SEC. 5408. INFORMATION ON THE SERVICE SECTOR.

(a) SERVICE SECTOR INFORMATION.-The Secretary shall ensure that, to the extent possible, there is included in the Data Bank information on service sector economic activity that is as complete and timely as information on economic activity in the merchandise sector.

(b) SURVEY.-The Secretary shall undertake a new benchmark survey of service transactions, including transactions with respect to

(1) banking services;

(2) information services, including computer software services:

(3) brokerage services;

(4) transportation services;

(5) travel services;

(6) engineering services;

(7) construction services; and

(8) health services.

(c) GENERAL INFORMATION AND INDEX OF LEADING INDICATORS.The Secretary shall provide

(1) not less than once a year, comprehensive information on the service sector of the economy; and

(2) an index of leading indicators which includes the measurement of service sector activity in direct proportion to the contribution of the service sector to the gross national product of the United States.

SEC. 5409. EXCLUSION OF INFORMATION.

The Data Bank shall not include any information—

(1) the disclosure of which to the public is prohibited under any other provision of law or otherwise authorized to be withheld under other provision of law; or

(2) that is specifically authorized under criteria established by statute or an Executive order not to be disclosed in the interest of national defense or foreign policy and are in fact properly classified pursuant to such Executive order.

SEC. 5410. NONDUPLICATION.

The Secretary shall ensure that information systems created or developed pursuant to this subtitle do not unnecessarily duplicate information systems available from other Federal agencies or from the private sector.

SEC. 5411. COLLECTION OF DATA.

Except as provided in section 5408, nothing in this subtitle shall be considered to grant independent authority to the Federal Government to collect any data or information from individuals or entities outside of the Federal Government.

SEC. 5412. FEES AND ACCESS.

The Secretary shall provide reasonable public services and access (including electronic access) to any information maintained as part of the Data Bank and may charge reasonable fees consistent with section 552 of title 5, United States Code.

SEC. 5413. REPORT TO CONGRESS.

(a) INTERIM REPORT.-Not more than 1 year after the date of enactment of this Act, the Secretary after consultation with the Advisory Committee shall submit a report to the Governmental Affairs Committee and the Banking, Housing, and Urban Affairs Committee of the Senate, other appropriate committees of the Senate, and the House of Representatives describing actions taken pursuant to this subtitle particularly

(1) actions taken to provide the information on services described in section 5408; and

(2) actions taken to provide State-by-State information as described in section 5406(b)(7).

(b) FINAL REPORT.-Not more than 3 years after the date of enactment of this Act, the Secretary after consultation with the Advisory Committee shall submit a report to the Governmental Affairs Committee and the Banking, Housing, and Urban Affairs Committee of the Senate, other appropriate committees of the Senate, and the House of Representatives

(1) assessing the current quality and comprehensiveness of, and the ability of the public and of private entities to obtain access to trade data;

(2) describing all other actions taken and planned to be taken pursuant to this subtitle;

(3) including comments by the private sector and by State agencies that promote exports on the implementation of the Data Bank;

(4) describing the extent to which the systems within the Data Bank are being used and any recommendations with regard to the operation of the system; and

(5) describing the extent to which United States citizens and firms have access to the data banks of foreign countries that is similar to the access provided to foreign citizens and firms.

PART III: U.S. INTERNATIONAL ECONOMIC

POSITION-DATA AND ANALYSIS

CHANGE IN THE U.S. INTERNATIONAL ECONOMIC
POSITION, 1980 TO PRESENT

The decade of the 1980s ushered in a period of deterioration in the U.S. external accounts to a degree unprecedented in modern U.S. history. The balance on the U.S. merchandise trade and current accounts turned sharply into deficit, and the United States became the world's largest debtor country in the space of just a few

years.

To be sure, the United States had confronted serious challenges on the international economic front before. In 1971, following substantial downward pressure on the dollar and in the face of the first U.S. merchandise trade deficit since 1893, President Nixon suspended the convertibility of dollars into gold or other reserve assets, imposed a 10-percent surcharge on imports, and called for negotiations with major trading nations to lower the fixed exchange rate of the dollar in order to restore U.S. international competitiveness. That action, and the inadequacy of the newly agreed exchange rate system, led to the total collapse of the postwar Bretton Woods system of fixed exchange rates in 1973.

The experience of the 1980s differed substantially from that of the 1970s, however. In the 1980s, the world was operating under a system of largely floating exchange rates (although some currencies remained fixed), which was expected to provide automatic adjustment of payments imbalances through appreciation or depreciation of currencies in response to changes in countries' international competitive positions. In addition, substantial deregulation of, and innovation in, private capital markets meant that tremendous volumes of funds could be shifted across national boundaries in seconds, totally outside the control of governments. Under such a system, exchange rates are not determined by government fiat; and payments imbalances do not lend themselves to correction by import surcharges or other measures imposed solely at national borders. Instead, they are brought about and corrected by more fundamental aspects of countries' domestic and international economic competitive positions.

CAUSES OF THE U.S. TRADE AND CURRENT ACCOUNT DEFICITS

The emergence of large deficits in the U.S. merchandise trade account1 and the current account 2 beginning in the early 1980s has been attributed widely to several major factors. First, in 1982, the world was in the midst of the worst economic downturn in the postwar period, with accompanying stagnation in world trade growth. The United States was the first major country to emerge from recession; its real gross national product (GNP) grew by a healthy 3.6 percent in 1983 and a robust 6.8 percent in 1984, up from a negative rate of 2.5 percent in 1982. Strong U.S. economic growth, which substantially outstripped that of its trading partners, stimulated U.S. import demand, while overseas demand for U.S. exports remained sluggish. Between 1982 and 1984, U.S. imports rose 33 percent, while U.S. exports rose only 3 percent.

Second, the developing country debt crisis beginning in 1982 resulted in a sharp decline in U.S. exports to debtor countries, particularly in Latin America where much of the debt problem initially was concentrated. The inability of key countries in Latin America and elsewhere to service their debt-which had increased substantially following the oil shocks of the 1970s and had been exacerbated by the very high interest rates of the late 1970s and early 1980s meant that debtor countries simply did not have sufficient foreign exchange to continue purchasing goods and services from abroad. Between 1981, when U.S. exports to the region hit a then all-time high, and 1983, U.S. exports to Latin America fell 62 percent. (It was not until 1988 that U.S. exports in nominal terms exceeded their 1981 levels.) At the same time, debt-laden nations of Latin America took dramatic steps to restore their solvency and improve their ability to export, including exchange rate depreciation (since their currencies had remained pegged to the dollar in many cases). U.S. imports from Latin America rose 26 percent between 1982 and 1984 alone.

The third and most important factor directly affecting U.S. international competitiveness in the early 1980s was the substantial rise in the value of the dollar against other major currencies. Capital flows into the United States push up, or cause appreciation in the value of the dollar on foreign exchange markets. Capital flows out of the United States push down, or cause depreciation in the value of the dollar. Beginning in the early 1980s, foreign capital inflows grew much more rapidly than capital outflows, resulting in substantial dollar appreciation. On a trade-weighted, inflation-adjusted basis, the dollar rose 16 percent between 1981 and 1983, and 27 percent between 1981 and 1984. When the dollar peaked in 1985, it was 31 percent above its average 1981 level. Dollar appreciation eroded the competitiveness of U.S. exports by raising their price on world markets, while simultaneously improving the price competitiveness of imports in the U.S. market.

The merchandise trade balance reflects the difference between the value of goods exported from the United States and the value of goods imported into the United States.

2 The current account balance provides the broadest measure of U.S. international transactions including merchandise trade, services trade, international investment income, and unilateral transfers, which in turn consist primarily of government outlays for foreign aid and other external grants as well as payments to U.S. pensioners living abroad.

The dollar's rise was rooted in a confluence of macroeconomic forces that raised the relative attractiveness of U.S. assets, prompting a large net inflow of funds into the U.S. economy. First, strong U.S. economic growth made investment in the United States highly attractive for both U.S. and foreign investors. Second, the tight monetary/loose fiscal policy mix implemented by the U.S. Government during the late 1970s and early 1980s, coupled with a lassez faire approach to the foreign exchange market, contributed to an increase in domestic interest rates. Higher rates meant greater yields on investments in the U.S. market. Third, liberalization of government controls in foreign financial markets, particularly Japan, raised the effective supply of investable funds in international financial markets, and resulted in a significant increase in foreign purchases of U.S. assets, particularly U.S. Government securities. Fourth, the role of the U.S. dollar as a "safe haven" investment in times of economic and political uncertainty undoubtedly also was a factor affecting the flow of foreign funds into dollar-denominated assets.

"Capital flight" from the debtor countries of Latin America and elsewhere buoyed the value of the U.S. dollar, as residents of those countries sought safe investments in a currency other than their own. In response to defaults on debt payments by major debtor nations and other uncertainties, U.S. commercial banks sharply reduced their overseas lending after 1982. (The total flow of private capital out of the United States fell from $113 billion in 1982 to $50 billion in 1983 and $22 billion in 1984.)

Finally, the U.S. budget deficit rose sharply, growing from 2.6 percent of GNP in 1981 to 6.3 percent in 1983 (including both onand off-budget Federal expenditures). The rising budget deficit resulted in a growing gap between U.S. savings and U.S. domestic investment needs. That gap was filled by funds from abroad, a gap which continues today.

In response to the major factors described above, the U.S. merchandise trade deficit rose from $22 billion in 1981 to a peak of $153 billion in 1987. The U.S. current account shifted from a surplus of $5 billion in 1981 to a deficit of $164 billion in 1987. The counterpart in the financial markets to the fast growing trade deficit was rapidly rising foreign investment in the United States. By 1986, such capital inflows eroded the U.S. net investment position to a net debtor status for the first time since 1914.

RECENT DEVELOPMENTS AND OUTLOOK

Major changes on a number of fronts exchange rates, developing country debt, and world economic growth rates began to take place in the mid- to late-1980s, resulting in a steady decline in U.S. trade and current account deficits through 1990.

Exchange rates. In September 1985, the finance ministers and central bank governors of the Group of Five (G-5) 3 industrial nations met at the Plaza Hotel in New York City and agreed to cooperate in efforts to reduce further the value of the dollar on foreign exchange markets. (The dollar had begun a generalized decline against most foreign currencies in February 1985.) Following the

'The G-5 countries include: France, Germany, Japan, United Kingdom, United States.