Publication Number: 3906

Report Title: The Economic Effects of Significant U.S. Import Restraints, Fifth Update

Investigation Number: 332-325

Author's name(s): Alan K. Fox, Project Leader, William M. Powers, Deputy Project Leader, Sandra A. Rivera, Deputy Project Leader, Hugh Arce, William Deese, Nicholas Grossman, Kyle Johnson, Jose Signoret, Marinos Tsigas, Andrea Boron, Jonathan Coleman, Roger Corey, Kimberlie Freund, Brad Gehrke, Jack Greenblatt, Erland Herfindahl, Douglas Newman, Joann Peterson, George Serletis, Peter Dixon, Maureen Rimmer, Ashley Winston

Date Published: February 2007

Report Description/Introductory Text: This report addresses the question, "What does the United States have to gain–or lose–from the removal of significant restraints on imports?" The Commission estimates that U.S. welfare would increase by about $3.7 billion annually if all of the significant restraints quantified in this report were removed unilaterally. Exports would expand by $13.5 billion and imports by $19.6 billion, while about 60,000 workers would move from contracting sectors to expanding sectors as a result of liberalization. In addition, this report features a discussion of other significant restraints that do not lend themselves to quantification. The increase in U.S. welfare would likely be greater if the nonquantifiable barriers, such as those identified in transport services, were also removed.

The main vehicle for quantitative analysis in this report is the USAGE-ITC economic model. The model uses detailed sectoral data, macroeconomic forecasts, and negotiated changes to U.S. import tariffs and quotas to establish a projection of the U.S. economy from 2005 to 2011. In contrast to previous updates, the model is dynamic, rather than static, and the simulations are now set in a forward-looking framework. The time span covers important changes to trade policy, including liberalization of sugar trade with Mexico in 2007, expiration of negotiated quantitative limits on textiles and apparel with China in 2008, and the continued phase-in of several free trade agreements. The economic simulations discussed here represent the effects of liberalization on the projected state of the economy in 2011, incorporating known trade policy changes, measured in 2005 dollars. The reported effects of liberalization should therefore be understood as deviations from the projected state of the economy in 2011, owing to removal of identified significant import barriers.

The $3.7 billion estimated annual increase in economic welfare is substantially lower than was identified in the previous update to this report, in large part due to the expiration of the Agreement on Textiles and Clothing. Consistent with previous updates of this report, the largest effect is in the individual liberalization of textiles and apparel. Liberalization of sugar, dairy, and footwear and leather products would also generate significant welfare gains.

Topics Covered: import restraint, tariff, tariff-rate quota, TRQ, nontariff barrier, NTB, Agreement on Textiles and Clothing, ATC, unilateral liberalization, welfare, worker displacement, labor transition, dynamic, USAGE, CGE

Countries: United States, China, Mexico, Canada, Vietnam, Belarus, Israel, Ukraine

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