Human Capital
Significant Challenges Confront U.S. Trade Agencies Gao ID: GAO-04-301T December 9, 2003Recent developments in global trade have created human capital challenges for U.S. trade agencies. At least 17 federal agencies, with the Office of the U.S. Trade Representative (USTR) as the lead, negotiate, monitor, or enforce trade agreements and laws. These agencies' strategies for effectively aligning their current and emerging needs in handling international trade functions and their human capital resources are critical to improving agency performance. GAO was asked to summarize its recent studies to illustrate important human capital challenges arising from current trade developments as U.S. trade agencies strive to negotiate, monitor, and enforce existing trade agreements and laws. For this testimony, GAO discussed the challenges that USTR, the Commerce Department, and the Bureau of Customs and Border Protection are facing in light of three recent developments in international trade: (1) the increased importance of security, (2) the ambitious U.S. negotiating agenda, and (3) the shifting global trade environment.
The importance of international trade to the U.S. economy has grown in the last decade, as have the responsibilities of federal agencies involved in implementing international trade functions. For example, the September 11, 2001, terrorist attacks have heightened the need for increased focus on security within the global trade environment. In response, the Bureau of Customs and Border Protection has implemented new programs to improve the security of the global supply chain. These new programs require greater attention to human capital strategies to ensure that they achieve their goals of facilitating trade while preventing terrorist acts. In addition, the administration has continued to pursue multilateral negotiations within the World Trade Organization and with the Free Trade Area of the Americas countries as well as a series of new, bilateral and subregional trade negotiations. The increase in the number of initiatives has strained available human capital, leading to a USTR request for additional staff. Finally, the shifting global trade environment has complicated efforts to monitor and enforce trade agreements. For example, the United States has become the most frequent defendant in World Trade Organization trade dispute proceedings. Furthermore, as the U.S. economy has shifted toward services and high-tech industries, the industry advisory committees that provide trade advice to the U.S. government have required structural realignment to reflect these changes. Also, China's growing influence in international trade has resulted in new challenges to its trading partners. These changing global forces require U.S. trade agencies to continuously ensure that their human capital strategies closely link to the nation's strategic trade functions.
GAO-04-301T, Human Capital: Significant Challenges Confront U.S. Trade Agencies
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Testimony:
Before the Subcommittee on Oversight of Government Management, the
Federal Workforce and the District of Columbia, U.S. Senate:
United States General Accounting Office:
GAO:
For Release on Delivery Expected at 10:00 a.m., EST:
Tuesday, December 9, 2003:
Human Capital:
Significant Challenges Confront U.S. Trade Agencies:
Statement of Loren Yager, Director International Affairs and Trade:
GAO-04-301T:
GAO Highlights:
Highlights of GAO-04-301T, a testimony before the Subcommittee on
Oversight, of Government Management, the Federal Workforce and the
District of Columbia, U.S. Senate
Why GAO Did This Study:
Recent developments in global trade have created human capital
challenges for U.S. trade agencies. At least 17 federal agencies,
with the Office of the U.S. Trade Representative (USTR) as the lead,
negotiate, monitor, or enforce trade agreements and laws. These
agencies‘ strategies for effectively aligning their current and
emerging needs in handling international trade functions and their
human capital resources are critical to improving agency performance.
GAO was asked to summarize its recent studies to illustrate important
human capital challenges arising from current trade developments as
U.S. trade agencies strive to negotiate, monitor, and enforce existing
trade agreements and laws. For this testimony, GAO discussed the
challenges that USTR, the Commerce Department, and the Bureau of
Customs and Border Protection are facing in light of three recent
developments in international trade: (1) the increased importance of
security, (2) the ambitious U.S. negotiating agenda, and (3) the
shifting global trade environment.
What GAO Found:
The importance of international trade to the U.S. economy has grown in
the last decade, as have the responsibilities of federal agencies
involved in implementing international trade functions. For example,
the September 11, 2001, terrorist attacks have heightened the need for
increased focus on security within the global trade environment. In
response, the Bureau of Customs and Border Protection has implemented
new programs to improve the security of the global supply chain. These
new programs require greater attention to human capital strategies to
ensure that they achieve their goals of facilitating trade while
preventing terrorist acts.
In addition, the administration has continued to pursue multilateral
negotiations within the World Trade Organization and with the Free
Trade Area of the Americas countries as well as a series of new,
bilateral and subregional trade negotiations. The increase in the
number of initiatives has strained available human capital, leading to
a USTR request for additional staff.
Finally, the shifting global trade environment has complicated efforts
to monitor and enforce trade agreements. For example, the United
States has become the most frequent defendant in World Trade
Organization trade dispute proceedings. Furthermore, as the U.S.
economy has shifted toward services and high-tech industries, the
industry advisory committees that provide trade advice to the U.S.
government have required structural realignment to reflect these
changes. Also, China‘s growing influence in international trade has
resulted in new challenges to its trading partners. These changing
global forces require U.S. trade agencies to continuously ensure that
their human capital strategies closely link to the nation‘s strategic
trade functions.
www.gao.gov/cgi-bin/getrpt?GAO-04-301T.
To view the full product, including the scope and methodology, click
on the link above. For more information, contact Loren Yager at (202)
512-4347 or YagerL@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss the implications of recent
trade developments on the human capital strategies of major U.S. trade
agencies that negotiate, monitor, and enforce trade agreements and
laws. International trade is an increasingly important part of the U.S.
and world economy: In 2001, world exports represented about one quarter
of the world's gross domestic product (GDP), partly as a result of the
succession of trade agreements that have reduced trade barriers.
However, this dynamic trade environment and the growing number of trade
agreements have also resulted in a significant burden on U.S. trade
agencies--and their human capital--as they strive to monitor and
enforce existing trade agreements and laws while simultaneously
negotiating a number of new agreements.
As we have reported in numerous studies and testimonies before this
Subcommittee and other congressional Committees, effective alignment
between the current and emerging needs and U.S. federal agencies' human
capital strategies is critical to improved agency performance. For this
testimony, you asked us to summarize some of our recent studies to
illustrate important human capital challenges confronting trade
agencies that have arisen from recent trade developments. Specifically,
today I will focus on the human capital challenges that trade agencies
face in light of three recent trade developments:
* the increased importance of security,
* the ambitious negotiating agenda of the United States at the current
time, and:
* the shifting global trade environment.
While numerous agencies have trade responsibilities, we are focusing
today on the Office of the U.S. Trade Representative (USTR) and the
U.S. Department of Commerce because of their key roles and
responsibilities for implementing trade functions, that is,
negotiating, monitoring, and enforcing trade agreements and laws. In
addition, we also discuss the Department of Homeland Security's Bureau
of Customs and Border Protection (CBP), because it has primary
responsibility for ensuring the security of trade in the post-9/11
environment. In performing this work, we have drawn on a number of our
recent reports, some of which directly addressed human capital issues,
and have also interviewed officials from relevant trade agencies.
Summary:
The terrorist attacks of September 11, 2001, have heightened the need
for increased security within the global trade environment. Combating
terrorism became the number one priority for CBP and has significant
implications for its human capital strategies and trade functions. Our
recent work indicates that it is too soon to tell how the increased
importance of security will affect the implementation of CBP's trade-
related activities over the long run; however, some short-term shifts
in human capital from trade to nontrade functions have occurred. Also
as part of its focus on terrorism, CBP has implemented new programs to
screen high-risk containers for weapons of mass destruction at overseas
ports and to improve security in the private sector's global supply
chain. Our recent work in this area found a need to link human capital
strategies with the goals of facilitating trade and combating terrorism
to establish accountability and ensure effective performance.
In recent years, the United States has been pursuing a broad trade
policy agenda whose cumulative impact has tested the limits of the
government's negotiating capacity. The administration has continued an
ambitious negotiating agenda relating to the ongoing World Trade
Organization (WTO)[Footnote 1] and Free Trade Area of the Americas
(FTAA) multilateral negotiations, plus a series of new, bilateral and
subregional trade negotiations following the passage of the Trade Act
of 2002.[Footnote 2] Our work in this area shows that pursuing such a
broad negotiating agenda has strained available resources, leading to
requests for additional staff in recent years.
Finally, the shifting global trade environment complicates efforts to
monitor and enforce existing agreements, placing a substantial burden
on the human capital resources of U.S. trade agencies. Based on our
recent work, the United States has become the most frequent defendant
in WTO trade dispute resolution proceedings. In addition, as the U.S.
economy has shifted toward services and high-technology industries, our
recent work shows that the industry committee structure that provides
advice to U.S. trade agencies has required realignment to reflect these
changes. Finally, a new set of challenges has also evolved in response
to China's growing influence in international trade. Our work shows
that these forces have stretched the human capital resources of U.S.
trade agencies. Although the government has taken steps to address some
of these challenges, these and other changes in the global trade
environment require that the trade agencies constantly monitor and
update their human capital strategies to ensure that they are closely
linked to the strategic goals of the agencies.
Background:
U.S. exports as a share of U.S. gross domestic product have grown
significantly, increasing from less than 6 percent in 1970 to a peak of
more than 11 percent in 1997, as shown in figure 1. The rise in U.S.
imports was even greater, increasing from about 5 percent in 1970 to
nearly 15 percent of GDP in 2000, according to Commerce Department
statistics. Although the share of U.S. exports and imports has declined
from those peak levels, they still represent a substantial part of our
GDP--at 9.3 percent, and 13.3 percent, respectively, in 2002. The
U.S.'s principal trading partners include Canada, Mexico, Japan, and
China.
Figure 1: U.S. Exports and Imports as a Share of GDP, 1970-2002:
[See PDF for image]
[End of figure]
At least 17 federal agencies, led by USTR, are involved in developing
and implementing U.S. trade policy. USTR's role includes developing and
coordinating U.S. international trade policy and leading or directing
negotiations with other countries on trade matters. It also has primary
statutory responsibility for monitoring and enforcing U.S. trade
agreements. The Department of Commerce has a relatively broad role with
respect to trade agreement activities, with three units in the
International Trade Administration performing the key trade functions:
The Import Administration helps enforce U.S. trade laws; Market Access
and Compliance is responsible for ensuring that other nations live up
to their trade agreements; and Trade Development focuses on advocacy
for U.S. companies, export promotion services, support for trade
negotiations, and market analysis. Trade functions at the CBP are
primarily directed toward enforcing U.S. import and export laws and
facilitating legitimate trade as well as collecting duties, fees, and
other assessments (more than $23 billion in fiscal year 2002). Other
agencies also play important roles, such as the departments of
Agriculture and State, which have relatively broad roles with respect
to trade agreement activities. The departments of the Treasury and
Labor have more specialized roles, such as advising on financial
services or labor and workers' rights issues. Federal trade policy
development and monitoring and enforcement efforts are coordinated
through an interagency mechanism comprising several management-and
staff-level committees and subcommittees.
The number of authorized full-time staff at USTR, Commerce's Import
Administration, and Commerce's Market Access and Compliance division
has increased in recent years (see fig. 2). However, actual staff
levels are still in the process of catching up with authorized levels
in Commerce and USTR offices. USTR has requested additional staff
resources for 2004.
Figure 2: Authorized and Actual Full-time Equivalent (FTE) Staff Years
at USTR and Commerce's Key Trade Offices, 1995-2004:
[See PDF for image]
Note: The authorized level shown for 2004 is based on the
administration's budget request for fiscal year 2004.
[End of figure]
As of January 23, 2003, the CBP had 3,269 positions dedicated to
performing trade-specific functions: 2,263 specialists, auditors, and
attorneys and 1,006 associated positions[Footnote 3] carry out trade
activities such as auditing trade compliance; processing entry
documents; collecting duties, taxes, and fees; assessing and collecting
fines and penalites for noncompliance; and advising on tariff
classification issues. CBP is expected to maintain these staff levels,
as the Homeland Security Act of 2002 stipulates that the Secretary of
Homeland Security may not reduce the staffing levels attributable to
such functions on or after the effective date of the act.[Footnote 4]
In addition, more than 18,000 CBP inspectors perform trade and nontrade
functions depending on the nature of their assignment. For example,
inspectors may screen and inspect cargo for illegal transshipment of
textiles, counterfeit cigarettes, illegal drugs, and other contraband;
and enforce compliance with U.S. trade and immigration laws.
The Increased Importance of Security Has Significant Implications for
Human Capital Strategies and Trade Functions:
After September 11, 2001, combating terrorism became the priority
mission for the U.S. Customs Service and remained so when the Customs
Service was transferred to the Department of Homeland Security and
incorporated into CBP. While it is too soon to tell how the increased
importance of security will affect the implementation of CBP's trade-
related activities in the long run, some short-term shifts in human
capital from trade to nontrade functions have occurred. As part of its
focus on terrorism, CBP has implemented new programs to screen high-
risk containers for weapons of mass destruction at overseas ports and
to improve security in the private sector's global supply chain. CBP
has made progress in getting these programs up and running but has not
devised systematic human capital plans to meet long-term staffing needs
for both programs. The increased importance of security requires human
capital strategies that link with the goals of combating terrorism and
facilitating trade to establish accountability and ensure effective
performance.
Combating Terrorism Becomes a Priority, Shifting Human Capital from
Trade Activities:
The historical mission of the U.S. Customs Service has been to collect
customs revenues and ensure compliance with trade laws, but this
mission has shifted over time. For example, in the 1970s Customs
expanded its functions to include the interdiction of narcotics
entering the United States. Since September 11, 2001, combating
terrorism has become Customs' priority mission, culminating in the
creation of CBP on March 1, 2003. On that date, the U.S. Customs
Service was transferred from the Department of the Treasury to the
Department of Homeland Security as part of the Homeland Security Act of
2002.[Footnote 5] Figure 3 illustrates the range of trade and nontrade
activities that CBP performs.
Figure 3: Range of CBP Activities:
[See PDF for image]
[End of figure]
While two of the nine key mission-related offices within CBP[Footnote
6] are primarily dedicated to trade, most offices and most of CBP's
more than 40,000 employees perform a range of activities that support
both trade and nontrade goals. Moreover, about a fifth of the 3,269 CBP
positions dedicated to performing trade activities are located in the
trade-specific offices, but most are located in offices that support
both goals. Within this kind of organization, activities performed by
persons in the offices that support both goals could shift from trade
to nontrade activities when security threat levels are higher without
actually seeing a reduction in the number of staff dedicated to trade.
Moreover, the activities of the 18,000 plus CBP inspectors who perform
trade and nontrade functions could shift to focus on combating
terrorism when security concerns are heightened.
Several examples illustrate the types of shifts from trade to security
activities that have occurred.
* After September 11, 2001, CBP temporarily detailed approximately 380
inspectors to international airports around the country to strengthen
security measures--reducing the number of inspectors available to work
on trade activities.
* During the first 2 quarters of fiscal year 2002, CBP audits on export
compliance were not conducted so that 150 inspectors could be
temporarily redeployed to land ports along the northern border to
strengthen security measures.
* During fiscal year 2002, the Compliance Measurement program, which
determines compliance with U.S. trade laws, regulations, and
agreements, was temporarily discontinued for 11 months because import
specialists and inspectors were redirected to border security
activities. Due to the limited compliance sampling, CBP was unable to
calculate an overall trade compliance rate for fiscal year 2002.
Moreover, compliance measurement helps ensure the quality of trade
data, and unreliable trade data increase the risk that critical threats
will not be identified.
* In fiscal year 2003, 3 of 14 scheduled textile production
verifications were canceled when the national security alert level
increased, so that the verification teams could remain at their ports
and field offices to focus on security-related activities. The textile
production verification teams, comprised of CBP import specialists and
special agents, examine the production facilities in nations where
there is potential for illegal transshipment of textiles.
While the Homeland Security Act stipulates that the Secretary of the
Department of Homeland Security may not reduce the staffing levels
attributable to specific trade-related activities, our examination
found that measuring inputs such as the number of staff assigned to
trade-related positions does not adequately capture possible shifts
away from trade activities--as the number of people assigned to trade-
related positions may remain the same, but the focus of their work may
shift to nontrade duties. In addition, those positions that were not
included in the legislation, such as inspectors, but conduct trade and
nontrade activities, may increasingly shift their focus away from trade
and concentrate on homeland security activities. Measuring changes in
CBP's outputs and outcomes will be important in assessing how the
increased emphasis on combating terrorism and Customs' transfer to the
Department of Homeland Security have affected trade activities and
whether human capital strategies need to be readjusted accordingly.
New CBP Antiterrorism Programs Paid Little Attention to Human Capital
Planning:
Responding to heightened concern about national security since 9/11,
CBP assumed the lead role in improving ocean container security and
reducing the vulnerabilities associated with the overseas supply chain.
In November 2001, CBP initiated the Customs-Trade Partnership Against
Terrorism program, where companies agree to voluntarily improve the
security of their supply chains in return for reducing the likelihood
that their containers will be inspected for weapons of mass
destruction. In January 2002, CBP also initiated the Container Security
Initiative whereby CBP officials are placed at strategic foreign
seaports to screen cargo manifest data for ocean containers to identify
those that may hold weapons of mass destruction. We reported in July
2003[Footnote 7] that CBP had not taken adequate steps to incorporate
human capital planning, develop performance measures, or plan
strategically- - factors crucial to the programs' long-term success and
accountability.
Initially, 10 officials were assigned to roll out the Customs-Trade
Partnership Against Terrorism. Under the program, companies enter into
partnership agreements with CBP and agree to self-assess their supply
chain security practices and document it in a security profile. These
10 officials provide guidance to companies on how to prepare their
security profiles as well as review the completed security profiles and
prepare feedback letters. As of May 2003, more than 3,300 agreements
had been signed, 1,837 security profiles reviewed, and 1,105 feedback
letters prepared. However, early on CBP realized that it did not have a
cadre of staff with the skills necessary to conduct site visits to
observe supply chain practices and make substantive recommendations for
improving security. In October 2002, CBP began the process of
developing a new position, called "supply chain specialists," to review
company security profiles, visit companies to validate information
contained in the security profiles, and develop action plans that
identify supply chain vulnerabilities and the corrective steps
companies need to take. CBP was authorized to hire more than 150 supply
chain specialists and expected to hire 40 supply chain specialists in
fiscal year 2003. As of October 2003, CBP has visited more than 130
companies to verify their supply chain security practices. While CBP
officials acknowledged the importance of human capital planning, they
said they had not been able to devote resources to developing a human
capital plan that outlines how the program will increase its staff 15-
fold and implement program elements that require specialized training.
The Container Security Initiative seeks to deploy 120-150 inspectors,
intelligence research analysts, and agents to 30 overseas ports by the
end of fiscal year 2004. CBP eventually plans to expand to 40 to 45
ports. Deploying four-to-five person CSI teams to foreign ports will be
a complex, multiyear task. CBP seeks candidates with specialized skills
needed to review cargo manifest data and identify suspicious containers
for inspection as well as diplomatic and language skills to interact
with their foreign counterparts. While CBP officials told us that they
did not experience significant difficulties in finding qualified staff
to fill their short-term human capital needs from among the pool of
existing CBP employees, CBP had only 12 ports up and running under the
Container Security Initiative at that time (May 2003). In addition, the
teams were on 120-day temporary duty assignments; however, CBP plans to
create 2-to 3-year assignments to replace the 120-day temporary duty
assignments. In spite of the potential challenges CBP could face, CSI
officials had not devised a systematic human capital plan.
To help ensure that the Container Security Initiative and the Customs-
Trade Partnership Against Terrorism achieve their objectives as they
transition from smaller start-up programs to larger programs with an
increasingly greater share of the Department of Homeland Security's
budget, we recommended in July 2003 that CBP develop human capital
plans that clearly describe how these programs will recruit, train, and
retain staff to meet their growing demands as they expand to other
countries and implement new program elements. Human capital plans are
particularly important given the unique operating environments and
personnel requirements of the two programs. According to CBP officials,
the professional and personal relationships that supply chain
specialists and the Container Security Initiative teams build with
their clients over time will be critical to the long-term success of
both programs. For example, the success of the Customs-Trade
Partnership Against Terrorism will depend, in large part, on the supply
chain specialists' ability to persuade companies to voluntarily adopt
their recommendations. Similarly, a key benefit of the Container
Security Initiative is the ability of CBP officials to work with
foreign counterparts to obtain sensitive information that enhances
their targeting of high-risk containers at foreign ports. If CBP fails
to establish these good working relationships, the added value of
screening manifest data at foreign ports could be called into question.
Ambitious Set of Ongoing Negotiations Creates Demands for Additional
Staff:
In recent years, the United States has been pursuing a broad trade
policy agenda whose cumulative impact has tested the limits of the
government's negotiating capacity. This agenda includes undertaking
significant negotiating efforts in multilateral, regional, and
bilateral arenas. The administration has characterized this effort as a
strategy of "competitive liberalization." First, the United States is
actively involved in the challenging WTO round of negotiations launched
in Doha, Qatar, in 2001. Second, the United States is also a co-chair
in ongoing negotiations to create a Free Trade Area of the Americas.
Finally, with the passage of trade promotion authority in
2002,[Footnote 8] the United States has also launched a series of
bilateral and subregional free trade agreement negotiations. The
increase in the number of these negotiations at the same time that
major global and regional trade initiatives are under way has strained
available resources.
WTO Negotiations Had Ambitious Schedule for September 2003 Cancun
Ministerial:
The United States is committed to completing a new round of WTO
negotiations. In November 2001, the WTO, with strong backing from the
United States, launched a new set of multilateral negotiations at its
ministerial conference in Doha. As we reported in September 2002, the
ministerial conference laid out an ambitious agenda for a broad set of
new multilateral trade negotiations as described in the Doha
Ministerial Declaration.[Footnote 9] The Doha mandate calls for the
continuation of negotiations to liberalize trade in agriculture and
services. In addition, it provides for new talks on market access for
nonagricultural products and negotiations on trade and the environment,
trade-related aspects of intellectual property rights, and a number of
other issues. The breadth of the negotiations means that USTR will need
to call on staff from a number of trade agencies to assist USTR
throughout the process. USTR has also asked for additional staff to
address the increased workload.
Despite recent problems, WTO negotiations are likely to continue to
command staff attention. Doha Round WTO negotiations are currently on
hold following a breakdown at the September 2003 Ministerial Meeting in
Cancun, Mexico, throwing the 2005 deadline for completion of the
negotiations in doubt. After the ministerial, WTO officials initially
canceled all special negotiating sessions and later called for a senior
officials' meeting by December 15, 2003. Despite these developments,
however, USTR officials do not anticipate any decrease in staff
workload on WTO issues because of the breadth of their ongoing WTO
responsibilities and their efforts to restart the negotiations.
Major U.S. Role in Final Phase of FTAA Talks Expands USTR's
Negotiations Workload:
We reported in April 2003[Footnote 10] that, as the co-chairman, with
Brazil, of the FTAA negotiations, USTR has faced a heavy expansion of
its workload. Demands on USTR resources increased significantly in fall
2003, when USTR's responsibilities as co-chair of the negotiations and
host of the ministerial intensified due to preparations for the
November 2003 Miami FTAA ministerial. The co-chair's formal tasks
include:
* coordinating with Brazil on a daily basis;
* providing guidance and management coordination to the FTAA
Administrative Secretariat;
* providing guidance to the negotiating groups and committees; and:
* co-chairing key FTAA committees.
In terms of resources, the U.S. team negotiating the FTAA--though
perceived as highly capable--is small and stretched thin. Like past
chairs, USTR has dedicated some staff specifically to the co-chair
function, while other USTR staff work on advancing the U.S. position in
the negotiations. In addition, USTR made arrangements with other
agencies for temporary assistance. For example, Commerce provided a
detailee who worked full time in Miami beginning in July, and State
provided both foreign service officers and conference specialists to
help host and conduct the ministerial.
U.S. Pursuing Simultaneous Negotiations on Numerous FTAs:
Bilateral negotiations are also applying pressure to trade agencies'
human capital resources. In addition to the WTO and the FTAA
negotiations, USTR has notified Congress of its intent to pursue free
trade agreements (FTA) with a number of countries and has started
negotiations toward this end. The passage of trade promotion authority
in 2002 gave U.S. negotiators the opportunity to pursue trade
agreements with other countries under a streamlined approval process in
Congress. The administration sees FTAs--some with a single country
(i.e., bilateral) and others with groups of countries (i.e.,
subregional)--as opportunities to promote the broader U.S. trade agenda
by serving as models and breaking new negotiating ground.
The United States is now negotiating four FTAs and intends to pursue
others soon. In late 2002, it began negotiating the Central American
Free Trade Agreement with Costa Rica, El Salvador, Guatemala, Honduras,
and Nicaragua; the Southern Africa Customs Union Free Trade Agreement
with South Africa, Botswana, Lesotho, Namibia, and Swaziland; and FTAs
with Morocco and Australia. In mid-2003, the administration also
announced that it plans to negotiate FTAs with the Dominican Republic
and Bahrain and in mid-November announced plans for an FTA with Panama.
Thailand and Sri Lanka are also being considered as FTA partners. With
the breakdown of WTO negotiations, the U.S. Trade Representative has
stated that the administration will focus on FTAs with willing partners
to continue making progress in trade liberalization.
USTR officials acknowledge that human capital impacts are associated
with conducting these FTAs. Each agreement involves a variety of
different subjects, and negotiations on most of these agreements are
complex. In particular, staffing constraints affect the timing of new
negotiations, because staff with regional responsibilities are limited
by the extent to which they can support additional negotiations. In
addition, completed FTAs will require additional work to monitor
compliance with the terms of the agreement.
Pursuing an ambitious set of negotiations on an international,
regional, and bilateral basis is having a cumulative impact on the
human capital capacity of agencies that conduct trade negotiations.
Since USTR's staff size of 199 is relatively small--having been set up
to coordinate policy among and draw expertise from executive branch
agencies--it relies on the departments of State, Commerce, Agriculture,
the Treasury, and others to provide assistance and additional issue
area expertise. However, USTR officials told us that their staff are
already responsible for supporting multiple negotiations. Although
these officials stated that USTR has taken steps to work more
efficiently with other agencies, they have nevertheless requested
additional resources, as shown in figure 2, in order to face the
anticipated negotiations workload. For example, a recent USTR budget
request noted that current staff would not be able to handle the
combination of WTO, FTAA, and FTA responsibilities required in the
areas of services and investment.
Shifting Global Forces Complicate Monitoring and Enforcement Efforts
and Place Substantial Demands on Human Capital Resources:
Shifting global forces have complicated trade agreement monitoring and
enforcement efforts, thus posing human capital challenges for U.S.
trade agencies. For example, we recently reported that the United
States has become the most frequent defendant in WTO trade dispute
resolution proceedings, particularly in the trade remedy area. As a
result, U.S. agencies have had to devote substantial staff resources to
handle these cases, and USTR has requested additional staff to address
the upward trend in dispute settlement cases. We also reported that the
U.S. economy has shifted toward services and high-technology
industries, while the industry committee structure that provides advice
to U.S. trade agencies has been heavily weighted toward the agriculture
and manufacturing sectors. Changing the committee structure to reflect
the current economy and keeping its membership current has required
U.S. trade agencies to devote staff resources to this effort. Finally,
we reported that China's rapid expansion in the world economy presents
U.S. trade agencies with significant human capital challenges as they
strive to monitor and enforce compliance with trade agreements with
China. Although the U.S. government has taken steps to address some of
these new challenges, questions remain about the alignment of human
capital with the rapidly growing set of responsibilities we discussed
in our reports. These three examples demonstrate the kinds of shifts
that occur in the trade arena and indicate the impacts that these
changes can have on human capital. In each of these cases, the shifting
global forces require the United States to respond, and an effective
response requires a clear link between the trade agencies' human
capital strategies and the goals of the agencies in that changing
environment.
United States Is Most Frequent Defendant in WTO Dispute Settlement
Activity, Requiring Substantial Human Capital Resources:
Shifting global forces in the trade arena can be seen in recent trends
in the WTO, the principal organization that regulates international
trade, as members act to monitor and enforce trade agreements. For
example, the United States has become by far the most frequent
defendant in WTO dispute settlement cases.[Footnote 11] Many WTO
disputes in recent years have concerned its members' use of trade
remedy measures whereby members impose duties or import restrictions
after determining that a domestic industry has been injured or
threatened with injury by imports.[Footnote 12] As shown in figure 4,
the United States was a defendant in 30 of the 64 trade remedy cases
brought from 1995 through 2002, with more than half of those cases
filed since January 2000.[Footnote 13] The next most frequent
defendants were Argentina, which had six cases, and the European Union,
a defendant in five cases. On the other hand, the United States was
less active than other WTO members in filing trade remedy cases. As
figure 4 shows, the European Union was the most frequent complainant in
the 64 trade remedy cases, and six WTO members filed more complaints
than the United States did between 1995 and 2002.
Figure 4: Most Frequent Complainants and Defendants in WTO Trade Remedy
Cases, 1995-2002:
[See PDF for image]
[End of figure]
U.S. officials stated that some WTO trade remedy rulings have been
extremely difficult to implement. For instance, some rulings have
placed a greater burden on domestic agencies to establish a clearer
link between increased imports and serious injury to domestic industry.
As a result, officials said they would now have to expend more
resources in conducting such investigations. In addition, U.S.
officials said that the rulings have required U.S. agencies to provide
more detailed explanations of their analyses and procedures for
applying several methodologies used in trade remedy investigations.
As a result of the increased WTO dispute settlement activity, U.S.
trade agencies have had to devote substantial staff resources to handle
these cases. According to Commerce officials, about one-half of the
Import Administration's 36 attorneys are significantly engaged in
handling WTO litigation. They said Commerce has sufficient staff to
handle the current workload unless the number of dispute settlement
cases increases. According to USTR, the number of WTO cases its lawyers
have handled has increased dramatically--from 11 in 1995, to 53 in
1997, to 69 in 1999, and to 91 in 2002. USTR expects this trend will
continue, both because more and more WTO members are making active use
of the dispute settlement system but also because there are more WTO
members. Although the number of USTR General Counsel staff attorneys
has roughly doubled since 1995 (with 13 new positions added in fiscal
year 2001), the lawyers that were added are more than fully occupied
with the current workload, USTR said. As a result, USTR has requested
another monitoring and enforcement attorney for fiscal year 2004 to
handle the increasing dispute settlement work.
WTO trade remedy rulings and the broader set of proceedings within the
WTO are an important component of the international set of obligations
and agreements to which the United States is a party. Our review found
that the United States has become a focus of complaints in trade remedy
cases, and U.S. agencies stated that some of the rulings on these cases
have important implications for the future, including potential
workforce implications. This situation requires trade agencies to
maintain human capital strategies that anticipate and respond quickly
to any changes. Doing so would allow them to allocate staff accordingly
to keep the trade functions current and relevant.
Changing Structure of the U.S. Economy Requires Trade Agencies to
Modify the Industry Advisory Committee System:
The changing structure of the U.S. economy has required a strategic
realignment of some trade functions. For example, the trade policy
advisory committee system[Footnote 14] performs an important function
through which private sector committee members are able to provide
input to trade agencies to help them negotiate, monitor, and enforce
trade agreements; however, our September 2002 report[Footnote 15] found
that the structure and composition of the trade advisory committee
system had not been fully updated to reflect changes in the U.S.
economy and U.S. trade policy.
Although the U.S. economy had shifted toward services and high-
technology industries since the 1970s, their representation on the
trade advisory committees had not kept pace with their growing
importance to U.S. output and trade. For example, certain manufacturing
sectors, such as electronics, had fewer members than their sizable
trade would have indicated. In other cases, U.S. negotiators reported
that some key issues in negotiations, such as investment, were not
adequately covered within the trade advisory committee system. In
addition, committee rosters were only about 50 percent of their
authorized levels, and some large companies did not participate,
limiting the availability of advice for negotiators from certain
committees.
Our 2002 report also found that the resources USTR and the other trade
agencies devoted to managing the trade advisory committee system did
not match the tasks that needed to be accomplished to keep the system
running reliably and well. For example, USTR officials told us that the
current staffing levels in its responsible office--three positions with
multiple responsibilities--did not allow them time to proactively
manage committee operations. The head of the office said that simply
restarting all the lapsed committees and keeping the rest of the system
operating were occupying much of the time she could devote to the
system. Commerce, which co-administers many of the trade advisory
committees, faced similar challenges. As discussed in our September
2002 report, Commerce officials said they had to focus their limited
staff--an office of three persons--on rechartering the committees and
appointment processes, which did not allow them to meet their
responsibilities to attend all the committee meetings.
We recommended that USTR work with Commerce and several other agencies
to update the trade advisory system to make it more relevant to the
U.S. economy and trade policy needs as well as to better match agency
resources to the tasks associated with managing the system. According
to recent information that agencies provided, their staff have planned
and, in some cases, already taken a number of actions in response to
our 2002 recommendations that they expect will increase efficiencies
and reduce the workload. For example, Commerce and USTR have developed
a plan for restructuring the industry advisory committees that
officials believe better reflects the U.S. economy. Under the plan,
some new committees are to be established, while the overall number of
committees is to be reduced. The latter action is expected to reduce
the administrative workload for Commerce's staff, enabling them to
focus more on substantive matters. The plan also calls for quarterly
plenary meetings that will be open to all trade advisors. According to
Commerce officials, bringing all advisors together at the same time
will facilitate a higher level of representation of U.S. trade
negotiators at the meetings and that, as a result, trade advisors will
be better informed about ongoing negotiations. In turn, the officials
said, trade advisors should be better prepared to deliberate on issues
of interest to them and thus better able to provide advice to U.S.
trade negotiators.[Footnote 16]
In addition, the agencies revised their process for clearing proposed
new members, thus reducing the amount of time it takes for clearance.
Moreover, a secure Web site has been established that allows members to
review the texts of draft trade negotiating documents. In addition, the
Assistant U.S. Trade Representative for Public Liaison now holds a
monthly teleconference with the chairmen of all committees. During this
call, USTR provides feedback to committees on previously raised areas
of concern or recommendations, discusses USTR's long-term negotiating
calendar to highlight upcoming issues, and is open to discussion of
general issues or concerns. According to Commerce and USTR officials,
they have taken these actions without increasing the size of their
authorized staffs. However, it was noted that Commerce staff, who did
much of the implementing work on this issue, sometimes put in long
hours in completing their tasks. In addition, in the case of Commerce,
a position that had been vacant was filled, thus increasing the actual
number of staff.
While administering the trade advisory committee system is only one of
many functions that trade agencies perform, the system does provide an
important forum for candid discussion of trade negotiating topics with
a wide range of private sector experts. Our review found that the
system has not realized its potential, however, and that lack of
administrative support was one of the reasons for this situation. While
the agencies have taken actions to improve the trade advisory committee
structure and its management, these kinds of improvements illustrate
how U.S. trade agencies need to utilize human capital strategies that
anticipate and respond to shifts in global market forces. Such an
effort would allow the agencies to allocate staff accordingly to keep
trade functions current and relevant.
Growing Importance of China Creates Range of Human Capital Challenges
for Trade Agencies:
China's rapid expansion in the world economy presents U.S. trade
agencies with significant human capital challenges as they strive to
monitor and enforce compliance with trade agreements. In 2002, China
was the United State's fourth largest trading partner. The rapid growth
of China's exports to the United States and the continuing role of the
government in China's economy create a significant challenge for U.S.
agencies and the Congress to ensure that U.S. businesses are treated
fairly. Since China's entry into the WTO on December 11, 2001, U.S.
agencies have taken significant actions to monitor and enforce an
extensive and complex set of WTO commitments. Among these actions are
increasing staff resources, establishing an interagency group to focus
on China trade issues, and considering organizational changes to better
concentrate analytical staff resources. However, early experiences with
monitoring China's compliance with numerous and complex commitments and
with WTO and U.S. government mechanisms for enforcing commitments
illustrate just how difficult and resource intensive--particularly in
terms of human capital--this task will be.
Size and Scope of China's Impact on U.S. Markets Are Considerable:
U.S. trade with China has been characterized by a rapidly growing
deficit, with a significant impact on a number of industries in the
United States. As figure 5 shows, U.S. imports from China have grown
rapidly since 1989, while U.S. exports to China have also expanded, but
at a much slower rate. The growing trade deficit has been addressed at
several congressional hearings and may require greater attention from
Commerce, USTR, and other trade agencies.
Figure 5: U.S. Exports, Imports, and Balance of Merchandise Trade with
China, 1989-2002:
[See PDF for image]
[End of figure]
In 2002, imports from China totaled nearly $125 billion, accounting for
nearly 11 percent of total U.S. imports and making China the third
largest supplier of U.S. imports, after Canada and Mexico,
respectively. The top five U.S. imports from China are shown in table 2
(see the app.). China was the seventh largest market for U.S. exports
in 2002, and U.S. exports totaled about $21 billion or 3.2 percent of
total U.S. exports to the world (see table 3 in the appendix).
Continuing Role of Chinese Government in the Economy Creates Challenges
for Monitoring and Enforcement:
China has made important progress during the past 25 years in opening
its market to foreign goods and services as well as foreign investment,
according to a USTR report.[Footnote 17] Economic and financial reforms
have introduced market forces into China, and privileges accorded
state-owned firms are gradually being removed. However, the transition
from a state-controlled economy to a market-driven one is far from
complete. According to USTR, reforms have been particularly difficult
in sectors that traditionally relied upon substantial state subsidies
as the central government continues to protect noncompetitive or
emerging sectors of the economy from foreign competition. Moreover,
USTR said, provincial and lower-level governments have strongly
resisted reforms that would eliminate sheltered markets for local
enterprises or reduce jobs and revenues in their jurisdictions,
inhibiting the central government's ability to implement trade
reforms.[Footnote 18] During 2003, the Commerce Department held more
than 20 roundtable discussions with U.S. manufacturers, both large and
small, across the United States and heard similar complaints. According
to Commerce's under secretary for the International Trade
Administration, no foreign country raised more attention as a source of
concern than China. Manufacturers complained about rampant piracy of
intellectual property, forced transfer of technology from firms
launching joint ventures in China, a broad range of trade barriers, and
capital markets that are largely insulated from free-market
pressures.[Footnote 19]
Another issue concerns the Chinese government's decade-long practice of
pegging the Chinese yuan to the dollar as a means, according to Chinese
officials, of fostering economic stability, the absence of which could
hurt its export industries and political stability. In order to
maintain this fixed exchange rate, the government has had to intervene
in the foreign exchange market and, according to Treasury officials,
recently intervened very heavily to prevent the yuan from appreciating
against the dollar. Considerable debate has occurred among experts and
observers about whether China's intervention to maintain a lower-valued
yuan is having a negative effect on U.S. manufacturers. This issue has
been the subject of numerous congressional hearings with administration
witnesses and was also a topic of discussion between Presidents Bush
and Hu Jintao at the October 2003 Asia Pacific Economic Cooperation
Economic Leaders' Meeting and during the Secretary of the Treasury's
September 2003 trip to China. Also in September, the Group of
Seven[Footnote 20] finance ministers issued a statement favoring more
flexibility in exchange rates for large economies. In an October 30,
2003, report to the Congress, the Treasury Department concluded that no
major trading partner of the United States was manipulating the rate of
exchange between its currency and the U.S. dollar for the purposes of
preventing effective balance of payments adjustments or gaining unfair
competitive advantage in international trade. However, the report also
found that China's fixed exchange rate was not appropriate for a major
economy like China and should be changed. According to the Treasury,
the Chinese government has indicated it will move to a flexible
exchange rate regime but believes taking immediate action would harm
its banking system and overall economy.
The growing importance of the Chinese economy for the United States has
been a particular focus of attention from U.S. officials due to the
implications for U.S. firms and for compliance with trade agreements.
However, these issues require increasing attention from U.S. agency
personnel. Moreover, as in the case of the debate surrounding the
Chinese currency, these issues require appropriate expertise from U.S.
trade and economic agencies, and a resolution of these matters may
ultimately require a significant investment of time from these
officials.
China's Accession to the WTO Strains Agencies' Monitoring Resources:
As we reported in October 2002,[Footnote 21] China's WTO commitments
span eight broad areas and require both general pledges and specific
actions. We identified nearly 700 individual commitments on how China
is expected to reform its trade regime, as well as commitments that
liberalize market access for more than 7,000 goods and nine broad
service sectors in industries important to the United States, such as
automobiles and information technology. Owing to the breadth and
complexity of China's commitments, China's accession to the WTO has led
to increased monitoring and enforcement responsibilities for the U.S.
government.
An illustration of the human capital difficulties involved in
monitoring and enforcing China's commitments relates to U.S. government
efforts to establish an interagency group--the China WTO Compliance
Subcommittee--whose mandate is to monitor China and the extent to which
it is complying with its WTO commitments. Almost 40 officials,
representing 14 departments and executive offices, participate in this
subcommittee. The subcommittee was very active in 2002, meeting 11
times. In these meetings, officials evaluated and prioritized current
monitoring activities, reviewed the steps that China has taken to
implement its commitments, and decided on appropriate responses. Also,
the subcommittee held a public hearing on September 18, 2002, and USTR
issued its first annual report to Congress on China's WTO compliance on
December 11, 2002, as required by law.
Still, it took some time for the subcommittee to get up to full speed.
For example, the various participants had to work out their respective
roles and responsibilities. USTR officials sought to delineate tasks
related to carrying out their monitoring action plan in China;
Washington, D.C.; and Geneva (the WTO's headquarters), including
expectations for information gathering, reporting, and setting initial
priorities. Finally, USTR officials undertook several activities at the
beginning of the year to educate themselves on China's WTO obligations.
This was important, because monitoring these obligations entailed new
or expanded responsibilities for officials in the field, and many of
the Washington-based officials were relatively new to their current
jobs. For example, many of the USTR officials who had actively
participated in the U.S. negotiations with China that resulted in those
obligations changed jobs and/or left the government soon after China
became a WTO member in 2001.
U.S. Agencies Have Added Staff and Are Considering Further
Organizational Changes:
USTR, Commerce, and other agencies have requested and received
additional resources to carry out the added responsibilities arising
from China's accession to the WTO. For example, full-time equivalent
staff in key units that are involved in China monitoring and
enforcement activities across four key agencies increased from about 28
to 53 from fiscal year 2000 to 2002, based on agency officials'
estimates (see table 1).
Table 1: Agency Staffing Estimates for Key Offices Involved in China
WTO Compliance Efforts, Fiscal Years 2000-02:
Agency: USTR; 2000: 3; 2001: 3; 2002: 5.
Agency: Department of Commerce:
Agency: Market Access and Compliance; 2000: 7; 2001: 19;
2002: 22.
Agency: Import Administration; 2000: 1.7; 2001: 3.3;
2002: 6.7.
Agency: Department of Agriculture; 2000: 7.5; 2001: 7.5;
2002: 10.5.
Agency: Department of State; 2000: 8.25; 2001: 8.25;
2002: 8.75.
Agency: Total; 2000: 27.5; 2001: 41.1; 2002: 53.
Source: U.S. General Accounting Office, World Trade Organization:
First-Year U.S. Efforts to Monitor China's Compliance, GAO-03-461
(Washington, D.C.: Mar. 31, 2003).
[End of table]
Commerce had the largest overall increase in staff devoted to China WTO
compliance during this period. Specifically, staffing levels in
Commerce's Market Access and Compliance division increased from 7 to 22
between fiscal years 2000 and 2002. Additionally, Commerce's Import
Administration, which takes the lead on monitoring China's commitments
concerning subsidies and unfair trade practices, also significantly
increased staff dedicated to China compliance activities during the
same time period. Commerce has also increased the number of staff
involved in the agency's compliance efforts on the ground in China by
creating a Trade Facilitation Office within the U.S. embassy in
Beijing. In addition, the Department of Agriculture has increased the
number of overseas staff involved in the agency's China WTO compliance
activities.
A Commerce official told us that the Import Administration is thinking
of combining all of its China work under one deputy assistant secretary
(the current practice is to distribute the work among three deputy
assistant secretaries). Doing so might enhance the office's expertise
and provide a better basis for assessing whether additional China
expertise is needed.
Conclusions:
As we have reported in numerous studies and testimonies before this
Subcommittee and others, effective alignment between federal agencies'
human capital approaches and their current and emerging strategic and
programmatic goals is critical to the ability of agencies to
economically, efficiently, and effectively perform their missions. The
importance of such a close alignment is demonstrated in the area of the
U.S. government's trade activities, where heightened security concerns,
an ambitious trade negotiating agenda, and an array of global economic
forces all have implications for sound human capital management.
Our testimony has cited illustrations in these three areas based on our
recent work for Congress. In some areas, failure to sufficiently plan
the human capital approach, such as the CBP programs to secure the
global supply chain, show that the success of the programs is not
assured in the absence of human capital planning. In other cases, such
as the U.S.'s ambitious trade negotiating agenda, human capital
resources may be a constraint on the ability of the trade agencies to
carry out their negotiations at the multilateral, regional, bilateral,
and subregional level. Finally, the array of shifting global forces
described in some of our recent studies also demonstrates the
implications for U.S. trade agency activities and, in many cases, the
agencies' human capital activities. For example, in the case of the
rapid growth of China in the world economy and its WTO accession
agreement, the demand for specialized expertise and focus on issues
related to China's economy have led to growth in personnel and efforts
to reorganize to meet these new monitoring and compliance challenges.
As your Subcommittee has stressed in its guidance and hearings
regarding other parts of the federal government, agencies must
constantly reevaluate their human capital strategies to adapt and even
anticipate major shifts in their environment. We believe that a number
of studies we have performed for Congress in recent months are good
illustrations--and further evidence--of the validity of that approach.
Mr. Chairman and members of the Subcommittee, this concludes my
prepared statement. I will be pleased to answer any questions you or
other members of the Subcommittee may have at this time.
Contacts and Acknowledgments:
For further contacts regarding this testimony, please call Loren Yager
at (202) 512-4347 or Christine Broderick (415) 904-2240. Individuals
making key contributions to this testimony included Adam Cowles, Etana
Finkler, Kim Frankena, Wayne Ferris, Rona Mendelsohn, Anthony Moran,
and Richard Seldin.
[End of section]
Appendix I: U.S. Imports from and Exports to China, 1989-2002:
This appendix provides information on U.S. imports from and exports to
China during the past 14 years. Table 2 provides data on the top five
U.S. imports from China between 1989 and 2002. Together, imports of
these five commodities accounted for about 59 percent of total imports
from China in 2002, according to the Department of Commerce.
Table 2: Top Five U.S. Imports from China, 1989-2002 (Dollars in
millions):
Year: 1989; Miscellaneous manufactured items: $2,529; Office machines:
$70; Telecommunication equipment: $1,032; Footwear: $720; Electrical
machinery: $535; Total: $11,859.
Year: 1990; Miscellaneous manufactured items: 3,236; Office machines:
117; Telecommunication equipment: 1,142; Footwear: 1,475; Electrical
machinery: 652; Total: 15,120.
Year: 1991; Miscellaneous manufactured items: 4,094; Office machines:
290; Telecommunication equipment: 1,466; Footwear: 2,532; Electrical
machinery: 876; Total: 18,855.
Year: 1992; Miscellaneous manufactured items: 5,932; Office machines:
543; Telecommunication equipment: 1,752; Footwear: 3,396; Electrical
machinery: 1,331; Total: 25,514.
Year: 1993; Miscellaneous manufactured items: 7,151; Office machines:
932; Telecommunication equipment: 2,279; Footwear: 4,505; Electrical
machinery: 1,723; Total: 31,425.
Year: 1994; Miscellaneous manufactured items: 8,690; Office machines:
1,583; Telecommunication equipment: 3,715; Footwear: 5,254; Electrical
machinery: 2,252; Total: 38,572.
Year: 1995; Miscellaneous manufactured items: 10,319; Office machines:
2,879; Telecommunication equipment: 4,215; Footwear: 5,817; Electrical
machinery: 3,094; Total: 45,370.
Year: 1996; Miscellaneous manufactured items: 11,867; Office machines:
3,562; Telecommunication equipment: 4,438; Footwear: 6,367; Electrical
machinery: 3,874; Total: 51,209.
Year: 1997; Miscellaneous manufactured items: 14,155; Office machines:
5,019; Telecommunication equipment: 5,126; Footwear: 7,354; Electrical
machinery: 4,877; Total: 61,996.
Year: 1998; Miscellaneous manufactured items: 15,872; Office machines:
6,329; Telecommunication equipment: 6,405; Footwear: 8,016; Electrical
machinery: 5,707; Total: 70,815.
Year: 1999; Miscellaneous manufactured items: 17,291; Office machines:
8,239; Telecommunication equipment: 7,382; Footwear: 8,438; Electrical
machinery: 7,022; Total: 81,522.
Year: 2000; Miscellaneous manufactured items: 19,445; Office machines:
10,980; Telecommunication equipment: 9,812; Footwear: 9,206;
Electrical machinery: 9,037; Total: 99,581.
Year: 2001; Miscellaneous manufactured items: 19,782; Office machines:
10,762; Telecommunication equipment: 10,062; Footwear: 9,767;
Electrical machinery: 9,048; Total: 102,069.
Year: 2002; Miscellaneous manufactured items: 23,495; Office machines:
15,230; Telecommunication equipment: 14,145; Footwear: 10,242;
Electrical machinery: 10,217; Total: 124,796.
Source: Department of Commerce data.
Note: Miscellaneous manufactured articles include toys and games.
Telecommunication equipment includes sound recording and reproducing
equipment such as telephone answering machines, radios, tape recorders
and players, televisions, VCRs, and so forth.
[End of table]
Table 3 provides figures on the top five U.S. exports to China between
1989 and 2002. Together, these five commodities accounted for about 42
percent of total U.S. exports to China in 2002.
Table 3: Top Five U.S. Exports to China, 1989-2002 (Dollars in
millions):
Year: 1989; Transport equipment: $540; Electrical machinery: $138;
General industrial machinery: $268; Specialized machinery: $359; Office
machines: $147; Total: $5,775.
Year: 1990; Transport equipment: 754; Electrical machinery: 133;
General industrial machinery: 176; Specialized machinery: 322; Office
machines: 133; Total: 4,776.
Year: 1991; Transport equipment: 1,084; Electrical machinery: 132;
General industrial machinery: 222; Specialized machinery: 370; Office
machines: 148; Total: 6,238.
Year: 1992; Transport equipment: 2,051; Electrical machinery: 207;
General industrial machinery: 275; Specialized machinery: 423; Office
machines: 161; Total: 7,339.
Year: 1993; Transport equipment: 2,252; Electrical machinery: 247;
General industrial machinery: 427; Specialized machinery: 669; Office
machines: 213; Total: 8,619.
Year: 1994; Transport equipment: 1,929; Electrical machinery: 285;
General industrial machinery: 515; Specialized machinery: 670; Office
machines: 233; Total: 9,178.
Year: 1995; Transport equipment: 1,187; Electrical machinery: 408;
General industrial machinery: 712; Specialized machinery: 675; Office
machines: 306; Total: 11,613.
Year: 1996; Transport equipment: 1,718; Electrical machinery: 553;
General industrial machinery: 764; Specialized machinery: 685; Office
machines: 254; Total: 11,801.
Year: 1997; Transport equipment: 2,127; Electrical machinery: 684;
General industrial machinery: 756; Specialized machinery: 765; Office
machines: 324; Total: 12,533.
Year: 1998; Transport equipment: 3,604; Electrical machinery: 931;
General industrial machinery: 663; Specialized machinery: 519; Office
machines: 830; Total: 13,908.
Year: 1999; Transport equipment: 2,325; Electrical machinery: 1,252;
General industrial machinery: 675; Specialized machinery: 478; Office
machines: 697; Total: 12,585.
Year: 2000; Transport equipment: 1,695; Electrical machinery: 1,502;
General industrial machinery: 812; Specialized machinery: 744; Office
machines: 1,154; Total: 15,335.
Year: 2001; Transport equipment: 2,452; Electrical machinery: 1,842;
General industrial machinery: 1,051; Specialized machinery: 773; Office
machines: 1,208; Total: 17,959.
Year: 2002; Transport equipment: 3,382; Electrical machinery: 2,185;
General industrial machinery: 1,105; Specialized machinery: 1,102;
Office machines: 913; Total: 20,553.
Source: Department of Commerce data.
Note: Transport equipment is primarily aircraft and parts. Office
machines are mainly computers.
[End of table]
FOOTNOTES
[1] The WTO is a multilateral organization, established in January
1995, that administers rules of international trade and provides a
forum for conducting trade negotiations among its 146 members as well
as a dispute settlement system for resolving trade disputes among its
members.
[2] Pub. L. No. 107-210, 116 Stat. 933, 993-1022.
[3] Associated positions support the specialists, auditors, and
attorneys and include positions such CBP managers, paralegals, account
managers, and clerical staff dedicated to trade activities.
[4] Section 412(b)(2) of the Homeland Security Act, Public Law 107-296,
116 stat. 2180, states that the Secretary of Homeland Security may not
reduce the staff levels attributable to functions performed by the
following personnel and their associated support staff: import
specialists, entry specialists, drawback specialists, national import
specialists, fines and penalties specialists, attorneys of the Office
of Regulations and Rulings, Customs auditors, international trade
specialists, and financial systems specialists.
[5] CBP was formed through the merger of most of the U.S. Customs
Service and immigration inspectors and the U.S. Border Patrol of the
former Immigration and Naturalization Service and the agricultural
border inspectors of the U.S. Department of Agriculture. While most of
Customs transferred to CBP, its Office of Investigations did not.
Instead, the more than 5,000 Customs investigators and staff were
transferred to the Bureau of Immigration and Customs Enforcement within
the Department of Homeland Security.
[6] The Office of Strategic Trade and the Office of Regulations and
Rulings are the two offices within CBP that are primarily dedicated to
trade.
[7] U.S. General Accounting Office, Container Security: Expansion of
Key Customs Programs Will Require Greater Attention to Critical Success
Factors, GAO-03-770 (Washington, D.C.: July 25, 2003).
[8] Pub. L. No. 107-210, 116 Stat. 933, 993-1022.
[9] U.S. General Accounting Office, World Trade Organization: Early
Decisions Are Vital to Progress in Ongoing Negotiations, GAO-02-879
(Washington, D.C.: Sept. 4, 2002).
[10] U.S. General Accounting Office, Free Trade Area of the Americas:
Negotiations Progress, but Successful Ministerial Hinges on Intensified
U.S. Preparations, GAO-03-560 (Washington, D.C.: Apr. 11, 2003).
[11] The dispute settlement system applies to disputes between members
arising under the WTO agreements. See U.S. General Accounting Office,
World Trade Organization: Standard of Review and Impact of Trade Remedy
Rulings, GAO-03-824 (Washington, D.C.: Sept. 24, 2002).
[12] Of 198 cases filed in the WTO from 1995 through 2002, about one-
third (64 cases) pertained to members challenging other members' trade
remedies--antidumping or countervailing duties or safeguard measures.
The remaining two-thirds of the cases pertained to nontrade remedy
issues such as application of sanitary and phytosanitary measures,
intellectual property rights, textiles and clothing, and trade-related
investment measures. The 198 cases originated from 276 separate
requests for consultations or filings--the first of four phases in the
dispute settlement process. We combined multiple requests for
consultation regarding the same measure or law into a single case.
[13] The United States was a defendant in 26 of the 108 nontrade remedy
cases brought from 1995 through 2002.
[14] Under section 135 of the Trade Act of 1974, 19 U.S.C. § 2155, the
President is required to seek information and advice from the private
sector on (1) negotiating objectives and bargaining positions before
entering into a trade agreement, (2) the operation of trade agreements,
and (3) other matters regarding the administration of U.S. trade
policy. A system of trade advisory committees was established in the
1970s to serve this purpose. In 2002, the system comprised about 735
advisers spread across 34 committees. The advisory committees are
administered by USTR, which assumes a leadership role, along with
several other departments, especially Commerce.
[15] U.S. General Accounting Office, International Trade: Advisory
Committee System Should Be Updated to Better Serve U.S. Policy Needs,
GAO-02-876 (Washington, D.C.: Sept. 24, 2002).
[16] On November 25, 2003, USTR and the Department of Commerce
announced that the plan has been approved and the agencies expect to
implement it by March 2004.
[17] USTR, 2003 National Trade Estimate Report on Foreign Trade
Barriers (Washington, D.C.: Mar. 31, 2003).
[18] In 2002, we surveyed the views of U.S. companies with business
activities in China about prospects for China implementing its WTO
commitments. Seventy percent or more of the responding companies
identified rule of law-related commitments to be the most difficult for
China to implement. These included (1) consistent application of laws,
regulations, and practices; (2) intellectual property rights; (3)
enforcement of contracts and judgments/settlement of disputes in the
Chinese court system; (4) equal treatment between Chinese and foreign
entities; and (5) transparency of laws, regulations, and practices. See
U.S. General Accounting Office, World Trade Organization: Selected U.S.
Company Views About China's Membership, GAO-02-1056 (Washington, D.C.:
Sept: 22, 2002).
[19] In mid-October 2003, the U.S.-China Security and Economic Review
Commission concluded that China was supporting its manufacturers
through a range of national industrial policies, such as, for example,
tax relief, preferential loans from state banks, and requirements for
foreign investors to provide foreign technology transfers. The
commission recommended that USTR and Commerce identify whether any of
China's industrial policies are inconsistent with its WTO obligations
and engage with the Chinese government to mitigate those that are
significantly impacting U.S. market access. (The commission, created on
October 30, 2000, consists of 12 members who were appointed on the
basis of recommendations made by the leadership of the House and
Senate.)
[20] Seven leading industrialized countries of the world, including
Canada, England, France, Germany, Italy, Japan, and the United States.
[21] U.S. General Accounting Office, World Trade Organization: Analysis
of China's Commitments to Other Members, GAO-03-461 (Washington, D.C.:
Oct. 3, 2002).
