April 20, 2015
U.S. Trade Policy: Background and Current Issues
U.S. Trade Policy in Context

U.S. Trade Trends
Congress plays a major role in U.S. trade policy through its
The United States is the world’s largest economy for total
legislative and oversight authority. Since World War II,
trade in goods and services, as well as a major source of
U.S. trade policy has focused on liberalizing markets by
and destination for foreign direct investment (FDI). U.S.
reducing trade and investment barriers, creating a rules-
trade has expanded and evolved over the past two decades
based trading system, enforcing commitments under trade
with greater integration of markets and production, as well
agreements, and supporting economic growth. Trade policy,
as the rise of supply chain networks (see Figure 1). U.S.
spanning a range of stakeholder interests, involves U.S.
trade composition and patterns also have changed, with
economic, foreign policy, and national security issues.
emerging and developing economies playing a greater role.
The top five U.S. merchandise trading partners are Canada,
Economics of Trade
China, Mexico, Japan, and Germany. The EU represents the
Economic theory maintains that trade is mutually
largest U.S. trading partner. The United States has a long-
beneficial, but its benefits may not be distributed evenly
running overall trade deficit, meaning the value of its
and costs may be concentrated. Countries specialize by
imports of goods and services exceed its exports of such.
increasing production and exporting goods and services in
Specifically, its goods trade deficit outweighs its service
which they have a higher comparative advantage through
trade surplus. The imbalance’s impact on the U.S. economy
skills or resources (e.g., U.S. exports using high-skilled
is debated. Trade is viewed as supporting U.S. recovery
labor), and importing those domestically unavailable or less
after the 2008-2009 global economic downturn.
efficiently produced (e.g., U.S. imports using lower-skilled
labor). Trade benefits can include more efficient resource
Figure 1. U.S. Goods and Services Trade
allocation, increased competition, economies of scale, and
2,500
lower prices and more choice for consumers. Costs can
$s
Goods Imports
include reallocation of resources or job losses in import
ion
ill
2,000
B
sensitive industries. The economic impact of trade
liberalization is difficult to measure and widely debated.
1,500
Goods Exports
Components of U.S. Trade Policy
1,000
Services Exports
The U.S. Trade Representative (USTR), which is
500
responsible for developing and coordinating U.S. trade
Services Imports
policy, is the lead U.S. trade negotiator. Other federal
0
1992
1997
2002
2007
2012
government agencies also are involved in U.S. trade policy,

with interagency processes and advisory systems providing
Source: Bureau of Economic and Analysis and Census Bureau.
support. Key components of U.S. trade policy include
Trade liberalization—Negotiation of reciprocal trade
U.S. Trade Agreements and
and investment agreements to open markets and
Negotiations
establish rules governing trade and investment;
Congress is active in shaping and examining U.S. trade
enforcement of trade agreement commitments.
policy. Several U.S. trade negotiations are ongoing.
Export promotion and controls—U.S. export
Role of Congress
promotion (e.g., export financing, market research,
advocacy, trade missions); licensing and control of
Under the U.S. Constitution, Congress has the authority to
certain strategic exports.
regulate foreign commerce, while the President has the

authority to conduct foreign relations. For the first 150
Trade remedies and adjustment—U.S. statutes on
years of U.S. history, Congress set tariff rates on all
certain trade practices (e.g., antidumping and
imported products. This policy shifted with the Reciprocal
countervailing duties); trade adjustment assistance
Trade Agreements Act of 1934, in which Congress
(TAA) for dislocated workers and firms.
delegated authority to the President to enter into reciprocal
Trade preferences—Unilateral preference programs
trade agreements that reduced tariffs within pre-approved
that provide duty-free access to U.S. markets for eligible
levels and to implement them through delegated
developing countries and products.
proclamation authority. With the growing prominence of

nontariff trade barriers, Congress adopted “fast track”
Investment—Investment protection and promotion;
authority in the Trade Act of 1974 to provide expedited
examination of foreign investment with national security
legislative consideration for implementing bills on future
implications.
trade agreements while preserving congressional
www.crs.gov | 7-5700

U.S. Trade Policy: Background and Current Issues
prerogatives on trade policy. Now called Trade Promotion
trade. Both serve strategic interests, with TPP the economic
Authority (TPA), it has been reauthorized four times. The
component of the Administration’s “rebalance to Asia” and
latest TPA, provided in 2002, expired in 2007. Bicameral
T-TIP a way to reaffirm the transatlantic alliance. The
legislation, the Bipartisan Congressional Trade Priorities
United States also is negotiating plurilaterally on services,
and Accountability Act of 2015, has been introduced in the
information technology tariffs, and environmental goods,
114th Congress to reauthorize TPA (H.R. 1890/S. 995).
and multilaterally on unresolved Doha Round issues.
Trade Promotion Authority: A “Political Compact”
Framing the Current Debate
Negotiating Objectives: Congress sets trade policy objectives
Congressional debate on trade policy comprises many
for President to negotiate in trade agreements.
policy issues that elicit a range of stakeholder views.
Notification, Consultation, and Reporting Requirements:
Market Access. Enhanced market access involves reducing
President engages in and keeps Congress abreast of negotiations.
and eliminating tariff and nontariff barriers. Average U.S.
Expedited Procedures: Congress considers implementing
tariff rates are around 3%, but higher in certain sensitive
legislation on an expedited basis, e.g., guaranteed consideration,
sectors. Developing countries’ average tariff rates are
up-or-down vote, no amendments, limited time period.
higher. All economies have offensive and defensive
interests, with sector-specific issues in goods, services,
Trade Architecture
agriculture, and government procurement.
The current rules-based, multilateral trading system is
Intellectual Property Rights. IPR, a source of U.S.
rooted in the World Trade Organization (WTO), established
competitiveness, are legal, private, enforceable rights to
in 1995 as the successor to the General Agreement on
inventors and artists to exclude others from using or
Tariffs and Trade (GATT). Formed in 1947, the GATT was
marketing their creations without permission for a certain
part of the post-WWII effort to build a stable, open, more
period of time. Current trade issues involve the level of
prosperous international economy. WTO agreements cover
protection and enforcement of patents, copyrights,
goods, services, and agricultural trade; remove tariff and
trademarks, and trade secrets.
nontariff barriers; and establish rules and disciplines on
intellectual property rights (IPR) and other trade-related
Worker Rights and the Environment. The treatment of
issues. They are based on principles of nondiscrimination,
worker rights and environmental issues in trade agreements
national treatment, most-favored nation, and transparency.
has evolved to include international norms and stronger
The WTO Doha Round of negotiations, launched in 2001,
enforcement mechanisms. Developed and developing
has been impeded by differences among developed and
country interests vary in addressing these issues.
developing countries on key trade issues in agriculture,
Investment. Investor protections and enforcement of rights
goods, and services. Some outstanding issues were resolved
are a focus in the current debate. Among the key issues is
in the December 2013 Bali Ministerial, during which a
treatment of investor-state dispute settlement (ISDS), which
WTO Trade Facilitation Agreement was concluded.
allows investors to submit an investment dispute with a host
With the Doha Round impasse, bilateral and regional FTA
country to binding, impartial, international arbitration.
negotiations have become more prominent. According to
New Trade Issues and Barriers. The increased role of
the WTO, about 400 reciprocal trade agreements are in
emerging economies, digital trade, and supply chains raise
force worldwide. The United States has sought
new challenges either modestly addressed, or not at all, in
comprehensive and “high standard” FTAs covering market
existing trade agreements. Current negotiations offer an
access and rules, often going beyond WTO standards or
opportunity to develop new trade “rules for the road,” such
commitments. The United States has 14 FTAs with 20
as on SOEs; cross-border data flows; localization barriers;
countries. The most economically significant U.S. FTA
trade secret theft, including through cybercrime; and
remains the 1994 North American Free Trade Agreement
“currency manipulation.” Congressional views differ on
(NAFTA) with Canada and Mexico. Since NAFTA, the
how to address these issues.
evolving trade landscape has brought new issues into focus.
The U.S.-South Korea FTA, which entered into force in
Looking Forward
2012, is characterized as the highest standard U.S. FTA.
The United States does not have FTAs with major emerging
Questions in U.S. trade policy include: What are issues in
economies such as China, Brazil, and India, but is
potential TPA renewal? What are prospects for concluding
negotiating bilateral investment treaties with some of them.
TPP and T-TIP as comprehensive and high standard FTAs?
Do current approaches adequately address new trade issues
Current Negotiations
and barriers? What should be U.S. trade priorities, such as
The United States is negotiating two “mega-regional”
on negotiating new and enforcing existing agreements?
FTAs: the Trans-Pacific Partnership (TPP) with 11
countries in the Asia-Pacific and the Transatlantic Trade
Shayerah Ilias Akhtar, siliasakhtar@crs.loc.gov, 7-9253
and Investment Partnership (T-TIP) with the EU.
Ian F. Fergusson, ifergusson@crs.loc.gov, 7-4997
Combined, the proposed FTAs would cover most of world
Brock R. Williams, bwilliams@crs.loc.gov, 7-1157
trade and investment. They would offer opportunities to

develop new and expanded rules in areas such as regulatory
compatibility, state-owned enterprises (SOEs), and digital
IF10156
www.crs.gov | 7-5700