Foreign
trade of the United States comprises the international
imports and exports of the United States, one of the world's most
significant economic markets. The country is among the top three global
importers and exporters.
The regulation of trade is
constitutionally vested in the United States Congress. After the Great
Depression, the country emerged as among the most significant global trade
policy-makers, and it is now a partner to a number of international trade
agreements, including the General Agreement on Tariffs and Trade (GATT) and
the International Trade Organization (ITO). Gross U.S. assets held by
foreigners were $16.3 trillion as of the end of 2006 (over 100% of GDP).
History
The Constitution gives Congress
express power over the imposition of tariffs and the regulation of
international trade. As a result, Congress can enact laws including those
that: establish tariff rates; implement trade agreements; provide remedies
against unfairly traded imports; control exports of sensitive technology;
and extend tariff preferences to imports from developing countries. Over
time, and under carefully prescribed circumstances, Congress has delegated
some of its trade authority to the Executive Branch. Congress, however, has,
in some cases, kept tight reins on the use of this authority by requiring
that certain trade laws and programs be renewed; and by requiring the
Executive Branch to issue reports to Congress to monitor the implementation
of the trade laws and programs.[1]
The authority of Congress to
regulate international trade is set out in Article I, Section 8, Paragraph 1
of the United States Constitution:
The Congress shall have power To
lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and
provide for the common Defence and general Welfare of the United States; but
all Duties, Imposts and Excises shall be uniform throughout the United
States;
Embargo Act of 1807 was designed
to force Britain to rescind its restrictions on American trade, but failed,
and was repealed in early 1809.
During the Civil War period,
leaders of the Confederacy were confident that Britain would come to their
aid because of British reliance on Southern cotton. The Union was able to
avoid this, through skillful use of diplomacy and threats to other aspects
of European-U.S. trade relations.
While the United States has always
participated in international trade, it did not take a leading role in
global trade policy-making until the Great Depression. Congress and The
Executive Branch came into conflict in deciding the mix of trade promotion
and protectionism. In order to stimulate employment, Congress passed the
Reciprocal Trade Agreements Act of 1934, allowing the executive branch to
negotiate bilateral trade agreements for a fixed period of time. During the
1930s the amount of bilateral negotiation under this act was fairly limited,
and consequently did little to expand global tade.
Near the end of the Second World
War U.S. policy makers began to experiment on a broader level. In the 1940s,
working with the British government, the United States developed two
innovations to expand and govern trade among nations: the General Agreement
on Tariffs and Trade (GATT) and the International Trade Organization (ITO).
GATT was a temporary multilateral agreement designed to provide a framework
of rules and a forum to negotiate trade barrier reductions among nations.
The growing importance of
international trade led to the establishment of the Office of the U.S. Trade
Representative in 1963 by Executive Order 11075, originally called The
Office of the Special Representative for Trade Negotiations.
Trade policy
United States trade policy has
varied widely through various American historical and industrial periods. As
a major developed nation, the U.S. has relied heavily on the import of raw
materials and the export of finished goods. Because of the significance for
American economy and industry, much weight has been placed on trade policy
by elected officials and business leaders.
The 1920s marked a decade of
economic growth in the United States following a Classical supply side
policy. U.S. President Warren Harding signed the Emergency Tariff of 1921
and the Fordney–McCumber Tariff of 1922. Harding's policies reduced taxes
and protected U.S. business and agriculture. Following the Great Depression
and World War II, the United Nations Monetary and Financial Conference
brought the Bretton Woods currency agreement followed by the economy of the
1950s and 1960s. In 1971, President Richard Nixon ended U.S. ties to Bretton
Woods, leaving the U.S. with a floating fiat currency. The stagflation of
the 1970s saw a U.S. economy characterized by slower GDP growth. In 1988,
the United States ranked first in the world in the Economist Intelligence
Unit "quality of life index" and third in the Economic Freedom of the World
Index.
Over the long run, nations with
trade surpluses tend also to have a savings surplus. The U.S. generally has
developed lower savings rates than its trading partners, which have tended
to have trade surpluses. Germany, France, Japan, and Canada have maintained
higher savings rates than the U.S. over the long run.
Some economists believe that GDP
and employment can be dragged down by an over-large deficit over the long
run. Others believe that trade deficits are good for the economy. The
opportunity cost of a forgone tax base may outweigh perceived gains,
especially where artificial currency pegs and manipulations are present to
distort trade.
In 2006, the primary economic
concerns focused on: high national debt ($9 trillion), high non-bank
corporate debt ($9 trillion), high mortgage debt ($9 trillion), high
financial institution debt ($12 trillion), high unfunded Medicare liability
($30 trillion), high unfunded Social Security liability ($12 trillion), high
external debt (amount owed to foreign lenders) and a serious deterioration
in the United States net international investment position (NIIP) (-24% of
GDP), high trade deficits, and a rise in illegal immigration.
These issues have raised concerns
among economists and unfunded liabilities were mentioned as a serious
problem facing the United States in the President's 2006 State of the Union
address. On June 26, 2009, Jeff Immelt, the CEO of General Electric, called
for the U.S. to increase its manufacturing base employment to 20% of the
workforce, commenting that the U.S. has outsourced too much in some areas
and can no longer rely on the financial sector and consumer spending to
drive demand.
In 1985, the U.S .had just began a
growing trade deficit with China. During the 1990s, U.S. trade deficit
became a more excessive long-run trade deficit, mostly with Asia. By 2012,
the U.S. trade deficit, fiscal budget deficit, and federal debt increased to
record or near record levels following accompanying decades of the
implementation of broad unconditional or unilateral U.S. free trade policies
and formal trade agreements.
The US last had a trade surplus in
1975. However, recessions may cause short-run anomalies to rising trade
deficits. The balance of trade in the United States has been a concern among
economists and business people. Warren Buffett, founder of Berkshire
Hathaway, was quoted in the Associated Press (January 20, 2006) as saying
"The U.S trade deficit is a bigger threat to the domestic economy than
either the federal budget deficit or consumer debt and could lead to
political turmoil... Right now, the rest of the world owns $3 trillion more
of us than we own of them."
In both a 1987 guest editorial to
the Omaha-World Herald and a more detailed 2003 Fortune
article, Buffett proposed a tool called Import Certificates as a solution to
the United States' problem and ensure balanced trade. "The rest of the world
owns a staggering $2.5 trillion more of the U.S. than we own of other
countries. Some of this $2.5 trillion is invested in claim checks—U.S.
bonds, both governmental and private— and some in such assets as property
and equity securities."
Today the United States' largest
trading partner is China. China has seen substantial economic growth in the
past 50 years and though a nuclear-security summit that took place in early
2010 president Obama hoped to insure another 50 years of growth between the
two countries. On April 19, 2010, President Barack Obama met with China's
President Hu Jintao to discuss trade policies between the two countries.
Customs territory
The main customs territory of the
United States includes the 50 states, the District of Columbia, and the
territory of Puerto Rico, with the exception of over 200 foreign trade zones
designated to encourage economic activity. The remaining insular areas are
separate customs territories administered largely by local authorities:
·
American Samoa
·
Guam
·
Northern Mariana Islands
·
United States Minor Outlying Islands (mostly uninhabited)
·
United States Virgin Islands
Transportation of certain living
things or agricultural products may be prohibited even within a customs
territory. This is enforced by U.S. Customs and Border Protection, the
federal Animal and Plant Health Inspection Service, and even state
authorities such as the California Department of Food and Agriculture.
Investment in the United States
Gross U.S. assets held by
foreigners were $16.3 trillion as of the end of 2006 (over 100% of GDP). The
U.S. net international investment position (NIIP)[24]
became a negative $2.5 trillion at the end of 2006, or about minus 19% of
GDP.[4][25]
This figure rises as long as the
US maintains an imbalance in trade, when the value of imports substantially
outweighs the value of exports. This external debt does not result mostly
from loans to Americans or the American government, nor is it consumer debt
owed to non-US creditors. It is an accounting entry that largely represents
US domestic assets purchased with trade dollars and owned overseas, largely
by US trading partners.
For countries like the United
States, a large net external debt is created when the value of foreign
assets (debt and equity) held by domestic residents is less than the value
of domestic assets held by foreigners. In simple terms, as foreigners buy
property in the US, this adds to the external debt. When this occurs in
greater amounts than Americans buying property overseas, nations like the
United States are said to be debtor nations, but this is not
conventional debt like a loan obtained from a bank.
If the external debt represents
foreign ownership of domestic assets, the result is that rental income,
stock dividends, capital gains and other investment income is received by
foreign investors, rather than by U.S. residents. On the other hand, when
American debt is held by overseas investors, they receive interest and
principal repayments. As the trade imbalance puts extra dollars in hands
outside of the U.S., these dollars may be used to invest in new assets
(foreign direct investment, such as new plants) or be used to buy existing
American assets such as stocks, real estate and bonds. With a mounting trade
deficit, the income from these assets increasingly transfers overseas.
Of major concern is the magnitude
of the NIIP (or net external debt), which is larger than those of most
national economies. Fueled by the sizable trade deficit, the external debt
is so large that economists are concerned over whether the current account
deficit is unsustainable. A complicating factor is that trading partners
such as China, depend for much of their economy on exports, especially to
America. There are many controversies about the current trade and external
debt situation, and it is arguable whether anyone understands how these
dynamics will play out in a historically unprecedented floating exchange
rate system. While various aspects of the U.S. economic profile have
precedents in the situations of other countries (notably government debt as
a percentage of GDP), the sheer size of the U.S., and the integral role of
the US economy in the overall global economic environment, create
considerable uncertainty about the future.
According to economists such as
Larry Summers and Paul Krugman, the enormous inflow of capital from China is
one of the causes of the global financial crisis of 2008–2009. China had
been buying huge quantities of dollar assets to keep its currency value low
and its export economy humming, which caused American interest rates and
saving rates to remain artificially low. These low interest rates, in turn,
contributed to the United States housing bubble because when mortgages are
cheap, house prices are inflated as people can afford to borrow more.
Trade agreements
The United States is a partner to
many trade agreements, shown in the chart below and the map to the right.
The United States has also
negotiated many Trade and Investment Framework Agreements, which are often
precursors to free trade agreements. It has also negotiated many bilateral
investment treaties, which concern the movement of capital rather than
goods.
The U.S. is a member of several
international trade organizations. The purpose of joining these
organizations is to come to agreement with other nations on trade issues,
although there is domestic political controversy to whether or not the U.S.
government should be making these trade agreements in the first place. These
organizations include:
·
World Trade Organization
·
Organization of American States
·
Security and Prosperity Partnership of North America |