CRS Issue Statement on Southeast Asia, Australasia, and the Pacific Islands

Bruce Vaughn, Coordinator
Specialist in Asian Affairs

The United States has many interests in Southeast Asia, Australasia, and the Pacific Islands, in keeping with the wide variety of countries in the region. It includes U.S. allies (Australia, Thailand, and the Philippines) and key strategic friends (including Singapore), two ideologically moderate, majority-Muslim democracies (Malaysia and Indonesia, the world's most populous Muslim country), one of the world's busiest waterways (the Straits of Malacca, through which half the world's oil shipments pass), sites of deadly terrorist attacks, a former adversary in the process of transforming itself into a quasi-market economy (Vietnam), and a "rogue" state whose human rights record and foreign policy have triggered extensive U.S. sanctions (Burma, or Myanmar). 

Southeast Asia has emerged as the hub for discussions of Asian economic and security architectures. Proximity to China, India, and Japan has increasingly made the region a center for strategic and economic rivalry. In the past several years China has significantly increased foreign aid, trade, and its diplomatic presence in the region. Some believe these ties may serve as a basis for China's cultivation of security relationships in Southeast Asia at the expense of U.S. interests in the future. Other observers argue that China's rise in the region does not threaten the position of the United States and may be of growing concern to some regional states.


Date of Report: January 15, 2010
Number of Pages: 3
Order Number: IS40388
Price: $7.95

Agriculture in Pending U.S. Free Trade Agreements with Colombia, Panama, and South Korea

Remy Jurenas
Specialist in Agricultural Policy

The 111th Congress could consider free trade agreements (FTAs) signed by the Bush Administration with Colombia, Panama, and South Korea under trade promotion authority, or fast-track rules, designed to expedite congressional consideration of these agreements. Liberalizing trade in agricultural products, particularly the pace of expanding market access for the more sensitive agricultural commodities, was one of the more difficult areas that trade negotiators faced in concluding each of these FTAs. In each instance, issues dealing with food safety and animal/plant health matters (technically not part of the FTA negotiating agenda) were not resolved until later. 

While U.S. negotiators sought to eliminate high tariffs and restrictive quotas imposed on U.S. agricultural exports to these three country markets, they also faced pressures to protect U.S. producers of import-sensitive commodities (beef, dairy products, and sugar, among others). FTA partner country negotiators faced similar pressures. One Bush Administration policy objective was for FTAs to be comprehensive (i.e., cover all products). For the more import-sensitive agricultural commodities, negotiators agreed on long transition periods, temporary additional protection in the case of import surges, or indefinite protection of a few commodities. To illustrate the latter, because of political sensitivities for the United States or its partners, negotiators agreed to retain in perpetuity quantitative import limits and prohibitively high tariffs on some of the most import-sensitive commodities. In one exception, though, the United States agreed to Korea's insistence that rice be completely excluded from their FTA. 

Of these three, the FTA with South Korea would be the most commercially significant one for U.S. agriculture since the North American Free Trade Agreement (NAFTA) took effect with Mexico in 1994. Because Colombia is a large market that imposes a high level of border protection on agricultural imports, the Colombia FTA has the potential to significantly increase U.S. agricultural exports. Though Panama represents a relatively small market, U.S. exporters would have numerous opportunities for additional sales. 

Conversely, each pending FTA partner would have additional access to the U.S. market for those agricultural commodities that are now protected by restrictive U.S. import quotas. Of these, the U.S. sugar sector would face some competition from increased imports of sugar from Colombia and Panama. The small increase in additional imports from South Korea would likely be in the form of primarily ethnic foods. Also, because these three countries consume most of the beef and dairy products that they produce, any additional export sales to the United States would likely be accommodated by the large U.S. market with little effect. 

The Obama Administration has signaled its intent to address outstanding issues of concern to some Members of Congress before submitting these FTAs to Congress for consideration. Officials during 2009 stated their intent to work with Members of Congress to develop "benchmarks" to use to determine when these agreements might be sent to Capitol Hill for debate, but little apparent movement occurred. With the White House pursuing health care and financial sector reforms (among other issues) as its legislative priorities, indications are that these FTAs might not be submitted to Congress until after the 2010 fall elections or sometime during 2011. 


Date of Report: February 4, 2010
Number of Pages: 21
Order Number: R40622
Price: $29.95

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International Trade: Rules of Origin

Vivian C. Jones
Specialist in International Trade and Finance

Michael F. Martin
Analyst in Asian Trade and Finance

Determining the country of origin of a product is important for properly assessing tariffs, enforcing trade remedies (such as antidumping and countervailing duties) or quantitative restrictions (tariff quotas), and statistical purposes. Other commercial trade policies are also linked with origin determinations, such as country of origin labeling and government procurement regulations. 

Rules of origin (ROO) can be very simple, noncontroversial tools of international trade as long as all of the parts of a product are manufactured and assembled primarily in one country. However, when a finished product's component parts originate in many countries—as is often the case in today's global trading environment—determining origin can be a very complex, sometimes subjective, and time-consuming process. 

U.S. Customs and Border Protection (CBP) is the agency responsible for determining country of origin using various ROO schemes. Non-preferential rules of origin are used to determine the origin of goods imported from countries with which the United States has most-favored-nation (MFN) status. Preferential rules are used to determine the eligibility of imported goods from certain U.S. free trade agreement (FTA) partners and certain developing country beneficiaries to receive duty-free or reduced tariff benefits under bilateral or regional FTAs and trade preference programs. Preferential rules of origin are generally specific to each FTA, or preference, meaning that they vary from agreement to agreement and preference to preference. 

CBP has periodically proposed implementing a more uniform system of ROO as an alternative to the "substantial transformation" rule that currently in place. In July 25, 2008, CBP's latest proposal suggested that a system known as the North American Free Trade Agreement (NAFTA) rules system "has proven to be more objective and transparent and provide greater predictability in determining the country of origin of imported merchandise than the system of case-by-case adjudication they would replace." The NAFTA scheme that would be applied has already been used for several years to determine the origin of imports under the NAFTA, and for most textile and apparel imports (about 40 percent of U.S. imports). The CBP proposed to apply the NAFTA rules to all country of origin determinations made by CBP, unless otherwise specified (e.g., unless the import enters under a preferential ROO scheme already in place). Such changes in rules of origin requirements are often opposed by some importers due to costs involved in transitioning to new rules, or because they believe that certain imported products might be at a disadvantage under new ROO methodology. As of this writing, the proposal has not been implemented. 

This report deals with ROO in three parts. First, we describe in more detail the reasons that country of origin rules are important and briefly describe U.S. laws and methods that provide direction in making these determinations. Second, we discuss briefly some of the more controversial issues involving rules of origin, including the apparently subjective nature of some CBP origin determinations, and the effects of the global manufacturing process on ROO. Third, we conclude with some alternatives and options that Congress could consider that might assist in simplifying the process. 


Date of Report: February 5, 2010
Number of Pages: 21
Order Number: RL34524
Price: $29.95

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CRS Issue Statement on the Korean Peninsula and Japan

Mark E. Manyin, Coordinator
Specialist in Asian Affairs

The Korean Peninsula and Japan represent a study in contrasts for U.S. foreign policy interests: the established democracies of Japan and the South Korea are long-standing U.S. military allies, while totalitarian North Korea represents one of the United States= biggest challenges through its production of nuclear weapons and missiles and its record of serious human rights abuses. Issues for Congress with respect to the three states relate to strategy and policies to maintain U.S. interests in security, stability, human rights, and trade and financial relationships both with and within the region. 

The most prominent issue is North Korea's nuclear weapons program. For Congress, the major policy question is to what extent it should support a policy of engagement through diplomacy and incentives or a policy of coercion through additional pressure and confrontation, or a combination of the two. A challenge for the United States is balancing its desire to achieve a full dismantlement of North Korea's nuclear weapons program and prevent proliferation with concerns about: North Korea=s willingness to stick with any deal, the continued evolution of its long-range missile capabilities, and the interests of the four other parties (China, South Korea, Japan, and Russia) in the Six-Party Talks over North Korea's program.


Date of Report: January 15, 2010
Number of Pages: 3
Order Number: IS40341
Price: $7.95

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The 2009 Asia Pacific Economic Cooperation (APEC) Meetings and U.S. Trade Policy in Asia

Michael F. Martin
Specialist in Asian Affairs

Congress and the Executive Branch have historically identified the Asia Pacific Economic Cooperation forum (APEC) as potentially important in the promotion of liberalized international trade and investment in Asia, and possibly the rest of the world. APEC's commitment to the goal of trade and investment liberalization is embodied in its Bogor Goals, in which APEC members pledged to free and open trade and investment in the Asia-Pacific by 2010 for industrialized economies and 2020 for developing economies. 

The 2009 APEC Leaders' and Ministerial Meetings focused on balanced growth, resisting protectionism, fostering trade and investment liberalization, accelerating regional economic integration, and enhancing human security. In the Leaders' Declaration, APEC presented a new "growth paradigm" based on balanced, sustainable, and inclusive growth. In the Ministerial Meeting, one of the main topics was efforts to be taken at, behind, and across borders to promote regional economic integration. 

The next two years may be a critical period for APEC and its achievement of the Bogor Goals. The 2010 meetings are to be held in Yokohama, Japan—the target year for APEC's industrialized members to achieve the Bogor Goals. The United States will host the 2011 meetings. The Obama Administration has chosen Honolulu as the host city for the 2011 Leaders' Meeting, but has not given a clear indication of APEC's role in U.S. trade policy. 

Several alternative avenues for the promotion of trade integration in Asia have emerged, challenging the past U.S. focus on APEC. The Association of Southeast Asian Nations (ASEAN) is promoting the creation of various forms of an all-Asian free trade association that could exclude the United States. In November 2009, the Obama Administration announced it would to enter into negotiations with the Trans-Pacific Strategic Economic Partnership Agreement (TPP), a free trade agreement between Brunei Darussalam, Chile, New Zealand, and Singapore. 

Critics of APEC have referred to the association as a "talk shop," that has produced few results. However, studies conducted by APEC reveal a substantial drop in members' average tariff rates, the elimination of a number of non-tariff trade barriers, and a major reduction in the transaction costs associated with international trade—all of which is likely attributable at least in part to APEC initiatives. 

Historical trade data is consistent with the premise that APEC has been successful in promoting greater trade within its member economies and with the rest of the world. Both the exports and imports of APEC members have grown faster than global trade since the creation of APEC. However, APEC's greater trade growth may be attributable to other factors than the liberalization of trade and investment policies among its members. 

The 111th Congress may reexamine U.S. policy towards APEC. It has already increased APECrelated funding in FY2009, in part to provide for the preparations for the 2011 APEC meetings to be held in the United States. In addition, there are other actions Congress may choose to take with respect to APEC, depending on its determination of APEC's role in relation to trade promotion initiatives in Asia. Congressional attitudes and actions may also be influenced by the Obama Administration's trade policies in Asia—and the role APEC plays in those policies. 

This report will be updated as circumstances warrant.


Date of Report: February 4, 2010
Number of Pages: 27
Order Number: R41071
Price: $29.95

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