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Tuesday, March 23, 2010

Singapore: Background and U.S. Relations

Emma Chanlett-Avery
Specialist in Asian Affairs


A former colonial island trading and military outpost of the far-flung British Empire, the tiny Republic of Singapore has transformed itself into a modern Asian nation and a major player in the global economy, though it still largely restricts political freedoms in the name of maintaining economic growth. Singapore's heavy dependence on international trade makes regional stability and the free flow of goods and services essential to its existence. As a result, the island nation is a firm supporter of both U.S. international trade policy and the U.S. security role in Asia. The U.S.-Singapore Free Trade Agreement (FTA) went into effect in January 2004.


Date of Report: March 19, 2010
Number of Pages: 9
Order Number: RS20490
Price: $29.95

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Chinese Tire Imports: Section 421 Safeguards and the World Trade Organization (WTO)

Jeanne J. Grimmett
Legislative Attorney

On April 20, 2009, the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union filed a petition with the U.S. International Trade Commission (ITC) requesting that it initiate an investigation under Section 421 of the Trade Act of 1974, a trade remedy statute addressing import surges from China, to examine whether Chinese passenger vehicle and light truck tires were causing market disruption to U.S. tire producers. Market disruption will be found to occur under Section 421 whenever imports of a Chinese product that is "like or directly competitive with" a domestic product "are increasing rapidly ... so as to be a significant cause of material injury, or threat of material injury, to the domestic industry." The ITC initiated the investigation (TA-421-7) on April 24, 2009. 

As a result of its investigation, the ITC in June 2009 voted 4-2 that imports of the subject tires were causing domestic market disruption and recommended that the President impose an additional duty on these items for three years at an annually declining rate. The ITC also recommended expedited consideration of trade adjustment assistance applications filed by affected firms or workers. On September 11, 2009, President Obama proclaimed increased tariffs on Chinese tires for three years effective September 26, 2009, albeit at lower rates than those recommended by the ITC. The tariff increase is 35% ad valorem in the first year, 30% in the second year, and 25% in the third year. The President also directed the Secretaries of Labor and Commerce to expedite applications for trade adjustment assistance and to provide other available economic assistance to affected workers, firms, and communities. The President may review the tariffs in six months and, after receiving an ITC report on the probable effects of any change, may modify, reduce or terminate them. Although six petitions were filed under Section 421 in the past and the ITC found that market disruption existed in four out of six of its investigations, President Bush decided against providing import relief under the statute in these earlier cases. 

Section 421 was enacted as one element of 2000 legislation that permitted the President to grant most-favored-nation (MFN) tariff treatment to Chinese products upon China's accession to the World Trade Organization (WTO). Section 421 authorizes the President to impose safeguards— i.e., temporary measures such as import surcharges or quotas—on Chinese goods if domestic market disruption is found. The statute implements a China-specific safeguard mechanism contained in China's WTO Accession Protocol that may be utilized by WTO Members through December 2013. The Protocol provision is separate from Article XIX of the General Agreement on Tariffs and Trade (GATT) 1994 and the WTO Agreement on Safeguards, which allow WTO Members to respond to injurious import surges generally but on a stricter basis than under the Protocol. A major difference is that the Protocol provision permits a safeguard to be applied only to Chinese products while the Safeguards Agreement requires that a safeguard be applied to a product regardless of its source. 

China filed a WTO complaint against the United States on September 14, 2009, and requested a dispute panel on December 21, 2009, claiming that the Section 421 tariffs violate U.S. GATT obligations to accord Chinese tires MFN tariff treatment and not to exceed negotiated tariff rates, that the United States imposed tariffs under China's Accession Protocol without first attempting to justify them under general GATT and WTO safeguard provisions, and that Section 421 and its application in this case violate U.S. obligations under the Protocol. A dispute panel was established on January 19, 2010; panelists were appointed March 12, 2010. This will be the first WTO dispute panel to consider the obligations of an importing WTO Member under the China specific safeguard. 
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Date of Report: March 18, 2010
Number of Pages: 29
Order Number: R40844
Price: $29.95

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Thursday, March 18, 2010

U.S.-Japan Economic Relations: Significance, Prospects, and Policy Options

William H. Cooper
Specialist in International Trade and Finance

Japan and the United States are the two largest economic powers. Together they account for over 30% of world domestic product, for a significant portion of international trade in goods and services, and for a major portion of international investment. This economic clout makes the United States and Japan potentially powerful actors in the world economy. Economic conditions in the United States and Japan have a significant impact on the rest of the world. Furthermore, the U.S.-Japan bilateral economic relationship can influence economic conditions in other countries. 

The U.S.-Japan economic relationship is very strong and mutually advantageous. The two economies are highly integrated via trade in goods and services—they are large markets for each other's exports and important sources of imports. More importantly, Japan and the United States are closely connected via capital flows. Japan is a major foreign source of financing of the U.S. national debt and will likely remain so for the foreseeable future, as the mounting U.S. debt needs to be financed and the stock of U.S. domestic savings remains insufficient to meet the demand. Japan is also a significant source of foreign private portfolio and direct investment in the United States, and the United States is the origin of much of the foreign investment in Japan. 

The relative significance of Japan and the United States as each other's economic partner has diminished somewhat with the rise of China as an economic power. For example, China has overtaken Japan and is the largest source of foreign financing of the U.S. national debt. In addition, U.S. economic ties with Canada, Mexico, and China have deepened, further eroding the direct relevance of Japan. Nevertheless, analyses of trade and other economic data suggest that the bilateral relationship remains important, and policy leaders of both countries face the challenge of how to manage it. 

During the last decade policy leaders seem to have made a deliberate effort to drastically reduce the friction that prevailed in the economic relationship. On the one hand, this calmer environment has stabilized the bilateral relationship and permitted the two countries to focus their attention on other issues of mutual interest, such as national security. On the other hand, as some have argued, the friendlier environment masks serious problems that require more attention, such as continuing Japanese failure to resolve long-standing market access barriers to U.S. exports of autos and auto parts and flat glass and the failure of the two countries to reduce bilateral trade imbalances. Failure to resolve any of these outstanding issues could cause heightened friction between the two countries. 

U.S.-Japan economic relations will likely be dominated directly or indirectly by the economic problems the two countries are now facing. Both Japan and the United States are grappling with the effects of the global financial crisis that has resulted in an economic downturn. Both the United States and Japan have shown signs of economic recovery. 

Other issues regarding U.S.-Japan economic relations may emerge on the agenda of the 111th Congress. U.S. and Japanese leaders have several options on how to manage their relationship, including stronger reliance on the World Trade Organization; special bilateral negotiating frameworks and agreements; or a free trade agreement. Each option has its advantages and drawbacks, and they are not necessarily mutually exclusive.



Date of Report: March 11, 2010
Number of Pages: 26
Order Number: RL32649
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Tuesday, March 16, 2010

U.S.-China Relations: Policy Issues

Thomas Lum
Specialist in Asian Affairs

The U.S.-China bilateral relationship is one of the world's most important, touching on a wide range of issues, including economics, global security threats, the environment, energy, human rights, and many others. U.S. interests regarding its relationship with the People's Republic of China (PRC) include promoting U.S. trade and investment, protecting national security interests, addressing global environmental and climate change issues, promoting economic liberalization and human rights in China, and maintaining peace and stability in the Taiwan Strait and the Asia- Pacific region. 

The emergence of China as a global economic power has added considerably to the complexity of U.S. policy toward China. The United States and the PRC are becoming increasingly interdependent, which means that the two countries must cooperate in many areas even when they disagree in others. The Obama Administration has sought cooperation with the PRC on several important international issues, including the global financial crisis, multilateral efforts to block the nuclear ambitions of Iran and North Korea, and climate change. The Strategic and Economic Dialogue (S&ED), established in 2009, is a flexible diplomatic mechanism that brings together senior officials from the United States and China on an annual basis to maintain dialogue and build trust on an array of issues. 

Despite growing areas of cooperation and dialogue, deep mutual suspicions persist based upon ideological differences and uncertainty over each other's intentions, particularly in the security realm. Some U.S. policy makers have questioned China's long term military goals, given its rising military budget and expanding capabilities. Furthermore, China's increasingly active diplomacy, growing economic assistance and investment in developing regions, and political and economic ties to "rogue states" make it a potential competitor for global influence and natural resources. 

Other U.S. concerns include the bilateral trade deficit with China and allegations of PRC unfair trade practices, PRC holdings of U.S. Treasuries, military confrontations in the South China Sea, disagreements on global climate change policies, PRC human rights violations, and cyber attacks on U.S. companies that appear to have originated in China. An ongoing policy debate includes the following questions: whether a decades-long U.S. policy of engagement with China has helped to promote U.S. economic, national security, and other interests, or strengthened the PRC at the expense of U.S. interests and the promotion of democratic values; whether China's global outreach is defensive in nature and focused on domestic concerns such as economic growth and social stability, or part of an effort to undermine U.S. influence; and does China have the will or capacity to become a "responsible stakeholder" in the broader global system, or will ideological differences and Beijing's preoccupation with domestic economic and political pressures hinder cooperation between China and other world powers. 

This report provides an overview of selected, major issues in the U.S.- China relationship as they pertain to the 111th Congress. It provides a list of related CRS reports, as well as related legislation (see Appendix). Some portions of this report are based upon CRS Report R40457,
China-U.S. Relations: Current Issues and Implications for U.S. Policy, by Kerry Dumbaugh. .


 


Date of Report: March 12, 2010
Number of Pages: 29
Order Number: RL41108
Price: $29.95

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Tuesday, March 9, 2010

Japan-U.S. Relations: Issues for Congress

Emma Chanlett-Avery, Coordinator
Specialist in Asian Affairs

William H. Cooper
Specialist in International Trade and Finance

Mark E. Manyin
Specialist in Asian Affairs

The post-World War II U.S.-Japan alliance has long been an anchor of the U.S. security role in East Asia. The alliance facilitates the forward deployment of about 36,000 U.S. troops and other U.S. military assets in the Asia-Pacific, thereby undergirding U.S. national security strategy in the region. For Japan, the alliance and the U.S. nuclear umbrella provides maneuvering room in dealing with its neighbors, particularly China and North Korea. 

U.S.-Japan relations have been adjusting to the Democratic Party of Japan's (DPJ) landslide victory in the August 30, 2009 elections for the Lower House of Japan's legislature. The victory gave the DPJ, under party president Yukio Hatoyama, control of the government. While most members of the left-of-center DPJ are broadly supportive of the U.S.-Japan alliance and the general thrust of Japanese foreign policy, in the past the party has questioned and/or voted against several features of the alliance, including base realignment and Japan's financial payments for U.S. forces stationed in Japan. The Party has put forward a foreign policy vision that envisions greater "equality" in Japan's relations with the United States, in part through deeper engagement with Asia and a more United Nations-oriented diplomacy. The DPJ's victory appears to mark the end of an era in Japan; it was the first time Japan's Liberal Democratic Party (LDP) was voted out of office. The LDP had ruled Japan virtually uninterrupted since 1955. 

Since the DPJ victory, bilateral tensions have arisen over the desire of some Hatoyama government members to alter a 2006 U.S.-Japan agreement to relocate the controversial Futenma Marine Air Station to a less densely populated location in Okinawa. The move is to be the first part of a planned realignment of U.S. forces in Asia, designed in part to reduce the footprint of U.S. forces on Okinawa by redeploying 8,000 U.S. Marines and their dependents to new facilities in Guam. The Hatoyama government withdrew Japan's naval deployment in the Indian Ocean that had been providing non-combat support to U.S. and allied forces in Afghanistan. Instead, Tokyo announced a new, five-year, $5 billion aid package for Afghanistan. 

Japan is one of the United States' most important economic partners. Outside of North America, it is the United States' second-largest export market and second-largest source of imports. Japanese firms are the United States' second-largest source of foreign direct investment, and Japanese investors are the second-largest foreign holders of U.S. treasuries, helping to finance the U.S. deficit and reduce upward pressure on U.S. interest rates. Bilateral trade friction has decreased in recent years, partly because U.S. concern about the trade deficit with Japan has been replaced by concern about a much larger deficit with China. One exception was U.S. criticism over Japan's decision in 2003 to ban imports of U.S. beef, which have since resumed. 

However, the economic problems in Japan and the United States associated with the credit crisis and the related economic recession and how the two countries deal with those problems will likely dominate their bilateral economic agenda for the foreseeable future. Japan has been hit particularly hard by the financial crisis and subsequent recession. Japan's gross domestic product (GDP) declined 0.7% in 2008 and is estimated to have declined by 5.5% in 2009, with a modest rebound expected in 2010. At the same time, the United States is showing some signs of recovery, at least according to some indicators. 



Date of Report: February 24, 2010
Number of Pages: 26
Order Number: RL33436
Price: $29.95

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Wednesday, March 3, 2010

The Proposed U.S.-South Korea Free Trade Agreement (KORUS FTA): Provisions and Implications

William H. Cooper, Coordinator
Specialist in International Trade and Finance

Mark E. Manyin
Specialist in Asian Affairs

Remy Jurenas
Specialist in Agricultural Policy

Michaela D. Platzer
Specialist in Industrial Organization and Business


On June 30, 2007, U.S. and South Korean trade officials signed the proposed U.S.-South Korean Free Trade Agreement (KORUS FTA) for their respective countries. If approved, the KORUS FTA would be the second largest FTA that South Korea has signed to date, after the agreement with the European Union (EU). It would be the second largest (next to North American Free Trade Agreement, NAFTA) in which the United States participates. South Korea is the seventh largest trading partner of the United States and the United States is South Korea's third largest trading partner. Various studies conclude that the agreement would increase bilateral trade and investment flows. The final text of the proposed KORUS FTA covers a wide range of trade and investment issues and, therefore, could have substantial economic implications for both the United States and South Korea. The agreement will not enter into force unless Congress approves implementation legislation. The negotiations were conducted under the trade promotion authority (TPA), also called fast-track trade authority, that the Congress granted the President under the Bipartisan Trade Promotion Act of 2002 (P.L. 107-210). The authority allows the President to enter into trade agreements that receive expedited congressional consideration (no amendments and limited debate). The Bush Administration did not send draft implementing legislation to Congress. 

The Obama Administration has not indicated if and when it will send the draft implementing bill to Congress. The Administration has stated that it is developing "benchmarks for progress" on resolving "concerns" it has with the KORUS FTA, particularly over market access for U.S. car exports. While U.S. Trade Representative Ron Kirk has called attention to the economic opportunities the KORUS FTA presents, he also has said that if the Administration's concerns are not resolved, "we'll be prepared to step away.... " Presidents Obama and Lee Myung-bak met in Seoul in November 2009, and the two presidents agreed to "move the agreement forward." However, the prospect of congressional action on the KORUS FTA in 2010 appears slim; as of late January 2010, the Obama Administration reportedly had not presented ideas for changes to the U.S. auto industry, key congressional offices, or the Korean government. 

In South Korea, however, the politics of the KORUS FTA likely will make it difficult for the government of President Lee Myung-bak to appear to accede to new U.S. demands. This is particularly due to memories of events in 2008, when Lee reached an agreement with the United States to fully lift South Korea's ban on U.S. beef imports, triggering massive anti-government protests that forced the two governments to renegotiate the beef agreement. Lee lifted the ban to make it easier for the George W. Bush Administration to submit the KORUS FTA to Congress. The South Korean National Assembly has yet to vote on the KORUS FTA, and is debating whether or not to do so before the U.S. Congress acts. It is expected that the Assembly would pass the agreement, at least in its current version. While a broad swath of the U.S. business community supports the agreement, the KORUS FTA faces opposition from some groups, including some auto and steel manufacturers and labor unions. Some U.S. supporters view passage of the KORUS FTA as important to secure new opportunities in the South Korean market, while opponents claim that the KORUS FTA does not go far enough. Other observers have suggested the outcome of the KORUS FTA could have implications for the U.S.-South Korean alliance as a whole, as well as on U.S. Asia policy and U.S. trade policy, particularly in light of an FTA completed in October 2009 between South Korea and the European Union.



Date of Report: February 12, 2010
Number of Pages: 53
Order Number: RL34330
Price: $29.95

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Monday, March 1, 2010

Taiwan: Major U.S. Arms Sales Since 1990

Shirley A. Kan
Specialist in Asian Security Affairs

This report, updated as warranted, discusses U.S. security assistance to Taiwan, or Republic of China (ROC), including policy issues for Congress and legislation. Congress has oversight of the Taiwan Relations Act (TRA), P.L. 96-8, which has governed arms sales to Taiwan since 1979, when the United States recognized the People's Republic of China (PRC) instead of the ROC. Two other relevant parts of the "one China" policy are the August 17, 1982, U.S.-PRC Joint Communique and the "Six Assurances" to Taiwan. U.S. arms sales to Taiwan have been significant. The United States also has expanded military ties with Taiwan after the PRC's missile firings in 1995-1996. However, there is no defense treaty with Taiwan. 

At the U.S.-Taiwan arms sales talks on April 24, 2001, President George W. Bush approved for possible sale diesel-electric submarines, P-3 anti-submarine warfare (ASW) aircraft (linked to the submarine sale), four decommissioned U.S. Kidd-class destroyers, and other items. Bush also deferred decisions on Aegis-equipped destroyers and other items, while denying other requests. Afterward, attention turned to Taiwan, where the military, civilian officials, and legislators from competing political parties debated contentious issues about how much to spend on defense and which U.S. weapons systems to acquire, despite the increasing threat (including a missile buildup) from the People's Liberation Army (PLA), as described in the Pentagon's reports to Congress on PRC military power. In February 2003, the Administration pointed Taiwan to three priorities for defense: command and control, missile defense, and ASW. Some in the United States questioned Taiwan's seriousness about its self-defense, level of defense spending, and protection of secrets. The Pentagon broadened its focus from Taiwan's arms purchases to its regular defense budget, readiness for self-defense, and critical infrastructure protection. Blocked by the Kuomintang (KMT) party in the Legislative Yuan (LY) that opposed the Democratic Progressive Party (DPP)'s president (2000-2008), the Special Budget (not passed) for submarines, P-3C ASW aircraft, and PAC-3 missile defense systems was cut from $18 billion in 2004 to $9 billion (for submarines only) in 2005. In March 2006, Taiwan's defense minister requested a 2006 Supplemental Defense Budget (not passed) in part for submarine procurement, P-3Cs, and PAC-2 upgrades (not new PAC-3 missiles). In June 2007, the LY passed Taiwan's 2007 defense budget with funds for P-3C planes, PAC-2 upgrades, and F-16C/D fighters. In December 2007, the LY approved $62 million to start the sub design phase. After the KMT's Ma Ying-jeou became President in May 2008, Taiwan retained the requests but has cut the defense budgets. 

Attention also turned to U.S. decisions on pending arms sales. In 2008, congressional concerns mounted about a suspected "freeze" in President Bush's notifications to Congress on arms sales. On October 3, 2008, Bush finally notified Congress. However, he submitted six of the eight pending programs (not a "package") for a combined value of $6.5 billion. Despite the concerns in 2008, President Obama continued that process to decide on submissions for congressional review at one time (on January 29, 2010) five programs with a total value of $6.4 billion. Presidents Bush and Obama did not notify the submarine design program (the only one pending from decisions in 2001) and did not accept Taiwan's request for F-16C/D fighters (pending since 2006). Congress might further assert its legislated role in any objective, ongoing determinations of Taiwan's self-defense needs and oversight of President Obama's adherence to the TRA. Legislation in the 111th Congress include: National Defense Authorization Act for FY2010, P.L. 111-84; H.Res. 733 (Gingrey); H.Con.Res. 200 (Andrews); H.R. 4102 (Ros-Lehtinen); and H.Res. 927 (Barton). Moreover, Congress directed Defense Secretary Robert Gates to submit by January 26 an assessment of Taiwan's air defense forces, including its F-16 fighters. 
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Date of Report: February 16, 2010
Number of Pages: 66
Order Number: RL30957
Price: $29.95

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