International Trade and Finance: Key Policy
Issues for the 113th Congress
Mary A. Irace, Coordinator
Section Research Manager
J. F. Hornbeck, Coordinator
Specialist in International Trade and Finance
January 4, 2013
Congressional Research Service
7-5700
www.crs.gov
R42882
CRS Report for Congress
Pr
epared for Members and Committees of Congress
International Trade and Finance: Key Policy Issues for the 113th Congress
Summary
Article I, Section 8, of the U.S. Constitution grants authority over the regulation of foreign
commerce to Congress. Congress exercises this authority in a variety of ways, including through
the consideration of legislation to approve trade agreements and authorize trade programs and
through oversight of trade policy more generally. Policy issues cover such areas as: U.S. trade
negotiations; tariffs; nontariff barriers; worker dislocation from trade liberalization, trade remedy
laws; import and export policies; international investment, economic sanctions; and the trade
policy functions of the federal government. Congress also has an important role in international
finance. For example, it has the authority over the level of U.S. financial commitments to
international financial institutions and oversight responsibilities over trade- and finance-related
agencies of the U.S. Government.
The 112th Congress approved U.S. bilateral free trade agreements (FTAs) with Colombia,
Panama, and South Korea, extended the Trade Adjustment Assistance (TAA) programs through
December 31, 2013, and reauthorized the Generalized System of Preferences (GSP) through July
31, 2013. In addition, Congress authorized permanent normal trade relations (PNTR) status for
Russia and Moldova, reauthorized the U.S. Export-Import Bank, and approved full U.S.
participation in general capital increases for the World Bank and four regional development
banks. It also conducted oversight of the Eurozone sovereign debt crisis.
The 113th Congress may revisit many of these issues and address new ones. This report provides
an overview of key international trade and finance policy issues, including the ones listed below.
• The ongoing Trans-Pacific Partnership (TPP) free trade agreement negotiations.
• Trade Promotion Authority (TPA) and its possible renewal.
• The stalemated WTO Doha Round negotiations and separate new trade
liberalizing proposals that some members of the WTO may undertake.
• Oversight of the emerging potential for U.S.-European Union FTA negotiations.
• U.S.-China trade relations including intellectual property rights protection,
currency reform, and market access liberalization.
• Renewal of expiring trade programs including GSP and TAA.
• The President’s request for new authority to reorganize and consolidate the
business- and trade-related functions of six federal entities, oversight of the
recently reauthorized Export-Import Bank, and the Administration’s National
Export Initiative.
• Ongoing review of the President’s export control reform initiative and possible
renewal of the Export Control Act (EAA), and review of trade sanctions on Iran,
Cuba, North Korea, and Syria.
• Reauthorization of U.S. Customs and Border Protection (CBP).
• International finance issues including implications of the ongoing Eurozone debt
crisis for the U.S. economy, oversight of international financial institutions, and
negotiations to conclude new bilateral investment treaties (BITs).
A list of CRS reports covering each of the issues is provided at the end of the report.
Congressional Research Service
International Trade and Finance: Key Policy Issues for the 113th Congress
Contents
Policymaking in a Global Economy ................................................................................................ 1
The Role of Congress in International Trade and Finance............................................................... 3
Policy Issues for Congress ............................................................................................................... 4
Renewal of Trade Promotion Authority (TPA) .......................................................................... 4
Trade Agreements and Negotiations .......................................................................................... 5
Trans-Pacific Partnership (TPP) FTA .................................................................................. 5
The WTO and WTO Doha Round ....................................................................................... 6
Potential U.S.-European Union Trade Agreement Negotiations ......................................... 7
U.S. Trade and Economic Engagement with the Middle East and North Africa ................ 8
China ......................................................................................................................................... 9
Industrial Policies .............................................................................................................. 10
Intellectual Property Rights Protection ............................................................................. 10
An Undervalued Currency ................................................................................................ 11
Chinese Economic Rebalancing ........................................................................................ 11
Challenges for the 113th Congress ..................................................................................... 12
Reorganization of Federal Trade-Related Agencies ................................................................ 12
U.S. Export and Investment Promotion ................................................................................... 13
National Export Initiative (NEI)........................................................................................ 13
Reauthorization of the Export-Import (Ex-Im) Bank and Overseas Private
Investment Corporation (OPIC) ..................................................................................... 14
Ex-Im Bank and International Export Credit Financing ................................................... 15
Export Controls and Sanctions ................................................................................................ 16
The President’s Export Control Initiative .......................................................................... 16
Economic Sanctions .......................................................................................................... 17
Import Policies......................................................................................................................... 18
Trade Remedies ................................................................................................................. 18
Trade Preferences .............................................................................................................. 19
U.S. Customs and Border Protection (CBP) Reauthorization ........................................... 19
Miscellaneous Tariff Bill (MTB) ....................................................................................... 20
Trade Adjustment Assistance ............................................................................................ 20
Intellectual Property Rights (IPR) in U.S. Trade Policy .......................................................... 21
IPR and U.S. Trade Negotiations ...................................................................................... 21
Section 337 Process and Online Copyright Infringement and Piracy ............................... 22
International Investment .......................................................................................................... 22
Foreign Investment and National Security ........................................................................ 23
U.S. International Investment Agreements ........................................................................ 23
Promoting Investment in the United States ....................................................................... 24
International Finance, Institutions, and Crises ........................................................................ 24
International Monetary Fund ............................................................................................. 24
Multilateral Development Banks....................................................................................... 25
G-20 ................................................................................................................................... 25
Eurozone Sovereign Debt Crisis ....................................................................................... 26
Argentina Sovereign Debt Default and Related Economic Policies ................................. 27
Select CRS Reports ........................................................................................................................ 28
Renewal of Trade Promotion Authority ................................................................................... 28
Trade Agreements and Negotiations ........................................................................................ 28
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International Trade and Finance: Key Policy Issues for the 113th Congress
China ....................................................................................................................................... 29
Reorganization of Federal Trade-Related Agencies ................................................................ 29
U.S. Export and Investment Promotion ................................................................................... 29
Export Controls and Sanctions ................................................................................................ 30
Import Policies......................................................................................................................... 30
International Property Rights in U.S. Trade Policy ................................................................. 31
International Investment .......................................................................................................... 31
International Finance, Institutions, and Crises ........................................................................ 31
Contacts
Author Contact Information........................................................................................................... 32
Congressional Research Service
International Trade and Finance: Key Policy Issues for the 113th Congress
Policymaking in a Global Economy1
The 113th Congress, in exercising both its legislative and oversight responsibilities, faces
numerous international trade and finance policy issues. They are important to Congress because
they can affect the health of the U.S. economy, the success of U.S. businesses and their workers,
and the standard of living of most Americans. A list of CRS reports covering in detail each of the
issues addressed in this report is provided at the end of the report.
International trade and finance issues are complex, and policy deliberation is often made more
challenging by developments in the global economy. First, the world continues to recover
unevenly from the 2008 global financial crisis, with many developed countries experiencing weak
growth compared to large emerging economies. The sovereign debt crisis in Europe and increased
vulnerability of the Eurozone are perhaps the most visible examples of developed country
economic weakness, which may stagnate or even worsen in 2013. Second, developing country
influence and role in the global economy are growing, as witnessed by changing trade and
investment patterns, as well as the ascendance of the Group of 20 (G-20) economies as a major
forum for international economic cooperation. The rise of China, Brazil, and India, among other
emerging economies, presents new challenges in U.S. trade policy and in developing global trade
and finance agreements. Third, economic tensions emanating from large international imbalances
have not eased.
The U.S. economy is recovering slowly from its worst recession in eight decades. It is
experiencing productivity gains and moderate expansion in output, with many economists
forecasting faster growth in 2013. Nonetheless, the economy continues to struggle with declining
but still high unemployment and a large federal debt. These domestic imbalances are connected to
international ones, including the large U.S. trade deficit, rising holdings of U.S. debt by foreign
countries, and downward pressure on the dollar. The United States has long consumed more than
it has produced, giving rise to the expanding trade deficit, which is financed by capital inflows.
The counterpart is large saving balances, trade surpluses, and capital outflows in other countries,
including China, Japan, and Germany.
The call for “global rebalancing” implies a reversal of these trends, which would require national
and foreign responses. For the United States, this would involve increased saving (less spending)
relative to investment that would produce a rise in net exports (reduction in trade deficit). Implicit
in this mix, particularly given steady de-leveraging of U.S. firms and households since 2008, is a
reduction of the fiscal deficit, the major source of U.S. dissaving since 2000. For trade surplus
countries, it implies the opposite—an increase in domestic demand and decrease in saving
relative to investment that would lead to a fall in net exports (reduction in trade surplus).
Rebalancing also implies changes in relative exchange rates, including a likely depreciation of the
dollar against major U.S. trade partner currencies, and appreciation of China’s currency.2
On the trade policy side, the 113th Congress will likely review and possibly take up legislation
that would lead to reciprocal trade opening agreements, including the Trans-Pacific Partnership
(TPP) trade negotiations. President Obama’s National Export Initiative (NEI) continues to
1 Written by J. F. Hornbeck, Specialist in International Trade and Finance, 7-7782.
2 The fundamentals are covered in Oliver Blanchard and Gian Maria Milesi-Ferretti, Global Imbalances: In
Midstream?, International Monetary Fund, Staff Position Note 09/29, Washington, D.C., December 22, 2009.
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promote the goal of doubling U.S. exports in five years as one solution to the challenge of
generating faster economic and employment growth. In addition to supporting U.S. companies,
the rationale for promoting exports is based on the view that foreign demand is needed to
supplement an American consumer still dealing with a residual debt overhang and a federal
government facing persistently large fiscal deficits. With an estimated 95% of the world’s
population living outside U.S. borders, some view exports as a critical force for the future growth
of the U.S. economy. U.S. exports have recovered briskly since 2009. Meeting the goal of
doubling exports, however, will be difficult because trade policy by itself is limited in its ability
to affect the trade deficit and aggregate output, which will require vibrant global economic
growth, a more competitive dollar, and changes in domestic and foreign macroeconomic policies.
Foreign country policies, however, may not align easily with U.S. priorities. The European Union
is wrestling with its own financial crisis and possibly another economic downturn, while Japan is
mired in persistent slow growth. Large emerging economies, whose recent strong growth
represents expanding markets for U.S. goods, may also be turning to less expansionist
macroeconomic policies. Many countries, including many G-20 and emerging economies, have
returned to industrial policies, backtracking on trade liberalization.3 So despite U.S. policies
directed at export promotion and encouraging macroeconomic changes abroad, U.S. economic
recovery still depends on a balance of increased domestic investment and demand, which could
worsen the trade deficit if increased saving is not also part of the mix.4
On the finance side, policy-driven currency misalignments and the specter of “currency wars”
point to the other side of the global imbalances problem. Some countries are discussing the need
for more coordinated and equitable exchange rate policies, if not a broader rethinking of the
international monetary system. Attention has also turned to the relevance of the International
Monetary Fund (IMF) and other multilateral economic institutions in this process, such as the
World Bank, including reevaluating their role, structure, and governance (i.e., increased role of
emerging economies). A current concern is the threat of competitive devaluations that could
inflame trade tensions, prevent the rebalancing of the global economy, and undermine
international economic stability. China is not alone in this behavior, but receives the most
attention because of its closed capital account and large holdings of U.S. Treasury securities.
U.S. international economic policy must also contend with “globalization,” or the increasing
integration of markets and production, and supply chain networks brought about by advances in
technology, communications, transportation, and lower barriers to trade. These transformative
changes in the global economy have led to large decreases in transaction costs that have spurred
tremendous growth in trade, particularly of intermediate goods, which now account for over 60%
of the world’s commercial exchange.5 It has also contributed to rising incomes. In the United
States, jobs are supported by U.S. exports to foreign affiliates and U.S. production abroad, as well
as foreign firms operating in the United States. These complex production networks further
complicate the trade and employment policy debates, and raise other questions such as what
3 Simon J. Evenett, ed., Debacle: The 11th Global Trade Alert (GTA) Report on Protectionism, Centre for Economic
Policy Research, London, June 2012, p. 1-8.
4 On the tradeoffs and challenges of dealing with the trade deficit, see: CRS Report RL31032, The U.S. Trade Deficit:
Causes, Consequences, and Policy Options, by Craig K. Elwell.
5 CRS Report R41969, Rising Economic Powers and the Global Economy: Trends and Issues for Congress, by
Raymond J. Ahearn.
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constitutes an “American-made” product and how will innovation and production strategies
continue to change the economic landscape.
At the same time, while global economic integration has increased trade and economic growth, it
has also exposed U.S. firms and workers to greater competition from lower-cost and more
efficient producers in certain sectors and increasingly, from state-owned-enterprises (SOEs).
Globalization and the larger volume of imports of goods and services, therefore, may force some
U.S. firms to make costly adjustments to remain competitive. In some cases this may take the
form of layoffs and shifts to production abroad, and may raise concerns in Congress over
distributional issues of global production and trade.
In short, U.S. costs and benefits linked to an increasingly interconnected global economy may run
in many directions. The discussion is no longer simply about free trade versus protectionism. The
debate involves domestic and foreign macroeconomic policies, the participation of foreign states
in markets, the competitiveness of U.S. firms and workers, implications of value-chain and cross-
country production, and the financial stability of the international economy. For the United States,
an overarching goal is to maintain its high standard of living by remaining innovative, productive,
and internationally competitive, while safeguarding those stakeholders who otherwise may be left
behind in a fast-changing global economy, suggesting a strong supporting role for complementary
domestic policies. These changes have also raised new trade policy issues, some of which are
being discussed in U.S. free trade agreement negotiations.
Congress is in a unique position to address these issues, particularly given its constitutional
mandate for legislating and overseeing international trade and financial policy, as discussed
below. In addition to the broader congressional oversight of the economic and political context of
the current U.S. participation in the global economy, this report highlights major international
trade and finance issues that the 113th Congress may address.
The Role of Congress in International Trade and
Finance6
The U.S. Constitution assigns express authority over foreign trade to Congress. Article I, Section
8, gives Congress the power to “regulate commerce with foreign nations” and to “lay and collect
taxes, duties, imposts, and excises.” For roughly the first 150 years of the United States, Congress
exercised its authority over foreign trade by setting tariff rates on all imported products.
Congressional trade debates in the 19th century often pitted Members from northern
manufacturing regions, who benefitted from high tariffs, against those from largely southern raw
material exporting regions, who advocated for low tariffs.
A major shift in U.S. trade policy occurred after Congress passed the highly protective “Smoot-
Hawley” Tariff Act of 1930, which, by raising U.S. tariff rates to an all-time high level, led U.S.
trading partners to respond in kind. In the process, world trade declined rapidly, exacerbating the
impact of the Great Depression. Since the passage of this tariff act, Congress has delegated
certain trade authority to the executive branch. First, Congress enacted the Reciprocal Trade
Agreements Act of 1934, which authorized the President to enter into reciprocal agreements to
6 Written by William H. Cooper, Specialist in International Trade and Finance, 7-7749.
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International Trade and Finance: Key Policy Issues for the 113th Congress
reduce tariffs within congressionally preapproved levels, and to implement the new tariffs by
proclamation without additional legislation. This authority was subject to periodic congressional
renewal. Second, Congress enacted the landmark Trade Act of 1974 aimed at opening markets
and establishing non-discriminatory international trade rule, and which also required
congressional approval for trade agreements that involved changes in U.S. law, including
multilateral trade agreements and bilateral and regional free trade agreements. This change
responded to the growing role of non-tariff barriers in trade agreement negotiations, and has been
amended several times. The statute also included “fast-track trade negotiating” authority, now
called trade promotion authority (TPA).
Congress also exercises trade policy authority through the enactment of laws authorizing trade
programs and governing trade policy generally. These include such areas as U.S. trade agreement
negotiations; tariffs; non-tariff barriers; trade remedies; import and export policies; economic
sanctions; and the trade policy functions of the federal government. In addition, Congress
conducts oversight of the implementation of trade policies, programs, and agreements.
Congress has an important role in international finance as well. It has the ultimate authority over
the level of U.S. financial commitments to the multilateral development banks (MDBs), including
the World Bank, and to the International Monetary Fund (IMF). Congress also has oversight
responsibilities over these institutions, as well as the Federal Reserve and the Treasury
Department, whose activities affect international capital flows. Congress also closely monitors
developments in international financial markets that could impact the U.S. economy, such as the
Eurozone sovereign debt crisis.
Policy Issues for Congress
The 112th Congress passed several legislative measures on international trade and finance topics,
including bills to implement free trade agreements (FTAs) with Colombia, Panama, and South
Korea. Each of those FTAs has subsequently entered into force. The 112th Congress also passed
legislation to reauthorize Trade Adjustment Assistance (TAA) and the U.S. Export-Import Bank
(Ex-Im), to increase funding for international financial institutions, and to authorize permanent
normal trade relations status (PNTR) for Russia and Moldova. In addition, the 112th Congress
approved extensions to three trade preference programs: the Generalized System of Preferences
(GSP); the Andean Trade Preference Act (ATPA); and a “third-country fabric” provision in the
African Growth and Opportunity Act (AGOA).
Many of these policy issues, as well as new ones, may come before the 113th Congress, which
may face issues that range from those with implications for overarching trade and economic
policies to more narrow customs, tariff, and appropriations issues. Some of the more significant
ones are discussed below.
Renewal of Trade Promotion Authority (TPA)7
The President may request and the 113th Congress may consider renewal of TPA. TPA allows
implementing bills for trade agreements to be considered under expedited legislative
7 Written by William H. Cooper, Specialist in International Trade and Finance, 7-7749.
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procedures—limited debate, no amendments, and an up or down vote—provided the President
observes certain statutory obligations in negotiating trade agreements. These obligations include
adhering to congressionally defined trade policy negotiating objectives, as well as congressional
notification and consultation requirements before, during, and after the completion of the
negotiation process. The primary purpose of TPA is to preserve the constitutional role of
Congress with respect to consideration of implementing legislation for trade agreements that
require changes in domestic law, while also bolstering the negotiating credibility of the executive
branch by ensuring that the trade agreements will not be changed. Since first enacted in the Trade
Act of 1974, TPA has been renewed multiple times, with the latest temporary grant of authority
expiring on July 1, 2007.
In light of TPA’s special provisions governing trade agreement implementing bills, many consider
its renewal as necessary to approve and implement new trade agreements. Others question
whether TPA is necessary to pass trade implementing bills and note that it is not a prerequisite for
initiating or concluding trade agreement negotiations. Some experts argue that TPA would have to
be renewed if the United States is to be a credible negotiator in concluding proposed trade
agreements such as the Trans-Pacific Partnership (TPP) free trade agreement negotiations, an
International Services Agreement (ISA), and the expansion of the Information Technology
Agreement (ITA). It can also be argued that while the Obama Administration has been notifying
and consulting Congress on these negotiations per previous TPA requirements, Congress has not
formally expressed its views in the form of new legislative negotiating objectives for trade
agreements, which have been an important part of previous TPA/fast-track authorities.
Trade Agreements and Negotiations
Historically, the United States has pursued trade agreements to eliminate barriers to trade and
establish non-discriminatory rules of exchange. Among the trade issues for the 113th Congress are
U.S. negotiations with the TPP countries—now 11 countries and possibly more—to create a
comprehensive and high-standard regional FTA. Furthermore, Members may examine the future
of the stalled WTO Doha Round and new negotiating proposals. In addition, Congress is likely to
monitor the Administration’s trade liberalizing initiatives with the Middle East and North Africa
region and with the European Union.
Trans-Pacific Partnership (TPP) FTA8
The TPP is an evolving regional FTA, which may become a vehicle to advance a wider Asia-
Pacific free trade area, as well as a U.S. policy response to the rapidly increasing economic and
strategic linkages among Asian states. The TPP was originally an FTA concluded in 2006 among
Singapore, New Zealand, Chile, and Brunei. Subsequently, the United States, Australia, Peru, and
Vietnam joined the negotiations in the fall of 2008 (during the Bush Administration). President
Obama endorsed the negotiations in November 2009, and Malaysia joined as a full participant in
October 2010. After intensive consultations with TPP participants during the first half of 2012,
Canada and Mexico became full participants at the 15th round of negotiations in Auckland, New
Zealand, in December 2012. Japan and Thailand, and other countries, have also expressed interest
in joining the negotiations.
8 Written by Ian F. Fergusson, Specialist in International Trade and Finance, 7-4997.
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The TPP is a potentially important trade agreement. In 2011, the TPP negotiating partners made
up 31% total U.S. total trade in goods and services. TPP negotiations aim to eliminate tariffs and
non-tariff barriers to create a comprehensive and high standard FTA to which other nations can
accede. The participants are also discussing new trade issues, such as supply chain management,
state-owned enterprises (SOEs), regulatory coherence, and the participation of small and
medium-sized enterprises to create what the Obama Administration refers to as a “21st century
trade agreement.” Certain aspects of the negotiations have proven controversial. These include
select market access issues, such as agriculture, textiles, and apparel, as well as the level of
intellectual property protection, the enforcement of labor and environmental rights, the treatment
of state-owned enterprises, and access to government procurement.
President Obama and other TPP leaders have declared their intention to conclude the negotiations
by October 2013. Congress has a direct legislative interest in the progress of the negotiations
because historically under the TPA statute, it has defined trade agreement negotiating objectives,
provided the President with authority to enter into the trade agreement, and defined the legislative
procedures under which it will consider a trade agreement implementing bill. Should TPP
negotiations conclude in 2013, the 113th Congress may take up an implementing bill for the
agreement.
The WTO and WTO Doha Round9
The World Trade Organization (WTO) is an international organization that administers the trade
rules and agreements negotiated by 157 participating parties—with Montenegro, Russia, Samoa,
and Vanuatu becoming members in 2012—and serves as a forum for dispute settlement resolution
and trade liberalization negotiations. The United States was a major force behind the
establishment of the WTO on January 1, 1995, and the new rules and trade liberalization
agreements that occurred as a result of the Uruguay Round of multilateral trade negotiations
(1986-1994). The WTO succeeded the General Agreement on Tariffs and Trade (GATT), first
established in 1947.
The WTO Doha Round of multilateral trade negotiations, begun in November 2001, has entered
its 12th year of negotiation. The negotiations have been characterized by persistent differences
among the United States, the European Union, and advanced developing countries on major
issues, such as agriculture, industrial tariffs and non-tariff barriers, services, and trade remedies.
Partly as a result of being labeled a “development round” to entice developing countries to
participate in the first place, developing countries (including emerging economic powerhouses
such as China, Brazil, and India) have sought the reduction of agriculture tariffs and subsidies
among developed countries, non-reciprocal market access for manufacturing sectors, and
protection for their services industries. Developed countries have sought increased access to
developing countries’ industrial and services sectors, while attempting to retain some measure of
protection for their agricultural sectors. Given the differences, which were not meaningfully
resolved by the 8th Ministerial of the WTO in December 2011, there is frustration over the ability
of WTO members to reach a comprehensive Doha Round agreement.
Despite the lack of agreement on existing issues at the December 2011 Ministerial, some
observers have suggested that the WTO should start to address trade-related challenges in such
subjects as the digital economy, climate change, food security, exchange rates, and energy in
9 Written by Ian F. Fergusson, Specialist in International Trade and Finance, 7-4997.
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order to maintain relevancy in a changing policy environment. While no decision was made to
adopt a work program on these issues, a revamped plurilateral government procurement
agreement was agreed to by 42 member states (including the 27 members of the European Union)
at the Ministerial. Also, several countries, including China, are in negotiations to accede to the
Government Procurement Agreement (GPA).
In addition, work has started on expanding the reach of the current WTO agreements outside the
scope of the Doha Round. A group now composed of 46 developed and advanced developing
countries began negotiating a possible framework for a plurilateral agreement that would
liberalize and expand disciplines in services trade beyond the WTO’s General Agreement on
Trade and Services (GATS). Negotiations to expand the scope of the current plurilateral
Information Technology Agreement (ITA) have also been proposed and efforts continue to
“harvest” some parts of the Doha Round, such as on trade facilitation. The 9th Ministerial of the
WTO is scheduled to take place on December 3-6, 2013.
Potential U.S.-European Union Trade Agreement Negotiations10
The United States and the European Union (EU) share a large, dynamic, and mutually beneficial
trade and economic relationship. However, concerns about slow growth, job creation, and
increased competition from emerging markets have prompted calls from stakeholders on both
sides of the Atlantic for renewed focus on reducing and eliminating remaining barriers to their
trade and investment. Following the EU-U.S. Summit in November 2011, the Transatlantic
Economic Council (TEC) established a High-Level Working Group on Jobs and Growth. Led by
U.S. Trade Representative Ron Kirk and EU Trade Commissioner Karel de Gucht, the Working
Group was tasked with assessing options for strengthening the U.S.-EU trade and investment
relationship. The Working Group issued an interim report in June 2012, which stated that, if
achievable, a “comprehensive agreement that addresses a broad range of bilateral trade and
investment policies” would provide the most significant benefit to the transatlantic relationship.
U.S. and EU leaders issued a joint statement welcoming the interim report’s findings.11 A final
report is expected in early 2013 and trade agreement negotiations may be launched.
Issues in a potential new trade agreement initiative might include tariff reduction and elimination,
regulatory compatibility and standards, improving market access for services, investment
protection, improved access to government procurement opportunities, intellectual property rights
protection and enforcement, and greater agricultural market access. New “21st century” issues
also could be addressed in areas such as trade facilitation, state-owned enterprises (SOEs), and
supply chains.12 Certain issues, notably regulatory compatibility, have been contentious in
previous transatlantic dialogues, and some question the likelihood of resolving these issues now.
Others suggest that economic and political factors have aligned to improve chances of political
and public support for possible FTA negotiations.
10 Written by Shayerah Ilias, Specialist in International Trade and Finance, 7-9253. Language draws from works by
Raymond J. Ahearn, Specialist in International Trade and Finance, x7-7629.
11 The White House, "Joint U.S.-EU Statement on the High Level Working Group on Jobs and Growth," press release,
June 19, 2012, http://www.whitehouse.gov/the-press-office/2012/06/19/joint-us-eu-statement-high-level-working-
group-jobs-and-growth.
12 EU-U.S. High Level Working Group on Jobs and Growth, Interim Report to Leaders from the Co-Chairs, June 19,
2012, http://trade.ec.europa.eu/doclib/docs/2012/june/tradoc_149557.pdf.
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Possible options for the contours of transatlantic trade negotiations range from a comprehensive
and traditional free trade agreement to parallel and separate negotiations in areas such as
elimination of tariffs on trade in goods, liberalization of services trade and foreign investment
restrictions, and reduction of regulatory barriers. The United States and the EU also could
consider alternative mechanisms for transatlantic issues, including intensified regulatory
cooperation; negotiation of a transatlantic bilateral investment treaty; and sector-specific
initiatives.
EU-U.S. trade relations are likely to be among the key policy issues confronting the 113th
Congress, with possible close examination of the Working Group recommendations. Congress
could examine the impact of greater transatlantic trade liberalization on U.S. economic growth;
the future of U.S. trade policy and other FTA negotiations (such as the ongoing TPP trade
negotiations); efforts to promote solutions to issues related to third countries (such as SOEs); and
trade liberalization through multilateral negotiations (such as in the WTO). Should FTA
negotiations commence, the congressional role would include consultations with U.S. negotiators
on and oversight of the negotiations, and eventual consideration of legislation to implement the
final trade agreement.
U.S. Trade and Economic Engagement with the Middle East and North Africa13
In light of the political changes taking place in the Middle East and North Africa (MENA), the
U.S. government has been considering ways to expand U.S. trade and investment with countries
in the region, which could help foster economic growth and provide support for successful
democratic transitions. However, the ongoing political turmoil and security issues in the region
may prompt greater scrutiny of U.S. engagement, as policymakers grapple with questions of
timing, feasibility, and political support for such efforts.14
A key part of the Administration’s trade and economic engagement is the MENA “Trade and
Investment Partnership Initiative” (MENA-TIP), announced by President Obama in May 2011.15
The objectives of the initiative are to facilitate trade within the region; promote greater trade and
investment with the United States and with other global markets; and “open the door to willing
and able MENA partners—particularly those adopting high standards of reform and trade
liberalization—to construct a regional trade arrangement.”16 As part of the MENA-TIP, the
United States, Egypt, Jordan, Morocco, and Tunisia have agreed to focus cooperation initially on
investment, trade facilitation, support for small- and medium-sized enterprises, and regulatory
practices and transparency.17
13 Written by Shayerah Ilias, Specialist in International Trade and Finance, 7-9253.
14 For details see, CRS Report R42153, U.S. Trade and Investment in the Middle East and North Africa: Overview and
Issues for Congress, coordinated by Rebecca M. Nelson.
15 Office of the Press Secretary, “Remarks by the President on the Middle East and North Africa,” The White House,
State Department, Washington, DC, May 19, 2011, http://www.whitehouse.gov/the-press-office/2011/05/19/remarks-
president-middle-east-and-north-africa.
16 Office of the United States Trade Representative (USTR), "Remarks by Ambassador Miriam Sapiro on Trade and
Investment with the Middle East and North Africa," press release, September 15, 2011, http://www.ustr.gov/about-
us/press-office/speeches/transcripts/2011/september/remarks-ambassador-miriam-sapiro-trade.
17 USTR, "Agreed Summary: Initial Meeting on Building a New Trade & Investment Partnership," press release, April
2012, http://www.ustr.gov/webfm_send/3348.
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The MENA-TIP could build on previous U.S. trade policy initiatives in the region, including the
Middle East Free Trade Area Initiative (MEFTA).18 It also could build on other forms of
economic engagement the United States is currently pursuing or considering, including debt relief
for Egypt; enterprise funds for Tunisia, Egypt, and Jordan; and international financing through the
“Deauville Partnership with Arab Countries in Transition.” Launched by the G-8 in May 2011,
the Deauville Partnership aims to coordinate international financing to help support countries in
the region undergoing democratic transitions. It includes Egypt, Jordan, Libya, Morocco, Tunisia,
and Yemen.19
U.S. trade and economic engagement with the MENA region may be of continuing interest for the
113th Congress. In addition to monitoring ongoing U.S. efforts to implement the MENA-TIP,
Congress could consider a number of policy approaches—some of which were raised in the 112th
Congress20— for bolstering trade and investment ties with some transitioning countries. Possible
approaches include maintaining the status quo until the impact of the political changes in the
region is clearer, creating enhanced U.S. trade preferences for U.S. imports from MENA
countries, increasing assistance from U.S. federal export promotion and financing agencies to the
region, and exploring new bilateral trade agreements with countries in the region, such as Egypt
and Tunisia.
Consideration of such approaches may prompt legislative debates about the effectiveness of U.S.
policy tools in promoting increased trade and investment, as well as their impact on political
transitions, and how quickly the benefits of these policy options would be borne out. In a tight
budget environment, trade and investment may be attractive policy tools for supporting MENA
economies compared to other options, such as foreign aid, while also potentially creating new
economic opportunities for U.S. exporters.
China21
Since China embarked upon a policy of economic and trade liberalization in 1979, U.S.-Chinese
economic ties have grown extensively. Total U.S.-China trade rose from $2 billion in 1979 to an
estimated $536 billion in 2012. China is currently the United States’ second-largest trading
partner, its largest source of imports, and its third largest export market. China’s large population
and rapidly growing economy make it a potentially huge market for U.S. exports, and lower-cost
imports from China benefit U.S. consumers. China is also an important part of the global supply
chain for many U.S. companies, many of which use China as the final point of assembly for their
products. In addition, China’s large-scale holdings of U.S. Treasury securities ($1.2 trillion as of
18 USTR, “Middle East Free Trade Area Initiative (MEFTA),” http://www.ustr.gov/trade-agreements/other-
initiatives/middle-east-free-trade-area-initiative-mefta.
19 CRS Report R42153, U.S. Trade and Investment in the Middle East and North Africa: Overview and Issues for
Congress, coordinated by Rebecca M. Nelson. The White House, "Fact Sheet: G-8 Action on the Deauville Partnership
with Arab Countries in Transition," press release, May 19, 2012.
20 See Carnegie Endowment for International Peace, “Lieberman Delivers Remarks on Democratic Transition in
Egypt,” July 22, 2011, http://carnegieendowment.org/files/Lieberman_Prepared_Remarks.pdf; John McCain, Lindsey
Graham, Mark Kirk, and Marco Rubio, “The Promise of a Pro-American Libya,” Wall Street Journal, October 7, 2011.
On November 18, 2011, Representative Dreier introduced a resolution, co-sponsored by Representative Meeks, that
calls for the United States to initiate FTA negotiations with Egypt (H.Res. 472).
21 Written by Wayne M. Morrison, Specialist in Asian Trade and Finance, 7-7767.
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September 2012) have helped the federal government finance its budget deficits, thereby helping
to keep U.S. real interest rates relatively low.
Despite the significant benefits, bilateral economic ties have become increasingly strained over a
number of issues. Many of these relate to China’s incomplete transition to a market economy and
efforts by the Chinese government to accelerate the country’s transformation to a developed
economy through the use of distortive policies that attempt to promote (e.g., subsidies) and
protect (e.g., trade and investment barriers) Chinese firms, especially state-owned enterprises
(SOEs). The 113th Congress is likely to examine U.S.-China trade relations on an ongoing basis,
including some or all of the issues discussed below.
Industrial Policies
Numerous policies have been implemented by China to promote the development of domestic
industries deemed critical for its future economic growth. China’s primary goals include
transitioning from a manufacturing center to a major global source of innovation, and sharply
reducing the country’s dependence on foreign technology by promoting “indigenous innovation.”
The latter policy can amount to discrimination against foreign firms and has become a major
source of trade tension with the United States. The Chinese government has responded that they
have not and will not discriminate against foreign firms or violate global trade rules, but many
U.S. business leaders remain skeptical even as they have acknowledged China’s pledge to delink
indigenous innovation from government procurement.
Many U.S. firms have also complained about Chinese pressure to establish production facilities in
China, share technology with Chinese partners, or set up R&D centers as a condition for gaining
market access. In 2011, U.S. Treasury Secretary Timothy Geithner reiterated this charge and a
2012 survey by the American Chamber of Commerce (AmCham) in China reported that 33% of
its respondents stated that technology transfer requirements were negatively affecting their
businesses.22 President Obama raised the issue with then-Chinese Vice President (now President)
Xi Jinping in a meeting on February 14, 2012,23 and shared in a White House Factsheet that
“China reiterates that technology transfer and technological cooperation shall be decided by
businesses independently and will not be used by the Chinese government as a pre-condition for
market access.” However, concerns remain that China will continue these practices. The Obama
Administration has initiated WTO dispute settlement cases against a number of Chinese industrial
policies, including China’s export subsidies to auto and auto parts (September 2012), export
restrictions on rare earth elements (March 2012), preferential subsidies given to Chinese wind
power equipment manufacturers (December 2010); and export restrictions on certain raw
materials manufacturers in China (June 2009).
Intellectual Property Rights Protection
Lack of effective and consistent protection and enforcement in China of U.S. IPR have been cited
by U.S. firms as one of the most significant problems they face in doing business in China.
Although China has significantly improved its IPR protection regime over the past few years,
22 Reuters, September 23, 2011 and AmCham China, 2012 China Business Climate Survey Report, March 2012,
available at http://www.amchamchina.org/businessclimate2012.
23 Inside Trade, USTR Seeks Info From Manufacturers On Forced Technology Transfer To China, January 31, 2012.
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U.S. industry officials complain that piracy rates in China remain unacceptably high. A 2012
AmCham China survey found that 79% of respondents felt that China’s IPR enforcement regime
was ineffective.24 A study by the U.S. International Trade Commission estimated that U.S.
intellectual property-intensive firms that conducted business in China lost $48.2 billion in sales,
royalties, and license fees in 2009 because of IPR violations.
U.S. business and government representatives have voiced growing concern over economic losses
suffered by U.S. firms as a result of cyber attacks, many of which are believed to originate in
China. According to a report by the U.S. Office of the Director of National Intelligence (DNI),
“Chinese actors are the world’s most active and persistent perpetrators of economic espionage.”
U.S. private sector firms and cyber security specialists have reported an onslaught of computer
network intrusions that have originated in China, but the intelligence community cannot confirm
who was responsible.25
An Undervalued Currency
Since 1994, the Chinese government has maintained a policy of intervening in currency markets
to limit the appreciation of its currency, the renminbi (RMB), against the U.S. dollar. Critics
charge that this policy has made Chinese exports to the United States significantly less expensive
and U.S. exports to China more expensive than would otherwise be the case. Many contend that
this policy acts as a subsidy for Chinese exports to the United States, while imposing a trade
barrier to U.S. exports to China and that this practice is a major cause of the large annual U.S.
bilateral trade deficits and the extensive loss of U.S. manufacturing jobs. In addition, some
economists claim that China’s currency policy induces other countries to intervene similarly in
currency markets.
Several bills were introduced in the 112th Congress that sought to address China’s currency policy,
and debate continues over the merits, as well as their possible negative repercussion on the United
States with respect to its WTO commitments. Some argue that any effort to induce China to
appreciate its currency more rapidly would likely do little to boost the U.S. economy in the short
run, while proponents argue they may, nonetheless, be necessary. According to the Department of
the Treasury, the RMB appreciated by 9.3% against the dollar from June 2010 through November
9, 2012, and by 12.6% on a real (inflation-adjusted) basis. Since 2005, the RMB has appreciated
by 40% in real terms.26 Still, some U.S. officials note that China’s dollar exchange rate changed
little in 2012.
Chinese Economic Rebalancing
A major focus of U.S. economic policy towards China has been to persuade it to rebalance its
economy by reducing the country’s policy preference for exporting and fixed investment and
increase the importance of consumer demand. This goal could be achieved with a number of
24 AmCham China, 2012 China Business Climate Survey Report, March 2012, available at
http://www.amchamchina.org/businessclimate2012.
25 DNI, Office of the National Counterintelligence Executive, Foreign Spies Stealing U.S. Economic Secrets in
Cyberspace, Report to Congress on Foreign Economic Collection and Industrial Espionage: 2009-2011, October 2011.
26 U.S. Department of the Treasury, Report to Congress on International Economic and Exchange Rate Policies,
November 27, 2012, p. 13.
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policies to boost household incomes (e.g., developing a social safety net and reducing the need to
maintain high rates of savings) and implementing reforms to reduce distortive government
policies (e.g., maintaining an undervalued currency and using the government-controlled banking
system to subsidize SOEs). Many economists argue that boosting Chinese domestic consumption
and eliminating distortive economic policies would greatly increase China’s demand for imports,
promote greater competition in China, improve Chinese living standards, and help reduce trade
tensions with the United States.
Challenges for the 113th Congress
Opinions differ as to the most effective way of dealing with China on major economic issues.
Some support a policy of engagement with China using various cabinet-level forums, such as the
U.S.-China Strategic and Economic Dialogue and the U.S.-China Joint Commission on
Commerce and Trade (JCCT). Others support a somewhat mixed policy of using engagement
when possible, coupled with a more aggressive use of WTO dispute settlement procedures to
address China’s unfair trade policies. Still others, who see China as a growing threat to the U.S.
economy and the global trading system, advocate a policy of trying to contain China’s economic
power and resorting to punitive measures when needed.
China’s continued economic rise and U.S.-China trade relations will likely be closely monitored
by the 113th Congress. Some Members may press the Administration to boost efforts to induce
China to abide more fully by its WTO commitments, including bringing more trade dispute
settlement cases in the WTO. They may also introduce new bills that seek to address China’s
currency, industrial, and IRP protection policies.
Reorganization of Federal Trade-Related Agencies27
U.S. policymakers’ interest in the organizational structure of U.S. government trade agencies has
grown in recent years, stimulated by federal efforts to promote U.S. exports and employment
through the National Export Initiative, as well as national debates on reducing federal spending
and the size of the U.S. government. In early 2012, President Obama submitted a proposal
seeking authority to reorganize and consolidate the business- and trade-related functions of six
federal entities—Department of Commerce, Export-Import Bank (Ex-Im Bank), Overseas Private
Investment Corporation (OPIC), Small Business Administration (SBA), Trade and Development
Agency (TDA), and Office of the United States Trade Representative (USTR)—into one
department. In the 112th Congress, bills based on the proposal were introduced in the Senate (S.
2129) and the House (H.R. 4409). The President may resubmit his request for reorganizational
authority in the 113th Congress.
The trade reorganization proposal has rekindled long-standing policy debates. On the one hand,
proponents of consolidation proposals believe that they may eliminate duplication of federal trade
functions, provide a more streamlined rationale for U.S. export promotion services and reduce
costs of U.S. trade policy programs. On the other hand, critics contend that such proposals could
result in the creation of a large, costly federal bureaucracy and undermine the effectiveness of key
agencies, such as the Office of the United States Trade Representative. They also assert that the
27 Written by Shayerah Ilias, Specialist in International Trade and Finance, 7-9253.
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diffusion of trade functions across federal government agencies helps to advance various aspects
of U.S. trade policy, such as small- and medium-sized or agricultural exporters.
Separately, the Administration has engaged in other efforts, within its existing authority, to
improve the effectiveness and efficiency of federal trade functions. For example, the
Administration has created new coordinating bodies, such as the Interagency Trade Enforcement
Center and the Interagency Task Force on Commercial Advocacy.28 In addition, the
Administration is reviewing a proposal to reorganize the International Trade Administration (ITA)
of the Department of Commerce, possibly by consolidating two units of the ITA—the U.S. and
Foreign Commercial Service unit and the Manufacturing Access and Compliance unit.29
Members of Congress will likely play a significant role in any trade reorganization debate.
Congress could conduct oversight, engage in consultations with the Administration, hold
hearings, grant reorganizational authority to the President, and/or introduce and enact trade
reorganization legislation separate from the President’s plan. Trade reorganization—whether
large-scale or restricted to individual agencies, such as the ITA—could be controversial from the
standpoint of congressional committee jurisdiction, given the fact that multiple committees have
jurisdiction over the trade-related agencies that could be included in a possible reorganization.
U.S. Export and Investment Promotion
In addition to negotiating agreements to open markets by eliminating barriers to U.S. trade, the
U.S. government promotes exports and investment by providing credit, finance, and insurance
programs that are administered by the Export-Import Bank (Ex-Im Bank), the Department of
Agriculture, and the Overseas Private Investment Corporation (OPIC). In addition, the
Department of Commerce promotes U.S. exports of goods and services, particularly by small and
medium-sized companies, and inward investment into the United States. Federal export
promotion has been elevated with the Obama Administration’s introduction of the National
Export Initiative (NEI) in the 2010 State of the Union Address.
National Export Initiative (NEI)30
Launched by the Obama Administration, the NEI is a strategy for doubling U.S. exports by the
end of 2014 to support U.S. jobs through: improved coordination and funding of federal export
promotion activities; greater U.S. export financing; enhanced government advocacy on behalf of
U.S. exporters; negotiation of new trade agreements; and more robust enforcement of existing
trade agreements.31 The NEI established an Export Promotion Cabinet (EPC), which includes
28 Executive Order 13601, "Establishment of the Interagency Trade Enforcement Center," 77 Federal Register 12981-
12983, March 5, 2012. Executive Order 13630, “Establishment of an Interagency Task Force on Commercial
Advocacy,” 77 Federal Register 73893-73895, December 11, 2012 and CRS Report R41495, U.S. Government
Agencies Involved in Export Promotion: Overview and Issues for Congress, coordinated by Shayerah Ilias.
29 "OMB Approves Proposal to Reorganize ITA; Commerce to Consult With Hill," Inside U.S. Trade, November 21,
2012. "Commerce Mulling ITA Reorganization, Possibly Merging MAC With USFCS," Inside U.S. Trade, October 19,
2012.
30 Written by Shayerah Ilias, Specialist in International Trade and Finance, 7-9253.
31 Executive Order 13534, "National Export Initiative," 74 Federal Register 123433-12435, March 16, 2012.
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Secretaries or Directors of key federal agencies involved in export promotion, to coordinate with
the existing Trade Promotion Coordinating Committee (TPCC) in implementing the NEI.32
Under the NEI, federal agencies have increased their export assistance activities, including
government-to-government commercial advocacy, trade missions, and export financing. Despite
the rise in U.S. exports since 2010, there is some debate over the effectiveness of the NEI. Some
policymakers welcome its high-level focus on export promotion. Others contend that the NEI
amounts to bureaucratic reorganization and fails to address shortcomings in federal efforts and
others argue that the NEI’s focus on direct forms of export assistance will have only marginal
effects on export levels. They encourage the Administration to focus more on broader trade and
macroeconomic policy issues that may be more effective in boosting exports such as: negotiating
and enforcing U.S. free trade agreements; reducing foreign trade barriers; addressing foreign
currency intervention; and working to rebalance the global economy.
The 113th Congress could conduct oversight and legislate on a number of export promotion issues
related to the NEI, including: the effectiveness of the NEI and federal agencies involved in
boosting U.S. exports; the authorities of appropriations for federal agencies with export
promotion functions; federal efforts to coordinate export promotion efforts; and, proposals to
reorganize federal trade functions.
Reauthorization of the Export-Import (Ex-Im) Bank and Overseas Private
Investment Corporation (OPIC)33
Ex-Im Bank and OPIC are two core federal agencies involved in export promotion. Ex-Im Bank,
the official export credit agency (ECA) of the U.S. government, provides direct loans, guarantees,
and insurance to help finance U.S. exports when the private sector is unable or unwilling to do so.
OPIC supports U.S. economic and foreign policy objectives by providing political risk insurance
and finance in support of U.S. investment in developing countries. Both agencies are self-
sustaining; they use offsetting collections, generated from fees charged for their services and
other sources, to fund their activities. Congress, as part of its legislative responsibilities, approves
an annual appropriation that sets an upper limit on each of the agencies’ administrative and
program expenses.
Congress has responsibility for reauthorizing Ex-Im Bank and OPIC. The 112th Congress passed
the Export-Import Bank Reauthorization Act of 2012 (P.L. 112-122), which extended Ex-Im
Bank’s authority through FY2014, raised the bank’s lending authority from $100 billion limit to
$140 billion in FY2014 and required increased bank reviews of lending operations, among other
provisions. In addition, it requires Ex-Im Bank to conduct international negotiations to reduce and
eliminate official export credit activity 34 The 113th Congress could conduct oversight of the Ex-
Im Bank’s implementation of these requirements.
32 Report to the President on the National Export Initiative: The Export Promotion Cabinet’s Plan for Doubling U.S.
Exports in Five Years, Washington, DC, September 2010. The inter-agency TPCC was established by executive order
in 1993 to coordinate the export promotion and export financing activities of the executive branch.
33 Written by Shayerah Ilias, Specialist in International Trade and Finance, 7-9253.
34 In 2006, Congress had extended the Bank’s authority through September 30, 2011 (P.L. 109-438) and since then, had
extended its authority through appropriations vehicle.
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The most recent stand-alone reauthorization of OPIC was through the Overseas Private
Investment Corporation Amendments Act of 2003 (P.L. 108-158), which reauthorized OPIC
through November 1, 2007. Since then, Congress has extended OPIC’s authority through
appropriations. The FY2013 continuing resolution extends OPIC’s authority through March 27,
2013. From an operational standpoint, some argue that OPIC would benefit form a multi-year or
permanent authorization, which may enhance OPIC’s capacity for long-term planning and ability
to provide assurances to investors about OPIC programs. Others argue that frequent
reauthorizations allow greater opportunity for congressional oversight of OPIC’s activities.
Ex-Im Bank and International Export Credit Financing
Many countries, including the United States through Ex-Im Bank, conduct government-backed
export financing through entities known as export credit agencies (ECAs), especially when it is
perceived that the market has failed to offer adequate financing. The Organization for Economic
Cooperation and Development (OECD) is the primary international organization guiding and
monitoring officially backed export credit activity. The OECD Arrangement on Officially
Supported Export Credits (“the OECD Arrangement”), created in 1978, established limitations on
the terms and conditions for official export credit activity of OECD member countries.
In recent decades, there has been a growth in export credit financing that is not regulated by the
OECD Arrangement. Certain OECD member countries are conducting unregulated export credit
financing through “market windows” and untied lending support.35 However, perhaps a bigger
shift in the landscape is due to the export credit financing by non-OECD countries such as China,
Brazil, and India—financing that is not subject to export credit disciplines under the OECD.
Although most of the non-OECD ECAs core programs appear to “operate within or close to
OECD parameters, some of these programs—especially in China—appear to consistently operate
with a financial edge over standard OECD financing.”36 However, it is difficult to confirm the
export credit financing terms and conditions of non-OECD countries with any certainty.
The changing international export credit financing landscape could raise questions about U.S.
exporters’ competitiveness in foreign markets. In some cases, U.S. firms that otherwise are fully
competitive producers may face competition over financing terms that are subsidized. The United
States has been engaged in negotiations through the OECD on export credit financing issues.
More recently, the United States has launched efforts to negotiate export credit guidelines with
China. In February 2012, the United States and China announced that they would establish an
international working group composed of export financing providers with the goal of completing
35 A “market window” is a government-owned entity or program that offers export credits on market terms. Market
windows generally do not operate on purely commercial terms, as they tend to receive benefits from their government
status that commercial lenders cannot access. Market windows lie outside of the purview of the OECD Arrangement.
Countries that operate market windows include Canada, Germany, and Italy; the United States does not have one.
According to the OECD, “untied aid is Official Development Assistance [ODA] for which associated goods and
services may be fully and freely procured in substantially all countries.” Because the untied loan is not tied to exports,
it is not subject to the OECD export credit guidelines. Source: U.S. Ex-Im Bank, 2011 Competitiveness Report, and
OECD, Glossary of Key Terms and Concepts.
36 Export-Import Bank of the United States (U.S. Ex-Im Bank), Report to the U.S. Congress on Export Credit
Competition and the Export-Import Bank of the United States, for the period January 1, 2011 through December 31,
2011, June 2012, p. 107. Hereinafter, this report will be referred to as “U.S. Ex-Im Bank, 2011 Competitiveness
Report.”
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a new set of export credit guidelines by 2014.37 It is unclear if membership in the working group
would include major providers of official export credit financing that are not a part of the OECD,
such as Brazil and India.
The 2012 Ex-Im Bank reauthorization act (P.L. 112-122) requires the United States to negotiate
with other major countries, including OECD members to substantially reduce—with the ultimate
goal of eliminating subsidized export financing and other forms of export subsidies. The 113th
Congress could examine such negotiations, both within the OECD and separately, such as the
U.S. engagement with China.
Export Controls and Sanctions
Congress has authorized the President to control the export of various items for national security,
foreign policy, and economic reasons. Separate programs and statutes for controlling different
types of exports exist for nuclear materials and technology, defense articles and services, and
dual-use goods and technology. Under each program, licenses of various types are required before
an export can be undertaken. The Departments of Commerce, State, and Defense administer these
programs. At the same time, Congress also legislates country-specific sanctions that restrict aid,
trade, and other transactions to address U.S. policy concerns about proliferation, regional
stability, and human rights. In the 113th Congress, these controls and sanctions may raise difficult
issues over how to balance U.S. foreign policy and national security objectives against U.S.
commercial and economic interests.
The President’s Export Control Initiative38
In 2009, the Obama Administration launched a comprehensive review of the U.S. export control
system. In the current system, responsibility for controlling exports is divided among the
Departments of Commerce, State, and Treasury, based on the nature of the product (munitions or
dual-use goods) and basis for control, with enforcement shared among these agencies, as well as
the Departments of Justice and Homeland Security. Former Defense Secretary Robert M. Gates
announced key elements of the Administration's agenda for reform in a speech on April 20, 2010,
and later proposed a four-pronged approach that would create a single export control licensing
agency for both dual-use and munitions exports; adopt a unified control list; create a single
integrated information technology system, which would include a single database of sanctioned
and denied parties; and establish a single enforcement coordination agency.
The Administration's blueprint envisions that these changes would be implemented in three
phases with the final tier requiring legislative action. To date, efforts have been undertaken to
harmonize the Commerce Control List (CCL), which focuses on dual-use items, with the U.S.
Munitions List (USML). This has been done through an ongoing category-by-category review of
USML items and a migration of what the Administration deems as less sensitive items to the
CCL. An Export Enforcement Coordination Center, which was created by executive order on
November 9, 2010, has been set up within the Department of Homeland Security to synchronize
37 The White House, "Joint Fact Sheet on Strengthening U.S.-China Economic Relations," press release, February 14,
2012, http://www.whitehouse.gov/the-press-office/2012/02/14/joint-fact-sheet-strengthening-us-china-economic-
relations.
38 Written by Ian F. Fergusson, Specialist in International Trade and Finance, 7-4997.
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enforcement efforts. An integrated information technology system based on the Defense
Department’s USXports platform is being adopted by the Departments of State and Commerce.
In the 113th Congress, Members may scrutinize this effort through oversight and may be asked to
approve certain changes proposed by the Administration. Congressional notification is required if
items are moved from the munitions list to the dual-use list; the manner by which this notification
is accomplished reportedly is being negotiated by the Administration and the congressional
committees of jurisdiction. The creation and placement of the proposed licensing agency may
require legislation.
Legislation to renew or rewrite the EAA was introduced in the House of Representatives during
the 112th Congress. The Export Administration Act Renewal Act of 2012 (H.R. 2122), introduced
in the 112th Congress, would have renewed the 1979 EAA until 2015, provided enhanced penalty
and enforcement authority, provided for congressional review of export control regulations,
toughened Iran sanctions, and authorized differential treatment of parts and components on the
USML. A second bill, the Technology Security Act of 2011 (H.R. 2004), would have rewritten the
EAA, vesting the President with the authority to control exports for national security, foreign
policy, proliferation, terrorism, or disruption of critical infrastructure reasons under certain
guidelines. Versions of these bills, or others, may be introduced in the 113th Congress.
In addition, the House version of the National Defense Authorization Act for FY2013 contained
provisions to permit the President to determine the export control jurisdiction of commercial
communications satellites and related components. The language of similar Senate legislation was
expected to be considered in the conference between those two bills.
Economic Sanctions39
Economic sanctions may be defined as coercive economic measures taken against a target to
bring about a change in policies. They typically include measures such as trade embargoes;
restrictions on particular exports or imports; denial of foreign assistance, loans, and investments;
or control of foreign assets and economic transactions that involve U.S. citizens or businesses.
The decision to apply trade and aid sanctions is based, to some extent, on a country’s record with
respect to human rights, international terrorism, religious freedom, proliferation of weapons of
mass destruction, international narcotics trafficking, trafficking in persons, high seas piracy,
corruption, money laundering, child abduction, and child soldiers. The United States currently
maintains robust sanctions regimes against foreign governments it has identified as supporters of
acts of international terrorism (Cuba, Iran, Sudan, and Syria), nuclear arms proliferators (Iran,
North Korea, Syria), and egregious violators of international human rights standards (Burma,
Cuba, Iran, North Korea).
The 113th Congress will likely examine the President’s implementation of economic sanctions
requirements enacted in the 112th Congress pertaining to weapons proliferation programs in Iran,
North Korea, and Syria, and rule of law matters in Russia. Legislation might be required to move
toward normalizing trade relations with Burma, support progress in the contentious Sudan-South
Sudan border, to consider economic agreements as a way to leverage U.S. influence throughout
North Africa and the Middle East, and to sustain or modify the decades-long sanctions regime the
United States has maintained on Cuba.
39 Written by Dianne E. Rennack, Specialist in Foreign Policy Legislation, 7-7608.
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Import Policies
U.S. policies affecting imports are shaped by a mixture of economic objectives, foreign policy
interests, and political considerations. The case for supporting freer trade and open markets rests
on the view that they yield substantial economic benefits. Decisions to deviate from that rationale
can be sanctioned by international trade rules that provide specific groups recourse to petition the
government for temporary protection if they can show that they have been injured by certain
kinds of “fair” and “unfair” competition. Additionally, efforts to forge closer economic and
political ties with developing regions and countries may also lead to more open policies through
the extension of preferential access to the U.S. market. Congress has responsibility for five basic
import policy areas: (1) trade remedies; (2) trade preferences; (3) border security and trade
facilitation; (4) miscellaneous tariff bills; and, (5) trade adjustment assistance.
Trade Remedies40
The United States and its trading partners use laws known as trade remedies to mitigate the injury
(or threat thereof) of various trade practices to domestic industries and workers. The three most
frequently applied U.S. trade remedies are: 1) antidumping (AD), which provides relief from
injurious imports sold at less than fair market value; 2) countervailing duty (CVD), which
provides relief from injurious imports subsidized by a foreign government or public entity; and 3)
safeguards, which provide relief from import surges of fairly traded goods. These laws are
enforced primarily through the administrative procedures of two U.S. government agencies, the
Department of Commerce (DOC) and the International Trade Commission (ITC). In AD and
CVD cases, the remedy is an additional duty assessed to offset the calculated amount of dumping
or subsidy. In safeguard cases that are determined by the President, an import quota or a tariff
may be assessed. In addition, the WTO has specific agreements and rules on these measures to
which its member countries, including the United States, adhere.
One issue that may emerge in the 113th Congress relates to the alleged under-collection of AD and
CVD duties, which continues to be a priority trade issue. U.S. Customs and Border Protection
(CBP) has responsibility for collecting duties. Legislation could be considered in the 113thth
Congress seeking to further prevent importers from circumventing these duties, either as a stand-
alone bill or as part of a package to reauthorize CBP, an initiative begun in the 112th Congress.
Second, many, including some in Congress, have asserted that China’s policy of intervening in
currency markets to limit the appreciation its currency, the renminbi (RMB), against the U.S.
dollar is intended to make its exports significantly less expensive than competing U.S. goods.41
The 113th Congress could see legislative proposals similar to bills introduced in the 112th
Congress seeking to direct administrative officials to treat currency misalignment (or
undervaluation) as a subsidy in U.S. countervailing duty investigations
40 Written by Vivian C. Jones, Specialist in International Trade and Finance, 7-7823.
41 CRS Report RS21625, China's Currency Policy: An Analysis of the Economic Issues, by Wayne M. Morrison and
Marc Labonte.
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Trade Preferences42
Since 1974, Congress has created five trade preference programs designed to assist “lesser
developed” countries: 1) the Generalized System of Preferences (GSP), which applies to all
eligible developing countries; 2) the Andean Trade Preference Act (APTA); 3) the Caribbean
Basin Economic Recovery Act (CBERA); 4) the Caribbean Trade Partnership Act (CBTPA); 5)
the African Growth and Opportunity Act (AGOA); and 6) the Haitian Opportunity through
Partnership Encouragement (HOPE) Act. Except for CBERA, which is permanent, these
programs give temporary, non-reciprocal, duty-free access to the U.S. market for a select group of
exports from eligible countries. Congress authorizes, revises, and conducts regular oversight of
these programs, and in 2013 may address two expiring programs, GSP and ATPA.
The 111th Congress approved extensions of the CBTPA and provided more flexible and generous
tariff preferences for Haiti through September 30, 2020. The 112th Congress approved extensions
of the GSP (P.L. 112-40) and ATPA (P.L. 112-42) programs through July 31, 2013, including a
third-country fabric provision. In addition, Congress extended until 2015 a provision in AGOA
that allows eligible countries to use fabrics from any country to make a limited amount of apparel
that is eligible for duty-free entry into the U.S. market (P.L. 112-163).43 Since the GSP and ATPA
programs expire in mid-2013, legislation extending and/or revising these preference programs
could be introduced in the 113th Congress. Colombia’s status as a beneficiary country under ATPA
expired upon entry into force of the U.S.-Colombia FTA and Bolivia has been dropped from the
program. Because Ecuador is the only remaining designated beneficiary country, there is some
question as to whether the 113th Congress will extend ATPA or allow it to expire.
U.S. Customs and Border Protection (CBP) Reauthorization44
Trade facilitation aims to improve the efficiency of international trade by harmonizing and
streamlining customs procedures, such as duplicative documentation requirements, customs
processing delays, and non-transparent or unequally enforced importation rules and requirements.
Congress may consider legislation to reauthorize U.S. Customs and Border Protection (CBP)—
providing CBP with additional authority and responsibility to expedite the processing of
legitimate trade and transportation at U.S. ports of entry, among other provisions.. Bills
introduced in the 112th Congress may provide a framework for CBP legislation that could emerge
in the 113th Congress.
Efforts to streamline trade facilitation procedures as part of the WTO Doha Round were
supported by many WTO members. Although the Doha Round is currently at an impasse, some
WTO members have continued negotiations on individual parts of the negotiating mandate,
including trade facilitation. Some WTO members have favored the possibility of finalizing trade
facilitation negotiations so that an agreement could be presented as part of a package of
“deliverables” at the 9th WTO Ministerial Conference in December 2013.45 If WTO members
reach consensus on a trade facilitation agreement, the 113th Congress could consider its approval.
42 Written by Vivian C. Jones, Specialist in International Trade and Finance, 7-7823.
43 This AGOA program is known as the “third-country fabric provision.”
44 Written by Vivian C. Jones, Specialist in International Trade and Finance, 7-7823.
45 World Trade Organization, “Lamy Cites ACP’s ‘Instrumental Role’ in Moving Trade Debate Forward,” Press
Release, October 24, 2012.
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Oversight into CBP efforts to enhance cargo security may also receive congressional attention as
part of or separate from consideration of a possible CBP reauthorization package. For example,
the SAFE Port Act (P.L. 109-347), as amended, included a statutory mandate to scan all U.S.
maritime cargo with non-intrusive inspection equipment at overseas ports of loading by July
2012.46 On May 2, 2012, Homeland Security Secretary Napolitano notified Congress that she
would exercise her authority to extend the 100% scanning deadline.47 Thus, cargo screening could
become the focus of additional legislation in the 113th Congress.
Miscellaneous Tariff Bill (MTB)48
Many Members of Congress often introduce bills that support importer requests for the temporary
suspension of tariffs on chemicals, raw materials, or other non-domestically made components
used as inputs in the manufacturing process. A rationale for these requests is that they help
domestic producers of manufactured goods reduce costs, making their products more price
competitive. Due to the large number of bills, they are often packaged together in a broader
miscellaneous tariff bill. The United States Manufacturing Enhancement Act of 2010 (P.L. 111-
227) enacted on August 11, 2010, is the most recent generated MTB. It expired on December 31,
2012.
Legislation could emerge in the 113th Congress proposing to renew these duty suspensions and
enact new ones. It is also possible, however, that because of past congressional moratoriums on
“earmarks,” which include measures to provide “limited tariff benefits,” including duty
suspensions, consideration of an MTB bill may be controversial. Some Members have also called
for modifying the way in which MTBs are currently crafted by shifting much of the task of
assembling and vetting the bill to the International Trade Commission or another agency. Thus,
legislation could emerge in the 113th Congress seeking to make procedural changes to the MTB
process.
Trade Adjustment Assistance49
Congress created Trade Adjustment Assistance (TAA) in the Trade Expansion Act of 1962 to help
workers and firms adjust to dislocation that may be caused by increased trade liberalization. It is
justified now, as it was then, on grounds that the government has an obligation to help those hurt
by policy-driven trade opening. TAA is also presented as an alternative to policies that would
restrict imports, and so provides assistance while bolstering freer trade and diminishing prospects
for potentially costly tension (retaliation) among trade partners. As in the past, critics debate the
46 The SAFE Port Act was amended by P.L. 110-53, §1701. This mandate may be postponed for a certain port or ports
in two-year increments by the Secretary of Homeland Security if certain conditions are met.
47 Letter from Janet Napolitano, Secretary of Homeland Security, to Hon. Joseph I. Lieberman, Senator, May 2, 2012.
In her notification to Congress, Secretary Napolitano cites “diplomatic, financial, and logistical” obstacles to
implementing a 100% scanning system. Pursuant to § 232(b)(4) of the SAFE Port Act, as amended, Secretary
Napolitano identified two conditions which necessitated the deadline extension: that the use of systems to scan
containers would have significant and negative impact on trade capacity and cargo flows, and that systems to scan
containers cannot be purchased, deployed, or operated at overseas ports due to limited physical infrastructure.
48 Written by Vivian C. Jones, Specialist in International Trade and Finance, 7-7823.
49 Written by J. F. Hornbeck, Specialist in International Trade and Finance, 7-7782. For a more detailed discussion, see
CRS Report R41922, Trade Adjustment Assistance (TAA) and Its Role in U.S. Trade Policy, by J. F. Hornbeck and
Laine Elise Rover.
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merits of TAA on equity, efficiency, and budgetary grounds. Democratic leaders and the Obama
Administration, however, considered TAA renewal essential for passage of three implementing
bills for free trade agreements (FTAs) with Colombia, Panama, and South Korea. With this
understanding, Congress reauthorized TAA and the FTAs with bipartisan support. President
Obama signed the TAA bill into law on October 21, 2011 (P.L. 112-40).
The TAA bill reauthorized the workers, firms, and farmers programs through December 31, 2013,
but discontinued TAA for communities because it was considered duplicative of other federal
programs. Many, but not all, of the enhanced programs passed in an earlier (2009) reauthorization
were continued, retaining eligibility for services workers and firms, increasing income support for
workers undergoing job training, raising the Health Coverage Tax Credit, expanding funding for
training benefits, and reinstituting more detailed program evaluation and reporting requirements.
Funding was reduced for job search, relocation assistance, and wage insurance for older workers,
and eligibility for public sector workers was discontinued. The firms and farmers TAA programs
were reauthorized at annualized levels of $16 million and $90 million, respectively, much less
than the 2009 authorized levels, but equal to current (and historical) appropriated levels. Congress
will likely consider a TAA bill given that the programs are set to expire at the end of 2013.
Intellectual Property Rights (IPR) in U.S. Trade Policy
The international protection and enforcement of IPR, such as patents, copyrights, and trademarks,
internationally is a major component of U.S. trade policy, due to the importance of IPR to the
U.S. economy and the potentially negative commercial, health and safety, and security
consequences associated with counterfeiting and piracy. The United States pursues IPR objectives
using a range of trade policy mechanisms, including multilaterally through the WTO, which
administers the Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS
Agreement”); regionally and bilaterally through the negotiation of FTAs; and domestically
through U.S. trade laws, such as “Section 337” and “Special 301.”
IPR and U.S. Trade Negotiations50
IPR protection and enforcement has been a key negotiating objective in TPA and in U.S. trade
agreement negotiations. If the 113th Congress takes up TPA, it may consider IPR negotiating
objectives. IPR issues in current and potential new free trade agreements could be of ongoing
congressional interest. The 113th Congress could conduct oversight over implementation of the
IPR commitments in the U.S. FTAs with Colombia, South Korea, and Panama, which entered
into force in 2012. Congress may also wish to conduct oversight of the negotiation of IPR issues
in the Trans-Pacific Partnership (TPP) free trade negotiations, in which the United States is
seeking IPR protection and enforcement that exceeds the TRIPS Agreement, as in earlier FTAs.
Among possible contentious IPR issues is the longstanding debate over the treatment of
pharmaceuticals and possible new concerns in the digital realm or with the protection of
geographical indications, an important issue in the transatlantic relationship.
Additionally, the 113th Congress could continue to monitor the resolution of the Anti-
Counterfeiting Trade Agreement (ACTA), an agreement that was negotiated outside of the WTO
by the United States and nearly 40 other primarily developed countries. It is intended to build on
50 Written by Shayerah Ilias, Analyst in International Trade and Finance, 7-9253.
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the minimum standards for IPR protection and enforcement set forth in the WTO TRIPS
Agreement, including emerging IPR issues such as counterfeiting and piracy in the digital
environment. ACTA negotiations concluded in October 2010, nearly three years after they began.
The United States and most of the other negotiating parties have signed the agreement.51 The
ACTA would enter into force after the sixth instrument of ratification, acceptance, or approval
(“formal approval”) is deposited. Japan is the only party that has submitted a formal instrument of
approval to date.52
ACTA’s prospects are in question, given the Europe Parliament’s rejection of the ACTA in July
2012 and the European Commission’s decision to place the ratification process on hold and to
submit the agreement to the European Court of Justice to determine if the ACTA is compatible
with EU law. Subsequently, in December 2012, the European Commission reportedly decided to
withdraw its request for review from the European Court of Justice, raising further uncertainty
about the future of the ACTA.53
Section 337 Process and Online Copyright Infringement and Piracy
Among the domestic tools that the United States has to pursue IPR-related trade policy is Section
337 of the Tariff Act of 1930 (19 U.S.C. §1337), as amended, which authorizes the U.S.
International Trade Commission (ITC) to prohibit imports of products into the United States that
infringe on U.S. intellectual property. Under Section 337, the ITC is authorized to order the U.S.
Customs and Border Protection (CBP) to stop imports from entering the U.S. border.
In the 112th Congress, Section 337 was a focus of legislative efforts to address jurisdictional
problems associated with holding foreign websites accountable for piracy and counterfeiting.
Multiple bills were introduced that renewed congressional and public debate about the balance
between protecting U.S. intellectual property and promoting innovation. The 113th Congress
could choose to take these issues up again.
International Investment
The United States is the largest source of foreign direct investment (FDI) in the world and also
the largest recipient of foreign direct investment. This dual role means that globalization, or the
spread of economic activity by firms across national borders, has become a prominent feature of
the U.S. economy. Globalization also means the United States has important economic, political,
and social interests at stake in the development of international policies regarding direct
investment. Congress weighs in on all aspects of these international investment issues.
51 Japan Ministry of Economy, Trade and Industry Press Release, “EU and EU Member States Sign the Anti-
Counterfeiting Trade Agreement (ACTA),” January 26, 2012.
52 Ministry of Foreign Affairs of Japan, “Conclusion of the Anti-Counterfeiting Trade Agreement (ACTA) by Japan,”
October 5, 2012, http://www.mofa.go.jp/policy/economy/i_property/acta_conclusion_1210.html.
53 "European Commission Puts ACTA Ratification on Hold; Requests EU High Court Review," BNA Bloomberg
Patent, Trademark & Copyright Law Daily, February 23, 2012. “Commission Takes Formal Step Signaling No
“Realistic Chance’ for ACTA, Inside U.S. Trade’s World Trade Online, December 26, 2012.
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Foreign Investment and National Security54
The United States has established domestic policies that treat foreign investors no less favorably
than U.S. firms, with some exceptions for national security. Under current U.S. law, the President
exercises broad discretionary authority over developing and implementing U.S. direct investment
policy, including the authority to suspend or block investments that “threaten to impair the
national security.” Despite the leading role of the President, Congress also is directly involved in
formulating the scope and direction of U.S. foreign investment policy. For instance, following the
terrorist attacks on the United States on September 11, 2001, some Members questioned the
traditional U.S. open-door policy and have argued for greater consideration of the long-term
impact of foreign direct investment on the structure and industrial capacity of the economy, and
on the ability of the economy to meet the needs of U.S. defense and security interests.
In July 2007, Congress asserted its own role in making and conducting foreign investment policy
when it adopted and the President signed P.L. 110-49, the Foreign Investment and National
Security Act of 2007. This law broadens Congress’s oversight role, and explicitly includes the
areas of homeland security and critical infrastructure as separately identifiable components of
national security that the President must consider when evaluating the national security
implications of foreign investment transactions. At times, the act has drawn Congress into a
greater dialogue over the role of foreign investment in the economy.
U.S. International Investment Agreements55
The United States promotes international investment agreements to reduce restrictions on foreign
investment, protect investor rights, and balance other U.S. policy interests. These typically take
two forms: bilateral investment treaties (BITs) and BIT-like chapters in free trade agreements. In
April 2012, the Obama Administration announced the conclusion of its review of the U.S. Model
BIT, the template which the United States uses to negotiate bilateral investment treaties (BITs)
with foreign countries and investment chapters in FTAs.
The 2012 Model BIT maintains the “core” or substantive investor protections affirmed in the
2004 Model BIT review. Among other provisions in the Model BIT, it clarifies that BIT
obligations apply to state-owned enterprises (SOEs); includes language limiting performance
requirements; clarifies labor and environmental provisions; clarifies which financial services
provisions may fall under a prudential exception (such as to address balance of payments
problems); expands transparency obligations; and increases requirements for stakeholder input in
the standards-setting process. The conclusion of the Model BIT review may generate momentum
to conclude previously launched negotiations with countries such as China and India, or to launch
investment negotiations with other U.S. trading partners. Investment policy issues feature
prominently in U.S. trade negotiations, chief of which currently is the proposed Trans-Pacific
Partnership (TPP) FTA.
BITs are submitted to Congress as treaties, which require a two-third’s vote of approval for
ratification. BIT-like chapters in FTAs, by contrast, require simple majority approval of the trade
implementing legislation by both Houses of Congress. The 113th Congress may be asked to
54 Written by James K. Jackson, Specialist in International Trade and Finance, 7-7751.
55 Written by Shayerah Ilias (7-9253) and Martin A. Weiss (7-5407), Specialists in International Trade and Finance
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consider new BITs, as well as a possible TPP agreement that would include an investment
chapter. Additionally, the Congress may consider the treatment of investment provisions in future
trade negotiating objectives if it takes up TPA renewal legislation (see section on TPA).
Promoting Investment in the United States
U.S. investment policy also focuses on attracting foreign investment to the United States. The
SelectUSA Initiative, established by President Obama on June 15, 2011, is the federal initiative to
encourage inward investment. It is administered by the Department of Commerce’s U.S. and
Foreign Commercial Service. SelectUSA facilitates investment by: (1) partnering with firms,
state and local governments, and other stakeholders; (2) assisting state and local governments
with regulatory barriers; (3) coordinating across federal agencies to provide services that
complement state and local efforts; and (4) managing the SelectUSA website, a resource for
potential investors. Congress could consider funding levels and conduct oversight of the
effectiveness of the SelectUSA initiative in promoting inward investment.
International Finance, Institutions, and Crises
The International Financial Institutions (IFIs) include the International Monetary Fund (IMF),
whose main task is ensuring international monetary and financial stability, and several
multilateral development banks (MDBs), including the World Bank and four regional
development banks—the African Development Bank, the Asian Development Bank, the European
Bank for Reconstruction and Development, and the Inter-American Development Bank. The
United States is a member and major contributor to these institutions.
The IFIs and the Group of Twenty (G-20) major economies were at the forefront of the global
response to the financial crisis in 2008, dramatically increasing their lending during 2008 and
2009 to help developing countries absorb the impact of reduced economic growth and its impacts
on trade and financial flows. As lending increased, the IMF and the MDBs sought new donor
resources. At several G-20 summits, world leaders committed to ensure sufficient resources for
the IFIs to support their macroeconomic stability and development mandates. Many of these
efforts, which were directed at stabilizing the world economy in the midst of the 2008-2009
global economic crisis, are now focused on resolving the Eurozone sovereign debt crisis to ensure
that it does not undermine the stability and growth of the world economy.
International Monetary Fund56
During the 112th Congress, attention centered on the use of IMF resources since the onset of the
global economic crisis in 2008, on proposed IMF governance changes, and on the IMF’s role in
the Eurozone debt crisis. Three Eurozone countries—Ireland, Greece, and Portugal—are currently
receiving IMF-budget support and Congress will likely continue to conduct oversight of events in
Europe.
In December 2010, the Board of Governors of the International Monetary Fund (IMF) agreed to a
wide-ranging set of institutional reforms. If enacted, they would increase the institution’s core
56 Written by Martin A. Weiss, Specialist in International Trade and Finance, 7-5407.
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source of funding and expand the representation of major emerging market countries, such as
Brazil, India, China, and Mexico. In order for key elements of the reform package to take effect,
IMF rules dictate that the reforms must be approved by three-fifths of IMF members (113)
representing 85% of the total voting power. Under this formula, approval by the United States is
essential because it controls 16.75% of the voting power.
To date, a majority of IMF member countries have approved these reforms, but the United States
has not. U.S. inaction reportedly created tensions at the IMF-World Bank Annual Meetings in
October 2012,57 with some IMF members frustrated because the United States was instrumental
in initially advancing some of the reforms.58 Congress plays a pivotal role in determining the U.S.
position on the current IMF reform agenda. Under U.S. law, congressional authorization is
required for the United States to consent to change the U.S. quota in the IMF, which determines
the U.S. share of total voting power. Furthermore, depending on the budgetary treatment of any
newly authorized U.S. contributions to the IMF, appropriations may be required.
Multilateral Development Banks59
Following several years of elevated lending, the Obama Administration and other governments
agreed to over $338 billion in general capital increases (GCIs) for the MDBs.60 During the first
session of the 112th Congress, Congress provided full authorization for U.S. participation, with
contributions expected to be spread out over a five- to eight-year period, depending on the
institution. In FY2012, Congress also appropriated funds for several MDB concessional lending
facilities and more targeted MDB funds.
Many policymakers view U.S. participation in MDB capital increases as important because the
United States is the largest shareholder in the MDBs, a position which also defines its power to
veto, which it can exercise under certain circumstances. The Obama Administration has strongly
supported capital increases at the MDBs, but cautioned that the increases must be tied to policy
reforms to: improve transparency, accountability, and governance; better align management
performance and incentives with improved development outcomes; and more clearly delineate the
division of labor between the World Bank and the regional development banks. Members of
Congress may evaluate the effectiveness of MDBs and act on possible future appropriations for
them.
G-2061
The Group of 20, or G-20, is the premier forum for international economic cooperation and
coordination, and includes 20 major advanced and emerging-market economies that, together,
57 For example, see Lesley Wroughton, “IMF Vote Reform Bogged Down by Delays, Deadlock,” Reuters, October 8,
2012, http://www.reuters.com/article/2012/10/08/us-imf-governance-idUSBRE8970B120121008.
58 See CRS Report RL33626, International Monetary Fund: Reforming Country Representation, by Martin A. Weiss.
59 Written by Martin A. Weiss, Specialist in International Trade and Finance, 7-5407.
60 Shareholders contribute two types of capital to the MDBs: “paid-in-capital,” which generally requires the payment of
cash to the MDB; and “callable capital.” which or funds that shareholders agree to provide, but only when necessary to
avoid a default on a loan or payment under a guarantee. Only a small portion (typically less than 5%) of the value of
these capital shares is actually paid to the MDB. The vast bulk is callable capital, which serves as the backing for
MDBs borrowing in capital markets.
61 Written by Rebecca M. Nelson, Analyst in International Trade and Finance, 7-6819.
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account for two-thirds of the world's population, 90% of world GDP, and 80% of world trade.62
The leaders of the G-20 countries hold annual meetings or “summits,” and meetings among
finance ministers, central bankers, and other officials occur more frequently. Discussions and
agreements primarily focus on international economic and financial issues, although related
topics, such as development, food security, and the environment, may also be featured.
During the height of the global financial crisis of 2008-2009, the G-20 reached a number of
substantial agreements, including coordinating fiscal policies and financial regulatory reforms. As
the immediate urgency of that crisis has waned, however, there are concerns that the G-20 has
failed to deliver on previous agreements or provide adequate leadership in the global economy,
particularly in the context of the Eurozone crisis. Others argue that the G-20 remains a critical
forum for discussing policy initiatives across major countries and encouraging greater
cooperation. The 113th Congress may want to exercise oversight over the Administration's
participation in the G-20 process, including the policy commitments that the Administration is
making in the context of the G-20 and the policies it is encouraging other G-20 countries to
pursue. The next G-20 summit is scheduled for September 5-6, 2013 in St. Petersburg, Russia.
Eurozone Sovereign Debt Crisis63
Since late 2009, the Eurozone has grappled with a sovereign debt crisis that threatens economic
stability in Europe and beyond.64 Three Eurozone governments—Greece, Ireland, and Portugal—
are receiving financial assistance from other Eurozone governments and the IMF. Compounding
concerns about public finances are weaknesses in the Eurozone banking system; slow or negative
growth, with the Eurozone re-entering recession in 2012; high unemployment, particularly among
youth; and persistent trade imbalances within the Eurozone. The financial crisis has also become
a political crisis, directly or indirectly leading to the fall of several governments in Europe and
exposing deep disagreements among European countries and institutions about the future of the
Eurozone and the European Union (EU).
European leaders and institutions have pursued a range of policy measures to respond to the crisis
and stem contagion, particularly to Italy and Spain, the third and fourth largest economies in the
Eurozone. These include ambitious austerity measures; debt restructuring; the creation of new
European rescue funds; unprecedented steps by the European Central Bank (ECB) to increase
liquidity in the Eurozone banking system; bank recapitalization in Spain; and the creation of a
single supervisor for European banks, among others. The policy response has been complicated
by the number of economic challenges facing the Eurozone, disagreements between Germany,
France, and the ECB, as well as others, and the slow pace of EU decision making. After cycling
through periods of intense market pressure and relative calm over the past two years, the
Eurozone still faces serious economic challenges and questions about its future remain.
62 The members of the G-20 include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia,
Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, and the United
States, plus the European Union (EU).
63 Written by Rebecca M. Nelson, Analyst in International Trade and Finance, 7-6819.
64 A total of 17 states of the 27-member European Union (EU) use the euro as the single currency. The 17 countries
include Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the
Netherlands, Portugal, Slovakia, Spain, and Slovenia.
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The United States and Europe have the largest bilateral economic relationship in the world, and
many Members of Congress have expressed concern about the impacts of the Eurozone crisis on
the U.S. economy. The crisis could continue to affect the U.S. economy through a number of
channels, including the exposure of U.S. financial institutions and depressed demand for U.S.
exports to Europe, among others. Some Members have also expressed concerns about the role of
the IMF in the crisis, particularly since the United States is the largest shareholder in the
institution. The 112th Congress held a number of hearings on the crisis and implications for the
United States, and the 113th Congress is likely to continue monitoring the situation closely.
Argentina Sovereign Debt Default and Related Economic Policies65
In December 2001, Argentina suffered a severe financial crisis, leading to the largest default on
sovereign debt in history. After unsuccessful attempts to find a mutually acceptable solution to
restructuring the debt, Argentina abandoned the negotiation process and made two bond exchange
offers in 2005 and 2010 that were accepted by 92% of private creditors. This outcome left debt
held by hedge funds and the Paris Club of countries, including the United States, in default. The
offers flaunted normal restructuring procedures, and, as a result, Argentina faces prolonged
litigation by holdout creditors that have resulted in judgments and attachment orders. In addition,
Argentina has adopted policies that have caused increased tension with foreign states and
companies. These include failure to pay judgments against Argentina in the World Bank’s
International Centre for Settlement of Investment Disputes (ICSID), nationalization of a largely
Spanish-owned oil company, increasingly protectionist trade measures, capital and exchange rate
controls, import taxes, and failure to submit to an IMF Article IV economic review required of all
Fund members.
U.S. policymakers remain frustrated at Argentina’s reluctance to settle with U.S. stakeholders and
alter other policies. The United States has employed a number of sanctions against Argentina,
including suspension of GSP benefits, and Congress has introduced resolutions calling for
Argentina’s membership in the G-20 to be conditioned on adherence to international norms of
economic behavior. In the 112th Congress, the Judgment Evading Foreign States Accountability
Act of 2011 (H.R. 1798/S. 912) was introduced that would have attempted to pressure Argentina
in a number of ways. The legislation did not receive a hearing, but was marked up by the House
Committee on Foreign Affairs Subcommittee on the Western Hemisphere on November 29, 2012.
Despite support for U.S. interests in this matter, some Members have distanced themselves from
this particular bill, in part because the committee lacks jurisdiction and hearings have not been
held. In addition, the issue still resides before U.S. federal courts, with an important appellate
court ruling expected in February 2013, and some Members of Congress may wish to consider it
in the context of broader international relations issues.
65 Written by J. F. Hornbeck, Specialist in International Trade and Finance, 7-7782.
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Select CRS Reports
Renewal of Trade Promotion Authority
CRS Report RL33743, Trade Promotion Authority (TPA) and the Role of Congress in Trade
Policy, by J. F. Hornbeck and William H. Cooper.
CRS Report RS21004, Trade Promotion Authority and Fast-Track Negotiating Authority for
Trade Agreements: Major Votes, by Carolyn C. Smith.
CRS Report 97-896, Why Certain Trade Agreements Are Approved as Congressional-Executive
Agreements Rather Than as Treaties, by Jeanne J. Grimmett.
CRS Report R41306, Trade Law: An Introduction to Selected International Agreements and U.S.
Laws, by Jeanne J. Grimmett.
CRS Report RL33944, Trade Primer: Qs and As on Trade Concepts, Performance, and Policy,
coordinated by J. F. Hornbeck.
Trade Agreements and Negotiations
CRS Report R42864, Rising Economic Powers and U.S. Trade Policy, by Raymond J. Ahearn.
CRS Report R42694, The Trans-Pacific Partnership Negotiations and Issues for Congress,
coordinated by Ian F. Fergusson.
CRS Report R42344, Trans-Pacific Partnership (TPP) Countries: Comparative Trade and
Economic Analysis, by Brock R. Williams.
CRS Report R42676, Japan’s Possible Entry Into the Trans-Pacific Partnership and Its
Implications, by William H. Cooper and Mark E. Manyin.
CRS Report R42448, Pivot to the Pacific? The Obama Administration’s “Rebalancing” Toward
Asia, coordinated by Mark E. Manyin.
CRS Report RL34330, The U.S.-South Korea Free Trade Agreement (KORUS FTA): Provisions
and Implications, coordinated by William H. Cooper.
CRS Report RL34470, The U.S.-Colombia Free Trade Agreement: Background and Issues, by M.
Angeles Villarreal.
CRS Report RL32540, The U.S.-Panama Free Trade Agreement, by J. F. Hornbeck.
CRS Report RL31356, Free Trade Agreements: Impact on U.S. Trade and Implications for U.S.
Trade Policy, by William H. Cooper.
CRS Report RL32060, World Trade Organization Negotiations: The Doha Development Agenda,
by Ian F. Fergusson.
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International Trade and Finance: Key Policy Issues for the 113th Congress
CRS Report RS22154, World Trade Organization (WTO) Decisions and Their Effect in U.S. Law,
by Jane M. Smith, Brandon J. Murrill, and Daniel T. Shedd.
CRS Report RS20088, Dispute Settlement in the World Trade Organization (WTO): An Overview,
by Daniel T. Shedd, Brandon J. Murrill, and Jane M. Smith.
CRS Report R42153, U.S. Trade and Investment in the Middle East and North Africa: Overview
and Issues for Congress, coordinated by Rebecca M. Nelson.
CRS Report R41652, U.S.-EU Trade and Economic Relations: Key Policy Issues for the 112th
Congress, by Raymond J. Ahearn.
China
CRS Report RL33536, China-U.S. Trade Issues, by Wayne M. Morrison.
CRS Report R42510, China’s Rare Earth Industry and Export Regime: Economic and Trade
Implications for the United States, by Wayne M. Morrison and Rachel Tang.
CRS Report RS21625, China's Currency Policy: An Analysis of the Economic Issues, by Wayne
M. Morrison and Marc Labonte.
CRS Report RL34314, China’s Holdings of U.S. Securities: Implications for the U.S. Economy,
by Wayne M. Morrison and Marc Labonte.
CRS Report R41748, China and the United States—A Comparison of Green Energy Programs
and Policies, by Richard J. Campbell.
Reorganization of Federal Trade-Related Agencies
CRS Report R42555, Trade Reorganization: Overview and Issues for Congress, by Shayerah
Ilias.
CRS Report R41495, U.S. Government Agencies Involved in Export Promotion: Overview and
Issues for Congress, coordinated by Shayerah Ilias.
U.S. Export and Investment Promotion
CRS Report R41929, Boosting U.S. Exports: Selected Issues for Congress, by Shayerah Ilias et
al.
CRS Report R41829, Reauthorization of the Export-Import Bank: Issues and Policy Options for
Congress, by Shayerah Ilias.
CRS Report R42472, Export-Import Bank: Background and Legislative Issues, by Shayerah Ilias.
CRS Report 98-567, The Overseas Private Investment Corporation: Background and Legislative
Issues, by Shayerah Ilias.
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International Trade and Finance: Key Policy Issues for the 113th Congress
CRS Report R41202, Agricultural Export Programs: Background and Issues, by Charles E.
Hanrahan.
Export Controls and Sanctions
CRS Report R41916, The U.S. Export Control System and the President’s Reform Initiative, by
Ian F. Fergusson and Paul K. Kerr.
CRS Report R41438, North Korea: Legislative Basis for U.S. Economic Sanctions, by Dianne E.
Rennack.
CRS Report RL33948, State and Local Economic Sanctions: Constitutional Issues, by Jeanne J.
Grimmett.
CRS Report RS20871, Iran Sanctions, by Kenneth Katzman.
CRS Report RL31502, Nuclear, Biological, Chemical, and Missile Proliferation Sanctions:
Selected Current Law, by Dianne E. Rennack.
CRS Report R41336, U.S. Sanctions on Burma, by Michael F. Martin.
Import Policies
CRS Report RL34524, International Trade: Rules of Origin, by Vivian C. Jones and Michael F.
Martin.
CRS Report RL33867, Miscellaneous Tariff Bills: Overview and Issues for Congress, by Vivian
C. Jones.
CRS Report RL32371, Trade Remedies: A Primer, by Vivian C. Jones.
CRS Report R41429, Trade Preferences: Economic Issues and Policy Options, coordinated by
Vivian C. Jones.
CRS Report RL33663, Generalized System of Preferences: Background and Renewal Debate, by
Vivian C. Jones.
CRS Report RS22541, Generalized System of Preferences: Agricultural Imports, by Renée
Johnson.
CRS Report RL31772, U.S. Trade and Investment Relations with sub-Saharan Africa and the
African Growth and Opportunity Act, by Vivian C. Jones and Brock R. Williams.
CRS Report RL34687, The Haitian Economy and the HOPE Act, by J. F. Hornbeck.
CRS Report RS22548, ATPA Renewal: Background and Issues, by M. Angeles Villarreal.
CRS Report R41922, Trade Adjustment Assistance (TAA) and Its Role in U.S. Trade Policy, by J.
F. Hornbeck and Laine Elise Rover.
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International Trade and Finance: Key Policy Issues for the 113th Congress
CRS Report R42012, Trade Adjustment Assistance for Workers, by Benjamin Collins.
CRS Report RS20210, Trade Adjustment Assistance for Firms: Economic, Program, and Policy
Issues, by J. F. Hornbeck.
CRS Report R40206, Trade Adjustment Assistance for Farmers, by Remy Jurenas.
International Property Rights in U.S. Trade Policy
CRS Report RL34292, Intellectual Property Rights and International Trade, by Shayerah Ilias
and Ian F. Fergusson.
CRS Report R41107, The Proposed Anti-Counterfeiting Trade Agreement: Background and Key
Issues, by Shayerah Ilias.
CRS Report RS22880, Intellectual Property Rights Protection and Enforcement: Section 337 of
the Tariff Act of 1930, by Shayerah Ilias.
CRS Report R42112, Online Copyright Infringement and Counterfeiting: Legislation in the 112th
Congress, by Brian T. Yeh.
International Investment
CRS Report RL33978, The U.S. Bilateral Investment Treaty Program: An Overview, by Martin A.
Weiss and Shayerah Ilias.
CRS Report RL33984, Foreign Direct Investment: Current Issues, by James K. Jackson.
CRS Report RL32462, Foreign Investment in U.S. Securities, by James K. Jackson.
CRS Report RL33388, The Committee on Foreign Investment in the United States (CFIUS), by
James K. Jackson.
CRS Report RL32461, Outsourcing and Insourcing Jobs in the U.S. Economy: Evidence Based
on Foreign Investment Data, by James K. Jackson.
International Finance, Institutions, and Crises
CRS Report R41170, Multilateral Development Banks: Overview and Issues for Congress, by
Rebecca M. Nelson.
CRS Report R41672, Multilateral Development Banks: General Capital Increases, by Martin A.
Weiss.
CRS Report RS20792, Multilateral Development Banks: U.S. Contributions FY2000-FY2013, by
Rebecca M. Nelson.
CRS Report R42019, International Monetary Fund: Background and Issues for Congress, by
Martin A. Weiss.
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International Trade and Finance: Key Policy Issues for the 113th Congress
CRS Report R42844, IMF Reforms: Issues for Congress, by Rebecca M. Nelson and Martin A.
Weiss.
CRS Report R42377, The Eurozone Crisis: Overview and Issues for Congress, coordinated by
Rebecca M. Nelson.
CRS Report R41411, The Future of the Eurozone and U.S. Interests, coordinated by Raymond J.
Ahearn.
CRS Report R40977, The G-20 and International Economic Cooperation: Background and
Implications for Congress, by Rebecca M. Nelson.
CRS Report R41029, Argentina’s Defaulted Sovereign Debt: Dealing with the “Holdouts”, by J.
F. Hornbeck.
Author Contact Information
Mary A. Irace, Coordinator
Martin A. Weiss
Section Research Manager
Specialist in International Trade and Finance
mirace@crs.loc.gov, 7-7679
mweiss@crs.loc.gov, 7-5407
J. F. Hornbeck, Coordinator
Shayerah Ilias
Specialist in International Trade and Finance
Specialist in International Trade and Finance
jhornbeck@crs.loc.gov, 7-7782
silias@crs.loc.gov, 7-9253
Wayne M. Morrison
M. Angeles Villarreal
Specialist in Asian Trade and Finance
Specialist in International Trade and Finance
wmorrison@crs.loc.gov, 7-7767
avillarreal@crs.loc.gov, 7-0321
William H. Cooper
Rebecca M. Nelson
Specialist in International Trade and Finance
Analyst in International Trade and Finance
wcooper@crs.loc.gov, 7-7749
rnelson@crs.loc.gov, 7-6819
Vivian C. Jones
Dianne E. Rennack
Specialist in International Trade and Finance
Specialist in Foreign Policy Legislation
vcjones@crs.loc.gov, 7-7823
drennack@crs.loc.gov, 7-7608
Ian F. Fergusson
Specialist in International Trade and Finance
ifergusson@crs.loc.gov, 7-4997
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