Funding and Financing Highways and Public Transportation

Robert S. Kirk and William J. Mallett
Specialist in Transportation Policy

Federal surface transportation programs are currently funded primarily through taxes on motor fuels that are deposited in the highway trust fund. Although there has been some modification to the tax system, the tax rates, which are fixed in terms of cents per gallon, have not been increased at the federal level since 1993. Prior to the recession that began in 2007, annual increases in driving, with a concomitant increase in fuel use, were sufficient to keep revenues rising steadily. This is no longer the case. Future increases in fuel economy standards are expected to suppress motor fuel consumption in the years ahead even if annual increases in vehicle mileage resume.

Congress has yet to address the surface transportation program’s fundamental revenue issues, and has not given serious consideration to raising fuel taxes in recent years. Instead, Congress has financed the federal surface transportation program by supplementing fuel tax revenues with transfers from the U.S. Treasury general fund. The most recent reauthorization act, the Moving Ahead for Progress in the 21st Century Act (MAP-21; P.L. 112-141), signed by President Barack Obama on July 6, 2012, authorized spending on federal highway and public transportation programs through September 30, 2014 and provided for general fund transfers to finance the programs. MAP-21 did not address concerns about funding of surface transportation programs over the longer term.

This report begins with a discussion of the problems associated with the trust fund financing system (which supports both federal highway and public transportation programs) and then explores possible options for financing surface transportation infrastructure. Among the key points:

• Raising motor fuel taxes could provide the highway trust fund with sufficient revenue to fully fund the program in the near term, but it may not be a viable long-term solution due to expected future declines in fuel consumption.

• Replacing current motor fuel taxes with a fuel sales tax or a fee based on vehicle miles traveled (VMT) raise a variety of financial and administrative concerns.

• The political difficulty of adequately financing the highway trust fund could lead Congress to consider the desirability of changes to maintain the trust fund system or eliminating it altogether. Such changes might involve a reallocation of responsibilities and obligations among federal, state, and local governments.

• Interest in improving transportation infrastructure with private and non-grant funding sources, such as tolls, public-private partnerships (PPPs), and federal loan programs is increasing, but many projects may not be well suited to alternative financing. 


Date of Report: September 23, 2013
Number of Pages: 33
Order Number: R42877
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The Trans-Pacific Partnership Negotiations and Issues for Congress

Ian F. Fergusson, Coordinator
Specialist in International Trade and Finance

William H. Cooper
Specialist in International Trade and Finance

Remy Jurenas
Specialist in Agricultural Policy

Brock R. Williams
Analyst in International Trade and Finance

The Trans-Pacific Partnership (TPP) is a proposed regional free trade agreement (FTA) being negotiated among the United States, Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. On March 15, 2013, Japanese Prime Minister Shinzo Abe announced that Japan would seek to participate in the TPP negotiations. On April 24, 2013, the Obama Administration gave Congress notice of its intent to negotiate with Japan in the TPP, and Japan participated for the first time in the round of negotiations in Malaysia during late July 2013. U.S. negotiators and others describe and envision the TPP as a “comprehensive and highstandard” FTA that aims to liberalize trade in nearly all goods and services and include commitments beyond those currently established in the World Trade Organization (WTO). The broad outline of an agreement was announced on the sidelines of the Asia-Pacific Economic Cooperation (APEC) ministerial in November 2011, in Honolulu, HI. If concluded as envisioned, the TPP potentially could eliminate tariff and non-tariff barriers to trade and investment among the parties and could serve as a template for a future trade pact among APEC members and potentially other countries. Congress has a direct interest in the negotiations, both through influencing U.S. negotiating positions with the executive branch, and by passing legislation to implement any resulting agreement.

The 18th round of negotiations concluded in Kota Kinabalu, Malaysia on July 24, 2013, and the 19th round is scheduled to be held in Bandar Seri Begawan, Brunei on August 23-30. The current goal is to reach an agreement by the end of 2013. For this deadline to be achieved, outstanding negotiating positions may need to be tabled soon in order for political decisions to be made. The negotiating dynamic itself is complex: decisions on key market access issues such as dairy, sugar, and textiles and apparel may be dependent on the outcome of controversial rules negotiations such as intellectual property rights or state-owned enterprises.

Twenty-nine chapters in the agreement are under discussion. The United States is negotiating market access for goods, services, and agriculture with countries with which it does not currently have FTAs: Brunei, Japan, Malaysia, New Zealand, and Vietnam. Negotiations are also being conducted on disciplines to intellectual property rights, trade in services, government procurement, investment, rules of origin, competition, labor, and environmental standards and other issues. In many cases, the rules being negotiated are intended to be more rigorous than comparable rules found in the WTO. Some topics, such as state-owned enterprises, regulatory coherence, and supply chain competitiveness, break new ground in FTA negotiations. As the countries that make up the TPP negotiating partners include advanced industrialized, middle income, and developing economies, the TPP, if implemented, may involve substantial restructuring of the economies of some participants.

The TPP serves several strategic goals in U.S. trade policy. First, it is the leading trade policy initiative of the Obama Administration, and is a manifestation of the Administration’s “pivot” to Asia. If concluded, it may serve to shape the economic architecture of the Asia-Pacific region by harmonizing existing agreements with U.S. FTA partners, attracting new participants, and establishing regional rules on new policy issues facing the global economy—possibly providing impetus to future multilateral liberalization under the WTO.

As the negotiations proceed, a number of issues important to Congress are emerging. One is whether the United States can balance its vision of creating a “comprehensive and high standard” agreement with a large and expanding group of countries, while not insisting on terms that other countries will reject. Another issue is how Congress will consider the TPP, if concluded. The present negotiations are not being conducted under the auspices of formal trade promotion authority (TPA)—the latest TPA expired on July 1, 2007—although the Administration informally is following the procedures of the former TPA. If TPP implementing legislation is brought to Congress, TPA may need to be considered if the legislation is not to be subject to potentially debilitating amendments or rejection. Finally, Congress may seek to weigh in on the addition of new members to the negotiations, before or after the negotiations conclude.

Date of Report: August 21, 2013
Number of Pages: 64
Order Number: R42694
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Japan Joins the Trans-Pacific Partnership: What Are the Implications?

William H. Cooper
Specialist in International Trade and Finance

Mark E. Manyin
Specialist in Asian Affairs

On July 23, 2013, Japan formally joined negotiations to establish a Trans-Pacific Partnership (TPP) becoming the 12 participant, including the United States. Japan’s membership in the TPP with the United States would constitute a de facto U.S.-Japan FTA. On April 12, 2013, the United States announced its support for Japan’s participation in the TPP. The announcement came after a series of discussions on conditions for U.S. support and outstanding bilateral issues. As a result of the discussions the two sides agreed on measures to address these issues as part of, and in parallel with, the main TPP negotiations. On April 20, the then-11 TPP countries formally invited Japan to participate in the negotiations. On April 24, then-Acting USTR Demetrios Marantis notified Congress that the United States intended to begin negotiations with Japan as part of the TPP thus beginning a 90-calendar-day consultation period with Congress.

The TPP would be a free trade agreement (FTA) among Japan, Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. The United States and its TPP partners envision the agreement as “a comprehensive, next-generation regional agreement that liberalizes trade and investment and addresses new and traditional trade issues and 21st century challenges.”

Congress has a direct and oversight role in the issue of U.S. participation in the TPP. It must approve implementing legislation, if the TPP is to apply to the United States. Some Members of Congress have already weighed in on Japan’s in the TPP and under what conditions. More may do so as the process proceeds.

The TPP is the leading U.S. trade policy initiative of the Obama Administration and a core component of Administration efforts to “rebalance” U.S. foreign policy priorities toward the Asia- Pacific region by playing a more active role in shaping the region’s rules and norms. As the second-largest economy in Asia, the third-largest economy in the world, and a key link in global supply/production chains, Japan’s participation would be pivotal to enhancing the credibility and viability of the TPP as a regional free trade arrangement. A large segment of the U.S. business community has expressed support for Japanese participation in the TPP, if Japan can resolve longstanding issues on access to its markets for U.S. goods and services. However, the Detroit-based U.S. auto industry and the UAW union have expressed strong opposition.

The TPP presents both risks and opportunities for the United States and Japan. On the one hand, if successful, it could reinvigorate a bilateral economic relationship that has remained steady but stagnant, by forcing the two countries to address long-standing, difficult issues, and allowing them to raise their relationship to a higher level. On the other hand, failure to do so could indicate that the underlying problems are too fundamental to overcome and could set back the relationship. It could signify the failure of the United States and/or Japan to deal with domestic opposition to a more open trade relationship.

In bringing Japan into the TPP talks, Prime Minister Abe has had to confront influential domestic interests that argued against the move. Among the most vocal have been Japanese farmers, especially rice farmers, and their representatives. Abe has acknowledged these domestic sensitivities, but also insisted that Japan needed to take advantage of “this last window of opportunity” to enter the negotiations, if it is to grow economically. Other Japanese business interests, including manufacturers, strongly support the TPP.


Date of Report: August 13, 2013
Number of Pages: 22
Order Number: R42676
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