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

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ignated monopolies. It also establishes a trilateral committee toconsider the relationship between trade and competition policy inthe NAFTA countries. Some other free-trade areas have gone further.For example, in the European Union and the Australia-NewZealand Free Trade Area, antidumping laws do not apply to tradeamong member countries, since this is considered internal trade,subject to organization-wide competition policies.Until there is greater convergence and international cooperationin the enforcement of antitrust laws against cross-border conduct,international disputes over unfair pricing between corporations ofdifferent national origins will often continue to play out in one oftwo ways: through the application of national competition laws,with the continuing difficulties associated with their internationalenforcement, or through the application of overly restrictive nationaltrade laws. As part of the Uruguay Round, the WTO Councilfor Trade in Goods will consider provisions on investment policyand competition policy in the future. The OECD is also pursuinga work program in this area.REGIONALISMAlthough there may be significant benefits to trade liberalizationon a regional basis, some nonmember countries could be hurtthrough trade and investment diversion, as trade and investmentare preferentially shifted from them to the member countries. Oneway to mitigate these concerns is for members of a free-trade areato move toward a customs union whose common external tariffwould match the lowest tariff within the region prior to the formationof the customs union. Another possibility would be to open regionalarrangements to new members. It has also been suggestedthat GATT rules be amended to allow compensation fornonmembers hurt by regional liberalization agreements. These andother proposals to deal with regional free-trade associations mayneed to be discussed in GATT in order to preserve the benefits ofregional trade liberalization while addressing the concerns of outsiders.FOREIGN EXCHANGE MARKETDEVELOPMENTSThe international value of the dollar, as measured by its tradeweightedaverage exchange rate, rose by an astonishing 50 percentbetween the end of 1980 and early 1985. By mid-1988, however,the dollar had returned to its 1980 level, and since then it has continuedon a slight downward trend, with much narrower fluctuationsthan earlier in the 1980s. The large appreciation and subsequentdepreciation of the dollar had a marked impact on the com-240
petitive position of U.S. firms. Had they been offset by differencesbetween the inflation rates of the United States and its tradingpartners, these large swings in the value of the dollar would havehad no impact on our competitiveness. Inflation differentials, however,were much smaller than the exchange-rate swings. As a result,the dollar appreciated and then depreciated in both real andnominal terms by roughly equal amounts.Chart 6-3 shows indexes of the value of the dollar relative to thecurrencies of our major trading partners. In addition to the nominaleffective exchange rate, which does not adjust for inflation differences,the chart shows two measures of the real effective exchangerate: one in which relative consumer prices are used for theinflation adjustment, and one in which relative unit labor costs areused. The chart clearly demonstrates the high correlation betweennominal and real exchange-rate movements since 1980. In addition,the chart shows that relative unit labor costs in manufacturinghave declined sharply since their 1985 peak. Partly as a result,U.S. manufacturing firms have become extremely competitive inworld markets.Chart 6-3 Nominal and Real Effective Dollar Exchange RatesThe value of the dollar has been more stable in the 1990s than during the 1980s.Index, 1985=100120110 ~1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993Real effective Relative unit labor Nominal effectiveexchange rate costs (manufacturing) exchange rateNote: Indexes are based on units of foreign currency per U.S. dollar. A decline in any of the indexes indicatesfalling relative costs and increasing competitiveness.Source: International Monetary Fund.241
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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
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CLIMATE CHANGE ACTION PLANCertain g
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eral, lays a foundation for broader
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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
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 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
Page 290 and 291: TABLE B-13.—Gross domestic produc
Page 292 and 293: TABLE B-15.—Personal consumption
Page 294 and 295: 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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