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A weekly service provided to the American Chambers of Commerce in Europe

ECONOMIC NEWS

U.S. Trade Deficit Rises With Sharp Increase in Imports

This week the U.S. Department of Commerce reported that the U.S. trade deficit rose in February to its highest level since April 2001 due to a sharp increase in imports. The February deficit was $31.5 billion, up from the revised January figure of $28.2 billion. Exports of goods and services increased about $1.0 billion from January to $79.2 billion while imports rose more than $4.0 billion from January to $110.7 billion, a likely reflection of U.S. economic recovery. Comprising the overall deficit were a deficit in goods of $36.9 billion and a surplus in services of $5,423 million. U.S. services exports increased $835 million, due largely to increases in travel, passenger fares, insurance and financial services, according to a Commerce news release. The department also said that the travel increases "reflect further, but still incomplete recovery from the post-September 11 lows recorded in October." Imports of goods rose $3.27 billion, fueled by rising U.S. demand for autos and auto parts as well as consumer goods.

Treasury Restores Pension Investments Used to Pay Debt

The U.S. Treasury Department has announced that it has fully restored a civil service pension fund that it used earlier to meet the government's debt payment obligations. In an April 17 statement Treasury Assistant Secretary Brian Roseboro said that the Government Securities Investment Fund, also known as the G-Fund, and its beneficiaries are now in the same financial position as if investments had never been suspended, including full credit for interest owed.

The Treasury Department suspended April 4 investments in the G-Fund to service public debt and avoid breaching the statutory debt limit. Roseboro emphasized that the government will face the debt limit again this summer, and he added that this time similar stop-gap measures will not be sufficient to avoid reaching it. However, Roseboro expressed hope that Congress will enact soon the $750,000 million permanent debt ceiling increase requested by the president.

Federal Reserve's Greenspan Cites Good Economic Prospects

Federal Reserve Board Chairman Alan Greenspan says that prospects for the U.S. economy have brightened as consumer spending has held up well and business profits and investment have moderately improved. In the April 17 testimony before the Congressional Joint Economic Committee he cited other factors, including the growth of productivity and relatively stable prices, as evidence that the economy is on the way to recovery. But Greenspan cautioned that the strength of the expansion is still uncertain with final demand strengthening only moderately and the sharp increase in world oil prices draining the purchasing power of consumers.

LAMY, ZOELLICK TO HOLD POST-SUMMIT RETREAT AS CONGRESS MEETS ON FSC

European Union Trade Commissioner Pascal Lamy and U.S. Trade Representative Robert Zoellick are scheduled to hold a one-day retreat next month to discuss major trade issues without a firm agenda. Issues that could arise at the May 3 Lamy-Zoellick meeting following a U.S.-EU summit are the future of the transatlantic relationship as well as the future of the multilateral trading system. This meeting could also cover pending trade disputes over steel and the Foreign Sales Corporation (FSC), which has been declared a prohibited export subsidy in several WTO rulings. Separately, Zoellick is scheduled to meet with the chairmen and ranking members of the House and Senate committees of jurisdiction early next week on how to handle the FSC issue.

U.S., NETHERLANDS ANTILLES ENHANCE TAX INFORMATION EXCHANGE

On April 17, Treasury Secretary Paul O'Neill signed a new agreement with the Kingdom of the Netherlands that will allow for exchange of information on tax matters between the United States and the Netherlands Antilles. The agreement was signed by Treasury Secretary Paul O'Neill and the Prime Minister of the Netherlands Antilles, Miguel Pourier.

HOUSE JUDICIARY COMMITTEE VOTES TO DIVIDE THE INS INTO TWO SERVICES

By a 32-2 vote, the House Judiciary Committee voted late April 10 to divide the U.S. Immigration and Naturalization Service (INS) into two separate bureaus, one for enforcement and another for citizenship services. After being criticized for years for weak enforcement and long delays in processing applications, the INS came under intense scrutiny in March when it mistakenly sent to a Florida flight school student visa approvals for two of the hijackers who died September 11. The bureaus would remain a part of the Justice Department. The bill to divide the INS was expected to come to the floor of the House of Representatives in about two weeks.

INS PROPOSES CHANGES TO RULES GOVERNING VISITORS AND STUDENTS

In its continuing effort to enhance homeland security and strengthen and control immigration in the United States, the Immigration and Naturalization Service (INS) is immediately implementing rule changes governing an alien's ability to begin a course of study and proposing significant changes to the rules governing the period of time visitors are permitted to remain in the United States. The proposed measures would reduce the amount of time granted to most foreign tourists, to 30 days from six months; limit most business travelers to a maximum of six months; and penalize illegal visitors who ignore the agency's orders to turn themselves in within 30 days. Under the new proposed rule, aliens disregarding this duty will be prohibited from acquiring future immigration benefits. INS is forwarding all three rules to the Federal Register for publication and public comment. For more information, please visit www.ins.gov.

FSC, STEEL TO FEATURE IN U.S.-EU SUMMIT HEAVY ON SECURITY ISSUES

The draft agenda for the May 1 U.S.-European Union summit is weighted heavily towards discussion of political and security issues but includes a trade element that will contain two major bilateral disputes along with an agenda item on “positive” issues. The disputes focus on the fallout from the U.S. decision to impose a steel safeguard and on U.S. corporate tax breaks for exporters that have been found to be prohibited export subsidies by the World Trade Organization. On the “positive” trade agenda, the two sides may highlight an agreement reached today (April 12) on guidelines for increased regulatory cooperation. It also could include the European Commission's effort to get a wider agreement on civil aviation agreement between EU countries and the U.S. The summit, which takes place annually, will cover two issue areas besides trade and economics. The first centers on cooperating in the fight against terrorism and the second is a discussion of different regional issues around the globe, such as the crisis in the Middle East.

U.S., EUROPEAN COMMISSION AGREE ON GUIDELINES FOR INCREASED REGULATORY COOPERATION

The United States and the European Commission announced April 12 that they have developed guidelines designed to promote more effective US-EU regulatory cooperation and better access to their respective regulatory development proceedings. The guidelines offer specific measures to achieve these goals including early and regular consultations, information exchange, and ways to increase public participation in the regulatory process. They are non-binding, voluntary principles. EU Commissioner for Enterprise and the Information Society Erkki Liikanen, United States Trade Representative Robert B. Zoellick, EU Trade Commissioner Pascal Lamy, and U.S. Commerce Secretary Don Evans welcomed the Guidelines as an important mechanism for promoting a more positive US-EU trade agenda. Under negotiation since late 1999, the completion of the "Guidelines on Regulatory Cooperation and Transparency" has been a priority initiative for the United States, the European Commission, and transatlantic stakeholders.