U.S. Trade Policy: Background and Current Issues Page: 1 of 2
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. Congressional Research Service
Informing the legislative debate since 1914
April 20, 2015
U.S. Trade Policy: Background and Current Issues
U.S. Trade Policy in Context
Congress plays a major role in U.S. trade policy through its
legislative and oversight authority. Since World War II,
U.S. trade policy has focused on liberalizing markets by
reducing trade and investment barriers, creating a rules-
based trading system, enforcing commitments under trade
agreements, and supporting economic growth. Trade policy,
spanning a range of stakeholder interests, involves U.S.
economic, foreign policy, and national security issues.
Economics of Trade
Economic theory maintains that trade is mutually
beneficial, but its benefits may not be distributed evenly
and costs may be concentrated. Countries specialize by
increasing production and exporting goods and services in
which they have a higher comparative advantage through
skills or resources (e.g., U.S. exports using high-skilled
labor), and importing those domestically unavailable or less
efficiently produced (e.g., U.S. imports using lower-skilled
labor). Trade benefits can include more efficient resource
allocation, increased competition, economies of scale, and
lower prices and more choice for consumers. Costs can
include reallocation of resources or job losses in import
sensitive industries. The economic impact of trade
liberalization is difficult to measure and widely debated.
Components of U.S. Trade Policy
The U.S. Trade Representative (USTR), which is
responsible for developing and coordinating U.S. trade
policy, is the lead U.S. trade negotiator. Other federal
government agencies also are involved in U.S. trade policy,
with interagency processes and advisory systems providing
support. Key components of U.S. trade policy include
" Trade liberalization-Negotiation of reciprocal trade
and investment agreements to open markets and
establish rules governing trade and investment;
enforcement of trade agreement commitments.
" Export promotion and controls-U.S. export
promotion (e.g., export financing, market research,
advocacy, trade missions); licensing and control of
certain strategic exports.
" Trade remedies and adjustment-U.S. statutes on
certain trade practices (e.g., antidumping and
countervailing duties); trade adjustment assistance
(TAA) for dislocated workers and firms.
" Trade preferences-Unilateral preference programs
that provide duty-free access to U.S. markets for eligible
developing countries and products.
" Investment-Investment protection and promotion;
examination of foreign investment with national security
U.S. Trade Trends
The United States is the world's largest economy for total
trade in goods and services, as well as a major source of
and destination for foreign direct investment (FDI). U.S.
trade has expanded and evolved over the past two decades
with greater integration of markets and production, as well
as the rise of supply chain networks (see Figure 1). U.S.
trade composition and patterns also have changed, with
emerging and developing economies playing a greater role.
The top five U.S. merchandise trading partners are Canada,
China, Mexico, Japan, and Germany. The EU represents the
largest U.S. trading partner. The United States has a long-
running overall trade deficit, meaning the value of its
imports of goods and services exceed its exports of such.
Specifically, its goods trade deficit outweighs its service
trade surplus. The imbalance's impact on the U.S. economy
is debated. Trade is viewed as supporting U.S. recovery
after the 2008-2009 global economic downturn.
Figure I. U.S. Goods and Services Trade
A 2,Goods Imports
S 2,000 - - - - - - - -
1992 1997 2002 2007 2012
Source: Bureau of Economic and Analysis and Census Bureau.
U.S. Trade Agreements and
Congress is active in shaping and examining U.S. trade
policy. Several U.S. trade negotiations are ongoing.
Role of Congress
Under the U.S. Constitution, Congress has the authority to
regulate foreign commerce, while the President has the
authority to conduct foreign relations. For the first 150
years of U.S. history, Congress set tariff rates on all
imported products. This policy shifted with the Reciprocal
Trade Agreements Act of 1934, in which Congress
delegated authority to the President to enter into reciprocal
trade agreements that reduced tariffs within pre-approved
levels and to implement them through delegated
proclamation authority. With the growing prominence of
nontariff trade barriers, Congress adopted "fast track"
authority in the Trade Act of 1974 to provide expedited
legislative consideration for implementing bills on future
trade agreements while preserving congressional
www.crs.gov I 7-5700
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U.S. Trade Policy: Background and Current Issues, report, April 20, 2015; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc819630/m1/1/: accessed August 14, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.