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The United States: Market Profile

Major Economic Indicators

Table: Major Economic Indicators of the United States
Table: Major Economic Indicators of the United States


Recent Developments

  • Goods brought into the US are often subject to import duties, but import licences are generally not required. There are no foreign exchange controls over payments for imports.
  • As a founding member of the Trans-Pacific Partnership (TPP) Agreement, the Office of the US Trade Representative on 5 November 2015 released the text of the TPP, which was formally signed by its 12 signatories in February 2016 and is expected to enter into force in 2018.
  • The US is Hong Kong’s second largest export market. Hong Kong’s total exports to the US decreased by 6% to US$12.5 billion in the first four months of 2016, while its imports from the US fell by 6% to US$8.2 billion.
  • The inflows of foreign direct investment (FDI) to the US exceeded US$92.4 billion in 2014, with China contributing US$7.6 billion. As of the end of 2014, China’s total stock of FDI to the US topped US$38 billion, up from US$823 million in 2005.
  • The US was the 6th-largest source of FDI in Hong Kong after British Virgin Islands, the Chinese mainland, the Netherlands, Bermuda and Cayman Islands, with a total stock of US$49.6 billion (or HK$385.0 billion) as at the end of 2014. Meanwhile, the US was the 8th-largest FDI destination of Hong Kong’s FDI in 2014, with a total stock of US$10.1 billion (or HK$78.1 billion).
  • Established by Executive Order of the US President in 2011, SelectUSA is a US government-wide effort to encourage, facilitate, and accelerate business investment in the US by both domestic and foreign firms. It provides enhanced coordination to existing resources and functions within the US Department of Commerce and across all federal departments and agencies with operations relevant to business investment.  It works in partnership with state, regional, and local economic development organisations to promote and facilitate overall US business attraction, retention, and reshoring. 
  • To stay competitive and maintain its status as a premier location for new business investment, the US has developed an extensive web of investment incentives, ranging from federal business incentives such as energy-efficient appliance manufacturing tax credit, employment & training administration grants, renewable energy investment tax credit and EB-5 Visa for Immigrant Investors to nearly 2,000 state business incentive programs. More information on the investment environment and the relevant regulations can be found at the SelectUSA.


Current Economic Situation


Economic growth in the US has been energetic, with GDP growth at 2.4% in the past two years. Despite a setback in the growth pace in the first quarter of 2016 caused by a decrease in non-residential fixed investment, a deceleration in private consumption and a downturn in federal government spending, many including the IMF expect the US economy to regain momentum in the rest of 2016.

Soft energy prices, tame inflation, reduced fiscal drag (the 2015 federal deficit was the lowest since 2007), strengthened household, corporate and bank balance sheets, and an improving housing market will remain in place for robust economic performance.

The unemployment rate fell further to 4.7% (lowest since Nov 2007) in May 2016 after a slight rebound to 5.0% in March and April and is expected to fall further in 2016. Despite the steady recovery, there is little evidence of upward price pressure, with headline inflation pointing to merely 0.4% in April 2016.

Externally, exports will likely face pressure as the world economy perplexes, while a strong dollar, further interest rate hikes, domestic politics in the run-up to the presidential election in November  and sustained geo-political tension in Eastern Europe and the Middle East can cause hiccups. Taken together, the US economy is forecast to grow at a similar pace of 2.4% in 2016.

Trade Policy Developments

On 8 November 2005, China and the US formally signed a comprehensive bilateral agreement on textile and clothing trade. China and the US agreed on the re-imposition of quotas from 1 January 2006 through 31 December 2008, covering a total of 21 groups involving 34 categories of textile and clothing products, which expired on 1 January 2009. Textile and clothing shipments to the US made on or after 1 January 2009 are no longer subject to any quotas.

On 5 April 2005, the US Department of Commerce (DOC) announced two major changes to anti-dumping (AD) practices involving non-market economy (NME) countries, including China. Under the new practice, application for a separate AD rate will no longer be made by completing and returning the Section A of the questionnaire to the DOC. Instead, an applicant should complete an application form which will be posted for each investigation on DOC’s website. In addition, each exporter applying for a separate rate will be required to list all the suppliers whose merchandise they export to the US during the period of investigation or review. The dumping margin assigned by the DOC to an exporter will be a combined rate, which is calculated from the rate of the exporter and those of the producers which supplied merchandise to it for export to the US.

In a landmark decision that confirmed a major reversal of US trade remedy policy for NME countries, the DOC issued on 30 March 2007 a preliminary affirmative determination of countervailing (CV) duty investigation of coated free sheet paper from China. Although the US government ultimately decided not to impose any CV duties in this proceeding, the investigation is significant in and of itself because it marked the reversal of a 20-year-old DOC policy against assessing CV duties on products from NME countries. Following this landmark decision, the US International Trade Commission (USITC) issued on 20 June 2008 a final affirmative injury determination in its anti-dumping and countervailing duty investigations of circular welded carbon-quality steel pipe from China, marking the first CV duty order on China over 20 years. This demonstrates the emergence of CV actions as a key weapon against allegedly subsidised mainland Chinese products.

In April 2016, the Office of the US Trade Representative (USTR) issued its annual “Special 301” report, evaluating the intellectual property rights (IPR) protection policies and enforcement measures in 73 trading partners. The report keeps China on the Priority Watch List by highlighting a complex and contradictory environment for protection and enforcement of IPR, including measures favoring domestically owned intellectual property in the name of promoting innovation, rampant piracy and counterfeiting and extensive use of unlicensed software. In addition to China, The priority watch list includes Algeria, Argentina, Chile, India, Indonesia, Kuwait, Russia, Thailand, Ukraine and Venezuela.

The US has adopted various security initiatives since 9/11, including the introduction of the Container Security Initiative (CSI) in January 2002. The CSI purports to push the US cargo screening process outward to reduce the risk to US ports and cities. To date, CSI is operational at 50 ports, representing the point of origin of more than 80% of the cargo shipped to the US. Other than cargo screening, the Transportation Security Administration (TSA) met the August 2010 deadline for screening 100% of cargo transported on domestic and outbound flights of passenger aircraft originating within the US, while the statutory mandate of 100% screening of all inbound air cargo went into effect on 3 December 2012.

Another cargo security initiative, the Customs-Trade Partnership Against Terrorism (C-TPAT), has been in force since November 2001. Through this initiative, CBP requests US companies to ensure the integrity of their security practices. Participants of C-TPAT are entitled to the convenience of fast-track clearance through US Customs. As such, major US importers have signed up to the programme, and request overseas suppliers to adopt measures in response to the C-TPAT requirement.

Regarding high-tech exports, the US Bureau of Industry and Security (BIS) created a Validated End-User (VEU) programme in June 2007 to facilitate civilian trade by reducing administrative and logistical hurdles for certain exports to pre-screened mainland Chinese companies. About four months later the BIS announced an initial list of five mainland Chinese companies approved to receive exports, re-exports and transfers of certain controlled goods and technology under the programme. Since then, several lawmakers and government watchdogs who are concerned that sensitive items exported without federal review could find their way to the Chinese military have called on the BIS to halt the VEU programme. In late January 2009, the BIS announced the full implementation of the VEU programme for China. As of December 2014, there were 12 authorised companies and more than 40 eligible facilities under the VEU programme for the Chinese mainland.

In his first State of the Union address on 27 January 2010, US President Obama unveiled the National Export Initiative (NEI) to boost exports and support new jobs. This was the first time the US has a government-wide export-promotion strategy with focused attention from the president and his cabinet. In addition, the Obama administration launched the NEI/NEXT in May 2014, which is a new customer service-driven strategy to help US companies reach more overseas markets by improving data, providing information on specific export opportunities, working more closely with financing organizations and service providers, and partnering with states and communities to empower local export efforts.

Established by Executive Order of the US President in 2011, SelectUSA is the first US government-wide effort to encourage, facilitate, and accelerate business investment in the US by both domestic and foreign firms. It provides enhanced coordination to existing resources and functions within the US Department of Commerce and across all federal departments and agencies with operations relevant to business investment.  It works in partnership with state, regional, and local economic development organisations to promote and facilitate overall US business attraction, retention, and reshoring. 

As a founding member of the 12-strong Trans-Pacific Partnership (TPP) group of countries – Australia, Brunei-Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam – the USTR on 5 November 2015 released the text of the TPP after a landmark agreement to liberalise trade in nearly all goods and services reached on 5 October 2015. The text, containing 30 chapters, was subsequently agreed and signed on 4 February 2016 and is expected to enter into force on or around 4 April 2018, although further delays are possibe. Under the text, the US will provide duty-free treatment to a broad range of originating products upon entry into force of the agreement. These products include, among others, most machinery, equipment and other products of HS Chapters 84 and 85; all clocks, watches and parts thereof of Chapter 91; most furniture, furnishings and fittings of Chapter 94; most games and sports equipment of Chapter 95; a broad range of textile, clothing and footwear products of Chapters 50 through 64; the vast majority of precious and semi-precious stones and imitation jewellery of Chapter 71; a range of plastic articles of Chapter 39; and most travel goods of heading 4202. In all, the US will eliminate an estimated 91% of duties on industrial products upon entry into force of the agreement, with tariffs on the remaining 9% phased out within 15 years or less. Meanwhile, US duties on a broad range of apparel products will be removed immediately, while duties on sensitive apparel items will be completely eliminated by 1 January of years five, 11 or 13.

Trade Rules and Regulations

Goods brought into the US are often subject to import duties, but import licences are generally not required. There are no foreign exchange controls over payments for imports.

Imports are usually subject to ad valorem and/or specific import duties. Regular rates are applied on imports from locations enjoying normal trade relations (NTR) or formerly most-favoured-nation status, including Hong Kong and the Chinese mainland. Products from some countries receive preferential import treatment via the US Generalised Scheme of Preferences (GSP). CBP has final authority on tariff classification for duty rates purposes.

The US rigorously enforces laws on dumping. When the DOC determines that a class of foreign goods is being, or is likely to be, sold to purchasers in the US at less than its fair value, an antidumping duty investigation may be conducted. The USITC is responsible for conducting the final injury investigation. If all the determinations are affirmative, the DOC will issue a duty order. On the other hand, the US also enforces laws on countervailing. When the DOC determines that a class of foreign goods receives countervailable foreign government subsidies, a countervailing duty investigation may be conducted. As a standard practice, the USITC is responsible for conducting the final injury investigation. If all the determinations are affirmative, the DOC will issue a duty order against the subject imports.

Imported goods are usually required to be marked with the country of origin in English. The marking has to be permanent, legible and conspicuous. Additional labelling is required on food, cosmetics, textiles and apparel, selected household products and flammable fabrics.

Certain imported products must be approved by the proper US authority. For example, certification by the Underwriters' Laboratory or ETL Testing Laboratories must be obtained for electrical appliances, gas equip¬ment and fire prevention apparatus.

Signed into law in August 2008, the Consumer Product Safety Improvement Act (CPSIA) forms part of a comprehensive effort by the US government to enhance the safety of imported consumer goods, which could create additional hurdles for the entry of items such as toys and other children’s products. Manufacturers of children's products must subject their products to third party testing of safety standards compliance 90 days after the publication of the applicable accreditation rule by the Consumer Product Safety Commission (CPSC).

As a proactive effort in raising Chinese manufacturers and importers’ compliance with the US product safety standards, the US’s CPSC set up its first overseas office in Beijing in January 2011. Also, the CPSIA was revised in May and signed into law on 12 August 2011 to include several important amendments. For example, the legislation includes a provision that implements the new 100 parts per million lead content standard for products designed or intended primarily for children 12 years of age or younger on a prospective rather than a retrospective basis. As a result, the new lead standard will apply to products manufactured on or after 14 August 2011 and not to products in inventory or on store shelves as of that date. On the other hand, the legislation creates a “functional purpose” exception for products, classes of products, materials or component parts that cannot meet the lead limits if the lead content serves a functional purpose, provided they are not likely to be placed in the mouth or ingested and reasonably foreseeable exposure to the product will not result in elevated blood lead levels.

Under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), the US requires specific documents for fur imports. In addition, to close a loophole in the Fur Product Labelling Act (FPLA) that exempts fur-trimmed garments from the labelling requirements, President Obama signed the Truth in Fur Labeling Act of 2010 into law on 18 December 2010. This legislation amends the Fur Products Labeling Act to require labelling of all fur garments, regardless of value.

Hong Kong’s Trade with the US [1]

The US is Hong Kong’s 2nd largest export market, behind only the Chinese mainland. Hong Kong’s total exports to the US fell by 6% to US$12.5 billion in the first four months of 2016, after increasing marginally to US$43.9 billion in 2015. Major export items in January-April 2016 included telecommunications equipment & parts (shared 18% of the total), computers (6%), pearls, precious & semi-precious stones (6%), jewellery (6%), articles of apparel, of textile fabrics (5%), women’s or girl’s wear of textile fabrics, not knitted (4%), electrical apparatus for electrical circuits (4%), electrical machinery & apparatus (4%), toys, games & sporting goods (4%), semi-conductors and electronic valves & tubes (4%), electrical power machinery & parts (3%), watches and clocks (3%) and parts & accessories of office machines/computers (3%).

On the other hand, the US is Hong Kong’s 5th largest source of imports. Hong Kong’s total imports from the US were down by 6% to US$8.2 billion in the first four months of 2016, after decreasing by 4% to US$27.0 billion in 2015. Leading import items in January-April 2016 included telecommunications equipment & parts (shared 16% of the total), semi-conductors and electronic valves and tubes (13%), pearls, precious and semi-precious stones (9%), jewellery (6%), fresh or dried fruit and nuts (not including oil nuts) (4%), works of art, collectors’ pieces and antiques (3%), fresh, chilled or frozen meat & edible meat offal (3%), measuring, checking, analyzing & controlling instruments & apparatus (3%), electrical apparatus for electrical circuits (3%) and fresh, chilled or frozen meat of bovine animals (3%).

Table: Hong Kong Trade with the United States
Table: Hong Kong Trade with the United States

US Involvement in the Hong Kong Economy

There are approximately 1,400 US firms in Hong Kong, concentrated in trading, banking and finance, and transport. As of 1 June 2015, there were 307 regional headquarters and 505 regional offices of US companies in Hong Kong.

The US is one of the major sources of foreign direct investment in Hong Kong. According to the latest Hong Kong official statistics, the US was the 6th-largest source of foreign direct investment in Hong Kong after British Virgin Islands, the Chinese mainland, the Netherlands, Bermuda and Cayman Islands, with a total stock of US$49.6 billion (or HK$385.0 billion) as at the end of 2014.
 
Most major US banks, insurance firms, transportation companies, and multinational corporations operate in Hong Kong. Among them are Citigroup, Federal Express, Exxon, Marriott International, Microsoft, IBM, Hewlett-Packard Company, American Express International, 3M, Starbucks, Coach, Samsonite, Forever 21, Gap, J. Crew, InVue Security, Direxion Asia Ltd (DAL), East-West Property Advisors, LuxTNT.com, PRA Global and Woodside Wine & Spirits.

Hong Kong invests in the US in various areas, such as hotel and manufacturing. The stock of Hong Kong's direct investment in the country amounted to US$10.1 billion (or HK$78.1 billion) as at the end of 2014. Hong Kong companies having presence/investment in the US include the Peninsula Group (hotel), the Bank of East Asia (banking), OOCL and Kerry Logistics (logistics), CK Hutchison (energy, finance and investment) and Lee Kum Kee and Vitasoy (food and beverage manufacturing).

As at the end of 2015, there were about 24,370 US nationals residing in Hong Kong, according to Hong Kong’s Immigration Department.


[1] Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the full picture of the export business managed by Hong Kong companies.

Content provided by Picture: Louis Chan