"Developing Countries," a heterogeneous group of low- and medium-income economies, are making an increasingly strong impact on U.S. foreign trade and investment and world trade. This impact is both economic and political and is likely to increase. Developing countries have been shaping U.S. trade patterns, trade policy priorities and policies. They are re-shaping the international trading system, asserting greater influence at bilateral and multilateral trade negotiations, and challenging the United States and other developed countries to reappraise long-held policies. At the same time, developing countries' advancement on the international trade stage has forced them to confront the challenges of international competition and the responsibilities that come with membership in the international trade community: Developed countries are demanding that developing countries jettison economic policies that protect domestic markets for local producers and workers. The growing role of some developing countries in U.S. and world trade raises sensitive policy issues for Members of Congress as they consider legislation to implement trade agreements, to monitor Administration enforcement of agreements and of trade laws, and to develop policies. Many of the U.S. free trade agreements (FTAs) in place or that are under negotiation are with developing countries. Furthermore, the United States has been engaged with the other 149 members of the World Trade Organization (WTO) in the Doha Development Agenda (DDA) round of negotiations. The vast majority of the WTO members are developing countries who are using the strength of their large numbers to influence the agenda and the pace of the negotiations. The DDA negotiations are now indefinitely stalled because of, among other reasons, conflicts between developed and developing countries on agricultural trade. Congressional interests and the congressional legislative agenda are filled with issues pertaining to trade with developing countries. The U.S. Generalized System of Preferences (GSP) program and other trade preference programs are subject to periodic reviews and renewals. Some Members of Congress have suggested that the Congress needs to re-examine the rationale for these programs and their eligibility criteria in light of the rapid economic advancements that some developing countries have made. In addition, the Congress has recently considered and passed legislation implementing FTAs with developing countries and will probably consider a number of others in the near future. Congressional debate and final action over these measures will likely be influenced by the perception of the role that developing countries play in U.S. trade. The purpose of this report is to assist the Congress in assessing and developing U.S. foreign trade and economic policies by examining the role that developing countries are playing in trading with the United States. The report will be updated as determined by events. The category "developing countries" includes economies representing many levels of economic development. However, they share one important quality: they are generally technology receivers rather than technology innovators, and so their economies still have room to "catch up" with industrialized countries through the increased application of technology-based production. Some of the developing countries have been more successful in "catching up" than others, leading to wide gaps in economic welfare among them. For the purposes of this report, developing countries include all countries except Australia, New Zealand, Europe, Japan, Canada, and the United States. The term also excludes the former Soviet republics and the former communist states in Central and Eastern Europe. Developing countries have accounted for growing shares of U.S. exports and imports of goods over a 20-year span. Data presented in the table below ( Table 1 ) illustrate this trend. From 1985 to 2006, developing countries accounted for an increasing share of U.S. exports, 32.8% in 1985 versus 47.0% in 2006. Similarly, developing countries are becoming more significant as sources of U.S. imports. Developing countries accounted for 34.5% of U.S. imports in 1985 and 54.7% of U.S. imports in 2006. However, the data clearly show that the trends are not consistent across developing country sub-groups. For example, Asian developing countries (all Asian countries except Japan) have accounted for much of the growth. They increased their share of U.S. exports from 12.6% in 1985 to 23.7% in 2006, and their share of U.S. imports rose from 16.4% in 1985 to 32.5% in 2006. Until recently, the four so-called East Asian Newly-Industrialized Economies (NIEs) (Hong Kong, South Korea, Singapore, and Taiwan) had been an important contributor to this growth, but their influence is declining. They accounted for 7.5% of U.S. exports and 11.3% of U.S. imports in 1985, and 9.4 % of U.S. exports and 5.9% of U.S. imports in 2006. The shares of U.S. trade accounted for by the 10 members of ASEAN were growing in the 1980s and early 1990s but are also in decline. Their shares of U.S. exports had been as high as 6.8% and of imports as high as 8.4% in 1995. They declined to 5.5% of exports and 6.0% of imports in 2006. Among East Asian economies and developing economies in general, China has made by far the most significant impact on U.S. trade during the last twenty years. It accounted for 1.8% of U.S. exports in 1985 and 5.3% in 2006 for 1.1% of U.S. imports in 1985 and 15.5% in 2006. The trends suggest that the patterns of U.S. trade with East Asia are shifting from the East Asian NIEs and ASEAN to China. India, a huge Asian economy, accounts for only a small part of U.S. trade (0.9% of U.S. exports and 1.1% of U.S. imports), a level of shares that has not changed appreciably over the past two decades. Latin America has also increased in importance, accounting for 14.0% of U.S. exports in 1985 and 21.5% in 2006, and for 13.6% of U.S. imports in 1985, increasing to 17.9% in 2006. However, the shift is largely the result of Mexico's surge as a U.S. trade partner. In 1985, 6.2% of U.S. exports went to Mexico, a share that rose to 12.9% in 2006. Similarly, the share of U.S. imports coming from Mexico increased from 5.5% in 1985 to 10.7% in 2006. Among the regional groups, the African countries, particularly those of sub-Saharan Africa, have largely stagnated in importance as U.S. trading partners. In 1985, U.S. exports to sub-Saharan Africa accounted for 1.7% of total U.S. exports in 1985 and for 1.2% in 2006. In 1985, U.S. imports from the sub-Saharan African countries increased modestly as a share of total U.S. imports from 2.8% in 1985 to 3.2% in 2006. However, 81% of U.S. imports from Sub-Saharan Africa is oil mostly from Nigeria and Angola. The United Nations identifies 50 countries as the poorest countries or "least-developed countries" (LDCs). This group, many of them located in Africa, have consistently accounted for very small shares of U.S. trade. In 1985 they accounted for 1.1% of U.S. exports and 0.8% of U.S. imports, and in 2005 for 0.6% of U.S. exports and 1.3% of U.S. imports. The members of the Organization of Petroleum Exporting Countries (OPEC) are another important subcategory of developing countries. Their shares of U.S. trade have remained fairly constant, with shares of U.S. imports reaching a high of 7.9% in 2006 but largely dependent on world oil prices. Their share of U.S. exports declined from 5.0% in 1985 to 3.9% in 2006. U.S. exports to developing countries are dispersed over a range of product categories, primarily manufactured goods: electronic products, computers and components, and autos and parts. For agricultural exporters, developing countries are a significant market. In 2006, they bought 56% of total U.S. agricultural exports. The leading U.S. imports from developing countries are crude oil, electrical machinery and computers and components. The product composition of U.S. trade changes somewhat depending on the subgroup of developing countries. In 2006, more than 60% of U.S. imports from the LDCs were oil (more than 70% came from Angola). Other leading U.S. imports from the LDCs consisted of textiles and apparel, with agricultural products and natural resources much further behind. In contrast, more than 90% of U.S. imports from the more advanced newly industrializing economies of East Asia consisted of more technology-advanced products, such as electrical machinery, other machinery, and cars. The trade patterns between the United States and the advanced-developing countries suggest intra-industry trade and trade where the developing countries are part of a international production supply chain. Developing countries have not made the same inroads in terms of U.S. foreign investment as they have U.S. trade. In 2005 (latest data available), 72% of U.S. foreign direct investment went to Australia, Canada, Europe, and Japan. The Latin American countries accounted for 8%, the Middle East for 1%, and Asia for 9%. Developing countries are even a much less important source of foreign direct investment in the United States (FDIUS). In 2005, Europe, Canada, Japan, and Australia accounted for 93% of these investments.