United States International Trade Commission

59TH REPORT

USITC Publication 4026July 2008

THE YEAR INTRADE 2007Operation of the TradeAgreements Program

Address all communications toSecretary to the Commission

United States International Trade CommissionWashington DC 20436

US International Trade Commission

Director of Economics

Robert B Koopman

Director of Operations

Robert A Rogowsky

COMMISSIONERS

Shara L Aranoff ChairmanDaniel R Pearson Vice Chairman

Deanna Tanner OkunCharlotte R Lane

Irving A WilliamsonDean A Pinkert

US International Trade CommissionWashington DC 20436

wwwusitcgov

July 2008Publication 4026

The Year in Trade 2007Operation of the Trade Agreements Program

59th Report

This report was principally prepared by

The Office of Economics

Arona Butcher Project LeaderJustino De La Cruz Deputy Project Leader

Nannette Christ Kelly Clark Nick Grossman William Greene Joanne GuthAlexander Hammer Walker Pollard James Stamps and

Edward C Wilson

Office of the General CounselWilliam W Gearhart and Robin Turner

Office of Tariff Affairs and Trade AgreementsNaomi Freeman and Dan Shepherdson

Office of InvestigationsMary Messer and Andy Rylyk

Office of Unfair Import InvestigationsAnne Goalwin

Office of IndustriesKim Freund Dawn Heuschel Laura Rodriguez Donald Sussman

Audrey Tafoya and Isaac Wohl

Office of Information Technology SystemsBarbara V Bobbitt

Supporting assistance was provided byPatricia M Thomas

InternLauren Deason

Office of Publishing

iii

PREFACEThis report is the 59th in a series of annual reports submitted to the US Congress undersection 163(c) of the Trade Act of 1974 (19 USC 2213(c)) and its predecessor legislationSection 163(c) of the Trade Act of 1974 states that ldquothe International Trade Commissionshall submit to the Congress at least once a year a factual report on the operation of thetrade agreements programrdquo

This report is one of the principal means by which the US International Trade Commissionprovides Congress with factual information on trade policy and its administration forcalendar year 2007 The trade agreements program includes ldquoall activities consisting of orrelated to the administration of international agreements which primarily concern trade andwhich are concluded pursuant to the authority vested in the President by the Constitutionrdquoand congressional legislation

v

TABLE OF CONTENTS

Page

Preface iii

Abbreviations and Acronyms xi

Executive Summary xv

Chapter 1 Overview of US Trade 1-1Scope and approach of the report 1-1Overview of the US economy in 2007 1-1

Exchange-rate trends 1-2Balance of payments 1-3Trade in goods and services 1-4

US trade in goods in 2007 1-5US merchandise trade by product category 1-5

Exports 1-5Imports 1-5

US merchandise trade with leading partners 1-6US trade in services in 2007 1-9

US services trade by product category 1-9Exports 1-9Imports 1-10

US services trade with leading partners 1-11

Chapter 2 Administration of US Trade Laws and Regulations 2-1Import relief laws 2-1

Safeguard actions 2-1Adjustment assistance 2-1

Trade adjustment assistance for workers 2-2Trade adjustment assistance for farmers 2-2Trade adjustment assistance for firms and industries 2-3

Laws against unfair trade practices 2-4Section 301 investigations 2-4

Active section 301 cases in 2007 2-4New section 301 petitions in 2007 2-4Special 301 2-5

Antidumping and countervailing duty investigations and reviews 2-7Antidumping investigations 2-7Countervailing duty investigations 2-8Reviews of outstanding antidumping and countervailing duty orderssuspension

agreements 2-9Section 337 investigations 2-9

Other import administration laws and programs 2-11Tariff preference programs 2-11

vi

TABLE OF CONTENTSndashContinued

Page

Chapter 2 Administration of US Trade Laws and RegulationsndashContinuedGeneralized System of Preferences 2-11African Growth and Opportunity Act 2-12Andean Trade Preference Act 2-16Caribbean Basin Economic Recovery Act 2-18

Textile and apparel developments in 2007 2-20US textile and apparel imports in 2007 2-20US-China textile and apparel trade 2-22Textile and apparel imports under AGOA ATPA and CBERA 2-22Textile and apparel imports under the Haitian Hemispheric Opportunity through

Trade Partnership Encouragement (HHOPE) Act 2-23US textile and apparel imports under CAFTA-DR 2-24

Chapter 3 Selected Trade Developments in the WTO OECD and APEC 3-1World Trade Organization 3-1

Doha trade negotiations 3-2Negotiations resumed in February 2007 3-2G-4 meetings at Potsdam 3-3Negotiations suspended in June 2007 3-4October 2007 General Council and TNC meetings 3-5November 2007 TNC meeting 3-5

General Council 3-6Work programs decisions and reviews 3-7

Transparency for preferential trade arrangements 3-7TRIPS Council matters 3-7Small economies 3-7Special and differential treatment 3-8Harmonization of nonpreferential rules of origin 3-9Aid for trade 3-10Cotton initiative 3-11Annual review of Chinarsquos protocol of accession to the WTO 3-12Biennial review of US Jones Act legislation 3-12Draft decision on Article 274 of the Agreement on Subsidies and

Countervailing Measures 3-12Accessions 3-13Waivers 3-13Seventh WTO ministerial conference 3-13

Dispute settlement 3-15Consultations and new panels established 3-15

Panels established during 2007 at the request of the United States 3-15Measures by China granting refunds reductions or exemptions from taxes

and other payments (DS358) 3-16

vii

TABLE OF CONTENTSndashContinued

Page

Chapter 3 Selected Trade Developments in the WTO OECD and APECndashContinuedMeasures by India imposing ldquoadditional dutiesrdquo or ldquoextra additional dutiesrdquo

including wines and distilled products (DS360) 3-17Measures by China affecting the protection of and enforcement of

intellectual property rights (DS362) 3-17Measures by China affecting trading rights and distribution services for

certain publications and audiovisual entertainment products (DS363) 3-18Panels established in which the United States is named as the respondent 3-18

Continued existence and application of ldquozeroingrdquo methodology in USantidumping duty reviews (DS350) 3-18

US subsidies and other domestic support for corn and other agriculturalproducts (DS357) 3-19

US domestic support and export credit guarantees for agriculturalproducts (DS365) 3-19

Appellate Body and panel reports adopted during 2007 that involved the UnitedStates 3-19

Reports in which the United States was the complainant 3-20Measures by Turkey affecting the importation of rice (DS334) 3-20

Reports in which the United States was the respondent 3-21US antidumping ldquozeroingrdquo methodology (DS322) 3-21US antidumping measure on shrimp from Ecuador (DS335) 3-22

Organization for Economic Cooperation and Development 3-22Global policy forums 3-22Nonmember focus 3-23Trade Committee priority topics 3-24

Export credits 3-25Aircraft sector understanding 3-25Export credit understandings for other sectors 3-26

Asia-Pacific Economic Cooperation 3-26Action Agenda 3-27Committee on Trade and Investment 3-27

Chapter 4 US Free Trade Agreements 4-1FTAs in force during 2007 4-1Other FTA developments during 2007 4-3

US-Panama Trade Promotion Agreement 4-5US-Korea Free Trade Agreement 4-6

North American Free Trade Agreement 4-7Free Trade Commission 4-8Commission for Labor Cooperation 4-9Commission for Environmental Cooperation 4-10Dispute settlement 4-12

Chapter 11 dispute settlement developments 4-13Chapter 19 dispute panel reviews 4-13

viii

TABLE OF CONTENTSndashContinued

Page

Chapter 5 US Relations with Major Trading Partners 5-1European Union 5-1

US-EU summit 5-2Canada 5-3

Agriculture 5-4Livestock 5-4Potatoes 5-4Softwood lumber agreement 5-5Aviation 5-5

China 5-6Intellectual property rights enforcement 5-6Product safety 5-7Market access 5-8

Goods 5-8Services 5-9

Global trade imbalances and Chinarsquos exchange-rate regime 5-9Mexico 5-10

Cross-border trucking between the United States and Mexico 5-10Japan 5-12

Beef 5-12Deregulation 5-13

Korea 5-14US-Korea FTA 5-15Beef 5-15

Taiwan 5-16Intellectual property rights 5-16Agriculture 5-17

Beef 5-17Rice 5-18

India 5-18Trade dialogue 5-19Mangoes 5-19Alcoholic beverages 5-20

Bibliography Bibl -1

ix

TABLE OF CONTENTSndashContinued

PageFiguresES1 US trade balance in goods and services 1986ndash2007 xv11 Indices of exchange rates for selected major currencies in relation to the US dollar

daily 2007 1-312 US merchandise trade with the world 2005ndash07 1-613 Leading US export markets by share 2007 1-714 Leading US import sources by share 2007 1-815 US private cross-border services trade with the world 2005ndash07 1-1016 Leading US private services exports 2007 1-1217 Leading US private services imports 2007 1-12

TablesES1 Summary of 2007 trade agreement activities xxv11 US merchandise trade with major trading partners and the world 2007 1-712 US private services trade with major trading partners and the world 2007 1-1121 Petitions certified and denied under the TAA program and estimated number of workers

affected FY 2006 and FY 2007 2-322 Benefits and services provided under the TAA program FY 2006 and FY 2007 2-323 Antidumping duty orders that became effective during 2007 2-824 US imports for consumption from GSP beneficiaries and the world 2007 2-1325 US imports for consumption from AGOA countries 2005ndash07 2-1526 US imports for consumption from ATPA countries 2005ndash07 2-1727 US imports for consumption from CBERA countries 2005ndash07 2-1928 US imports of textiles and apparel in 2007 by quantity percentage change in imports

2006ndash07 and share of total US imports of textiles and apparel for major USsuppliers selected regional groups and the world 2-21

31 WTO membership in 2007 3-1432 WTO observers in 2007 3-1533 WTO dispute settlement panels established in 2007 3-1641 US merchandise trade with FTA partners total trade 2005ndash07 4-242 US imports entered under FTA provisions by FTA partner 2005ndash07 4-343 Status of US FTA negotiations during 2007 4-544 US merchandise trade with NAFTA partners 2005ndash07 4-845 Active files through 2007 under article 14 of the North American Agreement on

Environmental Cooperation 4-1146 Citizen submissions on enforcement under article 15 of the North American Agreement

on Environmental Cooperation submissions active during 2007 4-1247 NAFTA chapter 19 binational panels active reviews in 2007 4-14

Appendix tablesA1 US merchandise trade with world by SITC codes (revision 3) 2005ndash07 A-3A2 US private services exports to the world by category 2005ndash07 A-4A3 US private services imports from the world by category 2005ndash07 A-5A4 Antidumping cases active in 2007 by USITC investigation number A-6

x

TABLE OF CONTENTSndashContinued

PageAppendix tablesndashContinuedA5 Antidumping duty orders in effect as of December 31 2007 A-7A6 Countervailing duty cases active in 2007 by USITC investigation number A-13A7 Countervailing duty orders in effect as of December 31 2007 A-14A8 Reviews of existing antidumping and countervailing duty orders completed in 2007

by date of completion A-15A9 Section 337 investigations and related proceedings completed by the US International

Trade Commission during 2007 and those pending on December 31 2007 A-17A10 Outstanding Section 337 exclusion orders as of December 31 2007 A-26A11 US imports for consumption of leading GSP duty-free imports 2007 A-31A12 US imports for consumption and imports eligible for GSP treatment by import

categories under the Harmonized Tariff Schedule 2007 A-32A13 US imports for consumption under AGOA provisions by source 2005ndash07 A-33A14 US imports for consumption of leading imports under AGOA 2005ndash07 A-34A15 US imports for consumption under ATPA provisions by source 2005ndash07 A-35A16 US imports for consumption of leading imports under ATPA 2005ndash07 A-36A17 US imports for consumption under CBERA provisions by source 2005ndash07 A-37A18 US imports for consumption of leading imports under CBERA 2005ndash07 A-38A19 WTO dispute-settlement cases to which the United States was a party developments

in 2007 A-39A20 NAFTA dispute-settlement cases to which the United States was a party developments

in 2007 A-46A21 US merchandise trade with the European Union by SITC codes (revision 3) 2005ndash07 A-47A22 Leading US exports to the European Union by Schedule B subheading 2005ndash07 A-48A23 Leading US imports from the European Union by HTS subheading 2005ndash07 A-49A24 US merchandise trade with Canada by SITC codes (revision 3) 2005ndash07 A-50A25 Leading US exports to Canada by Schedule B subheading 2005ndash07 A-51A26 Leading US imports from Canada by HTS subheading 2005ndash07 A-52A27 US merchandise trade with China by SITC codes (revision 3) 2005ndash07 A-53A28 Leading US exports to China by Schedule B subheading 2005ndash07 A-54A29 Leading US imports from China by HTS subheading 2005ndash07 A-55A30 US merchandise trade with Mexico by SITC codes (revision 3) 2005ndash07 A-57A31 Leading US exports to Mexico by Schedule B subheading 2005ndash07 A-58A32 Leading US imports from Mexico by HTS subheading 2005ndash07 A-59A33 US merchandise trade with Japan by SITC codes (revision 3) 2005ndash07 A-61A34 Leading US exports to Japan by Schedule B subheading 2005ndash07 A-62A35 Leading US imports from Japan by HTS subheading 2005ndash07 A-63A36 US merchandise trade with Korea by SITC codes (revision 3) 2005ndash07 A-65A37 Leading US exports to Korea by Schedule B subheading 2005ndash07 A-66A38 Leading US imports from Korea by HTS subheading 2005ndash07 A-67A39 US merchandise trade with Taiwan by SITC codes (revision 3) 2005ndash07 A-69A40 Leading US exports to Taiwan by Schedule B subheading 2005ndash07 A-70A41 Leading US imports from Taiwan by HTS subheading 2005ndash07 A-71A42 US merchandise trade with India by SITC codes (revision 3) 2005ndash07 A-73A43 Leading US exports to India by Schedule B subheading 2005ndash07 A-74A44 Leading US imports from India by HTS subheading 2005ndash07 A-75

xi

List of Frequently Used Abbreviations andAcronyms

ACP Former European Colonies in Africa Caribbean and the PacificAD AntidumpingAFT Aid for TradeAGOA African Growth and Opportunity ActAIT American Institute in TaiwanAPEC Asia-Pacific Economic CooperationAPHIS Animal and Plant Health Inspection Service (USDA)AQSIQ General Administration of Quality Supervision Inspection and Quarantine

(China)ASU Aircraft Sector UnderstandingATPA Andean Trade Preference ActATPDEA Andean Trade Promotion and Drug Eradication Act BECC Border Environment Cooperation Commission (NAFTA)BSE Bovine Spongiform EncephalopathyCAFTA-DR Dominican Republic-Central America-United States Free Trade Agreement CBERA Caribbean Basin Economic Recovery ActCBI Caribbean Basin InitiativeCBTPA Caribbean Basin Trade Partnership ActCD Compact DiscCEC Commission for Environmental Cooperation (NAFTA) CFTA United States-Canada Free Trade AgreementCITA Committee for the Implementation of Textile Agreements (USDOC)CLC Commission for Labor Cooperation (NAFTA)CNL Competitive Need LimitationCSQ Country Specific QuotaCTD Committee on Trade and Development (WTO)CTDSS Committee on Trade and Development in Special SessionCTI Committee on Trade and Investment (APEC)CVD Countervailing DutyDDA Doha Development AgendaDSB WTO Dispute Settlement BodyDSU WTO Dispute Settlement UnderstandingDVD Digital Video DiscECA Export Credit Arrangement (OECD)EDA Economic Development Administration (USDOC)EIF Enhanced Integrated Framework (WT)EPA United States Environmental Protection AgencyEU European UnionFAS Foreign Agricultural Service (USDA)FBI Federal Bureau of InvestigationFMCSA Federal Motor Carrier Safety Administration (USDOT)FTA Free Trade AgreementFTAA Free Trade Area of the AmericasFTC Free Trade Commission (NAFTA)FY Fiscal Year

xii

G-4 G-4 Bloc (Brazil China India South Africa)G-20 G-20 Bloc of Developing CountriesGATS General Agreement on Trade in ServicesGATT General Agreement on Tariffs and TradeGDP Gross Domestic ProductGOI Government of IndiaGSP Generalized System of PreferencesHHOPE Haitian Hemispheric Opportunity through Partnership Encouragement ActHS Harmonized SystemHTS Harmonized Tariff Schedule ( United States)IF Integrated FrameworkIMF International Monetary FundIPR Intellectual Property RightsITA International Trade Administration (USDOC)JCCT US-China Joint Commission on Commerce and TradeLCIA London Court of International ArbitrationLDB Least-Developed BeneficiaryLDBDC Least-Developed Beneficiary Developing CountryLTFV Less Than Fair ValueMEA Multilateral Environmental AgreementMOU Memorandum of UnderstandingMPS Ministry of Public Security (China)MRA Mutual Recognition Agreement NAAEC North American Agreement on Environmental Cooperation (NAFTA)NAALC North American Agreement on Labor Cooperation (NAFTA)NADB North American Development BankNAFTA North American Free Trade AgreementNAMA Nonagricultural Market AccessNAO National Administrative Office (NAFTA)NTR Normal Trade RelationsOAS Organization of American StatesOECD Organization for Economic Cooperation and DevelopmentOIE World Organization for Animal HealthOIG Office of the Inspector General (USDOT)OST Office of the Secretary of Transportation (USDOT)OTAI Office of Trade Agreement Implementation (NAFTA)PRC Peoples Republic of ChinaPSAG Private Sector Advisory GroupSampD Special and DifferentialSAARC South Asian Association for Regional CooperationSCM Subsidies and Countervailing MeasuresSED US-China Strategic Economic DialogueSITC Standard Industrial Trade ClassificationSLA Softwood Lumber AgreementSMEs Square Meter EquivalentsSPS Sanitary and Phytosanitary StandardsSSA Sub-Saharan AfricaSVE Small and Vulnerable EconomyTAA Trade Adjustment AssistanceTAAC Trade Adjustment Assistance Center

xiii

TACA Trade Advisory Committee on AfricaTEC Transatlantic Economic CouncilTIFA Trade and Investment Framework AgreementTNC Trade Negotiations CommitteeTPA Trade Promotion AgreementTPF Trade Policy ForumTPL Tariff Preference LevelTRIMS Trade-Related Investment MeasuresTRIPS Trade-Related Aspects of Intellectual Property Rights TRQ Tariff-Rate QuotaUN United NationsUNCTAD United Nations Conference on Trade and DevelopmentUSDA United States Department of AgricultureUSDOC United States Department of CommerceUSDOL United States Department of LaborUSDOS United States Department of StateUSITC United States International Trade CommissionUSTR United States Trade RepresentativeWTO World Trade Organization

xv

EXECUTIVE SUMMARY

The US economy continued to expand for the sixth consecutive year in 2007 although ata slower pace than in previous years US exports of goods and services ($1046 billion)increased more rapidly than US imports ($1943 billion) for the second year in a row (13percent for exports versus 5 percent for imports) leading to a decrease in the trade deficitin goods and services in 2007 (figure ES1) Increases in US exports of machinery andtransport equipment chemicals and related products food and live animals and crudematerials (except fuels) represented almost three-quarters of the total increase in exports in2007 while increases in US imports of machinery and transport equipment and mineralfuels lubricants and related materials represented over one-half of the increase in importsfor the same year The US surplus in services trade increased by 341 percent to $1069billion in 2007 More than one-half of the increase in exports was accounted for by private

Figure ES1 US trade balance in goods and services 1986ndash2007

services that included business professional and technical services insurance services andfinancial services The US dollar depreciated 6 percent in 2007 on a trade-weighted yearlyaverage basis against a basket of currencies including the Canadian dollar the euro theChinese yuan and the Japanese yen The largest depreciation was against the United Statesrsquolargest trading partner Canada Despite the fluctuations during the year the US dollarended the year at approximately where it began the year against the Mexican peso and theBritish pound

A summary of key US trade agreement activities in 2007 is presented below followed bya summary of key activities and developments on a monthly basis for the year Tradeagreement activities during 2007 included the administration of US trade laws and

xvi

regulations US participation in the World Trade Organization (WTO) the Organizationfor Economic Cooperation and Development (OECD) and the Asia-Pacific EconomicCooperation (APEC) forum US negotiation of and participation in free trade agreements(FTAs) and bilateral developments with major trading partners

Key Trade Developments in 2007

Administration of US Trade Laws and Regulations

bull Section 301 One active case under section 301 concerned the European Union(EU) meat hormone directive which the WTO had found violates the Agreementon the Application of Sanitary and Phytosanitary Measures

bull Special 301 The USTRrsquos 2007 special 301 report highlighted weak intellectualproperty rights (IPR) protection and enforcement in China and Russia both ofwhich were placed on the priority watch list Belize and Brazil were moved fromthe priority watch list to the watch list due to improved IPR enforcement TheBahamas and Latvia were removed from the watch list due to their improved IPRenforcement and Bulgaria and Croatia were removed from the watch list due totheir passage of IPR legislation and improved enforcement The EU was removedfrom the watch list principally because it adopted new regulations concerninggeographical indications following an adverse WTO ruling

bull Section 337 investigations During 2007 there were 77 active section 337investigations and ancillary proceedings at the US International TradeCommission (Commission) 39 of which were instituted in 2007 Of these 39 therewere 35 new section 337 investigations and four new ancillary proceedingsrelating to previously concluded investigations All of the new section 337institutions in 2007 included allegations of patent infringement At the close of2007 40 section 337 investigations and related proceedings were pending

bull Antidumping investigations The Commission instituted 33 new antidumpinginvestigations and completed 8 during 2007 Antidumping duty orders were issuedby the US Department of Commerce (Commerce) in 2007 on certain activatedcarbon from China and polyester staple fiber from China

bull Countervailing duty investigations The Commission instituted 7 newcountervailing duty investigations and completed three investigations during 2007However because the Commission made negative determinations in each of thethree investigations (on coated free sheet paper from China Indonesia and Korea)no new countervailing duty orders were issued during 2007

bull Sunset reviews During 2007 Commerce and the Commission instituted 33 sunsetreviews of existing antidumping and countervailing duty orders and theCommission completed 74 reviews resulting in 38 antidumping and countervailingduty orders being continued for five additional years

xvii

bull Trade adjustment assistance In 2007 the US Department of Labor certifiedpetitions covering approximately 146592 workers A total of 1427 petitions werecertified as eligible for benefits and services and 625 petitions were denied

Preferential Trade Programs

bull Generalized System of Preferences (GSP) Duty-free imports entering under theUS GSP program totaled $308 billion in 2007 Angola was the leading GSPbeneficiary in 2007 followed by India Thailand Brazil and Indonesia During2007 East Timor was designated a GSP beneficiary and a least-developed GSPbeneficiary Bulgaria and Romania were removed from GSP status as a result oftheir accession to the EU and the Dominican Republic was removed from the GSPprogram as a result of its accession to the United States-Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) Authorization for the GSPprogram is currently set to expire on December 31 2008

bull African Growth and Opportunity Act (AGOA) A total of 39 sub-Saharan African(SSA) countries were designated for benefits under AGOA as of January 1 2007and 26 SSA countries were eligible for AGOA textile and apparel benefitsDuty-free US imports under AGOA including GSP were valued at $511 billionin 2007 US imports under AGOA exclusive of GSP were valued at $423 billionin 2007 a 170 percent increase from 2006 The increase in AGOA imports wasdriven mainly by increases in US imports of petroleum-related products whichmade up more than 95 percent of imports by value under AGOA This increasewas almost exclusively due to increases in prices rather than volume

bull Andean Trade Preference Act (ATPA) ATPA as amended by the Andean TradePromotion and Drug Eradication Act (ATPDEA) provides duty-free treatment forcertain products of Bolivia Colombia Ecuador and Peru US imports underATPA were valued at $123 billion in 2007 a decrease of 87 percent from $135billion in 2006 Imports under ATPA from each of the four beneficiary countriesdecreased in 2007 Imports from Ecuador decreased by 134 percent in valueduring 2007 mainly because of lower petroleum production Petroleum-relatedproducts accounted for 67 percent of US imports under ATPA in 2007 Otherleading imports under ATPA in 2007 included apparel copper cathodes fresh cutflowers and asparagus

bull Caribbean Basin Economic Recovery Act (CBERA) CBERA as expanded by theCaribbean Basin Trade Partnership Act (CBTPA) provides duty-free and reduced-duty treatment for certain products of designated Caribbean Basin countries In2007 articles from 19 countries and territories were eligible for CBERApreferences US imports under CBERA were valued at $55 billion in 2007 a446 percent decline from $99 billion in 2006 The decline in US imports underCBERA was due to the fact that imports from El Salvador Guatemala Hondurasand Nicaragua entered under CAFTA-DR during 2007 rather than under CBERAThe Dominican Republic was a CBERA beneficiary for only part of 2007 beforeCAFTA-DR entered into force for that country Trinidad and Tobago was theleading supplier of US imports under CBERA in 2007 Mineral fuels methanoland apparel products ranked as the leading US imports under CBERA in 2007

xviii

Textiles and Apparel

bull Trade US imports of textiles and apparel in 2007 totaled 531 billion squaremeter equivalents (SMEs) ($964 billion) an increase of 18 percent by volume and34 percent by value over 2006 Similar to previous years 2007 was characterizedby a shift in US textile and apparel imports from Central American and SouthAmerican countries toward lower-priced Asian suppliersmdashprimarily China butalso Indonesia Bangladesh Vietnam and Cambodia

bull China US imports of textiles and apparel from China increased by $53 billionto $323 billion This increase is mainly attributable to a $42 billion increase inUS imports of apparel articles Of the total US textile and apparel imports fromChina in 2007 $227 billion were apparel and $96 billion were textiles LeadingUS apparel imports from China in 2007 included knit sweaters pullovers andvests knit babiesrsquo garments and accessories and womenrsquos or girlsrsquo trousers andshorts Leading imports of textiles from China included certain made-up textilesarticles bedding articles and certain curtains Chinarsquos share of the US importmarket expanded to 402 percent by volume in 2007 compared with 357 percentin 2006 In 2007 34 categories of textiles and apparel products were subject to 21quotas under the 2005 memorandum of understanding between the United Statesand China which established quotas on US imports of selected textile and apparelproducts from China from January 1 2006 through December 31 2008 During2007 quotas filled at an average rate of 619 percent

bull AGOA ATPA and CBERA In 2007 imports of textiles and apparel eligible forduty-free entry into the United States totaled $13 billion (327 million SMEs)under AGOA $12 billion (177 million SMEs) under ATPAATPDEA and $927million (481 million SMEs) under CBERACBTPA For the first time since 2004the volume of US imports under AGOA increased slightly (28 percent) Thevolume of US imports of textiles and apparel declined in 2007 under bothATPDEA (by 140 percent) and the CBTPA (by 658 percent)

bull Haitian Hemispheric Opportunity through Trade Partnership Encouragement(HHOPE) Act Haiti began shipping apparel to the United States under theHHOPE Act in the second half of 2007 US imports of textiles and appareleligible for duty-free entry under the HHOPE Act in 2007 totaled $136 million(40 million SMEs) or 3 percent of total US textile and apparel imports fromHaiti (the remaining imports entering under CBTPA) The CBTPA program underwhich US imports from Haiti have grown steadily in recent years has contributedto a viable apparel manufacturing sector in Haiti and created a base from which theindustry can benefit from enhanced preferences afforded by the HHOPE Act

WTO OECD and APEC

bull WTO developments The Doha Development Agenda multilateral tradenegotiations resumed on February 7 2007 only to be suspended four months laterin June The G-4 countriesmdashBrazil the EU India and the United Statesmdashmetduring June 19ndash21 2007 in an effort to reach some convergence in negotiatingpositions regarding market access for agricultural products domestic support for

xix

agricultural producers and market access for nonagricultural products Issuesraised at the WTO General Council included preferential trade arrangements smalland vulnerable economies the harmonization of nonpreferential rules of originand the Aid for Trade initiative The General Council also held its annual reviewof Chinarsquos Protocol of Accession to the WTO and its biennial review of the USJones Act legislation

bull WTO dispute settlement During 2007 WTO members filed 13 new requests forWTO dispute settlement consultations This compares with 22 in 2006 12 in 2005and 19 in 2004 Thirteen new dispute settlement panels were established in 2007One of these panels (DS358mdashreductions or exemptions from taxes) was laterterminated when the United States and China reached a mutually agreed settlementin December 2007 and another (DS359mdash reductions or exemptions from taxes)was terminated when Mexico and China reached a mutually agreed settlement inFebruary 2008 Four cases involved the United States as complainant (DS358DS360Indiamdashadditional and extra duties on imports DS362ChinamdashIPRenforcement and DS363Chinamdash trading rights and distribution services foraudiovisual entertainment products) Other complainants that brought one or moredispute settlement cases in 2007 included Argentina (3) Brazil (1) the EU (3)Mexico (1) and Panama (1) Two dispute settlement panels involved the UnitedStates as respondent (DS350EUmdashldquozeroingrdquo methodology andDS365Brazilmdashdomestic support and export credit for agricultural products)Other respondents cited in one or more dispute settlement cases in 2007 includedBrazil (1) Chile (2) China (4) Colombia (1) India (2) and Mexico (1) The tradeissues implicated in these cases included measures affecting antidumpingcountervailing duty and safeguard matters intellectual property rights taxmatters and measures affecting border and internal trade issues

bull OECD developments The OECD Trade Committee held several global policyforums during 2007 addressing subjects such as trade and labor market adjustmentand the international sourcing of information technology services The committeecompleted its comprehensive reviews of the economies of China and India andcontinued discussions on trade issues regarding other major nonmembereconomies

bull APEC developments During the September 2007 annual meeting APEC ministersagreed upon an Action Plan to stimulate energy efficiency and environmentalprotection in their region Also in 2007 APECrsquos Committee on Trade andInvestment agreed on measures with respect to regional and free trade agreementselectronic commerce rules of origin and origin procedures and sanitary andphytosanitary measures formulated a plan aimed at reducing intra-regionaltransaction costs associated with trade developed guidelines to enhance IPRcapacity building in the region and agreed on common procedures for acquiringnew patents in member countries

FTAs in Force During 2007

bull US FTAs in force in 2007 The United States was a party to nine FTAs as ofDecember 31 2007 CAFTA-DR (2006ndash07) the US-Bahrain FTA (2006) the

xx

US-Morocco FTA (2006) the US-Australia FTA (2005) the US-Chile FTA(2004) the US-Singapore FTA (2004) the US-Jordan FTA (2001) the NorthAmerican Free Trade Agreement (NAFTA) (1994) and the US-Israel FTA(1985)

bull FTA legislative developments The US Congress and the Administration agreedon a bipartisan trade deal on May 10 2007 calling for the inclusion of core laborand environmental standards among other things in the text of pending and futuretrade agreements The Presidentrsquos statutory authority to negotiate trade agreementsthat Congress can approve or disapprove but cannot amend lapsed on July 1 2007without being renewed

bull Other FTA developments The United States concluded FTA negotiations withPanama on December 19 2006 and the two parties signed the US-Panama TradePromotion Agreement (TPA) on June 28 2007 The United States concluded FTAnegotiations with Korea on April 1 2007 and the two parties signed a bilateralFTA agreement on June 30 2007 The United States signed bilateral agreementswith Colombia Oman and Peru in 2006 The United States and Peru concludednegotiations for an amended US-Peru TPA on June 25 2007 that was ratified byCongress in December 2007 and President Bush signed the implementinglegislation on December 14 2007 The United States and Colombia concludednegotiations for an amended US-Colombia TPA on June 28 2007 Howevernone of those bilateral agreements entered into force during 2007

bull US merchandise trade flows with FTA partners Total US exports of goods toFTA partners in 2007 were valued at $406 billion and accounted for 388 percentof total US exports while total US imports of goods from FTA partners werevalued at approximately $593 billion and accounted for 322 percent of total USimports The United States had an overall merchandise trade deficit with FTApartners in 2007 of $188 billion including a record high $190 billion deficit withNAFTA partners Australia Singapore and Morocco were the only FTA partnerswith whom the United States recorded a merchandise trade surplus during 2007

bull NAFTA developments Although NAFTA was launched on January 1 1994 thelast of its trade provisions were only fully implemented on January 1 2008 In2007 US two-way merchandise trade (exports plus imports) with NAFTApartners totaled $855 billion a 52 percent increase over 2006

bull NAFTA dispute settlement Chapter 11 of NAFTA includes provisions designedto protect cross-border investors and facilitate the settlement of investmentdisputes In 2007 there were five active chapter 11 cases against the United Statesby Canadian investors There were also six active chapter 11 cases by USinvestors against Canada and four active chapter 11 cases by US investors againstMexico Chapter 19 of NAFTA contains a mechanism that provides for review bya binational panel of final determinations made by national investigatingauthorities in antidumping and countervailing duty cases At the end of 2007 theNAFTA Secretariat listed 12 active binational panels under chapter 19 The twobinational panels formed in 2007 under chapter 19 challenged US agenciesrsquodeterminations on products from Mexico

The 27 members of the EU in 2007 were Austria Belgium Bulgaria Cyprus the Czech Republic1

Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia LithuaniaLuxembourg Malta the Netherlands Poland Portugal Romania the Slovak Republic Slovenia SpainSweden and the United Kingdom

xxi

Trade Activities with Major Trading Partners

European Union

bull The EU is the second-largest two-way (exports plus imports) US trading partner1

behind the combined NAFTA market of Canada and Mexico In 2007 US two-way merchandise trade with the EU totaled $5785 billion representing nearly one-fifth of US trade with the world US exports of goods to the EU were valued at$2263 billion in 2007 and US imports of goods from the EU were valued at$3522 billion resulting in a US merchandise trade deficit with the EU of $1259billion in 2007 Leading US exports to the EU during the year included aircraftand aircraft parts medicaments passenger cars blood fractions and gold LeadingUS imports from the EU included certain medicaments passenger cars petroleumderivatives and nucleic acids and their salts

bull There were several active WTO dispute settlement proceedings during 2007 inwhich both the United States and the EU were parties either as the complainantor the respondent Four of these cases involved alleged subsidies to their respectivecivil aircraft industries The United States and EU also created the TransatlanticEconomic Council to guide efforts to lower US and EU barriers to trade andinvestment

Canada

bull Canada was the second-largest export market for US goods in 2007 following theEU and the largest single-country trading partner of the United States withtwo-way merchandise trade valued at $5256 billion US merchandise exports toCanada were valued at $2131 billion in 2007 and US merchandise imports fromCanada were valued at $3125 billion resulting in a $994 billion US merchandisetrade deficit with Canada in 2007 Leading US exports to Canada during the yearincluded passenger and transport motor vehicles parts and accessories for motorvehicles and energy products such as natural gas and crude oils Leading USimports from Canada in 2007 included natural gas and crude oils and passengermotor vehicles

bull The United States and Canada conducted bilateral discussions on a number ofagricultural issues during 2007 notably the resumption of livestock tradefollowing concerns about bovine spongiform encephalopathy (BSE) and theliberalization of Canadian restrictions on imports of bulk shipments of potatoesThe United States also requested consultations with Canada under the US-CanadaSoftwood Lumber Agreement signed in September 2006 to resolve concernsregarding Canadarsquos implementation of several provisions The two countries alsoimplemented a bilateral air service agreement that removes remaining restrictionson civil aviation services between the two countries

xxii

China

bull China was the second-largest single-country trading partner of the United Stateswith two-way merchandise trade valued at $3838 billion in 2007 USmerchandise exports to China were valued at $610 billion and US merchandiseimports from China were valued at $3231 billion resulting in a $2621 billionUS merchandise trade deficit with China in 2007 accounting for 292 percent ofthe US global merchandise trade deficit in that year Leading US exports toChina included airplanes soybeans electronic integrated circuits and copper andaluminum waste and scrap Leading US imports from China included computersand their parts wireless telephones miscellaneous wheeled toys video games andfootwear

bull US-China bilateral trade relations in 2007 focused on IPR enforcement productsafety and market access for goods and services in China as well as the twocountriesrsquo global trade imbalances

Mexico

bull Mexico was the third-largest single-country trading partner of the United Stateswith two-way merchandise trade valued at $3296 billion in 2007 USmerchandise exports to Mexico were valued at $1194 billion and USmerchandise imports from Mexico were valued at $2102 billion resulting in a$908 billion US merchandise trade deficit with Mexico Leading US exports toMexico included machinery and transportation equipment Leading US importsfrom Mexico included crude oils and motor vehicles

bull On September 6 2007 the US Department of Transportation initiated the Cross-Border Trucking Demonstration Project which permits up to 100 Mexico-domiciled motor carriers to operate throughout the United States for one year

Japan

bull US two-way merchandise trade with Japan totaled $2030 billion in 2007 USmerchandise exports to Japan were valued at $581 billion and US merchandiseimports from Japan totaled $1449 billion resulting in an $868 billion USmerchandise trade deficit with Japan in 2007 Leading US exports to Japanincluded airplanes and other aircraft corn parts of airplanes or helicoptersmachines and apparatus for the manufacture of semiconductor devices orelectronic integrated circuits and soybeans Leading US imports from Japanincluded passenger motor vehicles parts and accessories of printing machinerytelevision cameras digital cameras and video camera recorders and gear boxesand parts for motor vehicles

bull The US-Japan Economic Partnership for Growth continues to serve as theprimary forum for trade and economic dialogue between the two countries In2007 discussions under this framework focused on US beef exports to Japan andderegulation of Japanrsquos economy including economy-wide and sector-specific

xxiii

reforms such as certification of communications equipment and air transportrestrictions

Korea

bull US two-way merchandise trade with Korea totaled $784 billion in 2007 USmerchandise exports to Korea were valued at $330 billion and US merchandiseimports from Korea totaled $454 billion resulting in a $123 billion USmerchandise trade deficit with Korea Leading US exports to Korea includedcomputer chips aircraft and machines and mechanical appliances havingindividual functions (mostly semiconductor production machinery) Leading USimports from Korea included automobiles cellular telephones computer chips andcomputer parts and accessories (mainly memory modules)

bull US-Korea trade relations in 2007 were dominated by FTA negotiations andnegotiations over US beef exports to Korea which had been suspended becauseof Korean concerns with BSE

Taiwan

bull US two-way merchandise trade with Taiwan totaled $625 billion in 2007 USmerchandise exports to Taiwan were valued at $245 billion and US merchandiseimports from Taiwan totaled $381 billion resulting in a $145 billion USmerchandise trade deficit with Taiwan in 2007 Leading US exports to Taiwanin 2007 included digital integrated circuits semiconductor and flat panelmanufacturing and assembly equipment aircraft corn and soybeans Leading USimports from Taiwan included digital integrated circuits transmission apparatusfor radiotelephony reception apparatus for television computer parts andnavigational and remote control radar machines

bull During the sixth session of the Trade and Investment Framework Agreement inJuly 2007 US-Taiwan negotiations focused on IPR enforcement in Taiwan USaccess to Taiwanrsquos beef market and Taiwanrsquos rice procurement practices

India

bull US two-way merchandise trade with India totaled $402 billion in 2007 USmerchandise exports to India were valued at $163 billion and US merchandiseimports from India totaled $239 billion resulting in a $76 billion merchandisetrade deficit with India in 2007 Leading US exports to India during the yearincluded aircraft fertilizers nonindustrial diamonds and nonmonetary goldLeading US imports from India included nonindustrial diamonds articles ofjewelry and parts of precious metals (excluding silver) and womenrsquos or girlsrsquocotton blouses shirts and blouses (not knitted or crocheted)

xxiv

bull During 2007 India resumed shipments of mangoes to the US market ending an18-year bilateral trade dispute under the condition that the mangoes undergoirradiation in India to eliminate pests

Table ES1 provides a summary of key activities and developments on a monthly basis forthe year 2007

xxv

TABLE ES1 Summary of 2007 trade agreement activities

January

1-Bulgaria and Romania become EU membersand are no longer designated as beneficiarydeveloping countries under theUS GSPprogram

8-Canada requests WTO consultations with theUnited States regarding US domestic supportmeasures for corn and other agriculturalproducts

8-Chiles status is elevated to ldquopriority watch listrdquofrom ldquowatch listrdquo as the result of an out-of-cycleSpecial 301 review of intellectual propertyprotections

10-The State Department certifies Madagascarand recertifies Nigeria as eligible to export wildshrimp to the United States

16-The EU lifts its restrictions requiring importedUS corn gluten feed and brewers grain to becertified as free of the genetically modifiedorganism Bt10

16-The United States appeals a WTO disputepanel ruling that found that the United Statesfailed to comply with an earlier panel rulingfaulting US sunset review procedures inantidumping cases

25-The United States and Uruguay sign a Tradeand Investment Framework Agreement (TIFA)

26-The United States and Mexico sign a customscooperation agreement to implement the apparelcumulation provisions of CAFTA-DR

30-A WTO panel upholds Ecuadors claim thatthe US Department of Commerce violated WTOantidumping rules by using ldquozeroingrdquo in itsoriginal investigation on imports of shrimp fromEcuador

February

2-The United States requests dispute settlementconsultations with China over prohibitedsubsidies

2-Canada announces that it will no longer requiretesting for bluetongue in cattle sheep and goatsimported from the United States

16-The United States and Liberia sign a TIFA

FebruarymdashContinued

16-The United States signs an agreement withJapan to facilitate trade in telecommunicationsequipment

16-Japan suspends imports of beef from aLexington Nebraska plant for potential violationof joint import rules

23-A US district court rules that an Illinois lawprohibiting certain investments in companiesdoing business in or with Sudan isunconstitutional

March

1-CAFTA-DR enters into force for the DominicanRepublic

2-Japan suspends imports of sausages from aCalifornia meat packer based on the suspicionthat the products contained banned USprocessed beef

6-The United States requests WTO disputesettlement consultations with India over customsduties India imposes on imports of wine anddistilled spirits

19-The United States and Vietnam beginnegotiations on a TIFA

20-President Bush signs a proclamationimplementing legislation that provides tradebenefits for Haiti under the HHOPE Act

30-The US Department of Commerceannounces its preliminary decision to apply UScountervailing duty law to imports from ChinaThis is the first time countervailing duties will beimposed on imports from a nonmarket economy

30-The United States requests formalconsultations with Canada under a disputeresolution mechanism in the 2006 US-CanadaSoftwood Lumber Agreement to discussCanadian compliance with several provisions ofthe pact

April

1-The United States and Korea completenegotiations for a free trade agreement (FTA)

xxvi

AprilndashContinued

10-The United States requests disputesettlement consultations with China regardingdeficiencies in Chinarsquos intellectual property rights(IPR) laws and market access barriers tocopyright-based industries

12-The WTO Appellate Body circulates its reportupholding a US statute concerning the USantidumping ldquosunsetrdquo review of oil country tubulargoods from Argentina

17-The EU announces an expansion of thenumber of products from the United States thatwill be subject to retaliatory import duties as aresult of increased payments to US firms underthe Byrd amendment which has been ruledinconsistent with WTO rules

30-Thailand and Chile are added to the USTRrsquosSpecial 301 priority watch list of countries that donot adequately protect IPR Brazil is removed

30-The United States and the EU agree on aframework to promote greater regulatorycooperation to facilitate transatlantic trade

May

1-First shipment of mangoes from India in 18years enters the United States under a 2006US-India agreement to irradiate mangoes priorto entry into the US market

10-The USTR and Congress announce abipartisan agreement to add core labor andenvironmental standards among other things topending US FTAs

10-The EU requests the establishment of a WTO dispute settlement panel to challenge 40 USantidumping measures that the EU says arebased on the zeroing methodology used inUS antidumping investigations

23-Customs officials from the United States andChina sign an agreement strengthening theenforcement of intellectual property laws

25-The United States requests the establishmentof a WTO dispute settlement panel challengingIndiarsquos duties on wine and spirits and otherimports from the United States

June

4-The United States submits a paper to the WTONegotiating Group on Rules proposing thatcertain trade-distorting subsidies be prohibited

JunendashContinued

8-Canada requests the establishment of a WTOdispute settlement panel to rule whether theUnited States violated WTO rules by providingexcessive subsidies to its farmers as well asillegal agricultural export subsidies

14-The United States and Rwanda launch formalnegotiations on a Bilateral Investment Treaty

20-Antigua and Barbuda announces that it willseek authorization from the WTO to imposemore than $34 billion in annual trade sanctionsagainst the United States for its failure to complywith a WTO ruling against US restrictions onInternet gambling

20-The United States and Georgia sign a TIFA

21-The United States and Vietnam sign a TIFA

25-The United States and Peru agree onamendments to the US-Peru Trade PromotionAgreement (TPA) pursuant to the May 10 2007US agreement to add core labor andenvironmental standards

27-Peru ratifies the amended US-Peru TPA

28-The United States and Colombia agree onamendments to the US-Colombia TPA pursuantto the May 10 2007 US agreement to add corelabor and environmental standards

28-The United States and Panama sign abilateral FTA

28-The United States terminates GSP duty-freebenefits for certain products from Brazil CocirctedIvoire India the Philippines Thailand andVenezuela

30-The United States and Korea sign a bilateralFTA

30-President Bush signs legislation to extendATPA duty-free benefits for Bolivia ColombiaEcuador and Peru

July

1-The Presidents Trade Promotion Authorityexpires

3-The Indian government announces that it willlift a tariff on imports of wines beer and spiritsthat is the subject of a WTO dispute settlementcomplaint

xxvii

JulyndashContinued

11-Brazil files a request for WTO disputesettlement consultations relating to US supportand export credit guarantees for agriculturalproducts paid to US farmers

11-Panama ratifies the US-Panama TPA

24-The United States and Mexico request aWTO dispute settlement panel challenging Chinese subsidies

August

13-The United States requests the establishmentof a WTO dispute settlement panel to resolveclaims that the Chinese IPR legal regime fails toadequately protect and enforce US copyrightsand trademarks

14-NAFTA trade ministers meet and agree onrules-of-origin changes to be implemented in2008

September

6-US-Mexican Cross-Border Trucking Programbegins satisfying provisions under NAFTA

14-China requests WTO dispute settlementconsultations relating to preliminary USantidumping and countervailing duties imposedon imports of Chinese coated free sheet paper(glossy paper)

21-A WTO dispute settlement panel report iscirculated that agrees with US claims thatTurkeyrsquos measures on imported rice areinconsistent with Turkeyrsquos WTO obligations

28-US duties for certain goods imported fromMexico are eliminated under NAFTA

28-President Bush signs legislation extending thetrade adjustment assistance program for threemonths

October

2-The United States establishes the ValidatedEnd-User program for India to increase securehigh-tech trade with India

8-Costa Rica approves CAFTA-DR in a nationalreferendum

16-President Bush signs a bill boosting penaltiesfor violations of export control regulations

OctoberndashContinued

30-Colombia ratifies the amended US-ColombiaTPA

November

1-The United States and Canada implement anarrangement concerning trade in potatoes

8-Brazil and Canada request establishment of a WTO dispute settlement panel to considerwhether the United States violated WTO rules byproviding excessive subsidies to US farmers

14-The United States and Libya agree toestablish a formal body that will meet annually todiscuss ways to broaden bilateral commercialties

19-China agrees to terminate subsidies that theUnited States alleged were inconsistent underWTO rules

21-The United States and Japan finalize anagreement to facilitate trade intelecommunications equipment and harmonizecertification requirements

28-A NAFTA panel rejects the US Departmentof Commerces use of ldquozeroingrdquo in calculatingdumping margins

30-The United States and the EU propose toincrease global trade in technologies that inhibitclimate change by eliminating tariffs and otherbarriers

December

4-Congress completes ratification of the US-Peru TPA

5-The United States and Paraguay agree toexpand coverage of GSP duty-free benefits toinclude certified handicrafts

11-The US Department of Commerce andChinarsquos Ministry of Commerce sign the ldquoGuidelines for US-China High Technology andStrategic Trade Developmentrdquo

11-The United States and China sign twoagreements on food and feed import safety anddrug and medical device import safety

12- The United States and China conclude amemorandum of understanding on illegal loggingand associated trade

xxviii

DecemberndashContinued

14-President Bush signs the US-Peru TPAImplementation Act

17-The United States reaches agreement withthe EU at the WTO on compensation for Internetgambling

27-President Bush proclaims modifications to theCAFTA-DR textile rules of origin

27-President Bush proclaims modifications to theUS-Chile FTA and the US-Singapore FTArules of origin

31-President Bush signs into law the SudanAccountability and Divestment Act of 2007

Sources Compiled from multiple USgovernment sources including US Departmentof Agriculture US Department of CommerceUS Department of Labor US InternationalTrade Commission US Department of Stateand the White House Other sources includeBureau of National Affairs International TradeDaily and US Chamber of Commerce

This is the 59th in a series of annual reports submitted to the US Congress under section 163(c) of the1

Trade Act of 1974 (19 USC 2213(c)) and its predecessor legislation According to the US Department of Commerce (USDOC) GDP growth in 2007 was the weakest since2

2002 The change is associated with a reorientation of the US economy away from housing investment andtoward exports and investment in business structures White House Economic Report of the PresidentFebruary 2008 25 USDOC Bureau of Economic Analysis (BEA) ldquoNational Economic Accountsrdquo3

A slowdown in real imports was also a factor in the positive contribution of net exports to the growth of4

GDP during the year Net exports added almost a percentage point to US GDP growth in the second half of2007 Board of Governors of the Federal Reserve System Monetary Policy Report to the Congress 17

1-1

CHAPTER 1Overview of US Trade

Scope and Approach of the Report

This report provides factual information on the operation of the US trade agreementsprogram and its administration for calendar year 2007 The trade agreement activities1

during 2007 include the administration of US trade laws and regulations US participationin the World Trade Organization (WTO) the Organization for Economic Cooperation andDevelopment (OECD) and the Asia-Pacific Economic Cooperation (APEC) forum USnegotiation of and participation in free trade agreements (FTAs) and bilateral developmentswith major trading partners

The report is based on primary source materials on US trade programs and administrativeactions thereunder including US government Federal Register notices publications andpress releases by the US International Trade Commission (USITC or the Commission) andother US government agencies Other primary sources of information include publicationsof international institutions including the International Monetary Fund (IMF) the OECDthe WTO and official publications of foreign governments Professional journals tradepublications and news reports are used to provide supplemental factual information whenprimary source information is unavailable

The data provided throughout the report are on merchandise trade except for chapter 1which also includes data on services trade as compiled by the Commission primarily fromthe US Census Bureau of the US Department of Commerce as well as the United Nations(UN) and the IMF

Overview of the US Economy in 2007

The expansion of the US economy continued for the sixth consecutive year in 2007 butgrowth was slower than in previous years Real US gross domestic product (GDP)2

increased by 22 percent in 2007 compared with 29 percent growth in 2006 Personal3

consumption expenditures exports nonresidential structures and state and local4

government spending were leading components of the growth in 2007 The decline in realGDP growth between 2006 and 2007 primarily reflected a large decrease in residential fixed

IMF ldquoWorld Economic Outlookrdquo April 2008 105

Economic growth slowed as a result of a weak housing sector credit tightening and high energy prices6

White House Economic Report of the President 18 The euro area includes Austria Belgium Finland France Germany Greece Ireland Italy Luxembourg7

the Netherlands Portugal Slovenia and Spain OECD ldquoMain Economic Indicators Country Comparison Tablesrdquo April 20088

GDP growth data for the world and China are from the IMF ldquoWorld Economic Outlookrdquo April 20089

table 11 8 The OECD includes Australia Austria Belgium Canada the Czech Republic Denmark Finland10

France Germany Greece Hungary Iceland Ireland Italy Japan Korea Luxembourg Mexico theNetherlands New Zealand Norway Poland Portugal the Slovak Republic Spain Sweden SwitzerlandTurkey the United Kingdom and the United States USDOC BEA ldquoInternational Economic AccountsmdashUS International Transactions Fourth Quarter11

and Year 2007 Current Accountrdquo These data cover exchange rates for the 2007 calendar year Data analyzedby the Federal Reserve covered January 2007 through February 21 2008 Those data show that the nominaltrade-weighted exchange value of the dollar against major currencies depreciated by more than 10 percentduring that period Board of Governors of the Federal Reserve System Monetary Policy Report to theCongress 33 Board of Governors of the Federal Reserve System Monetary Policy Report to the Congress 3312

1-2

investment a downturn in private inventory investment and a decline in equipment andsoftware expenditures that were partly offset by a decline in imports The decline in the UShousing market which began in 2006 continued to be a drag on economic activity in 20075

The quarterly pattern of real GDP growth in 2007 was uneven with relatively strongergrowth in the second and third quarters and relatively weaker growth in the first and fourthquarters GDP growth slowed sharply in the fourth quarter of 2007 increasing only at anannual rate of 06 percent after posting a 49 percent annual rate in the third quarter6

Despite slower growth in 2007 the US economy recorded growth that either equaled orexceeded that of some other major industrialized countries and areas including the euro area(22 percent) and Japan (18 percent) However US economic growth was below the7 8

world average GDP growth rate of 52 percent as well as that of Canada (29 percent)9

Mexico (38 percent) China (115 percent) and the OECD (29 percent)10

Exchange-Rate Trends

The US dollar depreciated 6 percent in 2007 on a trade-weighted yearly average basisagainst a group of major currencies (figure 11) It generally depreciated during the year11

against the Canadian dollar the euro the Chinese yuan and the Japanese yen with thelargest depreciation occurring against the Canadian dollar Short-term fluctuations in thedollar-yuan exchange rate continued to be small with the dollarrsquos rate of depreciationaccelerating against the yuan in late 2007 Despite the fluctuations during the year the12

US dollar ended the year at approximately where it began the year against the Mexicanpeso and the British pound

USDOC BEA ldquoInternational Economic AccountsmdashUS International Transactions Fourth Quarter13

and Year 2007 Current Accountrdquo The balance on income is income receipts (including income receipts on US-owned assets abroad and14

compensation of US employees abroad) less income payments (including income payments onforeign-owned assets in the United States and compensation of foreign employees in the United States)

1-3

Figure 11 Indices of exchange rates for selected major currencies in relation to the US dollar daily

2007a

Source US Federal Reserve Board

Units of the foreign currency per unit of the US dollar A decrease in the index represents a depreciation in thea

US dollar relative to the foreign currency and an increase in the index represents an appreciation of the US dollarrelative to the foreign currency

Balance of Payments

The US current account deficitmdashthe combined balances on trade in goods and servicesincome and net current unilateral transfersmdashdecreased from $8115 billion in 2006 to$7386 billion in 2007 As a share of US GDP the current account deficit was 53 percent13

in 2007 down from 62 percent in 2006 The decrease was accounted for by increases in thesurpluses on income and services as well as a decrease in the deficit on goods The deficiton trade in goods decreased from $8383 billion in 2006 to $8154 billion in 2007 Thebalance on income increased from a surplus of $366 billion in 2006 to a surplus of $74314

billion in 2007

Services trade data are reported here on a balance of payments (BOP) basis for purposes of comparison15

with merchandise trade figures BOP data include trade in private services as well as transfers under USmilitary agency sales contracts and US government purchases of miscellaneous services USDOC BEAldquoInternational Economic AccountsndashUS International Transactions Fourth Quarter and Year 2007 CurrentAccountrdquo table 1 US trade in services is described in greater detail below16

The main components of the financial account are capital transfers foreign direct investment portfolio17

investment banking and other flows statistical discrepancies and official reserve assets USDOC BEAldquoInternational Economic AccountsmdashUS International Transactions Fourth Quarter and Year 2007 CurrentAccountrdquo USDOC BEA ldquoInternational Economic AccountsmdashUS International Trade in Goods and Servicesrdquo18

The Census basis data for goods (used elsewhere in this report) are compiled from the documents19

collected by the US Customs Service and reflect the movement of goods between foreign countries and the50 states the District of Columbia Puerto Rico the US Virgin Islands and US foreign trade zones Dataon goods compiled on a Census basis are adjusted by the USDOC BEA to a BOP basis to bring the data inline with the concepts and definitions used to prepare the international and national accounts Theseadjustments are made to supplement coverage of the Census basis data to eliminate duplication oftransactions recorded elsewhere in the international accounts and to value transactions according to astandard definition For a more detailed discussion of the differences between BOP basis and Census basisdata see USDOC BEA ldquoInformation on Goods and Servicesrdquo in USDOC BEA ldquoInternational EconomicAccountsrdquo December 2007 BOP trade data in this section of the report may not match data in other sectionsor in the report appendix because of adjustments made to the data by the sources cited White House Economic Report of the President February 2008 3520

USDOC US Census Bureau ldquoInternational Economic AccountsmdashUS International Trade in Goods21

and Services December 2007rdquo February 14 2008

1-4

The trade surplus on services increased from $797 billion in 2006 to $1069 billion in2007 Exports of services increased to $4792 billion in 2007 from $4226 billion in 200615

and more than half of the increase was accounted for by an increase in ldquootherrdquo privateservices which includes business professional and technical services insurance servicesand financial services There were also increased exports of travel royalties and licensefees and ldquootherrdquo transportation which includes freight and port services Imports ofservices increased from $3428 billion in 2006 to $3723 billion in 2007 with more than halfof the increase accounted for by an increase in ldquootherrdquo private services Net financial16

account payments (outflows) were $12 trillion in 2007 up from $11 trillion in 200617

Trade in Goods and Services

The US foreign trade deficit for goods and services in 2007 was $7086 billion (51 percentof GDP) down from a deficit in 2006 of $7585 billion (57 percent of GDP) US exports18

of goods and services on a seasonally adjusted US balance-of-payments (BOP) basis19

were valued at $16284 billion in 2007 with imports of goods and services valued at$23369 billion Exports of services increased in 2007 but at a slower pace than in theprevious year The pace of the increase in the exports of goods and services reflected theeconomic growth of US trading partners expanded domestic production capacity andexchange-rate trends20

Largely as a result of higher petroleum prices US spending on petroleum imports increasedduring 2007 resulting in an increase in the petroleum products deficit from $2709 billionin 2006 to $2935 billion in 2007 Imports of petroleum accounted for 142 percent of total21

imports by value in 2007 and the petroleum products deficit represented 412 percent ofthe total US deficit on trade in goods and services in 2007 US trade in goods and servicesis discussed in more detail below

Merchandise trade data in this section do not match the seasonally adjusted BOP basis data presented22

above because of adjustments made to the data as described in footnote 19 US exports have been helped by rising foreign incomes the expansion of production in the United23

States and changes in exchange rates White House Economic Report of the President 20 US trade in services is described in greater detail below24

1-5

US Trade in Goods in 2007

US merchandise exports increased to $10464 billion (76 percent of GDP) in 2007 from$9295 billion (70 percent of GDP) in 2006 (figure 12) US merchandise imports22

increased to $19429 billion (140 percent of GDP) in 2007 from $18451 billion (140percent of GDP) in 2006 (figure 12) Exports increased more rapidly than imports for thesecond year in a row with exports increasing by 156 percent over the 2005ndash06 period and126 percent over the 2006ndash07 period and imports increasing 110 percent and 53 percentduring the same two periods23

US Merchandise Trade by Product Category24

Exports

Machinery and transport equipment ranked as the largest US export by StandardInternational Trade Classification (SITC) group in 2007 (appendix table A1) US exportsof machinery and transport equipment were valued at $4627 billion in 2007 accounting for442 percent of total US exports during the year and grew by 92 percent from $4238billion in 2006 Almost three quarters of the total increase in exports in 2007 wereaccounted for by increased US exports of machinery and transport equipment chemicalsand related products food and live animals and crude materials (except fuels) None of theSITC groups registered a decline in exports from 2006 to 2007

Imports

All SITC groups of US imports increased from 2006 to 2007 (appendix table A1) As inrecent years machinery and transport equipment was the largest US import group by SITCcode in 2007 US imports of machinery and transport equipment were valued at $7391billion in 2007 an increase of 43 percent over imports of $7086 billion in 2006 andaccounted for 380 percent of total US imports in 2007 Increased US imports ofmachinery and transport equipment and mineral fuels lubricants and related materialsrepresented over half of the total increase in imports in 2007

US imports under the four preferential trade programs with developing countries totaled$909 billion in 2007 and accounted for 47 percent of total US imports during the yearDuty-free imports totaled $308 billion (appendix table A12) under the Generalized Systemof Preferences (GSP) program $423 billion (excluding GSP imports) under the AfricanGrowth and Opportunity Act (AGOA) (appendix tables A13 and A14) and $123 billion

See chap 2 of this report for additional information25

Leading US exports to and imports from these partners are presented in appendix tables A22 through26

A44 Data in table 12 may not match with those in appendix tables A22 through A44 because ofadjustments made to the data Global expansion was strong in the first half of 2007 with turbulence in financial markets setting in27

during the last half of the year IMF ldquoWorld Economic Outlookrdquo April 2008 xiv USDOC USCB ldquoInternational Economic Accountsrdquo February 14 200828

1-6

Figure 12 US merchandise trade with the world 2005ndash07

Source US Department of Commerce

under the Andean Trade Preference Act (ATPA) (appendix tables A15 and A16) Inaddition imports that entered duty free or at reduced rates under the Caribbean BasinEconomic Recovery Act (CBERA) totaled $55 billion (appendix tables A17 and A18)During 2007 as in the past increased US imports under AGOA reflected the increasedvalue of petroleum imports primarily from the three leading exporters of oil underAGOAmdashNigeria Angola and Gabon25

US Merchandise Trade with Leading Partners

North American Free Trade Agreement (NAFTA) partners Canada and Mexico togetherremain the largest US global market for exports and imports followed by the EuropeanUnion (EU) (table 11) Figures 13 and 14 show leading US export and import markets26

by share in 2007

Foreign economic growth continued to be generally strong in 2007 aiding US export growthduring the year As shown above US exports increased by 126 percent while US27

imports increased by 53 percent over the 2006ndash07 period US exports to major trading28

partners Canada Japan and Korea continued to grow faster than imports from thosecountries during the year

1-7

Total $10464 billion

TABLE 11 US merchandise trade with major trading partners and the world 2007

Major trading partner Exports ImportsTrade

balanceTwo-way

(exports plus imports)

Billion dollars

EU-27 2263 3522 -1259 5784

Canada 2131 3125 -994 5256

China 610 3231 -2621 3841

Mexico 1194 2102 -908 3296

Japan 581 1449 -868 2030

Korea 330 454 -124 784

Taiwan 245 381 -135 626

Brazil 217 250 -33 467

India 163 239 -76 402

Russia 67 191 -125 258

South Africa 52 91 -39 143

World 10464 19429 -8965 29893

Source Compiled from official statistics of the US Department of Commerce

Note Because of rounding figures may not add to totals shown

Figure 13 Leading US export markets by share 2007

Source US Department of Commerce

US bilateral trade relations with China are discussed in chap 5 of this report29

1-8

Figure 14 Leading US import sources by share 2007

Total $19429 billion

Source US Department of Commerce

Canada remains the largest single-country two-way trading partner of the United Statesfollowed by China and Mexico China alone accounted for 292 percent of the total USmerchandise trade deficit of $8965 billion in 2007 and Canada and Mexico togetheraccounted for 211 percent of the deficit The US trade deficit with China rose from $2354billion in 2006 to $2621 billion in 2007 despite the fact that US exports to China grewfaster (an increase of 182 percent over 2006) than US imports from China (an increase of126 percent over 2006) 29

This section focuses primarily on cross-border services transactions in private services which exclude30

government sales and purchases of services The section presents changes from 2006 to 2007 and data on2005 are given where appropriate This section draws its services trade data from the BEA In these nationalaccounts data ldquocross-border transactionsrdquo occur when US firms and consumers sell to or purchase servicesfrom firms and consumers in another country with people information or money crossing US boundariesin the process Cross-border transactions appear explicitly as imports and exports in the balance of paymentsUS firms also provide services to foreign consumers through affiliates established in host countries with theincome generated by ldquoaffiliate transactionsrdquo appearing as investment income in the balance of payments Thechannel of delivery used by service providers depends primarily on the nature of the service For examplemany financial services such as retail banking services are supplied most effectively by affiliates locatedclose to the consumer Conversely trade in education services predominantly takes the form of cross-bordertransactions involving students studying abroad USDOC BEA ldquoPrivate Services Transactionsrdquo US International Transactions Accounts Data Table31

3 accessed June 3 2008 The category ldquobusiness professional and technical servicesrdquo includes advertising computer and32

information services research development and testing services management consulting and publicrelations services legal services construction architectural and engineering services industrial engineeringinstallation maintenance and repair of equipment operational leasing and other miscellaneous services The category ldquofinancial servicesrdquo include non-insurance non-deposit financial services provided by33

banks and securities firms USDOC BEA ldquoInternational Economic AccountsmdashUS InternationalTransactions Fourth Quarter and Yearrdquo 5 A country is said to have exported travel and tourism services when foreign nationals make purchases in34

that country during a visit of less than one year The value of tourism exports is measured by the totalexpenditures of foreign visitors irrespective of the purpose of the visit be it leisure recreation business orother activities Expenditures on transportation services between countries such as airfare and directspending on education or health care services are excluded from the measure of tourism exports InternationalMonetary Fund Balance of Payments Manual

1-9

US Trade in Services in 200730

Figure 15 shows US private cross-border services trade with the world from 2005 through2007 US private services exports increased from $4043 billion in 2006 to $4622 billion31

in 2007 an increase of 143 percent and US private services imports increased from$3078 billion in 2006 to $3353 billion in the same period an increase of 89 percent

US Services Trade by Product Category

The US surplus in cross-border private services trade increased by 315 percent to $1269billion in 2007 marking the fourth consecutive yearly increase and the largest annualincrease ever reported Numerous services accounted for the surge in the services tradesurplus most notably in the business professional and technical services and financial32

services categories33

Exports

Travel ranked as the largest US cross-border private services export increasing by 13334

percent to $971 billion in 2007 and accounting for 21 percent of total US exports(appendix table A2) This increase was consistent with the recovery of the US tourismindustry since 2004 following the terrorist attacks on the United States on September 112001 Increased travel exports reflect strong economic growth in leading overseas

Typically these 5 markets include Mexico Canada the United Kingdom Japan and Germany EIU35

ldquoIndustry BriefingmdashUnited States of America Travel and Tourism Forecastrdquo Ibid36

EIU ldquoIndustry BriefingmdashUSA tourism Bargain-hunting The Weak Dollar Lures Visitorsrdquo37

1-10

Figure 15 US private cross-border services trade with the world 2005ndash07

Source US Department of Commerce Bureau of Economic Analysis (BEA) website ldquoPrivate ServiceTransactionsrdquo

markets for tourism services and a decline in the value of the US dollar Other large35 36

US services export categories in 2007 were royalties and license fees and businessprofessional and technical services which increased by 144 and 184 percent over 2006 to$713 billion and $561 billion respectively Exports of financial services experienced themost rapid growth among all categories of US private services growing by 221 percentto $453 billion in 2007

Imports

Travel also ranked as the largest category of US private cross-border imports increasingby 61 percent from $720 billion in 2006 to $764 billion in 2007 representing 227 percentof total services imports (appendix table A3) The measured pace of this increase relativeto exports may be attributable to a decline in the value of the US dollar and increased oilprices Other significant categories for US imports of services in 2007 were freight37

transportation which totaled $456 billion and insurance services which totaled $380

1-11

billion While travel freight transportation and insurance were the largest US privateservices import categories in terms of value imports in two categoriesmdashbusinessprofessional and technical services and financial servicesmdashexperienced the most significantgrowth in 2007 increasing by 339 and 393 percent to $212 billion and $118 billionrespectively

US Services Trade With Leading Partners

Table 12 shows US services trade with major trading partners for 2007 The EU was boththe United Statesrsquo largest export market and largest import supplier accounting for 355percent of total US services exports and 393 percent of total US services imports (figures16 and 17) Canada and Japan followed the EU as the second and third most significantmarkets for US services trade in 2007 In addition to a large regional trade surplus withthe EU ($325 billion) the United States maintained large bilateral services trade surpluseswith Canada ($209 billion) Japan ($184 billion) Mexico ($82 billion) and Korea ($57billion) In marked contrast to the large US deficit in goods trade with China as shownabove the United States recorded a services trade surplus of $50 billion with China in 2007

TABLE 12 US private services trade with major trading partners and the world 2007 (million dollars)

Major trading partner Exports ImportsTrade

balance

EU-27 a 164311 131771 32540

Canada 46566 25687 20879

Japan 43462 25016 18446

Mexico 24221 16070 8151

China 13083 8090 4993

Korea 12385 6685 5700

Australia 9755 6239 3516

Brazil 8711 3126 5585

India 8211 7331 880

Taiwan 8031 7172 859

Other 123498 98116 25382

World 462234 335303 126931

Source US Department of Commerce Bureau of Economic Analysis website ldquoUS Economic Accountsrdquo

Note Data are preliminary estimates

EU-27 also includes data from the European Atomic Energy Community and the European Investment Bank Ina

addition data for 2007 include Bulgaria and Romania

1-12

2-1

CHAPTER 2Administration of US Trade Laws andRegulations

This chapter surveys activities related to the administration of US trade laws during 2007It covers import relief laws unfair trade laws programs affecting textile and apparelimports and certain other trade provisions including the US Generalized System ofPreferences (GSP) the African Growth and Opportunity Act (AGOA) the Andean TradePreference Act (ATPA) the Caribbean Basin Economic Recovery Act (CBERA) and theCaribbean Basin Trade Partnership Act (CBTPA)

Import Relief Laws

Safeguard Actions

This section covers only safeguard actions under provisions administered by the USITCincluding global safeguards provided for in sections 201ndash204 of the Trade Act of 1974China safeguards provided for in section 421 of the Trade Act of 1974 and safeguardsprovided for in various bilateral free trade agreements involving the United StatesSafeguard actions under provisions administered by other US government agencies suchas the China textile safeguard actions by the US Department of Commerce (Commerce)are described later in this chapter

The USITC did not conduct any safeguard investigations during 2007 no safeguardmeasures under provisions administered by the USITC were in place during calendar year2007 and no safeguard petitions filed under these provisions were pending before theUSITC at the end of 2007

Adjustment Assistance

The United States maintains a trade adjustment assistance (TAA) program for the purposeof assisting workers firms and farmers dislocated as a result of federal policies that reducedbarriers to foreign trade The program for workers is administered by the US Secretary ofLabor the program for firms by the US Secretary of Commerce and the program forfarmers by the US Secretary of Agriculture The eligibility requirements benefits andprocedures for the program are set forth in Parts 2 3 and 6 respectively of Title II of theTrade Act of 1974 as amended (19 USC 2271-2401) Program benefits available forqualifying petitioning workers consist principally of trade readjustment allowancesemployment services training and job search and relocation allowances Program benefitsfor qualifying petitioning firms consist of technical assistance Program benefits forpetitioning farmers or agricultural commodity producers (including livestock producers) are

Petitions may be filed by a group of three or more workers by a company official by ldquoOne-Stoprdquo1

operators or partners (including state employment security agencies and dislocated worker units) or by aunion or other duly authorized representative of such workers The workers on whose behalf a petition isfiled must be or have been employed at the firm or subdivision identified in the petition A completedpetition describes a group of workers working at a specific location for a specific company producing aspecific product or group of products If the group of workers described in the petition is certified thecertification will cover all workers in the group whether or not their names are on the petition USDepartment of Labor ETA Web site section ldquoTrade Adjustment Assistance (TAA) and AlternativeAdjustment Assistance (ATAA) Application Processrdquo The number of petitions certified for benefits and services and petitions denied will not add up to the2

total number of petitions received because the numbers do not reflect petitions that were terminated prior to adetermination and petitions in which a determination was made in the following fiscal year For workers to be certified as eligible to apply for TAA the Secretary of Labor must determine that3

workers in a firm have become or are threatened to become totally or partially separated that the firmrsquossales or production has decreased absolutely and that increases in like or directly competitive importedproducts contributed importantly to the total or partial separation and to the decline in the firmrsquos sales orproduction Workers certified for TAA are provided with a certification of eligibility and may apply for TAAbenefits at the nearest office of the State Employment Security Agency For further information see USDOLETA ldquoTrade Adjustment Assistance (TAA) and Alternative Adjustment Assistance (ATAA) ApplicationProcessrdquo USDA FAS ldquoPrograms and OpportunitiesmdashTrade Adjustment Assistancerdquo4

httpwwwfasusdagovitptaataaasp (accessed May 20 2008)

2-2

generally in the form of cash payments based on a formula related to commodity prices andlimited to a maximum of $10000 per producer in any 12-month period

Trade Adjustment Assistance for Workers

The US Department of Labor (USDOL) received 2218 TAA petitions during fiscal year1

(FY) 2007 (October 1 2006 through September 30 2007) (table 21) The FY 2007 figurerepresents a decrease from the 2495 TAA petitions received in FY 2006 Table 21 showsthe results of TAA petitions determinations during FY 2006 and FY 2007 In FY 2007 atotal of 1443 petitions were certified as eligible for benefits and services and 614 petitionswere denied a decrease from 1447 petitions certified and from 830 petitions denied in FY2006 A total of 146480 workers were certified for TAA benefits and services in FY 20072 3

This was an increase from the 119605 workers certified in FY 2006 Table 22 presents dataon benefits and services provided under the TAA program There were 47048 new TAArecipients in FY 2007 compared to 53491 new recipients in FY 2006 The USDOLappropriated $855 million in TAA funding to assist workers certified as eligible to receivebenefits and services under the TAA program in FY 2007 a decrease from $966 million inFY 2006

Trade Adjustment Assistance for Farmers

The statutory authority for the TAA for Farmers program expired on December 31 20074

Of the eight petitions filed under the TAA for Farmers program in FY 2007 none werecertified and no cash benefits were paid

Address all communications toSecretary to the Commission

United States International Trade CommissionWashington DC 20436

US International Trade Commission

Director of Economics

Robert B Koopman

Director of Operations

Robert A Rogowsky

COMMISSIONERS

Shara L Aranoff ChairmanDaniel R Pearson Vice Chairman

Deanna Tanner OkunCharlotte R Lane

Irving A WilliamsonDean A Pinkert

US International Trade CommissionWashington DC 20436

wwwusitcgov

July 2008Publication 4026

The Year in Trade 2007Operation of the Trade Agreements Program

59th Report

This report was principally prepared by

The Office of Economics

Arona Butcher Project LeaderJustino De La Cruz Deputy Project Leader

Nannette Christ Kelly Clark Nick Grossman William Greene Joanne GuthAlexander Hammer Walker Pollard James Stamps and

Edward C Wilson

Office of the General CounselWilliam W Gearhart and Robin Turner

Office of Tariff Affairs and Trade AgreementsNaomi Freeman and Dan Shepherdson

Office of InvestigationsMary Messer and Andy Rylyk

Office of Unfair Import InvestigationsAnne Goalwin

Office of IndustriesKim Freund Dawn Heuschel Laura Rodriguez Donald Sussman

Audrey Tafoya and Isaac Wohl

Office of Information Technology SystemsBarbara V Bobbitt

Supporting assistance was provided byPatricia M Thomas

InternLauren Deason

Office of Publishing

iii

PREFACEThis report is the 59th in a series of annual reports submitted to the US Congress undersection 163(c) of the Trade Act of 1974 (19 USC 2213(c)) and its predecessor legislationSection 163(c) of the Trade Act of 1974 states that ldquothe International Trade Commissionshall submit to the Congress at least once a year a factual report on the operation of thetrade agreements programrdquo

This report is one of the principal means by which the US International Trade Commissionprovides Congress with factual information on trade policy and its administration forcalendar year 2007 The trade agreements program includes ldquoall activities consisting of orrelated to the administration of international agreements which primarily concern trade andwhich are concluded pursuant to the authority vested in the President by the Constitutionrdquoand congressional legislation

v

TABLE OF CONTENTS

Page

Preface iii

Abbreviations and Acronyms xi

Executive Summary xv

Chapter 1 Overview of US Trade 1-1Scope and approach of the report 1-1Overview of the US economy in 2007 1-1

Exchange-rate trends 1-2Balance of payments 1-3Trade in goods and services 1-4

US trade in goods in 2007 1-5US merchandise trade by product category 1-5

Exports 1-5Imports 1-5

US merchandise trade with leading partners 1-6US trade in services in 2007 1-9

US services trade by product category 1-9Exports 1-9Imports 1-10

US services trade with leading partners 1-11

Chapter 2 Administration of US Trade Laws and Regulations 2-1Import relief laws 2-1

Safeguard actions 2-1Adjustment assistance 2-1

Trade adjustment assistance for workers 2-2Trade adjustment assistance for farmers 2-2Trade adjustment assistance for firms and industries 2-3

Laws against unfair trade practices 2-4Section 301 investigations 2-4

Active section 301 cases in 2007 2-4New section 301 petitions in 2007 2-4Special 301 2-5

Antidumping and countervailing duty investigations and reviews 2-7Antidumping investigations 2-7Countervailing duty investigations 2-8Reviews of outstanding antidumping and countervailing duty orderssuspension

agreements 2-9Section 337 investigations 2-9

Other import administration laws and programs 2-11Tariff preference programs 2-11

vi

TABLE OF CONTENTSndashContinued

Page

Chapter 2 Administration of US Trade Laws and RegulationsndashContinuedGeneralized System of Preferences 2-11African Growth and Opportunity Act 2-12Andean Trade Preference Act 2-16Caribbean Basin Economic Recovery Act 2-18

Textile and apparel developments in 2007 2-20US textile and apparel imports in 2007 2-20US-China textile and apparel trade 2-22Textile and apparel imports under AGOA ATPA and CBERA 2-22Textile and apparel imports under the Haitian Hemispheric Opportunity through

Trade Partnership Encouragement (HHOPE) Act 2-23US textile and apparel imports under CAFTA-DR 2-24

Chapter 3 Selected Trade Developments in the WTO OECD and APEC 3-1World Trade Organization 3-1

Doha trade negotiations 3-2Negotiations resumed in February 2007 3-2G-4 meetings at Potsdam 3-3Negotiations suspended in June 2007 3-4October 2007 General Council and TNC meetings 3-5November 2007 TNC meeting 3-5

General Council 3-6Work programs decisions and reviews 3-7

Transparency for preferential trade arrangements 3-7TRIPS Council matters 3-7Small economies 3-7Special and differential treatment 3-8Harmonization of nonpreferential rules of origin 3-9Aid for trade 3-10Cotton initiative 3-11Annual review of Chinarsquos protocol of accession to the WTO 3-12Biennial review of US Jones Act legislation 3-12Draft decision on Article 274 of the Agreement on Subsidies and

Countervailing Measures 3-12Accessions 3-13Waivers 3-13Seventh WTO ministerial conference 3-13

Dispute settlement 3-15Consultations and new panels established 3-15

Panels established during 2007 at the request of the United States 3-15Measures by China granting refunds reductions or exemptions from taxes

and other payments (DS358) 3-16

vii

TABLE OF CONTENTSndashContinued

Page

Chapter 3 Selected Trade Developments in the WTO OECD and APECndashContinuedMeasures by India imposing ldquoadditional dutiesrdquo or ldquoextra additional dutiesrdquo

including wines and distilled products (DS360) 3-17Measures by China affecting the protection of and enforcement of

intellectual property rights (DS362) 3-17Measures by China affecting trading rights and distribution services for

certain publications and audiovisual entertainment products (DS363) 3-18Panels established in which the United States is named as the respondent 3-18

Continued existence and application of ldquozeroingrdquo methodology in USantidumping duty reviews (DS350) 3-18

US subsidies and other domestic support for corn and other agriculturalproducts (DS357) 3-19

US domestic support and export credit guarantees for agriculturalproducts (DS365) 3-19

Appellate Body and panel reports adopted during 2007 that involved the UnitedStates 3-19

Reports in which the United States was the complainant 3-20Measures by Turkey affecting the importation of rice (DS334) 3-20

Reports in which the United States was the respondent 3-21US antidumping ldquozeroingrdquo methodology (DS322) 3-21US antidumping measure on shrimp from Ecuador (DS335) 3-22

Organization for Economic Cooperation and Development 3-22Global policy forums 3-22Nonmember focus 3-23Trade Committee priority topics 3-24

Export credits 3-25Aircraft sector understanding 3-25Export credit understandings for other sectors 3-26

Asia-Pacific Economic Cooperation 3-26Action Agenda 3-27Committee on Trade and Investment 3-27

Chapter 4 US Free Trade Agreements 4-1FTAs in force during 2007 4-1Other FTA developments during 2007 4-3

US-Panama Trade Promotion Agreement 4-5US-Korea Free Trade Agreement 4-6

North American Free Trade Agreement 4-7Free Trade Commission 4-8Commission for Labor Cooperation 4-9Commission for Environmental Cooperation 4-10Dispute settlement 4-12

Chapter 11 dispute settlement developments 4-13Chapter 19 dispute panel reviews 4-13

viii

TABLE OF CONTENTSndashContinued

Page

Chapter 5 US Relations with Major Trading Partners 5-1European Union 5-1

US-EU summit 5-2Canada 5-3

Agriculture 5-4Livestock 5-4Potatoes 5-4Softwood lumber agreement 5-5Aviation 5-5

China 5-6Intellectual property rights enforcement 5-6Product safety 5-7Market access 5-8

Goods 5-8Services 5-9

Global trade imbalances and Chinarsquos exchange-rate regime 5-9Mexico 5-10

Cross-border trucking between the United States and Mexico 5-10Japan 5-12

Beef 5-12Deregulation 5-13

Korea 5-14US-Korea FTA 5-15Beef 5-15

Taiwan 5-16Intellectual property rights 5-16Agriculture 5-17

Beef 5-17Rice 5-18

India 5-18Trade dialogue 5-19Mangoes 5-19Alcoholic beverages 5-20

Bibliography Bibl -1

ix

TABLE OF CONTENTSndashContinued

PageFiguresES1 US trade balance in goods and services 1986ndash2007 xv11 Indices of exchange rates for selected major currencies in relation to the US dollar

daily 2007 1-312 US merchandise trade with the world 2005ndash07 1-613 Leading US export markets by share 2007 1-714 Leading US import sources by share 2007 1-815 US private cross-border services trade with the world 2005ndash07 1-1016 Leading US private services exports 2007 1-1217 Leading US private services imports 2007 1-12

TablesES1 Summary of 2007 trade agreement activities xxv11 US merchandise trade with major trading partners and the world 2007 1-712 US private services trade with major trading partners and the world 2007 1-1121 Petitions certified and denied under the TAA program and estimated number of workers

affected FY 2006 and FY 2007 2-322 Benefits and services provided under the TAA program FY 2006 and FY 2007 2-323 Antidumping duty orders that became effective during 2007 2-824 US imports for consumption from GSP beneficiaries and the world 2007 2-1325 US imports for consumption from AGOA countries 2005ndash07 2-1526 US imports for consumption from ATPA countries 2005ndash07 2-1727 US imports for consumption from CBERA countries 2005ndash07 2-1928 US imports of textiles and apparel in 2007 by quantity percentage change in imports

2006ndash07 and share of total US imports of textiles and apparel for major USsuppliers selected regional groups and the world 2-21

31 WTO membership in 2007 3-1432 WTO observers in 2007 3-1533 WTO dispute settlement panels established in 2007 3-1641 US merchandise trade with FTA partners total trade 2005ndash07 4-242 US imports entered under FTA provisions by FTA partner 2005ndash07 4-343 Status of US FTA negotiations during 2007 4-544 US merchandise trade with NAFTA partners 2005ndash07 4-845 Active files through 2007 under article 14 of the North American Agreement on

Environmental Cooperation 4-1146 Citizen submissions on enforcement under article 15 of the North American Agreement

on Environmental Cooperation submissions active during 2007 4-1247 NAFTA chapter 19 binational panels active reviews in 2007 4-14

Appendix tablesA1 US merchandise trade with world by SITC codes (revision 3) 2005ndash07 A-3A2 US private services exports to the world by category 2005ndash07 A-4A3 US private services imports from the world by category 2005ndash07 A-5A4 Antidumping cases active in 2007 by USITC investigation number A-6

x

TABLE OF CONTENTSndashContinued

PageAppendix tablesndashContinuedA5 Antidumping duty orders in effect as of December 31 2007 A-7A6 Countervailing duty cases active in 2007 by USITC investigation number A-13A7 Countervailing duty orders in effect as of December 31 2007 A-14A8 Reviews of existing antidumping and countervailing duty orders completed in 2007

by date of completion A-15A9 Section 337 investigations and related proceedings completed by the US International

Trade Commission during 2007 and those pending on December 31 2007 A-17A10 Outstanding Section 337 exclusion orders as of December 31 2007 A-26A11 US imports for consumption of leading GSP duty-free imports 2007 A-31A12 US imports for consumption and imports eligible for GSP treatment by import

categories under the Harmonized Tariff Schedule 2007 A-32A13 US imports for consumption under AGOA provisions by source 2005ndash07 A-33A14 US imports for consumption of leading imports under AGOA 2005ndash07 A-34A15 US imports for consumption under ATPA provisions by source 2005ndash07 A-35A16 US imports for consumption of leading imports under ATPA 2005ndash07 A-36A17 US imports for consumption under CBERA provisions by source 2005ndash07 A-37A18 US imports for consumption of leading imports under CBERA 2005ndash07 A-38A19 WTO dispute-settlement cases to which the United States was a party developments

in 2007 A-39A20 NAFTA dispute-settlement cases to which the United States was a party developments

in 2007 A-46A21 US merchandise trade with the European Union by SITC codes (revision 3) 2005ndash07 A-47A22 Leading US exports to the European Union by Schedule B subheading 2005ndash07 A-48A23 Leading US imports from the European Union by HTS subheading 2005ndash07 A-49A24 US merchandise trade with Canada by SITC codes (revision 3) 2005ndash07 A-50A25 Leading US exports to Canada by Schedule B subheading 2005ndash07 A-51A26 Leading US imports from Canada by HTS subheading 2005ndash07 A-52A27 US merchandise trade with China by SITC codes (revision 3) 2005ndash07 A-53A28 Leading US exports to China by Schedule B subheading 2005ndash07 A-54A29 Leading US imports from China by HTS subheading 2005ndash07 A-55A30 US merchandise trade with Mexico by SITC codes (revision 3) 2005ndash07 A-57A31 Leading US exports to Mexico by Schedule B subheading 2005ndash07 A-58A32 Leading US imports from Mexico by HTS subheading 2005ndash07 A-59A33 US merchandise trade with Japan by SITC codes (revision 3) 2005ndash07 A-61A34 Leading US exports to Japan by Schedule B subheading 2005ndash07 A-62A35 Leading US imports from Japan by HTS subheading 2005ndash07 A-63A36 US merchandise trade with Korea by SITC codes (revision 3) 2005ndash07 A-65A37 Leading US exports to Korea by Schedule B subheading 2005ndash07 A-66A38 Leading US imports from Korea by HTS subheading 2005ndash07 A-67A39 US merchandise trade with Taiwan by SITC codes (revision 3) 2005ndash07 A-69A40 Leading US exports to Taiwan by Schedule B subheading 2005ndash07 A-70A41 Leading US imports from Taiwan by HTS subheading 2005ndash07 A-71A42 US merchandise trade with India by SITC codes (revision 3) 2005ndash07 A-73A43 Leading US exports to India by Schedule B subheading 2005ndash07 A-74A44 Leading US imports from India by HTS subheading 2005ndash07 A-75

xi

List of Frequently Used Abbreviations andAcronyms

ACP Former European Colonies in Africa Caribbean and the PacificAD AntidumpingAFT Aid for TradeAGOA African Growth and Opportunity ActAIT American Institute in TaiwanAPEC Asia-Pacific Economic CooperationAPHIS Animal and Plant Health Inspection Service (USDA)AQSIQ General Administration of Quality Supervision Inspection and Quarantine

(China)ASU Aircraft Sector UnderstandingATPA Andean Trade Preference ActATPDEA Andean Trade Promotion and Drug Eradication Act BECC Border Environment Cooperation Commission (NAFTA)BSE Bovine Spongiform EncephalopathyCAFTA-DR Dominican Republic-Central America-United States Free Trade Agreement CBERA Caribbean Basin Economic Recovery ActCBI Caribbean Basin InitiativeCBTPA Caribbean Basin Trade Partnership ActCD Compact DiscCEC Commission for Environmental Cooperation (NAFTA) CFTA United States-Canada Free Trade AgreementCITA Committee for the Implementation of Textile Agreements (USDOC)CLC Commission for Labor Cooperation (NAFTA)CNL Competitive Need LimitationCSQ Country Specific QuotaCTD Committee on Trade and Development (WTO)CTDSS Committee on Trade and Development in Special SessionCTI Committee on Trade and Investment (APEC)CVD Countervailing DutyDDA Doha Development AgendaDSB WTO Dispute Settlement BodyDSU WTO Dispute Settlement UnderstandingDVD Digital Video DiscECA Export Credit Arrangement (OECD)EDA Economic Development Administration (USDOC)EIF Enhanced Integrated Framework (WT)EPA United States Environmental Protection AgencyEU European UnionFAS Foreign Agricultural Service (USDA)FBI Federal Bureau of InvestigationFMCSA Federal Motor Carrier Safety Administration (USDOT)FTA Free Trade AgreementFTAA Free Trade Area of the AmericasFTC Free Trade Commission (NAFTA)FY Fiscal Year

xii

G-4 G-4 Bloc (Brazil China India South Africa)G-20 G-20 Bloc of Developing CountriesGATS General Agreement on Trade in ServicesGATT General Agreement on Tariffs and TradeGDP Gross Domestic ProductGOI Government of IndiaGSP Generalized System of PreferencesHHOPE Haitian Hemispheric Opportunity through Partnership Encouragement ActHS Harmonized SystemHTS Harmonized Tariff Schedule ( United States)IF Integrated FrameworkIMF International Monetary FundIPR Intellectual Property RightsITA International Trade Administration (USDOC)JCCT US-China Joint Commission on Commerce and TradeLCIA London Court of International ArbitrationLDB Least-Developed BeneficiaryLDBDC Least-Developed Beneficiary Developing CountryLTFV Less Than Fair ValueMEA Multilateral Environmental AgreementMOU Memorandum of UnderstandingMPS Ministry of Public Security (China)MRA Mutual Recognition Agreement NAAEC North American Agreement on Environmental Cooperation (NAFTA)NAALC North American Agreement on Labor Cooperation (NAFTA)NADB North American Development BankNAFTA North American Free Trade AgreementNAMA Nonagricultural Market AccessNAO National Administrative Office (NAFTA)NTR Normal Trade RelationsOAS Organization of American StatesOECD Organization for Economic Cooperation and DevelopmentOIE World Organization for Animal HealthOIG Office of the Inspector General (USDOT)OST Office of the Secretary of Transportation (USDOT)OTAI Office of Trade Agreement Implementation (NAFTA)PRC Peoples Republic of ChinaPSAG Private Sector Advisory GroupSampD Special and DifferentialSAARC South Asian Association for Regional CooperationSCM Subsidies and Countervailing MeasuresSED US-China Strategic Economic DialogueSITC Standard Industrial Trade ClassificationSLA Softwood Lumber AgreementSMEs Square Meter EquivalentsSPS Sanitary and Phytosanitary StandardsSSA Sub-Saharan AfricaSVE Small and Vulnerable EconomyTAA Trade Adjustment AssistanceTAAC Trade Adjustment Assistance Center

xiii

TACA Trade Advisory Committee on AfricaTEC Transatlantic Economic CouncilTIFA Trade and Investment Framework AgreementTNC Trade Negotiations CommitteeTPA Trade Promotion AgreementTPF Trade Policy ForumTPL Tariff Preference LevelTRIMS Trade-Related Investment MeasuresTRIPS Trade-Related Aspects of Intellectual Property Rights TRQ Tariff-Rate QuotaUN United NationsUNCTAD United Nations Conference on Trade and DevelopmentUSDA United States Department of AgricultureUSDOC United States Department of CommerceUSDOL United States Department of LaborUSDOS United States Department of StateUSITC United States International Trade CommissionUSTR United States Trade RepresentativeWTO World Trade Organization

xv

EXECUTIVE SUMMARY

The US economy continued to expand for the sixth consecutive year in 2007 although ata slower pace than in previous years US exports of goods and services ($1046 billion)increased more rapidly than US imports ($1943 billion) for the second year in a row (13percent for exports versus 5 percent for imports) leading to a decrease in the trade deficitin goods and services in 2007 (figure ES1) Increases in US exports of machinery andtransport equipment chemicals and related products food and live animals and crudematerials (except fuels) represented almost three-quarters of the total increase in exports in2007 while increases in US imports of machinery and transport equipment and mineralfuels lubricants and related materials represented over one-half of the increase in importsfor the same year The US surplus in services trade increased by 341 percent to $1069billion in 2007 More than one-half of the increase in exports was accounted for by private

Figure ES1 US trade balance in goods and services 1986ndash2007

services that included business professional and technical services insurance services andfinancial services The US dollar depreciated 6 percent in 2007 on a trade-weighted yearlyaverage basis against a basket of currencies including the Canadian dollar the euro theChinese yuan and the Japanese yen The largest depreciation was against the United Statesrsquolargest trading partner Canada Despite the fluctuations during the year the US dollarended the year at approximately where it began the year against the Mexican peso and theBritish pound

A summary of key US trade agreement activities in 2007 is presented below followed bya summary of key activities and developments on a monthly basis for the year Tradeagreement activities during 2007 included the administration of US trade laws and

xvi

regulations US participation in the World Trade Organization (WTO) the Organizationfor Economic Cooperation and Development (OECD) and the Asia-Pacific EconomicCooperation (APEC) forum US negotiation of and participation in free trade agreements(FTAs) and bilateral developments with major trading partners

Key Trade Developments in 2007

Administration of US Trade Laws and Regulations

bull Section 301 One active case under section 301 concerned the European Union(EU) meat hormone directive which the WTO had found violates the Agreementon the Application of Sanitary and Phytosanitary Measures

bull Special 301 The USTRrsquos 2007 special 301 report highlighted weak intellectualproperty rights (IPR) protection and enforcement in China and Russia both ofwhich were placed on the priority watch list Belize and Brazil were moved fromthe priority watch list to the watch list due to improved IPR enforcement TheBahamas and Latvia were removed from the watch list due to their improved IPRenforcement and Bulgaria and Croatia were removed from the watch list due totheir passage of IPR legislation and improved enforcement The EU was removedfrom the watch list principally because it adopted new regulations concerninggeographical indications following an adverse WTO ruling

bull Section 337 investigations During 2007 there were 77 active section 337investigations and ancillary proceedings at the US International TradeCommission (Commission) 39 of which were instituted in 2007 Of these 39 therewere 35 new section 337 investigations and four new ancillary proceedingsrelating to previously concluded investigations All of the new section 337institutions in 2007 included allegations of patent infringement At the close of2007 40 section 337 investigations and related proceedings were pending

bull Antidumping investigations The Commission instituted 33 new antidumpinginvestigations and completed 8 during 2007 Antidumping duty orders were issuedby the US Department of Commerce (Commerce) in 2007 on certain activatedcarbon from China and polyester staple fiber from China

bull Countervailing duty investigations The Commission instituted 7 newcountervailing duty investigations and completed three investigations during 2007However because the Commission made negative determinations in each of thethree investigations (on coated free sheet paper from China Indonesia and Korea)no new countervailing duty orders were issued during 2007

bull Sunset reviews During 2007 Commerce and the Commission instituted 33 sunsetreviews of existing antidumping and countervailing duty orders and theCommission completed 74 reviews resulting in 38 antidumping and countervailingduty orders being continued for five additional years

xvii

bull Trade adjustment assistance In 2007 the US Department of Labor certifiedpetitions covering approximately 146592 workers A total of 1427 petitions werecertified as eligible for benefits and services and 625 petitions were denied

Preferential Trade Programs

bull Generalized System of Preferences (GSP) Duty-free imports entering under theUS GSP program totaled $308 billion in 2007 Angola was the leading GSPbeneficiary in 2007 followed by India Thailand Brazil and Indonesia During2007 East Timor was designated a GSP beneficiary and a least-developed GSPbeneficiary Bulgaria and Romania were removed from GSP status as a result oftheir accession to the EU and the Dominican Republic was removed from the GSPprogram as a result of its accession to the United States-Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) Authorization for the GSPprogram is currently set to expire on December 31 2008

bull African Growth and Opportunity Act (AGOA) A total of 39 sub-Saharan African(SSA) countries were designated for benefits under AGOA as of January 1 2007and 26 SSA countries were eligible for AGOA textile and apparel benefitsDuty-free US imports under AGOA including GSP were valued at $511 billionin 2007 US imports under AGOA exclusive of GSP were valued at $423 billionin 2007 a 170 percent increase from 2006 The increase in AGOA imports wasdriven mainly by increases in US imports of petroleum-related products whichmade up more than 95 percent of imports by value under AGOA This increasewas almost exclusively due to increases in prices rather than volume

bull Andean Trade Preference Act (ATPA) ATPA as amended by the Andean TradePromotion and Drug Eradication Act (ATPDEA) provides duty-free treatment forcertain products of Bolivia Colombia Ecuador and Peru US imports underATPA were valued at $123 billion in 2007 a decrease of 87 percent from $135billion in 2006 Imports under ATPA from each of the four beneficiary countriesdecreased in 2007 Imports from Ecuador decreased by 134 percent in valueduring 2007 mainly because of lower petroleum production Petroleum-relatedproducts accounted for 67 percent of US imports under ATPA in 2007 Otherleading imports under ATPA in 2007 included apparel copper cathodes fresh cutflowers and asparagus

bull Caribbean Basin Economic Recovery Act (CBERA) CBERA as expanded by theCaribbean Basin Trade Partnership Act (CBTPA) provides duty-free and reduced-duty treatment for certain products of designated Caribbean Basin countries In2007 articles from 19 countries and territories were eligible for CBERApreferences US imports under CBERA were valued at $55 billion in 2007 a446 percent decline from $99 billion in 2006 The decline in US imports underCBERA was due to the fact that imports from El Salvador Guatemala Hondurasand Nicaragua entered under CAFTA-DR during 2007 rather than under CBERAThe Dominican Republic was a CBERA beneficiary for only part of 2007 beforeCAFTA-DR entered into force for that country Trinidad and Tobago was theleading supplier of US imports under CBERA in 2007 Mineral fuels methanoland apparel products ranked as the leading US imports under CBERA in 2007

xviii

Textiles and Apparel

bull Trade US imports of textiles and apparel in 2007 totaled 531 billion squaremeter equivalents (SMEs) ($964 billion) an increase of 18 percent by volume and34 percent by value over 2006 Similar to previous years 2007 was characterizedby a shift in US textile and apparel imports from Central American and SouthAmerican countries toward lower-priced Asian suppliersmdashprimarily China butalso Indonesia Bangladesh Vietnam and Cambodia

bull China US imports of textiles and apparel from China increased by $53 billionto $323 billion This increase is mainly attributable to a $42 billion increase inUS imports of apparel articles Of the total US textile and apparel imports fromChina in 2007 $227 billion were apparel and $96 billion were textiles LeadingUS apparel imports from China in 2007 included knit sweaters pullovers andvests knit babiesrsquo garments and accessories and womenrsquos or girlsrsquo trousers andshorts Leading imports of textiles from China included certain made-up textilesarticles bedding articles and certain curtains Chinarsquos share of the US importmarket expanded to 402 percent by volume in 2007 compared with 357 percentin 2006 In 2007 34 categories of textiles and apparel products were subject to 21quotas under the 2005 memorandum of understanding between the United Statesand China which established quotas on US imports of selected textile and apparelproducts from China from January 1 2006 through December 31 2008 During2007 quotas filled at an average rate of 619 percent

bull AGOA ATPA and CBERA In 2007 imports of textiles and apparel eligible forduty-free entry into the United States totaled $13 billion (327 million SMEs)under AGOA $12 billion (177 million SMEs) under ATPAATPDEA and $927million (481 million SMEs) under CBERACBTPA For the first time since 2004the volume of US imports under AGOA increased slightly (28 percent) Thevolume of US imports of textiles and apparel declined in 2007 under bothATPDEA (by 140 percent) and the CBTPA (by 658 percent)

bull Haitian Hemispheric Opportunity through Trade Partnership Encouragement(HHOPE) Act Haiti began shipping apparel to the United States under theHHOPE Act in the second half of 2007 US imports of textiles and appareleligible for duty-free entry under the HHOPE Act in 2007 totaled $136 million(40 million SMEs) or 3 percent of total US textile and apparel imports fromHaiti (the remaining imports entering under CBTPA) The CBTPA program underwhich US imports from Haiti have grown steadily in recent years has contributedto a viable apparel manufacturing sector in Haiti and created a base from which theindustry can benefit from enhanced preferences afforded by the HHOPE Act

WTO OECD and APEC

bull WTO developments The Doha Development Agenda multilateral tradenegotiations resumed on February 7 2007 only to be suspended four months laterin June The G-4 countriesmdashBrazil the EU India and the United Statesmdashmetduring June 19ndash21 2007 in an effort to reach some convergence in negotiatingpositions regarding market access for agricultural products domestic support for

xix

agricultural producers and market access for nonagricultural products Issuesraised at the WTO General Council included preferential trade arrangements smalland vulnerable economies the harmonization of nonpreferential rules of originand the Aid for Trade initiative The General Council also held its annual reviewof Chinarsquos Protocol of Accession to the WTO and its biennial review of the USJones Act legislation

bull WTO dispute settlement During 2007 WTO members filed 13 new requests forWTO dispute settlement consultations This compares with 22 in 2006 12 in 2005and 19 in 2004 Thirteen new dispute settlement panels were established in 2007One of these panels (DS358mdashreductions or exemptions from taxes) was laterterminated when the United States and China reached a mutually agreed settlementin December 2007 and another (DS359mdash reductions or exemptions from taxes)was terminated when Mexico and China reached a mutually agreed settlement inFebruary 2008 Four cases involved the United States as complainant (DS358DS360Indiamdashadditional and extra duties on imports DS362ChinamdashIPRenforcement and DS363Chinamdash trading rights and distribution services foraudiovisual entertainment products) Other complainants that brought one or moredispute settlement cases in 2007 included Argentina (3) Brazil (1) the EU (3)Mexico (1) and Panama (1) Two dispute settlement panels involved the UnitedStates as respondent (DS350EUmdashldquozeroingrdquo methodology andDS365Brazilmdashdomestic support and export credit for agricultural products)Other respondents cited in one or more dispute settlement cases in 2007 includedBrazil (1) Chile (2) China (4) Colombia (1) India (2) and Mexico (1) The tradeissues implicated in these cases included measures affecting antidumpingcountervailing duty and safeguard matters intellectual property rights taxmatters and measures affecting border and internal trade issues

bull OECD developments The OECD Trade Committee held several global policyforums during 2007 addressing subjects such as trade and labor market adjustmentand the international sourcing of information technology services The committeecompleted its comprehensive reviews of the economies of China and India andcontinued discussions on trade issues regarding other major nonmembereconomies

bull APEC developments During the September 2007 annual meeting APEC ministersagreed upon an Action Plan to stimulate energy efficiency and environmentalprotection in their region Also in 2007 APECrsquos Committee on Trade andInvestment agreed on measures with respect to regional and free trade agreementselectronic commerce rules of origin and origin procedures and sanitary andphytosanitary measures formulated a plan aimed at reducing intra-regionaltransaction costs associated with trade developed guidelines to enhance IPRcapacity building in the region and agreed on common procedures for acquiringnew patents in member countries

FTAs in Force During 2007

bull US FTAs in force in 2007 The United States was a party to nine FTAs as ofDecember 31 2007 CAFTA-DR (2006ndash07) the US-Bahrain FTA (2006) the

xx

US-Morocco FTA (2006) the US-Australia FTA (2005) the US-Chile FTA(2004) the US-Singapore FTA (2004) the US-Jordan FTA (2001) the NorthAmerican Free Trade Agreement (NAFTA) (1994) and the US-Israel FTA(1985)

bull FTA legislative developments The US Congress and the Administration agreedon a bipartisan trade deal on May 10 2007 calling for the inclusion of core laborand environmental standards among other things in the text of pending and futuretrade agreements The Presidentrsquos statutory authority to negotiate trade agreementsthat Congress can approve or disapprove but cannot amend lapsed on July 1 2007without being renewed

bull Other FTA developments The United States concluded FTA negotiations withPanama on December 19 2006 and the two parties signed the US-Panama TradePromotion Agreement (TPA) on June 28 2007 The United States concluded FTAnegotiations with Korea on April 1 2007 and the two parties signed a bilateralFTA agreement on June 30 2007 The United States signed bilateral agreementswith Colombia Oman and Peru in 2006 The United States and Peru concludednegotiations for an amended US-Peru TPA on June 25 2007 that was ratified byCongress in December 2007 and President Bush signed the implementinglegislation on December 14 2007 The United States and Colombia concludednegotiations for an amended US-Colombia TPA on June 28 2007 Howevernone of those bilateral agreements entered into force during 2007

bull US merchandise trade flows with FTA partners Total US exports of goods toFTA partners in 2007 were valued at $406 billion and accounted for 388 percentof total US exports while total US imports of goods from FTA partners werevalued at approximately $593 billion and accounted for 322 percent of total USimports The United States had an overall merchandise trade deficit with FTApartners in 2007 of $188 billion including a record high $190 billion deficit withNAFTA partners Australia Singapore and Morocco were the only FTA partnerswith whom the United States recorded a merchandise trade surplus during 2007

bull NAFTA developments Although NAFTA was launched on January 1 1994 thelast of its trade provisions were only fully implemented on January 1 2008 In2007 US two-way merchandise trade (exports plus imports) with NAFTApartners totaled $855 billion a 52 percent increase over 2006

bull NAFTA dispute settlement Chapter 11 of NAFTA includes provisions designedto protect cross-border investors and facilitate the settlement of investmentdisputes In 2007 there were five active chapter 11 cases against the United Statesby Canadian investors There were also six active chapter 11 cases by USinvestors against Canada and four active chapter 11 cases by US investors againstMexico Chapter 19 of NAFTA contains a mechanism that provides for review bya binational panel of final determinations made by national investigatingauthorities in antidumping and countervailing duty cases At the end of 2007 theNAFTA Secretariat listed 12 active binational panels under chapter 19 The twobinational panels formed in 2007 under chapter 19 challenged US agenciesrsquodeterminations on products from Mexico

The 27 members of the EU in 2007 were Austria Belgium Bulgaria Cyprus the Czech Republic1

Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia LithuaniaLuxembourg Malta the Netherlands Poland Portugal Romania the Slovak Republic Slovenia SpainSweden and the United Kingdom

xxi

Trade Activities with Major Trading Partners

European Union

bull The EU is the second-largest two-way (exports plus imports) US trading partner1

behind the combined NAFTA market of Canada and Mexico In 2007 US two-way merchandise trade with the EU totaled $5785 billion representing nearly one-fifth of US trade with the world US exports of goods to the EU were valued at$2263 billion in 2007 and US imports of goods from the EU were valued at$3522 billion resulting in a US merchandise trade deficit with the EU of $1259billion in 2007 Leading US exports to the EU during the year included aircraftand aircraft parts medicaments passenger cars blood fractions and gold LeadingUS imports from the EU included certain medicaments passenger cars petroleumderivatives and nucleic acids and their salts

bull There were several active WTO dispute settlement proceedings during 2007 inwhich both the United States and the EU were parties either as the complainantor the respondent Four of these cases involved alleged subsidies to their respectivecivil aircraft industries The United States and EU also created the TransatlanticEconomic Council to guide efforts to lower US and EU barriers to trade andinvestment

Canada

bull Canada was the second-largest export market for US goods in 2007 following theEU and the largest single-country trading partner of the United States withtwo-way merchandise trade valued at $5256 billion US merchandise exports toCanada were valued at $2131 billion in 2007 and US merchandise imports fromCanada were valued at $3125 billion resulting in a $994 billion US merchandisetrade deficit with Canada in 2007 Leading US exports to Canada during the yearincluded passenger and transport motor vehicles parts and accessories for motorvehicles and energy products such as natural gas and crude oils Leading USimports from Canada in 2007 included natural gas and crude oils and passengermotor vehicles

bull The United States and Canada conducted bilateral discussions on a number ofagricultural issues during 2007 notably the resumption of livestock tradefollowing concerns about bovine spongiform encephalopathy (BSE) and theliberalization of Canadian restrictions on imports of bulk shipments of potatoesThe United States also requested consultations with Canada under the US-CanadaSoftwood Lumber Agreement signed in September 2006 to resolve concernsregarding Canadarsquos implementation of several provisions The two countries alsoimplemented a bilateral air service agreement that removes remaining restrictionson civil aviation services between the two countries

xxii

China

bull China was the second-largest single-country trading partner of the United Stateswith two-way merchandise trade valued at $3838 billion in 2007 USmerchandise exports to China were valued at $610 billion and US merchandiseimports from China were valued at $3231 billion resulting in a $2621 billionUS merchandise trade deficit with China in 2007 accounting for 292 percent ofthe US global merchandise trade deficit in that year Leading US exports toChina included airplanes soybeans electronic integrated circuits and copper andaluminum waste and scrap Leading US imports from China included computersand their parts wireless telephones miscellaneous wheeled toys video games andfootwear

bull US-China bilateral trade relations in 2007 focused on IPR enforcement productsafety and market access for goods and services in China as well as the twocountriesrsquo global trade imbalances

Mexico

bull Mexico was the third-largest single-country trading partner of the United Stateswith two-way merchandise trade valued at $3296 billion in 2007 USmerchandise exports to Mexico were valued at $1194 billion and USmerchandise imports from Mexico were valued at $2102 billion resulting in a$908 billion US merchandise trade deficit with Mexico Leading US exports toMexico included machinery and transportation equipment Leading US importsfrom Mexico included crude oils and motor vehicles

bull On September 6 2007 the US Department of Transportation initiated the Cross-Border Trucking Demonstration Project which permits up to 100 Mexico-domiciled motor carriers to operate throughout the United States for one year

Japan

bull US two-way merchandise trade with Japan totaled $2030 billion in 2007 USmerchandise exports to Japan were valued at $581 billion and US merchandiseimports from Japan totaled $1449 billion resulting in an $868 billion USmerchandise trade deficit with Japan in 2007 Leading US exports to Japanincluded airplanes and other aircraft corn parts of airplanes or helicoptersmachines and apparatus for the manufacture of semiconductor devices orelectronic integrated circuits and soybeans Leading US imports from Japanincluded passenger motor vehicles parts and accessories of printing machinerytelevision cameras digital cameras and video camera recorders and gear boxesand parts for motor vehicles

bull The US-Japan Economic Partnership for Growth continues to serve as theprimary forum for trade and economic dialogue between the two countries In2007 discussions under this framework focused on US beef exports to Japan andderegulation of Japanrsquos economy including economy-wide and sector-specific

xxiii

reforms such as certification of communications equipment and air transportrestrictions

Korea

bull US two-way merchandise trade with Korea totaled $784 billion in 2007 USmerchandise exports to Korea were valued at $330 billion and US merchandiseimports from Korea totaled $454 billion resulting in a $123 billion USmerchandise trade deficit with Korea Leading US exports to Korea includedcomputer chips aircraft and machines and mechanical appliances havingindividual functions (mostly semiconductor production machinery) Leading USimports from Korea included automobiles cellular telephones computer chips andcomputer parts and accessories (mainly memory modules)

bull US-Korea trade relations in 2007 were dominated by FTA negotiations andnegotiations over US beef exports to Korea which had been suspended becauseof Korean concerns with BSE

Taiwan

bull US two-way merchandise trade with Taiwan totaled $625 billion in 2007 USmerchandise exports to Taiwan were valued at $245 billion and US merchandiseimports from Taiwan totaled $381 billion resulting in a $145 billion USmerchandise trade deficit with Taiwan in 2007 Leading US exports to Taiwanin 2007 included digital integrated circuits semiconductor and flat panelmanufacturing and assembly equipment aircraft corn and soybeans Leading USimports from Taiwan included digital integrated circuits transmission apparatusfor radiotelephony reception apparatus for television computer parts andnavigational and remote control radar machines

bull During the sixth session of the Trade and Investment Framework Agreement inJuly 2007 US-Taiwan negotiations focused on IPR enforcement in Taiwan USaccess to Taiwanrsquos beef market and Taiwanrsquos rice procurement practices

India

bull US two-way merchandise trade with India totaled $402 billion in 2007 USmerchandise exports to India were valued at $163 billion and US merchandiseimports from India totaled $239 billion resulting in a $76 billion merchandisetrade deficit with India in 2007 Leading US exports to India during the yearincluded aircraft fertilizers nonindustrial diamonds and nonmonetary goldLeading US imports from India included nonindustrial diamonds articles ofjewelry and parts of precious metals (excluding silver) and womenrsquos or girlsrsquocotton blouses shirts and blouses (not knitted or crocheted)

xxiv

bull During 2007 India resumed shipments of mangoes to the US market ending an18-year bilateral trade dispute under the condition that the mangoes undergoirradiation in India to eliminate pests

Table ES1 provides a summary of key activities and developments on a monthly basis forthe year 2007

xxv

TABLE ES1 Summary of 2007 trade agreement activities

January

1-Bulgaria and Romania become EU membersand are no longer designated as beneficiarydeveloping countries under theUS GSPprogram

8-Canada requests WTO consultations with theUnited States regarding US domestic supportmeasures for corn and other agriculturalproducts

8-Chiles status is elevated to ldquopriority watch listrdquofrom ldquowatch listrdquo as the result of an out-of-cycleSpecial 301 review of intellectual propertyprotections

10-The State Department certifies Madagascarand recertifies Nigeria as eligible to export wildshrimp to the United States

16-The EU lifts its restrictions requiring importedUS corn gluten feed and brewers grain to becertified as free of the genetically modifiedorganism Bt10

16-The United States appeals a WTO disputepanel ruling that found that the United Statesfailed to comply with an earlier panel rulingfaulting US sunset review procedures inantidumping cases

25-The United States and Uruguay sign a Tradeand Investment Framework Agreement (TIFA)

26-The United States and Mexico sign a customscooperation agreement to implement the apparelcumulation provisions of CAFTA-DR

30-A WTO panel upholds Ecuadors claim thatthe US Department of Commerce violated WTOantidumping rules by using ldquozeroingrdquo in itsoriginal investigation on imports of shrimp fromEcuador

February

2-The United States requests dispute settlementconsultations with China over prohibitedsubsidies

2-Canada announces that it will no longer requiretesting for bluetongue in cattle sheep and goatsimported from the United States

16-The United States and Liberia sign a TIFA

FebruarymdashContinued

16-The United States signs an agreement withJapan to facilitate trade in telecommunicationsequipment

16-Japan suspends imports of beef from aLexington Nebraska plant for potential violationof joint import rules

23-A US district court rules that an Illinois lawprohibiting certain investments in companiesdoing business in or with Sudan isunconstitutional

March

1-CAFTA-DR enters into force for the DominicanRepublic

2-Japan suspends imports of sausages from aCalifornia meat packer based on the suspicionthat the products contained banned USprocessed beef

6-The United States requests WTO disputesettlement consultations with India over customsduties India imposes on imports of wine anddistilled spirits

19-The United States and Vietnam beginnegotiations on a TIFA

20-President Bush signs a proclamationimplementing legislation that provides tradebenefits for Haiti under the HHOPE Act

30-The US Department of Commerceannounces its preliminary decision to apply UScountervailing duty law to imports from ChinaThis is the first time countervailing duties will beimposed on imports from a nonmarket economy

30-The United States requests formalconsultations with Canada under a disputeresolution mechanism in the 2006 US-CanadaSoftwood Lumber Agreement to discussCanadian compliance with several provisions ofthe pact

April

1-The United States and Korea completenegotiations for a free trade agreement (FTA)

xxvi

AprilndashContinued

10-The United States requests disputesettlement consultations with China regardingdeficiencies in Chinarsquos intellectual property rights(IPR) laws and market access barriers tocopyright-based industries

12-The WTO Appellate Body circulates its reportupholding a US statute concerning the USantidumping ldquosunsetrdquo review of oil country tubulargoods from Argentina

17-The EU announces an expansion of thenumber of products from the United States thatwill be subject to retaliatory import duties as aresult of increased payments to US firms underthe Byrd amendment which has been ruledinconsistent with WTO rules

30-Thailand and Chile are added to the USTRrsquosSpecial 301 priority watch list of countries that donot adequately protect IPR Brazil is removed

30-The United States and the EU agree on aframework to promote greater regulatorycooperation to facilitate transatlantic trade

May

1-First shipment of mangoes from India in 18years enters the United States under a 2006US-India agreement to irradiate mangoes priorto entry into the US market

10-The USTR and Congress announce abipartisan agreement to add core labor andenvironmental standards among other things topending US FTAs

10-The EU requests the establishment of a WTO dispute settlement panel to challenge 40 USantidumping measures that the EU says arebased on the zeroing methodology used inUS antidumping investigations

23-Customs officials from the United States andChina sign an agreement strengthening theenforcement of intellectual property laws

25-The United States requests the establishmentof a WTO dispute settlement panel challengingIndiarsquos duties on wine and spirits and otherimports from the United States

June

4-The United States submits a paper to the WTONegotiating Group on Rules proposing thatcertain trade-distorting subsidies be prohibited

JunendashContinued

8-Canada requests the establishment of a WTOdispute settlement panel to rule whether theUnited States violated WTO rules by providingexcessive subsidies to its farmers as well asillegal agricultural export subsidies

14-The United States and Rwanda launch formalnegotiations on a Bilateral Investment Treaty

20-Antigua and Barbuda announces that it willseek authorization from the WTO to imposemore than $34 billion in annual trade sanctionsagainst the United States for its failure to complywith a WTO ruling against US restrictions onInternet gambling

20-The United States and Georgia sign a TIFA

21-The United States and Vietnam sign a TIFA

25-The United States and Peru agree onamendments to the US-Peru Trade PromotionAgreement (TPA) pursuant to the May 10 2007US agreement to add core labor andenvironmental standards

27-Peru ratifies the amended US-Peru TPA

28-The United States and Colombia agree onamendments to the US-Colombia TPA pursuantto the May 10 2007 US agreement to add corelabor and environmental standards

28-The United States and Panama sign abilateral FTA

28-The United States terminates GSP duty-freebenefits for certain products from Brazil CocirctedIvoire India the Philippines Thailand andVenezuela

30-The United States and Korea sign a bilateralFTA

30-President Bush signs legislation to extendATPA duty-free benefits for Bolivia ColombiaEcuador and Peru

July

1-The Presidents Trade Promotion Authorityexpires

3-The Indian government announces that it willlift a tariff on imports of wines beer and spiritsthat is the subject of a WTO dispute settlementcomplaint

xxvii

JulyndashContinued

11-Brazil files a request for WTO disputesettlement consultations relating to US supportand export credit guarantees for agriculturalproducts paid to US farmers

11-Panama ratifies the US-Panama TPA

24-The United States and Mexico request aWTO dispute settlement panel challenging Chinese subsidies

August

13-The United States requests the establishmentof a WTO dispute settlement panel to resolveclaims that the Chinese IPR legal regime fails toadequately protect and enforce US copyrightsand trademarks

14-NAFTA trade ministers meet and agree onrules-of-origin changes to be implemented in2008

September

6-US-Mexican Cross-Border Trucking Programbegins satisfying provisions under NAFTA

14-China requests WTO dispute settlementconsultations relating to preliminary USantidumping and countervailing duties imposedon imports of Chinese coated free sheet paper(glossy paper)

21-A WTO dispute settlement panel report iscirculated that agrees with US claims thatTurkeyrsquos measures on imported rice areinconsistent with Turkeyrsquos WTO obligations

28-US duties for certain goods imported fromMexico are eliminated under NAFTA

28-President Bush signs legislation extending thetrade adjustment assistance program for threemonths

October

2-The United States establishes the ValidatedEnd-User program for India to increase securehigh-tech trade with India

8-Costa Rica approves CAFTA-DR in a nationalreferendum

16-President Bush signs a bill boosting penaltiesfor violations of export control regulations

OctoberndashContinued

30-Colombia ratifies the amended US-ColombiaTPA

November

1-The United States and Canada implement anarrangement concerning trade in potatoes

8-Brazil and Canada request establishment of a WTO dispute settlement panel to considerwhether the United States violated WTO rules byproviding excessive subsidies to US farmers

14-The United States and Libya agree toestablish a formal body that will meet annually todiscuss ways to broaden bilateral commercialties

19-China agrees to terminate subsidies that theUnited States alleged were inconsistent underWTO rules

21-The United States and Japan finalize anagreement to facilitate trade intelecommunications equipment and harmonizecertification requirements

28-A NAFTA panel rejects the US Departmentof Commerces use of ldquozeroingrdquo in calculatingdumping margins

30-The United States and the EU propose toincrease global trade in technologies that inhibitclimate change by eliminating tariffs and otherbarriers

December

4-Congress completes ratification of the US-Peru TPA

5-The United States and Paraguay agree toexpand coverage of GSP duty-free benefits toinclude certified handicrafts

11-The US Department of Commerce andChinarsquos Ministry of Commerce sign the ldquoGuidelines for US-China High Technology andStrategic Trade Developmentrdquo

11-The United States and China sign twoagreements on food and feed import safety anddrug and medical device import safety

12- The United States and China conclude amemorandum of understanding on illegal loggingand associated trade

xxviii

DecemberndashContinued

14-President Bush signs the US-Peru TPAImplementation Act

17-The United States reaches agreement withthe EU at the WTO on compensation for Internetgambling

27-President Bush proclaims modifications to theCAFTA-DR textile rules of origin

27-President Bush proclaims modifications to theUS-Chile FTA and the US-Singapore FTArules of origin

31-President Bush signs into law the SudanAccountability and Divestment Act of 2007

Sources Compiled from multiple USgovernment sources including US Departmentof Agriculture US Department of CommerceUS Department of Labor US InternationalTrade Commission US Department of Stateand the White House Other sources includeBureau of National Affairs International TradeDaily and US Chamber of Commerce

This is the 59th in a series of annual reports submitted to the US Congress under section 163(c) of the1

Trade Act of 1974 (19 USC 2213(c)) and its predecessor legislation According to the US Department of Commerce (USDOC) GDP growth in 2007 was the weakest since2

2002 The change is associated with a reorientation of the US economy away from housing investment andtoward exports and investment in business structures White House Economic Report of the PresidentFebruary 2008 25 USDOC Bureau of Economic Analysis (BEA) ldquoNational Economic Accountsrdquo3

A slowdown in real imports was also a factor in the positive contribution of net exports to the growth of4

GDP during the year Net exports added almost a percentage point to US GDP growth in the second half of2007 Board of Governors of the Federal Reserve System Monetary Policy Report to the Congress 17

1-1

CHAPTER 1Overview of US Trade

Scope and Approach of the Report

This report provides factual information on the operation of the US trade agreementsprogram and its administration for calendar year 2007 The trade agreement activities1

during 2007 include the administration of US trade laws and regulations US participationin the World Trade Organization (WTO) the Organization for Economic Cooperation andDevelopment (OECD) and the Asia-Pacific Economic Cooperation (APEC) forum USnegotiation of and participation in free trade agreements (FTAs) and bilateral developmentswith major trading partners

The report is based on primary source materials on US trade programs and administrativeactions thereunder including US government Federal Register notices publications andpress releases by the US International Trade Commission (USITC or the Commission) andother US government agencies Other primary sources of information include publicationsof international institutions including the International Monetary Fund (IMF) the OECDthe WTO and official publications of foreign governments Professional journals tradepublications and news reports are used to provide supplemental factual information whenprimary source information is unavailable

The data provided throughout the report are on merchandise trade except for chapter 1which also includes data on services trade as compiled by the Commission primarily fromthe US Census Bureau of the US Department of Commerce as well as the United Nations(UN) and the IMF

Overview of the US Economy in 2007

The expansion of the US economy continued for the sixth consecutive year in 2007 butgrowth was slower than in previous years Real US gross domestic product (GDP)2

increased by 22 percent in 2007 compared with 29 percent growth in 2006 Personal3

consumption expenditures exports nonresidential structures and state and local4

government spending were leading components of the growth in 2007 The decline in realGDP growth between 2006 and 2007 primarily reflected a large decrease in residential fixed

IMF ldquoWorld Economic Outlookrdquo April 2008 105

Economic growth slowed as a result of a weak housing sector credit tightening and high energy prices6

White House Economic Report of the President 18 The euro area includes Austria Belgium Finland France Germany Greece Ireland Italy Luxembourg7

the Netherlands Portugal Slovenia and Spain OECD ldquoMain Economic Indicators Country Comparison Tablesrdquo April 20088

GDP growth data for the world and China are from the IMF ldquoWorld Economic Outlookrdquo April 20089

table 11 8 The OECD includes Australia Austria Belgium Canada the Czech Republic Denmark Finland10

France Germany Greece Hungary Iceland Ireland Italy Japan Korea Luxembourg Mexico theNetherlands New Zealand Norway Poland Portugal the Slovak Republic Spain Sweden SwitzerlandTurkey the United Kingdom and the United States USDOC BEA ldquoInternational Economic AccountsmdashUS International Transactions Fourth Quarter11

and Year 2007 Current Accountrdquo These data cover exchange rates for the 2007 calendar year Data analyzedby the Federal Reserve covered January 2007 through February 21 2008 Those data show that the nominaltrade-weighted exchange value of the dollar against major currencies depreciated by more than 10 percentduring that period Board of Governors of the Federal Reserve System Monetary Policy Report to theCongress 33 Board of Governors of the Federal Reserve System Monetary Policy Report to the Congress 3312

1-2

investment a downturn in private inventory investment and a decline in equipment andsoftware expenditures that were partly offset by a decline in imports The decline in the UShousing market which began in 2006 continued to be a drag on economic activity in 20075

The quarterly pattern of real GDP growth in 2007 was uneven with relatively strongergrowth in the second and third quarters and relatively weaker growth in the first and fourthquarters GDP growth slowed sharply in the fourth quarter of 2007 increasing only at anannual rate of 06 percent after posting a 49 percent annual rate in the third quarter6

Despite slower growth in 2007 the US economy recorded growth that either equaled orexceeded that of some other major industrialized countries and areas including the euro area(22 percent) and Japan (18 percent) However US economic growth was below the7 8

world average GDP growth rate of 52 percent as well as that of Canada (29 percent)9

Mexico (38 percent) China (115 percent) and the OECD (29 percent)10

Exchange-Rate Trends

The US dollar depreciated 6 percent in 2007 on a trade-weighted yearly average basisagainst a group of major currencies (figure 11) It generally depreciated during the year11

against the Canadian dollar the euro the Chinese yuan and the Japanese yen with thelargest depreciation occurring against the Canadian dollar Short-term fluctuations in thedollar-yuan exchange rate continued to be small with the dollarrsquos rate of depreciationaccelerating against the yuan in late 2007 Despite the fluctuations during the year the12

US dollar ended the year at approximately where it began the year against the Mexicanpeso and the British pound

USDOC BEA ldquoInternational Economic AccountsmdashUS International Transactions Fourth Quarter13

and Year 2007 Current Accountrdquo The balance on income is income receipts (including income receipts on US-owned assets abroad and14

compensation of US employees abroad) less income payments (including income payments onforeign-owned assets in the United States and compensation of foreign employees in the United States)

1-3

Figure 11 Indices of exchange rates for selected major currencies in relation to the US dollar daily

2007a

Source US Federal Reserve Board

Units of the foreign currency per unit of the US dollar A decrease in the index represents a depreciation in thea

US dollar relative to the foreign currency and an increase in the index represents an appreciation of the US dollarrelative to the foreign currency

Balance of Payments

The US current account deficitmdashthe combined balances on trade in goods and servicesincome and net current unilateral transfersmdashdecreased from $8115 billion in 2006 to$7386 billion in 2007 As a share of US GDP the current account deficit was 53 percent13

in 2007 down from 62 percent in 2006 The decrease was accounted for by increases in thesurpluses on income and services as well as a decrease in the deficit on goods The deficiton trade in goods decreased from $8383 billion in 2006 to $8154 billion in 2007 Thebalance on income increased from a surplus of $366 billion in 2006 to a surplus of $74314

billion in 2007

Services trade data are reported here on a balance of payments (BOP) basis for purposes of comparison15

with merchandise trade figures BOP data include trade in private services as well as transfers under USmilitary agency sales contracts and US government purchases of miscellaneous services USDOC BEAldquoInternational Economic AccountsndashUS International Transactions Fourth Quarter and Year 2007 CurrentAccountrdquo table 1 US trade in services is described in greater detail below16

The main components of the financial account are capital transfers foreign direct investment portfolio17

investment banking and other flows statistical discrepancies and official reserve assets USDOC BEAldquoInternational Economic AccountsmdashUS International Transactions Fourth Quarter and Year 2007 CurrentAccountrdquo USDOC BEA ldquoInternational Economic AccountsmdashUS International Trade in Goods and Servicesrdquo18

The Census basis data for goods (used elsewhere in this report) are compiled from the documents19

collected by the US Customs Service and reflect the movement of goods between foreign countries and the50 states the District of Columbia Puerto Rico the US Virgin Islands and US foreign trade zones Dataon goods compiled on a Census basis are adjusted by the USDOC BEA to a BOP basis to bring the data inline with the concepts and definitions used to prepare the international and national accounts Theseadjustments are made to supplement coverage of the Census basis data to eliminate duplication oftransactions recorded elsewhere in the international accounts and to value transactions according to astandard definition For a more detailed discussion of the differences between BOP basis and Census basisdata see USDOC BEA ldquoInformation on Goods and Servicesrdquo in USDOC BEA ldquoInternational EconomicAccountsrdquo December 2007 BOP trade data in this section of the report may not match data in other sectionsor in the report appendix because of adjustments made to the data by the sources cited White House Economic Report of the President February 2008 3520

USDOC US Census Bureau ldquoInternational Economic AccountsmdashUS International Trade in Goods21

and Services December 2007rdquo February 14 2008

1-4

The trade surplus on services increased from $797 billion in 2006 to $1069 billion in2007 Exports of services increased to $4792 billion in 2007 from $4226 billion in 200615

and more than half of the increase was accounted for by an increase in ldquootherrdquo privateservices which includes business professional and technical services insurance servicesand financial services There were also increased exports of travel royalties and licensefees and ldquootherrdquo transportation which includes freight and port services Imports ofservices increased from $3428 billion in 2006 to $3723 billion in 2007 with more than halfof the increase accounted for by an increase in ldquootherrdquo private services Net financial16

account payments (outflows) were $12 trillion in 2007 up from $11 trillion in 200617

Trade in Goods and Services

The US foreign trade deficit for goods and services in 2007 was $7086 billion (51 percentof GDP) down from a deficit in 2006 of $7585 billion (57 percent of GDP) US exports18

of goods and services on a seasonally adjusted US balance-of-payments (BOP) basis19

were valued at $16284 billion in 2007 with imports of goods and services valued at$23369 billion Exports of services increased in 2007 but at a slower pace than in theprevious year The pace of the increase in the exports of goods and services reflected theeconomic growth of US trading partners expanded domestic production capacity andexchange-rate trends20

Largely as a result of higher petroleum prices US spending on petroleum imports increasedduring 2007 resulting in an increase in the petroleum products deficit from $2709 billionin 2006 to $2935 billion in 2007 Imports of petroleum accounted for 142 percent of total21

imports by value in 2007 and the petroleum products deficit represented 412 percent ofthe total US deficit on trade in goods and services in 2007 US trade in goods and servicesis discussed in more detail below

Merchandise trade data in this section do not match the seasonally adjusted BOP basis data presented22

above because of adjustments made to the data as described in footnote 19 US exports have been helped by rising foreign incomes the expansion of production in the United23

States and changes in exchange rates White House Economic Report of the President 20 US trade in services is described in greater detail below24

1-5

US Trade in Goods in 2007

US merchandise exports increased to $10464 billion (76 percent of GDP) in 2007 from$9295 billion (70 percent of GDP) in 2006 (figure 12) US merchandise imports22

increased to $19429 billion (140 percent of GDP) in 2007 from $18451 billion (140percent of GDP) in 2006 (figure 12) Exports increased more rapidly than imports for thesecond year in a row with exports increasing by 156 percent over the 2005ndash06 period and126 percent over the 2006ndash07 period and imports increasing 110 percent and 53 percentduring the same two periods23

US Merchandise Trade by Product Category24

Exports

Machinery and transport equipment ranked as the largest US export by StandardInternational Trade Classification (SITC) group in 2007 (appendix table A1) US exportsof machinery and transport equipment were valued at $4627 billion in 2007 accounting for442 percent of total US exports during the year and grew by 92 percent from $4238billion in 2006 Almost three quarters of the total increase in exports in 2007 wereaccounted for by increased US exports of machinery and transport equipment chemicalsand related products food and live animals and crude materials (except fuels) None of theSITC groups registered a decline in exports from 2006 to 2007

Imports

All SITC groups of US imports increased from 2006 to 2007 (appendix table A1) As inrecent years machinery and transport equipment was the largest US import group by SITCcode in 2007 US imports of machinery and transport equipment were valued at $7391billion in 2007 an increase of 43 percent over imports of $7086 billion in 2006 andaccounted for 380 percent of total US imports in 2007 Increased US imports ofmachinery and transport equipment and mineral fuels lubricants and related materialsrepresented over half of the total increase in imports in 2007

US imports under the four preferential trade programs with developing countries totaled$909 billion in 2007 and accounted for 47 percent of total US imports during the yearDuty-free imports totaled $308 billion (appendix table A12) under the Generalized Systemof Preferences (GSP) program $423 billion (excluding GSP imports) under the AfricanGrowth and Opportunity Act (AGOA) (appendix tables A13 and A14) and $123 billion

See chap 2 of this report for additional information25

Leading US exports to and imports from these partners are presented in appendix tables A22 through26

A44 Data in table 12 may not match with those in appendix tables A22 through A44 because ofadjustments made to the data Global expansion was strong in the first half of 2007 with turbulence in financial markets setting in27

during the last half of the year IMF ldquoWorld Economic Outlookrdquo April 2008 xiv USDOC USCB ldquoInternational Economic Accountsrdquo February 14 200828

1-6

Figure 12 US merchandise trade with the world 2005ndash07

Source US Department of Commerce

under the Andean Trade Preference Act (ATPA) (appendix tables A15 and A16) Inaddition imports that entered duty free or at reduced rates under the Caribbean BasinEconomic Recovery Act (CBERA) totaled $55 billion (appendix tables A17 and A18)During 2007 as in the past increased US imports under AGOA reflected the increasedvalue of petroleum imports primarily from the three leading exporters of oil underAGOAmdashNigeria Angola and Gabon25

US Merchandise Trade with Leading Partners

North American Free Trade Agreement (NAFTA) partners Canada and Mexico togetherremain the largest US global market for exports and imports followed by the EuropeanUnion (EU) (table 11) Figures 13 and 14 show leading US export and import markets26

by share in 2007

Foreign economic growth continued to be generally strong in 2007 aiding US export growthduring the year As shown above US exports increased by 126 percent while US27

imports increased by 53 percent over the 2006ndash07 period US exports to major trading28

partners Canada Japan and Korea continued to grow faster than imports from thosecountries during the year

1-7

Total $10464 billion

TABLE 11 US merchandise trade with major trading partners and the world 2007

Major trading partner Exports ImportsTrade

balanceTwo-way

(exports plus imports)

Billion dollars

EU-27 2263 3522 -1259 5784

Canada 2131 3125 -994 5256

China 610 3231 -2621 3841

Mexico 1194 2102 -908 3296

Japan 581 1449 -868 2030

Korea 330 454 -124 784

Taiwan 245 381 -135 626

Brazil 217 250 -33 467

India 163 239 -76 402

Russia 67 191 -125 258

South Africa 52 91 -39 143

World 10464 19429 -8965 29893

Source Compiled from official statistics of the US Department of Commerce

Note Because of rounding figures may not add to totals shown

Figure 13 Leading US export markets by share 2007

Source US Department of Commerce

US bilateral trade relations with China are discussed in chap 5 of this report29

1-8

Figure 14 Leading US import sources by share 2007

Total $19429 billion

Source US Department of Commerce

Canada remains the largest single-country two-way trading partner of the United Statesfollowed by China and Mexico China alone accounted for 292 percent of the total USmerchandise trade deficit of $8965 billion in 2007 and Canada and Mexico togetheraccounted for 211 percent of the deficit The US trade deficit with China rose from $2354billion in 2006 to $2621 billion in 2007 despite the fact that US exports to China grewfaster (an increase of 182 percent over 2006) than US imports from China (an increase of126 percent over 2006) 29

This section focuses primarily on cross-border services transactions in private services which exclude30

government sales and purchases of services The section presents changes from 2006 to 2007 and data on2005 are given where appropriate This section draws its services trade data from the BEA In these nationalaccounts data ldquocross-border transactionsrdquo occur when US firms and consumers sell to or purchase servicesfrom firms and consumers in another country with people information or money crossing US boundariesin the process Cross-border transactions appear explicitly as imports and exports in the balance of paymentsUS firms also provide services to foreign consumers through affiliates established in host countries with theincome generated by ldquoaffiliate transactionsrdquo appearing as investment income in the balance of payments Thechannel of delivery used by service providers depends primarily on the nature of the service For examplemany financial services such as retail banking services are supplied most effectively by affiliates locatedclose to the consumer Conversely trade in education services predominantly takes the form of cross-bordertransactions involving students studying abroad USDOC BEA ldquoPrivate Services Transactionsrdquo US International Transactions Accounts Data Table31

3 accessed June 3 2008 The category ldquobusiness professional and technical servicesrdquo includes advertising computer and32

information services research development and testing services management consulting and publicrelations services legal services construction architectural and engineering services industrial engineeringinstallation maintenance and repair of equipment operational leasing and other miscellaneous services The category ldquofinancial servicesrdquo include non-insurance non-deposit financial services provided by33

banks and securities firms USDOC BEA ldquoInternational Economic AccountsmdashUS InternationalTransactions Fourth Quarter and Yearrdquo 5 A country is said to have exported travel and tourism services when foreign nationals make purchases in34

that country during a visit of less than one year The value of tourism exports is measured by the totalexpenditures of foreign visitors irrespective of the purpose of the visit be it leisure recreation business orother activities Expenditures on transportation services between countries such as airfare and directspending on education or health care services are excluded from the measure of tourism exports InternationalMonetary Fund Balance of Payments Manual

1-9

US Trade in Services in 200730

Figure 15 shows US private cross-border services trade with the world from 2005 through2007 US private services exports increased from $4043 billion in 2006 to $4622 billion31

in 2007 an increase of 143 percent and US private services imports increased from$3078 billion in 2006 to $3353 billion in the same period an increase of 89 percent

US Services Trade by Product Category

The US surplus in cross-border private services trade increased by 315 percent to $1269billion in 2007 marking the fourth consecutive yearly increase and the largest annualincrease ever reported Numerous services accounted for the surge in the services tradesurplus most notably in the business professional and technical services and financial32

services categories33

Exports

Travel ranked as the largest US cross-border private services export increasing by 13334

percent to $971 billion in 2007 and accounting for 21 percent of total US exports(appendix table A2) This increase was consistent with the recovery of the US tourismindustry since 2004 following the terrorist attacks on the United States on September 112001 Increased travel exports reflect strong economic growth in leading overseas

Typically these 5 markets include Mexico Canada the United Kingdom Japan and Germany EIU35

ldquoIndustry BriefingmdashUnited States of America Travel and Tourism Forecastrdquo Ibid36

EIU ldquoIndustry BriefingmdashUSA tourism Bargain-hunting The Weak Dollar Lures Visitorsrdquo37

1-10

Figure 15 US private cross-border services trade with the world 2005ndash07

Source US Department of Commerce Bureau of Economic Analysis (BEA) website ldquoPrivate ServiceTransactionsrdquo

markets for tourism services and a decline in the value of the US dollar Other large35 36

US services export categories in 2007 were royalties and license fees and businessprofessional and technical services which increased by 144 and 184 percent over 2006 to$713 billion and $561 billion respectively Exports of financial services experienced themost rapid growth among all categories of US private services growing by 221 percentto $453 billion in 2007

Imports

Travel also ranked as the largest category of US private cross-border imports increasingby 61 percent from $720 billion in 2006 to $764 billion in 2007 representing 227 percentof total services imports (appendix table A3) The measured pace of this increase relativeto exports may be attributable to a decline in the value of the US dollar and increased oilprices Other significant categories for US imports of services in 2007 were freight37

transportation which totaled $456 billion and insurance services which totaled $380

1-11

billion While travel freight transportation and insurance were the largest US privateservices import categories in terms of value imports in two categoriesmdashbusinessprofessional and technical services and financial servicesmdashexperienced the most significantgrowth in 2007 increasing by 339 and 393 percent to $212 billion and $118 billionrespectively

US Services Trade With Leading Partners

Table 12 shows US services trade with major trading partners for 2007 The EU was boththe United Statesrsquo largest export market and largest import supplier accounting for 355percent of total US services exports and 393 percent of total US services imports (figures16 and 17) Canada and Japan followed the EU as the second and third most significantmarkets for US services trade in 2007 In addition to a large regional trade surplus withthe EU ($325 billion) the United States maintained large bilateral services trade surpluseswith Canada ($209 billion) Japan ($184 billion) Mexico ($82 billion) and Korea ($57billion) In marked contrast to the large US deficit in goods trade with China as shownabove the United States recorded a services trade surplus of $50 billion with China in 2007

TABLE 12 US private services trade with major trading partners and the world 2007 (million dollars)

Major trading partner Exports ImportsTrade

balance

EU-27 a 164311 131771 32540

Canada 46566 25687 20879

Japan 43462 25016 18446

Mexico 24221 16070 8151

China 13083 8090 4993

Korea 12385 6685 5700

Australia 9755 6239 3516

Brazil 8711 3126 5585

India 8211 7331 880

Taiwan 8031 7172 859

Other 123498 98116 25382

World 462234 335303 126931

Source US Department of Commerce Bureau of Economic Analysis website ldquoUS Economic Accountsrdquo

Note Data are preliminary estimates

EU-27 also includes data from the European Atomic Energy Community and the European Investment Bank Ina

addition data for 2007 include Bulgaria and Romania

1-12

2-1

CHAPTER 2Administration of US Trade Laws andRegulations

This chapter surveys activities related to the administration of US trade laws during 2007It covers import relief laws unfair trade laws programs affecting textile and apparelimports and certain other trade provisions including the US Generalized System ofPreferences (GSP) the African Growth and Opportunity Act (AGOA) the Andean TradePreference Act (ATPA) the Caribbean Basin Economic Recovery Act (CBERA) and theCaribbean Basin Trade Partnership Act (CBTPA)

Import Relief Laws

Safeguard Actions

This section covers only safeguard actions under provisions administered by the USITCincluding global safeguards provided for in sections 201ndash204 of the Trade Act of 1974China safeguards provided for in section 421 of the Trade Act of 1974 and safeguardsprovided for in various bilateral free trade agreements involving the United StatesSafeguard actions under provisions administered by other US government agencies suchas the China textile safeguard actions by the US Department of Commerce (Commerce)are described later in this chapter

The USITC did not conduct any safeguard investigations during 2007 no safeguardmeasures under provisions administered by the USITC were in place during calendar year2007 and no safeguard petitions filed under these provisions were pending before theUSITC at the end of 2007

Adjustment Assistance

The United States maintains a trade adjustment assistance (TAA) program for the purposeof assisting workers firms and farmers dislocated as a result of federal policies that reducedbarriers to foreign trade The program for workers is administered by the US Secretary ofLabor the program for firms by the US Secretary of Commerce and the program forfarmers by the US Secretary of Agriculture The eligibility requirements benefits andprocedures for the program are set forth in Parts 2 3 and 6 respectively of Title II of theTrade Act of 1974 as amended (19 USC 2271-2401) Program benefits available forqualifying petitioning workers consist principally of trade readjustment allowancesemployment services training and job search and relocation allowances Program benefitsfor qualifying petitioning firms consist of technical assistance Program benefits forpetitioning farmers or agricultural commodity producers (including livestock producers) are

Petitions may be filed by a group of three or more workers by a company official by ldquoOne-Stoprdquo1

operators or partners (including state employment security agencies and dislocated worker units) or by aunion or other duly authorized representative of such workers The workers on whose behalf a petition isfiled must be or have been employed at the firm or subdivision identified in the petition A completedpetition describes a group of workers working at a specific location for a specific company producing aspecific product or group of products If the group of workers described in the petition is certified thecertification will cover all workers in the group whether or not their names are on the petition USDepartment of Labor ETA Web site section ldquoTrade Adjustment Assistance (TAA) and AlternativeAdjustment Assistance (ATAA) Application Processrdquo The number of petitions certified for benefits and services and petitions denied will not add up to the2

total number of petitions received because the numbers do not reflect petitions that were terminated prior to adetermination and petitions in which a determination was made in the following fiscal year For workers to be certified as eligible to apply for TAA the Secretary of Labor must determine that3

workers in a firm have become or are threatened to become totally or partially separated that the firmrsquossales or production has decreased absolutely and that increases in like or directly competitive importedproducts contributed importantly to the total or partial separation and to the decline in the firmrsquos sales orproduction Workers certified for TAA are provided with a certification of eligibility and may apply for TAAbenefits at the nearest office of the State Employment Security Agency For further information see USDOLETA ldquoTrade Adjustment Assistance (TAA) and Alternative Adjustment Assistance (ATAA) ApplicationProcessrdquo USDA FAS ldquoPrograms and OpportunitiesmdashTrade Adjustment Assistancerdquo4

httpwwwfasusdagovitptaataaasp (accessed May 20 2008)

2-2

generally in the form of cash payments based on a formula related to commodity prices andlimited to a maximum of $10000 per producer in any 12-month period

Trade Adjustment Assistance for Workers

The US Department of Labor (USDOL) received 2218 TAA petitions during fiscal year1

(FY) 2007 (October 1 2006 through September 30 2007) (table 21) The FY 2007 figurerepresents a decrease from the 2495 TAA petitions received in FY 2006 Table 21 showsthe results of TAA petitions determinations during FY 2006 and FY 2007 In FY 2007 atotal of 1443 petitions were certified as eligible for benefits and services and 614 petitionswere denied a decrease from 1447 petitions certified and from 830 petitions denied in FY2006 A total of 146480 workers were certified for TAA benefits and services in FY 20072 3

This was an increase from the 119605 workers certified in FY 2006 Table 22 presents dataon benefits and services provided under the TAA program There were 47048 new TAArecipients in FY 2007 compared to 53491 new recipients in FY 2006 The USDOLappropriated $855 million in TAA funding to assist workers certified as eligible to receivebenefits and services under the TAA program in FY 2007 a decrease from $966 million inFY 2006

Trade Adjustment Assistance for Farmers

The statutory authority for the TAA for Farmers program expired on December 31 20074

Of the eight petitions filed under the TAA for Farmers program in FY 2007 none werecertified and no cash benefits were paid

US International Trade CommissionWashington DC 20436

wwwusitcgov

July 2008Publication 4026

The Year in Trade 2007Operation of the Trade Agreements Program

59th Report

This report was principally prepared by

The Office of Economics

Arona Butcher Project LeaderJustino De La Cruz Deputy Project Leader

Nannette Christ Kelly Clark Nick Grossman William Greene Joanne GuthAlexander Hammer Walker Pollard James Stamps and

Edward C Wilson

Office of the General CounselWilliam W Gearhart and Robin Turner

Office of Tariff Affairs and Trade AgreementsNaomi Freeman and Dan Shepherdson

Office of InvestigationsMary Messer and Andy Rylyk

Office of Unfair Import InvestigationsAnne Goalwin

Office of IndustriesKim Freund Dawn Heuschel Laura Rodriguez Donald Sussman

Audrey Tafoya and Isaac Wohl

Office of Information Technology SystemsBarbara V Bobbitt

Supporting assistance was provided byPatricia M Thomas

InternLauren Deason

Office of Publishing

iii

PREFACEThis report is the 59th in a series of annual reports submitted to the US Congress undersection 163(c) of the Trade Act of 1974 (19 USC 2213(c)) and its predecessor legislationSection 163(c) of the Trade Act of 1974 states that ldquothe International Trade Commissionshall submit to the Congress at least once a year a factual report on the operation of thetrade agreements programrdquo

This report is one of the principal means by which the US International Trade Commissionprovides Congress with factual information on trade policy and its administration forcalendar year 2007 The trade agreements program includes ldquoall activities consisting of orrelated to the administration of international agreements which primarily concern trade andwhich are concluded pursuant to the authority vested in the President by the Constitutionrdquoand congressional legislation

v

TABLE OF CONTENTS

Page

Preface iii

Abbreviations and Acronyms xi

Executive Summary xv

Chapter 1 Overview of US Trade 1-1Scope and approach of the report 1-1Overview of the US economy in 2007 1-1

Exchange-rate trends 1-2Balance of payments 1-3Trade in goods and services 1-4

US trade in goods in 2007 1-5US merchandise trade by product category 1-5

Exports 1-5Imports 1-5

US merchandise trade with leading partners 1-6US trade in services in 2007 1-9

US services trade by product category 1-9Exports 1-9Imports 1-10

US services trade with leading partners 1-11

Chapter 2 Administration of US Trade Laws and Regulations 2-1Import relief laws 2-1

Safeguard actions 2-1Adjustment assistance 2-1

Trade adjustment assistance for workers 2-2Trade adjustment assistance for farmers 2-2Trade adjustment assistance for firms and industries 2-3

Laws against unfair trade practices 2-4Section 301 investigations 2-4

Active section 301 cases in 2007 2-4New section 301 petitions in 2007 2-4Special 301 2-5

Antidumping and countervailing duty investigations and reviews 2-7Antidumping investigations 2-7Countervailing duty investigations 2-8Reviews of outstanding antidumping and countervailing duty orderssuspension

agreements 2-9Section 337 investigations 2-9

Other import administration laws and programs 2-11Tariff preference programs 2-11

vi

TABLE OF CONTENTSndashContinued

Page

Chapter 2 Administration of US Trade Laws and RegulationsndashContinuedGeneralized System of Preferences 2-11African Growth and Opportunity Act 2-12Andean Trade Preference Act 2-16Caribbean Basin Economic Recovery Act 2-18

Textile and apparel developments in 2007 2-20US textile and apparel imports in 2007 2-20US-China textile and apparel trade 2-22Textile and apparel imports under AGOA ATPA and CBERA 2-22Textile and apparel imports under the Haitian Hemispheric Opportunity through

Trade Partnership Encouragement (HHOPE) Act 2-23US textile and apparel imports under CAFTA-DR 2-24

Chapter 3 Selected Trade Developments in the WTO OECD and APEC 3-1World Trade Organization 3-1

Doha trade negotiations 3-2Negotiations resumed in February 2007 3-2G-4 meetings at Potsdam 3-3Negotiations suspended in June 2007 3-4October 2007 General Council and TNC meetings 3-5November 2007 TNC meeting 3-5

General Council 3-6Work programs decisions and reviews 3-7

Transparency for preferential trade arrangements 3-7TRIPS Council matters 3-7Small economies 3-7Special and differential treatment 3-8Harmonization of nonpreferential rules of origin 3-9Aid for trade 3-10Cotton initiative 3-11Annual review of Chinarsquos protocol of accession to the WTO 3-12Biennial review of US Jones Act legislation 3-12Draft decision on Article 274 of the Agreement on Subsidies and

Countervailing Measures 3-12Accessions 3-13Waivers 3-13Seventh WTO ministerial conference 3-13

Dispute settlement 3-15Consultations and new panels established 3-15

Panels established during 2007 at the request of the United States 3-15Measures by China granting refunds reductions or exemptions from taxes

and other payments (DS358) 3-16

vii

TABLE OF CONTENTSndashContinued

Page

Chapter 3 Selected Trade Developments in the WTO OECD and APECndashContinuedMeasures by India imposing ldquoadditional dutiesrdquo or ldquoextra additional dutiesrdquo

including wines and distilled products (DS360) 3-17Measures by China affecting the protection of and enforcement of

intellectual property rights (DS362) 3-17Measures by China affecting trading rights and distribution services for

certain publications and audiovisual entertainment products (DS363) 3-18Panels established in which the United States is named as the respondent 3-18

Continued existence and application of ldquozeroingrdquo methodology in USantidumping duty reviews (DS350) 3-18

US subsidies and other domestic support for corn and other agriculturalproducts (DS357) 3-19

US domestic support and export credit guarantees for agriculturalproducts (DS365) 3-19

Appellate Body and panel reports adopted during 2007 that involved the UnitedStates 3-19

Reports in which the United States was the complainant 3-20Measures by Turkey affecting the importation of rice (DS334) 3-20

Reports in which the United States was the respondent 3-21US antidumping ldquozeroingrdquo methodology (DS322) 3-21US antidumping measure on shrimp from Ecuador (DS335) 3-22

Organization for Economic Cooperation and Development 3-22Global policy forums 3-22Nonmember focus 3-23Trade Committee priority topics 3-24

Export credits 3-25Aircraft sector understanding 3-25Export credit understandings for other sectors 3-26

Asia-Pacific Economic Cooperation 3-26Action Agenda 3-27Committee on Trade and Investment 3-27

Chapter 4 US Free Trade Agreements 4-1FTAs in force during 2007 4-1Other FTA developments during 2007 4-3

US-Panama Trade Promotion Agreement 4-5US-Korea Free Trade Agreement 4-6

North American Free Trade Agreement 4-7Free Trade Commission 4-8Commission for Labor Cooperation 4-9Commission for Environmental Cooperation 4-10Dispute settlement 4-12

Chapter 11 dispute settlement developments 4-13Chapter 19 dispute panel reviews 4-13

viii

TABLE OF CONTENTSndashContinued

Page

Chapter 5 US Relations with Major Trading Partners 5-1European Union 5-1

US-EU summit 5-2Canada 5-3

Agriculture 5-4Livestock 5-4Potatoes 5-4Softwood lumber agreement 5-5Aviation 5-5

China 5-6Intellectual property rights enforcement 5-6Product safety 5-7Market access 5-8

Goods 5-8Services 5-9

Global trade imbalances and Chinarsquos exchange-rate regime 5-9Mexico 5-10

Cross-border trucking between the United States and Mexico 5-10Japan 5-12

Beef 5-12Deregulation 5-13

Korea 5-14US-Korea FTA 5-15Beef 5-15

Taiwan 5-16Intellectual property rights 5-16Agriculture 5-17

Beef 5-17Rice 5-18

India 5-18Trade dialogue 5-19Mangoes 5-19Alcoholic beverages 5-20

Bibliography Bibl -1

ix

TABLE OF CONTENTSndashContinued

PageFiguresES1 US trade balance in goods and services 1986ndash2007 xv11 Indices of exchange rates for selected major currencies in relation to the US dollar

daily 2007 1-312 US merchandise trade with the world 2005ndash07 1-613 Leading US export markets by share 2007 1-714 Leading US import sources by share 2007 1-815 US private cross-border services trade with the world 2005ndash07 1-1016 Leading US private services exports 2007 1-1217 Leading US private services imports 2007 1-12

TablesES1 Summary of 2007 trade agreement activities xxv11 US merchandise trade with major trading partners and the world 2007 1-712 US private services trade with major trading partners and the world 2007 1-1121 Petitions certified and denied under the TAA program and estimated number of workers

affected FY 2006 and FY 2007 2-322 Benefits and services provided under the TAA program FY 2006 and FY 2007 2-323 Antidumping duty orders that became effective during 2007 2-824 US imports for consumption from GSP beneficiaries and the world 2007 2-1325 US imports for consumption from AGOA countries 2005ndash07 2-1526 US imports for consumption from ATPA countries 2005ndash07 2-1727 US imports for consumption from CBERA countries 2005ndash07 2-1928 US imports of textiles and apparel in 2007 by quantity percentage change in imports

2006ndash07 and share of total US imports of textiles and apparel for major USsuppliers selected regional groups and the world 2-21

31 WTO membership in 2007 3-1432 WTO observers in 2007 3-1533 WTO dispute settlement panels established in 2007 3-1641 US merchandise trade with FTA partners total trade 2005ndash07 4-242 US imports entered under FTA provisions by FTA partner 2005ndash07 4-343 Status of US FTA negotiations during 2007 4-544 US merchandise trade with NAFTA partners 2005ndash07 4-845 Active files through 2007 under article 14 of the North American Agreement on

Environmental Cooperation 4-1146 Citizen submissions on enforcement under article 15 of the North American Agreement

on Environmental Cooperation submissions active during 2007 4-1247 NAFTA chapter 19 binational panels active reviews in 2007 4-14

Appendix tablesA1 US merchandise trade with world by SITC codes (revision 3) 2005ndash07 A-3A2 US private services exports to the world by category 2005ndash07 A-4A3 US private services imports from the world by category 2005ndash07 A-5A4 Antidumping cases active in 2007 by USITC investigation number A-6

x

TABLE OF CONTENTSndashContinued

PageAppendix tablesndashContinuedA5 Antidumping duty orders in effect as of December 31 2007 A-7A6 Countervailing duty cases active in 2007 by USITC investigation number A-13A7 Countervailing duty orders in effect as of December 31 2007 A-14A8 Reviews of existing antidumping and countervailing duty orders completed in 2007

by date of completion A-15A9 Section 337 investigations and related proceedings completed by the US International

Trade Commission during 2007 and those pending on December 31 2007 A-17A10 Outstanding Section 337 exclusion orders as of December 31 2007 A-26A11 US imports for consumption of leading GSP duty-free imports 2007 A-31A12 US imports for consumption and imports eligible for GSP treatment by import

categories under the Harmonized Tariff Schedule 2007 A-32A13 US imports for consumption under AGOA provisions by source 2005ndash07 A-33A14 US imports for consumption of leading imports under AGOA 2005ndash07 A-34A15 US imports for consumption under ATPA provisions by source 2005ndash07 A-35A16 US imports for consumption of leading imports under ATPA 2005ndash07 A-36A17 US imports for consumption under CBERA provisions by source 2005ndash07 A-37A18 US imports for consumption of leading imports under CBERA 2005ndash07 A-38A19 WTO dispute-settlement cases to which the United States was a party developments

in 2007 A-39A20 NAFTA dispute-settlement cases to which the United States was a party developments

in 2007 A-46A21 US merchandise trade with the European Union by SITC codes (revision 3) 2005ndash07 A-47A22 Leading US exports to the European Union by Schedule B subheading 2005ndash07 A-48A23 Leading US imports from the European Union by HTS subheading 2005ndash07 A-49A24 US merchandise trade with Canada by SITC codes (revision 3) 2005ndash07 A-50A25 Leading US exports to Canada by Schedule B subheading 2005ndash07 A-51A26 Leading US imports from Canada by HTS subheading 2005ndash07 A-52A27 US merchandise trade with China by SITC codes (revision 3) 2005ndash07 A-53A28 Leading US exports to China by Schedule B subheading 2005ndash07 A-54A29 Leading US imports from China by HTS subheading 2005ndash07 A-55A30 US merchandise trade with Mexico by SITC codes (revision 3) 2005ndash07 A-57A31 Leading US exports to Mexico by Schedule B subheading 2005ndash07 A-58A32 Leading US imports from Mexico by HTS subheading 2005ndash07 A-59A33 US merchandise trade with Japan by SITC codes (revision 3) 2005ndash07 A-61A34 Leading US exports to Japan by Schedule B subheading 2005ndash07 A-62A35 Leading US imports from Japan by HTS subheading 2005ndash07 A-63A36 US merchandise trade with Korea by SITC codes (revision 3) 2005ndash07 A-65A37 Leading US exports to Korea by Schedule B subheading 2005ndash07 A-66A38 Leading US imports from Korea by HTS subheading 2005ndash07 A-67A39 US merchandise trade with Taiwan by SITC codes (revision 3) 2005ndash07 A-69A40 Leading US exports to Taiwan by Schedule B subheading 2005ndash07 A-70A41 Leading US imports from Taiwan by HTS subheading 2005ndash07 A-71A42 US merchandise trade with India by SITC codes (revision 3) 2005ndash07 A-73A43 Leading US exports to India by Schedule B subheading 2005ndash07 A-74A44 Leading US imports from India by HTS subheading 2005ndash07 A-75

xi

List of Frequently Used Abbreviations andAcronyms

ACP Former European Colonies in Africa Caribbean and the PacificAD AntidumpingAFT Aid for TradeAGOA African Growth and Opportunity ActAIT American Institute in TaiwanAPEC Asia-Pacific Economic CooperationAPHIS Animal and Plant Health Inspection Service (USDA)AQSIQ General Administration of Quality Supervision Inspection and Quarantine

(China)ASU Aircraft Sector UnderstandingATPA Andean Trade Preference ActATPDEA Andean Trade Promotion and Drug Eradication Act BECC Border Environment Cooperation Commission (NAFTA)BSE Bovine Spongiform EncephalopathyCAFTA-DR Dominican Republic-Central America-United States Free Trade Agreement CBERA Caribbean Basin Economic Recovery ActCBI Caribbean Basin InitiativeCBTPA Caribbean Basin Trade Partnership ActCD Compact DiscCEC Commission for Environmental Cooperation (NAFTA) CFTA United States-Canada Free Trade AgreementCITA Committee for the Implementation of Textile Agreements (USDOC)CLC Commission for Labor Cooperation (NAFTA)CNL Competitive Need LimitationCSQ Country Specific QuotaCTD Committee on Trade and Development (WTO)CTDSS Committee on Trade and Development in Special SessionCTI Committee on Trade and Investment (APEC)CVD Countervailing DutyDDA Doha Development AgendaDSB WTO Dispute Settlement BodyDSU WTO Dispute Settlement UnderstandingDVD Digital Video DiscECA Export Credit Arrangement (OECD)EDA Economic Development Administration (USDOC)EIF Enhanced Integrated Framework (WT)EPA United States Environmental Protection AgencyEU European UnionFAS Foreign Agricultural Service (USDA)FBI Federal Bureau of InvestigationFMCSA Federal Motor Carrier Safety Administration (USDOT)FTA Free Trade AgreementFTAA Free Trade Area of the AmericasFTC Free Trade Commission (NAFTA)FY Fiscal Year

xii

G-4 G-4 Bloc (Brazil China India South Africa)G-20 G-20 Bloc of Developing CountriesGATS General Agreement on Trade in ServicesGATT General Agreement on Tariffs and TradeGDP Gross Domestic ProductGOI Government of IndiaGSP Generalized System of PreferencesHHOPE Haitian Hemispheric Opportunity through Partnership Encouragement ActHS Harmonized SystemHTS Harmonized Tariff Schedule ( United States)IF Integrated FrameworkIMF International Monetary FundIPR Intellectual Property RightsITA International Trade Administration (USDOC)JCCT US-China Joint Commission on Commerce and TradeLCIA London Court of International ArbitrationLDB Least-Developed BeneficiaryLDBDC Least-Developed Beneficiary Developing CountryLTFV Less Than Fair ValueMEA Multilateral Environmental AgreementMOU Memorandum of UnderstandingMPS Ministry of Public Security (China)MRA Mutual Recognition Agreement NAAEC North American Agreement on Environmental Cooperation (NAFTA)NAALC North American Agreement on Labor Cooperation (NAFTA)NADB North American Development BankNAFTA North American Free Trade AgreementNAMA Nonagricultural Market AccessNAO National Administrative Office (NAFTA)NTR Normal Trade RelationsOAS Organization of American StatesOECD Organization for Economic Cooperation and DevelopmentOIE World Organization for Animal HealthOIG Office of the Inspector General (USDOT)OST Office of the Secretary of Transportation (USDOT)OTAI Office of Trade Agreement Implementation (NAFTA)PRC Peoples Republic of ChinaPSAG Private Sector Advisory GroupSampD Special and DifferentialSAARC South Asian Association for Regional CooperationSCM Subsidies and Countervailing MeasuresSED US-China Strategic Economic DialogueSITC Standard Industrial Trade ClassificationSLA Softwood Lumber AgreementSMEs Square Meter EquivalentsSPS Sanitary and Phytosanitary StandardsSSA Sub-Saharan AfricaSVE Small and Vulnerable EconomyTAA Trade Adjustment AssistanceTAAC Trade Adjustment Assistance Center

xiii

TACA Trade Advisory Committee on AfricaTEC Transatlantic Economic CouncilTIFA Trade and Investment Framework AgreementTNC Trade Negotiations CommitteeTPA Trade Promotion AgreementTPF Trade Policy ForumTPL Tariff Preference LevelTRIMS Trade-Related Investment MeasuresTRIPS Trade-Related Aspects of Intellectual Property Rights TRQ Tariff-Rate QuotaUN United NationsUNCTAD United Nations Conference on Trade and DevelopmentUSDA United States Department of AgricultureUSDOC United States Department of CommerceUSDOL United States Department of LaborUSDOS United States Department of StateUSITC United States International Trade CommissionUSTR United States Trade RepresentativeWTO World Trade Organization

xv

EXECUTIVE SUMMARY

The US economy continued to expand for the sixth consecutive year in 2007 although ata slower pace than in previous years US exports of goods and services ($1046 billion)increased more rapidly than US imports ($1943 billion) for the second year in a row (13percent for exports versus 5 percent for imports) leading to a decrease in the trade deficitin goods and services in 2007 (figure ES1) Increases in US exports of machinery andtransport equipment chemicals and related products food and live animals and crudematerials (except fuels) represented almost three-quarters of the total increase in exports in2007 while increases in US imports of machinery and transport equipment and mineralfuels lubricants and related materials represented over one-half of the increase in importsfor the same year The US surplus in services trade increased by 341 percent to $1069billion in 2007 More than one-half of the increase in exports was accounted for by private

Figure ES1 US trade balance in goods and services 1986ndash2007

services that included business professional and technical services insurance services andfinancial services The US dollar depreciated 6 percent in 2007 on a trade-weighted yearlyaverage basis against a basket of currencies including the Canadian dollar the euro theChinese yuan and the Japanese yen The largest depreciation was against the United Statesrsquolargest trading partner Canada Despite the fluctuations during the year the US dollarended the year at approximately where it began the year against the Mexican peso and theBritish pound

A summary of key US trade agreement activities in 2007 is presented below followed bya summary of key activities and developments on a monthly basis for the year Tradeagreement activities during 2007 included the administration of US trade laws and

xvi

regulations US participation in the World Trade Organization (WTO) the Organizationfor Economic Cooperation and Development (OECD) and the Asia-Pacific EconomicCooperation (APEC) forum US negotiation of and participation in free trade agreements(FTAs) and bilateral developments with major trading partners

Key Trade Developments in 2007

Administration of US Trade Laws and Regulations

bull Section 301 One active case under section 301 concerned the European Union(EU) meat hormone directive which the WTO had found violates the Agreementon the Application of Sanitary and Phytosanitary Measures

bull Special 301 The USTRrsquos 2007 special 301 report highlighted weak intellectualproperty rights (IPR) protection and enforcement in China and Russia both ofwhich were placed on the priority watch list Belize and Brazil were moved fromthe priority watch list to the watch list due to improved IPR enforcement TheBahamas and Latvia were removed from the watch list due to their improved IPRenforcement and Bulgaria and Croatia were removed from the watch list due totheir passage of IPR legislation and improved enforcement The EU was removedfrom the watch list principally because it adopted new regulations concerninggeographical indications following an adverse WTO ruling

bull Section 337 investigations During 2007 there were 77 active section 337investigations and ancillary proceedings at the US International TradeCommission (Commission) 39 of which were instituted in 2007 Of these 39 therewere 35 new section 337 investigations and four new ancillary proceedingsrelating to previously concluded investigations All of the new section 337institutions in 2007 included allegations of patent infringement At the close of2007 40 section 337 investigations and related proceedings were pending

bull Antidumping investigations The Commission instituted 33 new antidumpinginvestigations and completed 8 during 2007 Antidumping duty orders were issuedby the US Department of Commerce (Commerce) in 2007 on certain activatedcarbon from China and polyester staple fiber from China

bull Countervailing duty investigations The Commission instituted 7 newcountervailing duty investigations and completed three investigations during 2007However because the Commission made negative determinations in each of thethree investigations (on coated free sheet paper from China Indonesia and Korea)no new countervailing duty orders were issued during 2007

bull Sunset reviews During 2007 Commerce and the Commission instituted 33 sunsetreviews of existing antidumping and countervailing duty orders and theCommission completed 74 reviews resulting in 38 antidumping and countervailingduty orders being continued for five additional years

xvii

bull Trade adjustment assistance In 2007 the US Department of Labor certifiedpetitions covering approximately 146592 workers A total of 1427 petitions werecertified as eligible for benefits and services and 625 petitions were denied

Preferential Trade Programs

bull Generalized System of Preferences (GSP) Duty-free imports entering under theUS GSP program totaled $308 billion in 2007 Angola was the leading GSPbeneficiary in 2007 followed by India Thailand Brazil and Indonesia During2007 East Timor was designated a GSP beneficiary and a least-developed GSPbeneficiary Bulgaria and Romania were removed from GSP status as a result oftheir accession to the EU and the Dominican Republic was removed from the GSPprogram as a result of its accession to the United States-Dominican Republic-Central America Free Trade Agreement (CAFTA-DR) Authorization for the GSPprogram is currently set to expire on December 31 2008

bull African Growth and Opportunity Act (AGOA) A total of 39 sub-Saharan African(SSA) countries were designated for benefits under AGOA as of January 1 2007and 26 SSA countries were eligible for AGOA textile and apparel benefitsDuty-free US imports under AGOA including GSP were valued at $511 billionin 2007 US imports under AGOA exclusive of GSP were valued at $423 billionin 2007 a 170 percent increase from 2006 The increase in AGOA imports wasdriven mainly by increases in US imports of petroleum-related products whichmade up more than 95 percent of imports by value under AGOA This increasewas almost exclusively due to increases in prices rather than volume

bull Andean Trade Preference Act (ATPA) ATPA as amended by the Andean TradePromotion and Drug Eradication Act (ATPDEA) provides duty-free treatment forcertain products of Bolivia Colombia Ecuador and Peru US imports underATPA were valued at $123 billion in 2007 a decrease of 87 percent from $135billion in 2006 Imports under ATPA from each of the four beneficiary countriesdecreased in 2007 Imports from Ecuador decreased by 134 percent in valueduring 2007 mainly because of lower petroleum production Petroleum-relatedproducts accounted for 67 percent of US imports under ATPA in 2007 Otherleading imports under ATPA in 2007 included apparel copper cathodes fresh cutflowers and asparagus

bull Caribbean Basin Economic Recovery Act (CBERA) CBERA as expanded by theCaribbean Basin Trade Partnership Act (CBTPA) provides duty-free and reduced-duty treatment for certain products of designated Caribbean Basin countries In2007 articles from 19 countries and territories were eligible for CBERApreferences US imports under CBERA were valued at $55 billion in 2007 a446 percent decline from $99 billion in 2006 The decline in US imports underCBERA was due to the fact that imports from El Salvador Guatemala Hondurasand Nicaragua entered under CAFTA-DR during 2007 rather than under CBERAThe Dominican Republic was a CBERA beneficiary for only part of 2007 beforeCAFTA-DR entered into force for that country Trinidad and Tobago was theleading supplier of US imports under CBERA in 2007 Mineral fuels methanoland apparel products ranked as the leading US imports under CBERA in 2007

xviii

Textiles and Apparel

bull Trade US imports of textiles and apparel in 2007 totaled 531 billion squaremeter equivalents (SMEs) ($964 billion) an increase of 18 percent by volume and34 percent by value over 2006 Similar to previous years 2007 was characterizedby a shift in US textile and apparel imports from Central American and SouthAmerican countries toward lower-priced Asian suppliersmdashprimarily China butalso Indonesia Bangladesh Vietnam and Cambodia

bull China US imports of textiles and apparel from China increased by $53 billionto $323 billion This increase is mainly attributable to a $42 billion increase inUS imports of apparel articles Of the total US textile and apparel imports fromChina in 2007 $227 billion were apparel and $96 billion were textiles LeadingUS apparel imports from China in 2007 included knit sweaters pullovers andvests knit babiesrsquo garments and accessories and womenrsquos or girlsrsquo trousers andshorts Leading imports of textiles from China included certain made-up textilesarticles bedding articles and certain curtains Chinarsquos share of the US importmarket expanded to 402 percent by volume in 2007 compared with 357 percentin 2006 In 2007 34 categories of textiles and apparel products were subject to 21quotas under the 2005 memorandum of understanding between the United Statesand China which established quotas on US imports of selected textile and apparelproducts from China from January 1 2006 through December 31 2008 During2007 quotas filled at an average rate of 619 percent

bull AGOA ATPA and CBERA In 2007 imports of textiles and apparel eligible forduty-free entry into the United States totaled $13 billion (327 million SMEs)under AGOA $12 billion (177 million SMEs) under ATPAATPDEA and $927million (481 million SMEs) under CBERACBTPA For the first time since 2004the volume of US imports under AGOA increased slightly (28 percent) Thevolume of US imports of textiles and apparel declined in 2007 under bothATPDEA (by 140 percent) and the CBTPA (by 658 percent)

bull Haitian Hemispheric Opportunity through Trade Partnership Encouragement(HHOPE) Act Haiti began shipping apparel to the United States under theHHOPE Act in the second half of 2007 US imports of textiles and appareleligible for duty-free entry under the HHOPE Act in 2007 totaled $136 million(40 million SMEs) or 3 percent of total US textile and apparel imports fromHaiti (the remaining imports entering under CBTPA) The CBTPA program underwhich US imports from Haiti have grown steadily in recent years has contributedto a viable apparel manufacturing sector in Haiti and created a base from which theindustry can benefit from enhanced preferences afforded by the HHOPE Act

WTO OECD and APEC

bull WTO developments The Doha Development Agenda multilateral tradenegotiations resumed on February 7 2007 only to be suspended four months laterin June The G-4 countriesmdashBrazil the EU India and the United Statesmdashmetduring June 19ndash21 2007 in an effort to reach some convergence in negotiatingpositions regarding market access for agricultural products domestic support for

xix

agricultural producers and market access for nonagricultural products Issuesraised at the WTO General Council included preferential trade arrangements smalland vulnerable economies the harmonization of nonpreferential rules of originand the Aid for Trade initiative The General Council also held its annual reviewof Chinarsquos Protocol of Accession to the WTO and its biennial review of the USJones Act legislation

bull WTO dispute settlement During 2007 WTO members filed 13 new requests forWTO dispute settlement consultations This compares with 22 in 2006 12 in 2005and 19 in 2004 Thirteen new dispute settlement panels were established in 2007One of these panels (DS358mdashreductions or exemptions from taxes) was laterterminated when the United States and China reached a mutually agreed settlementin December 2007 and another (DS359mdash reductions or exemptions from taxes)was terminated when Mexico and China reached a mutually agreed settlement inFebruary 2008 Four cases involved the United States as complainant (DS358DS360Indiamdashadditional and extra duties on imports DS362ChinamdashIPRenforcement and DS363Chinamdash trading rights and distribution services foraudiovisual entertainment products) Other complainants that brought one or moredispute settlement cases in 2007 included Argentina (3) Brazil (1) the EU (3)Mexico (1) and Panama (1) Two dispute settlement panels involved the UnitedStates as respondent (DS350EUmdashldquozeroingrdquo methodology andDS365Brazilmdashdomestic support and export credit for agricultural products)Other respondents cited in one or more dispute settlement cases in 2007 includedBrazil (1) Chile (2) China (4) Colombia (1) India (2) and Mexico (1) The tradeissues implicated in these cases included measures affecting antidumpingcountervailing duty and safeguard matters intellectual property rights taxmatters and measures affecting border and internal trade issues

bull OECD developments The OECD Trade Committee held several global policyforums during 2007 addressing subjects such as trade and labor market adjustmentand the international sourcing of information technology services The committeecompleted its comprehensive reviews of the economies of China and India andcontinued discussions on trade issues regarding other major nonmembereconomies

bull APEC developments During the September 2007 annual meeting APEC ministersagreed upon an Action Plan to stimulate energy efficiency and environmentalprotection in their region Also in 2007 APECrsquos Committee on Trade andInvestment agreed on measures with respect to regional and free trade agreementselectronic commerce rules of origin and origin procedures and sanitary andphytosanitary measures formulated a plan aimed at reducing intra-regionaltransaction costs associated with trade developed guidelines to enhance IPRcapacity building in the region and agreed on common procedures for acquiringnew patents in member countries

FTAs in Force During 2007

bull US FTAs in force in 2007 The United States was a party to nine FTAs as ofDecember 31 2007 CAFTA-DR (2006ndash07) the US-Bahrain FTA (2006) the

xx

US-Morocco FTA (2006) the US-Australia FTA (2005) the US-Chile FTA(2004) the US-Singapore FTA (2004) the US-Jordan FTA (2001) the NorthAmerican Free Trade Agreement (NAFTA) (1994) and the US-Israel FTA(1985)

bull FTA legislative developments The US Congress and the Administration agreedon a bipartisan trade deal on May 10 2007 calling for the inclusion of core laborand environmental standards among other things in the text of pending and futuretrade agreements The Presidentrsquos statutory authority to negotiate trade agreementsthat Congress can approve or disapprove but cannot amend lapsed on July 1 2007without being renewed

bull Other FTA developments The United States concluded FTA negotiations withPanama on December 19 2006 and the two parties signed the US-Panama TradePromotion Agreement (TPA) on June 28 2007 The United States concluded FTAnegotiations with Korea on April 1 2007 and the two parties signed a bilateralFTA agreement on June 30 2007 The United States signed bilateral agreementswith Colombia Oman and Peru in 2006 The United States and Peru concludednegotiations for an amended US-Peru TPA on June 25 2007 that was ratified byCongress in December 2007 and President Bush signed the implementinglegislation on December 14 2007 The United States and Colombia concludednegotiations for an amended US-Colombia TPA on June 28 2007 Howevernone of those bilateral agreements entered into force during 2007

bull US merchandise trade flows with FTA partners Total US exports of goods toFTA partners in 2007 were valued at $406 billion and accounted for 388 percentof total US exports while total US imports of goods from FTA partners werevalued at approximately $593 billion and accounted for 322 percent of total USimports The United States had an overall merchandise trade deficit with FTApartners in 2007 of $188 billion including a record high $190 billion deficit withNAFTA partners Australia Singapore and Morocco were the only FTA partnerswith whom the United States recorded a merchandise trade surplus during 2007

bull NAFTA developments Although NAFTA was launched on January 1 1994 thelast of its trade provisions were only fully implemented on January 1 2008 In2007 US two-way merchandise trade (exports plus imports) with NAFTApartners totaled $855 billion a 52 percent increase over 2006

bull NAFTA dispute settlement Chapter 11 of NAFTA includes provisions designedto protect cross-border investors and facilitate the settlement of investmentdisputes In 2007 there were five active chapter 11 cases against the United Statesby Canadian investors There were also six active chapter 11 cases by USinvestors against Canada and four active chapter 11 cases by US investors againstMexico Chapter 19 of NAFTA contains a mechanism that provides for review bya binational panel of final determinations made by national investigatingauthorities in antidumping and countervailing duty cases At the end of 2007 theNAFTA Secretariat listed 12 active binational panels under chapter 19 The twobinational panels formed in 2007 under chapter 19 challenged US agenciesrsquodeterminations on products from Mexico

The 27 members of the EU in 2007 were Austria Belgium Bulgaria Cyprus the Czech Republic1

Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia LithuaniaLuxembourg Malta the Netherlands Poland Portugal Romania the Slovak Republic Slovenia SpainSweden and the United Kingdom

xxi

Trade Activities with Major Trading Partners

European Union

bull The EU is the second-largest two-way (exports plus imports) US trading partner1

behind the combined NAFTA market of Canada and Mexico In 2007 US two-way merchandise trade with the EU totaled $5785 billion representing nearly one-fifth of US trade with the world US exports of goods to the EU were valued at$2263 billion in 2007 and US imports of goods from the EU were valued at$3522 billion resulting in a US merchandise trade deficit with the EU of $1259billion in 2007 Leading US exports to the EU during the year included aircraftand aircraft parts medicaments passenger cars blood fractions and gold LeadingUS imports from the EU included certain medicaments passenger cars petroleumderivatives and nucleic acids and their salts

bull There were several active WTO dispute settlement proceedings during 2007 inwhich both the United States and the EU were parties either as the complainantor the respondent Four of these cases involved alleged subsidies to their respectivecivil aircraft industries The United States and EU also created the TransatlanticEconomic Council to guide efforts to lower US and EU barriers to trade andinvestment

Canada

bull Canada was the second-largest export market for US goods in 2007 following theEU and the largest single-country trading partner of the United States withtwo-way merchandise trade valued at $5256 billion US merchandise exports toCanada were valued at $2131 billion in 2007 and US merchandise imports fromCanada were valued at $3125 billion resulting in a $994 billion US merchandisetrade deficit with Canada in 2007 Leading US exports to Canada during the yearincluded passenger and transport motor vehicles parts and accessories for motorvehicles and energy products such as natural gas and crude oils Leading USimports from Canada in 2007 included natural gas and crude oils and passengermotor vehicles

bull The United States and Canada conducted bilateral discussions on a number ofagricultural issues during 2007 notably the resumption of livestock tradefollowing concerns about bovine spongiform encephalopathy (BSE) and theliberalization of Canadian restrictions on imports of bulk shipments of potatoesThe United States also requested consultations with Canada under the US-CanadaSoftwood Lumber Agreement signed in September 2006 to resolve concernsregarding Canadarsquos implementation of several provisions The two countries alsoimplemented a bilateral air service agreement that removes remaining restrictionson civil aviation services between the two countries

xxii

China

bull China was the second-largest single-country trading partner of the United Stateswith two-way merchandise trade valued at $3838 billion in 2007 USmerchandise exports to China were valued at $610 billion and US merchandiseimports from China were valued at $3231 billion resulting in a $2621 billionUS merchandise trade deficit with China in 2007 accounting for 292 percent ofthe US global merchandise trade deficit in that year Leading US exports toChina included airplanes soybeans electronic integrated circuits and copper andaluminum waste and scrap Leading US imports from China included computersand their parts wireless telephones miscellaneous wheeled toys video games andfootwear

bull US-China bilateral trade relations in 2007 focused on IPR enforcement productsafety and market access for goods and services in China as well as the twocountriesrsquo global trade imbalances

Mexico

bull Mexico was the third-largest single-country trading partner of the United Stateswith two-way merchandise trade valued at $3296 billion in 2007 USmerchandise exports to Mexico were valued at $1194 billion and USmerchandise imports from Mexico were valued at $2102 billion resulting in a$908 billion US merchandise trade deficit with Mexico Leading US exports toMexico included machinery and transportation equipment Leading US importsfrom Mexico included crude oils and motor vehicles

bull On September 6 2007 the US Department of Transportation initiated the Cross-Border Trucking Demonstration Project which permits up to 100 Mexico-domiciled motor carriers to operate throughout the United States for one year

Japan

bull US two-way merchandise trade with Japan totaled $2030 billion in 2007 USmerchandise exports to Japan were valued at $581 billion and US merchandiseimports from Japan totaled $1449 billion resulting in an $868 billion USmerchandise trade deficit with Japan in 2007 Leading US exports to Japanincluded airplanes and other aircraft corn parts of airplanes or helicoptersmachines and apparatus for the manufacture of semiconductor devices orelectronic integrated circuits and soybeans Leading US imports from Japanincluded passenger motor vehicles parts and accessories of printing machinerytelevision cameras digital cameras and video camera recorders and gear boxesand parts for motor vehicles

bull The US-Japan Economic Partnership for Growth continues to serve as theprimary forum for trade and economic dialogue between the two countries In2007 discussions under this framework focused on US beef exports to Japan andderegulation of Japanrsquos economy including economy-wide and sector-specific

xxiii

reforms such as certification of communications equipment and air transportrestrictions

Korea

bull US two-way merchandise trade with Korea totaled $784 billion in 2007 USmerchandise exports to Korea were valued at $330 billion and US merchandiseimports from Korea totaled $454 billion resulting in a $123 billion USmerchandise trade deficit with Korea Leading US exports to Korea includedcomputer chips aircraft and machines and mechanical appliances havingindividual functions (mostly semiconductor production machinery) Leading USimports from Korea included automobiles cellular telephones computer chips andcomputer parts and accessories (mainly memory modules)

bull US-Korea trade relations in 2007 were dominated by FTA negotiations andnegotiations over US beef exports to Korea which had been suspended becauseof Korean concerns with BSE

Taiwan

bull US two-way merchandise trade with Taiwan totaled $625 billion in 2007 USmerchandise exports to Taiwan were valued at $245 billion and US merchandiseimports from Taiwan totaled $381 billion resulting in a $145 billion USmerchandise trade deficit with Taiwan in 2007 Leading US exports to Taiwanin 2007 included digital integrated circuits semiconductor and flat panelmanufacturing and assembly equipment aircraft corn and soybeans Leading USimports from Taiwan included digital integrated circuits transmission apparatusfor radiotelephony reception apparatus for television computer parts andnavigational and remote control radar machines

bull During the sixth session of the Trade and Investment Framework Agreement inJuly 2007 US-Taiwan negotiations focused on IPR enforcement in Taiwan USaccess to Taiwanrsquos beef market and Taiwanrsquos rice procurement practices

India

bull US two-way merchandise trade with India totaled $402 billion in 2007 USmerchandise exports to India were valued at $163 billion and US merchandiseimports from India totaled $239 billion resulting in a $76 billion merchandisetrade deficit with India in 2007 Leading US exports to India during the yearincluded aircraft fertilizers nonindustrial diamonds and nonmonetary goldLeading US imports from India included nonindustrial diamonds articles ofjewelry and parts of precious metals (excluding silver) and womenrsquos or girlsrsquocotton blouses shirts and blouses (not knitted or crocheted)

xxiv

bull During 2007 India resumed shipments of mangoes to the US market ending an18-year bilateral trade dispute under the condition that the mangoes undergoirradiation in India to eliminate pests

Table ES1 provides a summary of key activities and developments on a monthly basis forthe year 2007

xxv

TABLE ES1 Summary of 2007 trade agreement activities

January

1-Bulgaria and Romania become EU membersand are no longer designated as beneficiarydeveloping countries under theUS GSPprogram

8-Canada requests WTO consultations with theUnited States regarding US domestic supportmeasures for corn and other agriculturalproducts

8-Chiles status is elevated to ldquopriority watch listrdquofrom ldquowatch listrdquo as the result of an out-of-cycleSpecial 301 review of intellectual propertyprotections

10-The State Department certifies Madagascarand recertifies Nigeria as eligible to export wildshrimp to the United States

16-The EU lifts its restrictions requiring importedUS corn gluten feed and brewers grain to becertified as free of the genetically modifiedorganism Bt10

16-The United States appeals a WTO disputepanel ruling that found that the United Statesfailed to comply with an earlier panel rulingfaulting US sunset review procedures inantidumping cases

25-The United States and Uruguay sign a Tradeand Investment Framework Agreement (TIFA)

26-The United States and Mexico sign a customscooperation agreement to implement the apparelcumulation provisions of CAFTA-DR

30-A WTO panel upholds Ecuadors claim thatthe US Department of Commerce violated WTOantidumping rules by using ldquozeroingrdquo in itsoriginal investigation on imports of shrimp fromEcuador

February

2-The United States requests dispute settlementconsultations with China over prohibitedsubsidies

2-Canada announces that it will no longer requiretesting for bluetongue in cattle sheep and goatsimported from the United States

16-The United States and Liberia sign a TIFA

FebruarymdashContinued

16-The United States signs an agreement withJapan to facilitate trade in telecommunicationsequipment

16-Japan suspends imports of beef from aLexington Nebraska plant for potential violationof joint import rules

23-A US district court rules that an Illinois lawprohibiting certain investments in companiesdoing business in or with Sudan isunconstitutional

March

1-CAFTA-DR enters into force for the DominicanRepublic

2-Japan suspends imports of sausages from aCalifornia meat packer based on the suspicionthat the products contained banned USprocessed beef

6-The United States requests WTO disputesettlement consultations with India over customsduties India imposes on imports of wine anddistilled spirits

19-The United States and Vietnam beginnegotiations on a TIFA

20-President Bush signs a proclamationimplementing legislation that provides tradebenefits for Haiti under the HHOPE Act

30-The US Department of Commerceannounces its preliminary decision to apply UScountervailing duty law to imports from ChinaThis is the first time countervailing duties will beimposed on imports from a nonmarket economy

30-The United States requests formalconsultations with Canada under a disputeresolution mechanism in the 2006 US-CanadaSoftwood Lumber Agreement to discussCanadian compliance with several provisions ofthe pact

April

1-The United States and Korea completenegotiations for a free trade agreement (FTA)

xxvi

AprilndashContinued

10-The United States requests disputesettlement consultations with China regardingdeficiencies in Chinarsquos intellectual property rights(IPR) laws and market access barriers tocopyright-based industries

12-The WTO Appellate Body circulates its reportupholding a US statute concerning the USantidumping ldquosunsetrdquo review of oil country tubulargoods from Argentina

17-The EU announces an expansion of thenumber of products from the United States thatwill be subject to retaliatory import duties as aresult of increased payments to US firms underthe Byrd amendment which has been ruledinconsistent with WTO rules

30-Thailand and Chile are added to the USTRrsquosSpecial 301 priority watch list of countries that donot adequately protect IPR Brazil is removed

30-The United States and the EU agree on aframework to promote greater regulatorycooperation to facilitate transatlantic trade

May

1-First shipment of mangoes from India in 18years enters the United States under a 2006US-India agreement to irradiate mangoes priorto entry into the US market

10-The USTR and Congress announce abipartisan agreement to add core labor andenvironmental standards among other things topending US FTAs

10-The EU requests the establishment of a WTO dispute settlement panel to challenge 40 USantidumping measures that the EU says arebased on the zeroing methodology used inUS antidumping investigations

23-Customs officials from the United States andChina sign an agreement strengthening theenforcement of intellectual property laws

25-The United States requests the establishmentof a WTO dispute settlement panel challengingIndiarsquos duties on wine and spirits and otherimports from the United States

June

4-The United States submits a paper to the WTONegotiating Group on Rules proposing thatcertain trade-distorting subsidies be prohibited

JunendashContinued

8-Canada requests the establishment of a WTOdispute settlement panel to rule whether theUnited States violated WTO rules by providingexcessive subsidies to its farmers as well asillegal agricultural export subsidies

14-The United States and Rwanda launch formalnegotiations on a Bilateral Investment Treaty

20-Antigua and Barbuda announces that it willseek authorization from the WTO to imposemore than $34 billion in annual trade sanctionsagainst the United States for its failure to complywith a WTO ruling against US restrictions onInternet gambling

20-The United States and Georgia sign a TIFA

21-The United States and Vietnam sign a TIFA

25-The United States and Peru agree onamendments to the US-Peru Trade PromotionAgreement (TPA) pursuant to the May 10 2007US agreement to add core labor andenvironmental standards

27-Peru ratifies the amended US-Peru TPA

28-The United States and Colombia agree onamendments to the US-Colombia TPA pursuantto the May 10 2007 US agreement to add corelabor and environmental standards

28-The United States and Panama sign abilateral FTA

28-The United States terminates GSP duty-freebenefits for certain products from Brazil CocirctedIvoire India the Philippines Thailand andVenezuela

30-The United States and Korea sign a bilateralFTA

30-President Bush signs legislation to extendATPA duty-free benefits for Bolivia ColombiaEcuador and Peru

July

1-The Presidents Trade Promotion Authorityexpires

3-The Indian government announces that it willlift a tariff on imports of wines beer and spiritsthat is the subject of a WTO dispute settlementcomplaint

xxvii

JulyndashContinued

11-Brazil files a request for WTO disputesettlement consultations relating to US supportand export credit guarantees for agriculturalproducts paid to US farmers

11-Panama ratifies the US-Panama TPA

24-The United States and Mexico request aWTO dispute settlement panel challenging Chinese subsidies

August

13-The United States requests the establishmentof a WTO dispute settlement panel to resolveclaims that the Chinese IPR legal regime fails toadequately protect and enforce US copyrightsand trademarks

14-NAFTA trade ministers meet and agree onrules-of-origin changes to be implemented in2008

September

6-US-Mexican Cross-Border Trucking Programbegins satisfying provisions under NAFTA

14-China requests WTO dispute settlementconsultations relating to preliminary USantidumping and countervailing duties imposedon imports of Chinese coated free sheet paper(glossy paper)

21-A WTO dispute settlement panel report iscirculated that agrees with US claims thatTurkeyrsquos measures on imported rice areinconsistent with Turkeyrsquos WTO obligations

28-US duties for certain goods imported fromMexico are eliminated under NAFTA

28-President Bush signs legislation extending thetrade adjustment assistance program for threemonths

October

2-The United States establishes the ValidatedEnd-User program for India to increase securehigh-tech trade with India

8-Costa Rica approves CAFTA-DR in a nationalreferendum

16-President Bush signs a bill boosting penaltiesfor violations of export control regulations

OctoberndashContinued

30-Colombia ratifies the amended US-ColombiaTPA

November

1-The United States and Canada implement anarrangement concerning trade in potatoes

8-Brazil and Canada request establishment of a WTO dispute settlement panel to considerwhether the United States violated WTO rules byproviding excessive subsidies to US farmers

14-The United States and Libya agree toestablish a formal body that will meet annually todiscuss ways to broaden bilateral commercialties

19-China agrees to terminate subsidies that theUnited States alleged were inconsistent underWTO rules

21-The United States and Japan finalize anagreement to facilitate trade intelecommunications equipment and harmonizecertification requirements

28-A NAFTA panel rejects the US Departmentof Commerces use of ldquozeroingrdquo in calculatingdumping margins

30-The United States and the EU propose toincrease global trade in technologies that inhibitclimate change by eliminating tariffs and otherbarriers

December

4-Congress completes ratification of the US-Peru TPA

5-The United States and Paraguay agree toexpand coverage of GSP duty-free benefits toinclude certified handicrafts

11-The US Department of Commerce andChinarsquos Ministry of Commerce sign the ldquoGuidelines for US-China High Technology andStrategic Trade Developmentrdquo

11-The United States and China sign twoagreements on food and feed import safety anddrug and medical device import safety

12- The United States and China conclude amemorandum of understanding on illegal loggingand associated trade

xxviii

DecemberndashContinued

14-President Bush signs the US-Peru TPAImplementation Act

17-The United States reaches agreement withthe EU at the WTO on compensation for Internetgambling

27-President Bush proclaims modifications to theCAFTA-DR textile rules of origin

27-President Bush proclaims modifications to theUS-Chile FTA and the US-Singapore FTArules of origin

31-President Bush signs into law the SudanAccountability and Divestment Act of 2007

Sources Compiled from multiple USgovernment sources including US Departmentof Agriculture US Department of CommerceUS Department of Labor US InternationalTrade Commission US Department of Stateand the White House Other sources includeBureau of National Affairs International TradeDaily and US Chamber of Commerce

This is the 59th in a series of annual reports submitted to the US Congress under section 163(c) of the1

Trade Act of 1974 (19 USC 2213(c)) and its predecessor legislation According to the US Department of Commerce (USDOC) GDP growth in 2007 was the weakest since2

2002 The change is associated with a reorientation of the US economy away from housing investment andtoward exports and investment in business structures White House Economic Report of the PresidentFebruary 2008 25 USDOC Bureau of Economic Analysis (BEA) ldquoNational Economic Accountsrdquo3

A slowdown in real imports was also a factor in the positive contribution of net exports to the growth of4

GDP during the year Net exports added almost a percentage point to US GDP growth in the second half of2007 Board of Governors of the Federal Reserve System Monetary Policy Report to the Congress 17

1-1

CHAPTER 1Overview of US Trade

Scope and Approach of the Report

This report provides factual information on the operation of the US trade agreementsprogram and its administration for calendar year 2007 The trade agreement activities1

during 2007 include the administration of US trade laws and regulations US participationin the World Trade Organization (WTO) the Organization for Economic Cooperation andDevelopment (OECD) and the Asia-Pacific Economic Cooperation (APEC) forum USnegotiation of and participation in free trade agreements (FTAs) and bilateral developmentswith major trading partners

The report is based on primary source materials on US trade programs and administrativeactions thereunder including US government Federal Register notices publications andpress releases by the US International Trade Commission (USITC or the Commission) andother US government agencies Other primary sources of information include publicationsof international institutions including the International Monetary Fund (IMF) the OECDthe WTO and official publications of foreign governments Professional journals tradepublications and news reports are used to provide supplemental factual information whenprimary source information is unavailable

The data provided throughout the report are on merchandise trade except for chapter 1which also includes data on services trade as compiled by the Commission primarily fromthe US Census Bureau of the US Department of Commerce as well as the United Nations(UN) and the IMF

Overview of the US Economy in 2007

The expansion of the US economy continued for the sixth consecutive year in 2007 butgrowth was slower than in previous years Real US gross domestic product (GDP)2

increased by 22 percent in 2007 compared with 29 percent growth in 2006 Personal3

consumption expenditures exports nonresidential structures and state and local4

government spending were leading components of the growth in 2007 The decline in realGDP growth between 2006 and 2007 primarily reflected a large decrease in residential fixed

IMF ldquoWorld Economic Outlookrdquo April 2008 105

Economic growth slowed as a result of a weak housing sector credit tightening and high energy prices6

White House Economic Report of the President 18 The euro area includes Austria Belgium Finland France Germany Greece Ireland Italy Luxembourg7

the Netherlands Portugal Slovenia and Spain OECD ldquoMain Economic Indicators Country Comparison Tablesrdquo April 20088

GDP growth data for the world and China are from the IMF ldquoWorld Economic Outlookrdquo April 20089

table 11 8 The OECD includes Australia Austria Belgium Canada the Czech Republic Denmark Finland10

France Germany Greece Hungary Iceland Ireland Italy Japan Korea Luxembourg Mexico theNetherlands New Zealand Norway Poland Portugal the Slovak Republic Spain Sweden SwitzerlandTurkey the United Kingdom and the United States USDOC BEA ldquoInternational Economic AccountsmdashUS International Transactions Fourth Quarter11

and Year 2007 Current Accountrdquo These data cover exchange rates for the 2007 calendar year Data analyzedby the Federal Reserve covered January 2007 through February 21 2008 Those data show that the nominaltrade-weighted exchange value of the dollar against major currencies depreciated by more than 10 percentduring that period Board of Governors of the Federal Reserve System Monetary Policy Report to theCongress 33 Board of Governors of the Federal Reserve System Monetary Policy Report to the Congress 3312

1-2

investment a downturn in private inventory investment and a decline in equipment andsoftware expenditures that were partly offset by a decline in imports The decline in the UShousing market which began in 2006 continued to be a drag on economic activity in 20075

The quarterly pattern of real GDP growth in 2007 was uneven with relatively strongergrowth in the second and third quarters and relatively weaker growth in the first and fourthquarters GDP growth slowed sharply in the fourth quarter of 2007 increasing only at anannual rate of 06 percent after posting a 49 percent annual rate in the third quarter6

Despite slower growth in 2007 the US economy recorded growth that either equaled orexceeded that of some other major industrialized countries and areas including the euro area(22 percent) and Japan (18 percent) However US economic growth was below the7 8

world average GDP growth rate of 52 percent as well as that of Canada (29 percent)9

Mexico (38 percent) China (115 percent) and the OECD (29 percent)10

Exchange-Rate Trends

The US dollar depreciated 6 percent in 2007 on a trade-weighted yearly average basisagainst a group of major currencies (figure 11) It generally depreciated during the year11

against the Canadian dollar the euro the Chinese yuan and the Japanese yen with thelargest depreciation occurring against the Canadian dollar Short-term fluctuations in thedollar-yuan exchange rate continued to be small with the dollarrsquos rate of depreciationaccelerating against the yuan in late 2007 Despite the fluctuations during the year the12

US dollar ended the year at approximately where it began the year against the Mexicanpeso and the British pound

USDOC BEA ldquoInternational Economic AccountsmdashUS International Transactions Fourth Quarter13

and Year 2007 Current Accountrdquo The balance on income is income receipts (including income receipts on US-owned assets abroad and14

compensation of US employees abroad) less income payments (including income payments onforeign-owned assets in the United States and compensation of foreign employees in the United States)

1-3

Figure 11 Indices of exchange rates for selected major currencies in relation to the US dollar daily

2007a

Source US Federal Reserve Board

Units of the foreign currency per unit of the US dollar A decrease in the index represents a depreciation in thea

US dollar relative to the foreign currency and an increase in the index represents an appreciation of the US dollarrelative to the foreign currency

Balance of Payments

The US current account deficitmdashthe combined balances on trade in goods and servicesincome and net current unilateral transfersmdashdecreased from $8115 billion in 2006 to$7386 billion in 2007 As a share of US GDP the current account deficit was 53 percent13

in 2007 down from 62 percent in 2006 The decrease was accounted for by increases in thesurpluses on income and services as well as a decrease in the deficit on goods The deficiton trade in goods decreased from $8383 billion in 2006 to $8154 billion in 2007 Thebalance on income increased from a surplus of $366 billion in 2006 to a surplus of $74314

billion in 2007

Services trade data are reported here on a balance of payments (BOP) basis for purposes of comparison15

with merchandise trade figures BOP data include trade in private services as well as transfers under USmilitary agency sales contracts and US government purchases of miscellaneous services USDOC BEAldquoInternational Economic AccountsndashUS International Transactions Fourth Quarter and Year 2007 CurrentAccountrdquo table 1 US trade in services is described in greater detail below16

The main components of the financial account are capital transfers foreign direct investment portfolio17

investment banking and other flows statistical discrepancies and official reserve assets USDOC BEAldquoInternational Economic AccountsmdashUS International Transactions Fourth Quarter and Year 2007 CurrentAccountrdquo USDOC BEA ldquoInternational Economic AccountsmdashUS International Trade in Goods and Servicesrdquo18

The Census basis data for goods (used elsewhere in this report) are compiled from the documents19

collected by the US Customs Service and reflect the movement of goods between foreign countries and the50 states the District of Columbia Puerto Rico the US Virgin Islands and US foreign trade zones Dataon goods compiled on a Census basis are adjusted by the USDOC BEA to a BOP basis to bring the data inline with the concepts and definitions used to prepare the international and national accounts Theseadjustments are made to supplement coverage of the Census basis data to eliminate duplication oftransactions recorded elsewhere in the international accounts and to value transactions according to astandard definition For a more detailed discussion of the differences between BOP basis and Census basisdata see USDOC BEA ldquoInformation on Goods and Servicesrdquo in USDOC BEA ldquoInternational EconomicAccountsrdquo December 2007 BOP trade data in this section of the report may not match data in other sectionsor in the report appendix because of adjustments made to the data by the sources cited White House Economic Report of the President February 2008 3520

USDOC US Census Bureau ldquoInternational Economic AccountsmdashUS International Trade in Goods21

and Services December 2007rdquo February 14 2008

1-4

The trade surplus on services increased from $797 billion in 2006 to $1069 billion in2007 Exports of services increased to $4792 billion in 2007 from $4226 billion in 200615

and more than half of the increase was accounted for by an increase in ldquootherrdquo privateservices which includes business professional and technical services insurance servicesand financial services There were also increased exports of travel royalties and licensefees and ldquootherrdquo transportation which includes freight and port services Imports ofservices increased from $3428 billion in 2006 to $3723 billion in 2007 with more than halfof the increase accounted for by an increase in ldquootherrdquo private services Net financial16

account payments (outflows) were $12 trillion in 2007 up from $11 trillion in 200617

Trade in Goods and Services

The US foreign trade deficit for goods and services in 2007 was $7086 billion (51 percentof GDP) down from a deficit in 2006 of $7585 billion (57 percent of GDP) US exports18

of goods and services on a seasonally adjusted US balance-of-payments (BOP) basis19

were valued at $16284 billion in 2007 with imports of goods and services valued at$23369 billion Exports of services increased in 2007 but at a slower pace than in theprevious year The pace of the increase in the exports of goods and services reflected theeconomic growth of US trading partners expanded domestic production capacity andexchange-rate trends20

Largely as a result of higher petroleum prices US spending on petroleum imports increasedduring 2007 resulting in an increase in the petroleum products deficit from $2709 billionin 2006 to $2935 billion in 2007 Imports of petroleum accounted for 142 percent of total21

imports by value in 2007 and the petroleum products deficit represented 412 percent ofthe total US deficit on trade in goods and services in 2007 US trade in goods and servicesis discussed in more detail below

Merchandise trade data in this section do not match the seasonally adjusted BOP basis data presented22

above because of adjustments made to the data as described in footnote 19 US exports have been helped by rising foreign incomes the expansion of production in the United23

States and changes in exchange rates White House Economic Report of the President 20 US trade in services is described in greater detail below24

1-5

US Trade in Goods in 2007

US merchandise exports increased to $10464 billion (76 percent of GDP) in 2007 from$9295 billion (70 percent of GDP) in 2006 (figure 12) US merchandise imports22

increased to $19429 billion (140 percent of GDP) in 2007 from $18451 billion (140percent of GDP) in 2006 (figure 12) Exports increased more rapidly than imports for thesecond year in a row with exports increasing by 156 percent over the 2005ndash06 period and126 percent over the 2006ndash07 period and imports increasing 110 percent and 53 percentduring the same two periods23

US Merchandise Trade by Product Category24

Exports

Machinery and transport equipment ranked as the largest US export by StandardInternational Trade Classification (SITC) group in 2007 (appendix table A1) US exportsof machinery and transport equipment were valued at $4627 billion in 2007 accounting for442 percent of total US exports during the year and grew by 92 percent from $4238billion in 2006 Almost three quarters of the total increase in exports in 2007 wereaccounted for by increased US exports of machinery and transport equipment chemicalsand related products food and live animals and crude materials (except fuels) None of theSITC groups registered a decline in exports from 2006 to 2007

Imports

All SITC groups of US imports increased from 2006 to 2007 (appendix table A1) As inrecent years machinery and transport equipment was the largest US import group by SITCcode in 2007 US imports of machinery and transport equipment were valued at $7391billion in 2007 an increase of 43 percent over imports of $7086 billion in 2006 andaccounted for 380 percent of total US imports in 2007 Increased US imports ofmachinery and transport equipment and mineral fuels lubricants and related materialsrepresented over half of the total increase in imports in 2007

US imports under the four preferential trade programs with developing countries totaled$909 billion in 2007 and accounted for 47 percent of total US imports during the yearDuty-free imports totaled $308 billion (appendix table A12) under the Generalized Systemof Preferences (GSP) program $423 billion (excluding GSP imports) under the AfricanGrowth and Opportunity Act (AGOA) (appendix tables A13 and A14) and $123 billion

See chap 2 of this report for additional information25

Leading US exports to and imports from these partners are presented in appendix tables A22 through26

A44 Data in table 12 may not match with those in appendix tables A22 through A44 because ofadjustments made to the data Global expansion was strong in the first half of 2007 with turbulence in financial markets setting in27

during the last half of the year IMF ldquoWorld Economic Outlookrdquo April 2008 xiv USDOC USCB ldquoInternational Economic Accountsrdquo February 14 200828

1-6

Figure 12 US merchandise trade with the world 2005ndash07

Source US Department of Commerce

under the Andean Trade Preference Act (ATPA) (appendix tables A15 and A16) Inaddition imports that entered duty free or at reduced rates under the Caribbean BasinEconomic Recovery Act (CBERA) totaled $55 billion (appendix tables A17 and A18)During 2007 as in the past increased US imports under AGOA reflected the increasedvalue of petroleum imports primarily from the three leading exporters of oil underAGOAmdashNigeria Angola and Gabon25

US Merchandise Trade with Leading Partners

North American Free Trade Agreement (NAFTA) partners Canada and Mexico togetherremain the largest US global market for exports and imports followed by the EuropeanUnion (EU) (table 11) Figures 13 and 14 show leading US export and import markets26

by share in 2007

Foreign economic growth continued to be generally strong in 2007 aiding US export growthduring the year As shown above US exports increased by 126 percent while US27

imports increased by 53 percent over the 2006ndash07 period US exports to major trading28

partners Canada Japan and Korea continued to grow faster than imports from thosecountries during the year

1-7

Total $10464 billion

TABLE 11 US merchandise trade with major trading partners and the world 2007

Major trading partner Exports ImportsTrade

balanceTwo-way

(exports plus imports)

Billion dollars

EU-27 2263 3522 -1259 5784

Canada 2131 3125 -994 5256

China 610 3231 -2621 3841

Mexico 1194 2102 -908 3296

Japan 581 1449 -868 2030

Korea 330 454 -124 784

Taiwan 245 381 -135 626

Brazil 217 250 -33 467

India 163 239 -76 402

Russia 67 191 -125 258

South Africa 52 91 -39 143

World 10464 19429 -8965 29893

Source Compiled from official statistics of the US Department of Commerce

Note Because of rounding figures may not add to totals shown

Figure 13 Leading US export markets by share 2007

Source US Department of Commerce

US bilateral trade relations with China are discussed in chap 5 of this report29

1-8

Figure 14 Leading US import sources by share 2007

Total $19429 billion

Source US Department of Commerce

Canada remains the largest single-country two-way trading partner of the United Statesfollowed by China and Mexico China alone accounted for 292 percent of the total USmerchandise trade deficit of $8965 billion in 2007 and Canada and Mexico togetheraccounted for 211 percent of the deficit The US trade deficit with China rose from $2354billion in 2006 to $2621 billion in 2007 despite the fact that US exports to China grewfaster (an increase of 182 percent over 2006) than US imports from China (an increase of126 percent over 2006) 29

This section focuses primarily on cross-border services transactions in private services which exclude30

government sales and purchases of services The section presents changes from 2006 to 2007 and data on2005 are given where appropriate This section draws its services trade data from the BEA In these nationalaccounts data ldquocross-border transactionsrdquo occur when US firms and consumers sell to or purchase servicesfrom firms and consumers in another country with people information or money crossing US boundariesin the process Cross-border transactions appear explicitly as imports and exports in the balance of paymentsUS firms also provide services to foreign consumers through affiliates established in host countries with theincome generated by ldquoaffiliate transactionsrdquo appearing as investment income in the balance of payments Thechannel of delivery used by service providers depends primarily on the nature of the service For examplemany financial services such as retail banking services are supplied most effectively by affiliates locatedclose to the consumer Conversely trade in education services predominantly takes the form of cross-bordertransactions involving students studying abroad USDOC BEA ldquoPrivate Services Transactionsrdquo US International Transactions Accounts Data Table31

3 accessed June 3 2008 The category ldquobusiness professional and technical servicesrdquo includes advertising computer and32

information services research development and testing services management consulting and publicrelations services legal services construction architectural and engineering services industrial engineeringinstallation maintenance and repair of equipment operational leasing and other miscellaneous services The category ldquofinancial servicesrdquo include non-insurance non-deposit financial services provided by33

banks and securities firms USDOC BEA ldquoInternational Economic AccountsmdashUS InternationalTransactions Fourth Quarter and Yearrdquo 5 A country is said to have exported travel and tourism services when foreign nationals make purchases in34

that country during a visit of less than one year The value of tourism exports is measured by the totalexpenditures of foreign visitors irrespective of the purpose of the visit be it leisure recreation business orother activities Expenditures on transportation services between countries such as airfare and directspending on education or health care services are excluded from the measure of tourism exports InternationalMonetary Fund Balance of Payments Manual

1-9

US Trade in Services in 200730

Figure 15 shows US private cross-border services trade with the world from 2005 through2007 US private services exports increased from $4043 billion in 2006 to $4622 billion31

in 2007 an increase of 143 percent and US private services imports increased from$3078 billion in 2006 to $3353 billion in the same period an increase of 89 percent

US Services Trade by Product Category

The US surplus in cross-border private services trade increased by 315 percent to $1269billion in 2007 marking the fourth consecutive yearly increase and the largest annualincrease ever reported Numerous services accounted for the surge in the services tradesurplus most notably in the business professional and technical services and financial32

services categories33

Exports

Travel ranked as the largest US cross-border private services export increasing by 13334

percent to $971 billion in 2007 and accounting for 21 percent of total US exports(appendix table A2) This increase was consistent with the recovery of the US tourismindustry since 2004 following the terrorist attacks on the United States on September 112001 Increased travel exports reflect strong economic growth in leading overseas

Typically these 5 markets include Mexico Canada the United Kingdom Japan and Germany EIU35

ldquoIndustry BriefingmdashUnited States of America Travel and Tourism Forecastrdquo Ibid36

EIU ldquoIndustry BriefingmdashUSA tourism Bargain-hunting The Weak Dollar Lures Visitorsrdquo37

1-10

Figure 15 US private cross-border services trade with the world 2005ndash07

Source US Department of Commerce Bureau of Economic Analysis (BEA) website ldquoPrivate ServiceTransactionsrdquo

markets for tourism services and a decline in the value of the US dollar Other large35 36

US services export categories in 2007 were royalties and license fees and businessprofessional and technical services which increased by 144 and 184 percent over 2006 to$713 billion and $561 billion respectively Exports of financial services experienced themost rapid growth among all categories of US private services growing by 221 percentto $453 billion in 2007

Imports

Travel also ranked as the largest category of US private cross-border imports increasingby 61 percent from $720 billion in 2006 to $764 billion in 2007 representing 227 percentof total services imports (appendix table A3) The measured pace of this increase relativeto exports may be attributable to a decline in the value of the US dollar and increased oilprices Other significant categories for US imports of services in 2007 were freight37

transportation which totaled $456 billion and insurance services which totaled $380

1-11

billion While travel freight transportation and insurance were the largest US privateservices import categories in terms of value imports in two categoriesmdashbusinessprofessional and technical services and financial servicesmdashexperienced the most significantgrowth in 2007 increasing by 339 and 393 percent to $212 billion and $118 billionrespectively

US Services Trade With Leading Partners

Table 12 shows US services trade with major trading partners for 2007 The EU was boththe United Statesrsquo largest export market and largest import supplier accounting for 355percent of total US services exports and 393 percent of total US services imports (figures16 and 17) Canada and Japan followed the EU as the second and third most significantmarkets for US services trade in 2007 In addition to a large regional trade surplus withthe EU ($325 billion) the United States maintained large bilateral services trade surpluseswith Canada ($209 billion) Japan ($184 billion) Mexico ($82 billion) and Korea ($57billion) In marked contrast to the large US deficit in goods trade with China as shownabove the United States recorded a services trade surplus of $50 billion with China in 2007

TABLE 12 US private services trade with major trading partners and the world 2007 (million dollars)

Major trading partner Exports ImportsTrade

balance

EU-27 a 164311 131771 32540

Canada 46566 25687 20879

Japan 43462 25016 18446

Mexico 24221 16070 8151

China 13083 8090 4993

Korea 12385 6685 5700

Australia 9755 6239 3516

Brazil 8711 3126 5585

India 8211 7331 880

Taiwan 8031 7172 859

Other 123498 98116 25382

World 462234 335303 126931

Source US Department of Commerce Bureau of Economic Analysis website ldquoUS Economic Accountsrdquo

Note Data are preliminary estimates

EU-27 also includes data from the European Atomic Energy Community and the European Investment Bank Ina

addition data for 2007 include Bulgaria and Romania

1-12

2-1

CHAPTER 2Administration of US Trade Laws andRegulations

This chapter surveys activities related to the administration of US trade laws during 2007It covers import relief laws unfair trade laws programs affecting textile and apparelimports and certain other trade provisions including the US Generalized System ofPreferences (GSP) the African Growth and Opportunity Act (AGOA) the Andean TradePreference Act (ATPA) the Caribbean Basin Economic Recovery Act (CBERA) and theCaribbean Basin Trade Partnership Act (CBTPA)

Import Relief Laws

Safeguard Actions

This section covers only safeguard actions under provisions administered by the USITCincluding global safeguards provided for in sections 201ndash204 of the Trade Act of 1974China safeguards provided for in section 421 of the Trade Act of 1974 and safeguardsprovided for in various bilateral free trade agreements involving the United StatesSafeguard actions under provisions administered by other US government agencies suchas the China textile safeguard actions by the US Department of Commerce (Commerce)are described later in this chapter

The USITC did not conduct any safeguard investigations during 2007 no safeguardmeasures under provisions administered by the USITC were in place during calendar year2007 and no safeguard petitions filed under these provisions were pending before theUSITC at the end of 2007

Adjustment Assistance

The United States maintains a trade adjustment assistance (TAA) program for the purposeof assisting workers firms and farmers dislocated as a result of federal policies that reducedbarriers to foreign trade The program for workers is administered by the US Secretary ofLabor the program for firms by the US Secretary of Commerce and the program forfarmers by the US Secretary of Agriculture The eligibility requirements benefits andprocedures for the program are set forth in Parts 2 3 and 6 respectively of Title II of theTrade Act of 1974 as amended (19 USC 2271-2401) Program benefits available forqualifying petitioning workers consist principally of trade readjustment allowancesemployment services training and job search and relocation allowances Program benefitsfor qualifying petitioning firms consist of technical assistance Program benefits forpetitioning farmers or agricultural commodity producers (including livestock producers) are

Petitions may be filed by a group of three or more workers by a company official by ldquoOne-Stoprdquo1

operators or partners (including state employment security agencies and dislocated worker units) or by aunion or other duly authorized representative of such workers The workers on whose behalf a petition isfiled must be or have been employed at the firm or subdivision identified in the petition A completedpetition describes a group of workers working at a specific location for a specific company producing aspecific product or group of products If the group of workers described in the petition is certified thecertification will cover all workers in the group whether or not their names are on the petition USDepartment of Labor ETA Web site section ldquoTrade Adjustment Assistance (TAA) and AlternativeAdjustment Assistance (ATAA) Application Processrdquo The number of petitions certified for benefits and services and petitions denied will not add up to the2

total number of petitions received because the numbers do not reflect petitions that were terminated prior to adetermination and petitions in which a determination was made in the following fiscal year For workers to be certified as eligible to apply for TAA the Secretary of Labor must determine that3

workers in a firm have become or are threatened to become totally or partially separated that the firmrsquossales or production has decreased absolutely and that increases in like or directly competitive importedproducts contributed importantly to the total or partial separation and to the decline in the firmrsquos sales orproduction Workers certified for TAA are provided with a certification of eligibility and may apply for TAAbenefits at the nearest office of the State Employment Security Agency For further information see USDOLETA ldquoTrade Adjustment Assistance (TAA) and Alternative Adjustment Assistance (ATAA) ApplicationProcessrdquo USDA FAS ldquoPrograms and OpportunitiesmdashTrade Adjustment Assistancerdquo4

httpwwwfasusdagovitptaataaasp (accessed May 20 2008)

2-2

generally in the form of cash payments based on a formula related to commodity prices andlimited to a maximum of $10000 per producer in any 12-month period

Trade Adjustment Assistance for Workers

The US Department of Labor (USDOL) received 2218 TAA petitions during fiscal year1

(FY) 2007 (October 1 2006 through September 30 2007) (table 21) The FY 2007 figurerepresents a decrease from the 2495 TAA petitions received in FY 2006 Table 21 showsthe results of TAA petitions determinations during FY 2006 and FY 2007 In FY 2007 atotal of 1443 petitions were certified as eligible for benefits and services and 614 petitionswere denied a decrease from 1447 petitions certified and from 830 petitions denied in FY2006 A total of 146480 workers were certified for TAA benefits and services in FY 20072 3

This was an increase from the 119605 workers certified in FY 2006 Table 22 presents dataon benefits and services provided under the TAA program There were 47048 new TAArecipients in FY 2007 compared to 53491 new recipients in FY 2006 The USDOLappropriated $855 million in TAA funding to assist workers certified as eligible to receivebenefits and services under the TAA program in FY 2007 a decrease from $966 million inFY 2006

Trade Adjustment Assistance for Farmers

The statutory authority for the TAA for Farmers program expired on December 31 20074

Of the eight petitions filed under the TAA for Farmers program in FY 2007 none werecertified and no cash benefits were paid