Вы находитесь на странице: 1из 77

COUNTRY ANALYSIS REPORT

USA
In-depth PESTLE Insights
Publication Date: April 2010

OVERVIEW
Catalyst
This profile analyzes the political, economic, social, technological, legal and environmental structure in the US. Each of the
PESTLE factors is explored on four parameters: current strengths, current challenges, future prospects and future risks.

Summary
Key findings
The US is recognized as a global power but public opinion has turned against some of its international policies
The US has long enjoyed its status as a superpower; by virtue of this status it exerts immense economic and political
influence over national and global policy making. The extent of this influence became evident when the US was able to defy
the UN, declaring the 'war on terror' which was spearheaded by the most recent invasions of Afghanistan and Iraq in 2001
and 2003 respectively. However, the long drawn-out nature of these conflicts combined with the economic slowdown and
corresponding social tensions have increasingly made the US population critical of the government's international policies.
On a number of occasions its actions have been seen as intrusive in the domestic affairs of other countries and as a result,
its credibility and standing have been steadily eroded around the world. At the same time, anti-US feeling has further fueled
Islamic terrorist groups. The US is among the top terrorist targets globally and the threat of terrorist attack is ever present.
President Barack Obama has attempted to reach out to countries such as Iran and has also been toning down the rhetoric
against such nations, which is expected to mollify the perceptions that the US is anti-Islamic. Despite this, the economy and
social security will remain the key areas for policy making.
President Obamas 2011 budget will cut spending and end tax breaks
President Obama announced a $3.8 trillion budget for 2011 which includes plans to increase spending for the creation of
jobs. However, Obama's administration is expected to save $250 billion by capping a range of domestic programs for three
years and he has suspended plans to send astronauts back to the moon. His 2011 budget also proposes the elimination of
$36.5 billion in tax credits for oil and gas companies such as Exxon, Chevron and ConocoPhillips over the next decade, as
well as the introduction of taxation measures for overseas profits for companies such as Microsoft, the worlds largest

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Overview

software maker. The budget is considered to be a delicate balancing act by President Obama, in view of the economic
recession which has destabilized the global economy since 2008. Furthermore the budget calls for an array of regulations,
subsidies and taxes aimed at cutting the emission of greenhouse gases. The inherent strength of the American economy
along with the policy shifts towards cutting greenhouse gases and the creation of jobs is considered to augur well for the
country.
Extensive social security faces the challenges of an aging population and unemployment
The US government has put an extensive social security system in place and is far ahead of other countries in terms of
total health spending per capita, which takes care of pensions as well as disabled and unemployed citizens. However, like
most developed economies the US is facing the problem of an aging population, as the baby boom generation grows old.
According to US census data, half of the population was more than 35.3 years old in 2000, which increased to 36.7 years in
2009. In this scenario, the US faces a risk of slower economic growth, serious labor shortages and rising tax rates over the
next few decades. The governments social security payments will also put substantial pressure on its finances. Social
security benefits constitute 90% of the income of one third of Americans over the age of 65. At the same time, the number
of people contributing to the social security system has been steadily declining. Under the current law, public spending on
retirement and health programs is expected to rise to 20% of GDP by 2050.
Reliance on the private sector could threaten the countrys status as the global research and development center
The US has maintained its leadership position with respect to technological innovations. Overall spending on research and
development (R&D) in the US totaled $398 billion in 2008, up from $373 billion in 2007 at a growth rate of 6.7%. It has a
well established intellectual property rights protection and enforcement system which encourages innovators from
elsewhere to come to the US. As a result, the R&D climate has been conducive to the country's reputation as a favorite
spot for a large number of multinational corporations. However, the over-dependence on the private sector makes the
technological development vulnerable to the business activities of private enterprises. Although the country presents an
impressive picture of technological advancement, the level of R&D expenditure as a percentage of GDP is less than that
undertaken in a number of other developed nations such as France, Germany and Japan. The R&D expenditure in
educational institutions has been increasing, but also remains comparatively less than that of other technologically
advanced nations.
The investment climate has improved but the multiplicity of regulations acts as a dampener
The US government presents a favorable legal climate. It has maintained its openness towards foreign direct investment
(FDI) and is the worlds largest recipient of such investment. The total stock of FDI in the US in 2009 reached $2.39 trillion
as of December 31, 2009, increasing marginally from $2.36 trillion as of December 31, 2008. In order to retain the US'
attractiveness as an investment destination and as a reaction to the financial crisis, the authorities have begun to take stock
of financial regulations in an attempt to improve transparency.
Although the countrys strict corporate governance rules are hailed for their transparency, they have also been termed a
deterrent for foreign investors. Increasingly, foreign companies are complaining about the directives of the Securities and
Exchange Commission (SEC). Moreover, business enterprises are required to adhere to a large number of state and
federal government regulations, depending on where their businesses are situated. The non-uniformity of business laws
can make operating in the country tough, as it becomes difficult for companies to meet the requirements of more than one
state.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Overview

Measures to cut greenhouse gas emissions have been introduced but a fluctuating renewable energy market
creates cause for concern
President Obama's 2011 budget has initiated the formulation of regulations, subsidies and taxes aimed at cutting the
emission of greenhouse gases. The budget contains an increase of $39 billion in taxes on fossil fuel producers over a
period of 10 years, as well as an end to tax breaks and other incentives for the domestic production of oil, natural gas and
coal. Furthermore the budget proposes to triple federal support for nuclear energy, by adding $36 billion in new loan
authority for a Department of Energy program aimed at accelerating the construction of new reactors. An estimated $1.4
billion will be set aside to help developing countries address the impact of climate change, reduce deforestation and shift to
low-carbon energy sources.
The US renewable energy market has been fluctuating in value over recent years. Decelerated growth is expected for
2010, followed by further fluctuating growth rates throughout the remainder of the forecast period until 2014. The US
renewable energy market generated total revenues of $42.2 billion in 2009, representing a compound annual growth rate
(CAGR) of 1.6% for the period spanning 200509. In comparison, the European and Asia Pacific markets grew with
CAGRs of 6.2% and 4.4% respectively over the same period, to reach respective values of $137.7 billion and $102.7 billion
in 2009.

PESTLE highlights
Political landscape

In the congressional elections that took place on November 4, 2008, the Democratic Party took control of both
houses of the US Congress with a 256178 advantage in the House of Representatives and a 5641 advantage
in the Senate. Barack Obama, the party's candidate, assumed the presidency in January 2009.

The US has a low ranking in terms of political stability and the absence of violence. The country figures high on
the list of nations susceptible to terrorist attacks, while its international policies to fight terrorism have aggravated
the situation.

Economic landscape

According to the Congressional Budget Office (CBO), the budget deficit is expected to reach $1.3 trillion in fiscal
2010, slightly less than the $1.4 trillion recorded in fiscal 2009. The countrys fiscal deficit in 2009 was almost
10% of its GDP and this is definitely a cause for concern.

Since December 2008, the central bank has decided to hold benchmark overnight rates in the 00.25% range.
The Federal Reserve is likely to increase interest rates as the countrys economy is expected to bounce back,
with a growth rate of 2.5% forecast for 2010.

Social landscape

The demographic transition of the country poses a challenge. The rapid increase of people who are 65 and over
will begin in 2011, when the baby boom generation reaches age 65. This will then continue for many years.

The US remains an inequitable society, with the richest quintile making six times as much money as the poorest
quintile in 2007.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Overview

Technological landscape

The US leadership position in innovation is clear due to the fact that it is home to one third of the worlds
scientists and engineers, and accounts for one third of global R&D expenditure.

Technological innovation within the private and educational sector has been increasing, with each sector
accounting for 70.0% and 14.0% of innovations, respectively.

Legal landscape

The World Banks Doing Business 2010 report has ranked the US in fourth place with respect to ease of doing
business. The country's economic policies are generally pro-business and it has a very well developed financial
regulatory system, with financial markets being open to competition.

High tax rates and the differential federal rates of taxes however are major dampeners for business.

Environmental landscape

With 4.6% of the world's population, the US accounts for 20.9% of global emissions, producing an average of
20.6 tons of carbon dioxide per person in 2007. These emission levels are above those of other high-income
countries.

President Obamas 2011 budget proposes tripling federal support for nuclear energy, by adding $36 billion in new
loan authority for a Department of Energy program aimed at accelerating the construction of new reactors.

Key fundamentals

Table 1:

The US: key fundamentals

GDP, constant 2000 prices ($ billion)


GDP growth rate (%)

2008

2009

2010e

2011f

2012f

2013f

2014f

11,807.4

11,518.0

11,801.1

12,169.7

12,506.1

12,840.0

13,127.9

0.8

-2.5

2.5

3.1

2.8

2.7

2.2

38,811

37,492

38,039

38,852

39,543

40,209

40,716

Exports, total as % of GDP

12.53

11.01

10.60

10.77

10.74

10.72

10.81

Imports, total as % of GDP

17.57

15.40

15.98

16.81

17.01

17.03

17.01

304.06

307.21

310.23

313.23

316.27

319.33

322.42

5.80

9.28

10.00

9.17

9.04

8.98

9.12

GDP, constant 2000 prices, per capita ($)

Mid-year population, total (million)


Unemployment rate (%)
Doctors per 1,000 people
Mobile penetration (per 100 people)

2.38

2.38

2.37

2.37

2.37

2.37

2.36

84.26

85.76

87.22

88.65

90.04

91.4

92.72

Source: Datamonitor

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

D AT AM O N IT O R

Published 04/2010

Table of Contents

TABLE OF CONTENTS
Overview

Catalyst

Summary

Key facts and geographical location


Key facts
Geographical location
PESTLE analysis

9
9
10
11

Summary

11

Political analysis

12

Economic analysis

16

Social analysis

20

Technological analysis

23

Legal analysis

27

Environmental analysis

30

Political landscape

33

Summary

33

Evolution

33

Structure and policies

36

Performance

39

Outlook

40

Economic landscape

41

Summary

41

Evolution

41

Structure and policies

43

Performance

45

Outlook

55

Social landscape

56

Summary

56

Evolution

56

Structure and policies

56

Performance

59

Outlook

62

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Table of Contents
Technological landscape

63

Summary

63

Evolution

63

Structure and policies

63

Performance

65

Outlook

67

Legal landscape

68

Summary

68

Evolution

68

Structure and policies

68

Performance

72

Outlook

72

Environmental landscape

73

Summary

73

Evolution

73

Structure and policies

73

Performance

74

Outlook

76

APPENDIX

77

Ask the analyst

77

Datamonitor consulting

77

Disclaimer

77

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Table of Contents

TABLE OF FIGURES
Figure 1:

Map of the US

10

Figure 2:

The US: key political events since 1940

34

Figure 3:

The US: key political figures

36

Figure 4:

The US: historical GDP growth and key economic events (19702009)

42

Figure 5:

Market capitalization of NYSE, 200108

44

Figure 6:

GDP and GDP growth rate in the US, 200313 (real GDP at constant 2000 prices)

46

Figure 7:

GDP composition by sector in the US, 2009

47

Figure 8:

Agricultural output of the US, 200309

48

Figure 9:

Industrial output of the US, 200309

49

Figure 10:

Service output of the US, 200309

50

Figure 11:

External trade of the US, 200509

51

Figure 12:

Consumer price index and inflation in the US, 200313f

53

Figure 13:

Unemployment rate in the US, 200313

55

Figure 14:

Major religions in the US, 2009

58

Figure 15:

Expenditure on healthcare in the US, 200309

60

Figure 16:

Government expenditure on education in the US, 200309

62

Figure 17:

The US court system

69

Figure 18:

Carbon dioxide emission in the US, 200313

75

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Table of Contents
TABLES
Table 1:

The US: key fundamentals

Table 2:

The US: key facts

Table 3:

Analysis of the US political landscape

12

Table 4:

Analysis of the US economy

16

Table 5:

Analysis of the US social system

20

Table 6:

Analysis of the US technology landscape

23

Table 7:

Analysis of the US legal landscape

27

Table 8:

Analysis of the US environmental landscape

30

Table 9:

Mid-year population by age (millions), 2008

57

Table 10:

Comparative performance on receipt of patents, 200008 (USPTO)

64

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Key Facts and Geographical Location

KEY FACTS AND GEOGRAPHICAL LOCATION


Key facts

Table 2:

The US: key facts

Country and capital


Full name

United States of America

Capital city

Washington

Government
Government type

Federal Republic

Head of state

President Barack Obama

Head of government

President Barack Obama

Population

301 million

Currency

Dollar

GDP per capita (PPP)

$46,400

Internet domain

.us

Demographic details
Life expectancy

78.1 years (total population)


75.6 years (men)
80.6 years (women)

Ethnic composition (2003 data)

Whites 81.7%, Blacks 12.9%, Asians 4.2%, and others 1.2%

Major religion (2007 data)

Protestants 51.3%, Roman Catholics 23.9%, other Christians 1.6%,


and others 23.2%

Country area

9,826,630 sq km

Language

English

Exports

Agricultural products, industrial supplies, capital goods (transistors,


aircraft, motor vehicle parts, computers, telecommunications
equipment), consumer goods (automobiles, medicines)

Imports

Agricultural products, industrial supplies, capital goods (computers,


telecommunications equipment, motor vehicle parts, office machines,
electric power machinery), consumer goods (automobiles, clothing,
medicines, furniture, toys)

Source: CIA

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

DAT AMONITOR

Published 04/2010

Key Facts and Geographical Location


Geographical location
The US is located in North America, bordering both the North Atlantic Ocean and the North Pacific Ocean; it shares its
boundaries with Canada and Mexico.
Figure 1:

Map of the US

Source: CIA The World Factbook

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

DAT AMONITOR

Published 04/2010

PESTLE Analysis

PESTLE ANALYSIS
Summary
Since the middle of the 20th century, the US has been the dominant global power in economic, political, military, scientific,
technological and cultural affairs. The country has successfully become a technological leader through the early adoption
and propagation of information and communication technology. Meanwhile, its military might is absolute, and an extensive
network of regional alliances and security arrangements ensures its diplomatic power. The country not only enjoys
economic supremacy but also a stable political establishment which has witnessed the continuity of certain policies
irrespective of the regime. Barack Obama succeeded George W. Bush as president in January 2009, having defeated John
McCain of the Republican Party in the presidential elections.
With a GDP of more than $11 trillion in 2009 the US has the largest economy in the world, far ahead of the West European
nations and Japan. After the economic boom of the 1990s growth slowed down after 2000, while the events of 9/11 added
to the economic decline. Despite the slowdown, the economy managed a CAGR of 2.8% over 200106; however, in the
second half of 2006 the economy started decelerating below the long-term growth trend.
The US economy was in recession in 2009, during which time the countrys economy contracted by 2.5%. In addition to the
$188 billion stimulus package in 2008, the Obama administration initiated a $787 billion stimulus package in February
2009. This has increased the governments indebtedness. Moreover, the US Congress passed an 8% increase in spending
for the balance of fiscal 2009. Although the government has no problem selling its debt in the current market, there is a
growing concern about its ability to do so in the future; Chinese premier Wen Jiabao voiced his concern about the state of
US credit in 2009. The countrys public debt increased from 39.7% of GDP in 2008 to reach 52.9% of GDP in 2009.
On the social front, as a result of its rapidly aging population the US faces the risk of slower economic growth, serious labor
shortages and rising tax rates over the next few decades. Furthermore, the aging population and rising healthcare costs are
projected to increase the burden on public retirement and healthcare systems.
In the technological sphere, the US has been a leader in adapting and applying technology since its inception. Continued
investment is likely to see the US retain its technological superiority in the near future. Regulatory and legal reforms in a
broad range of industries began in the 1970s and accelerated over the course of the 1980s, resulting in deregulation in
many sectors, which has enhanced competition and improved overall efficiency.
The nation's economic ambitions, however, have meant that it has not achieved a balance between its economic growth
and environmental sustenance, which is reflected in its performance on environmental indicators.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

PESTLE Analysis

Political analysis
Overview
The US continues to have a major influence in economic, political, and military spheres. In its domestic policies, it has an
effective judicial system along with prevalence of rule of law. The current economic climate of the country has forced the
government to pursue policies which aim to increase disposable income. The government has been accused of double
standards for its foreign policies, specifically relating to Iraq and Afghanistan.

Table 3:

Analysis of the US political landscape

Current strengths

Current challenges

Strong democratic setup

Internal disagreements in the presidential team

Global influence

Slowdown of economy and social tension


Threat of terrorism

Future prospects

Future risks

Recent negotiations for free trade agreements

Rift between Israel and the US

Emergence of new political classes

Increasing international criticism of interventionist policies


Illegal immigration may increase discontent

Source: Datamonitor

DAT AMONITOR

Current strengths
Strong democratic setup
The US has a robust democratic setup which has also proved to be its inherent strength. The countrys federal character
has been well entrenched, as the states have their own legislative and executive power which are integrated with national
policies. According to the world governance indicators ranking by the World Bank, in 2008 the US had a good percentile
rank of 86.1 in voice and accountability. The principles of democracy are deep-rooted and elections are considered to be
fair and transparent. Furthermore, the election process is transparent, with adequate participation of citizens. The country
also has an active media which functions as an effective pressure group. However, the involvement of business interest
groups in the election process, through the provision of soft funds, occasionally makes the system of policy making biased.

Global influence
Since the end of the Cold War, the US has been recognized as the leading power in the world. By virtue of this status, it
enjoys immense economic and political influence over national and global policy making, having secured the support of a
majority of nations. The extent of this influence became evident when the US declared a 'war on terror', spearheaded by
the invasions of Afghanistan and Iraq.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

PESTLE Analysis

Furthermore, according to a survey by the Chicago Council on Global Affairs and the East Asia Institute of South Korea in
2009, the US remains highly regarded in all of the key issues covered: American soft power, economics, culture, human
capital and diplomacy. The report suggests that American soft power was hit by the financial crisis, although it continued to
have significant advantages over China.

Current challenges
Internal disagreements in the presidential team
President Obama has made a serious bid to reach across the partisan divide by appointing high profile experts with an
affiliation to the Republican Party. Because of this the Obama administration faces internal threats, as there are a number
of independent figures and high profile individuals from the Republican Party in his administration. Robert Gates, the
Defense Secretary under Obama's Republican predecessor, George W. Bush, was asked to stay on in his position and
Obama has nominated another Republican, Ray LaHood, as the transport secretary. These choices indicate that the
president especially opted for a team of experts with strong political experience, regardless of partisan preferences, for key
appointments in his administration. Therefore, there is a likelihood of strong internal disagreements and dissension in the
administration, which could be a major challenge.

Slowdown of economy and social tension


The recession in the country has brought many challenges for the US government. The slowdown in the manufacturing
sector and the recessionary trend in housing have continued, which could give rise to labor difficulties and social tension.
The industrial output declined from 1.2% in 2008 to reach a meager 0.3% in 2009. Doubts regarding the outsourcing of
services continue, as such actions are perceived to reduce the employment opportunities for the native population. Due to
the changing economic situation the government has been forced to take measures such as reducing the visa caps on
foreign workers, which was not its original agenda.

Threat of terrorism
The US is among the top terrorist targets globally and the threat of terrorist attack is ever present. Moreover, the US
embassies in many countries have already come under attack from Islamic terrorists. The former Bush government
pursued its 'war on terror' vehemently and secured support from many European nations in this course. Initially, this worked
to the government's favor, increasing its popularity; however, gradually the US population became critical of many of the
actions that the government was carrying out. With the passage of time, the war on terror has lost much of its appeal within
the nation as well as internationally. At the same time, anti-US feeling has further fueled Islamic terrorist groups.
Unfortunately, the sequence of events after 9/11 and the US war on terrorism have made minority groups in the US
vulnerable to attack. Within a week after 9/11, the Council on American-Islamic Relations reported more than 300 cases of
harassment and abuse of Muslims and Southeast Asian minorities, which was nearly half the total number it received in
2000.

Future prospects
Recent negotiations for free trade agreements
The US has propagated free trade agreements (FTAs) with other nations to bolster trade and drive its economy. In a
continuation of this initiative, the country has been negotiating an FTA with South Korea, which is still pending in the US.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

PESTLE Analysis

The FTA has been billed as the most noteworthy event in the US-South Korea relationship since the two countries signed
their military accord in 1953. Economically it is expected to enhance two-way trade, which is already worth $79 billion a
year, by as much as $20 billion in the coming years. Apart from bolstering trade between the two nations, the FTA has also
been considered vital in giving thrust to the economic initiatives of the South Korean president, Lee Myung-bak.
The US has also been carrying out negotiations with countries such as Malaysia, although there are a number of political
issues to be ironed out before an FTA can be agreed. Once these agreements are in force, they are expected to enhance
trade between the nations, and the US is keen to leverage the opportunity.

Emergence of new political classes


US society has evolved over the years, witnessing an amalgamation of many social classes into its mainstream. For
example those immigrants who have made the US their home are rising in political circles, with many occupying high
offices at federal and national levels. It is expected that the emergence of these political groups will influence policies in
favor of minorities.

Future risks
Rift between Israel and the US
Historically, the US has had strong relations with Israel. However, there are reports of disagreements between President
Obama and Israeli Prime Minister Benjamin Netanyahu. Although both sides agree that Iran should not develop nuclear
weapons, there are differences with regard to the ways in which they believe Iran should be dealt with. President Obama is
hoping to convince Iran not to go ahead with its weapons program, and has toned down the hawkish remarks against Iran
typical of the shrill rhetoric of the Bush administration. Israel continues to be skeptical with regard to this new approach.
With regard to the Palestine issue, President Obama is in support of the creation of a Palestinian state alongside Israel.
Moreover, he believes that both sides have obligations towards this end. Israel has a right to protect its citizens from the
rocket attacks being launched by Hamas in Gaza. At the same time, President Obama believes that the blockade of
Palestine increases the hardship of Palestinians, which heightens the risk of attack against Israel. However, Prime Minister
Netanyahu does not subscribe to the two state theory. Although he supports the idea of a limited self-government in
Palestine, he believes that Palestinian independence in east Jerusalem and the West Bank could result in a forward missile
base for Hamas and Iran. Therefore, the US and Israeli leaders may be on a collision course. The right wing coalition led by
Mr. Netanyahu is expected to take a hardline stance with regard to continuing expansion of Jewish settlements in occupied
territories, while Obama is expected to reiterate his opposition against the expansion, which is against international law.

Increasing international criticism of the interventionist policies of the US


The former Bush administration's 'war on terror' earned it a great deal of criticism from a number of countries, damaging
both international and domestic public opinion of the US' foreign policy. On a number of occasions its actions have been
perceived as intrusive in the domestic affairs of other countries and as a result, the US credibility and standing have been
steadily eroded around the world. Consequently it will be difficult for the incumbent government led by Barack Obama to
take unilateral action in the future.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

PESTLE Analysis

Illegal immigration may increase discontent


The US is faced with the problem of dealing with illegal immigrants and as many as 30 states have passed laws or taken
steps to crack down on this problem. It is estimated that there are around 12 million illegal immigrants in the US. Under
federal law, states are expected to provide some services to illegal immigrants, including public education and emergency
medical care. However, illegal immigrants are being dealt with severely in many states, which is souring relations between
the federal and state governments. There are an increasing number of racially motivated attacks against minority groups,
which reflects a growing racial intolerance. It is expected that conditions will deteriorate in the future due to the threat of
terrorism, the influx of illegal immigrants and increasing unemployment.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

PESTLE Analysis

Economic analysis
Overview
The US is the largest economy in the world, with a GDP of more than $11.5 trillion and a per capita GDP of $46,400 in
2009. Real GDP contracted by around 2.5% in 2009. The unemployment rate soared to approximately 9.3% in 2009, which
is the highest rate of unemployment in the country since 1983. To help stabilize financial markets, Congress established a
$700 billion Troubled Asset Relief Program (TARP) in October 2008. The government used some of these funds to
purchase equity in US banks and other industrial corporations. In January 2009, Congress passed a bill signed by
President Obama which provided an additional $787 billion fiscal stimulustwo thirds on additional spending and one third
on tax cutsto create jobs and to help the economy recover. President Obamas 2011 budget further proposes to create
jobs and cut back spending on several fronts; to increase the resources available, the government has decided to axe the
tax credits for oil and gas companies. The US is expected to bounce back from recession to record a growth rate of 2.5% in
2010.

Table 4:

Analysis of the US economy

Current strengths

Current challenges

Well developed economy

Recession

Obamas 2011 budget plan

Rising unemployment

Future prospects

Future risks

Financial stimulus

Drive towards free market policies may slow down

Strong retail savings and investment market

Increasing budget deficit

Source: Datamonitor

DAT AMONITOR

Current strengths
A well developed economy
The US has one of the most developed economic systems in the world, enabling it to overcome deep global economic
crises. Its GDP in 2009 stood at $11.5 trillion. The economy gathers strength from its diversity and its leadership position in
the manufacturing and services sectors. It is a forerunner in industries such as automotive, aerospace,
telecommunications, chemicals, electronics and information technology (IT). Its traditional industries have also been
strengthened by the adoption of modern technology, while US services companies have managed to remain costcompetitive by offshoring a number of services. Except for oil, the country is self-sufficient in regards to most raw materials,
which adds to its economic might.

Obamas budget
President Obama announced a $3.8 trillion budget for 2011 which includes plans to increase spending for the creation of
jobs. However, Obama's administration is expected to save $250 billion by capping a range of domestic programs for three
years and has suspended plans to send astronauts back to the moon. His 2011 budget also proposes to end tax breaks for

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

PESTLE Analysis

the elimination of $36.5 billion in tax credits for oil and gas companies such as Exxon, Chevron and ConocoPhillips over the
next decade, as well as the introduction of taxation measures for overseas profits by companies such as Microsoft, the
worlds largest software producer. The budget is considered to be a delicate balancing act by President Obama, in view of
the economic recession which has destabilized the global economy since 2008. Furthermore the budget calls for an array
of regulations, subsidies and taxes aimed at cutting the emission of greenhouse gases. The inherent strength of the
American economy along with the policy shifts towards cutting greenhouse gases and the creation of jobs is considered to
augur well for the country.

Current challenges
Recession
The economic slowdown began in 2007 and is not showing any signs of recovery. It was triggered by the 2006 slump in the
housing market, which has subsequently deteriorated. New and existing home sales in January 2008 declined by 34% and
23% respectively, compared to the same period in 2007. Despite a fall in house prices, supply continues to exceed
demand. Manufacturing activities have also slowed down, as the demand for both consumer and capital goods has
declined. The global economic slowdown led to recession in the country with the economy contracting by 2.5% in 2009,
while the countrys real GDP growth came down from 2.1% in 2007 to 0.8% in 2008.

Rising unemployment
According to the Department of Labor's Bureau of Labor Statistics, the number of unemployed individuals grew by 134,000
in March 2010 from February, to reach 15 million. In 2009 the unemployment rate reached 9.2% due to the recession, up
from 5.8% in 2008. According to the International Monetary Fund (IMF), the high degree of financial stress and uncertainty
are impeding a speedy recovery in the supply of jobs in the US, and high levels of unemployment continue to be a major
challenge to the government.

Future prospects
Financial stimulus
Obamas administration aggressively pushed its $787 billion stimulus package in 2009, a much larger investment compared
to the $188 billion package of 2008. The stimulus package included funds for unemployed benefits ($83 billion), healthcare
($148 billion), tax cuts for both individuals ($237 billion) and businesses ($51 billion), as well as spending on what is
typically thought of as stimulus, such as building roads ($45 billion) and energy infrastructure ($45 billion). By April 2009,
around $54 billion had been "obligated," meaning that municipalities or other recipients could begin drawing from these
funds, while a further $11.7 billion was disbursed. States also began to invest in highways, expecting to receive funds from
the federal Transportation Department as a part of the stimulus package. Moreover, workers began to see bigger pay
cheques as a result of a payroll-tax cut included in the package.
In February 2009, new measures for the financial sector were announced under the Financial Stability Plan (FSP). The
FSP replaced the Troubled Asset Relief Program (TARP, which was criticized due to its lack of effect on lending.
Furthermore, TARP imposed little accountability in terms of disbursements, especially relating to executive pay, which
incensed the American public. The scheme has three parts. Firstly, a public-private investment fund with up to $1 trillion is
to be created. This will take toxic assets off banks' balance sheets (which have been contributing to fears of insolvency).
Secondly, if private funds are insufficient, the remaining $350 billon of TARP funds will be used to improve commercial
USA: Country Analysis Report In-depth PESTLE Insights
Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

PESTLE Analysis

banks' capital reserves. Thirdly, the Term Asset-Backed Securities Loan Facility (TALF), which currently has $200 billon of
funding, is to be extended to $1 trillion. The total cost of these measures could be up to $2.5 trillion. The FSP is expected to
revive the troubled financial sector in the country.

Strong retail savings and investment market


The retail savings and investment market includes four non-life retail savings and investment products: deposits, mutual
funds, direct investment in equity and direct investment in bonds. Following a period of decent growth, the market plunged
into decline in 2008, with the market remaining in such a state in 2009. Recovery is forecast for 2010, followed by
accelerating growth through to 2014.
The US retail savings and investments market had total assets of $20,457 billion in 2009, representing a compound annual
rate of change (CARC) of -1.8% for the period spanning 200509. In comparison, the European and Asia Pacific markets
grew with CAGRs of 1.3% and 0.3% respectively over the same period, to reach respective values of $14,585.9 billion and
$10,123.6 billion in 2009.
The deposits segment was the US market's most lucrative in 2009, with a total value of $9,240.4 billion which is equivalent
to 45.2% of the market's overall value. The equities segment contributed a further $4,360 billion in 2009, equating to 21.3%
of the market's aggregate value.
The performance of the market is forecast to accelerate, with an anticipated CAGR of 5.7% for the five-year period 2009
14; this is expected to drive the market to a value of $27,039.3 billion by the end of 2014. Comparatively, the European and
Asia Pacific markets will grow with CAGRs of 5.8% and 3.4% respectively over the same period, to reach respective values
of $19,363.7 billion and $11,973.2 billion in 2014. This indicates that the US will continue to be far ahead in terms of retail
savings and investment.

Future risks
Drive towards free market policies may slow down
There has been increasing resentment among consumers concerning the globalization and liberalization of trade, which to
make matters worse has received some political support. Such resentment will result in raising protective barriers and a
decline in offshoring services. For example President Obama proposes to cut tax incentives to companies that outsource
jobs in May 2009, stating that companies should record their profits in the home country and not elsewhere. Moreover,
Obama has also reaffirmed his intention to bring in measures which will increase transparency, especially with regard to
American bank accounts in foreign tax havens. Obamas policies might affect outsourcing and thus increase costs for
companies.
There is also a growing disparity in income between skilled and unskilled workers, partly brought about by technological
development. It is widely believed that immigration and outsourcing have depressed the wages of domestic low-skilled
workers. A small number of states, including North Carolina, Indiana, New Jersey and Michigan, have already introduced
anti-outsourcing laws, while the US Senate passed the first federal law against outsourcing in 2004, barring American
companies from giving out sub-contracts to low cost nations. In view of public opinion, the US may drift away from free
market policies.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

PESTLE Analysis

Increasing budget deficit


According to the Congressional Budget Office (CBO), the budget deficit will reach $1.3 trillion in fiscal 2010, slightly less
than the $1.4 trillion recorded in fiscal 2009. The CBO also added that if current government policy does not change,
budget deficits are expected to average $600 billion annually between 2011 and 2020. The governments debt limit is
expected to reach around $14 trillion by the end of 2010, up from $12 trillion in 200910, and is expected to climb to $15
trillion by 2015. Analysts and economists continue to believe that the future economic prosperity of the country is at grave
risk if the budget deficits are not reduced in the future.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

PESTLE Analysis

Social analysis
Overview
As a result of a rapidly aging population, the US faces a risk of slower economic growth, serious labor shortages and rising
tax rates over the next few decades. The distribution of income in the US is the most unequal of all major economies, while
poverty and child poverty rates are the highest of all developed nations, as is the infant mortality rate. An aging population
and rising healthcare costs are projected to increase the burden on public retirement and healthcare systems.
The UN's Human Development Index 2009 has ranked the US in 13th place; noticeably, it is ranked below various
developed nations such as Norway, Iceland, Canada and Japan. In April 2010 the US Congress approved an almost sixweek extension of federal jobless benefits and health insurance subsidies for unemployed people. The social security
system has operated successfully in the US for many years, but the decline in economic growth and the aging of the baby
boomer population will cause social security to become a financial burden on the governments revenue. Expenditure on
pensions and healthcare will increase in the coming years, but there are concerns that the country's revenue will not be
sufficient to match this growth.

Table 5:

Analysis of the US social system

Current strengths

Current challenges

Impressive education system

Ageing population

Healthcare and social security policies in place

Increasing inequality of income

Future prospects

Future risks

Universal healthcare

Social security outgoings to burden government finances

Increase in labor productivity


Extension of jobless benefits and health insurance subsidies

Source: Datamonitor

DAT AMONITOR

Current Strengths
Impressive education system
The US has an efficient education system with a high level of attainment. The quality of education in the US is among the
best in the world, which is one of the major reasons for the presence of a large number of international students in the
country, particularly in higher education. According to the OECD report Education at a Glance (2009), around 39% of the
adult population in the 2564 age group is qualified up to the tertiary level in the US, which is above the OECD average of
27%. Other countries are now catching up with the performance of the US, but it is expected to maintain its lead because of
its strong foundation.

Healthcare and social security policies in place


The US healthcare system has evolved over the years to be one of the best in the world. Total government health
expenditure increased from $57.7 billion in 2008 to $59.8 billion in 2009, which is nearly 19% of GDP. Moreover, healthcare

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

PESTLE Analysis

expenditure in the US is above the average spending of developed nations. The US also ranks far ahead of other countries
in terms of total health spending per capita, as well as having an extensive social security system in place which takes care
of pensions, and disabled and unemployed individuals.

Current challenges
Ageing population
Like most developed economies, the US is facing the problem of an aging population as the baby boomer generation grows
old. According to US census data, half of the population was more than 35.3 years old in 2000, which was the countrys
highest median age to date. In 2000, the majority of the population belonged to the 3544 years age group. The median
age is estimated to have reached 36.7 years in 2009, which indicates that more than half the population is beyond this
mark. The ongoing trend of an aging population poses a threat as the labor market will experience a dramatic loss of
personnel, as many seniors retire from the workforce.

Increasing inequality of income


The economic progress of the US has also led to inequality of income distribution, which has become a social concern;
according to the United Nations Development Programme (UNDP) report, as measured by the Gini coefficient, the US
rd

ranks 73 of 126 countries in terms of income equality. The percentage of people below the poverty line is also high at
13%. The main causes of poverty are the low minimum wage and regional imbalance in job opportunities. Although strong
growth benefited low-wage workers and their families, inequality has continued to rise. In the US, growth has not translated
into increased wages or redistributive social policies.

Future prospects
Universal healthcare
President Obama signed into law a new healthcare bill on March 29, 2010, which has overhauled the $2.5 trillion US
healthcare system. The Patient Protection and Affordable Care Act (known as the "Senate bill") became law on March 23,
2010 and was shortly thereafter amended by the Health Care and Education Reconciliation Act of 2010. The legislation is
the most comprehensive shift in US social policy in decades, extending insurance coverage to 32 million previously
uninsured people. The bill also bars insurers from excluding coverage to people with pre-existing medical conditions and
prevents them from arbitrarily dropping policy holders. According to the bill individuals are required to obtain health
insurance, with failure to do so resulting in fines of up to 2.5% of income by 2016. Firms with more than 50 workers which
do not offer medical coverage could face fines of $2,000 per full-time employee. Furthermore, Medicaid, the government
health insurance program for the poor, will be available to everyone with incomes of up to 133% of the poverty level, which
stands at $10,830 for an individual and $22,050, for a family of four. Many states have eligibility requirements below those
levels.

Increase in labor productivity


The US has traditionally enjoyed high labor productivity, although this has declined since 2007. The decline is likely to be
more a result of cyclical factors than structural weakness, and the country's productivity remains higher than that of most
European and Asian countries. It is widely believed that R&D, patents and management innovations have contributed to
productivity growth in the US, while the diffusion of new technologies and their application in more firms and sectors will

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

PESTLE Analysis

continue to boost productivity gains. The US will continue to remain a leader in terms of innovation and development of new
technologies. Moreover, the increasing demand for such technologies explains the country's competitiveness.

Extension of jobless benefits and health insurance subsidies


In April 2010 the US Congress approved an almost six-week extension of federal jobless benefits and health insurance
subsidies for unemployed people, amounting to $18.2 billion. The bill is expected to extend the maximum total of 99 weeks
of combined federal and state jobless benefits to June 2, 2010. This means that unemployed people who have exhausted
shorter periods of benefits will continue to receive cheques from the federal government. Furthermore, under the bill the
flood-insurance program allows homeowners and businesses to protect against flood-related losses by buying insurance
from the government. The bill is expected to continue healthcare subsidies through the Cobra program and includes funds
to avert a 21% decrease in payments to doctors who see Medicare patients through to the end of May 2010. The bill is
expected to get President Obamas approval.

Future risks
Social security outgoings to burden government finances
The governments social security payments will place substantial pressure on its finances. According to a release by the
White House, social security benefits constitute 90% of the income of one third of Americans over the age of 65. At the
same time, the number of people contributing to the social security system has been steadily declining. Under the current
law, public spending on retirement and health programs is expected to rise to 20% of GDP by 2050. Furthermore, the
government estimates that it will pay out more in social security benefits than it collects in payroll taxes by 2017.
The government's finances are increasingly coming under pressure because of the growing needs of an aging population
and declining labor force. To maintain the standard of living for the working and dependent population, labor productivity
has to increase. According to the budget projections, spending on entitlement programs, including social security and
Medicare, will increase by around 1.5% of GDP in each decade through to 2080. The contributions to these programs are
expected to grow much less rapidly and current estimates indicate a 75 year funding gap in the social security and
Medicare systems, at 325% of GDP. The social security system presently runs a cash surplus of 1.5% of GDP, which is
projected to fall into deficit as early as 2017. Unless the growing needs of an aging population are addressed, there will be
an excessive burden on the government's fiscal condition.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

PESTLE Analysis

Technological analysis
Overview
Technology and innovation are the cornerstones of the US economy. The country has been a leader in adapting and
applying technology for the betterment of its people since its inception, spending 2.6% of its GDP on R&D. Continued
investment should allow it to retain its technological superiority. However, the US spends less in this sector than a number
of other developed nations such as France, Germany and Japan. Although the US is one of the highest spenders on R&D
activities, it did not figure in the top four patent-receiving countries for 2006. The R&D expenditure in educational
institutions has been increasing, but also remains comparatively less than that of other technologically advanced nations.
It is expected that the US will face increasing competition from emerging nations such as China, which is making a
successful foray into technology-intensive industries. The governments R&D is focused on defense (58.3% of its R&D
budget) and the trend may continue for the next couple of years, although information and communication technologies
(ICT) will also remain a driving force of the US initiative. There is a need for the government to streamline its efforts to
develop the telecom segment which has been lagging behind that of other developed nations, particularly in mobile and
broadband internet subscription.

Table 6:

Analysis of the US technology landscape

Current strengths

Current challenges

Strong innovation system in place

Low expenditure on R&D as percentage of GDP compared to


other developed nations

Home to largest global players


Intellectual property protection

Declining level of competence in mathematics and science

Future prospects

Future risks

Rising pharmaceutical market

Overdependence on the private sector for patents

Significant development in emerging technologies

Competition from other nations

Source: Datamonitor

DAT AMONITOR

Current strengths
Strong innovation system in place
Since the years immediately following World War II, the US has maintained its position of leadership in terms of technology
development and innovation. In 2006, the US was responsible for 45% of total R&D expenditure within the OECD
countries. According to the National Science Board's science and engineering indicators, around 40% of the worlds high
technology manufacturing output came from the US in 2006, which shows an increase since 1998 when the figure stood at
around 30%. This growth has come at the cost of other technologically advanced regions such as the EU and Japan.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

PESTLE Analysis

Home to the largest global players


A large number of multinational corporations (MNCs) are based in the US. Out of the Fortune 500 global companies, 170
are based in the US and these companies are significant contributors to the country's economy. The private sector spent an
estimated $289 billion on R&D in 2008, accounting for 73% of R&D funding in the US. Affiliates of other global companies
have also contributed significantly in terms of providing employment, raising wages and boosting exports. In addition to
their contribution to the economy, these US affiliates have been instrumental in bringing new technology and skills to the
US.

Intellectual property protection


The US has a well established intellectual property rights protection and enforcement system which encourages innovators
from other countries to come to the country. Of the 191,933 patents granted by the US Patent Office in 2009, almost 50%
of the applications originated from the US. The US accounts for about 34% of worldwide triadic patents, which are typically
high value patents, taken simultaneously at the European Patent Office (EPO), the Japan Patent Office (JPO), and the US
Patent and Trademark Office (USPTO). It also encourages the commercialization of technology with ease.
Furthermore, the United States Trade Representative office (USTR) uses a number of bilateral and multilateral trade tools
to ensure adherence to intellectual property laws all over the world. Moreover, it also releases the 'Special 301' review
reports annually, which includes reviews of other countrys intellectual property rights (IPR) programs. The defaulting
nations are required to make improvements in their IPR systems, which helps to improve the global IPR environment.

Current challenges
Low expenditure on R&D as a percentage of GDP compared to other developed nations
The expenditure on R&D as a percentage of GDP in the US is low compared to other developed nations. Again, the
expenditure undertaken does not match with the number of patents received. The country's expenditure on R&D stood at
2.6% of GDP in 2007, whereas Japan spent 3.3% of its GDP in the same year. In Europe, countries such as Germany also
have a higher expenditure on R&D. Besides the developed nations, there is the additional challenge from developing
nations, which have begun to catch up in terms of technological innovation. In order to retain its position in the global
market, the US needs to increase the number of patents received and increase its copyrights in fields such as computer
software.

Declining level of competence in mathematics and science


US students' competence in math and science has been declining, lagging behind the average level of competence of
OECD nations. Furthermore there has been a decline in enrolment for math and physical sciences over the past two
decades; this has been recognized as an important area of concern as these subjects are a significant determinant of the
future level of competence in technology. The share of science, engineering, technology and mathematics professionals in
employment has also declined to 5% from 5.6% during 200006. The trend is indicative of an apparent loss of interest
among students to build a career in the field of science and technology. This may be problematic going forward as the
country will lose out in terms of R&D personnel.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

PESTLE Analysis

Future prospects
Rising pharmaceutical market
Having displayed decelerating growth rates in the period 200509, the US pharmaceuticals market is expected to rise quite
vigorously in 2010, followed by a period of fluctuating growth in the years up to 2014.
The US pharmaceuticals market generated total revenues of $276.6 billion in 2009, representing a CAGR of 2.8% for the
period spanning 200509. In comparison, the European and Asia Pacific markets grew with CAGRs of 4.1% and 6.3%
respectively over the same period, to reach respective values of $187.3 billion and $124.3 billion in 2009.
Central nervous system sales proved the most lucrative for the US pharmaceuticals market in 2009, generating total
revenues of $65.4 billion which is equivalent to 23.6% of the market's overall value. In comparison, cardiovascular sales
generated revenues of $57.1 billion in 2009, equating to 20.6% of the market's aggregate revenues.
The performance of the market is forecast to decelerate slightly, with an anticipated CAGR of 2.5% for the five-year period
200813. This is expected to drive the market to a value of $312.9 billion by the end of 2014. Growth in the European and
Asia Pacific markets is forecast to be slightly higher with CAGRs of 3.1% and 4.2% respectively for the same period,
although their market values will be significantly lower at $218.4 billion and $152.9 billion respectively by 2014. According
to these figures the US pharmaceutical market will continue to be the major market in the medium term.

Significant development in emerging technologies


The US has been at the forefront in developing and enhancing emerging technologies. The emerging areas, such as
biotechnology, nanotechnology and environmental technology, are full of potential, which opens up opportunities for US
companies with expertise in these fields. The US biotechnology industry has been growing at a rate of around 14% and is
expected to touch $132 billion by 2010. The use of biotechnology to develop genetically modified seeds provides a lucrative
business opportunity in developing nations. Similarly, demand for new environmental technology has also been increasing
from third world nations, as these countries become serious about meeting their international environmental commitments.

Future risks
Overdependence on the private sector for patents
More than 70% of the R&D expenditure in the US came from the private sector in 2008. This over-dependence on the
private sector makes technological development vulnerable to the business activities of private enterprises. Furthermore,
the economic slowdown of the US will have an adverse impact on R&D, as there are expectations that there will be a
reduction in the flow of funds. There is a need to reform the governments R&D financing policies to curtail this dependence
on large business enterprises and encourage small and medium enterprises (SMEs) to invest more in innovative activities.

Competition from other nations


Besides the competition from developed European nations, the US has been facing intense competition from Asian
countries too. The US edge in instrumentation and other manufacturing sectors is being slowly overtaken by China. China
was the third largest in terms of R&D expenditure in the world behind the US and Japan in 2008. Furthermore, China has
moved ahead of Germany, France and the UK in terms of R&D expenditure. While the US continues to lead the world in
research output, China has become the second most prolific contributor to the world's peer-reviewed science and
USA: Country Analysis Report In-depth PESTLE Insights
Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

PESTLE Analysis

engineering research articles in 2008, up from 14th place just 10 years earlier. Asian economies, including South Korea,
Taiwan, and Singapore, have witnessed increases in R&D investment, leading to notable increases in the number of
researchers. Similarly in IT services, India has emerged as a cost competitive center. In the high technology segment,
Canada, Germany, Australia, Japan, and South Korea present formidable competition.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

PESTLE Analysis

Legal analysis
Overview
The US has a sound legal framework for business entities in the country and an independent judiciary which creates a
positive investment climate. It follows the federal legal system, with individual state laws functioning alongside federal laws.
Regulatory reform efforts in a broad range of industries began in the 1970s and accelerated over the course of the 1980s,
resulting in partial deregulation in many sectors and an increased reliance on competition to improve efficiency. As a result
of the worsening economic scenario, the US government has begun to take protectionist measures. This is a major
challenge as the affected governments are expected to retaliate in a 'tit for tat' move. In view of the slowdown faced by the
economy, the country needs to have structural reforms in place to help increase productivity and employment. These
reforms are required to keep the labor in the workforce for a longer period by doing away with incentives such as the
disability insurance system, or by raising the age limit for full social security benefits.

Table 7:

Analysis of the US legal landscape

Current strengths

Current challenges

Comprehensive legal framework for business entities

Rise in protectionist measures

Favorable policies to promote FDI

Strict corporate governance rule hampers foreign


investors
Multiplicity of business laws across states

Future prospects

Future risks

Impending financial regulation bill

Possible merger of securities and commodities market


regulator
Employing personnel from other nations

Source: Datamonitor

DAT AMONITOR

Current strengths
Comprehensive legal framework for business entities
Legal and regulatory aspects are crucial to create a successful business environment in any country. They reflect the policy
framework and the mindset of the governmental structure of that country and ensure that every company is functioning as
per the statutory framework of the country. The US has an independent judiciary and fair business laws. Contractual
agreements are always secure, as long as they meet the requirements of state government. The antitrust policy of the
government promotes competition and economic efficiency and, moreover, the government participates in the market only
as a regulator.

Favorable policies to promote FDI


The US government has maintained its openness towards FDI and is the worlds largest recipient of such investment. The
total stock of direct foreign investment reached $2.39 trillion as of December 31, 2009, up from $2.36 trillion as of
December 31, 2008. The US government does not restrict foreign investment, except in sectors that might pose a threat to
national security. However, in some other strategic sectors, investment proposals have to go through screening by the

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

PESTLE Analysis

government authority. In these cases, again, there is no bias toward foreign investors and the screening requirements are
the same for foreign and domestic investors.

Current challenges
Rise in protectionist measures
With the worsening economic scenario, the US government has begun to take protectionist measures. For example, it has
withdrawn an agreement which allowed truckers from Mexico to transport goods on US highways. This program was one of
the measures of the North American Free Trade Agreement (NAFTA) which began in 2008 after a long delay. The Mexican
government, in retaliation, has imposed higher tariffs on around 90 goods from the US. The rise in protectionist measures is
a major challenge as the affected governments are expected to retaliate in a 'tit for tat' move.

Strict corporate governance rules hamper foreign investors


The corporate governance rules of the US are extremely strict where the shareholder interests are considered to be at risk.
Although foreign companies listed in the US are subject to the same corporate governance rules as domestic companies,
increasingly foreign companies are complaining about the directives of the SEC. There are concerns that this will work
against the country's status as a global financial center.

Multiplicity of business laws across states


Firms operating in the US have to adhere to a large number of regulations which are enacted by both the state and federal
governments. The non-uniformity of business laws makes it difficult for businesses to meet the requirements of more than
one state. There are specific restrictions on FDI by individual state governments, and these must be taken into
consideration before deciding about investing in a particular region.

Future prospects
Impending financial regulation bill
The Obama administration is expected to push for a financial regulations bill. Senate Banking Committee chairman
Christopher Dodd and House of Representatives Financial Services Committee chairman Barney Frank are leading the
effort to pass the plan in Congress. The proposed bill supports the creation of a financial watchdog, headed by an
independent federal agency. This move has been opposed by Republicans and lobbyists for the banking industry as well as
by Wall Street. Furthermore, in mid-2009 President Obama proposed an independent Consumer Financial Protection
Agency (CFPA) to regulate credit cards and consumer loans such as the subprime mortgages which helped inflate the real
estate bubble behind the financial crisis. This was supported by the White House in its bill of December 2009. To put an
end to the assumption that some financial organizations are "too big to fail," the bill is expected to have a provision to close
down large financial firms. It is also likely to empower government regulators to seize distressed firms and put into a motion
a bankruptcy-like process. This bill is expected to create considerable wrangling in the Senate before it is passed by the
lawmakers.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

PESTLE Analysis

Future risks
Possible merger of securities and commodities market regulator
The new financial sector reform measure envisages the merger between the two regulators of the countrys financial
markets: the SEC and the Commodity Futures Trading Commission (CFTC). Currently, the SEC regulates the equity
market while the CFTC regulates the commodities market. There is apprehension about the success of the proposed
merged authority due to the fundamental differences in principles that exist in the equity and commodities market.

Employing personnel from other nations


The employment of laborers from other countries has become difficult, with stricter regulations for entry as well as caps on
visa authorizations. As a result, many foreigners heading to the US find the tight security controls cumbersome, and there
are fears that the continuation of such policies may lead to a shortage of skilled personnel. In addition, public opinion
against the outsourcing of services is also gaining ground. Although it has not received any political approval, there are
concerns that the weight of public disfavor may act as a deterrent for companies in the US.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

PESTLE Analysis

Environmental analysis
Overview
The US' leading economic status is not reflected in its performance on environmental indicators. The focus for the US
remains to increase the efficiency of its environmental management and energy use while continuing to yield economic
benefits. Given its superpower status in the world economy, there is a need to be more proactive in relation to international
environmental co-operation, with a focus on climate protection, biodiversity and the use of toxic chemicals.
The Environment Protection Agency (EPA) is the leading federal government agency, with a mandate to protect human
health and the environment. Besides that, each state has its own regulating agency. Since the 1960s, the US government
has recognized the importance of protecting the environment, first drafting the Clean Air Act in 1963. Although the
performance of the country has improved in terms of greenhouse gas (GHG) emissions, it has remained an underperformer compared to leading industrial countries.

Table 8:

Analysis of the US environmental landscape

Current strengths

Current challenges

Strong environmental policy framework and initiatives

Poor performance on environmental indicators

Measures to cut greenhouse gas emissions

Decelerated growth in the US renewable market

Future prospects

Future risks

Renewed focus on renewable energy

Ineffective enforcement of laws

Increased co-operation with China

Unfriendly waste management practices

International partnerships to promote environmental technologies

Source: Datamonitor

DAT AMONITOR

Current strengths
Strong environmental policy framework and initiatives
The US has a strong environmental policy and legislative framework, with well established institutions at federal and state
levels. The Clean Air Act is one of the major government initiatives to improve air quality. There are different statutes for
water, air, waste management and the preservation of biodiversity, while separate agencies exist under federal and state
governments which are entrusted with the implementation of policies.
The US has taken the initiative to develop clean energy technologies. Moreover, the country is forming several international
partnerships to pursue clean and renewable energy such as the Asia Pacific Partnership on Clean Development and
Climate (APP). These steps will help in improving national and international environmental standards.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

PESTLE Analysis

Measures to cut greenhouse gas emissions


President Obama's 2011 budget has initiated the formulation of regulations, subsidies and taxes aimed at cutting the
emission of GHGs. The budget contains an increase of $39 billion in taxes on fossil fuel producers over a period of 10
years, as well as an end to tax breaks and other incentives for the domestic production of oil, natural gas and coal.
Furthermore the budget proposes to triple federal support for nuclear energy, by adding $36 billion in new loan authority for
a Department of Energy program aimed at accelerating the construction of new reactors. An estimated $1.4 billion will be
set aside to help developing countries address the impact of climate change, reduce deforestation and shift to low-carbon
energy sources.

Current challenges
Poor performance on environmental indicators
The US has failed to perform impressively on various economic parameters. With 4.6% of the world's population, the US
accounts for 20.9% of global emissions of carbon dioxide, generating an average of 20.6 tons per person in 2007. These
emission levels are above those of other high-income countries, and emissions are currently increasing in both per capita
and absolute terms. The US is a major contributor to the increase in GHG emissions; despite the existence of a well
developed environmental technology industry, these figures indicate the lack of seriousness and political will to enforce
regulations.

Decelerated growth in the US renewable energy market


The US renewable energy market has fluctuated in value over recent years. Decelerated growth is expected for 2010,
followed by further fluctuating growth rates throughout the remainder of the forecast period until 2014.
The US renewable energy market generated total revenues of $42.2 billion in 2009, representing a CAGR of 1.6% for the
period spanning 200509. In comparison, the European and Asia Pacific markets grew with CAGRs of 6.2% and 4.4%
respectively over the same period, to reach respective values of $137.7 billion and $102.7 billion in 2009.
Market consumption volumes increased with a CAGR of 1.4% between 2005 and 2009, to reach a total of 391.7 billion
kilowatt-hours (BkWh) in 2009. The market's volume is expected to rise to 496.6BkWh by the end of 2014, representing a
CAGR of 4.9% for the 200914 period.
The performance of the market is forecast to accelerate, with an anticipated CAGR of 1.7% for the five year period 2009
14. This is expected to drive the market to a value of $45.9 billion by the end of 2014. Comparatively, the European market
will increase with a CAGR of 2.5%, while the Asia Pacific market will decline with a compound annual rate of change
(CARC) of -0.6% over the same period, to reach respective values of $155.6 billion and $99.4 billion by 2014.

Future prospects
Renewed focus on renewable energy
The EPA has declared that the increase in carbon dioxide and other greenhouse gas emissions constitute a health risk,
acknowledging that this will aggravate climate change, worsen air quality and generate heat waves. This marks a
significant change in the position of the US in terms of environmental policy, suggesting that a new approach might soon be
taken which could impact climate change regulation. In April 2009, President Obama went as far as to assert that the US
USA: Country Analysis Report In-depth PESTLE Insights
Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

PESTLE Analysis

was ready to lead the world on climate change. Congress is currently exploring a draft bill for clean energy development
which aims to cut carbon emissions by 20% from their 2005 levels by 2020, boosting reliance on renewable sources of
energy.

Increased co-operation with China


The US and China have reached an agreement on a 10 year co-operation framework for energy and the environment, with
both nations working on a five step action plan. The five initial targets being addressed under the framework include: clean,
efficient and safe electricity production and transmission; clean water; clean air; clean and efficient transportation; and the
preservation of forest and wetland ecosystems. Furthermore, China and the US have also decided to explore the idea of
eco-partnerships as a potential vehicle for implementing the goals of the framework at the next round of discussions. Both
countries are facing similar challenges, as global energy production has remained stagnant for the past decade while
demand for energy has risen constantly.

International partnerships to promote environmental technologies


The US and the EU have submitted a proposal to the World Trade Organization (WTO) to increase global trade in
environmental goods and services. These countries have proposed to eliminate tariff and non-tariff barriers to
environmental technologies and services. A free trade in these technologies will be beneficial to the US, given its
competitive advantage. Moreover, the promotion of trade in environment technologies will enable a number of developing
countries to comply with various national and international environmental directives.

Future risks
Ineffective enforcement of laws
In the US, although the environmental laws and regulations are comprehensive, the serious intention of the political
establishment to implement them in letter and spirit is lacking. More often than not, political parties are pro-industry at the
expense of the environment, which leads to the inept implementation and enforcement of environmental regulations.

Unfriendly waste management practices


The US has also come under scrutiny due to its deleterious waste dumping practices. On a number of occasions, nuclear
and medical waste has been dumped in the sea or on the shores of developing or developed nations. This practice
presents a global hazard, and particularly affects those developing countries without the appropriate technologies to deal
with such waste. The US is also among the few countries not to have ratified some of the instruments under the Basel
Convention, which regulates the trans-boundary disposal of nuclear waste.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Political Landscape

POLITICAL LANDSCAPE
Summary
The US freed itself from British colonial rule to become the longest surviving democratic nation in the world. The
constitution of the US set up the government in the form of a federal republic. There is a division of power between the
federal government and the state governments, with the president controlling the executive branch of the federal
government. In 2001 George W. Bush of the Republican Party became the 43rd president, with Dick Cheney as vice
president. Bush was re-elected in 2004 after defeating his Democratic opponent, Senator John Kerry. Most recently,
Barack Obama was sworn in as the president of the US in January 2009 after he defeated John McCain of the Republican
Party in the presidential elections.
The US has vast economic, political, and military influence on a global scale, which makes its foreign policy a subject of
great interest around the world. The former Bush administration initiated policies towards tax cuts, fair minimum wage laws,
social security schemes and trade liberalization, and has been criticized for the war on terrorism that led to the invasions of
Iraq and Afghanistan. The Obama administration is also expected to offer tax cuts to benefit around 150 million workers.
Obamas Making Work Pay tax cut of up to $500 per worker, or $1,000 per working family for example, is expected to
reduce taxes for over 10 million Americans.

Evolution
Pre 1950s
The modern history of the US dates back to 1775, when 13 British colonies agreed to come together to free themselves
from colonial rule. On July 4, 1776, the declaration of independence was made, announcing the birth of a new nation. In the
aftermath of the proclamation of independence, heavy conflict between the colonies and their colonial rulers continued up
until the peace treaty was signed in 1783 in Paris. The Treaty of Paris acknowledged the independence, freedom, and
sovereignty of the 13 former American colonies, which are now states. At the same time, it also laid the foundation of a
modern democratic nation. The constitution was ratified in 1787, when the states agreed to a loose federal structure.
George Washington was sworn in as the first president of the US on April 30, 1789. In the years that followed the country
was affected by civil wars and sectional conflict, as politicians underwent the difficult task of building a modern democracy.
By the late 19th century, American society had stabilized and the process of industrialization began. During World War I, the
US business interests were seriously affected. President Wilson negotiated an end to the conflict based on his 14-point
plan to achieve lasting peace, but this was not accepted by all of the US states. In the post-war period labor unrest and
racial tension proliferated, yet despite these problems the US enjoyed a period of real and broadly distributed prosperity for
a few years during the 1920s. However the economy was soon plunged into a great depression between1929 and 1939.
President Herbert Hoover began the process of rebuilding the economy but his efforts had little impact. He lost the election
to Franklin Roosevelt who took some bold measures and initiated an era of economic and political change. His 'New Deal'
listed many measures to lift Americans out of the depression, a unifying factor for states which led to economic growth.
However, economic prosperity did not last for long in the US, hampered by its involvement with the allied forces in World
War II.
The US played a major role in global affairs in the years immediately after World War II, especially through its influence in
the newly formed United Nations (UN) and North Atlantic Treaty Organization (NATO). The most important political and

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Political Landscape

diplomatic challenge in the early post-war period was the Cold War, which grew out of long-standing disagreements
between the US and the Soviet Union.
The figure below gives a snapshot of the US political evolution since independence:
Figure 2:

The US: key political events since 1940

1940-55

In
Inthe
theWorld
WorldWar
WarII,
II,the
the
US
US played
played an
an active
active
role;
led
the
allied
role; led the allied
forces
to
defeat
forces
to
defeat
Germany
Germanyinin1941.
1941.
Japan
surrendered
Japan
surrendered
following
USs
following
USs
bombing
bombing on
on Hiroshima
Hiroshima
and
andNagasaki
Nagasakiinin1945.
1945.
The
The Cold
ColdWar
War with
with the
the
Soviet
Soviet Union
Union began
began inin
1947;
1947; US
US initiated
initiated the
the
policy
policy of
of providing
providing aid
aid
to
tocountries
countriesthreatened
threatened
by
communist
regime.
by communist regime.
The
The US
US also
also started
started
the
program
of
the
program
of
rebuilding
European
rebuilding
European
economies.
economies.
Racial
Racial segregation
segregation inin
schools
schools was
was made
made
unconstitutional
inin
unconstitutional
1954.
1954.

1956-70

Democratic
Party
Democratic
Party
candidate
John
FF
candidate
John
Kennedy
was
elected
Kennedy was elected
president
president inin 1960,
1960,
narrowly
narrowly defeating
defeating his
his
rival
Richard
Nixon.
rival Richard Nixon.

Cuba
Cuba was
was invaded
invaded by
by
Cuban
exiles
with
Cuban
exiles
with
support
of
the
US.
support of the US.
President
President Kennedy
Kennedy was
was
assassinated
assassinated inin 1963;
1963;
Lyndon
Johnson
Lyndon
Johnson
became
the
next
became
the
next
president.
president.
The
The US
US increased
increased its
its
military
military intervention
intervention inin
Vietnam
in
1964.
Vietnam in 1964.
The
The Republican
Republican Party
Party
candidate
candidateRichard
RichardNixon
Nixon
was
elected
the
was
elected
the
president
presidentinin1969.
1969.
Public
Public opposition
opposition to
to
Vietnam
Vietnam war
war gathered
gathered
momentum
momentum

1971-85

1986-2000

Nixon
Nixon was
was re-elected
re-elected inin George
GeorgeBush,
Bush,Reagans
Reagans
the
the 1972
1972 elections;
elections; vice
vicepresident,
president,was
was
Vietnam
ceasefire
elected
president
Vietnam
ceasefire
elected presidentinin
agreement
was
signed
in
1988.
agreement was signed in
1988.
1973.
1973.
The
TheUS
USforces
forcesplayed
played
Nixon
Nixon resigned
resigned inin 1974;
1974; dominant
dominantrole
roleininwar
war
Jimmy
Carter,
of
the
against
Iraq
in
1991.
Jimmy Carter, of the
against Iraq in 1991.
Democratic
Democratic Party
Party was
was
elected
president
elected
president inin The
The NAFTA
NAFTA treaty
treaty was
was
1976.
signed
1976.
signedinin1992.
1992.
Carters
popularity
Carters
popularity Bill
Bill Clinton
Clinton was
was elected
elected
declined
by
1980
declined
by
1980 the
thepresident
presidentinin1992.
1992.
following
following the
the 444
444 days
days
long
long hostage
hostage crisis
crisis of
of the
the Mid
Mid term
term elections
elections of
of
US
embassy
in
Tehran.
1994
US embassy in Tehran.
1994 saw
saw Republican
Republican
Party
Party majority
majority inin both
both
The
The Republican
Republican Party's
Party's houses
housesof
ofparliament.
parliament.
Ronald
Ronald Reagan
Reagan elected
elected
president
in
1980;
he

Clinton
was
president in 1980; he Clinton wasre-elected
re-electedinin
adopted
tax-cutting
1996,amidst
amidstallegations
allegations
adopted
tax-cutting 1996,
policies
offinancial
financialscandals
scandalsand
and
policies which
which led
led to
to aa of
large
federal
budget
sexual
harassment
large federal budget
sexual harassmentcase.
case.
deficit.
deficit.
Clinton
Clinton was
was acquitted
acquitted inin
Reagan
Reagan re-elected
re-elected inin Senate
Senateimpeachment
impeachmenttrial
trial
1984
inin1999.
1984
1999.

Source: Datamonitor

2001 onwards

George
GeorgeW
WBush
Bush
became
becamethe
thepresident
presidentinin
2001
after
a
2001 after aclosely
closely
fought
election
fought electionwith
withAl
Al
Gore.
Gore.
Following
Followingthe
the
September
September11,
11,2001
2001
attack
attackon
onWorld
WorldTrade
Trade
Center,
Center,the
theUS
USlaunched
launched
an
anattack
attackagainst
againstTaliban
Taliban
forces
forcesininAfghanistan.
Afghanistan.
Attacks
Attackson
onIraq
Iraqbegan
beganinin
2003
2003led
ledto
tooverthrowing
overthrowing
of
Saddam
Husseins
of Saddam Husseins
regime.
regime.
In
In2006
2006mid
midterm
term
elections
electionsthe
theDemocratic
Democratic
Party
got
majority
Party got majorityinin
parliament.
parliament.
Barack
BarackObama
Obamaof
ofthe
the
Democratic
Democraticparty
partywas
was
th
sworn
swornininas
asthe
the44
44th
president
presidentininJanuary
January
2009.
2009.

DAT AMONITOR

195090
During the Cold War era, the US' international political relations were based on the fight against the spread of communism.
Its relations with the Soviet Union were not cordial as the two nations were drawn into indirect confrontations in Turkey,
North Korea, Iran and Afghanistan. In the mid-1960s, the US sent troops to defend South Vietnam against a communist
insurgency based in North Vietnam. The war was unsuccessful and made Americans wary of further foreign
entanglements. During this period, there was an improvement with respect to gender and racial equality, and capitalist
forces were involved in major economic and business decisions.
The liberal activism of the 1960s and 1970s was replaced by conservative policies in the 1980s, dominated by Ronald
Reagan who occupied the office of president during 198189. Reagan favored limited government involvement, a firm
stance against communism and tax cuts to spur economic growth. The end of the Cold War and the collapse of the Soviet
Union marked his second term, and his vice president, George Bush, succeeded him.

19912009
Bill Clinton was elected as president in 1992 on the promise of youth and change, and completed two terms in the office.
His policies were described as 'centrist', as he favored free trade. Clinton has been credited with immensely successful
USA: Country Analysis Report In-depth PESTLE Insights
Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Political Landscape

economic policies, which gave the US the longest period of peace-time economic expansion in its history, including a
balanced budget and a reported federal surplus.
Clintons term in office was not an easy one. After two years of Democratic Party control under his leadership, the
Democratic Party lost control of both houses of congress in the mid-term elections held in 1994. During Clinton's second
term, the Republican-controlled house voted to impeach him but he was subsequently acquitted by the Senate and
completed his term in 2001.
After a controversial and bitterly fought contest against the incumbent vice president, Al Gore of the Democratic Party,
George W. Bush assumed the office of president in 2001. Bush offered promises of reforms in education, economy and
social security. However, the governments priorities changed after 9/11 with the announcement of the war against
terrorism. US involvement in Afghanistan and Iraq had public approval initially, but many grew uncomfortable as US
soldiers faced increasing casualties. Despite controversy over the war in Iraq and domestic issues, Bush won a second
term in office. The economy slowed down during his administration.
On November 4, 2008, Congressional and gubernatorial elections took place. All 435 seats in the House of
Representatives and roughly one third of the 100 seats in the Senate were contested in this election. The Democratic Party
took control of both houses of the US Congress with a 256178 advantage in the House of Representatives and a 5641
advantage in the Senate. Barack Obama emerged as the presidential candidate of the Democratic Party after winning a
hard fought battle with Hillary Clinton, wife of former president Bill Clinton. Obama defeated John McCain of the Republican
Party in the presidential elections and was sworn in as president of the country in January 2009.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Political Landscape
Structure and policies
Key political figures
Figure 3:

The US: key political figures

Barack Obama was sworn in as the 44th president of the US on 20 January, 2009. He is the first
African-American to assume the nations highest office. After high school, Obama studied at
Occidental College in Los Angeles for two years. He then went to Columbia University in New
York, graduating in 1983 with a degree in political science. Obama entered Harvard Law School
in 1988. In February 1990, he was elected as the first AfricanAmerican editor of the Harvard
Law Review. Obama graduated in 1991. Obama became only the third African-American to be
elected to the US Senate since Reconstruction in November 2004. In February 2007, Obama
announced his candidacy for the 2008 Democratic presidential nomination. He became the
nominee after defeating the US Senator from New York, Hillary Rodham Clinton on June 3,
2008. On November 4, 2008, Obama defeated Republican presidential nominee John McCain
for the position of US president.
Joseph Robinette Biden, Jr., is the vice president of the country. He received a bachelor's
degree from the University of Delaware in 1965 and a law degree from Syracuse University in
New York in 1968. Biden was elected to the US Senate in 1972 at the age of 29. As a senator,
Biden focused on foreign relations, criminal justice, and drug policy. Since 1975, he has served
on the Senate's Foreign Relations Committee and he was in the chair of this committee twice.
He chaired the Judiciary Committee during the contentious US Supreme Court nominations of
Robert Bork and Clarence Thomas. Biden unsuccessfully sought the Democratic presidential
nomination in 1988 and 2008, both times dropping out early in the process. Barack Obama
selected Biden to be the Democratic Party nominee for vice president in the 2008 US election.

Source: Datamonitor

DAT AMONITOR

Structure of government
The president is the head of government as well as head of state. The legislative branch comprises a bicameral parliament
known as Congress. It consists of the House of Representatives (the lower house) and the Senate (the upper house). A
college of representatives, elected directly from each state, carries out the presidential election.
In addition to the federal government, there are 50 state governments and the government of the District of Columbia.
Further down the ladder are still smaller units which govern counties, cities, towns and villages.

Structure of legislature
Key political parties
The Democratic Party

The Democratic Party is one of the two major parties and is the oldest existing political party in both the US and arguably in
the world. It was founded in 1792 by Thomas Jefferson and James Madison, and has placed itself to the left of the
Republican Party on the majority of issues and viewpoints. Franklin D Roosevelt shaped the ideologies and the agendas of
the party, which is pro-people and supportive of the poor. Historically, the partys support has come from groups of farmers,
workers and trade unions, and it has also supported religious and ethnic minorities. However, when it comes to industry
and economics, the party is opposed to unregulated business and finance, and favors progressive income taxes. In recent
USA: Country Analysis Report In-depth PESTLE Insights
Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Political Landscape

decades, the party has favored a free enterprise system with some amount of government intervention. Its agenda also
includes promoting civil liberties and equal rights.
Bill Clinton of the Democratic Party was elected to the presidency in 1992 and 1996, but the party lost control of Congress
in the elections of 1994 to the Republican Party. The Democratic Party regained majority control of Congress in 2006. In
the congressional elections that took place in November 2008, the Democratic Party took control of both houses of the US
Congress with a 256178 advantage in the House of Representatives, also achieving a 5641 current advantage in the
Senate. Barack Obama became the partys nominee for the presidency after defeating the US Senator from New York,
Hillary Rodham Clinton on June 3, 2008. Obama was sworn in as the 44th president of the country after he defeated the
Republican Partys John McCain in the November 2008 elections.
The Republican Party

The Republican Party was founded in 1854. Senator Mel Martinez of Florida is the Republican Party's current general
chairman, and Mike Duncan is the chairman of the Republican National Committee. George W. Bush, the former president,
was the 18th Republican to hold that position. In the elections of 2000, the party gained control of the presidency and both
the houses of Congress for the first time since 1954. The party follows conservative policies in the social sphere and liberal
economic policies. In the 1980s, the party became more conservative than before and openly criticized government
intervention in business. It believes in a lesser role for the courts and the judges in the Supreme Court, and wants to place
greater limitations on federal power and more powers in the hands of states. The Republican Party supports a strong probusiness platform, with its ideology rooted in economic liberalism. It has always advocated strong national defense and
supports unilateralism in issues of national security. There have been 22 presidents from the Republican Party.

Key policies
The US joined World War II in 1941, during which time the economy received a boost from the heavy capital investments
and the creation of jobs. After the war, the Soviet Union and the US were the two major powers of the world and a rush for
technological superiority began. The election of Ronald Reagan as president in 1980 marked a significant shift towards the
right in American politics. In the late 1980s and 1990s, the Soviet Union's power diminished, leading to its collapse. The
leadership role taken by the US and its allies in the UN allowed it to sanction the Gulf War and the Yugoslav wars, which
helped it to preserve its position as the world's last remaining superpower. President Obama unveiled a new defense policy
in March 2010 significantly curtailing the circumstances in which the US would use nuclear weapons. Furthermore, in
March 2010, Democrats in the House of Representatives narrowly voted to adopt the Senate version of health care reform,
circumventing Republican opposition in the Senate.

Economic policies
The subprime mortgage crisis went on to become a global economic crisis. The pandemic economic downturn has been
concomitant with investment bank failures, falling home prices, and tight credit. All the above factors pushed the US into a
recession by mid-2008. To help stabilize financial markets, the US Congress established a $700 billion Troubled Asset
Relief Program (TARP) in October 2008. The government used some of these funds to purchase equity in US banks and
other industrial corporations. In January 2009, the US Congress passed a bill signed by President Obama, providing an
additional $787 billion fiscal stimulustwo thirds for additional spending and one third for tax cutsto create jobs and to
help the economy recover.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Political Landscape

In February 2009, new measures for the financial sector were announced under the Financial Stability Plan (FSP). The
FSP replaces the TARP, which was criticized due to its lack of effect on lending. Furthermore, TARP imposes little
accountability in terms of disbursements, especially relating to executive pay, which incensed the American public. The
scheme has three parts. Firstly, a public-private investment fund with up to $1 trillion is to be created. This will take toxic
assets off banks' balance sheets (which have been contributing to fears of insolvency). Secondly, if private funds are
insufficient, the remaining $350 billon of TARP funds will be used to improve commercial banks' capital reserves. Thirdly,
the Term Asset-Backed Securities Loan Facility (TALF), which currently has $200 billon of funding, is to be extended to $1
trillion. The total cost of these measures could be up to $2.5 trillion. The FSP is expected to revive the troubled financial
sector in the country.

Social policies
For over 60 years, social security has been a dependable source of income for millions of Americans during their retirement
years, providing a basic safety net. Millions of workers pay into the social security system with the expectation of receiving
a benefit at retirement, as well as insurance for their family in the event of their death or disability. However the social
security fund has raised concerns among policy makers as the level of expenditure in coming years will far exceed the
contribution to the fund. The budget for 2009 has highlighted the financial challenge facing the social security program. The
new policy has proposed voluntary personal accounts funded by a portion of the workers social security payroll taxes.
Account contributions will be capped at 4% of social security taxable earnings, up to a $1,400 limit in 2013, increasing by
$100 more than the average wage growth each year through 2018.
According to a ministry report, by 2018, for the first time, the social security program is expected to bring in less payroll
taxes than it pays in benefits. By 2042 it is estimated that social security will be able to provide only 73% of promised
benefits. The program has come under criticism from the Democrats on the grounds that this would be costly to implement,
and would endanger the savings and earnings of low income individuals. The proposal of privatizing the fund has also been
criticized, as it would not enhance overall effectiveness.

Foreign policies
US foreign trade and global economic policies have changed direction dramatically. In its early days, the government and
business concentrated primarily on developing the domestic economy. Since World War II however, the US has sought to
reduce trade barriers and co-ordinate the world economic system. The country took a lead role in establishing the UN,
becoming a permanent member of the Security Council and host to the organization's headquarters. The US enjoys a
special relationship with the UK and strong ties with Australia, Japan, Israel and fellow NATO members. It also works
closely with its neighbors through various organizations and agreements. The US supported trade liberalization and was
instrumental in the creation of the General Agreement on Tariffs and Trade (GATT). The government supports free trade
policies and legislations, and has signed free trade agreements with several countries including Australia, Chile and
Singapore, as well as many countries in the Eurozone and six other countries under the Central American Free Trade
Agreement. However the former Bush administration faced much criticism for its protectionist policies during the 'war
against terrorism'.
Since the terrorist attacks of 9/11, one of the primary components of US foreign policy has been its efforts related to the
war against terrorism. In late 2001, US forces led a NATO invasion of Afghanistan and removed the Taliban government,
and in late 2002, the Bush administration began to press for regime-change in Iraq. The US invaded Iraq in 2003 and
ousted President Saddam Hussein. The Bush doctrine argued for a policy of pre-emptive war in cases where the US or its
USA: Country Analysis Report In-depth PESTLE Insights
Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Political Landscape

allies are threatened by terrorists or by rogue states engaged in the production of weapons of mass destruction. The wars
that were entered into during the Bush term also involved reasonable efforts to include other nations in military or
diplomatic actions; however, in the absence of coalition partners the country was willing to take unilateral military action
against perceived threats. The policy document states that: "The US has, and intends to keep, military strength beyond
challenge", indicating that the US intends to take any actions to continue in its role as the world's sole military superpower.
President Obama has decided to refocus American policy to counter the resurgence of al Qaeda and the Taliban in
Afghanistan and Pakistan. Consequently, the US government is expected to augment troop levels in Afghanistan and press
its NATO allies to do the same. Moreover, President Obama has also decided to increase resources to revitalize
Afghanistans economic development. Obama and Vice President Biden are expected to demand that the Afghan
government should do more, in terms of cracking down on corruption and the illicit opium trade.

Performance
Governance indicators
The World Bank report on governance uses voice and accountability, political stability and absence of violence,
government effectiveness, regulatory quality, rule of law, and control of corruption as indicators for 212 countries and
territories over the period 19962008. The study has been carried out by Daniel Kaufmann and Massimo Mastruzzi of the
World Bank Institute, and Aart Kraay of the World Bank Development Economics Research Group. For any country, a
percentile rank of 0 corresponds to the lowest rank and 100 corresponds to the highest rank.
The US scored a percentile rank of 86.1 in voice and accountability in 2008. Although high, it is behind its neighbor,
Canada, and a few European countries such as the UK in this respect. Voice and accountability measures the extent to
which a country's citizens are able to participate in selecting their government, as well as freedom of expression, freedom
of association, and a free media. Canada has a 95.7 percentile rank and the UK scores a 92.3 percentile on this parameter.
The principles of democracy are deep-rooted in the US and elections are considered to be fair and transparent. However,
the involvement of business interest groups in the election process, through the provision of soft funds, makes the system
of policy making biased.
On political stability and absence of violence, the US has a ranking of 68.4 percentile. This measures perceptions of the
likelihood that the government will be destabilized or overthrown by unconstitutional or violent means, including national
conflict and terrorism. The US figures high on the list of countries susceptible to terrorist attacks and the country's
international policies to fight terrorism have worsened the situation. Canada has a comparatively high rank of 83.7
percentile, but the UK fares poorly, at 65.6 in this parameter.
Most of the developed nations perform well in terms of government effectiveness, which measures the quality of public and
civil services, the degree of governmental independence from political pressures, the quality of policy formulation and
implementation, and the credibility of the government's commitment to such policies. The US has a strong ranking of 92.9
percentile with respect to government effectiveness. However, in comparison, Canada has a percentile rank of 96.2, which
is again higher than the rank of both the US and the UK, ranked at 94.3.
The US has one of the best legal frameworks in the world. It ranks in the 93.2 percentile on regulatory quality in 2008,
which measures the ability of the government to formulate and implement sound policies and regulations that permit and
promote private sector development. Members of both parties have committed themselves to a fair and transparent

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Political Landscape

government regime. For years, the US has been considered one of the best places to conduct business. Its ranking on this
measure, however, is less than Canada (97.2) and the UK (98.1) in 2008.
The US has a 91.9 percentile rank on the rule of law in 2008, which indicates that the country has a highly effective judicial
system. Rule of law measures the extent to which agents have confidence in and abide by the rules of society, and in
particular the quality of contract enforcement, the police, and the courts, as well as the likelihood of crime and violence.
Canada ranks in the 95.2 percentile and the UK has a 92.3 percentile rank, higher than that of the US.
The US has a percentile rank of 91.8 on control of corruption. Control of corruption measures the extent to which public
power is exercised for private gain, including both petty and grand forms of corruption, as well as 'capture' of the state by
elites and private interests. Canada and the UK have higher percentile rankings at 95.7 and 92.8, respectively in 2008.

Outlook
President Obama has a strong majority in Congress, with 257 out of 435 seats in the House of Representatives and 59 out
of 100 seats in the Senate. Moreover, Obama is making a serious effort to reach across the partisan divide. Due to the
support that he enjoys, the president is in a good position to implement his agenda. However, Republicans can use a
filibuster in the Senate, which would result in the blocking of a procedure unless 60 senators vote to close the debate. The
Republicans are unlikely to do so however, as they do not want to come across as impediments to economic recovery. The
president is also making use of the strong goodwill that he had generated throughout his election campaign to push through
his agenda. However, these high expectations are likely to end in disappointment. The serious economic downturn puts
limits on what the president can achieve, especially by the mid-term elections of November 2010 when all the seats for the
House of Representatives and one third of the Senate seats will be up for grabs. Due to the high expectations of the US
people, any partial success achieved by his administration could be perceived as a failure. This may affect the chances of
the Democratic Partys chances in the mid-term polls.
Obamas administration is expected to make college affordable for all Americans by creating a new American Opportunity
Tax Credit. This fully refundable credit will provide $4,000 a year for college education, covering two thirds of the cost of
tuition at the average public college or university. Moreover, the incumbent dispensation is expected to eliminate all income
taxes for seniors making less than $50,000 per year. This proposal will eliminate income taxes for seven million senior
citizens of the country and provide them with average savings of $1,400 each year. The government is also expected to
create an Advanced Manufacturing Fund to identify and invest in the most compelling advanced manufacturing strategies.
In terms of infrastructure, the Obama administration is expected to its increase spending with the aim of improving the
countrys national transportation system: its highways, bridges, roads, ports, air, and train systems.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Economic Landscape

ECONOMIC LANDSCAPE
Summary
The US is the largest economy in the world, with a GDP of around $11.5 trillion and a per capita GDP of $37,492 in 2009.
The subprime mortgage crisis went on to become a global economic crisis. The pandemic economic downturn has been
concomitant with investment bank failures, falling home prices, and tight credit. All the above factors pushed the US into a
recession by mid-2008. To help stabilize financial markets, the US Congress established a $700 billion Troubled Asset
Relief Program (TARP) in October 2008. The government used some of these funds to purchase equity in US banks and
other industrial corporations. In January 2009, the US Congress passed a bill signed by President Obama, providing an
additional $787 billion fiscal stimulustwo thirds for additional spending and one third for tax cutsto create jobs and to
help the economy recover.

Evolution
Pre 1940s
th

th

The rapid industrialization of the US economy began during the late 19 century, and by the beginning of the 20 century it
was one of the fastest growing technologically advanced economies in the world. The country also witnessed ample
infrastructural development due to the discovery of coal, iron ore, copper and silver deposits, and a number of steel and
cement factories were set up. There was also a growth in the number of private business enterprises during the 1920s,
although this was marred by the great economic depression of 192939 which led to closure of factories and mass
unemployment. The government's involvement in the economy increased most significantly during the New Deal of the
1930s. This represented the economic measures initiated by President Franklin D Roosevelt to alleviate the economic
crisis, creating closer ties between business and government. During this period, the foundations of the modern economic
and financial systems were laid, while regulating agencies such as the SEC and the Federal Deposit Insurance Corporation
were created. The social security system also took effect during this period.
194080
During World War II, there was increased intervention of government in business, as most of the manufacturing outlets
were used for the production of war equipment. As consumer goods became increasingly scarce, the government put price
control mechanisms in place due to fears of inflation. In the post-war years consumer demand fueled economic growth,
providing a fillip to the manufacturing sector, with new industries such as aviation and electronics growing rapidly. There
was also a housing boom during this period.
The 1970s marked the beginning of the new world economic order, with the emergence of new nations in Asia and Africa.
US policies were also directed at increasing the nations presence in the world economy. During the mid 1970s there was
high inflation, rising unemployment and stagnant business activity. By 1980, the economy had plunged into recession as
the Federal Reserve Bank resorted to a tight money supply resulting in an interest rate rise.
19812009
The 1980s was the decade of deregulation. The economy rebounded from recession in the early years of the decade after
tax rates were reduced and consumer demand strengthened, but there were huge budget and trade deficits. With the fall of
the Soviet Union and Eastern European communism in the late 1980s, trade opportunities expanded greatly for the US. In
USA: Country Analysis Report In-depth PESTLE Insights
Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Economic Landscape

the 1980s, the government relaxed controls on bank interest rates and long-distance telephone service, and in the 1990s it
moved to ease regulation of local telephone services. Throughout the 1990s, the economy was on a growth path. A tax
increase and cuts in spending eased the budget deficits and the real GDP growth declined to 0.75% in 2001. The economy
started to recover slowly in the latter half of 2003 due to increased federal expenditure, military buildup and tax cuts. The
economy had fully recovered by 2004 when GDP growth touched 3.8%, continuing to grow at an average rate of 3.0% per
annum until 2006. There was temporary disruption in growth in 2005 due to Hurricane Katrina and Hurricane Rita, but the
economy continued its growth. However, a slump in the housing market along with the subprime crisis adversely affected
the economy in 2007 when it registered a growth of only 2.2%. The economy grew by 1.3% during 2008, however real GDP
contracted by 2.5% in 2009. The US economy is expected to bounce back and register growth of 2.5% in 2010.
The Figure below shows the evolution of the US economy since 1970:
Figure 4:

The US: historical GDP growth and key economic events (19702009)

5.00

4.00

Growth rate (%)

3.00

2.00

1.00

0.00
1991

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

-1.00

-2.00

-3.00
Year
Source: Datamonitor

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

DAT AMONITOR

Published 04/2010

Economic Landscape

Structure and policies


Financial system

Financial authorities/regulators
Federal Reserve System

The Federal Reserve System (the Fed) is the central bank of the country. Its duties are:

Conducting the nations monetary policy.

Supervising and regulating banking institutions to ensure the safety and soundness of the nations banking
system.

Containing systematic risks that may arise in the financial markets.

Providing financial services to depository institutions, the US government and foreign official institutions,
including playing a major role in operating the nations payment system.

Banking is regulated at both the federal and state level, and banking institutions are required to adhere to both sets of
regulations.
Federal Deposit Insurance Corporation

The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the federal government which protects the
interest of consumers by insuring their deposits. The FDIC was created in 1933 in response to the thousands of bank
failures that occurred in the 1920s and early 1930s. The FDIC directly examines and supervises about 5,250 banks and
savings banks; more than half the institutions in the banking system. The FDIC is the primary federal regulator of statechartered banks that do not join the Fed. In addition, the FDIC is the back-up supervisor for the remaining insured banks
and thrift institutions. However, the FDIC insures only deposits, and does not insure securities, mutual funds or similar
types of investments that banks and thrift institutions may offer.
Securities and Exchange Commission

The SEC is the primary overseer and regulator of the US securities market. The commission's purpose is to protect
investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. The SEC works closely with many
other institutions, including Congress, other federal departments and agencies, the self-regulatory organizations (e.g. the
stock exchanges), state securities regulators, and various private sector organizations.
National Association of Insurance Commissioners

Insurance companies in the US are subject to respective state regulations. The National Association of Insurance
Commissioners (NAIC), created by the state insurance regulators in 1871, ensures the uniformity of regulations and coordinates regulation of multi-state insurers.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Economic Landscape

Stock markets
The US has 10 securities exchanges, registered with the SEC. The New York Stock Exchange (NYSE) is one of the
leading exchanges besides the NASDAQ, which is a leader in technology stocks. Some exchanges are registered with the
SEC for the purpose of trading security futures. The market capitalization of NYSE peaked at $15,650 billion in 2007, but
came down after the global financial crisis to around $9,208 billion in 2008.
Figure 5:

Market capitalization of NYSE, 200108

18,000.0
16,000.0
14,000.0

$ billion

12,000.0
10,000.0
8,000.0
6,000.0
4,000.0
2,000.0
0.0
2001

2002

2003

2004

2005

2006

2007

2008

Year
Source: Datamonitor

DAT AMONITOR

Banking
According to the FDIC, there were 8,430 FDIC-insured commercial banks in the US as of August 2008. At the end of 2007,
FDIC-insured banks in the US held nearly $6.9 trillion in deposits, supported more than 73,000 branches, and employed
1.8 million people. The US has a highly developed but fragmented financial system, with a large number of regional and
community banks. However, the demand for efficient banking services in the US continues at a relatively stable rate. The
US has been seriously affected by the subprime mortgage and liquidity crises that played out in 2007 and 2008, with some
big banks finding themselves in need of rescue and various smaller banks disappearing off the map. The ranking of the
largest competitors in the US is currently in flux. There are numerous financial intermediaries which provide payment,
clearing and settlement services, with over 20,000 deposit-taking institutions also offering some type of payment service.
Privately operated payment systems range from the localized interbank associations that clear cheques for their members
or operate automated teller machine (ATM) or point of sale (POS) networks to the nationwide credit and debit card

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Economic Landscape

networks, to a major large value electronic funds transfer system. The central bank also plays an important role in
providing a wide range of interbank payment services. In addition, innovation and competition have led to the use of new
instruments and systems that rely increasingly on electronic payment mechanisms.

Insurance
In recent years the gross premium income in the US insurance market had been growing at a fairly fluctuating rate. Decline
is forecast for this market in 2009, with recovery not expected until 2011.
The US insurance market generated a gross premium income of $1,243.9 billion in 2008, representing a CAGR of 2.9% for
the period spanning 200408. In comparison, the European and Asia Pacific markets grew with CAGRs of 5.4% and 5.2%
respectively over the same period, to reach respective values of $1,483.6 billion and $845.6 billion in 2008.
Non-life insurance sales proved the most lucrative for the US market in 2008, generating a gross premium income of
$665.7 billion. This is equivalent to 53.5% of the market's overall value. In comparison, sales of life insurance generated a
gross premium income of $578.2 billion in 2008, equating to 46.5% of the market's aggregate income.
The performance of the market is forecast to decelerate with an anticipated CAGR of 0.7% for the five-year period 2008
13, which is expected to drive the market to a value of $1,289.7 billion by the end of 2013. Comparatively, the European
and Asia Pacific markets will grow with CAGRs of 2.1% and 6.7% respectively over the same period, to reach respective
values of $1,647.4 billion and $1,166.8 billion in 2013.

Asset management
Following a period of decent growth, the market plunged into decline in 2008, with the market remaining in such a state in
2009. Recovery is forecast for 2010, followed by accelerating growth through to 2014.
The US retail savings and investments market had total assets of $20,457 billion in 2009, representing a CARC of -1.8% for
the period spanning 200509. In comparison, the European and Asia Pacific markets grew with CAGRs of 1.3% and 0.3%
respectively over the same period, to reach respective values of $14,585.9 billion and $10,123.6 billion in 2009.
The deposits segment was the market's most lucrative in 2009, with a total value of $9,240.4 billion which is equivalent to
45.2% of the market's overall value. The equities segment contributed a further $4,360 billion in 2009, equating to 21.3% of
the market's aggregate value.
The performance of the market is forecast to accelerate with an anticipated CAGR of 5.7% for the five-year period 2009
14, which is expected to drive the market to a value of $27,039.3 billion by the end of 2014. Comparatively, the European
and Asia Pacific markets will grow with CAGRs of 5.8% and 3.4% respectively over the same period, to reach respective
values of $19,363.7 billion and $11,973.2 billion in 2014.

Performance
GDP and growth rate
The US is the largest economy in the world, with a GDP of more than $11 trillion in 2009. After the economic boom of the
1990s, growth slowed down after 2000. The events of 9/11 further added to the economic slowdown. Despite this, the
economy managed an average growth of 2.6% during 200006. In the second half of 2006, however, the US economy

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Economic Landscape

started decelerating below the long-term growth trend. The economic slump continued in 2007, mainly due to the slowdown
in the housing market and the subprime crisis. The economy registered a growth of 2.2% during 2007 and 0.8% during
2008, with the real GDP contracting by 2.5% in 2009. The US returned to growth in the third quarter of 2009, with the
economy expanding by 3.5%. The countrys economy is expected to bounce back and register a growth of 2.5% in 2010.
Figure 6:

GDP and GDP growth rate in the US, 200313 (real GDP at constant 2000 prices)

14,000.0

4.0
3.5

12,000.0

3.0
2.5

10,000.0

2.0

$ billion

8,000.0

1.0
0.5

6,000.0

0.0
-0.5

4,000.0

Growth rate (%)

1.5

-1.0
-1.5

2,000.0

-2.0
-2.5

0.0

-3.0
2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Year
GDP
Source: RBI Annual Report 200607

Real GDP growth rate


DAT AMONITOR

GDP composition by sector


In 2009, the services sector was the largest contributor to GDP in the economy (76.9%), followed by industry (21.9%) and
agriculture (1.2%). For the greater part of the twentieth century, the US was the world's top manufacturer and provider of
services.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Economic Landscape

Figure 7:

GDP composition by sector in the US, 2009

Agriculture, 1.2%

Industry, 21.9%

Services, 76.9%

Source: Datamonitor

DAT AMONITOR

Agriculture

In the late 1990s, the agricultural economy of the US was unstable. It grew in 1996 and 1997, and slumped in the next two
years. Agricultural production picked up in 2002 and reached its peak in 2004, only to fall again in 2005 and 2006. Later
agricultural output declined from around $160 billion in 2008 to $155 billion in 2009, with shrinking growth rates in the same
years. Even though agriculture now has a small share of GDP, farmers remain economically and politically powerful forces.
The value of US agricultural production is less than that of China and India. Despite its overall trade deficit, the US has a
surplus in agriculture and about a quarter of US farm output is exported. The major exported agricultural commodities
include dairy products and corn. The next in importance are grains, such as wheat, and oilseeds, such as soybeans. The
dairy industry is dominated by poultry, eggs and milk, produced by a small number of large farms. The activities on these
farms are carried out on a commercial basis.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Economic Landscape

Figure 8:

Agricultural output of the US, 200309

180.0

50.0

160.0

40.0

140.0
30.0

$ billion

100.0

20.0

80.0

10.0

Growth rate (%)

120.0

60.0
0.0
40.0
-10.0

20.0
0.0

-20.0
2004

2005

2006

2007

2008

2009

Year
Agriculture output
Source: Datamonitor

Growth rate
DAT AMONITOR

Industry

The US is the world's top manufacturing country and the sector accounts for 21.9% of the nations GDP. The industrial
output increased from around $2,886 billion in 2008 to reach $2,895 billion in 2009. Successive governments have played
an important role in the industry, having advanced US business goals in international trade within their policies. The federal
government aims to negotiate lower tariffs and remove other barriers to US imports, and it also protects US companies
from unfair foreign competition. Furthermore state governments promote the export of goods produced from the industries
in their respective regions.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Economic Landscape

Industrial output of the US, 200309

3,000.0

9.0

2,900.0

8.0

2,800.0

7.0

2,700.0

6.0

2,600.0

5.0

2,500.0

4.0

2,400.0

3.0

2,300.0

2.0

2,200.0

1.0

2,100.0

Growth rate (%)

$ billion

Figure 9:

0.0
2004

2005

2006

2007

2008

2009

Year
Industry output
Source: Datamonitor

Growth rate
DAT AMONITOR

Services

The services sector has been performing marginally better than the manufacturing sector during the economic slowdown.
In 2008, it registered a growth of 3.0%, but the services output declined by 3.6% in 2009. The services provided by the
private sector accounted for 67.8% of GDP in 2006, with real estate and financial services on top. The most rapidly
expanding sectors were financial services; professional, scientific, and technical services; durable goods manufacturing,
particularly computers and electronic products; real estate; and healthcare. However, since the subprime crisis of 2007, the
banking sector has been slowing down and this trend is expected to continue due to the imposition of tighter lending
conditions.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Economic Landscape

Figure 10:

Service output of the US, 200309

12,000.0

8.0

6.0

10,000.0

4.0

$ billion

2.0
6,000.0
0.0

Growth rate (%)

8,000.0

4,000.0
-2.0
2,000.0

-4.0

0.0

-6.0
2004

2005

2006

2007

2008

2009

Year
Services output
Source: Datamonitor

Growth rate
DAT AMONITOR

Fiscal situation
According to the Congressional Budget Office (CBO), the budget deficit is expected to reach $1.3 trillion in fiscal 2010,
slightly less than the $1.4 trillion recorded in fiscal 2009. The countrys fiscal deficit in 2009 was almost 10% of its GDP and
this is definitely a cause for concern. The CBO also added that if current government policy does not change, budget
deficits are expected to average $600 billion annually between 2011 and 2020. The governments debt limit is expected to
reach around $14 trillion by the end of 2010, up from $12 trillion in 200910, and is expected to climb to $15 trillion by
2015. Analysts and economists continue to believe that the future economic prosperity of the country is at grave risk if the
budget deficits are not reduced in the future.

Exports and imports


The total trade of the country fell due to the global economic crisis, shrinking by approximately 15% in 2009. Exports from
the US reduced to reach $1,546 billion in 2009, down from $1,809 billion in 2008. In the same vein, imports too came down
to $2,162 billion in 2009 from $2,537 billion in 2008. . According to the Department of Commerce, the deficit shrank in 2008
for the second time in seven years, down to $681.1 billion from $707.8 billion in 2007. Furthermore, trade deficit came
down in 2009 to reach $615 billion. As a percentage of GDP, the goods and services deficit equaled 4.8% in 2008, down
from 5.1% in 2007. During 200007 exports increased at a CAGR of 6.6% but imports went up even faster, recording a

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Economic Landscape

CAGR of 8.4%, with the deficit nearly doubling over those years. With stagnating import growth and buoyant export growth,
it is expected that the trade deficit will start to show improvement.
The top imports to the US were industrial supplies, crude oil, capital goods consisting of computers, telecommunications
equipment, motor vehicle parts, office machines, electric power machinery, and consumer goods consisting of automobiles,
clothing, medicines, furniture, and toys. Countries importing most goods to the US were China (16.9%), Canada (15.7%),
Mexico (10.6%), Japan (7.4%), and Germany (4.8%) in 2007. Industrial supplies (organic chemicals), capital goods
(transistors, aircraft, motor vehicle parts, computers, telecommunications equipment), and consumer goods (automobiles
and medicines) were among the top US exports in 2007. The top US export destinations were Canada (21.4%), Mexico
(11.7%), China (5.6%), Japan (5.4%), the UK (4.3%), and Germany (4.3%).

Figure 11:

External trade of the US, 200509

5,000
4,346

4,500
3,983

4,000
3,500

3,276
2,362

$ billion

3,000

2,537

2,233
2,013

2,500

2,162
1,809

2,000
1,500

3,708

3,667

1,621

1,546

1,435
1,263

1,000
500
0
2005

2006

2007

2008

2009

Year
Exports
Source: Datamonitor

Imports

Total trade
DAT AMONITOR

Current account
The US has had a negative current account balance since the 1990s. The increase in imports is being partially offset by the
increase in services and the deficit has marginally decreased with an improvement in export performance. The current
account deficit fell from $757.3 billion in 2007 to $707.8 billion in 2008. In the fourth quarter of 2009 this reached $115.6
billion, after recording a low of $98 billion in the second quarterits lowest level in seven years. Due to increasing import of
goods, the deficit on goods and services increased by $12.5 billion in Q4 2009. With the recovery of the US economy, the
USA: Country Analysis Report In-depth PESTLE Insights
Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Economic Landscape

swing in the inventory cycle should continue to increase imports; consequently, the goods deficit is expected to increase
throughout 2010. The income surplus fell by $4 billion in the fourth quarter to $25.1 billion as payments of interest,
dividends, and profits on foreign-owned assets in the US rose more than corresponding receipts on US-owned assets
abroad. Despite its substantial net overseas debt, the US continues to enjoy a surplus on investment income. In 2009 the
income surplus totaled $89 billion, down from a record $118 billion in the previous year, and now remains at comfortable
levels.

International investment position

Foreign direct and portfolio investments


The US is the largest foreign direct investor in the world and also the largest recipient of FDI. The large inflows of foreign
investment in the US arise from the relatively better economic growth that occurred in the US, compared to developed
nations. The stock of FDI came down from $758.9 billion in 2007 to reach $576.1 billion as of December 31, 2009.

Foreign exchange position


The US' reserves comprising foreign exchange and gold reached $2.2 trillion as of December 31, 2009, up from $1.9 trillion
as of December 31, 2008.

Credit rating
According to Standard & Poors, both local and foreign currencies are stable, with a rating of AAA.

Key monetary indicators


Inflation

The average rate of inflation was 2.7% during the period 200207, rising to 4% in 2008. The US recorded deflation of
0.36% in 2009, as a weak economy puts pressure on manufacturers and retailers to reduce prices. The high food and
energy prices which prevailed in 2007 for instance, started to ease in the latter half of 2008. Deflation poses a severe
problem for indebted companies as they would have to reduce the prices of their products. Consequently, revenues from
sales will decline while debt remains at the same level. Nevertheless the growth outlook for 2010 is positive, with the
country expected to record a growth rate of 2.5% and inflation expected to be around 1.94%.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Economic Landscape

Figure 12:

Consumer price index and inflation in the US, 200313f

4.50

160.00

4.00

140.00
120.00

3.00
2.50

100.00

2.00
80.00
1.50
60.00

1.00

Inflation (%)

Consumer price index

3.50

0.50

40.00

0.00
20.00

-0.50

0.00

-1.00
2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Year
Consumer price index

Inflation

Source: Datamonitor

DAT AMONITOR

Interest rate
The central bank has held benchmark overnight rates in the 00.25% range and interest rates have remained at the same
level since December 16, 2008. The Fed announced in March 2009 that it is likely to persist with these interest rates for an
extended period while the country recovers from recession. There is an expectation that rates will be firmed up due to a
modest economic recovery in 2010.

Banking sector
Despite recording strong accelerating growth rates over the past few years, the US banking industry experienced a drop of
5.9% in 2009. The growth rate is expected to drop slightly once again in 2010, before returning to the strong growth rates
previously experienced by the industry for the remainder of the forecast period up to 2014.
The total assets held by the US banking industry reached a value of $10,526.5 billion in 2009, representing a CAGR of
8.6% for the period spanning 200509. In comparison, the European and Asia Pacific industries grew with CAGRs of 7.9%
and 10.3% respectively over the same period, to reach respective values of $51,746.6 billion and $24,491 billion in 2009.
The Bank Credit sector was the industry's largest segment in 2009, holding total assets to the value of $8,035.7 billion,
which is equivalent to 76.3% of the industry's overall value. The Cash Assets segment held total assets to the value of
$945.9 billion in 2009, equating to 9.0% of the industry's aggregate revenues.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Economic Landscape

The performance of the industry is forecast to accelerate with an anticipated CAGR of 9.4% for the five year period 2009
14, which is expected to drive the industry to a value of $16,505.1 billion by the end of 2014. Comparatively, the European
and Asia Pacific industries will grow with CAGRs of 8.6% and 11.2% respectively over the same period, to reach respective
values of $78,345.2 billion and $41,622.4 billion in 2014.

Employment
Through most of the country's history the labor force has grown steadily, sustaining economic expansion. Moreover,
immigrants have been a major source of labor, tending to increase in number during times of low unemployment when
demand for workers goes up.
At the beginning of 2008, total non-farm employment stood at 138.1 million and the unemployment rate was at 5.8%.
Employment has remained on an upward trend since 2004, although the rate of increase has declined since 2005. The
labor force participation rate, after reaching 79.0% in 1996, declined marginally to touch 78.09% in 2006. Employment in
the farm sector has been stagnant at 2% of total employment since 1991. Meanwhile, employment within the secondary
sector has been falling steadily from 26% in 1991 to 23% in 2000, and 21% in 2006. The tertiary sectors employment
correspondingly shows a steady increase.
The US economy nose-dived in the last quarter of 2008 and the country entered into recession the following year. Real
GDP decreased by around 2.5% in 2009 while domestic demand plunged, resulting in record job losses within the
industries and services sectors. Around 12.5 million Americans were unemployed in February 2009, up from 7.4 million a
year earlier. During November 2008 to February 2009, a monthly average of 646,000 jobs was lost in the country,
approximately 2.6 million jobs in total. The unemployment rate soared to around 9.3% in 2009, the highest rate of
unemployment in the country since 1983. This is expected to reach 10.0% in 2010.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Economic Landscape

Figure 13:

Unemployment rate in the US, 200313

18.00

12.0

10.0
14.00
12.00

8.0

10.00
6.0
8.00
6.00

4.0

Rate of unemployment (%)

Number of unemployed (millions)

16.00

4.00
2.0
2.00
0.00

0.0
2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Year
Total unemployment

Rate of unemployment (%)

Source: Datamonitor

DAT AMONITOR

Outlook
In 2009 the US economy was in recession, having been hit by a slump in the housing market and a crisis within the
financial sector; however, the country is expected to bounce back in 2010. The financial crisis resulted in the collapse of
Lehman Brothers on September 15, 2008 and the financial sector has continued to face serious issues since then. The
countrys economy contracted by around 2.5% in 2009; however the country is expected to record a growth rate of 2.55%
in 2010. This is mainly due to the considerable fiscal stimulus and a strong monetary policy action.
According to the CBO, the deficit will reach $1.3 trillion in fiscal 2010, slightly less than the $1.4 trillion recorded in fiscal
2009. The CBO also added that if current government policy does not change, budget deficits are expected to average
$600 billion annually between 2011 and 2020. The governments debt limit is expected to reach around $14 trillion by the
end of 2010, up from around $12 trillion in 200910, and is expected to climb to $15 trillion by 2015. Analysts and
economists continue to believe that the future economic prosperity of the country is at grave risk if the budget deficits are
not controlled in the future.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Social landscape

SOCIAL LANDSCAPE
Summary
As a result of the rapid aging of its population the US faces a risk of slower economic growth, serious labor shortages and
rising tax rates over the next few decades. The distribution of income in the US, however, is the most unequal of all major
economies. While income has risen for all US households in recent years, the biggest gains went to the group of top
earners. Poverty and child poverty rates are the highest of all the developed nations in the US. Meanwhile an aging
population and rising healthcare costs are expected to place an ever increasing burden on public retirement and healthcare
systems in the US.

Evolution
In the early 20th century, the federal government played a minimal role with respect to social security measures. There was
an increase in industrial output as well as the availability of farmland, and social welfare was believed to be the
responsibility of local government. Social security measures as they are understood today were introduced during the
1930s, following the great economic depression. Though most of these were temporary relief measures, the social security
system remained in place. The program is funded by deductions from the salaries of working people and ensures that
retired persons receive a modest monthly income, while also providing workers with unemployment insurance, disability
insurance, and other forms of assistance.
There were significant developments in the 1960s, when assistance programs such as Medicaid and Medicare were
established. Housing for lower income groups was provided by federal funds and in later years, with the increasing number
of people below the poverty line, special programs were introduced for the aid of poor families. These families received
welfare payments allowing them to obtain such necessities as food, clothing, and shelter. Social security payments
constitute a large proportion of government expenditure, which was equal to nearly 20% of GDP in 2006.

Structure and policies


Demographic composition

Age and gender composition


Around 67% of the US population is in the age group 1564; the population above 65 years is 12.6% and the remaining
20.4% belongs to the 014 year age group. The gender ratio at birth now stands at 1.05 males per female. According to US
census data, half of the population was more than 35.3 years old in 2000, the countrys highest median age to date. By
2000, the largest age group of people was between 3544 years old. The proportion of the population over 65 declined for
the first time in the 1990s, partly due to the relatively low number of births in the late 1920s and early 1930s. However this
segment of the population will rapidly increase in number in 2011 when the baby boomer generation reaches age 65, a
trend which will continue for many years.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Social landscape

Table 9:

Mid-year population by age (millions), 2008

Age

Female

Male

04

10.18

10.64

59

9.72

10.16

1014

9.88

10.36

1519

10.55

11.11

2024

10.24

10.79

2529

10.24

10.57

3034

9.60

9.79

3539

10.49

10.56

4044

11.00

10.88

4549

11.57

11.28

5054

10.72

10.27

5559

9.42

8.85

6064

7.53

6.89

6569

5.76

5.03

7074

4.73

3.86

7579

4.21

3.08

80+

7.30

3.89

Source: Datamonitor

DAT AMONITOR

The female population comprises 50.9% of the total population, with the male population accounting for 49.1%.

Urban/rural composition and migration


In the US, the suburban areas of metropolitan locations account for the most metropolitan growth. Nearly one third of
Americans live in metropolitan areas. The population of the west grew faster than the population in other regions, although
the population density of the north east exceeded the densities elsewhere in the nation. This region also has the highest
percentage of its population living in metropolitan areas.
The percentage of people living in metropolitan areas ranges from 74% in the Midwest to 90% in the north east. In the
states of California, Connecticut, Florida, Massachusetts, New Jersey, New York, and Rhode Island, 90% of the population
were living in metropolitan areas by 2000.
The percentage of the population born outside of the US increased by 57% throughout the twentieth century. According to
the 2000 census, this group constituted 11% of the population. This has led to an increase in the proportion of the male
population to that of the female population. There was also an internal migration to the east and south. Almost two thirds of
immigrants have settled in the gateway states of California, New York, Texas, Florida, Illinois, and New Jersey.

Religious composition
Christianity is the major religion of the US population, with the share of Protestants at 51%, Roman Catholics at 24%, other
religions at 21%, and none at 4%.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Social landscape

Figure 14:

Major religions in the US, 2009

None
4%
Roman Catholics
24%

Others
21%

Protestants
51%

Source: Datamonitor

DAT AMONITOR

Education

System of education
The system of education in the US is decentralized, with control and funding of education coming from federal, state and
local governments. The government has provided for a mandatory and universal system of education at primary and
secondary levels. The No Child Left Behind Act of 2002, a piece of federal legislation, calls for an annual assessment of
progress and greater accountability. In particular, it requires states to establish clear content standards and thresholds for
adequate yearly progress against which performance can be assessed. Moreover, the act requires the states to implement
curriculum-based external exit exams.
The different schools that students can opt for are public schools, private schools and home schools. The schooling years
of kindergarten to twelfth grade are divided into elementary school, junior high school (middle school), and senior high
school. Post-secondary education, also known as college or university, is governed separately from the elementary and
high school system. After graduation students may move to higher education, which provides specialized learning. There is
no distinction between 'university level' and 'non-university level' higher education as in many other countries.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Social landscape

Healthcare

Healthcare services
President Obama signed into law a new healthcare bill on March 29, 2010, which has overhauled the $2.5 trillion US
healthcare system. The legislation is the most comprehensive shift in US social policy in decades, extending insurance
coverage to 32 million previously uninsured people. The bill also bars insurers from excluding coverage to people with preexisting medical conditions and prevents them from arbitrarily dropping policy holders. According to the bill, individuals are
required to obtain health insurance, with failure to do so resulting in fines of up to 2.5% of income by 2016. Firms with more
than 50 workers which do not offer medical coverage could face fines of $2,000 per full-time employee. Furthermore,
Medicaid, the government health insurance program for the poor, will be available to everyone with incomes of up to 133%
of the poverty level, which stands at $10,830 for an individual and $22,050, for a family of four. Many states have eligibility
requirements below those levels.

Social welfare
US policy makers recognize the potential damage to the economy from stagnant and low incomes. Although the economy
is developed, the distribution of income is not equitable. Consequently, the benefits of economic growth do not reach the
poorest; the richest quintile made six times as much money as the poorest quintile in 2006 and this level of inequality has
continued to rise. Furthermore, an aging population and rising healthcare costs are expected to increase the burden on
social security and health systems, creating a need for reforms to make the programs financially viable.
As the baby boomer generation reaches retirement age, social security will have to be financed by greater taxation of a
smaller base of workers relative to the number of pensioners, or by cuts in the value of social security benefits. Public
expenditure on Medicare is projected to rise even more rapidly. These problems will be magnified unless there is a
significant reversal in the trend towards early retirement.
According to the budget projections, spending on entitlement programs, including social security and Medicare, will
increase by around 1.5% of GDP in each decade through to 2080. The contributions to these programs are expected to
grow much less rapidly; the current estimates indicate a 75 year funding gap in the social security and Medicare systems,
at 325% of GDP. The social security system presently runs a cash surplus of 1.5% of GDP, which is projected to fall into
deficit as early as 2017.
The administration has also been encouraging initiatives to increase the efficiency of the Medicaid program. Moreover,
officials have observed that states are in a better position than the federal government to control health costs through policy
initiatives and experimentation. State representatives have agreed that the federal government was providing significant
flexibility in the Medicaid program, while also tightening the definition of expenses eligible for federal matching grants. In
addition the president has endorsed slowing benefit growth by linking payments to a sliding combination of wage and price
indexing, which would halve the 75 year funding gap

Performance
Healthcare
In a study of 191 member nations, the WHO ranked the US healthcare system first in both responsiveness and
th

nd

expenditure. However, it was ranked 37 in terms of overall performance and 72 in terms of overall level of health. Total

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Social landscape

health spending accounted for 19.1% of GDP in 2009, an increase from 17.6% in 2008 and 16.0% in 2007. This indicates
that the country has the highest share in the OECD, with the average being 8.9% in 2007. In comparison, France,
Switzerland and Germany allocated respectively 11.0%, 10.8% and 10.4% of their GDP to health in 2007. The US is far
ahead of other OECD countries in terms of total health spending per capita, spending $7,290 (adjusted for purchasing
power parity), which is almost two-and-a-half times more than the OECD average of $2,964 in 2007.
Life expectancy in the US stood at 78 years in 2009 and the infant mortality rates stood at 6.3 deaths per 1,000 live births in
2009.

Figure 15:

Expenditure on healthcare in the US, 200309

70.0

25.0

60.0
20.0

15.0

40.0
30.0

10.0

Percentage (%)

$ billion

50.0

20.0
5.0
10.0
0.0

0.0
2003

2004

2005

2006

2007

2008

2009

Year
Healthcare expenditure
Source: Datamonitor

Healthcare expenditure as % of GDP


DAT AMONITOR

Income distribution

Standard of living
According to the US census report, real median household income rose between 2005 and 2006 for the second
consecutive year. Average household income increased by 0.7%, from $47,845 to $48,201. However OECD estimates
indicate that 13.2% of the population in the US was below the federal poverty threshold in 2008. The main causes of
poverty have been identified as the low minimum wage and regional imbalance in job opportunities. Although strong growth

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Social landscape

in the US has benefited low-wage workers and their families, inequality has continued to rise. The growth in the country has
generally not been equitable in terms of wages paid by firms or through redistributive social policies.
The UN Development Program Report 2006 ranks income distribution in the US as the 73rd most equal out of 126
countries, as measured by the Gini Coefficient. The richest quintile made six times as much as the poorest quintile in 2006.
To a large extent, the rise in inequality is due to differences in skill levels. This, in turn, is associated with technological
advancements such as improvements in information technology, which tend to raise the productivity and hence the wages
of high-skilled workers. With skill differential becoming a major source of inequality, improvement in education is of key
importance.

Regional disparity
During 200506, households in the north-east and west had the highest median income at $52,057 and $52,249, followed
by households in the Midwest at $47,836. Households in the south have the lowest median income ($43,884). During the
same period, real median income for households inside metropolitan areas rose by 1.1% to $50,616. Households inside
principal cities had a 2006 median income of $42,627, while households outside principal cities had an average income of
$55,775.

Education
The US higher education system is one of the best in the world. The country has a literacy rate of 99.0%, with an equal
number of male and female literates. The number of primary schools grew at a rate of 2.0% in 2000 and 1.33% in 2006.
However, the annual growth in the number of secondary schools was higher, at 3.2% in 2000 and 3.8% for 2006. According
to government statistics, in 2007 86% of all adults (25 and older) had completed at least high school and 29% had at least
a bachelor's degree. The level of educational attainment is marginally in favor of men; while 30% of men have a bachelors
degree, only 28% of women have achieved that level of education. Furthermore, the statistics reveal a positive correlation
between the degree obtained and income earned. Adults with advanced degrees earn four times more than those with less
than a high school diploma.
The education expenditure of the country has increased from $20.5 billion in 2003 to reach $52 billion in 2009. As a
percentage of GDP this has come down marginally from 7.8% to 7.6% during the same time period. Workers aged 18 and
above with a masters, professional or doctoral degree earned an average of $82,320 in 2006, while those with less than a
high school diploma earned $20,873. The level of educational attainment is highest among Asians, with 52% in the age
group 25 and above having a bachelors degree or more, compared with 32% of non-Hispanic whites, 19% of African
Americans and 13% of Hispanics.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Social landscape

Figure 16:

Government expenditure on education in the US, 200309

60.0

8.00
7.90

50.0

7.80
7.70
7.60
7.50

30.0

7.40
20.0

Percentage

$ billion

40.0

7.30
7.20

10.0

7.10
0.0

7.00
2003

2004

2005

2006

2007

2008

2009

Year
Expenditure on education
Source: Datamonitor

Expenditure as % of GDP
DAT AMONITOR

Outlook
The UN Human Development Index has ranked the US at 12th place, which is below other developed nations such as
Norway, Iceland, Canada and Japan. The US social security system has run successfully for many years. However, decline
in economic growth and an increase in expenditure on social security due to the aging baby boom generation will become a
burden on the governments revenues. Therefore, the governments expenditure on pension and healthcare will increase in
the coming years. The US healthcare system requires greater involvement from the public sector to assure services to all
its citizens
In April 2010 the US Congress approved an almost six-week extension of federal jobless benefits and health insurance
subsidies for unemployed people, amounting to $18.2 billion. The bill is expected to extend the maximum total of 99 weeks
of combined federal and state jobless benefits to June 2, 2010. This means that unemployed people who have exhausted
shorter periods of benefits will continue to receive cheques from the federal government. Furthermore, under the bill the
flood-insurance program allows homeowners and businesses to protect against flood-related losses by buying insurance
from the government. The bill is expected to continue healthcare subsidies through the Cobra program and includes funds
to avert a 21% decrease in payments to doctors who see Medicare patients through to the end of May 2010. The bill is
expected to get President Obamas approval.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Technological landscape

TECHNOLOGICAL LANDSCAPE
Summary
Technology and innovation are the cornerstones of the US economy. Besides maintaining its economic supremacy, the
nation has also guarded its status as a leader in the field of technological advancement. Continued investment in
technology is likely to see this superiority continue. The US spends 2.6% of its GDP on R&D expenditure, demonstrating its
commitment to innovation. However, this is less than that of other developed nations such as Japan, which spends nearly
3.2% of its GDP. The main body for R&D funding in the US is the National Science and Technology Council, which carries
out and supports research in wide areas.

Evolution
In terms of industry and technology, the US made the greatest progress between the end of the 18th century and the early
20th century. The years following the US civil war (186165), often termed as the second industrialization, laid the
groundwork for technological advancements. The late 19th century and the early 20th centuries witnessed new discoveries
and inventions: the discovery of oil, and the invention of the typewriter, the telephone, the phonograph and electric light.
Automobiles and airplanes also changed the way people commuted. With increasing demand, new production techniques
were devised to make the country more technology intensive, while the manufacturing industry matured in the post World
War II era.
The next wave of advancements came during the late 1980s and 1990s with the development of IT, contributing to the
unprecedented economic growth of this period. Since the mid-1990s, the IT sector has been vital to the growth of the US
economy and continues to drive it. This is partly because IT has applications in diverse sectors such as healthcare,
transportation, banking and financial services, retail, telecommunication, and media. It has furthered the growth of SMEs,
which invest a quarter of their total capital expenditure on computers and communications equipment; this is comparable to
the investment undertaken by large firms on these heads.
At the beginning of the 21st century, biotechnology was internationally recognized for its potential in human and animal
health, and related areas. In 2002, the Department of Commerces Bureau of Industry and Security initiated the first
comprehensive government assessment of the development and adoption of biotechnology in the industry.

Structure and policies


Intellectual property
The US Patent and Trademark Office (USPTO) grants patent and trademark protection to inventors and businesses for
their inventions and intellectual property (IP) rights. The huge number of patents filed represents the depth and leadership
of the US in science and technology. Nevertheless, the US contribution to global patenting is lower than its contribution to
global R&D efforts. France, Germany, Japan, the UK and the US combined accounted for 83.6% of all triadic patent
families in 2001. The US and the EU account for about 34% of worldwide triadic patents, while Japan accounts for just
under 25% of all triadic patents in 2001.
This increase occurred in the wake of several significant changes that resulted in stronger patent rights. There were a
number of disputes related to patents with regard to genetically engineered bacteria, software and business methods, and
financial services products during the 1980s and 1990s. The associated court orders enhanced the patentability of products
USA: Country Analysis Report In-depth PESTLE Insights
Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Technological landscape

belonging to these categories. In 1982, the Court of Appeals of the Federal Circuit (CAFC) was established, and it has
nationwide jurisdiction in areas such as patents and trademarks. The global Trade-Related Aspects of Intellectual Property
(TRIPS) agreement of 1994 led to a change in the length of a patents term, from 17 to 20 years from the filling date of
patent application, with some important exceptions related to pharmaceuticals.
Table 10:

Comparative performance on receipt of patents, 200008 (USPTO)

Year

Canada

France

Germany

Japan

US

2000

3,925

4,173

10,824

32,922

97,011

2001

4,063

4,456

11,894

34,890

98,655

2002

3,857

4,421

11,957

36,339

97,125

2003

3,894

4,126

12,140

37,248

98,590

2004

3,781

3,686

11,367

37,032

94,129

2005

3,177

3,106

9,575

31,834

82,586

2006

4,094

3,856

10,889

39,411

102,267

2007

3,970

3,720

10,012

35,942

93,691

2008

4,125

3,813

10,086

36,679

Source: Datamonitor

92,000
DAT AMONITOR

Research and development


There are a total of 477 research and academic institutions and 191 nonprofit biomedical research institutions in the US as
of 2005, according to the National Science Foundation.
The presidents 2008 budget maintains the commitment to basic research, particularly in areas that promote knowledge
and technologies through the American Competitiveness Initiative. Moreover, there are plans to double investment over the
next decade in the National Science Foundation, the Department of Energys Office of Science, and the Department of
Commerces National Institute of Standards and Technology laboratories (NIST).
The National Science Foundation is the primary support agency for funding research in the physical sciences through a
competitive and peer-reviewed process. Nanotechnology, advanced networking and information technology, physics,
chemistry, materials science, mathematics, and engineering have been identified as the focus areas of research. The
Department of Energys Office of Science supports funding for grants and infrastructure in research related to economically
significant innovations. Finally, the Department of Commerces NIST primarily works for research and standards
development to improve manufacturing capabilities and construct newer laboratories.

Research initiatives
The American Competitiveness Initiative has committed $5.9 billion (in 2007) to increase investments in research and
development, strengthen education and encourage entrepreneurship. Over a span of 10 years, the initiative will commit $50
billion to increase funding for R&D and $86 billion for R&D tax incentives; the budget allocation for R&D in 2007 increased
by nearly 50% over 2001 levels. Biomedical research and advanced security technologies are the priority federal funding
areas. The government is also bringing in new investments in physical sciences and engineering, which will generate
scientific and technological discoveries. However, there has been a decline in enrolment for math and physical sciences
degrees over the past two decades. Consequently, proposals to revamp the math and science education system to ensure
childrens interest have been introduced. The program also involves training teachers in these subjects.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Technological landscape
Performance
ICT, telecoms and biotechnology are some of the sectors that are driving the US economy. Invest in America has identified
the following sectors, among others, as good opportunities for investment:

Internet access market

The US internet access market has exhibited strong growth over the previous five years, but will begin to slow
in its growth towards 2013 as internet access approaches saturation.

The US internet access market generated total revenues of $37.7 billion in 2008, representing a CAGR of
5.7% for the period spanning 200408. In comparison, the Canadian and Mexican markets grew with CAGRs
of 9.4% and 19.1% respectively over the same period, to reach respective values of $4.5 billion and $5 billion
in 2008.

The number of internet subscribers increased with a CAGR of 4.7% between 200408, to reach a total of 86.4
million at the end of this period. The number of subscribers is expected to rise to 94.8 million by the end of
2013, representing a CAGR of 1.9% for the 200813 period.

The performance of the market is forecast to decelerate with an anticipated CAGR of 1.9% for the five-year
period 200813, which is expected to drive the market to a value of $41.4 billion by the end of 2013.
Comparatively, the Canadian and Mexican markets will grow with CAGRs of 2.7% and 11.9% respectively
over the same period, to reach respective values of $5.1 billion and $8.8 billion in 2013.

E-commerce

After posting very high growth rates between 200407, the US online retail sector is estimated to decelerate by
more than a half in 2008 followed by further deceleration in growth throughout the next consecutive years up to
2013.

The US online retail sector generated total revenues of $186.7 billion in 2008, representing a CAGR of 28.1%
for the period spanning 200408. In comparison, the European sector grew with a CAGR of 25.7% over the
same period, to reach a value of $76.1 billion in 2008.

Electronics sales proved the most lucrative for the US online retail sector in 2008, generating total revenues of
$40.2 billion which is equivalent to 21.5% of the sector's overall value. In comparison, sales of
apparel/accessories/footwear generated revenues of $26.6 billion in 2008, equating to 14.2% of the sector's
aggregate revenues.

The performance of the sector is forecast to decelerate with an anticipated CAGR of 11.7% for the five-year
period 200813, which is expected to drive the sector to a value of $325.2 billion by the end of 2013.
Comparatively, the European sector will grow with a CAGR of 10.7% over the same period, to reach a value of
$126.2 billion in 2013.

Software market

The US software market has grown at an uneven pace in recent years. In 2009, the growth rate and value of
the market declined. A steadier rate of growth is expected between 2010 and 2014.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Technological landscape

The US software market generated total revenues of $98.9 billion in 2009, representing a CAGR of 3.1% for
the period spanning 200509. In comparison, the European and Asia Pacific markets grew with CAGRs of
6.8% and 7.2% respectively over the same period, to reach respective values of $88.2 billion and $40.8 billion
in 2009.

Network and database management sales proved the most lucrative for the US software market in 2009,
generating total revenues of $24 billion which is equivalent to 24.3% of the market's overall value. In
comparison, sales of general business productivity and home use applications generated revenues of $23.4
billion in 2009, equating to 23.6% of the market's aggregate revenues.

The performance of the market is forecast to accelerate with an anticipated CAGR of 5.6% for the five-year
period 200914, which is expected to drive the market to a value of $129.9 billion by the end of 2014.
Comparatively, the European and Asia Pacific markets will expand with CAGRs of 5.4% and 9.4%
respectively over the same period, to reach respective values of $114.8 billion and $63.9 billion by 2014.

Control systems

After reaching its highest growth rate of 8.8% in 2007, the US control systems market is expected to decline in
2008 and 2009 followed by recovery in the years up to 2013.

The US control systems market generated total revenues of $3.2 billion in 2008, representing a CAGR of 4.5%
for the period spanning 200308. In comparison, the European and Asia Pacific markets grew with CAGRs of
3.9% and 3.3% respectively, over the same period, to reach respective values of $7.4 billion and $6.2 billion in
2008.

Distributed Control Systems (DCS) sales proved the most lucrative for the US control systems market in 2008,
generating total revenues of over $2 billion which is equivalent to 63.6% of the market's overall value. In
comparison, Programmable Logic Controllers (PLC) sales generated revenues of $1.2 billion in 2008,
equating to the remaining 36.4% of the market's aggregate revenues.

The performance of the market is forecast to decelerate with an anticipated CAGR of 3.2% for the five-year
period 200813, which is expected to drive the market to a value of $3.7 billion by the end of 2013.
Comparatively, the European and Asia Pacific markets will grow with CAGRs of 2.8% and 4.4% respectively
over the same period, to reach respective values of $8.5 billion and $7.6 million in 2013.

Biotechnology

The US biotechnology market has posted robust rates of growth over the past few years, although a sharp
deceleration is expected in 2009. Forecasts anticipate a return to secure and stable growth in the subsequent
year.

The US biotechnology market generated total revenues of $91.9 billion in 2008, representing a CAGR of
12.7% for the period spanning 200408.

In comparison, the European and Asia Pacific markets grew with CAGRs of 8.5% and 10.1% respectively over
the same period, to reach respective values of $46.1 billion and $45.1 billion in 2008.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Technological landscape

The medical/healthcare segment proved the most lucrative for the US biotechnology market in 2008,
generating total revenues of $61.7 billion which is equivalent to 67.2% of the market's overall value. In
comparison, the service provider segment generated revenues of $22.6 billion in 2008, equating to 24.6% of
the market's aggregate revenues.

The performance of the market is forecast to decelerate with an anticipated CAGR of 6.6% for the five-year
period 200813, which is expected to drive the market to a value of $126.4 billion by the end of 2013.
Comparatively, the European and Asia Pacific markets will grow with CAGRs of 5.6% and 6.8% respectively
over the same period, to reach respective values of $60.5 billion and $62.8 billion by 2013.

Research and development

R&D expenditure
The US is among the most technologically advanced nations and leads the world in most of the technological indicators.
The countrys investment in research and development fell by 3.9% in 2009, the first decline since 2002, but it is expected
to rebound slightly in 2010 as the economy gradually improves. After accounting for inflation, spending on R&D is forecast
to rise 1.7% to reach $395.9 billion in 2010 from $382.6 billion in 2009. Expenditure on R&D grew at an average rate of
2.6% of GDP during 200006. The share of R&D within the private sector and educational institutions has also been
witnessing an upward trend, with their share at 70.0% and 14.0% respectively. The census report states that R&D is one of
the most significant factors for an increase in economic growth and productivity. Almost two thirds of business sector
expenditure has gone into ICT and biotechnology-related industries. However, government R&D expenditure was mostly
directed towards defense. Moreover, funding for basic research increased by over 32.0% during 200107. Nevertheless,
there has been a decline in R&D expenditure as a percentage of GDP. To conclude, the US leadership position is clear
due to the fact that it is home to one third of the worlds scientists and engineers, and accounts for one third of global R&D
expenditure.
R&D investment in new medicines and vaccines by the US biopharmaceutical industry was around $65 billion in 2009, an
increase of more than $1.5 billion from the total R&D investment made in 2008. Pharmaceutical companies spent an
estimated $46 billion on R&D in 2009, while non-pharmaceutical research companies spent an estimated $19 billion.
Pharmaceutical research and biotechnology companies are devoted to inventing medicines that allow patients to live
longer, healthier, and more productive lives.

Outlook
After accounting for inflation, expenditure on R&D is forecast to rise 1.7% to reach $395.9 billion in 2010 from $382.6 billion
in 2009. For decades, the US has been able to maintain its leadership position with respect to innovation and investment in
R&D. Increasing R&D expenditure from the corporate sector indicates the innovativeness of the private sector, but the
government's declining share is a matter of concern. R&D expenditure in educational institutes, though increasing, is
comparatively less than that of other technologically advanced nations. Moreover, the US has to prepare itself for the
increasing competition from emerging nations such as China, which are making successful forays in technology intensive
industries. However, the governments R&D expenditure is currently focused on defense (58.3% of the governments R&D
budget) and the trend may continue in the next few years.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Legal landscape

LEGAL LANDSCAPE
Summary
The US legal system was originally derived from English law. The country follows a federal legal system, with individual
state laws alongside federal laws. The supreme law of the US is its constitution. Regulatory reforms have been followed in
a broad range of industries, resulting in increased competition in the economy. Moreover, the regulatory reform that began
in the 1970s accelerated over the course of the 1980s, resulting in partial deregulation of many sectors. This led to an
increased reliance on competition to improve efficiency. Although open competition is followed in most sectors, there are a
few sectors of the economy from which competition policy and law are completely excluded due to their sensitive nature.

Evolution
Prior to the adoption of the constitution, the US was governed by the articles of confederation. Under the articles, almost all
functions of the national government were vested in a single-chamber legislature called congress and there was no
separation of executive and legislative powers. Following the ratification of the constitution in 1788, the Judiciary Act of
1789 laid the foundation of the federal judicial system. The act set up a judicial system composed of the following features:
a Supreme Court, consisting of a chief justice and five associate justices; three circuit courts, each comprising two justices
of the Supreme Court and a district judge; and 13 district courts, each presided over by one district judge. As provided by
the act, the congress created two sets of lower courts.
In the initial years, federal-state relations dominated the Supreme Court's rulings and the federal government was favored
at the expense of state governments. Moreover, economic regulations came to dominate the scene with the advent of
capitalism as there were an increasing number of national and state laws aimed at monitoring business activities. Since
1937, the Supreme Court has focused on civil liberties, in particular the constitutional guarantees of freedom of expression
and freedom of religion.

Structure and policies


Judicial system

Structure of the system


There are three levels of courts in the US: federal, state and local. Some legal problems are resolved entirely in the state
courts, whereas others are handled entirely in the federal courts, and there are occasions when both of these courts are
involved in a case. The federal Supreme Court deals with matters pertaining to the federal government, disputes between
states, and interpretation of the US constitution.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Legal landscape

Figure 17:

The US court system

United States
Supreme Court

Court of claims

Circuit courts of appeal(11)

Customs and patents


Appeal court

US tax Courts and


administrative agencies

District courts with


federal jurisdiction only (89)

District courts with local


and federal jurisdiction (3)

Source: Datamonitor

Direct Appeals

DAT AMONITOR

Legislation affecting business

Industrial acts, legislations and regulations


In the US, there are four sources of law: constitutional law, administrative law, statutes and common law. Law enforcement
in the US has three components: courts, corrections and policing.
The basic antitrust statutes have remained unchanged for 50 years. The policy has evolved through court decisions
interpreting their general terms, rather than through individual cases of law. The merger policy attempts to prevent market
power while supporting entry and capital mobility. Moreover, the policy regarding horizontal mergers was methodically
elaborated in 1992 and the Sarbanes Oxley Act is being implemented across industries. This act is responsible for
enhancing the disclosure requirements of public companies. The responsibility of executives in financial reporting has also
been enhanced. The Foreign Corrupt Practices Act of 1977 was enacted to prevent corporate bribery of foreign officials.
US pharmaceutical patents receive special treatment because the process regulating drug introductions can take a long
time. The Drug Price Competition and Patent Restoration Act of 1984, known as the Hatch-Waxman Act, was designed to
address this issue and, moreover, it promotes innovation and eases generic drug approval. Moreover, it provides enough
time for pre-market clinical testing and approvals by the Food and Drug Administration (FDA). It also allows generic entry
without the duplication of certain testing. With a view to boost incentives for innovation, intellectual property rights were
strengthened by a series of court decisions in the 1980s and 1990s.
Furthering its openness to foreign competition, the US has continued to pursue further trade liberalization. Most importantly,
negotiations regarding the Doha round are continuing. The US has proposed to eliminate export subsidies in agriculture
and reduce other trade distortions and elimination of industrial and consumer goods tariffs by 2015. Furthermore, efforts
have been made to increase competition in regulated industries through partial deregulation or regulatory reforms between
the mid-1970s and the mid-1990s. Banking services were liberalized in the early 1980s and the transportation sector

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Legal landscape

(airlines, trucking, intercity buses and railroads) was deregulated by the mid-1980s. Moreover, regulations in the natural
gas sector were substantially eased in the mid-1980s.
In the case of electricity markets, the Federal Energy Regulatory Commission (FERC) regulates wholesale electric power
sales and the prices charged for transmission services across states, while the state Public Utility Commissions regulate
distribution and retail sales, oversee construction of facilities, and determine prices in the local markets. The 1992 Energy
Policy Act (EP Act) established non-utility generators known as exempt wholesale generators (EWGs). These generators
are exempt from renewable fuel and cogeneration requirements. Furthermore, the EP Act also gives the FERC the
authority to order that utilities provide transmission service to wholesale generators on a reasonable and non-discriminatory
basis. Another positive step taken by FERC has been its proposal regarding a standard market design (SMD) for wholesale
markets.
With regard to telecommunication services, the Federal Communications Commission (FCC) has exclusive jurisdiction over
interstate matters and intra-state issues where legislation pre-empts state authority. The Telecommunications Act of 1996
began the effort to spur competition among local services. Moreover, the act agreed with the view that a local fixed-line
telephone service was not a substitute for alternative telecommunications services. This created a need for a set of
regulatory rules to facilitate competition over the local loop. In particular, universal service goals were expanded as part of
the 1996 act.

Establishing operations as a foreign enterprise


An investor can set up a business enterprise in the US in the following ways: sole proprietorships, partnerships,
corporations or limited liability companies.
Sole proprietorships

The vast majority of small businesses start out as sole proprietorships. These firms are owned by an individual, who is
responsible for conducting the business. Sole proprietors own all the assets of the business and are entitled to the profits
generated by the same.
Partnerships

In a partnership, two or more people share ownership of a single business. Like proprietorships, the law does not
distinguish between the business and its proprietors. The partners should have a legal contract that sets forth how
decisions will be undertaken, profits will be shared, disputes will be resolved, how future partners will be admitted to the
partnership, how partners can be bought out, and what steps will be taken to dissolve the partnership when needed.
Corporation

A corporation is chartered by the state in which it is based and is considered by law to be a unique body. A corporation can
be taxed, it can be sued, and it can enter into contracts. The owners of a corporation are its shareholders. The
shareholders elect a board of directors to supervise the major policies and decisions. The corporation has a 'life' of its own
and does not dissolve when ownership changes.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Legal landscape
Limited Liability Company (LLC)

An LLC is a comparatively new type of hybrid business that is now permissible in most of the states. It is intended to offer
the limited liability features of a corporation, and the tax efficiencies and operational flexibility of a partnership. The method
to form an LLC is more complex and formal than that necessary for a general partnership. The owners are members and
the duration of the LLC is usually determined when the organization papers are filed. The time limit can be continued, if
desired, by a vote of the members at the time of expiration. LLCs should not have more than two of the four features that
define corporations: limited liability to the extent of assets; continuity of life; centralization of management; and free transfer
of ownership interests.

Tax regulations

Income tax and estimated tax


All businesses, except partnerships, must file an annual income tax return. Partnerships file an information return instead.
The federal income tax is a pay-as-you-go tax, which means the business entities must pay the tax as they earn or receive
income during the year. An employee usually has income tax withheld from his or her pay. The tax rates vary in different
states. All forms of income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes
and awards are liable for this tax. The employee may also have to pay estimated tax if the amount of income tax being
withheld from salary, pension, or other income is not enough.

Self-employment tax
Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. The
payment of SE tax contributes toward coverage under the social security system. Social security coverage provides
individuals with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits.

Employment tax
Employers are responsible for paying certain taxes, on behalf of their employees. Employment taxes include the social
security and Medicare taxes, federal income tax withholding, and federal unemployment tax.

Excise tax
Business enterprises are also required to pay for excise taxes if they are involved in the manufacturing or selling of
products, using various kinds of equipment, facilities or products, or receiving payments for certain services.
In addition, quarterly federal excise tax return consists of several broad categories including:

environmental taxes;

communications and air transportation taxes;

fuel taxes;

tax on the first retail sale of heavy trucks, trailers, and tractors;

manufacturers taxes on the sale or use of a variety of different articles.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Legal landscape

Trade regulations
The US is a supporter of free trade and has entered into free trade agreements with 20 countries. The trade regulations are
in line with international practices.

Goods entering the US are subject to customs duty, except those exempt by law. The duty on goods varies
according to their categorization.

The FDA releases the specifications for foods, drugs, medicines and cosmetics which must be followed by
exporters. All other products must comply with the regulations of the Federal Trade Commission (FTC). The
recent legislation on bioterrorism will impact food and drink companies who wish to export to the US.

Performance
Effectiveness of the legal system
According to World Banks Doing Business report, the US is ranked in third position with respect to ease of doing business.
A high ranking indicates a favorable legal environment for business, and the ease with which a business can be formed and
operated in the country. The country has followed the rule of law in all matters including business for many years now. US
economic policies are generally pro-business and it has a very well developed financial regulatory system, with financial
markets which are open to competition. The country has an independent, effective and efficient judicial system.
Foreign investment is subject to the same rules as domestic capital. No prior approval is needed from the federal
government although a few states have specific investment regulations. However, foreign investment in banking, mining,
defense contracting, certain energy-related industries, fishing, shipping, communications, and aviation is restricted. The
government also restricts foreign acquisitions which may impair national security. The purchase of real estate is
unrestricted, but the purchase of agricultural land by foreign nationals or companies must be reported to the government.
The US governments investment in R&D also provides a suitable environment for such practices, and the country sustains
a strong regime of intellectual property rights protection and enforcement. Of the 173,000 patents granted by the US Patent
Office in 2006, almost 50% of the applications originated from a foreign country.
Labor market regulations are also flexible, which enhances overall productivity growth and employment opportunities. The
non-salary cost of employing a worker is low, and dismissing a redundant employee is not cumbersome.
Although businesses in the US can be operated with ease due to minimal government intervention, one of the major
dampeners for the business is the high tax rates and the differential federal rates of taxes.

Outlook
Effective legal and regulatory frameworks are crucial to the creation of a successful business environment in any country.
The US has a sound legal framework for business entities and an independent judiciary, which makes the investment
climate positive. In view of the slowdown in the economy, it is felt that the country needs to have some structural reforms in
place to raise productivity levels and increase employment. Furthermore, the country also has comparatively higher
corporate and personal taxes, and the prevalence of high rates will continue to adversely affect business enterprises. Thus,
the US is likely to lose out to other countries such as Canada and the EU nations which are vying for a larger share of FDI.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Environmental landscape

ENVIRONMENTAL LANDSCAPE
Summary
The Environment Protection Agency (EPA) is the leading federal government agency, with a mandate to protect human
health and the environment. Each state also has its own regulating agency. Since the 1960s, the US government has
recognized protection of the environment as an important agenda, first drafting the Clean Air Act in 1963. Although the
performance of the country has improved in terms of toxic and greenhouse gas (GHG) emissions, it has remained an
underperformer compared to leading industrial countries.

Evolution
Prior to the 1960s, environmental issues did not attract major attention either from the public or the government. The Clean
Air Act of 1963 was the first significant government policy that linked air pollution with public health. The act was
subsequently amended in 1970, 1977, and 1990, to improve its scope.
Under the Clean Air Act, the EPA has focused on key air pollutants that have a significant impact on public health and the
environment: ozone, carbon monoxide, nitrogen dioxide, sulfur dioxide, and lead. Besides the Clean Air Act, other
environmental programs which have had substantial impact on public health are:

The removal of lead from gasoline (adopted by EPA in the late 1970s).

The acid rain program (enacted in 1990 to reduce sulfur dioxide emission from power plants).

The Clean Air Interstate Rule, adopted by EPA in 2005, to further reduce pollutants.

The Non-Road Diesel Rule (adopted by EPA in 2004 to reduce particulate matter and nitrogen oxide waste from
construction, farming, and other non-road equipment).

The heavy-duty highway vehicle and diesel sulfur rule (adopted by EPA in 2000 to reduce particulate matter and
nitrogen oxide waste from diesel trucks, buses and other on-road vehicles).

Structure and policies


Environmental regulations
The creation of the Council for Environmental Quality (CEQ) in 1969 and the EPA in 1970 were the two main initiatives
from the US to counter the degradation of the environment. The US, along with most other countries, has not met the
commitment that it made in 1992, following the establishment of the UN Framework Convention on Climate Change
(UNFCCC). The UNFCCC had a stipulation that greenhouse gas emissions would not be higher in the year 2000 than in
1990. The US is also a signatory to the Kyoto Protocol, but has not ratified it. The protocol would commit it to substantial
reductions in emissions by 200812, compared with those projected in the absence of policy changes.
The Clean Air Act of 1970 requires the EPA to establish National Ambient Air Quality Standards (NAAQS) which the
country should strive to achieve. In 1997, the EPA promulgated tighter standards for two pollutants: ozone and particulate
matter. The pollution control measures include the sulfur dioxide trading system, embodied in the Acid Rain program which
has been in operation since 1992. The sulfur dioxide trading scheme was provided for in the 1990 amendments to the

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Environmental landscape

Clean Air Act. There are also legislations in place which require the industries to report the release of listed chemicals,
whether accidental or otherwise, as well as information on off-site transfers for disposal. Such information is recorded in the
Toxic Release Inventory (TRI). Therefore, it becomes easy for concerned members of the public to take legal action against
violations, as well as ensuring general adherence to the norms. The government has also initiated steps to control
greenhouse gas emissions, which has reduced consumption of hydrocarbon fuels. Since increasing taxation tends to be
particularly difficult politically in the US, the tendency may be to seek to improve fuel economy by subsidizing research into
more efficient engines. However, without direct incentives to reduce fuel consumption itself, most of these measures will fail
to achieve the desired results.
Part of the program intended to 'reinvent regulation', Project XL (for Excellence and Leadership), was launched in 1995 as
an experiment in trying to make existing approaches more flexible and, therefore, to reduce costs. Regulatory programs are
frequently criticized for not taking sufficient account of local conditions.

Performance
Environmental impact
Since the 1970s, the US has been trying to improve its performance in terms of environmental indicators. With rapid
industrialization and increasing dependence on fossil fuels, the environment took a back seat in US government policies.
For years, the US has had the dubious distinction of being the largest polluter; however China overtook the country in 2007.
The US alone accounted for 36.1% of worldwide greenhouse gas emissions in 1990. With 4.6% of the world's population,
the US still accounts for 20.9% of global emissions, with an average of 20.6 tons of carbon dioxide produced per person in
2007. These emission levels are above those of other high-income countries and the US, with increasing emissions both
per capita and in absolute terms, is a major contributor to increases in global concentrations of greenhouse gases.
On the positive side, the US has made some improvements. Since 1970, the emission of harmful pollutants has been cut
from 273 million metric tons to 133 million metric tons; emissions of lead decreased by 98%; volatile organic compounds
that contribute to ground level smog decreased by 54%; carbon monoxide by 52%; sulfur dioxide by 49%; and nitrogen
oxides by 24% in 2005. Carbon dioxide emission has come down marginally from 5825 million metric tons in 2008 to
around 5809 million metric tons in 2009.
The US has successfully introduced sulfur dioxide trading on a large scale, following a number of smaller scale
experiments in different areas. The nitrogen dioxide scheme among north-eastern states also appears to have started
successfully, and will be enlarged to a number of other states; logically, the inclusion of some Canadian provinces would
also yield cost-effective environmental benefits.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Environmental landscape

Figure 18:

Carbon dioxide emission in the US, 200313

6,050.0

2.00

6,000.0

1.50
1.00
0.50

5,900.0
0.00
5,850.0

Growth (%)

Million metric tons

5,950.0

-0.50
5,800.0

-1.00

5,750.0

-1.50

5,700.0

-2.00
2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Year
Volume
Source: Datamonitor

Growth rate
DAT AMONITOR

International agreements
The US has not supported important international environmental treaties such as the Kyoto Protocol and Comprehensive
Test Ban Treaty. Although it has signed the Kyoto Protocol, it is yet to ratify the same, which implies that the country is not
committed to meeting the emission standards as required by the act. It is also a signatory to the Montreal Protocol, which
aims at limiting the production of substances which are harmful to the stratospheric ozone layer, such as
chlorofluorocarbons (CFCs).
The US has signed other international treaties with respect to water conservation, biodiversity and wildlife protection.

Copenhagen conference on climate change


The UNFCCC sets an overall framework for intergovernmental efforts to tackle the challenge posed by climate change. It
recognizes that the climate system is a shared resource whose stability can be affected by industrial and other emissions of
carbon dioxide and greenhouse gases. The convention has a universal membership, with 192 countries having ratified the
convention. While no deal could be clinched during the climate conference in Copenhagen, talks on a binding international
climate change pact will continue in 2010.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Environmental landscape
Outlook
President Obamas 2011 budget proposals include various measures for the reduction of greenhouse gas emissions. The
budget contains an increase of $39 billion in taxes on fossil fuel producers over a period of 10 years, as well as an end to
tax breaks and other incentives for the domestic production of oil, natural gas and coal. Furthermore the budget proposes
to triple federal support for nuclear energy, by adding $36 billion in new loan authority for a Department of Energy program
aimed at accelerating the construction of new reactors. An estimated $1.4 billion will be set aside to help developing
countries address the impact of climate change, reduce deforestation and shift to low-carbon energy sources.
The EPA has declared carbon dioxide and other greenhouse gases to be a health risk, acknowledging that this will
aggravate climate change, worsen air quality and generate heat waves. This marks a significant change in the position of
the US in terms of environmental policy, suggesting that a new approach might soon be taken which could impact climate
change regulation. President Obama too asserted in April 2009 that the US was ready to lead the world on climate change.
Congress is exploring a draft bill for clean energy development which aims to cut carbon emissions by 20% from their 2005
levels by 2020, boosting reliance on renewable sources of energy.
In 2009 the EPA proposed the first mandatory national system to report the emissions of carbon dioxide and other gases.
The proposal covers around 13,000 facilities, which account for 8590% of greenhouse gas emissions in the US. This
system includes producers of crude petroleum, coal and oil refineries, ethanol production facilities, natural gas, or any
facility with GHG emissions surpassing 25,000 ton/yr. The EPA believes that the companies will incur an expenditure of
$160m for the first year in order to comply with the reporting requirements, while in subsequent years the cost is likely to be
$127m annually. The EPA is formulating this rule under the Clean Air Act, which will give environment planners an accurate
idea as to the extent of emissions; this will determine the future course of actions to reduce GHG emissions.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Appendix

APPENDIX
Ask the analyst
Datamonitors Country Analysis Practice consists of a team of economists, analysts and researchers, all with expertise in
their given fields. For any questions or comments about this report you can contact the author directly.
countryanalysis@datamonitor.com

Datamonitor consulting
We hope that the data and analysis in this brief will help you make informed and imaginative business decisions. If you
have further requirements, Datamonitors consulting team may be able to help you. For more information about
Datamonitors consulting capabilities, please contact us directly at consulting@datamonitor.com.

Disclaimer
All Rights Reserved.
No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means,
electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, Datamonitor.
The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the
findings, conclusions and recommendations that Datamonitor delivers will be based on information gathered in good faith
from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such
Datamonitor can accept no liability whatever for actions taken based on any information that may subsequently prove to be
incorrect.

USA: Country Analysis Report In-depth PESTLE Insights


Datamonitor. This brief is a licensed product and is not to be photocopied

Published 04/2010

Оценить