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1 1 (January 6, 2022)

handle is hein.crs/goveglg0001 and id is 1 raw text is: Congressional Research Service Inforrninglih legiative debate sice 1914 U.S. Tariff Policy: Overview Updated January 6, 2022 Introduction A tariff is a customs duty levied on imported and exported goods and services. Historically, countries used tariffs as a primary means of collecting revenue. Today, other taxes account for most government revenue in developed countries. Tariffs are now typically used to protect domestic industries or as leverage in trade negotiations and disputes. The U.S. Constitution empowers Congress to set tariffs, a power that Congress has partially delegated to the President. The United States is also a member of the World Trade Organization (WTO) and a party to a number of trade agreements, which include specific tariff-related commitments. Congress and the President thus create U.S. tariff policy within the context of a rules-based global trading system. Rules-Based Global Trading System The rules-based global trading system was established following World War II. It began as the General Agreement on Tariffs and Trade (GATT), which was later integrated into a larger set of agreements establishing the WTO. This system has aimed to reduce trade barriers and prevent trade wars by establishing rules for the use of tariff and nontariff barriers to trade. Among this system's core rules with regard to tariffs are Nondiscrimination. Under the most-favored nation (MFN) rule, a country must extend any trade concession, such as a reduced tariff rate, granted to one country member to all other WTO members. There are exceptions, such as preferential rates for FTAs, special treatment for developing countries, and WTO-allowed responses to unfair trading practices. Binding Commitments. Through multilateral negotiations, countries bind themselves to ceilings on tariff rates for specific imports. That ceiling is called the bound rate, which can be higher than actual applied rates. Lowering bound rates has been a general goal of each of the multilateral negotiations. Transparency. The WTO requires members to publish and report their tariff rates and other trade regulations. Safety Valves. The WTO agreements permit members to raise tariffs to address unfair trade practices and to allow domestic industries to adjust to sudden surges in imports in some circumstances. Following the establishment of the GATT in 1947 and the WTO in 1995, global tariff rates declined significantly, spurring trade and opening markets for U.S. exports. Since the establishment of the WTO, the value of exports of U.S. goods have increased more than 160% adjusted for inflation. Figure 1. Weighted Average Applied Tariff Rates Source: World Bank. Notes: Weighted average of applied tariff rates globally and among the five largest economies by GDP. Gaps indicate missing data. 2019 is the most recent year with fully comparable data. Europe refers to the European Union. U.S. Tariff Policy Who Makes US. Tariff Policy? The Constitution grants the power to lay and collect duties and to regulate commerce with foreign nations to Congress. The Constitution grants the authority to negotiate international agreements to the President. Since tariffs are no longer a primary source of revenue, they have increasingly become an instrument of U.S. international trade and foreign policy. As such, Congress now works with the President to set tariff policy by granting authority to negotiate trade agreements and to adjust tariffs in certain other circumstances. Presidential Trade Promotion Authority (TPA). Prior to the 1930s, Congress usually set tariff rates itself. As U.S. and global tariff rates increased during the Great Depression, U.S. exports decreased. Congress responded by authorizing the President to negotiate reciprocal trade agreements that reduced tariffs through proclamation authority up to a pre-set boundary. Hence, such an agreement could enter into force without further implementing legislation. However, nontariff barriers to trade (such as discriminatory technical standards) became a greater focus of trade negotiations in the late 1960s. As a result, it became difficult to predict the substance of the negotiations and authorize changes to existing U.S. laws by proclamation before the negotiations took place. Congress addressed this challenge in 1974 by establishing expedited procedures to implement more complicated future trade agreements. Under these procedures, currently known as Trade Promotion Authority (TPA), Congress establishes

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