5 billion. This deficit does not necessarily imply
that the United States is losing the high technology race, since 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.
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Table 8. 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 216.1 259.7 -43.6
2006 252.7 290.8 -38.1
2007 264.9 326.8 -61.9
2008 270.1 331.2 -61.1
Source: U.S. Bureau of the Census. U.S. International Trade in Goods and Services. FT-900, issued monthly.
Notes: 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. Data are on a BoP basis.
Table 9 and Figure 9 provide data on trade in passenger cars, trucks, and parts with major
automobile producing nations for 2008. This does not include foreign cars assembled in the
United States, or American cars assembled abroad. The United States incurs the largest deficits in
this trade with Japan, Mexico, Germany, and South Korea. In 2008 the United States had a
surplus in automotive trade with Canada. The U.S. trade balance in motor vehicles improved
from a $144,990 million deficit in 2006 to a $120,941 million deficit in 2007, and $106,592
deficit in 2008.15 Figure 9 shows that while the United States runs deficits in both cars and
automotive parts, it runs a small surplus in trucks.


15 For information on the automobile industry, see CRS CRS Report RL32883, U.S. Automotive Industry: Recent
History and Issues, by Stephen Cooney and Brent D. Yacobucci.
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Table 9. U.S. Trade in Motor Vehicles (Passenger Cars, Trucks, and Buses) and Parts
by Selected Countries, 2008
In millions of U.S. dollars
Country Total
Cars Trucks Parts


U.S. Exports


TOTAL
126,208 49,569 19,246 57,394
Canada
54,541 14,662 11,475 28,404
Germany 10,387
8,477 188
1,721
Japan
2,234 534 138
1,562
Korea 855
370
69
416
Mexico
19,225 4,034 1,215 13,975



U.S. Imports


TOTAL 232,800
125,606
15,876
91,318
Canada 53,591
31,371
5,761
16,459
Germany 25,981
18,366 240
7,375
Japan 55,730
41,383
428
13,919
Korea 11,314
4,414
3
3,897
Mexico 48,274
13,944
8,416
25,914



U.S. Balance


TOTAL -106,592
-76,037
3,370
-33,924
Canada 950
-16,709
5,714
11,945
Germany -15,594
-9,889 -52
-5,654
Japan -53,496
-40,849
-290
-12,357
Korea -10,459
-7,044
66
-3,481
Mexico
-29,049 -9,910 -7,201 -11,939
Source: U.S. Bureau of the Census, U.S. International Trade in Goods and Services, FT-900 (09-04).
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Figure 9. 2008 U.S. Automotive Trade by Major Segment
In millions of U.S. dollars

Source: U.S. Bureau of the Census. U.S. International Trade in goods and Services. FT-900 (09-04).
Table 10 shows imports of crude petroleum by major country source. In 2007, the United States
imported $246 billion in crude oil or 13% of all imports. Roughly half comes from the
Organization of the Petroleum Exporting Countries (OPEC) with Saudi Arabia, Venezuela, and
Nigeria the predominant suppliers. Imports from Iraq are recovering with $11 billion worth in
2007. Over 40% of U.S. petroleum imports come from non-OPEC sources, primarily Canada and
Mexico.16
Table 10. U.S. Imports of Crude Oil from Selected Countries, 2008
Table 11. (quantity and customs value)
Customs Value
Quantity
Country
($ million)
(thousand barrels)
Total World
353,537
3,716,127
OPEC Total
205,687
2,116,884
Saudi Arabia
53,223
546,293
Venezuela 43,734
475,316
Nigeria 35,945
345,024

16 For policy discussion, see CRS Report RS22204, U.S. Trade Deficit and the Impact of Changing Oil Prices, by
James K. Jackson.
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Customs Value
Quantity
Country
($ million)
(thousand barrels)
Iraq 21,710
223,864
Angola 18,548
184,501
Algeria 15,118
153,406
Ecuador 7,102
80,113
Kuwait 6,631
73,638
Libya 2,865
26,620
Indonesia 649
6,715
United Arab Emirates
162
1,395
Qatar 0
0
Iran 0
0
Non-OPEC Total
147,850
1,622,359
Canada 62,951
686,022
Mexico 37,154
418,501
Brazil 7,851
86,088
Colombia 5,897
63,283
Russia 4,957
46,751
Congo 4,930
50,030
Azerbaijan 4,275
41,005
Chad 3,178
36,264
Equatorial Guinea
3,084
32,482
United Kingdom
2,609
27,006
Gabon 2,156
22,527
Other Non-OPEC
8,808
89,285
Sources: U.S. Census Bureau, U.S. International Trade in Goods and Services, FT-900, issued monthly, and World Trade
Atlas, using Harmonized Schedule (HS) 270900 for crude oil.
Note: Census basis data.

Some Common Perceptions
This section of the report addresses a few common perceptions about trade that can be validated
by data.
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
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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. In the current global financial crisis, the dollar and U.S. Treasury securities are being
viewed as a safe haven for investors, so capital inflows into the United States have remained
sufficient to cover U.S. budget deficits and other government borrowing.
Figure 10 shows the U.S. current account balance as a percent of nominal U.S. gross domestic
product (GDP). It grew in magnitude from near zero in 1980 to 3.4% in 1987, dropped into
negative 0.1% in 1991 and rose to 6% in 2006 (exceeding the 5% level considered to warrant
caution by the International Monetary Fund). The current account balance-GDP ratio remained
above the IMF caution level for 2007 at 5.3%. However, beginning in 2008 through 2010, it is
forecast to decline to below the IMF caution level primarily because the U.S. recession is
shrinking imports faster than exports and causing the trade deficit to decline. This effect is
expected to continue through 2009 before it begins to rise again in 2010.
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Figure 10. The U.S. Current Account Deficit as a Percent
of Gross Domestic Product, 1985-2011 (forecast)
Percent
7
Actual
Forecast
6
5.9
6
5.3
5.2
4.9
5
IMF Caution Lev el
4.7
4.2
4.3
4. 3
4
3. 8
4
3. 6
3.3 3.4
3.2
3.1
2. 8
3
2. 4
2.4
1.8
2
1.7
1.4
1.5 1.6 1. 7
1.3
0. 8
1
0
0
85
87
89
91
93
95
97
99
01
03
05
07
09
11
Year

Sources: Data from U.S. Department of Commerce. Forecasts by IHS 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, including 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 2006, China
accounted for 35.3% of such imports, as compared to 4.9% for Hong Kong, South Korea, and
Taiwan combined. In 2007, China’s contribution to U.S. imports of woven apparel increased to
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35.7%. Hong Kong, South Korea, and Taiwan collectively represented 3.4% of such imports, a
decline from 2006.17 The decline in woven apparel imports from Hong Kong, South Korea, and
Taiwan also may reflect their shift to production of high-technology goods. As these Southeast
Asian countries continue to industrialize, woven apparel imports from less-developed countries,
such as Indonesia, Bangladesh, and Vietnam, likely will continue to increase.
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 $92.9 billion (4.7% of total) in
2007, while imports from China rose from $15.2 billion (3.3% of total) in 1990 to $321.4 billion
(16.4% of total) in 2007.18 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
from both, however, continues to rise, while 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 $11.8 billion (1.5% of the
total) in 2007. U.S. trade with Hong Kong actually went from a deficit in 1992 to a surplus in
1993, and has remained in surplus through 2007. The U.S. trade deficit with China, meanwhile,
went from $10.4 billion (10.2% of the total U.S. trade deficit) in 1990 to $256.2 billion (32.2% of
the total) in 2007. What actually is happening is quite complex. While the U.S. trade deficit with
the world is declining, it continues to rise with China, Mexico and oil exporting countries. Table
12 illustrates this complexity. Negative percentage change numbers, noted in bold, indicate a
shrinking U.S. merchandise trade deficit with that country or group. Positive percentage changes
indicate growing deficits.
Table 12. Changes in U.S. Merchandise Trade Balances With
Selected Countries and Groups, 2006 and 2007
% Chg
% Chg
Country 2006
2007
2008
2007/2006
2008/2007
World Total
-$827,971
-$808,763
-$816,199
-2.3
0.9
China
-$234,101
-$258,506
-$268,040
10.4
3.7
-OPEC-
-$121,408
-$128,769
-$177,699
6.1
38.0
-EU 27-
-$119,325 -$110,243 -$95,807
-7.6 -13.1
Canada
-$71,782 -$68,169 -$78,342
-5.0
14.9
Japan
-$89,722 -$84,304 -$74,120
-6.0 -12.1
Mexico
-$64,531 -$74,796 -$64,722
15.9
-13.5
Germany
-$47,923 -$44,744 -$42,991
-6.6 -3.9
Saudi Arabia
-$24,049
-$25,230
-$42,263
4.9
67.5
Venezuela
-$28,131
-$29,709
-$38,814
5.6
30.7
Nigeria

-$25,630
-$29,992
-$33,966 17.0 13.3







17 Calculations based on data from World Trade Atlas, using HS 62 for woven apparel.
18 The numbers are comparable for all Asian countries.
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% Chg
% Chg
Country 2006
2007
2008
2007/2006
2008/2007
Algeria

-$14,354
-$16,164
-$18,112 12.6 12.1
Russia
-$15,128 -$12,031 -$17,448
-20.5
45.0
France
-$13,528
-$14,877
-$15,209
10.0
2.2
Thailand
-$14,551 -$14,418 -$14,472
-0.9
0.4
Korea, South
-$13,584 -$13,161 -$13,400
-3.1
1.8
Taiwan
-$15,502 -$12,449 -$11,400
-19.7 -8.4
Asian 4 NICs
-$13,234 -$5,509 $2,184
58.4
139.6
Singapore
$6,057
$7,225
$11,969 19.3 65.7
Hong Kong
$9,795
$12,876
$15,015
31.4
16.6
Source: U.S. Department of Commerce, Bureau of the Census via World Trade Atlas.
Notes: Merchandise trade data on a Census Basis. The U.S. balance with Singapore, Hong Kong and Asian 4 NICs are
positive. Members of OPEC are listed in, Table 10, above. Members of Asian 4 Newly Industrializing Countries (NICs)
are: Hong Kong, Singapore, South Korea and Taiwan.
May Asian Nations Form a Free Trade Agreement
Which May Effect U.S. Imports and Exports to Asian
Nations?
According to information in Washington Trade Daily, negotiations between Asian nations for both
a financial agreement and a trade agreement continue. Text of the two brief articles follows:
● Asia-Pacific leaders called on Sunday, October 29th, for regional-wide free trade and other
measures to reduce dependence on the United States and big Western markets as Asia leads the
way out of the global economic downturn, Reuters news service reported (WTD, 10/17/09).
Japanese Prime Minister Yukio Hatoyama urged Asian leaders to keep up fiscal and monetary
stimulus measures even as their economies show mounting signs of recovery, saying there was
“no room for complacency” and that the job market was still “dire.”
“At the moment the global economy is showing signs of recovery, mainly in Asia,” Hatoyama
told the closed-door East Asia Summit of 16 Asia-Pacific leaders in the Thai town of Hua Hin,
according to Foreign Ministry spokesman Kazuo Kodama. At the meetings, held under tight
security, Hatoyama found tentative support from his Asian counterparts for a proposed regional
community inspired by the European Union that would account for nearly a quarter of global
economic output.
But there were signs that integrating Asia’s wildly divergent countries—from the economic
powerhouses of Japan and China to the hermit state of Myanmar and impoverished regions of
Southeast Asia—is easier said than done. Thailand, the world’s biggest rice exporter, and the
Philippines failed to reach agreement on the weekend in a row over import tariffs that could derail
a trade pact at the heart of Southeast’s bid to build an economic community by 2015. A free-trade
pact in Southeast Asia, a region of 570 million people, calls for Philippine rice import tariffs to be
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cut to 20 percent from 40 percent by January 1, and then be progressively cut further. But Manila
says the tariffs should stay at 35 percent.
Economic and Trade Ministers of China, Japan and South Korea vowed Sunday to oppose trade
protectionism in all forms, Xinhua news agency reported. “We will oppose trade protectionism in
all forms, uphold a fair, free and open global trading and investment system,” said a joint
statement issued after the ministers’ meeting. “We are determined to seek an ambitious and
balanced conclusion to the Doha Development Round in 2010, consistent with its mandate, based
on the progress already made, including with regard to modalities,” added the statement.
● Australia and New Zealand’s free-trade agreement with a group of Southeast Asian nations will
take effect next year, Australia said according to a Bloomberg news service report (WTD,
3/21/09). The deal, originally signed in February at an earlier meeting of the 10-member
Association of Southeast Asian Nations is designed to eliminate or lower tariffs on products such
as coffee, dairy, minerals, cars, and vegetables in the next 12 years. The accord was estimated to
boost trade by $12 billion when originally announced.
The agreement will eliminate tariffs on 96 percent of Australia’s exports to ASEAN by 2020,
according to the statement. About 67 percent of Australia’s exports to the area are currently tariff
free. ASEAN includes Indonesia, Thailand, Malaysia, Singapore, Brunei, the Philippines,
Cambodia, Laos, Myanmar and Vietnam.19
International Trade Statistics Web Resources
Listed below are a list of resources available online for international trade statistics.
The single most authoritative, comprehensive, and frequently-published trade data statistical
source is the monthly “FT900”. Its actual title is U.S. International Trade in Goods and Services.
The FT-900 is issued monthly by the U.S. Census Bureau and the U.S. Bureau of Economic
Analysis. It provides information on the U.S. trade in goods and services (balance, exports, and
imports) in specific commodities and end-use categories and with selected countries. The report
also provides information on trade in advanced technology, petroleum, and motor vehicle
products. The report is available from the U.S. Bureau of Economic Analysis at
http://www.bea.gov/newsreleases/rels.htm. Under “International” click on latest news release.
Information on trade in specific commodities, with particular regions, or for different time
periods also can be obtained from the U.S. International Trade Commission at
http://dataweb.usitc.gov/ (registration is required).
Historical and current U.S. exchange rate data are available from the Federal Reserve Bank of St.
Louis at http://research.stlouisfed.org/fred2/.
Information on foreign country holdings of U.S. Treasury securities are available at
http://www.treasury.gov/tic/.


19 Trade Reports International Group. Washington Trade Daily, October 26, 2009, page 4.
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Author Contact Information

Dick K. Nanto
J. Michael Donnelly
Specialist in Industry and Trade
Information Research Specialist
dnanto@crs.loc.gov, 7-7754
mdonnelly@crs.loc.gov, 7-8722
Shayerah Ilias

Analyst in International Trade and Finance
silias@crs.loc.gov, 7-9253


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