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1 1 (August 18, 2020)

handle is hein.crs/govdbjt0001 and id is 1 raw text is: 01;0i E.$~ & Updated August 18, 2020 Managed Trade and Quantitative Restrictions: Issues for Congress Congress plays a prominent role in shaping U.S. trade policy, due in part to trade policy's impact on the overall health of the U.S. economy and specific sectors, the success of U.S. businesses and workers, and Americans' standard of living. The Trump Administration and some Members of Congress contend that past trade negotiations and agreements have failed to address effectively foreign protectionist practices and enhance reciprocal market access for U.S. firms and workers. They cite as evidence the disruption of some U.S. industries, difficulties of U.S. firms in penetrating some foreign markets, and large U.S. merchandise trade deficits even with countries with which the United States has a free trade agreement. They argue that the main goals of U.S. trade policy should be to achieve fair and balanced trade and to place more emphasis on measurable results (e.g., increased exports and market share abroad). To some observers, the Trump Administration is pursuing a managed trade policy that seeks specific or numerical outcomes of trade by using the size of the U.S. economy as leverage. The concept drew attention in the 1980s and early 1990s in reaction to proposals and actions by Congress and the Reagan and Clinton Administrations to address the large U.S. trade deficit with Japan and the market-entry restrictions faced by U.S. firms there. Critics contend that the most recent manifestations of a managed trade approach by the Trump Administration are the quotas negotiated in the U.S.-Mexico-Canada Agreement on autos (through side letter agreements), the quota arrangements that allowed South Korea, Brazil, and Argentina to avoid U.S. tariff increases on steel and aluminum imports stemming from the use of Section 232, and more prominently, the Phase One Agreement with China, which committed China to increase purchases of U.S. goods and services by no less than $200 billion between 2020 and 2021. Today, proponents of this approach argue, as they did three decades ago, that many trading partners are not fulfilling their trade obligations or that current trade rules do not address many barriers and distortive practices. Therefore, the most effective way to promote U.S. economic interests, they argue, is to pressure countries to agree to specific trade results. As the Administration pursues new trade agreements, the implications of this approach may interest the 116th Congress. Generally, managed trade refers to government efforts to achieve measurable results by establishing through quantitative restrictions (QRs) on trade and other numerical targeted approaches specific market shares or targets for certain products. These are met through mutual agreement or under threat of trade action (e.g., increased tariffs). There are various types and degrees of government involvement in trade which might be termed managed trade, and governments often use different types of QRs to achieve their trade policy objectives (Table 1). Table I. Quantitative Restrictions on Trade Quantitative restrictions (QRs) on trade in goods are measures that limit the quantity of a product that may be imported or exported. They may be based on the number of units, weight, volume, and value. Major types of QRs include: * Prohibitions. Bans on the importation or exportation of a product; such provisions may be absolute or conditional. * Quotas. Measures indicating the quantity that may be imported or exported; quotas can be global or bilateral. * Licensing requirements. Procedures that require an application or document (other than that required for customs purposes) as a prior condition for importation. * Voluntary export restraints (VERs). Actions taken by exporting countries involving a self-imposed QR of exports; VERs are taken unilaterally or under the terms of an agreement between two or more countries. Source: P. Van den Bossche and W. Zdouc, The Law and Policy of the World Trade Organization, 3rd ed., 2014. The Trump Administration has stated that, by negotiating quota arrangements on steel and aluminum with South Korea, Brazil, and Argentina, purchasing targets with China, and potentially similar measures with other countries, the United States can ensure that trade with these countries is fair and balanced, and that U.S. imports are reduced to strengthen certain U.S. industries and boost employment. Some Members see this approach as a move away from a market-driven, multilateral rules-based system to a unilateral managed approach driven by arbitrary numerical outcomes and targets-one that could lead to increasing trade restrictions, retaliation or replication by other countries, rising prices, lower global economic growth, and erosion of the global trading system. Cakn ge Few, if any, nations completely practice free trade. Some governments intervene more than others in markets by providing subsidies to domestic firms, restricting foreign imports, or promoting exports. U.S. trade policy over time has sought the elimination of these discriminatory or unfair practices through trade agreements and rules- setting. Advocates of managed trade policies have called for increased efforts to influence trade flows between the United States and certain trading partners, particularly China, in order to rectify market distortions and create a level trading field for U.S. firms. Such proposals reflect a belief that the current level and composition of trade between countries either provides unequal benefits to the gogn, q \popmm- , goo g , q as ' X 11LULANJILiN,

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