News

News

U.S. – EUROPE COMMERCE NEWS

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

US & EU ECONOMIC STATS

U.S. CURRENT ACCOUNT DEFICIT HITS RECORD $130.0 BILLION IN SECOND QUARTER

According to the U.S. Bureau of Economic Analysis, the U.S. current account deficit – the combination of trade in goods and services, income, and net unilateral current transfers – increased to $130.0 billion (preliminary) in the second quarter of 2002, up from $112.5 billion in the first quarter. The deficit in goods increased from $106.4 billion in the first quarter to $122.6 billion in the second quarter, with the largest increases in industrial supplies and materials, capital goods, and automotive products. The surplus in services increased from $10.9 billion in the first quarter to $12.0 billion in the second, with the largest increases in “other” private services, royalties, and license fees. Also in the second quarter, the U.S. dollar depreciated 4 percent on a trade-weighted quarterly average basis against a group of 7 major currencies.

U.S. FEDERAL RESERVE ISSUES “BEIGE BOOK” REPORT

The Federal Reserve issued its “Beige Book” report, which is a compilation of reports from the 12 U.S. Federal Districts. According to the report, automobile sales and the housing market were strong in most of the country, but manufacturing, travel, and tourism activity were weak. Also, businesses did not take out many new loans and the labor market continued to be weak. Federal Reserve policy makers are scheduled to meet again on September 24 to decide whether or not to cut interest rates. The Fed has made 11 interest rate cuts since March 2001.

U.S JOBLESS BENEFIT CLAIMS AT FOUR-MONTH HIGH

The U.S. Department of Labor reported that new requests for unemployment benefits in the U.S. have increased to a four-month high. New unemployment insurance claims rose to 426,000 last week – the highest since April 20 – from 403,000 in the previous week. Readings above the 400,000 level are generally considered to be recessionary. New claims had decreased from a decade high of 525,000 last year to as low as 366,000 in late July, but the rate has steadily increased since then. The total number of outstanding claims in the U.S. rose to a two-month high of 3.57 million.

EUROPEAN COMMISSION SUBMITS LIST OF PROPOSED SANCTIONS IN FSC DISPUTE

A week after the World Trade Organization (WTO) gave the EU the right to impose $4 billion in sanctions on American exports in the U.S. – EU “Foreign Sales Corporations” arbitration, the European Commission circulated a draft list of U.S. products that may be hit with punitive tariffs. The list, which targets a wide range of products including food, paper, textiles, and electronics, was subsequently published in the EU’s Official Journal on Friday. European companies will have 60 days to review the list before it is finalized for approval of the EU member states, which may happen as early as November. EU officials have said that they will delay immediate retaliation against the U.S. until Congress has an opportunity to move legislation that would bring the U.S. into compliance with the WTO rulings.

U.S. HOUSE PANEL APPROVES $16.5 BILLION FOREIGN OPERATIONS BILL

The U.S. House of Representatives Appropriations Committee approved a $16.5 billion bill to fund foreign aid and export financing in fiscal year 2003 (FY03), which will begin October 1. The bill emphasizes economic growth in foreign countries, and would allocate $1.4 billion for longer-term development assistance, $296 million for disasters worldwide, and $40 million for transition initiatives. The bill would also direct the U.S. Agency for International Development, the State Department, and the Trade and Development Agency to dedicate not less than $452 million to trade capacity building. However, the bill would cut $29 million from the FY02 level of assistance to the former Soviet Union, and would cut $101 million in assistance to Southeast Europe and the Balkans. The bill will now go to the full House for consideration. The Senate is also considering a foreign operations bill, and differences between the two bills would have to be reconciled before a final bill is sent to the president for signature.

U.S. PROPOSES ELIMINATION OF GLOBAL STEEL SUBSIDIES

U.S. negotiators presented a proposal at a working-level round of the Organization for Economic Cooperation and Development (OECD) to eliminate virtually all subsidies, tariffs, and other trade barriers in the worldwide steel industry. In order to reduce global steel overcapacity, the proposal calls on 39 steel-producing countries to stop using export credits for steel plants and equipment and for supporting multilateral bank financing of steel plant projects. The proposal also calls for better enforcement of national and international competition laws and policies. The London-based Iron and Steel Statistics Bureau has estimated that Eastern Europe and the former Soviet Union account for 100 million tons of overcapacity, with Asia accounting for another 70 million tons, the European Union for 50 million tons, and the United States for 15 million tons. The proposal appears to represent a shift in U.S. policy, as the Bush administration has recently faced international criticism for its protectionist approach to the steel sector.

U.S. GAO RECOMMENDS STRONGER TECH EXPORT CONTROLS

In a report released on September 6, the U.S. General Accounting Office (GAO) urged the Department of Commerce to take stronger steps to prevent the dissemination of protected advanced technology by foreign nationals hired by U.S. companies. The GAO is concerned about “deemed exports,” an instance where foreigners hired by U.S. technology companies or research institutions take back advanced knowledge with them to their home countries. Currently, the Department of Commerce issues licenses to the companies that employ foreign nationals, which have conditions aimed at preventing the dissemination of classified technology. The GAO recommended that the Department of Commerce work with the Immigration and Naturalization Service and the Bush administration to further tighten these security measures.

ZOELLICK SEES 2004 AS A TARGET DATE FOR RUSSIA’S ACCESSION TO THE WTO

In a closed meeting with the members of the House Ways and Means Committee, U.S. Trade Representative Robert Zoellick estimated that Russia may be able to complete its accession to the World Trade Organization (WTO) by 2004. Zoellick’s estimate is later than the projections of WTO leaders and Russian officials, who have said that Russia could be welcomed into the WTO at the 2003 Ministerial in Mexico. Representative Sander Levin (D-MI) reportedly stated that the United States should take a cautious approach to graduating Russia from the Jackson-Vanik procedures that require an annual congressional vote on extending Normal Trade Relations (NTR) status. He noted that while Russia may have made progress on emigration issues, the U.S. should leverage Jackson-Vanik to negotiate a good WTO accession deal.