With important responsibilities for the formulation of U.S. international trade and financial policies, Congress has an interest in understanding how these shifts of wealth and power are affecting U.S. economic interests. This report addresses these concerns in two parts by (1) describing and analyzing trends that are transforming the global economy, and (2) highlighting varied policy challenges raised by the new global economy for congressional consideration. Often referred to as "Factory Asia," this development has been driven by the proliferation of global supply chains that rely on significant amounts of goods and services inputs from different countries, including from the United States. The rising economic powers have also increased their financial holdings and wealth and are becoming more important players in international financial markets. While a dominant share of financial assets, financial centers, and financial regulatory power remains concentrated in the United States and Europe, these emerging economies have accumulated large volumes of foreign exchange reserves, established sovereign wealth funds, borrowed capital from international financial markets, attracted foreign direct investment, and begun investing some of their assets abroad. As a result of these changes, the long-standing division between advanced and developing countries has eroded, particularly for the handful of rising economic powers. The advanced or developed countries may still be the richest countries in terms of per capita incomes, but their economies may no longer be the largest, the fastest-growing, or the most dynamic. This development, in turn, has implications for U.S. economic well-being and global economic leadership that are subject to debate. Shifts in Global Production and Trade

			World GDP Rankings

The balance of international economic power is shifting from the United States and European powers that have dominated the world economy since the end of World War II to a few dozen developing countries located in Asia, Latin America, and the Middle East. Sources of World Growth

Led by China, India, and Brazil, rising economic powers are responsible for a dramatic shift in the sources of world GDP growth. Some research sees these changes contributing to growing income and employment changes throughout the U.S. economy with highly educated workers enjoying more job opportunities and higher wages than workers with less education. Issues for Congress

The changing global economic landscape poses numerous challenges and opportunities for U.S. international trade and financial policies, including the functioning of the global economic institutions. The future direction of U.S. trade negotiations—multilateral, regional, and bilateral—as well as analysis of trade relations, may need to take into better account the growing role that production chains and trade in intermediate products are playing in today's global economy. New issues raised by the changing global landscape include the role of state-owned enterprises, access to developing country markets for procurement, and distinctions among developing countries concerning their world trade obligations. These include concerns about the adequacy of the regulatory system for integrating developing countries into international financial arrangements, rules for direct investment, the role and operation of sovereign wealth funds, and the future of the dollar as world's primary reserve currency. The emergence of developing country multinational firms may also create greater competition for U.S. firms for natural resources, technology, and access to capital markets. U.S. Trade Negotiations and New Trade Policy Challenges

The growing redistribution of global economic power and rise of global supply chains has raised challenges for U.S. trade negotiations and trade policy. Shifts in relative economic power positions also raise broader questions concerning possible impacts on U.S. influence and leadership of the global economy.
A small group of developing countries are transforming the global economic landscape. Led by China, India, and Brazil, these rising economic powers pose varied challenges and opportunities for U.S. economic interests and leadership of the global economy. They also raise significant policy issues for Congress, including the future direction of U.S. trade policy and negotiations, as well as for the multilateral economic institutions that have historically served as the foundation of an open and rules-based global economy.
This report addresses ongoing shifts in global trade and finance and projected future trends resulting from the emergence of these economies. It is the first of a three-part CRS series that focuses on how the Rising Economic Powers are affecting U.S. interests and raising challenges for congressional oversight of U.S. international trade and financial policies.
The major trends in the global economy identified and discussed in this report are:
The balance of global economic power is shifting from the United States and Europe to a number of fast-growing and large developing countries. These economies account for rising shares of global GDP, manufacturing, and trade, including a significant expansion of trade among the developing countries (South-South trade). These shifts are driven by growing economic integration and interdependence among economies, particularly through new global production and supply chains that incorporate inputs from many different countries. Rising economic powers are becoming more important players in international finance. They have increased holdings of foreign exchange reserves, established sovereign wealth funds, borrowed capital from international capital markets, and attracted substantial foreign investment. Their multinational corporations, many state-owned, are investing assets globally and are competing with U.S. firms for natural resources and access to other developing-country markets. The long-standing distinction between advanced and developing countries, particularly for rising economic powers, is blurring. The advanced countries may still be the richest countries in terms of per capita income, but their economies may no longer be the largest, the fastest-growing, or the most dynamic. Rising economic powers are exerting greater influence in global trade and financial policies and in the multilateral institutions that have underpinned the global economy since World War II. These developments, in turn, have implications for U.S. global leadership that are subject to debate. While the impact of the rising economic powers is considered by most economists to be strongly positive for the U.S. economy overall, not all groups of Americans have benefitted equally. Highly educated workers are seen gaining more job opportunities and higher wages than workers with less education.
Issues for Congress on the international trade and finance policies raised by the changing global landscape could include:
Seizing full advantage of growing markets for U.S. manufacturers, service providers, agricultural producers, and their workers, including preparing for increased competition. The future direction of U.S. trade negotiations and the global trading system, as well as specific policies and issues raised by the global economy. These might include the increasing role of state-owned enterprises, access to developing country markets for services and government procurement, the future role of the dollar as the primary reserve currency, and U.S. participation in global supply chains, among other issues. The evolution of international frameworks for financial integration, as well as multilateral and bilateral frameworks for foreign direct investment and sovereign wealth funds.
This report will be updated as events warrant.