LegiStorm

Summary:

Summary The United States is the world's biggest economy (in nominal dollars), leading trading nation (goods and services), and largest source of and destination for foreign direct investment. The U.S. output of goods and services, or gross domestic product (GDP), totaled $19.5 trillion in 2017. That is almost the combined GDP in nominal dollars of the next three largest economies. All told, the United States, with close to 5% of the world's population, accounted for almost 25% of the world's output and more than 16% of its growth in 2017. While the United States is the world's largest exporter (goods and services combined), U.S. exports are overshadowed by the large U.S. demand for imported products. However, the level of both U.S. exports and imports of goods and services depends on many interrelated domestic and international macroeconomic factors, including the value of the U.S. dollar relative to other currencies, global demand for other dollar-denominated assets—including U.S. Treasury securities, and the relative strength of the U.S. and world economies. While the United States is still by far the dominant economy in the world, its relative position has shifted in the past two decades. The changing dynamics and composition of U.S. trade have been important to Congress because they can affect the overall health of the U.S. economy and specific industries, the success of U.S. businesses and workers, and the U.S. standard of living. They also have implications for U.S. geopolitical interests. Conversely, geopolitical tensions, risks, and opportunities can have major impacts on U.S. trade flows. These issues are complex and at times controversial, and developments in the global economy often make policymaking more challenging, as it involves balancing many competing interests. Congress is in a unique position to address these and other issues, particularly given its constitutional authority for legislating and overseeing international trade and financial policy. Key Trade and Economic Developments in 2017 World Economic Developments. World economic growth rose from 3.3% in 2016 to 3.7% in 2017. Advanced economies grew 2.3%, while emerging market and developing economies grew 4.7%—partly due to the moderate slowdown in China's GDP growth over the past few years (from 10.6% in 2010 to 6.7% in 2017). In 2017, the United States accounted for 24.5% of global GDP (down from 30.6% in 2000), China for 14.7% (up from 3.6% in 2000), Japan for 6.5% (down from 14.6% in 2000), and Germany for 4.6% (down from 5.8% in 2000). In addition, world merchandise trade recorded its largest increase since 2011. In nominal terms, world merchandise exports expanded 10.6% in 2017, after two years of declines, reaching $17.5 trillion. World merchandise imports also grew considerably in 2017, up 11.3%, after declining 3.2% in 2016. In addition, world exports and imports of services increased in value considerably in 2017, up 7.7% and 6.9%, respectively. U.S. Goods Trade. U.S. merchandise exports totaled $1.6 trillion in 2017, a 6.6% increase from the 2016 level. The value of U.S. merchandise imports was $2.4 trillion over the same period, up 6.9% from the 2016 level. U.S. imports increased more than U.S. exports, leading to a $56.4 billion (7.5%) increase in the U.S. merchandise trade deficit, which reached $807.5 billion in 2017. In 2017, the European Union (EU) was the United States' top trading partner in terms of two-way (exports plus imports) merchandise trade (accounting for 22.5% of total U.S. merchandise trade), while China was the largest single-country trading partner (accounting for 16.3% of total U.S. merchandise trade). U.S. Services Trade. U.S. two-way (exports and imports) trade in services grew 5.6% between 2016 and 2017. During that period, U.S. exports of services increased 5.1%, from $758.9 billion to $797.7 billion, while U.S. services imports grew 6.4%, from $509.8 billion to $542.5 billion. The United States maintained a services trade surplus with every major services trading partner except Hong Kong, India, and France in 2017. The overall services trade surplus increased 2.5% ($6.1 billion) to $255.2 billion. The EU was the United States' top trading partner in terms of two-way (exports plus imports) services trade in 2017, while the largest single-country trading partners were the United Kingdom, Canada, Japan, China, and Germany. U.S. Total Trade. In 2017, U.S. exports of goods and services totaled $2.4 trillion, while U.S. imports totaled $2.9 trillion, resulting in a deficit of $552.3 billion, up slightly from 2016, but down from the all-time high level registered in 2006 ($761.7 billion). Issues for Congress International trade is one of several important drivers of economic growth. A number of questions regarding recent and future trends in U.S exports and imports could arise as the Trump Administration renegotiates U.S. free trade agreements (FTAs) and pursues news ones, and takes a more forceful stance to reduce U.S. bilateral trade deficits, enforce U.S. trade laws and agreements, and promote what it considers to be "free," "fair," and "reciprocal" trade. One question pertains to the impact of renegotiating or pursuing new FTAs on the U.S. economy. As with any trade liberalizing measure, an FTA can have net positive overall effects on some sectors and adverse effects on others. An FTA may create export and import opportunities in one sector of the U.S. economy but divert trade away from others. Members of Congress weigh these effects on various industries and on their constituencies, while also considering the overall impact on the United States and other trading partners. Because trade relations can differ significantly from one trade partner to another, the evaluation will likely differ in each case. Furthermore, Members may take into account not only the immediate static effects of greater global economic integration efforts, but also the long-term, dynamic effects, which could play an important role in evaluating their contribution to the U.S. economy. Finally, other issues for Congress raised by the changing patterns in U.S. trade and the global landscape could include contemplating the future direction of the global trading system, as well as assessing the quality and availability of data on trade and what, if any, additional resources should be devoted to collecting trade data and analyzing the role of trade in the U.S. economy.