I 111th CONGRESS 1st Session H. R. 1202 IN THE HOUSE OF REPRESENTATIVES February 25, 2009 Mr. Sherman (for himself and Mr. Royce) introduced the following bill; which was referred to the Committee on Foreign Affairs A BILL To require a report on business and investment climates in foreign countries, and for other purposes.

1.

Annual country reports on business and investment climates

(a)

Annual country reports on business and investment climates

Not later than September 1 of each year, the Secretary of State, in consultation with the Assistant Secretary of State for Economic, Energy and Business Affairs, as well as the Assistant Secretary of Commerce for Trade Promotion and the Director General of the Foreign Commercial Service, shall submit to the Committee on Foreign Affairs of the House of Representatives and the Committee on Foreign Relations of the Senate a report providing— (1)detailed assessments with respect to each foreign country— (A)in which acts of unfair business and investment practices or other acts that have resulted in poor business and investment climates were, in the opinion of the Secretary, of major significance; and (B)which the Secretary determines should be the subject of such a report; (2)all relevant information about such unfair business and investment practices or other actions during the preceding year by members of the business community, the judiciary, and the government of such country which may have impeded United States business or investment in such country, including the capacity for United States citizens to operate their businesses without fear of reprisals; and (3)with respect to each foreign country from which the United States Government has sought cooperation to assemble the annual country-specific investment climate reports required under this section and address issues of unfair business and investment practices, information on— (A)the extent to which the government of each such foreign country is working to prevent unfair business and investment practices; and (B)the extent of United States Government action to prevent unfair business and investment practices or other actions that harm United States business or investment interests in relevant cases. (b)

Provisions To be included in the report

The report under subsection (a) should, to the extent feasible, include— (1)with respect to paragraph (1)(A) of such subsection— (A)a review of the efforts undertaken by foreign countries to promote a healthy business and investment climate that is also conducive to the United States business community and United States investors, including, as appropriate, steps taken in international fora; (B)the response of the judicial and local arbitration systems of each foreign country that is the subject of such report with respect to matters relating to the business and investment climates affecting United States citizens and entities, or that have, in the opinion of the Secretary, and in consultation with the Director General of the Foreign Commercial Service, a significant impact on United States business and investment efforts; and (C)each foreign country’s access to the United States market; (2)with respect to paragraph (2) of such subsection, any— (A)actions undertaken by governments of foreign countries that prevent United States citizens and businesses from receiving equitable treatment; (B)actions taken by private businesses and citizens of foreign countries against members of the United States business community and United States investors; (C)unfair decisions rendered by the legal systems of foreign countries that clearly benefit State and local corporations and industries; and (D)unfair decisions rendered by local arbitration panels of foreign countries that do not exemplify objectivity and do not provide an equitable ground for United States citizens and businesses to address their disputes; and (3)with respect to paragraph (3)(A) of such subsection, actions taken by the United States Government to— (A)promote the rule of law, in general; (B)prevent discriminatory treatment of United States citizens and businesses engaged in business or investment activities; (C)allow United States goods to enter foreign countries without requiring a co-production agreement; and (D)protect United States intellectual property rights. (c)

Preparation of reports regarding business and investment climates

(1)

Standards and investigations

The Secretary of State shall ensure that the United States diplomatic and consular missions abroad maintain a consistent reporting standard and thoroughly investigate reports of unfair business and investment practices or any other actions that impede a strong business or investment climate in the countries in which such missions are located. (2)

Updating information based on foreign country media

In compiling data and assessing the business and investment climates abroad for each report required under subsection (a), United States foreign service officers shall, as appropriate and with respect to the foreign country in which such officers are posted, research such country’s media sources, including newspaper, radio, and television, to document any cases with evidence of unfair business or investment practices or any occurrences that may destabilize the business or investment climate in such country. (3)

Contacts with business leaders

In compiling data and assessing the business and investment climates abroad for each report required under subsection (a), United States foreign service officers shall, as appropriate and with respect to the foreign country in which such officers are posted, seek out and maintain contacts with corporate leaders in all sectors of the market of such country to discuss issues of foreign direct investment and the challenges United States citizens or businesses may face in making investments or earning returns on investments. (4)

Contacts with union leaders

In compiling data and assessing the business and investment climates abroad for each report required under subsection (a), United States foreign service officers shall, as appropriate and with respect to the foreign country in which such officers are posted, seek out and maintain contacts with leaders of local and national unions of such country to assess the political stability of such country as measured through social cohesion and the rights of workers. (5)

Contacts with the judiciary

In compiling data and assessing the business and investment climates abroad for each report required under subsection (a), United States foreign service officers shall, as appropriate and with respect to the foreign country in which such officers are posted, seek out and maintain contacts with members of the judicial system of such country to evaluate the capacity of the legal institutions to address discrepancies and disputes that may arise, including corruption and nationalization. Such officers shall also research the capacity for arbitration locally to address concerns if such country’s legal system is unable to provide suitable or satisfactory recourse in a matter relating to an unfair business or investment practice involving a United States citizen or business. (6)

Contacts with nongovernmental organizations

In compiling data and assessing the business and investment climates abroad for each report required under subsection (a), United States foreign service officers shall, as appropriate and with respect to the foreign country in which such officers are posted, seek out and maintain contacts with members of nongovernmental organizations in such country that address the concerns of the business community, with the consent of such organizations, including receiving reports and updates from such organizations and, when appropriate, investigating such reports. (d)

Classification of report

(1)

In general

A report required under subsection (a) of this section shall, to the extent practicable, be submitted in an unclassified form but may be accompanied by a classified appendix if the Secretary of State determines that such is appropriate. (2)

Cooperation

If the Secretary of State determines that the submission of any information with respect to a foreign country under paragraph (3) of subsection (a) in classified form would make more likely the cooperation of the government of such foreign country, the Secretary may submit such information in classified form. (3)

Summarization

If the Secretary of State determines that it is in the national security interests of the United States or is necessary for the safety of individuals or entities to be identified in a report required under subsection (a) or is necessary to further the purposes of this Act, any information required under such subsection, including measures taken by the United States, may be summarized in such report and submitted in more detail in a classified addendum.

2.

Business and investment climate warnings

(a)

In general

The Secretary of State, with the assistance of the Assistant Secretary of State for Economic, Energy and Business Affairs, as well as the Assistant Secretary of Commerce for Trade Promotion and the Director General of the Foreign Commercial Service, shall establish a system that informs members of the United States business community and United States investors prior to their entry into a foreign country of the business and investment conditions in such country. (b)

Warnings

The system established under subsection (a) shall, if appropriate, issue investment warnings— (1)to describe long-term, protracted conditions that make a country’s business or investment climate risky or potentially dangerous to members of the United States business community and United States investors; or (2)when the ability of the United States Government to assist such members and investors is constrained due to the closure of a United States diplomatic or consular mission in such country. (c)

Four-tier system

(1)

In general

The Secretary of State and the Secretary of Commerce shall develop a four-tier system to grade the business and investment climate of each country that receives over $5,000,000,000 in exports, aid, and remittances from the United States, based on the following criteria: (A)Political stability. (B)Macroeconomic stability. (C)Rule of law. (D)Corruption and transparency. (E)Regulatory quality. (F)Good governance. (G)Civil society engagement. (2)

Additional criteria

The grading within the four-tier system referred to in paragraph (1) shall also address the following unfair business and investment practices with respect to each country identified and graded under such paragraph: (A)Discriminatory treatment of United States citizens and businesses engaged in business or investment activities. (B)The status of allowing United States goods to enter each such country without requiring a co-production agreement. (C)Protection of United States intellectual property rights. (d)

Public accessibility

The Secretary of State shall publish on the website of the Department of State information on countries under this section.

3.

Definitions

In this Act: (1)

Civil society engagement

The term civil society engagement means the extent to which individuals exercise peacefully their rights of expression, association, and assembly, including through their establishing and participating in nongovernmental organizations, unions, and other civil society organizations. (2)

Corruption and transparency

The term corruption and transparency means the extent to which public officials seek illegitimate personal gain, including through bribery, extortion, graft, nepotism, or embezzlement. (3)

Co-production agreement

The term co-production agreement means a United States Government or United States business working with a foreign government, foreign company, or an international organization to produce or manufacture an item. (4)

Good governance

The term good governance means the extent to which institutions are sustainable and democratic, with responsive, professional civil services providing high quality public services. (5)

Macroeconomic stability

The term macroeconomic stability means the extent to which the economy of a foreign country is vulnerable to internal and external shocks. (6)

Political stability

The term political stability means the likelihood that the government of a foreign country will be destabilized or overthrown by unconstitutional or violent means. (7)

Regulatory quality

The term regulatory quality means the extent to which the government of a foreign country is able to formulate and implement sound policies and regulations that permit and promote private sector development. (8)

Rule of law

The term rule of law means the extent to which laws of a foreign country are publicly promulgated, equally enforced, independently adjudicated, and are consistent with international norms and standards. (9)

Unfair business and investment practices

The term unfair business and investment practices includes any of the following: (A)Unlawful actions under international law or the law of the foreign country taken by the government of such country or by businesses, citizens, or other entities of such country that have resulted in lost assets, contracts, or otherwise contributed to an inhospitable business or investment climate. (B)Discriminatory treatment of United States businesses, whether wholly- or partially-owned. (C)Failure to protect intellectual property rights. (D)Requiring a co-production agreement in order for goods from the United States to enter a foreign country.