United States WT/TPR/S/16
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I. THE ECONOMIC ENVIRONMENT
1. TheU.S.economy hasdoneverywellsincethelastTrade Policy Review oftheUnited States,
inFebruary 1994. Growth hasbeenabove theaverage forindustrial countries (Chart I.1),inflation
hasremained moderate andtheunemployment rateisatalowforthedecade. Concurrently, theFederal
Government 'sbudget deficit hasnarrowed substantially, toitslowest share ofgross domestic product
(GDP) since 1979. Theexternal current account deficit haswidened slightly since 1993, butthisis
attributable toincreased investment, improving theprospects forhigher productivity growth.
2. TheUnited States invests asmaller share ofitsGDP thanmostofitsindustrial counterparts,
including theEuropean Union andJapan.1However, capital productivity andtherateofreturn on
investment arewellabove theOECD average.2Thisisatribute totheallocative efficiency ofU.S.
markets, afactor thatunderpins U.S.prosperity. Animportant element inthisisthattheUnited States
isamong theworld 'smost open economies, which helps tokeepeconomic actors under constant
competitive pressure nottomisallocate resources. Thecounterpoint isthatitisinthebestinterest
oftheUnited States tokeepitsmarkets securely open, andtoimprove onthesituation totheextent
possible.
1Since 1990, annual gross investment intheUnited States hasaveraged 16.9percentofGDP, compared
to19.8and31.9percentintheEuropeanUnionandJapan,respectively,and20.4percentonaverageinindustrial
countries. International Monetary Fund (1996).
2McKinsey Global Institute (1996); andOECD (1995).WT/TPR/S/16 Trade Policy Review
Page 2
3. Inthisregard, twopoints made intheprevious U.S.Trade Policy Review areworth noting.
Thefirstconcerns theU.S.savings-investment imbalance and-through theassociated current account
deficit -itsperceived potential toerode traditional national support forliberal trade; bilateral aspects
ofthedeficit haveattimes caused concern insome quarters, bringing pressure fortrade-restrictive
measures. Since 1993, theU.S.saving shortfall, relative toinvestment, hasincreased andhence the
current account deficit haswidened somewhat, to2percentofGDP. However, inthisinstance the
larger imbalance isassociated withbothimproved savings performance andahigher levelofinvestment;
largely duetofiscal consolidation, gross savings increased by1.5percentage points between 1993and
1995, toalmost 16percentofGDP. Nevertheless, thislevelisstillrelatively lowbyinternational
standards anditremains important fortheUnited States tocontinue tostrengthen national savings,
particularly toimprove itslong-term growth prospects, which would alsoacttohelpdefuse any
protectionist sentiment.
4. Thesecond point isthesteadily increasing share oftradeinU.S.economic activity. Theratio
ofU.S. trade toGDP was23.6percentin1995, compared to20.6percentin1990 and17.2per
centin1985.3Thisincreased involvement intradetends toserve asacounter-cyclical buffer. In1990
and1991, exports cushioned theimpact oftherecession, emphasizing theimportance fortheUnited
States thatitsexporters haveopen, secure access toexternal markets within astrong andwell-functioning
multilateralsystem.Subsequently,asU.S.growthimproved,netimportsaccommodatedexcessdomestic
demand, allowing forlower inflation andinterest ratesthanmight otherwise havebeenthecase.
(1) Recent Economic Performance
5. Economic growth accelerated in1994, withrealGDPgrowth rising from2.2percentin1993
to3.5percent(Table I.1). Theincrease wasunderpinned bythestrength ofdomestic demand; in
particular, investment wasupbymore than14percent, thusclimbing byalmost 33percentsince
thebeginning of1992. Foreign demand forU.S.output alsoremained strong, withexports increasing
bysome 8percent, following cumulative growth ofover10percentintheprevious twoyears.
Nevertheless, withhighdomestic demand flowing overintoimports, which wereupby12percent,
thecurrent account deficit widened tojustover2percentofGDP. High demand wasreflected in
resource use; industrial-capacity utilization wasalmost 84percent, itshighest levelinwellovera
decade, andunemployment wasdown toaround 6percent,itslowest point since 1990. Toforestall
consumer price inflationary pressures, theauthorities tightened monetary policy during thecourse of
theyear, andinflation actually abated towellunder 3percent.
6. Thepaceofeconomicexpansionslowedin1995.However,withtheauthoritieseasingmonetary
conditions andexport volume again upbyover8percent, growth didnotstall. Fortheyear, real
GDPincreased by2percent. Lower growth reflected acertain weakness indomestic demand, including
asharp decline inthegrowth rateofinvestment. Import growth wasdown to8percent,perhaps also
slowed somewhat bytherealdepreciation oftheU.S.dollar ofabout 7percentin1994-1995. Although
lower thanin1994, economic growth wassufficiently robust tomaintain ahighlevelofresource use,
withtheunemploymentratedroppingwellbelow6percent.Inflationremainedlow,atunder3percent.
Thislatter outcome washelped bythefactthatinthesustained recovery since 1991investment played
animportant rôle; industrial capacity hasthusgrown faster thanintherecent past,withtheeconomy
perhaps moving away from acapacity constraint.
3Theratios areforthesumofexports andimports ofgoods andnon-factor services (thus excluding interest
payments) tonominal GDP.United States WT/TPR/S/16
Page 3
Table I.1
U.S.economic performance, 1990-96a
1990 1991 1992 1993 1994 1995 1996b
Annual percentage change
RealGDP
Personal consumption
Gross pvt.domestic invest.
Fixed investment
Governmentc
Federal Government
Netexports, goods andn.f.
servicesd
Consumer prices
Unitlabour costse
Realeffective exchange ratef
Money supply (M2)h1.3
1.7
-5.2
-3.1
3.0
2.0
0.4
5.4
4.9
-4.9
3.5-1.0
-0.6
-9.7
-8.0
0.6
-0.5
0.7
4.2
4.2
-1.9
3.42.7
2.8
7.1
5.7
0.5
-2.1
-0.1
3.0
1.7
-1.9
1.72.2
2.8
8.5
6.8
-0.3
-3.7
-0.7
3.0
2.4
2.7
1.93.5
3.0
14.3
10.1
0.0
-3.7
-0.5
2.6
1.4
-2.3
-2.12.0
2.4
3.2
6.1
0.1
-3.5
-0.1
2.8
2.2
-4.5
4.32.8
3.5
6.4
10.0
1.8
6.7
-0.8
3.4
...
2.6g
...
Percent
Discount rate(endofperiod)
Return oncapital (business
sector)i
Capacity utilization
Unemployment6.5
17.1
82.1
5.53.5
16.6
79.2
6.73.0
17.4
80.3
7.43.0
17.8
81.4
6.84.75
18.3
83.9
6.15.25
18.3
83.7
5.65.0i
...
...
5.3j
PercentofGDP
Federal Government balancek
External current account
Trade account
Gross saving
Personal saving
Gross investment
Private investment-4.0
-1.6
-1.9
15.7
3.6
17.4
13.3-4.7
-0.1
-1.3
15.8
4.2
15.8
12.1-4.9
-1.0
-1.5
14.5
4.4
16.0
12.7-4.1
-1.5
-2.0
14.3
3.3
16.5
13.4-3.1
-2.1
-2.4
15.2
2.8
17.7
14.8-2.3
-2.0
-2.4
15.8
3.3
17.8
15.0...
...
...
...
...
...
...
...Notavailable.
aCalendar year, unless otherwise indicated.
bUnless otherwise noted, percentage change from fourth quarter 1995 tofirstquarter 1996 atannual rate,onthebasis ofannualized,
seasonally adjusted data.
cConsumption andgross investment.
dContribution toGDP growth.
eBusiness sector.
fBased onunitlabour costs inthemanufacturing sector; upward movements indicate anappreciation andviceversa.
gFirstquarter 1995 tofirstquarter 1996.
hNational definition; seasonally adjusted.
iEnd-April 1996.
jEnd-June 1996.
kFiscal yearending 30September; includes on-andoff-budget receipts andoutlays.
Source: U.S.Government, Economic Report ofthePresident, various issues; U.S.Department ofCommerce, Survey ofCurrent Business,
various issues; Organization forEconomic Co-operation andDevelopment (1996) OECD Economic Outlook, No.59,June; and
International Monetary Fund, International Financial Statistics, various issues.WT/TPR/S/16 Trade Policy Review
Page 4
7. Economic activity picked upinthefirstpartof1996. Growth inthefirstquarter wasatan
annual rateof2.8percent, notwithstanding severe weather conditions intheearly partoftheyear.
Domestic demand wasstrong, withpersonal consumption accounting forsome 80percentofGDP
growth andfixed investment upby10percent,atanannual rate. Exports grew apace withGDP and
import growth remained steady relative to1995, holding thecurrent account deficit ataround 2per
centofGDP. Unemployment declined further, tounder 5.5percent,among thelowest intheOECD.
Inflation roseslightly, influenced byweather-related increases infoodandenergy prices.
(2) Major Features oftheU.S.Economy
8. Datasince 1990 indicate thecontinuing growth oftheservices sector inthecomposition of
U.S.output andaconcomitant relative decline intheshares ofagriculture andmanufacturing (Table I.2).
These changing shares partly reflect differential inflation ratesinthegoods andservices sectors, with
higher ratesinthelatter. Intheperiod 1991 to1995, U.S.goods output wasupby14.5percentin
realterms while realservices output roseby7.4percent. Intheperiod 1990-95, labour productivity
inthebusiness sector rosebyover7percentandtheindex ofindustrial production (including mining
andutilities) increased by15percent; almost 8million jobswerecreated -equivalent toabout 6.5per
centofcivilian employment attheendofthe1980s -andGDP percapita improved byover25per
cent.4Concurrently, theUnited States hasincreased itsparticipation inglobalization andinternational
specialization, withtheshare oftrade inGDP uptoalmost aquarter andintra-industry trade close
to60percent(section (3)(iii)).
9. Therising share ofservices intheU.S.economy underlines theimportance ofproductivity
growth inthesector.5Services haveaweight ofneartofourtimes thatofmanufacturing inthemake-up
ofGDP intheUnited States; apercentage point increase inproductivity inservices isthusimportant
toeconomy-wide productivity growth inservices thanitisinmanufacturing. Asimprovements in
living standards depend critically onproductivity improvements, thebenefits totheUnited States of
ahighly efficient services sector become clear. Itisthusimportant fortheUnited States thatitsservices
markets remain openandcompetitive. Thisisparticularly thecasefor"input" services, suchasfinance,
communications andtransport, where productivity gains cansignificantly lower costsinother sectors,
suchasmanufacturing.6
4U.S. Government (1996).
5Onthispoint see,forexample Krugman (1994).
6Observershavenotedthatdomesticallyproducedservicesareaparticularlyimportantinputintomanufacturing,
thusaffecting thecompetitiveness ofU.S. merchandise exports oninternational markets; Dighe etal(1994)United States WT/TPR/S/16
Page 5
Table I.2
Major features oftheU.S.economy, 1990-95
1990 1991 1992 1993 1994 1995
Population (million) 250.0 252.7 255.4 258.1 260.7 263.0
Labour force (million)a
Labour force participation rate(percent)b
Female124.8
66.4
57.5125.3
66.0
57.3127.0
66.3
57.8128.0
66.2
57.9131.1
66.6
58.8132.3
66.6
58.9
Unemployment rate 5.5 6.7 7.4 6.8 6.1 5.6
GDP, nominal (US$ billion)
GDP percapita (US$)5,744
22,9795,917
23,4166,244
24,4476,550
25,3736,931
26,5897,246
27,551
Share innational income (percent)c
Agricultured
Mining
Manufacturing
Servicese
Government2.0
0.8
18.9
63.1
14.71.8
0.9
18.0
63.8
15.21.9
0.8
17.6
64.4
15.11.7
0.8
17.6
65.0
14.81.8
0.8
17.9
65.3
14.41.6
0.7
17.5
66.1
14.1
Share inemployment (percent)c
Agricultured
Mining
Manufacturing
Servicese
Government2.8
0.6
16.9
63.4
16.32.9
0.6
16.5
63.5
16.52.9
0.6
16.2
63.7
16.72.7
0.5
15.9
64.3
16.62.9
0.5
15.6
64.7
16.32.9
0.5
15.3
65.3
16.1
Merchandise exports f.o.b. (US$ billion)f
Merchandise imports f.o.b. (US$ billion)f389.3
498.3416.9
491.0440.4
536.5456.8
589.4502.5
668.6575.9
749.3
Exports ofgoods andnon-factor
services/GDP (percent)
Imports ofgoods andnon-factor
services/GDP (percent)9.7
10.910.2
10.510.2
10.710.1
11.110.4
11.811.1
12.5
a Civilian labour force, aged16andover.
b Percentage ofthecivilian, non-institutional, population overage16inthelabour force.
c National income hasnotbeenadjusted forcapital consumption byindustry. Shares innational income, rather thaninGDP,
areshown because dataonshares innational income aremore up-to-date; shares innational income areagoodproxy forshares
inGDP. Theshares maynotaddto100duetorounding andstatistical discrepancies.
d Includes forestry andfishing.
e Includes construction andelectricity, gasandsanitary services; inTable I.2ofGATT (1994) these weregrouped withIndustry.
f Customs basis.
Source: U.S.Government, Economic Report ofthePresident, various issues; U.S.Department ofCommerce, Survey ofCurrent Business,
various issues; andInternational Monetary Fund, International Financial Statistics, various issues.
(i) Agriculture
10. Agriculture intheUnited States accounts forasmall anddeclining share ofeconomic activity
butalarger share ofemployment andparticularly ofinternational trade. Itsshare inGDPwasaround
1.6percentin1995, compared toabout 2.0percentin1990 andsome 2.5percentin1980;7the
share ofagriculture intotalemployment hasremained roughly constant at2.8percentsince 1990,
compared tosome 3.4percentin1980. Thegrowth ofmultifactor productivity infarming averaged
7Processed foodandtobacco products areincluded inmanufacturing; theyaccount forabout anadditional
2percentofGDP, ashare thathasbeen relatively stable since themid-1980s. U.S. Government (1996) and
U.S. Department ofCommerce (1995).WT/TPR/S/16 Trade Policy Review
Page 6
about 2.5percentayearinthedecade totheearly1990s, thelatest period forwhich dataareavailable;
overthesameperiod, labour productivity increased byabout 28percent,withlabour-saving machinery
playing anincreasingly important rôleinthesector.8Themajor agricultural commodities produced
intheUnited States in1994, byvalue, were cattle andcalves, maize, milkandsoybeans.9
11. TheUnitedStatesistheworld'sleadingexporterofanumberoffarmproducts,includingcereals
andcotton. Itisalsoanimportant importer ofanumber ofagricultural items, especially fruit,
vegetables, andtropical products, suchascoffee, tea,cocoa andpalmoils.In1995, theshare offarm
products intotalU.S.merchandise exports wasabout 10percent,unchanged relative to1990butdown
from 19percentin1980; farm products were about 4percentofmerchandise imports in1995,
compared toaround 5percentin1990.10The1995agricultural tradesurplus ofalmost US$26 billion
equalled 0.4percentofGDP, virtually unchanged relative to1990butdown significantly from0.9per
centin1980.
12. Agricultural policy intheUnited States aimsatanumber ofobjectives, including satisfactory,
equitable andstable incomes forfarmers, consumer protection, stable foodsupplies, agricultural
competitiveness andenvironmental protection.11Thepolicy environment forachieving these goals
haschanged significantly since thelastReview. Inparticular, under theUruguay Round Agreement
onAgriculture, theUnited States hastariffied itsquantitative import restrictions, bound alltariffs,
andmade commitments onreductions inexport subsidies anddomestic support expenditures. Going
beyond these changes, theFederal Agricultural Improvement andReform Actof1996 significantly
altered theincentives fordomestic production, especially inthatmost domestic support hasbeen
converted tonon-production-related, direct-income payments, andthesetting asideofproductive farm
landhasbeeneliminated except forenvironmental reasons.
(ii) Manufacturing
13. Theshare ofmanufacturing inGDPdeclined fromalmost 22percentin1980tounder 19per
centin1990 andaround 17.5percentin1995. Over thesame period, employment inthesector fell
from 27toaround 15.3percentoftotalU.S.employment.
14. However, thefigures forshare inGDP areslightly misleading astorecent developments.
Thedataindicate thatsince 1992, thegrowth ofrealvalue added inmanufacturing hasexceeded that
ofrealGDP.12Underlying thisdevelopment arefairly sharp productivity increases, averaging about
3.4percentayearintheperiod 1992-95; during thistime, unitlabour costsinmanufacturing declined
8Based onTable 547ofU.S. Department ofAgriculture (1996a) andonTable B-95 ofU.S. Government
(1996).
9U.S. Department ofAgriculture (1996a).
10U.S. Department ofAgriculture (1996b).
11See,forexample, theUnited States "Federal Agricultural Improvement andReform Act" of1996; and
Winters (1990).
12In1993 and1994, realvalue added inmanufacturing grew atanaverage rateof4.8percentayearwhile
realGDP wasupatanaverage annual rateofaround 2.9percent: U.S. Department ofCommerce (1996).United States WT/TPR/S/16
Page 7
byalmost 1percent.13Concurrently, U.S.exports ofmanufactures wereover32percenthigher in
1995thanin1992, withparticularly goodperformance inareas suchasoffice machines andchemicals;
similar exports byagroup ofother developed countries (Canada, European Union andJapan) were
upbysome 29percent.14
15. Asof1993, thelatest yearforwhich dataareavailable, about 12.5percentoftheU.S.
manufacturing sector 'soutput wasexported, some 5percentage points more thanin1985 when the
U.S. dollar 'srealeffective exchange ratewasover50percenthigher.15Theratioofthesumof
manufactured exports andimports tomanufacturing GDP hadby1993 risen toalmost 61percent,
compared tosome 56percentin1990 and45percentin1985. Imports ofmanufactures accounted
forsome 16percentofdomestic consumption in1990, upfrom14and12percentin1990and1985,
respectively.
(iii) Services
16. Theservice sector, broadly defined toinclude transportation, communications, wholesale and
retail trade, financial services andconstruction, hasaccounted foragrowing share ofnominal GDP,
rising from some 59percentin1980 toabout 63percentin1990 andaround 66percentin1995
(Table I.3).16Thesector provided over65percentoftotalU.S.employment in1995, upfrom63per
centin1990andaround 56percentin1980. Since thelastReview, rapidly growing service industries,
interms oftheirgrowth inrealvalue added, include security andcommodity brokers (50percenthigher
in1994thanin1992); pipelines, except natural gas(23percent); non-depository financial institutions
(20percent); andtransportation byair(16percent).
17. In1994, theUnited States wastheworld 'slargest exporter andimporter ofcommercial services,
accounting for16.5and12percentofworld service exports andimports.17In1995, U.S.exports
ofservices wereup43percentrelative to1990, withgrowth atanannual average rateofaround 7.4per
cent; theirshare intotalexports (ofgoods andnon-factor services) wasalmost 27percent, roughly
thesame asin1990butdown fromalmost 29percentin1993. U.S.imports ofservices havegrown
more slowly, ataround 3.6percentayearonaverage since 1990; in1995, theyaccounted forabout
16percentoftotalU.S.imports, down from ashare ofover19percentin1990.
13International Monetary Fund (1996).
14WTO Secretariat calculations based onUNSTAT, Comtrade Database. Thecomparison ismore favourable
totheUnited States thanthedatasuggest atfirstsight; dataareinU.S. dollars andin1995, onaperiod average
basis, theU.S. dollar wasalmost 8percentlower against theSDR thanin1992.
15OECD(1996a).Industriesexportingalargeshareofproductioninclude"officeandcomputingmachinery",
which exported 40percentofoutput in1993 (upfrom 24percentin1985); aircraft, withexports equal to
32percentofproduction (compared to20percentin1985); andelectrical machinery, where exports in1993
were about 23percentofoutput (relative to10percentin1985).
16Government accounted foraround 14percentofGDP in1995, compared toabout 14.7 percentin1990.
17WTO Press Release/44, 22March 1996.WT/TPR/S/16 Trade Policy Review
Page 8
Table I.3
Services intheU.S.economy, 1990-95
Share innational income Share inemployment
1990 1993 1995 1990 1993 1995
Percent
Servicesa
ofwhich:
Transportation andpublic
utilities
Wholesale trade
Retail trade
Financial servicesb63.1
7.1
5.7
8.3
16.265.0
7.6
5.5
8.2
17.266.1
7.8
5.6
8.3
17.163.4
5.1
5.5
17.4
6.064.3
5.1
5.3
17.4
5.965.3
5.2
5.3
17.4
5.8
Share inexports ofgoods andservicescShare inimports ofgoods andservicesc
1990 1993 1995 1990 1993 1995
Percent
Servicesc
ofwhich:
Transportd
Royalties andlicence fees
Financiale
Telecommunications
Businessf27.5
15.1
3.1
1.3
0.5
1.428.9
15.3
3.2
0.9
0.4
2.126.8
13.7
3.4
1.0
0.4
2.119.2
11.8
0.5
0.7
0.9
0.317.6
11.0
0.7
0.6
0.9
0.615.9
10.0
0.7
0.7
0.8
0.5
Exports ofservicescImports ofservicesc
1990 1993 1995 1990 1993 1995
US$billion
Servicesc
ofwhich
Transportd
Royalties andlicence fees
Financiale
Telecommunications
Businessf147.5
81.1
16.6
6.7
2.7
7.6186.1
98.4
20.3
6.0
2.8
13.3210.6
107.7
27.0
7.5
2.8
16.3118.8
73.0
3.1
4.2
6.0
2.0125.5
78.3
4.8
4.5
6.4
4.0142.2
89.4
6.3
6.2
6.8
4.5
a Includes construction andelectricity, gasandsanitary services.
b Includes realestate.
c Non-factor services; onacustoms basis.
d Includes travel, passenger fares andother transportation.
e Includes insurance, net.
f Includes professional andtechnical services.
Source: U.S. Department ofCommerce, Survey ofCurrent Business, various issues.United States WT/TPR/S/16
Page 9
18. Cross-border trade inservices iscomplemented bythesupply ofservices byforeign firms
established inthecountry where thetransactions aremade. Inthefour-year period ending with1993,
thelatestyearforwhich dataareavailable, U.S.service salestoforeigners bynon-bank, majority-owned
foreign affiliates ofU.S. companies grew atanannual average rateof9.6percent, i.e.atafaster
ratethancross-border exports overthecomparable period (Table I.4). Over thesame period, sales
toU.S.persons bynon-bank, majority-owned affiliates offoreign companies grew atanaverage rate
ofover10.5percentayear, triple thegrowth rateofcross-border imports ofservices intotheUnited
States andafactor thathelps toexplain whyservices imports havedeclined asashare oftotalU.S.
imports. Infact,ineachoftheyears 1990 to1993, salesofservices byaffiliates intheUnited States
exceeded cross-border imports. There issome evidence tosuggest therefore thattherehasbeenashift
inthepreferred mode ofdelivery ofservices, away fromcross-border toward establishment, intothe
United States. Thishasundoubtedly beeninfluenced bythefactthattheU.S.inward foreign investment
(FDI) régime isvirtually without restrictions (section (4)).
(3) Trade Performance
(i) Composition oftrade
19. Thechange inthecomposition ofU.S.merchandise tradeaway fromprimary products toward
manufactures continued intheperiod 1990to1995. Overtheperiod, thecombined share ofagriculture
andmining inU.S.merchandise exports declined from21.8to18.9percent,while thatofmanufactures
rosefrom justover74percentto77.3percent(Table I.5). Since 1990, U.S.merchandise exports
havegrown atanaverage annual rateof7.8percent, withgrowth accelerating toanannual rateof
almost 9percentintheyears 1993-95, thushelping tosustain theU.S.economic recovery thathad
begun inlate1991.
20. Therecent growth inmerchandise exports hasbeenbroad-based, withexports ofmanufactures
upbysome 9.2percentayearsince 1992. Within thiscategory, exports ofoffice machines and
telecommunications equipment haveincreased atabout 17percentayear, andthose ofchemicals at
some 11.5percentayear. Automotive products havealsodone well, indicative oftheadjustment
inthesector, withtheirshare intotalmerchandise exports nowwellover10percent, compared to
9.4percentin1990. Growth hasalsobeenstrong inexports ofironandsteel, another sector where
adjustment hasbeenconsiderable; exports havegrown atsome 12.3percentayearsince 1992.WT/TPR/S/16 Trade Policy Review
Page 10
Table I.4
Sales ofservices byaffiliates, 1989 and1993
(US$ billion)
Services sales toforeigners bynon-bank, majority-owned foreign affiliates ofU.S.companies ("exports")
1989 1993
TOTAL
Bysector
in:Petroleum
Manufacturing
Wholesale trade
Finance, except banking
Insurance
Computer anddataprocessing
Business servicesb
Motion picturesc
Transportation
Other
Bygeographic area
in:Canada
France
Germany
Netherlands
Italy
Switzerland
United Kingdom
Japan
Other99.2
6.0
13.3
14.6
8.9
18.2
5.6
7.4
3.6
3.7
20.2
16.1
7.1
6.9
5.1
3.5
2.4
19.7
9.8
28.6143.1
8.2
17.4
15.4
...a
27.7
12.9
11.7
5.9
6.8
37.1
18.4
10.3
11.8
7.7
5.2
3.2
29.0
15.8
41.7
Services sales toU.S.persons bynon-bank, majority-owned affiliates offoreign companies ("imports")
1989 1993
TOTAL
Bysector
in:Petroleum
Manufacturing
Wholesale trade
Finance, except banking
Insurance
Computer anddataprocessing
Business servicesb
Motion picturesc
Transportation
Other
Bygeographic area
in:Canada
France
Germany
Netherlands
Italy
Switzerland
United Kingdom
Japan
Other94.2
2.3
7.9
2.7
4.6
32.6
1.6
3.2
3.6
6.6
29.1
18.8
4.5
5.1
7.4
...a
8.8
27.4
7.5
14.7140.5
3.3
9.8
9.8
5.6
50.9
2.4
5.3
7.6
9.1
36.7
23.5
13.5
10.5
9.6
0.8
10.9
33.4
19.8
18.5
... Notavailable.
a Suppressed toavoid disclosure ofdataofindividual companies.
b Includes accounting, architectural, engineering, management, research, surveying andrelated services.
c Including television tapeandfilm.
Source: U.S. Department ofCommerce, Survey ofCurrent Business, various issues.United States WT/TPR/S/16
Page 11
Table I.5
U.S.merchandise exports bybroad product categories, 1980-95
(US$ million andpercent)
Commodity 1980 1985 1990 1991 1992 1993 1994 1995
Total 212,887 205,239 371,466 397,705 420,812 430,189 476,190 541,367
Percentoftotal merchandise exports
Total primary products
Agriculture
Food
Agricultural rawmaterial
Mining
Oresandother minerals
Non-ferrous metals
Fuels
Manufactures
Iron&steel
Chemicals
Other semi-manufactures
Machinery andtransport
equipment
Power generating machines
Other non-electrcl. machnry.
Machines n.e.s. non-
electric
Agrc. machnry &tractors
Office machines &telecom.
equip.
Office machines
Telecom.
Other electrical machines
Other elect. mach. n.e.s.
Automotive products
Road motor vehicles
Other transp. equip.
Aircraft
Textiles
Clothing
Clothing notoffur
Other consumer goods
Furniture
Footwear
Other32.2
23.4
18.3
5.1
8.8
2.7
2.4
3.7
65.5
1.5
9.9
5.1
41.2
1.7
11.6
6.0
1.5
7.3
3.9
1.5
5.2
2.7
8.4
6.7
6.9
6.0
1.7
0.6
0.5
5.6
0.2
0.1
2.325.4
17.7
13.5
4.2
7.6
1.8
1.0
4.8
69.9
0.6
10.4
4.3
47.7
2.1
9.1
5.1
0.8
11.4
7.1
1.9
6.0
3.1
11.5
9.4
7.6
6.9
1.1
0.4
0.3
5.4
0.3
0.1
4.721.8
15.6
11.2
4.4
6.2
1.6
1.5
3.2
74.1
1.0
10.5
5.0
47.0
2.2
8.9
5.6
0.7
12.0
6.5
2.3
5.7
2.0
9.4
7.7
8.9
8.0
1.3
0.7
0.6
8.7
0.5
0.1
4.120.9
14.4
10.5
3.9
6.5
2.0
1.5
3.0
75.1
1.2
10.1
5.1
47.8
2.3
9.0
5.7
0.6
11.7
6.3
2.4
5.8
2.2
9.4
7.7
9.6
8.7
1.4
0.8
0.8
8.8
0.6
0.1
4.019.5
14.6
11.0
3.6
4.9
1.1
1.2
2.6
76.4
1.0
10.4
5.3
48.3
2.1
8.9
5.7
0.6
11.8
6.2
2.5
5.9
2.2
10.2
8.4
9.4
8.5
1.4
1.0
0.9
9.1
0.7
0.1
4.118.3
14.0
10.6
3.3
4.3
1.0
1.1
2.2
77.7
0.9
10.4
5.4
49.2
2.2
9.2
6.0
0.7
12.6
6.1
2.9
6.3
2.3
10.9
8.9
7.9
7.2
1.4
1.1
1.1
9.3
0.7
0.1
4.017.7
13.7
10.2
3.5
4.0
1.0
1.2
1.8
78.3
0.8
10.8
5.5
49.4
2.0
9.4
6.2
0.7
13.7
6.3
3.2
6.4
2.3
11.1
9.1
6.8
6.1
1.3
1.1
1.1
9.2
0.7
0.1
4.018.9
14.5
10.6
3.9
4.5
1.2
1.4
1.8
77.3
1.1
11.2
5.6
48.0
1.9
9.5
6.4
0.6
14.7
6.6
3.3
6.5
2.4
10.3
8.4
5.3
4.5
1.3
1.2
1.2
8.8
0.7
0.1
3.8
Note: Values aref.o.b. onacustoms basis.
Source: UNSTAT, Comtrade Database.WT/TPR/S/16 Trade Policy Review
Page 12
21. TheshareofmanufacturesinU.S.merchandiseimportsrosefrom73percentin1990to76.2per
centin1992andsubsequently toover79percentin1995(Table I.6).There hasbeenacorresponding
decline intheshare ofprimary-product imports. Growth inimports ofmanufactures hasbeenled,
since1992, byoffice machines andtelecommunications equipment (20.8 percentayear), non-electrical
machinery(17.5percent),andchemicals(13percent).Theshareofautomotiveproductsinmerchandise
imports declined tounder 15percent.
Table I.6
U.S.merchandise imports bybroad product categories, 1980-95
(US$ million andpercent)
Commodity 1980 1985 1990 1991 1992 1993 1994 1995
Total 250,280 358,705 516,442 507,020 551,591 601,137 687,096 768,667
Percentofmerchandise imports
Total primary products
Agriculture
Food
Agricultural rawmaterial
Mining
Oresandother minerals
Non-ferrous metals
Fuels
Crude petroleum
Manufactures
Iron&steel
Chemicals
Other semi-manufactures
Machinery andtransport
equipment
Power generating machines
Other non-electrcl. machnry.
Machines n.e.s. non-
electric
Agrc. machnry &tractors
Office machines &telecom.
equip.
Other electriacal machines
Other elect. mach. n.e.s.
Automotive products
Road motor vehicles
Other transp. equip.
Textiles
Clothing
Clothing notoffur
Other consumer goods
Furniture
Footwear
Other48.3
10.8
8.2
2.5
37.6
1.6
3.1
32.8
25.8
50.0
3.3
3.9
6.3
25.6
0.6
4.3
2.1
0.6
5.2
2.3
0.8
11.3
10.3
1.9
1.0
2.8
2.7
7.1
0.5
1.2
1.727.5
9.2
7.0
2.1
18.3
0.8
2.0
15.5
9.5
70.1
3.1
4.4
7.3
39.6
0.8
5.4
3.0
0.4
10.0
4.0
1.3
17.7
16.1
1.7
1.4
4.5
4.4
9.7
1.0
1.7
2.423.8
7.7
5.8
1.9
16.1
0.9
2.0
13.3
9.0
73.0
2.1
4.8
7.0
41.1
1.1
6.0
3.7
0.5
11.8
4.6
1.2
15.9
14.3
1.7
1.3
5.3
5.2
11.4
1.1
1.9
3.221.7
7.7
5.9
1.8
14.0
0.8
1.7
11.5
7.9
75.2
2.0
5.2
6.8
42.3
1.1
5.6
3.7
0.4
13.0
4.8
1.2
15.7
14.2
2.0
1.4
5.5
5.5
11.9
1.1
1.9
3.220.5
7.6
5.7
1.9
12.9
0.7
1.6
10.6
7.5
76.2
1.9
5.3
6.7
42.6
1.2
5.5
3.6
0.4
14.0
4.9
1.3
15.2
13.6
1.9
1.5
6.0
6.0
12.3
1.1
1.8
3.319.3
7.3
5.3
2.0
12.0
0.6
1.5
9.8
6.8
77.5
1.8
5.1
6.9
43.8
1.0
5.6
3.7
0.4
14.9
5.0
1.3
15.5
13.8
1.7
1.4
6.0
5.9
12.5
1.1
1.9
3.218.2
7.1
5.0
2.0
11.1
0.6
1.7
8.7
6.0
78.6
2.3
5.2
6.8
45.4
0.9
6.2
4.0
0.4
16.0
5.1
1.3
15.6
13.8
1.6
1.4
5.7
5.6
12.0
1.2
1.7
3.217.7
6.9
4.8
2.1
10.8
9.6
1.9
8.2
5.9
79.2
2.0
5.5
7.0
46.2
0.8
6.4
4.2
0.4
17.7
5.2
1.4
14.7
13.0
1.5
1.3
5.4
5.4
11.7
1.2
1.6
3.2
Note: Imports arec.i.f., onacustoms basis.
Source: UNSTAT, Comtrade Database.United States WT/TPR/S/16
Page 13
22. Inservices,transport(includingtravel,passengerfaresandothertransportation)hastraditionally
been, andremains, thelargest export earner. Since 1990, itsshare inservice exports hasfallen from
55to51percent; however, withoverall service earnings upatalmost 6percentayear, thedecline
intheshare largely reflects rapid growth inother areas (Table I.3). Thus, forexample, exports of
business services havemore thandoubled since 1990, growing atanaverage annual rateof16.5per
cent; andreceipts from royalties andlicence feeswereupbyalmost 63percentintheperiod 1990
to1995.
23. Ontheimport side,transport isthepredominant element, withasteady share ofabout 62per
centofU.S. service imports since 1990. Royalties andlicence feesdoubled intheperiod 1990 to
1995, butremain, at4.2percent,arelatively small share ofU.S.service imports; bycontrast, export
receipts fromroyalties andlicence feesarealmost 13percentofU.S.service exports. U.S.imports
offinancial services havegrown ataround 8percentayearsince 1995; exports ofsuchservices have
grown more slowly, at2.3percentayear.
24. Establishment, asnoted above, hasbecome animportant mode ofdelivery bothforU.S.services
abroad andforforeign services intheUnited States. Insurance isthelargest component insalesabroad
byforeign affiliates ofU.S. companies, witha1995 share insuch sales ofalmost 20percent
(Table I.4).18However, growth hasbeenfastest incomputer anddataprocessing, where saleshave
increased atarateof15percentayearsince 1989; thisgrowth complements therapid expansion
ofU.S.exports ofoffice machines. Other areas ofreasonably fastgrowth havebeentransportation
(10.7 percentayear), motion pictures (8.6percent) andbusiness services (7.9percent).
25. Insurance isalsothelargest component ofservice salestoU.S.persons byaffiliates offoreign
companies intheUnited States, withashare ofover36percentinalltransactions. Areas inwhich
therehasbeensignificantgrowthincludewholesaletrade(24percentayearsince1989),motionpictures
(13.3 percent) andinsurance (7.7percent)
(ii) Geographic pattern oftrade
26. Theshiftinthedirection ofU.S.exports away fromEurope toward eastAsiaandtheAmericas
continued intheperiod 1990 to1995. Nevertheless, theEuropean Union remains thelargest market
forU.S.products, andalthough itsshare hasdeclined bysome 5percentage points relative to1990,
itstilltookover21percentofallU.S.merchandise exports in1995 (Table I.7). Over theperiod,
theshare ofCanada hasremained relatively constant, atanaverage ofjustunder 21percent; but
thatofMexico, withNAFTA lowering barriers, rosefairly rapidly through 1994, onlytodecline to
around 8percentin1995, inthewake ofMexico 'sfinancial crisis anddecline inGDP. Witheconomic
growth intheRepublic ofKorea andtheASEAN region averaging over8percentayear,thesecountries
havebecome anevermoreimportant destination forU.S.products, withtheirshare inU.S.merchandise
exports nowover11percent,compared tosomewhat over6percentinthemid-1980s. Japan'sshare
inU.S.exports isdown slightly; nevertheless since1992itsimports fromtheUnited States havegrown
atsome 10percentayear.
18Data arefornon-bank, majority-owned affiliates.WT/TPR/S/16 Trade Policy Review
Page 14
Table I.7
U.S.merchandise exports byregion, 1980-95
(US$ million andpercent)
1980 1985 1990 1991 1992 1993 1994 1995
World 212,898 205,239 371,466 397,705 420,812 430,189 476,190 541,367
Percentoftotal merchandise exports
America
Canada
Other America
Mexico33.0
15.3
17.7
6.935.9
21.5
14.4
6.335.0
20.9
14.0
7.435.2
19.8
15.4
8.137.0
19.7
17.3
9.438.6
21.2
17.5
9.340.3
21.7
18.6
10.338.0
20.8
17.1
8.3
Europe
European Union (15)
United Kingdom
Germany
Netherlands
France
EFTA
Central &Eastern Europe
Former USSR
Other Europe31.7
27.6
5.3
5.1
4.0
3.4
1.8
1.6
0.7
0.627.6
24.0
5.2
4.2
3.4
2.8
1.2
1.5
1.2
0.929.4
26.1
5.8
4.7
3.3
3.4
1.3
1.1
0.8
0.828.9
25.5
5.1
5.0
3.2
3.6
1.4
1.2
0.9
0.727.0
23.9
4.8
4.7
3.1
3.2
1.1
1.3
0.9
0.724.5
21.2
4.8
4.1
2.8
2.8
1.1
1.4
0.9
0.923.6
20.8
4.9
3.8
2.7
2.6
1.1
1.1
0.7
0.623.7
21.2
4.7
3.9
3.0
2.4
1.0
1.0
0.7
0.6
Asia
Middle East
EastAsia
Japan
ASEAN
Korea Rep.
Chinese Taipei
China
South Asia27.0
5.0
20.7
9.6
4.1
2.1
2.0
1.8
1.227.6
4.0
22.3
10.5
3.7
2.8
2.1
1.8
1.330.8
2.9
26.9
12.4
4.8
3.8
3.0
1.3
1.031.3
3.7
26.8
11.6
5.0
3.8
3.2
1.6
0.831.1
3.9
26.5
10.9
5.3
3.4
3.3
1.7
0.732.4
3.8
27.7
10.7
6.2
3.3
3.5
2.0
0.931.8
3.2
27.9
10.7
6.3
3.7
3.3
1.9
0.734.1
3.1
30.2
11.2
6.7
4.5
3.3
2.1
0.9
Oceania 2.3 2.9 2.6 2.4 2.5 2.2 2.4 2.3
Africa
Sub-saharan Africa
Other Africa4.0
1.4
2.73.3
1.2
2.12.1
0.6
1.52.2
0.6
1.52.3
0.7
1.62.1
0.6
1.61.9
0.5
1.51.8
0.5
1.3
Other 2.1 2.7 0.1 0.1 0.1 0.1 0.1 0.1
Note: Exports aref.o.b., onacustoms basis.
Source: UNSTAT, Comtrade database.
27. EastAsiaistheUnited States 'largest regional source ofimports, withashare ofaround
40percent(Table I.8).However, within theeast-Asian region therehasbeenashiftinsourcing away
from Japan toward ASEAN, perhaps reflecting Japanese investment inmanufactures intheareaand
movements inexchange rates. Theshare ofChina isalsoupsignificantly, doubling to6.3percent
intheperiod 1990-95. Canada isthemostimportant single country source ofU.S.imports, witha
share rising toover19percent, astheCanadian dollar weakened inrealterms against itsU.S.
counterpart. TheEuropean Union 'sshare ofU.S.merchandise imports hasdeclined steadily since
1990, although overtheperiod to1995 itsexports totheUnited States grew atsome 5.8percenta
year.United States WT/TPR/S/16
Page 17
WT/TPR/S/16 Trade Policy Review
Page 18
Table I.9
U.S.intra-industry trade withtheworld, bytheGATT Tariff Study Categories, 1980-95
T.S
Code DescriptionNumber of
SITC linesIntra-industry trade (%)
1980 1985 1990 1995
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34Allcategories
Rawhides andskins, leather andfurskins
Rubber
Wood andcork
Pulp, paper andpaperboard
Textiles andclothing
Mineral products andfertilizers
Precious stones andprecious metals
Oresandmetals
Coal, petroleum, natural gas
Chemicals
Non-electrical machinery
Electrical machines andapparatus
Transport equipment
Professional, scientific andcontrolling instruments,
photographic apparatus, clocks andwatches
Footwear andtravel goods
Photographic andcinematographic supplies
Furniture
Musical instruments, sound recording orreproduction
apparatus
Toys
Works ofartandcollectors pieces
Firearms, ammunition, tanks andother armoured
fighting vehicles
Office andstationery supplies
Manufactured articles notelsewhere specified
Foodstuffs
Grains
Animals andproducts thereof
Oilseeds, fatsandoilsandtheirproducts
Cutflowers, plants, vegetable materials
Beverages andspirits
Dairy products
Fish, shellfish andproducts
Tobacco
Other agricultural products ofanimal origin
Other agricultural products ofvegetable origin804
24
13
28
27
79
64
17
115
22
72
45
21
31
17
5
5
2
6
3
4
4
3
15
63
13
24
36
6
8
8
6
6
4
836.9
43.1
41.4
43.3
48.2
30.4
38.5
59.0
43.2
4.5
50.3
53.7
80.5
45.0
49.9
12.2
52.0
59.9
51.2
63.6
68.4
11.9
68.1
75.4
22.8
0.5
27.0
2.0
48.2
23.0
10.7
45.7
33.7
79.4
22.145.4
34.1
42.4
33.4
50.9
19.9
35.6
31.8
33.8
16.2
67.4
78.5
66.4
46.7
57.0
5.8
84.8
32.0
24.1
22.4
24.1
15.3
47.1
84.4
30.5
2.0
39.8
4.9
39.1
15.6
12.7
36.9
36.0
76.7
29.656.1
33.8
60.3
47.2
57.7
28.8
37.7
24.4
59.8
15.7
70.9
84.6
81.5
50.0
62.9
9.4
87.2
51.1
44.4
32.5
69.7
28.7
51.0
82.5
47.4
3.9
55.8
9.8
60.4
31.5
20.6
67.3
22.1
73.0
33.459.7
37.7
61.1
40.2
61.9
37.0
41.4
27.2
61.4
16.7
74.5
76.9
79.0
57.2
64.3
10.7
93.8
56.7
46.7
41.3
35.4
24.8
50.3
75.1
52.3
7.8
43.6
12.3
49.3
52.9
23.9
61.8
18.5
91.5
33.0
Source: Calculations byWTO Secretariat using 4-digit SITC Rev.1 data.United States WT/TPR/S/16
Page 19
(4) Foreign Direct Investment
32. Thebasicprinciple ofU.S.policy toward foreign direct investment (FDI) isnational treatment.22
Foreign firms generally facenoobstacles thatdomestic firms donotalsofaceincreating orexpanding
operations. Most deviations fromnational treatment arejustified onnational security grounds; thus
inareassuchasnuclear energy, transportation andtelecommunications, which haveatradition offederal
regulation, foreign direct investment mayberestricted.23TheExon-Florio provision intheOmnibus
Trade andCompetitiveness Actof1988developed theU.S.Government 'sability torestrict FDIinto
those industries notsubject tofederal regulation; theprovision hasonlyoncebeenusedtoblock an
investment andhasnotbeeninvoked sincethelastTrade Policy Review. Inafewindustries, including
banking andinsurance, treatment given toaforeign firmintheUnited States maydepend onreciprocity,
viz.ontreatment given aU.S.firmoperating, orwishing tooperate, inthesameindustry ofthatcountry.
33. Thepolicy oftheUnited States toward outgoing FDIisalsooneofneutrality: theunderlying
tenet isthatU.S. investors abroad should begranted treatment atleastasfavourable asanyother
investor. U.S.outflows ofFDIarefreetoallbutafewcountries, withrestrictions inplaceforcountries
towhich sanctions apply forsecurity reasons (Chapter III(3)).
34. Thedirect investment position ofother countries intheUnited States equalled justover
US$500 billion attheendof1994, having increased atarateofalmost 12percentayearoverthe
previous decade (Table I.10). Over athirdoftheinward FDIstock isinmanufacturing, withmuch
oftheremainder intheservice sectors. Inthethree years to1994, financial services wasthesingle
largest destination forinward FDI,withalmost 40percentofallflows. Chemicals andallied products
wasalsoanimportant sector forinward investment, aswaswholesale andretailtrade, Majority-owned,
non-bank affiliates intheUnited States areestimated tohaveemployed 5.3million persons in1993,
equal to4.4percentofallemployment.
35. Attheendof1994theFDIposition abroad oftheUnited States equalled about US$612 billion,
following anannual average rateofincrease ofjustover11percentsince 1984. Some 36percent
ofthestock ofU.S.investment abroad wasinmanufacturing, down from over40percentadecade
earlier. Asignificant portion ofrecent outward flows havebeenintofinancial services, although in
1994thereweresubstantial U.S.investments abroad inthechemicals, machinery andtrading sectors.
22Formore detailed review oftheU.S.investment régime seeGATT (1994).
23Graham andKrugman (1991). Forexample, under theCommunication Act,theFederal
Communication Commission maydenyorrevoke licences, inthepublic interest, subject tolimits on
foreign equity-holdings; theAtomic Energy Actallows noaliens orforeign firms tooperate inthe
U.S.nuclear energy industries; theFederal Aviation Actmandates thatairtransport between twopoints
intheUnited States maybecarried outonlybyU.S.firms withatleast75percentU.S.ownership;
andunder theJones Act,corporations operating vessels forcoastal orinland-waterway transportation
must have75percentorgreater domestic ownership.WT/TPR/S/16 Trade Policy Review
Page 20
Table I.10
Foreign direct investment (FDI) bysource anddestination, selected years
StockaAnnual flows
1984 1994 1992 1993 1994
FDIintotheUnited States (US$ billion) 164.6 504.4 18.9 41.7 50.1
Shares ofselected partners Percent
Canada 9.3 8.6 7.1 7.4 7.9
Europe 65.8 62.0 42.9 81.5 62.8
France 4.0 6.6 -0.6 15.8 8.7
Germany 7.5 7.8 6.8 17.3 12.5
Netherlands 20.5 14.0 14.3 6.4 -1.3
United Kingdom 23.3 22.5 -5.7 29.3 24.7
Latin America 9.8 4.8 18.5 9.4 8.1
Middle East 3.2 1.1 -0.4 1.1 0.6
AsiaandPacific ... 23.4 32.1 0.6 20.5
Australia 1.3 1.6 -0.6 0.9 3.7
Japan 9.8 20.4 31.1 0.2 12.9
U.S. FDIabroad (US$ billion) 211.5 612.1 42.6 71.3 47.7
Share inselected partners Percent
Canada 22.1 11.9 4.9 4.5 8.9
Europe 43.3 49.0 44.4 56.9 32.0
France 3.0 4.6 9.0 -0.6 6.8
Germany 7.0 6.5 4.1 6.0 3.9
Netherlands 2.8 4.0 -3.7 2.0 5.2
United Kingdom 13.5 16.7 14.6 28.5 -4.4
Latin America 11.7 18.8 29.9 23.6 33.0
Middle East 2.4 1.1 2.0 1.1 1.2
AsiaandPacific 15.3 17.7 17.3 12.3 24.4
Australia 4.2 3.4 3.4 2.7 2.9
Japan 3.8 6.1 1.6 2.1 6.0
... Notavailable.
a Onanhistorical-cost basis.
Source: U.S.DepartmentofCommerce(1987and1995),SurveyofCurrentBusiness,Volumes67and75,No.8,August,Washington,D.C.
36. Over60percentoftheinward FDIstock isfromEuropean countries (Table I.11). Thesingle
largest investor istheUnited Kingdom, withalmost 23percentofthestock andwithwellover25per
centofinward flows in1993-94. Japan'sshare oftheinward FDIstock more thandoubled toover
20percentinthedecade to1994. Almost halfoftheU.S.investment stock abroad isinEurope, up
fromabout 43percentin1984. Theshare ofLatin America hasalsoincreased significantly, toabout
19percentin1994 compared tounder 12percentin1984. Japan'sshare isaround 6percent,
compared tounder 4percentin1994. Theshare ofU.S.investment stock inCanada fellfrom 22
to12percentintheperiod 1984 to1994.United States WT/TPR/S/16
Page 21
(5) Outlook
37. Afeature ofU.S.economic policy since theprevious Review isthesteady progress thathas
beenmade inreducing thefiscal deficit. Inpractice, thiscanbeofdecided importance tothetrade
policy stance, inthatfiscal consolidation canhelptoraiseU.S.savings andthuseasepressure onthe
external current andtrade accounts. Between 1992 and1995, thedeficit oftheFederal Government
narrowed from4.9to2.3percentofGDP; inthiscontext, itisnotable thatdemand bytheFederal
Government wasdown bysome 13percentinthefouryears to1995. Concurrently, private savings
declined andthose byState andlocal governments remained relatively steady, withfederal fiscal
constraint thussignificantly contributing totherecently improved U.S.savings performance. TheU.S.
Administration andCongress haveagreed ontheobjective ofreaching budget balance by2002, which
could augur wellfornational savings, thushelping theexternal accounts while allowing forsteady
growth ininvestment.
38. Thiscould establish avirtuous circle. Higher investment would laytheframework forimproved
growth. Credible fiscal consolidation might lead,incombination withmonetary action, tolower interest
rates, thushelping tosustain suchgrowth. Inherent inthisisthecontinued efficiency ofU.S.markets,
andtherefore theneedtokeepthem securely openwithin awell-functioning multilateral system.
Table I.11
Foreign direct investment (FDI) byactivity, selected years
StockaAnnual flows
1984 1994 1992 1993 1994
FDIintotheUnited States (US$ billion) 164.6 504.4 18.9 41.7 50.1
Shares inselected sectors Percent
Petroleum 15.4 6.8 -4.2 -3.3 6.7
Manufacturing 31.5 36.6 39.9 33.3 43.3
Food andkindred products 5.0 4.1 10.6 0.0 2.8
Chemicals andallied products 10.1 13.3 16.3 15.5 20.9
Machinery andelectric andelectronic equipment 5.9 6.3 3.7 4.0 6.3
Wholesale andretail trade 19.0 15.8 11.9 9.6 17.5
Banking, finance andinsurance 15.1 22.4 40.7 57.8 16.1
Other servicesb15.7 14.1 3.7 -2.9 5.7
U.S. FDIabroad (US$ billion) 211.5 612.1 42.6 71.3 47.7
Share inselected sectors Percent
Petroleum 27.5 10.7 0.2 7.5 5.8
Manufacturing 40.6 36.0 39.6 27.1 52.1
Food andkindred products 3.9 4.7 8.9 8.4 7.6
Chemicals andallied products 9.1 8.4 12.2 6.1 11.6
Machinery andelectric &electronic equipment 10.9 8.4 -1.3 2.9 14.7
Wholesale andretail trade 11.8 12.6 15.0 8.6 21.2
Banking, finance andinsurance 13.6 33.2 33.4 51.8 3.8
Other servicesb3.7 6.0 10.6 4.9 14.1
a Onanhistorical-cost basis.
b Including construction.
Source: U.S.Department ofCommerce (1987 and1995), Survey ofCurrent Business, Volumes 67and75,No.8,August, Washington, D.C.