A number of economic factors influence U.S. trade policy: domestic economic conditions;growing trade deficits; the impact of trade (exports and imports) on various states, regions, andindustries; the importance of trade to the U.S. economy; and the geographical distribution of U.S.exports and imports; among other factors. It is also influenced by political factors, such as the roleand concerns of Congress in trade policy, the role and agenda of the President, and the differentperspectives that the two branches bring to the trade debate and foreign policy considerations. Thesefactors influence the climate in which the issues emerge and are debated by the Congress. Domestic economic conditions can influence the trade policy agenda. Poor economicgrowth or recession that is coupled with escalating unemployment often causes policymakers todirect their attention to trade. For example, the structural adjustments that the steel industry hadbeen experiencing led to presidential measures to restrict steel imports in 2002. (1) Rapidly growing U.S. trade deficits also generate interest in foreign trade and reassessmentsof trade policies. Economists assert that trade deficits are themselves not the results of trade policybut are the products of broader economic conditions. Nevertheless, large trade deficits have causedthe Congress, in many cases, to give priority to trade on its agenda especially when U.S. tradedeficits with one or more trading partners are increasing rapidly. Large deficits are often perceivedas an indication that the trade relationship is unbalanced or unfair. Table 1 below shows U.S. tradein goods and services from 1996-2005. Table 1. U.S. Trade in Goods and Services,1996-2005 (Billions of Dollars) Source: U.S. Department of Commerce. Bureau of the Census. In 2005, the U.S. trade deficit in goods and services hit a record $725.8 billion, a 17.5%increase over the previous record of $617.6 billion in 2004. During the 10-year (1996-2005) period, the U.S. trade deficit increased over 600%, from $102.9 billion to $725.8 billion. Most economistsattribute the deficits, especially the broader current account deficits, to macroeconomic factors,including relative real economic growth rates of the United States and its major trading partners, realexchange rates, and savings and investment balances in the United States and other countries. (2) Trade policy and trade policytools have little effect on trade balances, especially in the long run. However, they affect thecomposition of trade. But trade deficits, by definition, translate into more U.S. firms and workersbeing hit by import competition thereby increasing the pressure for protection. Related to U.S. trade deficits is the value of the U.S. dollar in terms of other majorcurrencies. Over time, the U.S. dollar has fluctuated in value. Recently, the dollar has beenappreciating against major currencies despite record-breaking U.S. current account deficits. (3) A stronger dollar makes U.S.domestic goods more expensive compared to imports exacerbating U.S. trade imbalances. Whileconsumers benefit from lower import prices, import-sensitive manufacturers must make adjustmentsto match the competition. These adjustments might include using labor-saving technology and/ormoving some production offshore and may lead to protectionist trade policy actions. Along with the growing U.S. trade deficits and the value of the U.S. dollar, the increasing importance of foreign trade in the U.S. economy plays a role in setting the congressional tradeagenda. It creates more "winners" and "losers" from trade, thus, increasing the potential salience ofthe trade issues. In 1960, the ratio of exports plus imports of goods and services to U.S. grossdomestic product (GDP), a measure of openness, was 9.5%. By 2005, the ratio increased to26.6%. (4) As the UnitedStates has become more integrated with the rest of the world economy, a larger range of economicactivities is affected by trade and raises policy issues. For example, advances in telecommunicationstechnology now allow some services to be imported or "outsourced" from India and other countriescreating competition for some U.S. domestic providers. However, these same advances also lowercosts to consumers of those services. The geographical distribution of U.S. trade has shifted. In particular, the role of advanceddeveloped countries has declined while the role of less developed countries has expanded. In 1990,63.9% of U.S. exports went to the industrialized countries while 35.1% went to developingcountries. By 2005, the share of U.S. exports accounted for by developing countries had increasedto 47.0%. Similarly, in 1990 58.8% of U.S. imports came from industrialized countries and 40.9%from developing countries. In 2005, 54.9% of U.S. imports came from developing countries. (5) The rise of the newlyindustrializing economies of East Asia (Hong Kong, Singapore, South Korea, Taiwan) and theemergence of Mexico as a significant U.S. trading partner account for part of this surge; however,much of the increase in developing countries' share of U.S. trade derives from China. Between1990-2005, China's share of U.S. imports grew from 3.1% to 14.6% and its share of U.S. exportsrose from 1.2% to 4.7%. Shifts in trade patterns have coincided with rising concerns about theability of U.S. workers to compete with countries with low wages and the impact of globalizationon U.S. employment, wages, and living standards. The relative share of the United States in world trade has declined over the years. U.S.exports accounted for 15.7% of world exports in 1960 (when Japan and Europe were still recoveringfrom the devastation of World War II) and 9.0% in 2004. The decline can be attributed to, amongother things, the emergence in the international trading system China and other developing countries,as they have opened up their economies to the rest of the world. It can also be attributed to theemergence market economies in the former communist states in Central and Eastern Europe and theformer Soviet Union. (6) Congressional concerns and responsibilities in U.S. trade and trade policy are extensive. The Constitution assigns trade responsibility to the Congress. Article I, Section 8, states in part thatthe Congress shall have the authority "to lay and collect taxes, duties, imposts and excises... [and]regulate commerce with foreign nations, and among the several states..." For most of U.S. historythis responsibility largely meant setting tariffs on imports into the United States. With the enactment of the Reciprocal Trade Agreements Act (RTAA) of 1934, the Congressdelegated for limited periods of time the authority to the President to negotiate trade agreements toreduce tariffs reciprocally. It also delegated to the President the authority to reduce tariffs byproclamation within certain parameters. The RTAA was a congressional and executive branchreaction to the growing political burden on the Congress from tariff administration, to the politicalreality that it was easier for Congress to raise tariffs than lower tariffs given the political imperativeof constituent interests, and to the largely adverse economic results of the Smoot-Hawley Tariff Actof 1930. (7) Over time, trade negotiations have become more complex as trade negotiations have movedbeyond tariffs to nontariff trade barriers, investment, labor, environment, and other issues. Theyhave moved from the bilateral frameworks under the original RTAA to the multilateral negotiationsunder the General Agreement on Tariffs and Trade (GATT) and its successor organization, theWorld Trade Organization (WTO). In 1974, the trade negotiating authority was granted in the formof expedited (or fast-track) congressional consideration (limited debate and no amendments) ofimplementing legislation for proposed agreements. While delegating negotiating authority to the President, the Congress maintains much controlover trade policy. It does so by placing time limits on the authority, thus requiring the President toreturn to Congress to request its renewal. The Congress establishes negotiating objectives that mustbe adhered to in any agreement eligible to receive expedited (fast-track) treatment. The Congressrequires that the executive branch notify the Congress when it intends to enter trade agreementnegotiations and when it intends to sign trade agreements. It also requires the executive branch toconsult the Congress during the negotiations. The Congress most recently granted the authority in2002, initially until July 1, 2005, but was extended until July 1, 2007, as provided by law, upon thePresident's request and after the Congress did not pass a resolution disapproving the request. An overall concern of Members of Congress is that the President remains mindful ofCongress's constitutional authority over trade. In addition, Members want to make sure theAdministration consults the Congress as its pursues negotiations in the bilateral and multilateral foraand conducts other aspects of U.S. trade policy. Members are also concerned that U.S. trade policynot unduly harm their constituents. Some want to make sure that the United States will preserve itsability to protect U.S. industries from dumped imports and other unfair foreign trade practices andthat foreign countries allow U.S. exports to compete fairly. Members also want to ensure the UnitedStates holds its trade partners accountable for adhering to trade agreement obligations. Each presidential administration conducts trade policy based on its own priorities andstrategy. During the Bush Administration's first term, the United States pursued an activist tradeagenda.