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Congressional Research Service (CRS)

 

U.S. Trade Concepts, Performance, and Policy: Frequently Asked Questions

Wayne M. Morrison, Coordinator ,Specialist in Asian Trade and Finance

Mary Jane Bolle ,Specialist in International Trade and Finance

Craig K. Elwell, Specialist in Macroeconomic Policy

James K. Jackson, Specialist in International Trade and Finance

Vivian C. Jones, Specialist in International Trade and Finance

M. Angeles Villarreal, Specialist in International Trade and Finance

November 17, 2014

http://fas.org/sgp/crs/misc/RL33944.pdf

[full-text, 44 pages]

 

Summary

Congress plays a major role in U.S. trade policy through its legislative and oversight authority.

There are a number of major trade issues that are currently the focus of Congress. For example,

bills were introduced in the 113th Congress to reauthorize Trade Promotion Authority (TPA), the

U.S. Generalized System of Preferences (GSP), and the U.S. Export-Import Bank. Congress has

also been involved with proposed free trade agreements (FTAs), including the Trans-Pacific

Partnership (TPP) involving the United States and 11 other countries and the Transatlantic Trade

and Investment Partnership (TTIP) between with United States and the European Union (EU).

Also of interest to Congress are current plurilateral negotiations for a Trade in Services

Agreement (TISA) and a new multilateral Information Technology (ITA) agreement in the World

Trade Organization (WTO). Trade and investment policies of major U.S. trading partners (such as

China), especially when they are deemed harmful to U.S. economic interests, are also of

continued concern to Congress. Events in the Ukraine have prompted U.S. trade sanctions against

Russia. The costs and benefits of trade to the U.S. economy, firms, workers, and constituents, and

the future direction of U.S. trade policy, are hotly debated topics in Congress.

 

This report provides information and context for these and many other trade topics. It is intended

to assist Members and staff who may be new to trade issues. The report is divided into four

sections in a question-and-answer format: trade concepts; U.S. trade performance; formulation of

U.S. trade policy; and trade and investment issues. Additional suggested readings are provided in

an appendix.

 

The first section, “Trade Concepts,” deals with why countries trade, the consequences of trade

expansion, and the relationship between globalization and trade. Key questions address the

benefits of specialization in production and trade, efforts by governments to influence a country’s

comparative advantage, how trade expansion can be costly and disruptive to workers in some

industries, and some unique characteristics of trade between developed countries.

 

The second section, “U.S. Trade Performance,” lists data on U.S. trade flows and focuses on the

U.S. trade deficit, including its implications for the U.S. economy. Questions address the causes

of trade deficits, the role of foreign trade barriers, and how the trade deficit might be reduced.

 

The third section, “Formulation of U.S. Trade Policy,” deals with the roles played by the

executive branch, Congress, the private sector, and the judiciary in the formulation of U.S. trade

policy. Information on how trade policy functions are organized in Congress and the executive

branch, as well as the respective roles of individual Members and the President, is provided. The

roles of the private sector and the judiciary are also discussed.

 

The fourth section, “U.S. Trade and Investment Policy Issues,” lists questions related to trade

negotiations and agreements and to imports, exports, and investments. The justification, types,

and consequences of trade liberalization agreements, along with the role of the WTO, are treated

in this section. The costs and benefits of imports, exports, and investments are also discussed,

including how the government deals with disruption and injury to workers and companies caused

by imports and its efforts to both restrict and promote exports. The motivations and consequences

of foreign direct investment flows are also discussed.

 

Contents

Trade Concepts ................................................................................................................................ 1

The Basics of Trade ................................................................................................................... 1

Trade and Jobs ........................................................................................................................... 3

Economic Globalization ............................................................................................................ 5

U.S. Trade Performance ................................................................................................................... 7

The U.S. Role in the World Economy ....................................................................................... 7

The U.S. Trade Deficit ............................................................................................................... 8

Understanding Data on U.S. Trade and the Economy ............................................................. 14

U.S. Manufacturing ................................................................................................................. 17

Formulation of U.S. Trade Policy .................................................................................................. 18

Role of Congress ..................................................................................................................... 18

Role of the Executive Branch .................................................................................................. 19

Role of the Private Sector ........................................................................................................ 20

Role of the Judiciary ................................................................................................................ 21

U.S. Trade and Investment Policy Issues ....................................................................................... 22

Trade Negotiations and Agreements ........................................................................................ 22

Import Issues ........................................................................................................................... 25

Federal Export Issues .............................................................................................................. 27

Investment Issues ..................................................................................................................... 30

Additional Readings ...................................................................................................................... 33

CRS Reports ............................................................................................................................ 33

CRS Insights and In Focus Products ....................................................................................... 35

Other Readings ........................................................................................................................ 36

List of Questions ............................................................................................................................ 37

Trade Concepts ........................................................................................................................ 37

U.S. Trade Performance .......................................................................................................... 37

Understanding Data on U.S. Trade and the Economy ............................................................. 38

U.S. Manufacturing ................................................................................................................. 38

Formulation of U.S. Trade Policy ............................................................................................ 38

Role of the Judiciary ................................................................................................................ 38

U.S. Trade and Investment Policy Issues ................................................................................ 39

Selected Import Issues ............................................................................................................. 39

Selected Export Issues ............................................................................................................. 39

Investment Issues ..................................................................................................................... 40

 

Figures

Figure 1. U.S. Current Account Balance as a Percent of GDP: 1990-2013 ................................... 11

Figure 2. U.S. Exports and Imports of Goods and Services as a Percent of GDP: 1980-2013 (%) .................................... 15

Figure 3. U.S. FDI Outflows and Inflows: 1990-2013 .................................................................. 32

 

Tables

Table 1. Largest Global Trading Economies Based on Total Trade in Goods and Services (G&S) : 2013 ........................ 8

Table 2. U.S. Merchandise Trade and Current Account Trade: 2004-2013 ..................................... 9

Table 3. The Ratio of National Savings to Total Investment and Current Account

Balances as a Percent of GDP for Major Economies in 2013 .................................................... 11

Table 4. Top U.S. Trading Partners Ranked by Total Merchandise Trade, 2013 ........................... 15

 

Contacts

Author Contact Information........................................................................................................... 40

 

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