For much of the post-World War II era, developing countries were relatively minor players in the world economy. Accounting for 80% of the world's population but less than 20% of the world's output two decades ago, developing countries throughout Africa, Asia, Latin America, and the Middle East were often dismissively referred to as the Third World. At the time, these countries generally exported raw materials, and few ever expected them to be able to export sophisticated manufactured goods to the industrialized world or to become significant world importers. Developing country economic prospects began to change in the 1980s with the spectacular success of four Asian countries—Hong Kong, South Korea, Taiwan, and Singapore. Dubbed the "Asian tigers," these countries adopted export-led growth strategies that helped boost annual per capita incomes by between 5% and 6% over the entire decade. This success, which also involved the use of industrial policies to develop their manufacturing sectors, helped shift the focus of other developing countries from production for domestic and regional markets to production for world markets. This reorientation in thinking accelerated dramatically in the early 1990s with the advance of globalization. Bolstered by the fall of communism, the beginnings of the information technology (IT) revolution, sharply declining transportation costs, the freer movement of capital and technology from developed to developing countries, and economic reforms, economic growth in developing countries began to take off, reaching practically every region of the world and encompassing dozens of developing countries. China led the way with average annual real gross domestic product (GDP) growth increases of nearly 10% from 1979 to 2011. Its share in global GDP increased from 1.5% in 1990 to 9.5% in 2010. Growth in a handful of developing countries with very large populations, such as India, Brazil, Indonesia, Turkey, and Mexico, was also stronger than it had been in previous periods for various reasons. These other developing countries increased their share of global GDP from 15% to 22% over the same period, enabling developing countries as a group with now 83% of the world's population (5.1 billion people) to expand their share of global output to almost 33% today. During this same period, the size of the global economy more than doubled, increasing from $28 trillion in 1990 to $68 trillion in 2010. Projections abound that a handful of developing countries will continue to gain shares of global output vis-à-vis the advanced countries, and in the process change the face of the global economy. A World Bank study projects that by 2030, developing countries will contribute about 50% of global output (with China contributing 20%) and two-thirds of global economic growth (with China contributing 25%). Long-term projections, however, can be far off the mark. Some of these countries may falter as aging populations, rising labor costs, corruption, environmental challenges, failure to innovate or reform more deeply, or infrastructure deficiencies limit them from growing as rapidly as predicted, while other developing countries currently not on anyone's radar screen could turn their economic and political fortunes around. Nevertheless, there is widespread consensus that in addition to China, many of these other larger populous developing countries will continue to experience faster economic growth than the advanced economies, as they have over the past decade, thus continuing the shift of relative economic wealth to a handful of developing countries. Reasons for this assessment include both a continuing large potential for "catch-up" gains in output and productivity that these developing countries possess, combined with continuing slow growth in advanced economies due to deleveraging and the impact of high debt burdens. Despite likely gains in economic power, the living standards (as measured by per capita income levels) of the rising powers are likely to remain well below the levels in advanced countries due to their huge populations and still high poverty rates. But still "developing" countries are becoming significant forces in the world economy for the first time in hundreds of years, creating uncertainties regarding their role in the global economy. These rising countries present the United States with both opportunities and challenges. On the opportunity side, rising imports from these economies offer U.S. consumers an expanding choice of products at lower prices, raising real incomes and contributing towards higher standards of living. Many of the imports are also intermediate goods used in the production of U.S.-produced goods, lowering costs and, thereby, helping to maintain the competitiveness of U.S. firms in the global economy. As their economies grow, the REP s are also providing U.S. exporters and investors with robust new markets—their successful growth strategies are expected to create billions of new "middle-class" consumers and unleash billions of dollars in infrastructure spending over the next few decades for which U.S. exporters of goods and services can compete. At the same time, many U.S.-based firms and workers are competing now with an expanded pool of lower-wage labor, much of it located in the REPs. Such competition can nudge U.S.-based firms to reduce costs by adopting labor-saving technology, to move production overseas, or to shut operations that may no longer be competitive. Even firms and workers in high-end service sectors are feeling the pressure of competition from these countries. U.S. relations with the REPs, thus, are affecting U.S. economic welfare in fundamental ways. From the perspective of U.S. trade policy, efforts to reduce the trade and investment barriers of the REPs that are impeding U.S. producers and workers from maximizing the benefits of participation in the global economy are likely to be a high priority. But the views and practices of the REPs regarding the role of the state in economic activity, which may differ sharply from U.S. perspectives and actions, make the elimination of trade barriers and the negotiation of new world trade rules more difficult. For their part, the REP s are also protesting U.S. policies on trade remedies, high tariffs on apparel and other import-sensitive items, pricing of medicines, agricultural subsidies and quotas, the temporary entry of foreign workers, and monetary expansion (so-called quantitative easing). In addition, they are making their concerns heard in international institutions, particularly the WTO. How the REP s evolve may also affect the nature and integrity of the world trading system. U.S. trade policy officials have generally assumed that as the REPs gain weight in the international trading system, they will become more responsible stakeholders by sharing not only the benefits but the costs of system maintenance and by embracing the principles of free and fair trade with limited government intervention. As China and other developing economies with heavy state involvement in guiding economic activity evolve, it is not certain that they are going to accept this place in the liberal international economic order that the United States and Britain jointly constructed in the aftermath of World War II. The rise of China and other developing countries has also coincided with a weakening of the WTO-centered multilateral trade order. Bilateral and regional preferential trade agreements have proliferated and WTO-sponsored multilateral trade liberalization negotiations have stalled. In this environment, questions arise over how the world trade order will be kept and how new rules will be established. These profound changes in the global economy raise a number of questions that the 113 th Congress may wish to consider in its oversight of U.S. trade policy. First, what kinds of trade negotiations can best be utilized to open up REP markets in a way that provides for more balanced and mutually beneficial relationships? Second, in what ways can the United States best influence the REPs to adopt more market-oriented trade and economic policies or reduce barriers to U.S. exports and investment? Third, how can the United States best influence China and the other REPs to become responsible stakeholders in the world trading system? This report is organized into four parts. Part one summarizes the key observations of the report. Part two discusses the key characteristics of the REPs and their reform challenges. Part three analyzes the relationship between U.S. trade interests and the REP s . Part four considers a range of U.S. trade policy responses to challenges raised by the REPs , including the role of Congress. The key observations of the report are summarized below. More detailed analysis and information is provided in the main body of the report. U.S. Exports and Imports: The REPs are becoming much more important U.S. trading partners (see Figure 3 ). They accounted for 47% of U.S. exports in 2011, up from 20% in 2000. Their share of U.S. imports has risen from 23% in 2000 to 36% in 2011. If the REPs continue to grow rapidly and open their economies further to trade, these trends could accelerate in the future. REP Trade Barriers: If the United States is to maximize its export potential and boost its living standards, exporters and investors will need to have better access to REP markets. REP trade and regulatory barriers on multiple fronts—tariffs and non-tariff barriers, and restrictions on services and investment—remain considerably higher than in the United States and most other advanced countries. Many of these barriers are denying U.S. producers and workers the extension of comparative advantage, particularly in the areas of services, foreign investment, intellectual property, and government procurement, not only in REP markets, but also in third country markets. A number of these barriers are inadequately covered or difficult to enforce under current WTO rules. REP Interventionist Policies: The ability of the United States to persuade the REPs to embrace the principles of free and fair trade is constrained by growing differences over the role that the state should play in economic activity. While the rules-based GATT/WTO trading system favors commercial outcomes to be determined by market forces, most REP governments play a much larger role in their economies than does the U.S. government.