Testimony 

Before the Subcommittee on Oversight of 

Government Management, the Federal 

Workforce and the District of Columbia, 

U.S. Senate

United States General Accounting Office 

GAO

For Release on Delivery 

Expected at 10:00 a.m., EST 

Tuesday, December 9, 2003 HUMAN CAPITAL 

Significant Challenges 

Confront U.S. Trade 

Agencies 

Statement of Loren Yager, Director 

International Affairs and Trade 

GAO-04-301T 
The importance of international trade to the U.S. economy has grown in the 

last decade, as have the responsibilities of federal agencies involved in 

implementing international trade functions. For example, the September 11, 

2001, terrorist attacks have heightened the need for increased focus on 

security within the global trade environment. In response, the Bureau of 

Customs and Border Protection has implemented new programs to improve 

the security of the global supply chain. These new programs require greater 

attention to human capital strategies to ensure that they achieve their goals 

of facilitating trade while preventing terrorist acts. 

In addition, the administration has continued to pursue multilateral 

negotiations within the World Trade Organization and with the Free Trade 

Area of the Americas countries as well as a series of new, bilateral and 

subregional trade negotiations. The increase in the number of initiatives has 

strained available human capital, leading to a USTR request for additional 

staff. 

Finally, the shifting global trade environment has complicated efforts to 

monitor and enforce trade agreements. For example, the United States has 

become the most frequent defendant in World Trade Organization trade 

dispute proceedings. Furthermore, as the U.S. economy has shifted toward 

services and high-tech industries, the industry advisory committees that 

provide trade advice to the U.S. government have required structural 

realignment to reflect these changes. Also, China’s growing influence in 

international trade has resulted in new challenges to its trading partners. 

These changing global forces require U.S. trade agencies to continuously 

ensure that their human capital strategies closely link to the nation’s 

strategic trade functions. 

Recent Trade Developments Create Human Capital Challenges in Performing Trade 

Functions 

Recent developments in global 

trade have created human capital 

challenges for U.S. trade agencies. 

At least 17 federal agencies, with 

the Office of the U.S. Trade 

Representative (USTR) as the lead, 

negotiate, monitor, or enforce trade 

agreements and laws. These 

agencies’ strategies for effectively 

aligning their current and emerging 

needs in handling international 

trade functions and their human 

capital resources are critical to 

improving agency performance. 

GAO was asked to summarize its 

recent studies to illustrate 

important human capital 

challenges arising from current 

trade developments as U.S. trade 

agencies strive to negotiate, 

monitor, and enforce existing trade 

agreements and laws. For this 

testimony, GAO discussed the 

challenges that USTR, the 

Commerce Department, and the 

Bureau of Customs and Border 

Protection are facing in light of 

three recent developments in 

international trade: (1) the 

increased importance of security, 

(2) the ambitious U.S. negotiating 

agenda, and (3) the shifting global 

trade environment. 

www.gao.gov/cgi-bin/getrpt?GAO-04-301T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Loren Yager at 

(202) 512-4347 or YagerL@gao.gov. 

Highlights of GAO-04-301T, a testimony 

before the Subcommittee on Oversight, of 

Government Management, the Federal 

Workforce and the District of Columbia, 

U.S. Senate 

December 9, 2003 

HUMAN CAPITAL

Significant Challenges Confront U.S. 

Trade Agencies 
Page 1 GAO-04-301T Human Capital Challenges 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss the implications of recent trade 

developments on the human capital strategies of major U.S. trade agencies 

that negotiate, monitor, and enforce trade agreements and laws. 

International trade is an increasingly important part of the U.S. and world 

economy: In 2001, world exports represented about one quarter of the 

world’s gross domestic product (GDP), partly as a result of the succession 

of trade agreements that have reduced trade barriers. However, this 

dynamic trade environment and the growing number of trade agreements 

have also resulted in a significant burden on U.S. trade agencies—and 

their human capital—as they strive to monitor and enforce existing trade 

agreements and laws while simultaneously negotiating a number of new 

agreements. 

As we have reported in numerous studies and testimonies before this 

Subcommittee and other congressional Committees, effective alignment 

between the current and emerging needs and U.S. federal agencies’ human 

capital strategies is critical to improved agency performance. For this 

testimony, you asked us to summarize some of our recent studies to 

illustrate important human capital challenges confronting trade agencies 

that have arisen from recent trade developments. Specifically, today I will 

focus on the human capital challenges that trade agencies face in light of 

three recent trade developments: 

• the increased importance of security, 

• the ambitious negotiating agenda of the United States at the current 

time, and 

• the shifting global trade environment. 

While numerous agencies have trade responsibilities, we are focusing 

today on the Office of the U.S. Trade Representative (USTR) and the U.S. 

Department of Commerce because of their key roles and responsibilities 

for implementing trade functions, that is, negotiating, monitoring, and 

enforcing trade agreements and laws. In addition, we also discuss the 

Department of Homeland Security’s Bureau of Customs and Border 

Protection (CBP), because it has primary responsibility for ensuring the 

security of trade in the post-9/11 environment. In performing this work, we 

have drawn on a number of our recent reports, some of which directly 

addressed human capital issues, and have also interviewed officials from 

relevant trade agencies. 
Page 2 GAO-04-301T Human Capital Challenges 

The terrorist attacks of September 11, 2001, have heightened the need for 

increased security within the global trade environment. Combating 

terrorism became the number one priority for CBP and has significant 

implications for its human capital strategies and trade functions. Our 

recent work indicates that it is too soon to tell how the increased 

importance of security will affect the implementation of CBP’s traderelated activities over the long run; however, some short-term shifts in 

human capital from trade to nontrade functions have occurred. Also as 

part of its focus on terrorism, CBP has implemented new programs to 

screen high-risk containers for weapons of mass destruction at overseas 

ports and to improve security in the private sector’s global supply chain. 

Our recent work in this area found a need to link human capital strategies 

with the goals of facilitating trade and combating terrorism to establish 

accountability and ensure effective performance. 

In recent years, the United States has been pursuing a broad trade policy 

agenda whose cumulative impact has tested the limits of the government’s 

negotiating capacity. The administration has continued an ambitious 

negotiating agenda relating to the ongoing World Trade Organization 

(WTO)1

 and Free Trade Area of the Americas (FTAA) multilateral 

negotiations, plus a series of new, bilateral and subregional trade 

negotiations following the passage of the Trade Act of 2002.2

 Our work in 

this area shows that pursuing such a broad negotiating agenda has 

strained available resources, leading to requests for additional staff in 

recent years. 

Finally, the shifting global trade environment complicates efforts to 

monitor and enforce existing agreements, placing a substantial burden on 

the human capital resources of U.S. trade agencies. Based on our recent 

work, the United States has become the most frequent defendant in WTO 

trade dispute resolution proceedings. In addition, as the U.S. economy has 

shifted toward services and high-technology industries, our recent work 

shows that the industry committee structure that provides advice to U.S. 

trade agencies has required realignment to reflect these changes. Finally, a 

new set of challenges has also evolved in response to China’s growing 

 1

The WTO is a multilateral organization, established in January 1995, that administers rules 

of international trade and provides a forum for conducting trade negotiations among its 146 

members as well as a dispute settlement system for resolving trade disputes among its 

members. 

2

Pub. L. No. 107-210, 116 Stat. 933, 993-1022. 

Summary 
Page 3 GAO-04-301T Human Capital Challenges 

influence in international trade. Our work shows that these forces have 

stretched the human capital resources of U.S. trade agencies. Although the 

government has taken steps to address some of these challenges, these 

and other changes in the global trade environment require that the trade 

agencies constantly monitor and update their human capital strategies to 

ensure that they are closely linked to the strategic goals of the agencies. 

U.S. exports as a share of U.S. gross domestic product have grown 

significantly, increasing from less than 6 percent in 1970 to a peak of more 

than 11 percent in 1997, as shown in figure 1. The rise in U.S. imports was 

even greater, increasing from about 5 percent in 1970 to nearly 15 percent 

of GDP in 2000, according to Commerce Department statistics. Although 

the share of U.S. exports and imports has declined from those peak levels, 

they still represent a substantial part of our GDP—at 9.3 percent, and 13.3 

percent, respectively, in 2002. The U.S.’s principal trading partners include 

Canada, Mexico, Japan, and China. 

Figure 1: U.S. Exports and Imports as a Share of GDP, 1970-2002 

At least 17 federal agencies, led by USTR, are involved in developing and 

implementing U.S. trade policy. USTR’s role includes developing and 

coordinating U.S. international trade policy and leading or directing 

negotiations with other countries on trade matters. It also has primary 

statutory responsibility for monitoring and enforcing U.S. trade 

agreements. The Department of Commerce has a relatively broad role with 

respect to trade agreement activities, with three units in the International 

Trade Administration performing the key trade functions: The Import 

Administration helps enforce U.S. trade laws; Market Access and 

Compliance is responsible for ensuring that other nations live up to their 

Background 
Page 4 GAO-04-301T Human Capital Challenges 

trade agreements; and Trade Development focuses on advocacy for U.S. 

companies, export promotion services, support for trade negotiations, and 

market analysis. Trade functions at the CBP are primarily directed toward 

enforcing U.S. import and export laws and facilitating legitimate trade as 

well as collecting duties, fees, and other assessments (more than $23 

billion in fiscal year 2002). Other agencies also play important roles, such 

as the departments of Agriculture and State, which have relatively broad 

roles with respect to trade agreement activities. The departments of the 

Treasury and Labor have more specialized roles, such as advising on 

financial services or labor and workers’ rights issues. Federal trade policy 

development and monitoring and enforcement efforts are coordinated 

through an interagency mechanism comprising several management- and 

staff-level committees and subcommittees. 

The number of authorized full-time staff at USTR, Commerce’s Import 

Administration, and Commerce’s Market Access and Compliance division 

has increased in recent years (see fig. 2). However, actual staff levels are 

still in the process of catching up with authorized levels in Commerce and 

USTR offices. USTR has requested additional staff resources for 2004. 
Page 5 GAO-04-301T Human Capital Challenges 

Figure 2: Authorized and Actual Full-time Equivalent (FTE) Staff Years at USTR and Commerce’s Key Trade Offices, 1995-

2004 

Note: The authorized level shown for 2004 is based on the administration’s budget request for fiscal 

year 2004. 
Page 6 GAO-04-301T Human Capital Challenges 

As of January 23, 2003, the CBP had 3,269 positions dedicated to 

performing trade-specific functions: 2,263 specialists, auditors, and 

attorneys and 1,006 associated positions3

 carry out trade activities such as 

auditing trade compliance; processing entry documents; collecting duties, 

taxes, and fees; assessing and collecting fines and penalites for 

noncompliance; and advising on tariff classification issues. CBP is 

expected to maintain these staff levels, as the Homeland Security Act of 

2002 stipulates that the Secretary of Homeland Security may not reduce 

the staffing levels attributable to such functions on or after the effective 

date of the act.4

 In addition, more than 18,000 CBP inspectors perform 

trade and nontrade functions depending on the nature of their assignment. 

For example, inspectors may screen and inspect cargo for illegal 

transshipment of textiles, counterfeit cigarettes, illegal drugs, and other 

contraband; and enforce compliance with U.S. trade and immigration laws. 

After September 11, 2001, combating terrorism became the priority 

mission for the U.S. Customs Service and remained so when the Customs 

Service was transferred to the Department of Homeland Security and 

incorporated into CBP. While it is too soon to tell how the increased 

importance of security will affect the implementation of CBP’s traderelated activities in the long run, some short-term shifts in human capital 

from trade to nontrade functions have occurred. As part of its focus on 

terrorism, CBP has implemented new programs to screen high-risk 

containers for weapons of mass destruction at overseas ports and to 

improve security in the private sector’s global supply chain. CBP has made 

progress in getting these programs up and running but has not devised 

systematic human capital plans to meet long-term staffing needs for both 

programs. The increased importance of security requires human capital 

strategies that link with the goals of combating terrorism and facilitating 

trade to establish accountability and ensure effective performance. 

 3

Associated positions support the specialists, auditors, and attorneys and include positions 

such CBP managers, paralegals, account managers, and clerical staff dedicated to trade 

activities. 

4

Section 412(b)(2) of the Homeland Security Act, Public Law 107-296, 116 stat. 2180, states 

that the Secretary of Homeland Security may not reduce the staff levels attributable to 

functions performed by the following personnel and their associated support staff: import 

specialists, entry specialists, drawback specialists, national import specialists, fines and 

penalties specialists, attorneys of the Office of Regulations and Rulings, Customs auditors, 

international trade specialists, and financial systems specialists. 

The Increased 

Importance of 

Security Has 

Significant 

Implications for 

Human Capital 

Strategies and Trade 

Functions 
Page 7 GAO-04-301T Human Capital Challenges 

The historical mission of the U.S. Customs Service has been to collect 

customs revenues and ensure compliance with trade laws, but this mission 

has shifted over time. For example, in the 1970s Customs expanded its 

functions to include the interdiction of narcotics entering the United 

States. Since September 11, 2001, combating terrorism has become 

Customs’ priority mission, culminating in the creation of CBP on March 1, 

2003. On that date, the U.S. Customs Service was transferred from the 

Department of the Treasury to the Department of Homeland Security as 

part of the Homeland Security Act of 2002.5

 Figure 3 illustrates the range of 

trade and nontrade activities that CBP performs. 

Figure 3: Range of CBP Activities 

While two of the nine key mission-related offices within CBP6

 are primarily 

dedicated to trade, most offices and most of CBP’s more than 40,000 

 5

CBP was formed through the merger of most of the U.S. Customs Service and immigration 

inspectors and the U.S. Border Patrol of the former Immigration and Naturalization Service 

and the agricultural border inspectors of the U.S. Department of Agriculture. While most of 

Customs transferred to CBP, its Office of Investigations did not. Instead, the more than 

5,000 Customs investigators and staff were transferred to the Bureau of Immigration and 

Customs Enforcement within the Department of Homeland Security. 

6

The Office of Strategic Trade and the Office of Regulations and Rulings are the two offices 

within CBP that are primarily dedicated to trade. 

Combating Terrorism 

Becomes a Priority, 

Shifting Human Capital 

from Trade Activities 
Page 8 GAO-04-301T Human Capital Challenges 

employees perform a range of activities that support both trade and 

nontrade goals. Moreover, about a fifth of the 3,269 CBP positions 

dedicated to performing trade activities are located in the trade-specific 

offices, but most are located in offices that support both goals. Within this 

kind of organization, activities performed by persons in the offices that 

support both goals could shift from trade to nontrade activities when 

security threat levels are higher without actually seeing a reduction in the 

number of staff dedicated to trade. Moreover, the activities of the 18,000 

plus CBP inspectors who perform trade and nontrade functions could shift 

to focus on combating terrorism when security concerns are heightened. 

Several examples illustrate the types of shifts from trade to security 

activities that have occurred. 

• After September 11, 2001, CBP temporarily detailed approximately 380 

inspectors to international airports around the country to strengthen 

security measures—reducing the number of inspectors available to 

work on trade activities. 

• During the first 2 quarters of fiscal year 2002, CBP audits on export 

compliance were not conducted so that 150 inspectors could be 

temporarily redeployed to land ports along the northern border to 

strengthen security measures. 

• During fiscal year 2002, the Compliance Measurement program, which 

determines compliance with U.S. trade laws, regulations, and 

agreements, was temporarily discontinued for 11 months because 

import specialists and inspectors were redirected to border security 

activities. Due to the limited compliance sampling, CBP was unable to 

calculate an overall trade compliance rate for fiscal year 2002. 

Moreover, compliance measurement helps ensure the quality of trade 

data, and unreliable trade data increase the risk that critical threats will 

not be identified. 

• In fiscal year 2003, 3 of 14 scheduled textile production verifications 

were canceled when the national security alert level increased, so that 

the verification teams could remain at their ports and field offices to 

focus on security-related activities. The textile production verification 

teams, comprised of CBP import specialists and special agents, 

examine the production facilities in nations where there is potential for 

illegal transshipment of textiles. 

While the Homeland Security Act stipulates that the Secretary of the 

Department of Homeland Security may not reduce the staffing levels 
Page 9 GAO-04-301T Human Capital Challenges 

attributable to specific trade-related activities, our examination found that 

measuring inputs such as the number of staff assigned to trade-related 

positions does not adequately capture possible shifts away from trade 

activities—as the number of people assigned to trade-related positions 

may remain the same, but the focus of their work may shift to nontrade 

duties. In addition, those positions that were not included in the 

legislation, such as inspectors, but conduct trade and nontrade activities, 

may increasingly shift their focus away from trade and concentrate on 

homeland security activities. Measuring changes in CBP’s outputs and 

outcomes will be important in assessing how the increased emphasis on 

combating terrorism and Customs’ transfer to the Department of 

Homeland Security have affected trade activities and whether human 

capital strategies need to be readjusted accordingly. 

Responding to heightened concern about national security since 9/11, CBP 

assumed the lead role in improving ocean container security and reducing 

the vulnerabilities associated with the overseas supply chain. In November 

2001, CBP initiated the Customs-Trade Partnership Against Terrorism 

program, where companies agree to voluntarily improve the security of 

their supply chains in return for reducing the likelihood that their 

containers will be inspected for weapons of mass destruction. In January 

2002, CBP also initiated the Container Security Initiative whereby CBP 

officials are placed at strategic foreign seaports to screen cargo manifest 

data for ocean containers to identify those that may hold weapons of mass 

destruction. We reported in July 20037

 that CBP had not taken adequate 

steps to incorporate human capital planning, develop performance 

measures, or plan strategically- - factors crucial to the programs’ long-term 

success and accountability. 

Initially, 10 officials were assigned to roll out the Customs-Trade 

Partnership Against Terrorism. Under the program, companies enter into 

partnership agreements with CBP and agree to self-assess their supply 

chain security practices and document it in a security profile. These 10 

officials provide guidance to companies on how to prepare their security 

profiles as well as review the completed security profiles and prepare 

feedback letters. As of May 2003, more than 3,300 agreements had been 

 7

U.S. General Accounting Office, Container Security: Expansion of Key Customs 

Programs Will Require Greater Attention to Critical Success Factors, GAO-03-770

(Washington, D.C.: July 25, 2003). 

New CBP Antiterrorism 

Programs Paid Little 

Attention to Human 

Capital Planning 
Page 10 GAO-04-301T Human Capital Challenges 

signed, 1,837 security profiles reviewed, and 1,105 feedback letters 

prepared. However, early on CBP realized that it did not have a cadre of 

staff with the skills necessary to conduct site visits to observe supply 

chain practices and make substantive recommendations for improving 

security. In October 2002, CBP began the process of developing a new 

position, called “supply chain specialists,” to review company security 

profiles, visit companies to validate information contained in the security 

profiles, and develop action plans that identify supply chain vulnerabilities 

and the corrective steps companies need to take. CBP was authorized to 

hire more than 150 supply chain specialists and expected to hire 40 supply 

chain specialists in fiscal year 2003. As of October 2003, CBP has visited 

more than 130 companies to verify their supply chain security practices. 

While CBP officials acknowledged the importance of human capital 

planning, they said they had not been able to devote resources to 

developing a human capital plan that outlines how the program will 

increase its staff 15-fold and implement program elements that require 

specialized training. 

The Container Security Initiative seeks to deploy 120-150 inspectors, 

intelligence research analysts, and agents to 30 overseas ports by the end 

of fiscal year 2004. CBP eventually plans to expand to 40 to 45 ports. 

Deploying four-to-five person CSI teams to foreign ports will be a 

complex, multiyear task. CBP seeks candidates with specialized skills 

needed to review cargo manifest data and identify suspicious containers 

for inspection as well as diplomatic and language skills to interact with 

their foreign counterparts. While CBP officials told us that they did not 

experience significant difficulties in finding qualified staff to fill their 

short-term human capital needs from among the pool of existing CBP 

employees, CBP had only 12 ports up and running under the Container 

Security Initiative at that time (May 2003). In addition, the teams were on 

120-day temporary duty assignments; however, CBP plans to create 2- to 3-

year assignments to replace the 120-day temporary duty assignments. In 

spite of the potential challenges CBP could face, CSI officials had not 

devised a systematic human capital plan. 

To help ensure that the Container Security Initiative and the CustomsTrade Partnership Against Terrorism achieve their objectives as they 

transition from smaller start-up programs to larger programs with an 

increasingly greater share of the Department of Homeland Security’s 

budget, we recommended in July 2003 that CBP develop human capital 

plans that clearly describe how these programs will recruit, train, and 

retain staff to meet their growing demands as they expand to other 

countries and implement new program elements. Human capital plans are 
Page 11 GAO-04-301T Human Capital Challenges 

particularly important given the unique operating environments and 

personnel requirements of the two programs. According to CBP officials, 

the professional and personal relationships that supply chain specialists 

and the Container Security Initiative teams build with their clients over 

time will be critical to the long-term success of both programs. For 

example, the success of the Customs-Trade Partnership Against Terrorism 

will depend, in large part, on the supply chain specialists’ ability to 

persuade companies to voluntarily adopt their recommendations. 

Similarly, a key benefit of the Container Security Initiative is the ability of 

CBP officials to work with foreign counterparts to obtain sensitive 

information that enhances their targeting of high-risk containers at foreign 

ports. If CBP fails to establish these good working relationships, the added 

value of screening manifest data at foreign ports could be called into 

question. 

In recent years, the United States has been pursuing a broad trade policy 

agenda whose cumulative impact has tested the limits of the government’s 

negotiating capacity. This agenda includes undertaking significant 

negotiating efforts in multilateral, regional, and bilateral arenas. The 

administration has characterized this effort as a strategy of “competitive 

liberalization.” First, the United States is actively involved in the 

challenging WTO round of negotiations launched in Doha, Qatar, in 2001. 

Second, the United States is also a co-chair in ongoing negotiations to 

create a Free Trade Area of the Americas. Finally, with the passage of 

trade promotion authority in 2002,8

 the United States has also launched a 

series of bilateral and subregional free trade agreement negotiations. The 

increase in the number of these negotiations at the same time that major 

global and regional trade initiatives are under way has strained available 

resources. 

The United States is committed to completing a new round of WTO 

negotiations. In November 2001, the WTO, with strong backing from the 

United States, launched a new set of multilateral negotiations at its 

ministerial conference in Doha. As we reported in September 2002, the 

ministerial conference laid out an ambitious agenda for a broad set of new 

multilateral trade negotiations as described in the Doha Ministerial 

 8

Pub. L. No. 107-210, 116 Stat. 933, 993-1022. 

Ambitious Set of 

Ongoing Negotiations 

Creates Demands for 

Additional Staff 

WTO Negotiations Had 

Ambitious Schedule for 

September 2003 Cancun 

Ministerial 
Page 12 GAO-04-301T Human Capital Challenges 

Declaration.9 The Doha mandate calls for the continuation of negotiations 

to liberalize trade in agriculture and services. In addition, it provides for 

new talks on market access for nonagricultural products and negotiations 

on trade and the environment, trade-related aspects of intellectual 

property rights, and a number of other issues. The breadth of the 

negotiations means that USTR will need to call on staff from a number of 

trade agencies to assist USTR throughout the process. USTR has also 

asked for additional staff to address the increased workload. 

Despite recent problems, WTO negotiations are likely to continue to 

command staff attention. Doha Round WTO negotiations are currently on 

hold following a breakdown at the September 2003 Ministerial Meeting in 

Cancun, Mexico, throwing the 2005 deadline for completion of the 

negotiations in doubt. After the ministerial, WTO officials initially canceled 

all special negotiating sessions and later called for a senior officials’ 

meeting by December 15, 2003. Despite these developments, however, 

USTR officials do not anticipate any decrease in staff workload on WTO 

issues because of the breadth of their ongoing WTO responsibilities and 

their efforts to restart the negotiations. 

We reported in April 200310 that, as the co-chairman, with Brazil, of the 

FTAA negotiations, USTR has faced a heavy expansion of its workload. 

Demands on USTR resources increased significantly in fall 2003, when 

USTR’s responsibilities as co-chair of the negotiations and host of the 

ministerial intensified due to preparations for the November 2003 Miami 

FTAA ministerial. The co-chair’s formal tasks include 

• coordinating with Brazil on a daily basis; 

• providing guidance and management coordination to the FTAA 

Administrative Secretariat; 

• providing guidance to the negotiating groups and committees; and 

 9

U.S. General Accounting Office, World Trade Organization: Early Decisions Are Vital to 

Progress in Ongoing Negotiations, GAO-02-879 (Washington, D.C.: Sept. 4, 2002). 

10U.S. General Accounting Office, Free Trade Area of the Americas: Negotiations Progress, 

but Successful Ministerial Hinges on Intensified U.S. Preparations, GAO-03-560

(Washington, D.C.: Apr. 11, 2003). 

Major U.S. Role in Final 

Phase of FTAA Talks 

Expands USTR’s 

Negotiations Workload 
Page 13 GAO-04-301T Human Capital Challenges 

• co-chairing key FTAA committees. 

In terms of resources, the U.S. team negotiating the FTAA—though 

perceived as highly capable—is small and stretched thin. Like past chairs, 

USTR has dedicated some staff specifically to the co-chair function, while 

other USTR staff work on advancing the U.S. position in the negotiations. 

In addition, USTR made arrangements with other agencies for temporary 

assistance. For example, Commerce provided a detailee who worked full 

time in Miami beginning in July, and State provided both foreign service 

officers and conference specialists to help host and conduct the 

ministerial. 

Bilateral negotiations are also applying pressure to trade agencies’ human 

capital resources. In addition to the WTO and the FTAA negotiations, 

USTR has notified Congress of its intent to pursue free trade agreements 

(FTA) with a number of countries and has started negotiations toward this 

end. The passage of trade promotion authority in 2002 gave U.S. 

negotiators the opportunity to pursue trade agreements with other 

countries under a streamlined approval process in Congress. The 

administration sees FTAs—some with a single country (i.e., bilateral) and 

others with groups of countries (i.e., subregional)—as opportunities to 

promote the broader U.S. trade agenda by serving as models and breaking 

new negotiating ground. 

The United States is now negotiating four FTAs and intends to pursue 

others soon. In late 2002, it began negotiating the Central American Free 

Trade Agreement with Costa Rica, El Salvador, Guatemala, Honduras, and 

Nicaragua; the Southern Africa Customs Union Free Trade Agreement 

with South Africa, Botswana, Lesotho, Namibia, and Swaziland; and FTAs 

with Morocco and Australia. In mid-2003, the administration also 

announced that it plans to negotiate FTAs with the Dominican Republic 

and Bahrain and in mid-November announced plans for an FTA with 

Panama. Thailand and Sri Lanka are also being considered as FTA 

partners. With the breakdown of WTO negotiations, the U.S. Trade 

Representative has stated that the administration will focus on FTAs with 

willing partners to continue making progress in trade liberalization. 

USTR officials acknowledge that human capital impacts are associated 

with conducting these FTAs. Each agreement involves a variety of 

different subjects, and negotiations on most of these agreements are 

complex. In particular, staffing constraints affect the timing of new 

negotiations, because staff with regional responsibilities are limited by the 

U.S. Pursuing 

Simultaneous Negotiations 

on Numerous FTAs 
Page 14 GAO-04-301T Human Capital Challenges 

extent to which they can support additional negotiations. In addition, 

completed FTAs will require additional work to monitor compliance with 

the terms of the agreement. 

Pursuing an ambitious set of negotiations on an international, regional, 

and bilateral basis is having a cumulative impact on the human capital 

capacity of agencies that conduct trade negotiations. Since USTR’s staff 

size of 199 is relatively small—having been set up to coordinate policy 

among and draw expertise from executive branch agencies—it relies on 

the departments of State, Commerce, Agriculture, the Treasury, and others 

to provide assistance and additional issue area expertise. However, USTR 

officials told us that their staff are already responsible for supporting 

multiple negotiations. Although these officials stated that USTR has taken 

steps to work more efficiently with other agencies, they have nevertheless 

requested additional resources, as shown in figure 2, in order to face the 

anticipated negotiations workload. For example, a recent USTR budget 

request noted that current staff would not be able to handle the 

combination of WTO, FTAA, and FTA responsibilities required in the areas 

of services and investment. 

Shifting global forces have complicated trade agreement monitoring and 

enforcement efforts, thus posing human capital challenges for U.S. trade 

agencies. For example, we recently reported that the United States has 

become the most frequent defendant in WTO trade dispute resolution 

proceedings, particularly in the trade remedy area. As a result, U.S. 

agencies have had to devote substantial staff resources to handle these 

cases, and USTR has requested additional staff to address the upward 

trend in dispute settlement cases. We also reported that the U.S. economy 

has shifted toward services and high-technology industries, while the 

industry committee structure that provides advice to U.S. trade agencies 

has been heavily weighted toward the agriculture and manufacturing 

sectors. Changing the committee structure to reflect the current economy 

and keeping its membership current has required U.S. trade agencies to 

devote staff resources to this effort. Finally, we reported that China’s rapid 

expansion in the world economy presents U.S. trade agencies with 

significant human capital challenges as they strive to monitor and enforce 

compliance with trade agreements with China. Although the U.S. 

government has taken steps to address some of these new challenges, 

questions remain about the alignment of human capital with the rapidly 

growing set of responsibilities we discussed in our reports. These three 

examples demonstrate the kinds of shifts that occur in the trade arena and 

indicate the impacts that these changes can have on human capital. In 

Shifting Global Forces 

Complicate 

Monitoring and 

Enforcement Efforts 

and Place Substantial 

Demands on Human 

Capital Resources 
Page 15 GAO-04-301T Human Capital Challenges 

each of these cases, the shifting global forces require the United States to 

respond, and an effective response requires a clear link between the trade 

agencies’ human capital strategies and the goals of the agencies in that 

changing environment. 

Shifting global forces in the trade arena can be seen in recent trends in the 

WTO, the principal organization that regulates international trade, as 

members act to monitor and enforce trade agreements. For example, the 

United States has become by far the most frequent defendant in WTO 

dispute settlement cases.11 Many WTO disputes in recent years have 

concerned its members’ use of trade remedy measures whereby members 

impose duties or import restrictions after determining that a domestic 

industry has been injured or threatened with injury by imports.12 As shown 

in figure 4, the United States was a defendant in 30 of the 64 trade remedy 

cases brought from 1995 through 2002, with more than half of those cases 

filed since January 2000.13 The next most frequent defendants were 

Argentina, which had six cases, and the European Union, a defendant in 

five cases. On the other hand, the United States was less active than other 

WTO members in filing trade remedy cases. As figure 4 shows, the 

European Union was the most frequent complainant in the 64 trade 

remedy cases, and six WTO members filed more complaints than the 

United States did between 1995 and 2002. 

 11The dispute settlement system applies to disputes between members arising under the 

WTO agreements. See U.S. General Accounting Office, World Trade Organization: 

Standard of Review and Impact of Trade Remedy Rulings, GAO-03-824 (Washington, D.C.: 

Sept. 24, 2002). 

12Of 198 cases filed in the WTO from 1995 through 2002, about one-third (64 cases) 

pertained to members challenging other members’ trade remedies—antidumping or 

countervailing duties or safeguard measures. The remaining two-thirds of the cases 

pertained to nontrade remedy issues such as application of sanitary and phytosanitary 

measures, intellectual property rights, textiles and clothing, and trade-related investment 

measures. The 198 cases originated from 276 separate requests for consultations or 

filings—the first of four phases in the dispute settlement process. We combined multiple 

requests for consultation regarding the same measure or law into a single case. 

13The United States was a defendant in 26 of the 108 nontrade remedy cases brought from 

1995 through 2002. 

United States Is Most 

Frequent Defendant in 

WTO Dispute Settlement 

Activity, Requiring 

Substantial Human Capital 

Resources 
Page 16 GAO-04-301T Human Capital Challenges 

Figure 4: Most Frequent Complainants and Defendants in WTO Trade Remedy Cases, 1995-2002 

U.S. officials stated that some WTO trade remedy rulings have been 

extremely difficult to implement. For instance, some rulings have placed a 

greater burden on domestic agencies to establish a clearer link between 

increased imports and serious injury to domestic industry. As a result, 

officials said they would now have to expend more resources in 

conducting such investigations. In addition, U.S. officials said that the 

rulings have required U.S. agencies to provide more detailed explanations 

of their analyses and procedures for applying several methodologies used 

in trade remedy investigations. 

As a result of the increased WTO dispute settlement activity, U.S. trade 

agencies have had to devote substantial staff resources to handle these 

cases. According to Commerce officials, about one-half of the Import 

Administration’s 36 attorneys are significantly engaged in handling WTO 

litigation. They said Commerce has sufficient staff to handle the current 

workload unless the number of dispute settlement cases increases. 

According to USTR, the number of WTO cases its lawyers have handled 

has increased dramatically—from 11 in 1995, to 53 in 1997, to 69 in 1999, 
Page 17 GAO-04-301T Human Capital Challenges 

and to 91 in 2002. USTR expects this trend will continue, both because 

more and more WTO members are making active use of the dispute 

settlement system but also because there are more WTO members. 

Although the number of USTR General Counsel staff attorneys has roughly 

doubled since 1995 (with 13 new positions added in fiscal year 2001), the 

lawyers that were added are more than fully occupied with the current 

workload, USTR said. As a result, USTR has requested another monitoring 

and enforcement attorney for fiscal year 2004 to handle the increasing 

dispute settlement work. 

WTO trade remedy rulings and the broader set of proceedings within the 

WTO are an important component of the international set of obligations 

and agreements to which the United States is a party. Our review found 

that the United States has become a focus of complaints in trade remedy 

cases, and U.S. agencies stated that some of the rulings on these cases 

have important implications for the future, including potential workforce 

implications. This situation requires trade agencies to maintain human 

capital strategies that anticipate and respond quickly to any changes. 

Doing so would allow them to allocate staff accordingly to keep the trade 

functions current and relevant. 

The changing structure of the U.S. economy has required a strategic 

realignment of some trade functions. For example, the trade policy 

advisory committee system14 performs an important function through 

which private sector committee members are able to provide input to 

trade agencies to help them negotiate, monitor, and enforce trade 

agreements; however, our September 2002 report15 found that the structure 

and composition of the trade advisory committee system had not been 

fully updated to reflect changes in the U.S. economy and U.S. trade policy. 

 14Under section 135 of the Trade Act of 1974, 19 U.S.C. § 2155, the President is required to 

seek information and advice from the private sector on (1) negotiating objectives and 

bargaining positions before entering into a trade agreement, (2) the operation of trade 

agreements, and (3) other matters regarding the administration of U.S. trade policy. A 

system of trade advisory committees was established in the 1970s to serve this purpose. In 

2002, the system comprised about 735 advisers spread across 34 committees. The advisory 

committees are administered by USTR, which assumes a leadership role, along with several 

other departments, especially Commerce. 

15U.S. General Accounting Office, International Trade: Advisory Committee System 

Should Be Updated to Better Serve U.S. Policy Needs, GAO-02-876 (Washington, D.C.: Sept. 

24, 2002). 

Changing Structure of the 

U.S. Economy Requires 

Trade Agencies to Modify 

the Industry Advisory 

Committee System 
Page 18 GAO-04-301T Human Capital Challenges 

Although the U.S. economy had shifted toward services and hightechnology industries since the 1970s, their representation on the trade 

advisory committees had not kept pace with their growing importance to 

U.S. output and trade. For example, certain manufacturing sectors, such as 

electronics, had fewer members than their sizable trade would have 

indicated. In other cases, U.S. negotiators reported that some key issues in 

negotiations, such as investment, were not adequately covered within the 

trade advisory committee system. In addition, committee rosters were 

only about 50 percent of their authorized levels, and some large companies 

did not participate, limiting the availability of advice for negotiators from 

certain committees. 

Our 2002 report also found that the resources USTR and the other trade 

agencies devoted to managing the trade advisory committee system did 

not match the tasks that needed to be accomplished to keep the system 

running reliably and well. For example, USTR officials told us that the 

current staffing levels in its responsible office—three positions with 

multiple responsibilities—did not allow them time to proactively manage 

committee operations. The head of the office said that simply restarting all 

the lapsed committees and keeping the rest of the system operating were 

occupying much of the time she could devote to the system. Commerce, 

which co-administers many of the trade advisory committees, faced 

similar challenges. As discussed in our September 2002 report, Commerce 

officials said they had to focus their limited staff—an office of three 

persons—on rechartering the committees and appointment processes, 

which did not allow them to meet their responsibilities to attend all the 

committee meetings. 

We recommended that USTR work with Commerce and several other 

agencies to update the trade advisory system to make it more relevant to 

the U.S. economy and trade policy needs as well as to better match agency 

resources to the tasks associated with managing the system. According to 

recent information that agencies provided, their staff have planned and, in 

some cases, already taken a number of actions in response to our 2002 

recommendations that they expect will increase efficiencies and reduce 

the workload. For example, Commerce and USTR have developed a plan 

for restructuring the industry advisory committees that officials believe 

better reflects the U.S. economy. Under the plan, some new committees 

are to be established, while the overall number of committees is to be 

reduced. The latter action is expected to reduce the administrative 

workload for Commerce’s staff, enabling them to focus more on 

substantive matters. The plan also calls for quarterly plenary meetings that 

will be open to all trade advisors. According to Commerce officials, 
Page 19 GAO-04-301T Human Capital Challenges 

bringing all advisors together at the same time will facilitate a higher level 

of representation of U.S. trade negotiators at the meetings and that, as a 

result, trade advisors will be better informed about ongoing negotiations. 

In turn, the officials said, trade advisors should be better prepared to 

deliberate on issues of interest to them and thus better able to provide 

advice to U.S. trade negotiators.16

In addition, the agencies revised their process for clearing proposed new 

members, thus reducing the amount of time it takes for clearance. 

Moreover, a secure Web site has been established that allows members to 

review the texts of draft trade negotiating documents. In addition, the 

Assistant U.S. Trade Representative for Public Liaison now holds a 

monthly teleconference with the chairmen of all committees. During this 

call, USTR provides feedback to committees on previously raised areas of 

concern or recommendations, discusses USTR’s long-term negotiating 

calendar to highlight upcoming issues, and is open to discussion of general 

issues or concerns. According to Commerce and USTR officials, they have 

taken these actions without increasing the size of their authorized staffs. 

However, it was noted that Commerce staff, who did much of the 

implementing work on this issue, sometimes put in long hours in 

completing their tasks. In addition, in the case of Commerce, a position 

that had been vacant was filled, thus increasing the actual number of staff. 

While administering the trade advisory committee system is only one of 

many functions that trade agencies perform, the system does provide an 

important forum for candid discussion of trade negotiating topics with a 

wide range of private sector experts. Our review found that the system has 

not realized its potential, however, and that lack of administrative support 

was one of the reasons for this situation. While the agencies have taken 

actions to improve the trade advisory committee structure and its 

management, these kinds of improvements illustrate how U.S. trade 

agencies need to utilize human capital strategies that anticipate and 

respond to shifts in global market forces. Such an effort would allow the 

agencies to allocate staff accordingly to keep trade functions current and 

relevant. 

 16On November 25, 2003, USTR and the Department of Commerce announced that the plan 

has been approved and the agencies expect to implement it by March 2004. 
Page 20 GAO-04-301T Human Capital Challenges 

China’s rapid expansion in the world economy presents U.S. trade 

agencies with significant human capital challenges as they strive to 

monitor and enforce compliance with trade agreements. In 2002, China 

was the United State’s fourth largest trading partner. The rapid growth of 

China’s exports to the United States and the continuing role of the 

government in China’s economy create a significant challenge for U.S. 

agencies and the Congress to ensure that U.S. businesses are treated fairly. 

Since China’s entry into the WTO on December 11, 2001, U.S. agencies 

have taken significant actions to monitor and enforce an extensive and 

complex set of WTO commitments. Among these actions are increasing 

staff resources, establishing an interagency group to focus on China trade 

issues, and considering organizational changes to better concentrate 

analytical staff resources. However, early experiences with monitoring 

China’s compliance with numerous and complex commitments and with 

WTO and U.S. government mechanisms for enforcing commitments 

illustrate just how difficult and resource intensive—particularly in terms 

of human capital—this task will be. 

U.S. trade with China has been characterized by a rapidly growing deficit, 

with a significant impact on a number of industries in the United States. As 

figure 5 shows, U.S. imports from China have grown rapidly since 1989, 

while U.S. exports to China have also expanded, but at a much slower rate. 

The growing trade deficit has been addressed at several congressional 

hearings and may require greater attention from Commerce, USTR, and 

other trade agencies. 

Growing Importance of 

China Creates Range of 

Human Capital Challenges 

for Trade Agencies 

Size and Scope of China’s 

Impact on U.S. Markets Are 

Considerable 
Page 21 GAO-04-301T Human Capital Challenges 

Figure 5: U.S. Exports, Imports, and Balance of Merchandise Trade with China, 

1989-2002 

In 2002, imports from China totaled nearly $125 billion, accounting for 

nearly 11 percent of total U.S. imports and making China the third largest 

supplier of U.S. imports, after Canada and Mexico, respectively. The top 

five U.S. imports from China are shown in table 2 (see the app.). China 

was the seventh largest market for U.S. exports in 2002, and U.S. exports 

totaled about $21 billion or 3.2 percent of total U.S. exports to the world 

(see table 3 in the appendix). 

China has made important progress during the past 25 years in opening its 

market to foreign goods and services as well as foreign investment, 

according to a USTR report.17 Economic and financial reforms have 

introduced market forces into China, and privileges accorded state-owned 

 17USTR, 2003 National Trade Estimate Report on Foreign Trade Barriers (Washington, 

D.C.: Mar. 31, 2003). 

Continuing Role of Chinese 

Government in the Economy 

Creates Challenges for 

Monitoring and Enforcement 
Page 22 GAO-04-301T Human Capital Challenges 

firms are gradually being removed. However, the transition from a statecontrolled economy to a market-driven one is far from complete. 

According to USTR, reforms have been particularly difficult in sectors that 

traditionally relied upon substantial state subsidies as the central 

government continues to protect noncompetitive or emerging sectors of 

the economy from foreign competition. Moreover, USTR said, provincial 

and lower-level governments have strongly resisted reforms that would 

eliminate sheltered markets for local enterprises or reduce jobs and 

revenues in their jurisdictions, inhibiting the central government’s ability 

to implement trade reforms.18 During 2003, the Commerce Department 

held more than 20 roundtable discussions with U.S. manufacturers, both 

large and small, across the United States and heard similar complaints. 

According to Commerce’s under secretary for the International Trade 

Administration, no foreign country raised more attention as a source of 

concern than China. Manufacturers complained about rampant piracy of 

intellectual property, forced transfer of technology from firms launching 

joint ventures in China, a broad range of trade barriers, and capital 

markets that are largely insulated from free-market pressures.19

Another issue concerns the Chinese government’s decade-long practice of 

pegging the Chinese yuan to the dollar as a means, according to Chinese 

officials, of fostering economic stability, the absence of which could hurt 

its export industries and political stability. In order to maintain this fixed 

exchange rate, the government has had to intervene in the foreign 

exchange market and, according to Treasury officials, recently intervened 

 18In 2002, we surveyed the views of U.S. companies with business activities in China about 

prospects for China implementing its WTO commitments. Seventy percent or more of the 

responding companies identified rule of law-related commitments to be the most difficult 

for China to implement. These included (1) consistent application of laws, regulations, and 

practices; (2) intellectual property rights; (3) enforcement of contracts and 

judgments/settlement of disputes in the Chinese court system; (4) equal treatment between 

Chinese and foreign entities; and (5) transparency of laws, regulations, and practices. See 

U.S. General Accounting Office, World Trade Organization: Selected U.S. Company Views 

About China’s Membership, GAO-02-1056 (Washington, D.C.: Sept: 22, 2002). 

19In mid-October 2003, the U.S.-China Security and Economic Review Commission 

concluded that China was supporting its manufacturers through a range of national 

industrial policies, such as, for example, tax relief, preferential loans from state banks, and 

requirements for foreign investors to provide foreign technology transfers. The commission 

recommended that USTR and Commerce identify whether any of China’s industrial policies 

are inconsistent with its WTO obligations and engage with the Chinese government to 

mitigate those that are significantly impacting U.S. market access. (The commission, 

created on October 30, 2000, consists of 12 members who were appointed on the basis of 

recommendations made by the leadership of the House and Senate.) 
Page 23 GAO-04-301T Human Capital Challenges 

very heavily to prevent the yuan from appreciating against the dollar. 

Considerable debate has occurred among experts and observers about 

whether China’s intervention to maintain a lower-valued yuan is having a 

negative effect on U.S. manufacturers. This issue has been the subject of 

numerous congressional hearings with administration witnesses and was 

also a topic of discussion between Presidents Bush and Hu Jintao at the 

October 2003 Asia Pacific Economic Cooperation Economic Leaders’ 

Meeting and during the Secretary of the Treasury’s September 2003 trip to 

China. Also in September, the Group of Seven20 finance ministers issued a 

statement favoring more flexibility in exchange rates for large economies. 

In an October 30, 2003, report to the Congress, the Treasury Department 

concluded that no major trading partner of the United States was 

manipulating the rate of exchange between its currency and the U.S. dollar 

for the purposes of preventing effective balance of payments adjustments 

or gaining unfair competitive advantage in international trade. However, 

the report also found that China’s fixed exchange rate was not appropriate 

for a major economy like China and should be changed. According to the 

Treasury, the Chinese government has indicated it will move to a flexible 

exchange rate regime but believes taking immediate action would harm its 

banking system and overall economy. 

The growing importance of the Chinese economy for the United States has 

been a particular focus of attention from U.S. officials due to the 

implications for U.S. firms and for compliance with trade agreements. 

However, these issues require increasing attention from U.S. agency 

personnel. Moreover, as in the case of the debate surrounding the Chinese 

currency, these issues require appropriate expertise from U.S. trade and 

economic agencies, and a resolution of these matters may ultimately 

require a significant investment of time from these officials. 

As we reported in October 2002,21 China’s WTO commitments span eight 

broad areas and require both general pledges and specific actions. We 

identified nearly 700 individual commitments on how China is expected to 

reform its trade regime, as well as commitments that liberalize market 

access for more than 7,000 goods and nine broad service sectors in 

 20Seven leading industrialized countries of the world, including Canada, England, France, 

Germany, Italy, Japan, and the United States. 

21U.S. General Accounting Office, World Trade Organization: Analysis of China’s 

Commitments to Other Members, GAO-03-461 (Washington, D.C.: Oct. 3, 2002). 

China’s Accession to the WTO 

Strains Agencies’ Monitoring 

Resources 
Page 24 GAO-04-301T Human Capital Challenges 

industries important to the United States, such as automobiles and 

information technology. Owing to the breadth and complexity of China’s 

commitments, China’s accession to the WTO has led to increased 

monitoring and enforcement responsibilities for the U.S. government. 

An illustration of the human capital difficulties involved in monitoring and 

enforcing China’s commitments relates to U.S. government efforts to 

establish an interagency group—the China WTO Compliance 

Subcommittee—whose mandate is to monitor China and the extent to 

which it is complying with its WTO commitments. Almost 40 officials, 

representing 14 departments and executive offices, participate in this 

subcommittee. The subcommittee was very active in 2002, meeting 11 

times. In these meetings, officials evaluated and prioritized current 

monitoring activities, reviewed the steps that China has taken to 

implement its commitments, and decided on appropriate responses. Also, 

the subcommittee held a public hearing on September 18, 2002, and USTR 

issued its first annual report to Congress on China’s WTO compliance on 

December 11, 2002, as required by law. 

Still, it took some time for the subcommittee to get up to full speed. For 

example, the various participants had to work out their respective roles 

and responsibilities. USTR officials sought to delineate tasks related to 

carrying out their monitoring action plan in China; Washington, D.C.; and 

Geneva (the WTO’s headquarters), including expectations for information 

gathering, reporting, and setting initial priorities. Finally, USTR officials 

undertook several activities at the beginning of the year to educate 

themselves on China’s WTO obligations. This was important, because 

monitoring these obligations entailed new or expanded responsibilities for 

officials in the field, and many of the Washington-based officials were 

relatively new to their current jobs. For example, many of the USTR 

officials who had actively participated in the U.S. negotiations with China 

that resulted in those obligations changed jobs and/or left the government 

soon after China became a WTO member in 2001. 

USTR, Commerce, and other agencies have requested and received 

additional resources to carry out the added responsibilities arising from 

China’s accession to the WTO. For example, full-time equivalent staff in 

key units that are involved in China monitoring and enforcement activities 

across four key agencies increased from about 28 to 53 from fiscal year 

2000 to 2002, based on agency officials’ estimates (see table 1). 

U.S. Agencies Have Added Staff 

and Are Considering Further 

Organizational Changes 
Page 25 GAO-04-301T Human Capital Challenges 

Table 1: Agency Staffing Estimates for Key Offices Involved in China WTO 

Compliance Efforts, Fiscal Years 2000-02 

Agency 2000 2001 2002

USTR 3 3 5

Department of Commerce 

 Market Access and Compliance 7 19 22

 Import Administration 1.7 3.3 6.7

Department of Agriculture 7.5 7.5 10.5

Department of State 8.25 8.25 8.75

Total 27.5 41.1 53

Source: U.S. General Accounting Office, World Trade Organization: First-Year U.S. Efforts to Monitor China’s Compliance, GAO-03-

461 (Washington, D.C.: Mar. 31, 2003). 

Commerce had the largest overall increase in staff devoted to China WTO 

compliance during this period. Specifically, staffing levels in Commerce’s 

Market Access and Compliance division increased from 7 to 22 between 

fiscal years 2000 and 2002. Additionally, Commerce’s Import 

Administration, which takes the lead on monitoring China’s commitments 

concerning subsidies and unfair trade practices, also significantly 

increased staff dedicated to China compliance activities during the same 

time period. Commerce has also increased the number of staff involved in 

the agency’s compliance efforts on the ground in China by creating a 

Trade Facilitation Office within the U.S. embassy in Beijing. In addition, 

the Department of Agriculture has increased the number of overseas staff 

involved in the agency’s China WTO compliance activities. 

A Commerce official told us that the Import Administration is thinking of 

combining all of its China work under one deputy assistant secretary (the 

current practice is to distribute the work among three deputy assistant 

secretaries). Doing so might enhance the office’s expertise and provide a 

better basis for assessing whether additional China expertise is needed. 

As we have reported in numerous studies and testimonies before this 

Subcommittee and others, effective alignment between federal agencies’ 

human capital approaches and their current and emerging strategic and 

programmatic goals is critical to the ability of agencies to economically, 

efficiently, and effectively perform their missions. The importance of such 

a close alignment is demonstrated in the area of the U.S. government’s 

trade activities, where heightened security concerns, an ambitious trade 

negotiating agenda, and an array of global economic forces all have 

implications for sound human capital management. 

Conclusions 
Page 26 GAO-04-301T Human Capital Challenges 

Our testimony has cited illustrations in these three areas based on our 

recent work for Congress. In some areas, failure to sufficiently plan the 

human capital approach, such as the CBP programs to secure the global 

supply chain, show that the success of the programs is not assured in the 

absence of human capital planning. In other cases, such as the U.S.’s 

ambitious trade negotiating agenda, human capital resources may be a 

constraint on the ability of the trade agencies to carry out their 

negotiations at the multilateral, regional, bilateral, and subregional level. 

Finally, the array of shifting global forces described in some of our recent 

studies also demonstrates the implications for U.S. trade agency activities 

and, in many cases, the agencies’ human capital activities. For example, in 

the case of the rapid growth of China in the world economy and its WTO 

accession agreement, the demand for specialized expertise and focus on 

issues related to China’s economy have led to growth in personnel and 

efforts to reorganize to meet these new monitoring and compliance 

challenges. 

As your Subcommittee has stressed in its guidance and hearings regarding 

other parts of the federal government, agencies must constantly reevaluate 

their human capital strategies to adapt and even anticipate major shifts in 

their environment. We believe that a number of studies we have performed 

for Congress in recent months are good illustrations—and further 

evidence—of the validity of that approach. 

Mr. Chairman and members of the Subcommittee, this concludes my 

prepared statement. I will be pleased to answer any questions you or other 

members of the Subcommittee may have at this time. 

For further contacts regarding this testimony, please call Loren Yager at 

(202) 512-4347 or Christine Broderick (415) 904-2240. Individuals making 

key contributions to this testimony included Adam Cowles, Etana Finkler, 

Kim Frankena, Wayne Ferris, Rona Mendelsohn, Anthony Moran, and 

Richard Seldin. 

Contacts and 

Acknowledgments 
Page 27 GAO-04-301T Human Capital Challenges 

This appendix provides information on U.S. imports from and exports to 

China during the past 14 years. Table 2 provides data on the top five U.S. 

imports from China between 1989 and 2002. Together, imports of these 

five commodities accounted for about 59 percent of total imports from 

China in 2002, according to the Department of Commerce. 

Table 2: Top Five U.S. Imports from China, 1989-2002 (Dollars in millions) 

Year 

Miscellaneous 

manufactured items Office machines

Telecommunication 

equipment Footwear 

Electrical 

machinery Total 

1989 $2,529 $70 $1,032 $720 $535 $11,859 

1990 3,236 117 1,142 1,475 652 15,120 

1991 4,094 290 1,466 2,532 876 18,855 

1992 5,932 543 1,752 3,396 1,331 25,514 

1993 7,151 932 2,279 4,505 1,723 31,425 

1994 8,690 1,583 3,715 5,254 2,252 38,572 

1995 10,319 2,879 4,215 5,817 3,094 45,370 

1996 11,867 3,562 4,438 6,367 3,874 51,209 

1997 14,155 5,019 5,126 7,354 4,877 61,996 

1998 15,872 6,329 6,405 8,016 5,707 70,815 

1999 17,291 8,239 7,382 8,438 7,022 81,522 

2000 19,445 10,980 9,812 9,206 9,037 99,581 

2001 19,782 10,762 10,062 9,767 9,048 102,069 

2002 23,495 15,230 14,145 10,242 10,217 124,796 

Source: Department of Commerce data. 

Note: Miscellaneous manufactured articles include toys and games. Telecommunication equipment 

includes sound recording and reproducing equipment such as telephone answering machines, radios, 

tape recorders and players, televisions, VCRs, and so forth. 

Appendix: U.S. Imports from and Exports to 

China, 1989-2002 
Page 28 GAO-04-301T Human Capital Challenges 

Table 3 provides figures on the top five U.S. exports to China between 

1989 and 2002. Together, these five commodities accounted for about 42 

percent of total U.S. exports to China in 2002. 

Table 3: Top Five U.S. Exports to China, 1989-2002 (Dollars in millions) 

Year 

Transport 

equipment 

Electrical 

machinery 

General industrial 

machinery 

Specialized 

machinery Office machines Total 

1989 $540 $138 $268 $359 $147 $5,775 

1990 754 133 176 322 133 4,776 

1991 1,084 132 222 370 148 6,238 

1992 2,051 207 275 423 161 7,339 

1993 2,252 247 427 669 213 8,619 

1994 1,929 285 515 670 233 9,178 

1995 1,187 408 712 675 306 11,613 

1996 1,718 553 764 685 254 11,801 

1997 2,127 684 756 765 324 12,533 

1998 3,604 931 663 519 830 13,908 

1999 2,325 1,252 675 478 697 12,585 

2000 1,695 1,502 812 744 1,154 15,335 

2001 2,452 1,842 1,051 773 1,208 17,959 

2002 3,382 2,185 1,105 1,102 913 20,553 

Source: Department of Commerce data. 

Note: Transport equipment is primarily aircraft and parts. Office machines are mainly computers. 

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