Economic Report of the President 1994 - The American Presidency ...

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that if the states of the former Soviet Union were like typical industrialeconomies, their share of world exports would eventuallyrise to over 10 percent, from around 4 percent in 1988. Through thefirst 9 months of 1993, Russia's two most important exports to theUnited States were aluminum ($326 million) and crude oil ($131million), which together accounted for more than 40 percent of thetotal.Expanding trade with economies in transition from socialismraises special problems for the application of U.S. antidumpinglaws, which divide the world into market and nonmarket economies(NMEs), with separate methodologies for assessing dumping specifiedfor each. (Russia, for example, is classified as an NME.) Formarket economies, dumping is determined to have occurred whena foreign producer charges lower prices in the U.S. than in itshome market (or, alternatively, prices below its costs in the homemarket). In the case of NMEs, since neither prices nor input costsare market determined, they are not used in dumping investigations.Instead, U.S. law instructs the Commerce Department toconstruct cost estimates based on costs in a "surrogate" country ata similar stage of development. In practice, the surrogates are oftenat quite dissimilar stages of development, thus potentially tiltingthe calculation toward finding large dumping margins. For example,the Department of Commerce has used Swiss, Canadian,Dutch, French, German, and Japanese producers as surrogates forChinese firms in antidumping petitions. Perhaps the best knownexample, however, is that of Polish golf carts, described in Box6—2.Box 6-2.—The Case of the Polish Golf CartsIn the mid-1970s an antidumping petition was filed againstPolish electric golf carts* Because Poland was an NME thathad no golf courses and therefore little domestic demand forgolf carts, the U.S. authorities rightly concluded that it wasimpossible to compare the prices at which the carts were soldin the United States with prices in Poland. Instead, the authoritiesemployed a surrogate-country approach: they attemptedto estimate what golf carts cost in a country similarto Poland. Canada was chosen. Unfortunately, Canada didn'tproduce golf carts either, so the final determination was basedon an estimate of what golf carts would have cost in Canada—if Canada had actually produced them.Reclassification of NMEs such as Russia as market economieswould not necessarily solve the problem, however, since they wouldthen become subject to U.S. countervailing duty law at a time224
when their subsidies to state-owned producers remain sizable. Asa result, either the market or the nonmarket methodology may impedeimports from economies in transition.This situation is particularly problematic since allowing Russiaand other economies in transition to export the goods in which theyhave comparative advantage benefits both these economies (whichobtain valuable hard-currency revenues as well as experience inworld markets) and Western nations (which obtain goods producedrelatively more efficiently than they can be produced in the West).Open market access is therefore a positive-sum means of encouragingthe reform process.REGIONAL INITIATIVESSome issues cannot be handled on a bilateral basis, and the Administrationhas been deeply engaged in a number of regional efforts.The most prominent of these has been the North AmericanFree Trade Agreement, which will solidify the ongoing reforms inMexico and help expand U.S.-Mexican trade.The North American Free Trade AgreementIn November 1993 the Congress ratified the North AmericanFree Trade Agreement, which went into effect on January 1, 1994.NAFTA creates a free-trade area of 370 million consumers and over$6.5 trillion of annual output, linking the United States to Canadaand Mexico, our largest and third-largest trading partners. Buildingon the earlier United States-Canada Free-Trade Agreement,NAFTA will contribute to productive efficiency, enhance the abilityof North American producers to compete globally, and raise thestandard of living of all three countries. By improving the investmentclimate in North America, and by providing innovative companieswith a larger market, NAFTA will also increase economicgrowth.NAFTA will help reinforce the market reforms already underway in Mexico (Box 6-3). Mexico's reforms have raised its rate ofeconomic growth, making it an increasingly important export marketfor the United States. A stable and prosperous Mexico is importantto the United States for both economic and geopolitical reasons.The United States shares a border roughly 2,000 miles longwith Mexico; and as economic opportunities in Mexico improve,Mexican workers will have fewer incentives to migrate to the UnitedStates. NAFTA will help forge a lasting relationship betweenthe two countries, based on open trade and cooperation.In addition to dismantling trade barriers in industrial goods,NAFTA includes agreements on services, investment, intellectualproperty rights, agriculture, and strengthening of trade rules.There are also side agreements on labor adjustment provisions,protection of the environment, and import surges.225
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unitedminds
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Economic Report of the PresidentTo
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the Technology Reinvestment Project
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formed health care system, increase
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CONTENTSPageCHAPTER 1. A STRATEGY F
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PageProviding Comprehensive Benefit
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LIST OF CHARTS—CONTINUEDPage3-5 L
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CHAPTER 1A Strategy for Growth and
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which have left consumers and busin
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that growth in both real compensati
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for inflation was on average roughl
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Box 1-2.—Saving, Investment, and
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investments in human capital; inves
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of the income distribution (Table 1
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Box 1-3.—Credible Deficit Reducti
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Chart 1-7 Correlation of Investment
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Box 1~4*~-A Balanced Budget Amendme
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This educational record is not good
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fallen markedly since the 1960s (Ch
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The development and deployment of n
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Earlier rounds of GATT talks had fo
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Chart 1-10 Projected Real Growth Ra
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are therefore on the public dole. M
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prise communities and be granted sm
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ingredient that should allow the ec
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Chart 2-2 National Defense Purchase
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Chart 2-3 Growth of U.S. Merchandis
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Chart 2-5 Households: Credit Market
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THE HEADWINDS ARE MOSTLY CALMINGAs
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1993, real consumer spending increa
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RESIDENTIAL INVESTMENTResidential i
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smallest annual increase in 20 year
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ments with the Internal Revenue Ser
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safe-harbor rules for underpayment
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Chart 2-9 Alternative Measures of t
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Meanwhile, the Mountain States were
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inflation is measured by the Blue C
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Saving, Investment, and Capital Acc
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the future should be reflected in l
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Chart 2-15 Dynamic Effects of Defic
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joyed healthy average real GDP grow
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Chart 2-16 Personal Income Taxes as
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TABLE 2-2.— Administration Foreca
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TABLE 2-3.— Accounting for Growth
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CHAPTER 3Trends and Recent Developm
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first quarter of 1991, nonfarm payr
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cause defense cutbacks have caused
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UNEMPLOYMENT AND NONEMPLOYMENTThe U
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Chart 3-3 Civilian Unemployment Rat
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Chart 3-6 Employment-to-Population
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Chart 3-8 Ratio of White-Collar to
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than would be expected given its hi
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that the natural rate is falling? M
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SLOW INCOME GROWTHIncome trends hav
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Chart 3-10 Average Annual Growth of
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Box 3-3.—Consequences of Producti
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likely that immigration could expla
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We do, however, know how many worke
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size. No data are available on vola
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BENEFITSOne of the concerns raised
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edented partnership to develop a nu
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CHAPTER 4Health Care ReformTHE UNIT
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make cost-conscious decisions. In a
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A third rationale for universal cov
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Box 4-1.—Moral Hazard and Adverse
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ies depending on one's health statu
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than people in other countries do,
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sumers are ill equipped to bring st
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By itself, the aging of the populat
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TABLE 4-3.- Sources and Uses of Hea
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about 65 to 70 cents for a typical
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THE ARCHITECTURE OF THE HEALTHSECUR
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etary savings for the Federal Gover
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contribution, within limits. Outsid
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salary income, payments from the em
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TABLE 4-6.—Caps on Premiums by Fi
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An example will illustrate the proc
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TABLE 4-9.—Sources and Uses of Fe
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Chart 4-9 Business Spending on Heal
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Health care reform should set the s
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and private sectors, addressing env
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Box 5-1.—Selected National Perfor
Page 180 and 181: Box 5-2*—Market PowerFirms are sa
Page 182 and 183: ate regulation. For example, State
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Page 186 and 187: Box 5-4.—ExternalitiesAn external
Page 188 and 189: in the habitat of the spotted owl r
Page 190 and 191: CLIMATE CHANGE ACTION PLANCertain g
Page 192 and 193: eral, lays a foundation for broader
Page 194 and 195: The Administration's proposal seeks
Page 196 and 197: vances in technical know-how have a
Page 198 and 199: Investments in R&D are risky. Like
Page 200 and 201: 1950s and 1960s, and American compa
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Page 204 and 205: of industry. MOCs will be affiliate
Page 206 and 207: tiveness. Again, the hoped-for resu
Page 208 and 209: forts to cut the massive Federal bu
Page 210 and 211: TECHNOLOGY POLICY, GROWTH, ANDCOMPE
Page 212 and 213: mitment to an open international tr
Page 214 and 215: ses, which take such intersectoral
Page 216 and 217: An important sectoral development i
Page 218 and 219: TABLE 6-3.—Stock of U.S. Outward
Page 220 and 221: technical change has been offered a
Page 222 and 223: ent account is a broader measure of
Page 224 and 225: TABLE 6-6.—Intrafirm Trade as Sha
Page 226 and 227: greater access to the Japanese mark
Page 228 and 229: the transparency of its trade regim
Page 232 and 233: Box 6-3.—Mexican Economic Reforms
Page 234 and 235: 1998, while nontariff barriers on a
Page 236 and 237: ward convergence in environmental a
Page 238 and 239: Box 6-4.—The Asian "Miracle"Per c
Page 240 and 241: Box 6-5.—The Economic Impact of t
Page 242 and 243: development, and environmental clea
Page 244 and 245: THE TRADE POLICY AGENDABy lowering
Page 246 and 247: ignated monopolies. It also establi
Page 248 and 249: The dollar ended 1993 roughly where
Page 250 and 251: Box 6-7.—Exchange-Rate Volatility
Page 252 and 253: Chart 6-5 French Franc-Deutsche Mar
Page 254 and 255: Besides bringing these endeavors to
Page 257 and 258: LETTER OF TRANSMITTALCOUNCIL OF ECO
Page 259 and 260: Report to the President on the Acti
Page 261 and 262: duction budget package, the North A
Page 263 and 264: Working Group studying cost-benefit
Page 265 and 266: prepares the Economic Indicators an
Page 267: Appendix BSTATISTICAL TABLES RELATI
Page 270 and 271: POPULATION, EMPLOYMENT, WAGES, AND
Page 272 and 273: AGRICULTURE:PageB-96. Farm income,
Page 274 and 275: NATIONAL INCOME OR EXPENDITURETABLE
Page 276 and 277: TABLE B-2.—Gross domestic product
Page 278 and 279: TABLE B-3.—Implicit price deflato
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TABLE B-4.—Fixed-weighted price i
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TABLE B-5.—Changes in gross domes
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TABLE B-7.—Cross domestic product
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TABLE B-9.—Gross domestic product
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TABLE B-ll.—Gross domestic produc
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TABLE B-13.—Gross domestic produc
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TABLE B-15.—Personal consumption
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TABLE B-17.—Gross and net private
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TABLE B-19.—Inventories and final
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TABLE B-21.—Foreign transactions
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TABLE B-23.—Relation of gross dom
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TABLE B-25.—National income by ty
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TABLE B-26.—Sources of personal i
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TABLE B-27.—Disposition of person
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TABLE B-29.—Gross sating and inve
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TABLE B-31.—Median money income (
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TABLE B-33.—Population and the la
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TABLE B-34.—Civilian employment a
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TABLE B-36.—Unemployment by demog
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TABLE B-38.—Civilian labor force
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TABLE B-40.—Civilian unemployment
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TABLE B-42.—Unemployment by durat
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TABLE B-44.—Employees on nonagric
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TABLE B-45.—Hours and earnings in
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TABLE B-47.—Productivity and rela
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PRODUCTION AND BUSINESS ACTIVITYTAB
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TABLE B-51.—Industrial production
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TABLE B-53.—New construction acti
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TABLE B-54.—New housing units sta
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Year or monthTABLE B-56.—Manufact
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TABLE B-58.—Manufacturers' new an
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TABLE B-60.—Consumer price indexe
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TABLE B-61.—Consumer price indexe
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TABLE B-63.—Changes in consumer p
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TABLE B-64.—Producer price indexe
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TABLE B-66.—Producer price indexe
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TABLE B-67.—Changes in producer p
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TABLE B-69.—Components of money s
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TABLE B-70.—Aggregate reserves of
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TABLE B-72.—Bond yields and inter
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TABLE B-73.—Total funds raised in
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TABLE B-74.—Mortgage debt outstan
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TABLE B-76.—Consumer credit outst
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TABLE B-78.—Federal receipts, out
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TABLE B-79.—Federal budget receip
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TABLE B-81.—Federal and State and
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TABLE B-83.—State and local gover
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TABLE B-85.—Interest-bearing publ
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TABLE B-87.—Estimated ownership o
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TABLE B-89.—Corporate profits by
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TABLE B-91.—Sales, profits, and s
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TABLE B-93.—Sources and uses of f
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TABLE B-95.—Business formation an
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19481949195019511952195319541955195
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TABLE B-99.—Indexes of prices rec
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TABLE B-101.— Farm business balan
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TABLE B-103.—U.S. international t
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TABLE B-104.—U.S. merchandise exp
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TABLE B-106.—U.S. merchandise exp
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TABLE B-108.—Industrial productio
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TABLE B-110.—Foreign exchange rat
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NATIONAL WEALTHTABLE B-l 12.—Nati
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SUPPLEMENTARY TABLETABLE B-114.—S
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