International Trade Administration

Abstract

The International Trade Administration (ITA) is the government agency charged with strengthening American businesses and making them more competitive, promoting American trade in global markets, identifying potential business opportunities for U.S. businesses, analyzing trading aspects of specific industries, and overseeing compliance with trade laws and agreements. The responsibility for compliance oversight means that ITA is actively involved in monitoring exports. ITA has been accused of acting in the interests of American businesses even when that attitude threatens trading relations with other nations.

Overview

The International Trade Administration operates under the auspices of the Department of Commerce and answers to the secretary of that department and to the Senate Finance Committee and the House Ways and Means Committee. The goals of the ITA are to make American industries stronger and more competitive in the global environment, to encourage trade and investment, and to monitor American trade laws. ITA is, therefore, responsible for such actions as overseeing exports crucial to national security, carrying out executive orders that specifically concern either imports or exports, and preventing actions that interfere with the flow of free trade.

Traditionally, the ITA has worked through three separate divisions. The Global Market Unit has been composed of country and regional experts on trade and foreign and domestic staff who carry out relevant duties. The Global Market Unit has been responsible for promoting U.S. trade operations in other countries. The Industry and Analysis Unit has been composed of experts on specific industries and has been charged with the economic aspect of trade, including promoting American competitiveness and encouraging investment and trade. The Enforcement and Compliance Unit has been responsible for monitoring compliance with and enforcement of existing trade laws. On the first of October in 2013, the three divisions were merged into a single unit.

The Department of Commerce and Labor was founded in 1912. The following March, the department split into two distinct departments. By the 1960s, characteristics of trade had begun to change drastically with the rise of multinational corporations. That rise was accompanied by increased demands for protection of domestic enterprises. By 1978, U.S. trade had climbed to $143 billion. The following year, President Jimmy Carter announced Reorganization Plan Number 3, which assigned responsibilities for negotiating foreign trade issues and formulating trade policy to the Office of the United States Trade Representative and charged the Department of Commerce with implementing U.S. trade policies. In 1980, the ITA was founded with the Department of Commerce. In 1984, the responsibility for analyzing the different aspects of American industry was transferred to ITA. In the twenty-first century, more than forty-seven different federal agencies are involved in some aspect of trade.

The ITA carries out its responsibilities in conjunction with the International Trade Commission (ITC) and the Court of International Trade. Together, they oversee compliance with trade laws and ensure that trade laws and agreements are fairly implemented. The ITC is a presidentially appointed six-member board of commissioners who serve overlapping nine-year terms. ITC acts independently of ITA to fulfill a quasi-judicial role in investigating cases in which other countries challenge alleged violations of U.S. antidumping laws, cases involving subsidized imports, or cases involving violation of intellectual property laws. ITC is also a clearinghouse for trade data. The Court of International Trade is charged with reviewing actions taken by both the ITA and the ITC and in hearing appeals of their decisions.

If an American business claims that it has been treated unfairly in violation of trade laws, both the ITA and ITC are required to conduct investigations. Responsibility for identifying goods that have been illegally dumped or which have been illegally subsidized by exporting governments lies with the ITA. Responsibility for determining if a particular industry has been harmed by such an action lies with the ITC. The ITA conducts an investigation by collecting information from relevant parties and the general public and presenting it to the Secretary of Commerce, who decides on appropriate action. The ITC holds a trial that allows both parties to present arguments to the commissioners. Additional duties are most likely to be levied when both the ITA and the ITC acknowledge the viability of the complainant. In cases where countries charged with import violations are not parties to agreements such as the Subsidiary Code of the General Agreement on Tariffs and Trade (GATT), the ITA has sole jurisdiction.

Applications

The ITA is charged with ensuring that foreign governments do not engage in unfair trading practices such as attempting to sell items below their fair foreign market value, which prevents exporters from charging Americans significantly higher prices than the prices of those same goods sold on the domestic market. Exporters may, however, charge the constructed value of an item because it is fairly based on the cost of making the item, plus related costs such as shipping and handling.

Critics of the ITA and the ITC argue that members of both agencies often feel they have a congressional dictate to act in the best interests of American business owners when making decisions. Political scientists have traditionally studied the behavior of the ITA and ITC through an interest group model that examines decision-making as a product of intense lobbying efforts, with lobbyists working for particular industries. However, since 1980, political scientists have shifted to a state-centered model that explains ITA/ITC behavior as a response to pluralistic and nationalistic influences, suggesting that the ITA and the ITC make decisions in response to a variety of influences from the government and multiple agencies.

American workers are protected by a number of laws that guarantee such rights and benefits as safe working conditions, a minimum wage, a standard eight-hour day/40-hour workweek, and overtime pay. Thus, the cost of manufacturing items in the United States is likely to be higher than in some countries without these worker protections. Consequently, the federal government has passed laws, established agencies, and created programs designed to protect American industry while promoting competitiveness in trade. Those efforts may include taking such measures as the levying of tariffs and the passing of antidumping (AD) and countervailing duty (CVD) laws so that domestic industries are protected from constantly being undercut by foreign competitors. While tariffs are outside ITA's jurisdiction, the organization is responsible for enforcing AD and CVD laws.

Antidumping laws have been used to restrict the importation of under-priced items such as furniture, tires, and steel products. For example, the ITA and the ITC charged China with violation of antidumping laws, resulting in increased duties on wooden furniture that caused the price of such items to rise significantly. Chinese manufacturers, however, bypassed penalties by manufacturing items in Vietnam, which is not subject to the same duties, and shipping them to the United States from that country. Some critics insist that AD and CVD procedures endanger trade relationships with other nations at a cost of approximately $4 billion per year.

Following the rise in global terrorism, particularly after the attacks on the United States on September 11, 2011, customs and border protections have heightened at the same time the need to move goods efficiently across national borders has increased. In 2015, trade accounted for 28 percent of the American gross domestic product, and American exports totaled $1.511 trillion. In 2016, the Automated Commercial Environment (ACE) program was established in order to cut down on the downtime associated with moving products into and out of the United States. When announcing plans for the streamlining process, President Barack Obama announced that it would reduce downtime from days to hours in some cases.

The ITA is in charge of a number of programs that deal with the various aspects of trade. The Foreign Trade Zone (FTZ) program was established by the United States in 1934 as a means of leveling the field for domestic industries. FTZ applications are approved by the Foreign Trade Zones Board, and applicants are required to demonstrate benefits gained from participation in the program. Within these zones, duties on both raw materials and finished products used in American manufacturing may be eliminated, reduced, or delayed. Examples of such products include engines and driveshafts used in the manufacture of automobiles. Other benefits of FTZs include the elimination of duties on items shipped into the United States that are destined to be re-exported; benefits specific to a particular type of production; the absence of duties on parts identified as waste, scrap, or rejected, or those which have failed to pass quality control testing; reduced duties on intra-FTZ transfers; suspension of some quotas and restrictions; and the reduction or elimination of Customs and Border Protection clearances. Additionally, FTZ also offers expedited customs procedures for direct delivery and weekly entry items.

ITA has oversight of two types of FTZs: General Purpose Free Trade Zones and Alternative Site Framework Free Trade Zones. The General Purpose FTZ generally operates under the sponsorship of a state or local government, an economic development group, or a transportation authority. In Savannah, Georgia, for example, the Savannah Development Commission sponsors FTZ Number 104, which encompasses the Savannah International Airport and all its buildings and lands located in adjoining counties. Thus, all material shipped to the Port of Savannah fall within this FTZ. The Alternative Site Framework may be either a magnet site or a usage-driven site. A magnet site consists of specified areas such as buildings, industrial parks, and logistic centers. Sponsored by the Indianapolis Airport Authority, Foreign Trade Zone Number 72 is an example of this type of FTZ, stretching from the 4,800 acres of the Indianapolis International Airport to Anderson, which is about 44 miles way, and encompassing 123 acres of Eagle Point Business Park. Foreign Trade Zone Number 114, which is sponsored by the Economic Development Council for Central Illinois, is an example of a usage-driven FTZ. It covers 120,000 square feet of an electrode manufacturing company. In 2015, the ITA was responsible for 250 Free Trade Zones operating in key areas. By reducing manufacturing costs, the FTZ program makes American industries more competitive with foreign products.

Issues

One of the most controversial responsibilities of the ITA has been oversight of antidumping laws. The ITA has been accused of using its position to protect the interests of American politicians and industries rather than protecting free trade. Wendy L. Hansen and Kee OK Park (1995) examined ITA cases from 1980 to 1990, finding that ITA ruled against protecting domestic interests in only 103 of 1,029 cases. In 233 cases, no decision was made or the case was terminated without action. In another 23 cases, no ruling was made because the accused government negotiated a settlement with the U.S. government. In three-fourths of all antidumping cases in which decisions were handed down, the decision favored the American company that brought the charges. This was also true in 65 percent of CVD cases. Despite repeated calls for reevaluation and reform in the 1990s, a 1994 study by Michael A. Lawrence found that in 97 percent of all investigations, ITA found other countries guilty of illegally dumping products on the American market.

The U.S. Court of International Trade may overturn the actions of the ITA. For example, in a 1983 case in which the ITA charged a Japanese ball-bearing company with illegal dumping, the court overturned the decision and ordered reimbursement of all fines. However, some critics claim that the ITA has not always complied with decisions of that court (Lawrence, 1994). Even some former members of the ITA, have admitted to the domestic bias of the organization.

The internal operations of the ITA have also drawn criticism. In 2011, a cyberattack on the ITA's website led to hackers gaining access to user names and account numbers. In 2012, the Office of the Inspector General and the Office of Audit and Evaluation issued a joint report, calling for major improvements in the way that the ITA handles security issues. Investigators found that hackers had been able to target the agency because ITA had failed to adequately address basic security issues. Those issues included failing to perform routine scanning and patching, inadequately securing databases, allowing installations of unauthorized software and media, and failing to set up secure networks. Between 2007 and 2012, there were sixty-six malicious files placed on ITA servers and workstations, providing hackers with the ability to change passwords, gain centralized access, and change network architecture.

One of the most important of all responsibilities of the ITA continues to be promoting U.S. trade with other countries. In 2015, American exports of goods amounted to more than $2.2 trillion, and the export of services totaled $751 billion. However, in response to intense globalization, trading patterns are shifting. In 2016, 95 percent of the world's consumers lived outside of the United States, and 80 percent of global purchasing power had shifted to other countries. The proliferation of free trade agreements has meant that protectionism is no longer an acceptable trade policy.

Only 1 percent of American companies are exporters, and 98 percent of those companies employ less than 500 workers. Small- and medium-sized companies are also entering the exporting business. Between 2006 and 2016, the number of SMES exporters rose from 27 to 33 percent. Research has consistently shown that American businesses that export are economically healthier than those that do not export, and they are better equipped than non-exporting enterprises to handle economic downturns. Employees at exporting funds earn salaries from 13 to 18 percent higher than those at non-exporting firms.

Support for growth among American exporters has been made possible in part by programs such as the Investing in Manufacturing Partnership, the Market Development Cooperator Program, and the Strategic Partnership Program. The Investing in Manufacturing Program was a 2013 initiative launched by the Obama administration that brought coordinating federal agencies, including the International Trade Organization, together to work with local communities to create well-paid jobs in the manufacturing sector. The Market Development Cooperator Program allows the International Trade Organization to offer technical as well as financial help in projects dedicated to advancing competitiveness in global trade. The ITA's role in the Strategic Partnership Program is to work with trade associations, private companies, chambers of commerce, other government agencies, and organizations to provide information on global business opportunities, thereby promoting American participation in global markets. The ITA works in conjunction with the Economic Development Administration to improve the distribution of information about business and trading opportunities and to ensure that such opportunities are effectively pursued.

Terms & Concepts

Antidumping Laws: Laws that prohibit the importing of goods to be sold at prices below market values. The ITA has a responsibility to ensure that such goods are prevented from entering the country because they undercut American products sold at market value.

Automated Commercial Environment: System used by the United States since 2016 to streamline the process by which traded items are imported and exported. Using the "single window" method, ACE allows for automation of work that was formerly done manually and has eliminated the need for paper records of transactions through an expedited admissibility process.

Countervailing Duties: Fines levied by the federal government to prevent the import of goods that have been subsidized by exporting governments, which would allow them to be sold at lower prices that comparable American products.

Customs and Border Patrol: Government agency charged with oversight of goods coming into the United States. The ITA works with Customs and Border Patrol to comply with American trade laws concerning imported items.

Executive Order: A directive handed down by the president of the United States that has the same legal standing as an act of Congress. Examples of executive orders related to importing and exporting include President Barack Obama's order of February 2014 that required the streamlining of the importing and exporting process or his executive order of July 2014 that prohibited the import of AK-47 weapons.

Foreign Trade Zones: Trade zones located within the United States that allow American companies to eliminate, reduce, or delay import duties on materials used in manufacturing in order to reduce production costs and make domestic industries more competitive with foreign manufacturers.

Government Subsidized: Refers to goods or services underwritten by a government to make them less expensive and more competitive in foreign markets. Governments may subsidize domestic industries to the point that they can be sold overseas at a price that undercuts the importing country's own producers, a practice called dumping.

Bibliography

Caddell, J. (2014). Domestic competition over trade barriers in the US international trade commission. International Studies Quarterly, 58(2), 260–268. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=96408425&site=ehost-live

Hansen, W. L., & Park, K. O. (1995). Nation-state and pluralistic decision making in trade policy: The case of the International Trade Administration. International Studies Quarterly, 39(2), 181–212. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=9508175338&site=ehost-live

Improvements Are Needed to Strengthen ITA's Information Technology Security Program. (2013). Washington, D.C.: Department of Commerce, Office of Inspector General, Office of Audit and Evaluation.

Lawrence, M. A. (1994). Bias in the International Trade Administration: The need for impartial decisionmakers in United States antidumping procedures. Case Western Reserve Journal of International Law, 26(1), 1–26. Retrieved 8 October 2017 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=9611124341&site=ehost-live

Post, T. (2015). Extending foreign trade zone status to a single manufacturer. Economic Development Journal, 14(3), 37–43. Retrieved 8 October 2017 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=110852054&site=ehost-live

Riker, D. (2011). The impact of exporting on the stability of U.S. manufacturing industries. Washington, D.C.: U.S. Department of Commerce, International Trade Administration.

Smith, A. (2015). Getting up to speed with the border clearance process. Material Handling and Logistics, 70(10), 34–38. Retrieved 8 October 2017 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=111986771&site=ehost-live

Zuelke, A., & Kirwan, P. (2016). Global competitiveness and local business development. Economic Development Journal, 15(3), 5–13. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=118603926&site=ehost-live

Suggested Reading

Andreas, Peter. (2013). Smuggler nation: How illicit trade made America. New York, NY: Oxford University Press.

Maltais, K. (2016). Zhongwang 5050 circumventing tariffs: ITA. Metal Bulletin Daily, 30. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=119817361&site=ehost-live

Moore, M. (2016). "Unfair trade practices" spark move. Rubber & Plastics News, 45(13), 0001. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=112578006&site=ehost-live

Sowinski, L. L. (2016). Hot markets for US cold chain. Journal of Commerce (1542–3867), 17(17), 56–58. Retrieved January 1, 2018 from EBSCO Online Database Business Source Ultimate. http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=117501368&site=ehost-live