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

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Box 6-5.—The Economic Impact of the Uruguay RoundEven before the Uruguay Round was completed, researcherswere attempting to quantify its likely effects on the Americaneconomy. Studies based on existing formal economic modelsunanimously conclude that these effects will be beneficial. It isquite likely that new studies incorporating some of the Round'sfinal accomplishments in such areas as intellectual propertyprotection will yield even larger estimates of benefits.The Uruguay Round will increase American output becausethe specialization encouraged by more-open markets will raiseproductivity. As foreign markets open, we will produce more ofthe goods that make use of the highly skilled, highly productiveU.S. work force. Economic models offer a range of estimatesof the output gain from greater specialization. A recentOECD study estimates those gains to be 0.4 percent of GDP forthe United States. But this is almost certainly a gross under*estimate of the impact of the Round, because it ignored a hostof important factors, including gains from specialization withinthe manufacturing sector. Another study by World Bank andOECD economists estimates even smaller gains, but focuses onagriculture. Studies that more adequately capture gains fromspecialization suggest that the benefit to the U.S* economy islikely to be approximately 1 percent of GDP after the UruguayRound tariff cuts are fully phased in.Other important sources of benefit are not captured by theexisting models, which do not quantify the impact of trade liberalizationin services or enhanced protection of intellectualproperty rights. In addition, higher productivity will result inincreased investment and innovation, providing an importantadditional benefit. These additional gains are difficult to quantify,but they are almost certainly sizable and may even exceedthe more easily quantified gains. The total gain 10 years afterimplementation of the agreement begins is then likely to bemore than $100 billion but less than $200 billion annually.Major U.S. trading partners agreed to deep tariff cuts, rangingfrom 50 to 100 percent, on important electronics items includingsemiconductors, computer parts, and semiconductor manufacturingequipment.Tariffs of industrial and major developing countries on chemicalproducts are to be harmonized at very low rates (zero, 5.5,or 6.5 percent, according to product).The agreement significantly increased access to markets representingapproximately 85 percent of world trade by reducingtariffs on certain specific items of key interest to U.S. export-234
ers. Progress in textiles and apparel was particularly significant.For decades, international trade in textiles and apparelproducts has effectively been exempted from GATT rules. Instead,the Multi-Fiber Arrangement establishes a procedure forlimiting textile and apparel exports from developing to industrialcountries. Under the final Uruguay Round agreement,products covered by the Multi-Fiber Arrangement will be freeof quotas after 10 years, and textiles will be integrated intogeneral GATT rules. Tariffs will be reduced as well.Throughout the Uruguay Round negotiations, one of the mostcontentious issues was agricultural trade liberalization. The finalagreement on agriculture strengthens the long-term rules for agriculturaltrade and sharply limits national policies that distort thattrade. U.S. agricultural exports will benefit significantly from reductionsin foreign export subsidies and from market opening byour trading partners.The United States was successful in its effort to obtain meaningfulrules and explicit commitments to reduce export subsidies, cutdomestic subsidies, and increase market access. Agricultural exportsubsidies and trade-distorting domestic farm subsidies are not onlyto be reduced, but for the first time will be subject to explicit multilateraldisciplines. The United States also prevailed in establishingthe principle of comprehensive tariffication, which will lead to theeventual removal of all import quotas and other nontariff importbarriers. Nontariff barriers will first be replaced by tariffs, ensuringminimum or current access, and then these tariffs will graduallybe reduced.Progress in creating a more hospitable trading system for hightechnologyproducts was achieved on two fronts. First, the UnitedStates was able to win greater protection for intellectual propertyrights, such as patents, copyrights, and trademarks. This is veryimportant for a diverse set of U.S. industries, including the electronicsindustry (where semiconductor masks will be protected), thepharmaceutical industry (patents), and the communications industry(protection of copyrights).Second, the Uruguay Round agreement sets forth multilateralrules governing subsidies. Because of the beneficial social spilloversassociated with research and development activities, governmentsupport cannot and should not be ruled out altogether. The challengefor the multilateral trading system is to find rules that permitgovernments to support innovations that benefit all nationswhile precluding rent-shifting subsidies designed to benefit one nationat the expense of others. The Uruguay Round agreementmakes progress in this respect by establishing clearer rules andstronger disciplines in the subsidies area. It also makesnonactionable certain subsidies relating to basic research, regional235
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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
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Box 5-2*—Market PowerFirms are sa
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ate regulation. For example, State
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competitiveness of U.S. industry, a
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Box 5-4.—ExternalitiesAn external
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in the habitat of the spotted owl r
Page 190 and 191: CLIMATE CHANGE ACTION PLANCertain g
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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 230 and 231: that if the states of the former So
Page 232 and 233: Box 6-3.—Mexican Economic Reforms
Page 234 and 235: 1998, while nontariff barriers on a
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Page 238 and 239: Box 6-4.—The Asian "Miracle"Per c
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
Page 280 and 281: TABLE B-4.—Fixed-weighted price i
Page 282 and 283: TABLE B-5.—Changes in gross domes
Page 284 and 285: TABLE B-7.—Cross domestic product
Page 286 and 287: TABLE B-9.—Gross domestic product
Page 288 and 289: 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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