[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2644 Reported in House (RH)]





                                                 Union Calendar No. 211

105th CONGRESS

  1st Session

                               H. R. 2644

                          [Report No. 105-365]

_______________________________________________________________________

                                 A BILL

To provide to beneficiary countries under the Caribbean Basin Economic 
  Recovery Act benefits equivalent to those provided under the North 
                     American Free Trade Agreement.

_______________________________________________________________________

                            October 31, 1997

Committed to the Committee of the Whole House on the State of the Union 
                       and ordered to be printed





                                                 Union Calendar No. 211
105th CONGRESS
  1st Session
                                H. R. 2644

                          [Report No. 105-365]

To provide to beneficiary countries under the Caribbean Basin Economic 
  Recovery Act benefits equivalent to those provided under the North 
                     American Free Trade Agreement.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 9, 1997

 Mr. Archer (for himself and Mr. Crane) introduced the following bill; 
         which was referred to the Committee on Ways and Means

                            October 31, 1997

Committed to the Committee of the Whole House on the State of the Union 
                       and ordered to be printed

_______________________________________________________________________

                                 A BILL


 
To provide to beneficiary countries under the Caribbean Basin Economic 
  Recovery Act benefits equivalent to those provided under the North 
                     American Free Trade Agreement.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``United States-Caribbean Trade 
Partnership Act''.

SEC. 2. FINDINGS AND POLICY.

    (a) Findings.--The Congress makes the following findings:
            (1) The Caribbean Basin Economic Recovery Act represents a 
        permanent commitment by the United States to encourage the 
        development of strong democratic governments and revitalized 
        economies in neighboring countries in the Caribbean Basin.
            (2) The economic security of the countries in the Caribbean 
        Basin is potentially threatened by the diversion of investment 
        to Mexico as a result of the North American Free Trade 
        Agreement.
            (3) Offering NAFTA equivalent benefits to Caribbean Basin 
        beneficiary countries, pending their eventual accession to the 
        NAFTA or a free trade agreement comparable to the NAFTA, will 
        promote the growth of free enterprise and economic opportunity 
        in the region, and thereby enhance the national security 
        interests of the United States.
            (4) Countries in the Western Hemisphere offer the greatest 
        opportunities for increased exports of United States textile 
        and apparel products.
            (5) Given the greater propensity of countries located in 
        the Western Hemisphere to use United States components and to 
        purchase United States products compared to other countries, 
        increased trade and economic activity between the United States 
        and countries in the Western Hemisphere will create new jobs in 
        the United States as a result of expanding export 
        opportunities.
    (b) Policy.--It is the policy of the United States--
            (1) to offer to the products of Caribbean Basin partnership 
        countries tariffs and quota treatment equivalent to that 
        accorded to products of NAFTA countries, and to seek the 
        accession of these partnership countries to the NAFTA or a free 
        trade agreement comparable to the NAFTA at the earliest 
        possible date, with the goal of achieving full participation in 
        the NAFTA or in a free trade agreement comparable to the NAFTA 
        by all partnership countries by not later than January 1, 2005; 
        and
            (2) to assure that the domestic textile and apparel 
        industry remains competitive in the global marketplace by 
        encouraging the formation and expansion of ``partnerships'' 
        between the textile and apparel industry of the United States 
        and the textile and apparel industry of various countries 
        located in the Western Hemisphere.

SEC. 3. DEFINITIONS.

    As used in this Act:
            (1) Partnership country.--The term ``partnership country'' 
        means a beneficiary country as defined in section 212(a)(1)(A) 
        of the Caribbean Basin Economic Recovery Act (19 U.S.C. 
        2702(a)(1)(A)).
            (2) NAFTA.--The term ``NAFTA'' means the North American 
        Free Trade Agreement entered into between the United States, 
        Mexico, and Canada on December 17, 1992.
            (3) Trade representative.--The term ``Trade 
        Representative'' means the United States Trade Representative.
            (4) WTO and wto member.--The terms ``WTO'' and ``WTO 
        member'' have the meanings given those terms in section 2 of 
        the Uruguay Round Agreements Act (19 U.S.C. 3501).

SEC. 4. TEMPORARY PROVISIONS TO PROVIDE NAFTA PARITY TO PARTNERSHIP 
              COUNTRIES.

    (a) Temporary Provisions.--Section 213(b) of the Caribbean Basin 
Economic Recovery Act (19 U.S.C. 2703(b)) is amended to read as 
follows:
    ``(b) Import-Sensitive Articles.--
            ``(1) In general.--Subject to paragraphs (2) through (5), 
        the duty-free treatment provided under this title does not 
        apply to--
                    ``(A) textile and apparel articles which were not 
                eligible articles for purposes of this title on January 
                1, 1994, as this title was in effect on that date;
                    ``(B) footwear not designated at the time of the 
                effective date of this title as eligible articles for 
                the purpose of the generalized system of preferences 
                under title V of the Trade Act of 1974;
                    ``(C) tuna, prepared or preserved in any manner, in 
                airtight containers;
                    ``(D) petroleum, or any product derived from 
                petroleum, provided for in headings 2709 and 2710 of 
                the HTS;
                    ``(E) watches and watch parts (including cases, 
                bracelets and straps), of whatever type including, but 
                not limited to, mechanical, quartz digital, or quartz 
                analog, if such watches or watch parts contain any 
                material which is the product of any country with 
                respect to which HTS column 2 rates of duty apply; or
                    ``(F) articles to which reduced rates of duty apply 
                under subsection (h).
            ``(2) NAFTA transition period treatment of certain textile 
        and apparel articles.--
                    ``(A) Equivalent tariff and quota treatment.--
                During the transition period--
                            ``(i) the tariff treatment accorded at any 
                        time to any textile or apparel article that 
                        originates in the territory of a partnership 
                        country shall be identical to the tariff 
                        treatment that is accorded at such time under 
                        section 2 of the Annex to an article described 
                        in the same 8-digit subheading of the HTS that 
                        is a good of Mexico and is imported into the 
                        United States;
                            ``(ii) duty-free treatment under this title 
                        shall apply to any textile or apparel article 
                        that is imported into the United States from a 
                        partnership country and that--
                                    ``(I) is assembled in a partnership 
                                country, from fabrics wholly formed and 
                                cut in the United States from yarns 
                                formed in the United States, and is 
                                entered--
                                            ``(aa) under subheading 
                                        9802.00.80 of the HTS; or
                                            ``(bb) under chapter 61, 
                                        62, or 63 of the HTS if, after 
                                        such assembly, the article 
                                        would have qualified for 
                                        treatment under subheading 
                                        9802.00.80 of the HTS, but for 
                                        the fact the article was 
                                        subjected to bleaching, 
                                        garments dyeing, stone-washing, 
                                        enzyme-washing, acid-washing, 
                                        perma-pressing, oven-baking, or 
                                        embroidery; or
                                    ``(II) is knit-to-shape in a 
                                partnership country from yarns wholly 
                                formed in the United States;
                                    ``(III) is made in a partnership 
                                country from fabric knit in a 
                                partnership country from yarns wholly 
                                formed in the United States;
                                    ``(IV) is cut and assembled in a 
                                partnership country from fabrics wholly 
                                formed in the United States from yarns 
                                wholly formed in the United States; or
                                    ``(V) is identified under 
                                subparagraph (C) as a handloomed, 
                                handmade, or folklore article of such 
                                country and is certified as such by the 
                                competent authority of such country; 
                                and
                            ``(iii) no quantitative restriction or 
                        consultation level may be applied to the 
                        importation into the United States of any 
                        textile or apparel article that--
                                    ``(I) originates in the territory 
                                of a partnership country, or
                                    ``(II) qualifies for duty-free 
                                treatment under subclause (I), (II), 
                                (III), (IV), or (V) of clause (ii).
                    ``(B) NAFTA transition period treatment of other 
                nonoriginating textile and apparel articles.--
                            ``(i) Preferential tariff treatment.--
                        Subject to clause (ii), the President may place 
                        in effect at any time during the transition 
                        period with respect to any textile or apparel 
                        article that--
                                    ``(I) is a product of a partnership 
                                country, but
                                    ``(II) does not qualify as a good 
                                that originates in the territory of a 
                                partnership country or is eligible for 
                                benefits under subparagraph (A)(ii),
                        tariff treatment that is identical to the in-
                        preference-level tariff treatment accorded at 
                        such time under Appendix 6.B of the Annex to an 
                        article described in the same 8-digit 
                        subheading of the HTS that is a product of 
                        Mexico and is imported into the United States. 
                        For purposes of this clause, the `in-
                        preference-level tariff treatment' accorded to 
                        an article that is a product of Mexico is the 
                        rate of duty applied to that article when 
                        imported in quantities less than or equal to 
                        the quantities specified in Schedule 6.B.1, 
                        6.B.2., or 6.B.3. of the Annex for imports of 
                        that article from Mexico into the United 
                        States.
                            ``(ii) Limitations on all articles.--(I) 
                        Tariff treatment under clause (i) may be 
                        extended, during any calendar year, to not more 
                        than 45,000,000 square meter equivalents of 
                        cotton or man-made fiber apparel, to not more 
                        than 1,500,000 square meter equivalents of wool 
                        apparel, and to not more than 25,000,000 square 
                        meter equivalents of goods entered under 
                        subheading 9802.00.80 of the HTS.
                            ``(II) Except as provided in subclause 
                        (III), the amounts set forth in subclause (I) 
                        shall be allocated among the 7 partnership 
                        countries with the largest volume of exports to 
                        the United States of textile and apparel goods 
                        in calendar year 1996, based upon a pro rata 
                        share of the volume of textile and apparel 
                        goods of each of those 7 countries that entered 
                        the United States under subheading 9802.00.80 
                        of the HTS during the first 12 months of the 
                        14-month period ending on the date of the 
                        enactment of the United States-Caribbean Trade 
                        Partnership Act.
                            ``(III) Five percent of the amounts set 
                        forth in subclause (I) shall be allocated among 
                        the partnership countries, other than those to 
                        which subclause (II) applies, based upon a pro 
                        rata share of the exports to the United States 
                        of textile and apparel goods of each of those 
                        countries during the first 12 months of the 14-
                        month period ending on the date of the 
                        enactment of the United States-Caribbean Trade 
                        Partnership Act.
                            ``(iii) Prior consultation.--The President 
                        may implement the preferential tariff treatment 
                        described in clause (i) only after consultation 
                        with representatives of the United States 
                        textile and apparel industry and other 
                        interested parties regarding--
                                    ``(I) the specific articles to 
                                which such treatment will be extended,
                                    ``(II) the annual quantities of 
                                such articles that may be imported at 
                                the preferential duty rates described 
                                in clause (i), and
                                    ``(III) the allocation of such 
                                annual quantities among beneficiary 
                                countries.
                    ``(C) Handloomed, handmade, and folklore 
                articles.--For purposes of subparagraph (A), the Trade 
                Representative shall consult with representatives of 
                the partnership country for the purpose of identifying 
                particular textile and apparel goods that are mutually 
                agreed upon as being handloomed, handmade, or folklore 
                goods of a kind described in section 2.3 (a), (b), or 
                (c) or Appendix 3.1.B.11 of the Annex.
                    ``(D) Bilateral emergency actions.--(i) The 
                President may take--
                            ``(I) bilateral emergency tariff actions of 
                        a kind described in section 4 of the Annex with 
                        respect to any textile or apparel article 
                        imported from a partnership country if the 
                        application of tariff treatment under 
                        subparagraph (A) to such article results in 
                        conditions that would be cause for the taking 
                        of such actions under such section 4 with 
                        respect to an article described in the same 8-
                        digit subheading of the HTS that is imported 
                        from Mexico; or
                            ``(II) bilateral emergency quantitative 
                        restriction actions of a kind described in 
                        section 5 of the Annex with respect to imports 
                        of any textile or apparel article described in 
                        subparagraphs (B)(i) (I) and (II) if the 
                        importation of such article into the United 
States results in conditions that would be cause for the taking of such 
actions under such section 5 with respect to a like article that is a 
product of Mexico.
                    ``(ii) The requirement in paragraph (5) of section 
                4 of the Annex (relating to providing compensation) 
                shall not be deemed to apply to a bilateral emergency 
                action taken under this subparagraph.
                    ``(iii) For purposes of applying bilateral 
                emergency action under this subparagraph--
                            ``(I) the term `transition period' in 
                        sections 4 and 5 of the Annex shall be deemed 
                        to be the period defined in paragraph (5)(E); 
                        and
                            ``(II) any requirements to consult 
                        specified in section 4 or 5 of the Annex are 
                        deemed to be satisfied if the President 
                        requests consultations with the partnership 
                        country in question and the country does not 
                        agree to consult within the time period 
                        specified under such section 4 or 5, whichever 
                        is applicable.
            ``(3) NAFTA transition period treatment of certain other 
        articles originating in beneficiary countries.--
                    ``(A) Equivalent tariff treatment.--
                            ``(i) In general.--Subject to clause (ii), 
                        the tariff treatment accorded at any time 
                        during the transition period to any article 
                        referred to in any of subparagraphs (B) through 
                        (F) of paragraph (1) that originates in the 
                        territory of a partnership country shall be 
                        identical to the tariff treatment that is 
                        accorded at such time under Annex 302.2 of the 
                        NAFTA to an article described in the same 8-
                        digit subheading of the HTS that is a good of 
                        Mexico and is imported into the United States.
                            ``(ii) Exception.--Clause (i) does not 
                        apply to any article accorded duty-free 
                        treatment under U.S. Note 2(b) to subchapter II 
                        of chapter 98 of the HTS.
                    ``(B) Relationship to subsection (h) duty 
                reductions.--If at any time during the transition 
                period the rate of duty that would (but for action 
                taken under subparagraph (A)(i) in regard to such 
                period) apply with respect to any article under 
                subsection (h) is a rate of duty that is lower than the 
                rate of duty resulting from such action, then such 
                lower rate of duty shall be applied for the purposes of 
                implementing such action.
            ``(4) Customs procedures.--
                    ``(A) In general.--
                            ``(i) Regulations.--Any importer that 
                        claims preferential tariff treatment under 
                        paragraph (2) or (3) shall comply with customs 
                        procedures similar in all material respects to 
                        the requirements of Article 502(1) of the NAFTA 
                        as implemented pursuant to United States law, 
                        in accordance with regulations promulgated by 
                        the Secretary of the Treasury.
                            ``(ii) Determination.--In order to qualify 
                        for such preferential tariff treatment and for 
                        a Certificate of Origin to be valid with 
                        respect to any article for which such treatment 
                        is claimed, there shall be in effect a 
                        determination by the President that--
                                    ``(I) the partnership country from 
                                which the article is exported, and
                                    ``(II) each partnership country in 
                                which materials used in the production 
                                of the article originate or undergo 
                                production that contributes to a claim 
                                that the article qualifies for such 
                                preferential tariff treatment,
                        has implemented and follows, or is making 
                        substantial progress toward implementing and 
                        following, procedures and requirements similar 
                        in all material respects to the relevant 
                        procedures and requirements under chapter 5 of 
                        the NAFTA.
                    ``(B) Certificate of origin.--The Certificate of 
                Origin that otherwise would be required pursuant to the 
                provisions of subparagraph (A) shall not be required in 
                the case of an article imported under paragraph (2) or 
                (3) if such Certificate of Origin would not be required 
                under Article 503 of the NAFTA (as implemented pursuant 
                to United States law), if the article were imported 
                from Mexico.
                    ``(C) Penalties for transshipments.--If the 
                President determines, based on sufficient evidence, 
                that an exporter has engaged in willful illegal 
                transshipment or willful customs fraud with respect to 
                textile or apparel articles for which preferential 
                tariff treatment under subparagraph (A) or (B) of 
                paragraph (2) is claimed, then the President shall deny 
                all benefits under this title to such exporter, and any 
                successors of such exporter, for a period of 2 years.
                    ``(D) Study by ustr on cooperation of other 
                countries concerning circumvention.--The United States 
                Commissioner of Customs shall conduct a study analyzing 
                the extent to which each partnership country--
                            ``(i) has cooperated fully with the United 
                        States, consistent with its domestic laws and 
                        procedures, in instances of circumvention or 
                        alleged circumvention of existing quotas on 
                        imports of textile and apparel goods, to 
                        establish necessary relevant facts in the 
                        places of import, export, and, where 
                        applicable, transshipment, including 
                        investigation of circumvention practices, 
                        exchanges of documents, correspondence, 
                        reports, and other relevant information, to the 
                        extent such information is available;
                            ``(ii) has taken appropriate measures, 
                        consistent with its domestic laws and 
                        procedures, against exporters and importers 
                        involved in instances of false declaration 
                        concerning fiber content, quantities, 
                        description, classification, or origin of 
                        textile and apparel goods; and
                            ``(iii) has penalized the individuals and 
                        entities involved in any such circumvention, 
                        consistent with its domestic laws and 
                        procedures, and has worked closely to seek the 
                        cooperation of any third country to prevent 
                        such circumvention from taking place in that 
                        third country.
                The Trade Representative shall submit to the Congress, 
                not later than October 1, 1998, a report on the study 
                conducted under this subparagraph.
            ``(5) Definitions.--For purposes of this subsection--
                    ``(A) The term `the Annex' means Annex 300-B of the 
                NAFTA.
                    ``(B) The term `NAFTA' means the North American 
                Free Trade Agreement entered into between the United 
                States, Mexico, and Canada on December 17, 1992.
                    ``(C) The term `partnership country' means a 
                beneficiary country.
                    ``(D) The term `textile or apparel article' means 
                any article referred to in paragraph (1)(A) that is a 
                good listed in Appendix 1.1 of the Annex.
                    ``(E) The term `transition period' means, with 
                respect to a partnership country, the period that 
                begins on May 15, 1998, and ends on the earlier of--
                            ``(i) July 15, 1999; or
                            ``(ii) the date on which--
                                    ``(I) the United States first 
                                applies the NAFTA to the partnership 
                                country upon its accession to the 
                                NAFTA, or
                                    ``(II) there enters into force with 
                                respect to the United States and the 
                                partnership country a free trade 
                                agreement comparable to the NAFTA that 
                                makes substantial progress in achieving 
                                the negotiating objectives set forth in 
                                section 108(b)(5) of the North American 
                                Free Trade Agreement Implementation Act 
                                (19 U.S.C. 3317(b)(5)).
                    ``(F) An article shall be deemed as originating in 
                the territory of a partnership country if the article 
                meets the rules of origin for a good set forth in 
                chapter 4 of the NAFTA, and, in the case of an article 
                described in Appendix 6.A of the Annex, the 
                requirements stated in such Appendix 6.A for such 
                article to be treated as if it were an originating 
                good. In applying such chapter 4 or Appendix 6.A with 
                respect to a partnership country for purposes of this 
                subsection--
                            ``(i) no countries other than the United 
                        States and partnership countries may be treated 
                        as being Parties to the NAFTA,
                            ``(ii) references to trade between the 
                        United States and Mexico shall be deemed to 
                        refer to trade between the United States and 
                        partnership countries, and
                            ``(iii) references to a Party shall be 
                        deemed to refer to the United States or a 
                        partnership country, and references to the 
                        Parties shall be deemed to refer to any 
                        combination of partnership countries or the 
                        United States.''.
    (b) Determination Regarding Retention of Designation.--Section 
212(e)(1) of the Caribbean Basin Economic Recovery Act (19 U.S.C. 
2702(e)) is amended--
            (1) by inserting ``(A)'' after ``(1)'';
            (2) by redesignating subparagraphs (A) and (B) as clauses 
        (i) and (ii), respectively;
            (3) by adding at the end the following:
            ``(B)(i) Based on the President's review and analysis 
        described in subsection (f), the President may determine if the 
        preferential treatment under section 213(b) (2) and (3) should 
        be withdrawn, suspended, or limited with respect to any article 
        of a partnership country. Such determination shall be included 
        in the report required by subsection (f).
            ``(ii) Withdrawal, suspension, or limitation of the 
        preferential treatment under section 213(b) (2) and (3) with 
        respect to a partnership country shall be taken only after the 
        requirements of subsection (a)(2) and paragraph (2) of this 
        subsection have been met.''.
    (c) Reporting Requirements.--Section 212(f) of the Caribbean Basin 
Economic Recovery Act (19 U.S.C. 2702(f)) is amended to read as 
follows:
    ``(f) Reporting Requirements.--Not later than 1 year after the date 
of the enactment of the United States-Caribbean Trade Partnership Act 
and at the close of each 3-year period thereafter, the President shall 
submit to the Congress a complete report regarding the operation of 
this title, including--
            ``(1) with respect to subsections (b) and (c) of this 
        section, the results of a general review of beneficiary 
        countries based on the considerations described in such 
        subsections;
            ``(2) with respect to subsection (c)(4), the degree to 
        which a country follows accepted rules of international trade 
        provided for under the General Agreement on Tariffs and Trade 
        and the World Trade Organization;
            ``(3) with respect to subsection (c)(9), the extent to 
        which beneficiary countries are providing or taking steps to 
        provide protection of intellectual property rights comparable 
        to the protection provided to the United States in bilateral 
        intellectual property rights agreements;
            ``(4) with respect to subsection (b)(2) and subsection 
        (c)(5), the extent that beneficiary countries are providing or 
        taking steps to provide protection of investment and investors 
        comparable to the protection provided to the United States in 
        bilateral investment treaties;
            ``(5) with respect to subsection (c)(3), the extent that 
        beneficiary countries are providing the United States and other 
        WTO members (as such term is defined in section 2(10) of the 
        Uruguay Round Agreements Act (19 U.S.C. 3501(10)) with 
        equitable and reasonable market access in the product sectors 
        for which benefits are provided under this title;
            ``(6) with respect to subsection (c)(11), the extent that 
        beneficiary countries are cooperating with the United States in 
        administering the provisions of section 213(b); and
            ``(7) with respect to subsection (c)(8), the extent that 
        beneficiary countries are meeting the internationally 
        recognized worker rights criteria under such subsection.
In the first report under this subsection, the President shall include 
a review of the implementation of section 213(b), and his analysis of 
whether the benefits under paragraphs (2) and (3) of such section 
further the objectives of this title and whether such benefits should 
be continued.''.
    (d) Conforming Amendment.--Section 213(a)(1) of the Caribbean Basin 
Economic Recovery Act is amended by inserting ``and except as provided 
in section 213(b) (2) and (3),'' after ``Tax Reform Act of 1986,''.

SEC. 5. EFFECT OF NAFTA ON SUGAR IMPORTS FROM BENEFICIARY COUNTRIES.

    The President shall monitor the effects, if any, that the 
implementation of the NAFTA has on the access of beneficiary countries 
under the Caribbean Basin Economic Recovery Act to the United States 
market for sugars, syrups, and molasses. If the President considers 
that the implementation of the NAFTA is affecting, or will like- ly 
affect, in an adverse manner the access of such countries to the United 
States market, the President shall promptly--
            (1) take such actions, after consulting with interested 
        parties and with the appropriate committees of the House of 
        Representatives and the Senate, or
            (2) propose to the Congress such legislative actions,
as may be necessary or appropriate to ameliorate such adverse effect.

SEC. 6. DUTY-FREE TREATMENT FOR CERTAIN BEVERAGES MADE WITH CARIBBEAN 
              RUM.

    Section 213(a) of the Caribbean Basin Economic Recovery Act (19 
U.S.C. 2703(a)) is amended--
            (1) in paragraph (5), by striking ``chapter'' and inserting 
        ``title''; and
            (2) by adding at the end the following new paragraph:
    ``(6) Notwithstanding paragraph (1), the duty-free treatment 
provided under this title shall apply to liqueurs and spirituous 
beverages produced in the territory of Canada from rum if--
            ``(A) such rum is the growth, product, or manufacture of a 
        beneficiary country or of the Virgin Islands of the United 
        States;
            ``(B) such rum is imported directly from a beneficiary 
        country or the Virgin Islands of the United States into the 
        territory of Canada, and such liqueurs and spirituous beverages 
        are imported directly from the territory of Canada into the 
        customs territory of the United States;
            ``(C) when imported into the customs territory of the 
        United States, such liqueurs and spirituous beverages are 
        classified in subheading 2208.90 or 2208.40 of the HTS; and
            ``(D) such rum accounts for at least 90 percent by volume 
        of the alcoholic content of such liqueurs and spiritous 
        beverages.''.

SEC. 7. MEETINGS OF TRADE MINISTERS AND USTR.

    (a) Schedule of Meetings.--The President shall take the necessary 
steps to convene a meeting with the trade ministers of the partnership 
countries in order to establish a schedule of regular meetings, to 
commence as soon as is practicable, of the trade ministers and the 
Trade Representative, for the purpose set forth in subsection (b).
    (b) Purpose.--The purpose of the meetings scheduled under 
subsection (a) is to reach agreement between the United States and 
partnership countries on the likely timing and procedures for 
initiating negotiations for partnership to accede to the NAFTA, or to 
enter into mutually advantageous free trade agreements with the United 
States that contain provisions comparable to those in the NAFTA and 
would make substantial progress in achieving the negotiating objectives 
set forth in section 108(b)(5) of the North American Free Trade 
Agreement Implementation Act (19 U.S.C. 3317(b)(5)).

SEC. 8. REPORT ON ECONOMIC DEVELOPMENT AND MARKET ORIENTED REFORMS IN 
              THE CARIBBEAN.

    (a) In General.--The Trade Representative shall make an assessment 
of the economic development efforts and market oriented reforms in each 
partnership country and the ability of each such country, on the basis 
of such efforts and reforms, to undertake the obligations of the NAFTA. 
The Trade Representative shall, not later than July 1, 1998, submit to 
the President and to the Committee on Finance of the Senate and the 
Committee on Ways and Means of the House of Representatives a report on 
that assessment.
    (b) Accession to NAFTA.--
            (1) Ability of countries to implement nafta.--The Trade 
        Representative shall include in the report under subsection (a) 
        a discussion of possible timetables and procedures pursuant to 
        which partnership countries can complete the economic reforms 
        necessary to enable them to negotiate accession to the NAFTA. 
        The Trade Representative shall also include an assessment of 
        the potential phase-in periods that may be necessary for those 
        partnership countries with less developed economies to 
        implement the obligations of the NAFTA.
            (2) Factors in assessing ability to implement nafta.--In 
        assessing the ability of each partnership country to undertake 
        the obligations of the NAFTA, the Trade Representative should 
        consider, among other factors--
                    (A) whether the country has joined the WTO;
                    (B) the extent to which the country provides 
                equitable access to the markets of that country;
                    (C) the degree to which the country uses export 
                subsidies or imposes export performance requirements or 
                local content requirements;
                    (D) macroeconomic reforms in the country such as 
                the abolition of price controls on traded goods and 
                fiscal discipline;
                    (E) progress the country has made in the protection 
                of intellectual property rights;
                    (F) progress the country has made in the 
                elimination of barriers to trade in services;
                    (G) whether the country provides national treatment 
                to foreign direct investment;
                    (H) the level of tariffs bound by the country under 
                the WTO (if the country is a WTO member);
                    (I) the extent to which the country has taken other 
                trade liberalization measures; and
                    (J) the extent which the country works to 
                accommodate market access objectives of the United 
                States.
    (c) Parity Review in the Event a New Country Accedes to NAFTA.--
If--
            (1) a country or group of countries accedes to the NAFTA, 
        or
            (2) the United States negotiates a comparable free trade 
        agreement with another country or group of countries,
the Trade Representative shall provide to the committees referred to in 
subsection (a) a separate report on the economic impact of the new 
trade relationship on partner- ship countries. The report shall include 
any measures the Trade Representative proposes to minimize the po- 
tential for the diversion of investment from partnership countries to 
the new NAFTA member or free trade agree- ment partner.

SEC. 9. OVERRULING OF SCHMIDT BAKING COMPANY CASE WITH RESPECT TO 
              SEVERANCE PAY.

    (a) In General.--The Internal Revenue Code of 1986 shall be applied 
with respect to severance pay without regard to the result reached in 
the case of Schmidt Baking Company, Inc. v. Commissioner of Internal 
Revenue, 107 T.C. 271 (1996).
    (b) Regulations.--The Secretary of the Treasury or the Secretary's 
delegate shall prescribe regulations to reflect subsection (a).
    (c) Effective Date.--
            (1) In general.--Subsections (a) and (b) shall apply to 
        taxable years ending after October 8, 1997.
            (2) Change in method of accounting.--In the case of any 
        taxpayer required by this section to change its method of 
        accounting for its first taxable year ending after October 8, 
        1997--
                    (A) such change shall be treated as initiated by 
                the taxpayer,
                    (B) such change shall be treated as made with the 
                consent of the Secretary of the Treasury, and
                    (C) the net amount of the adjustments required to 
                be taken into account by the taxpayer under section 481 
                of the Internal Revenue Code of 1986 shall be taken 
                into account in such first taxable year.