[Congressional Record Volume 142, Number 75 (Friday, May 24, 1996)]
[Senate]
[Pages S5643-S5645]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          MFN STATUS FOR CHINA

  Mr. BAUCUS. Mr. President, I rise to discuss the question of most-
favored-nation tariff status for China.
  Our goals in China policy over the next 10 years are more important 
than our goals for the next 2 months. But we must begin with the next 2 
months and MFN status, because we can not do much at all unless we 
avoid disaster in the short term.
  We Americans should begin by understanding what MFN status is, and 
what it is not. MFN is not a special favor and it does not mean ``best 
country.'' It traditionally meant that we would give a country the same 
tariff rates everyone else got. But today, MFN is closer to ``Least'' 
than ``Most'' favored nation.
  Only seven countries--Afghanistan, Cuba, Cambodia, Laos, North Korea, 
Vietnam, and Yugoslavia lack MFN status. And the House, as well as the 
Senate Finance Committee, has already passed a bill to get Cambodia off 
that list.
  By contrast, 31 countries get tariffs below MFN through the Caribbean 
Basin Initiative, the Andean Trade Preference Act, the NAFTA, and the 
United States-Israel Free-Trade Agreement. And when we renew the 
Generalized System of Preferences, the total will rise to 151 countries 
and territories with tariffs below MFN.
  So giving China MFN status is nothing special. Now look at revoking 
MFN. It raises tariffs from Uruguay Round to Smoot-Hawley rates. That 
brings our average tariff on Chinese goods from 4.6 to 40 percent. To 
choose some of China's largest exports, Smoot-Hawley tariffs raise the 
duty on silk blouses tenfold, from 6.5 to 65 percent. On radio-tape 
players, from 1 to 35 percent. On toys and stuffed animals, zero to 70 
percent.
  This would make trade with China impossible. China would lose about 
$44 billion of exports, nearly a third of its total sales to the world. 
China's inevitable retaliation would cost us $14 billion in direct 
exports, plus much of our $17 billion in exports to Hong Kong.
  The consequences would be staggering. China would suffer a 
humanitarian crisis, as millions of workers in coastal export factories 
lose their jobs overnight. That is why the dissident Wei Jingsheng 
hopes we will not revoke MFN status, and says that ``the direct victims 
of such measures are the already poverty-stricken Chinese people.''
  They would not be the only victims. The damage to Hong Kong would be 
tremendous. The United States would lose hundreds of thousands of 
export jobs. Retailers and the millions of people they employ would 
suffer a massive disruption of toy and apparel imports just as they are 
buying stocks for the Christmas season.
  And although MFN is a trade policy, the malign effect of revoking it 
would go far beyond trade and jobs. It is hard to see how we could 
continue working with China in areas of mutual interest. And the 
consequences in politics and security--from our ability to manage the 
nuclear aspirations of North Korea, to preventing weapons proliferation 
in the Middle East, to the U.N. Security Council and beyond--would be 
immense.
  That brings us to the larger and more important question--what we 
hope to achieve in China policy generally. And again, start with the 
facts.
  China is the world's most populous country. It has nuclear weapons 
and the world's largest army.
  It is a major industrial contributor to global climate change and 
pollution of the oceans. And it is the world's fastest growing major 
economy. So in the coming decades, China will have significant effect, 
for good or for ill, on economic, environmental and political 
developments in Asia and around the world.
  If China is hostile--or, short of outright hostility, refuses to 
recognize the standards of behavior most countries accept, and 
approaches the world with an angry nationalism--hopes for peace and 
prosperity recede.
  And as the first half of this century showed, a weak, poor, and 
fragmented China is equally dangerous.
  It becomes a source of revolution. It sends refugees across the 
world. And it attracts the greed and aggression of its neighbors, as it 
did Bolshevik Russia and Imperial Japan.
  So we should do what we can to avoid either extreme. That is a 
difficult foreign policy problem which requires patient, continuous 
engagement. We should work with China wherever possible. And issues 
from environmental protection, to adoption of Chinese orphans, to 
security in Korea show that it is often possible.
  We also have disputes with China, on intellectual property 
protection, treatment of dissidents, and weapons sales. And we must 
address these disputes in a calm but serious way. The U.S.TR's 
announcement of sanctions for violations of the 1995 Intellectual 
Property Agreement today is a good example.
  But whether we are talking about mutual interests, or disputes, there 
is really only one way to succeed. That is by staying engaged and 
remembering our long-term goal of a world a bit more peaceful and more 
prosperous.
  Barring a cataclysmic event that makes engagement impossible--an 
unprovoked attack on Taiwan, for example--revoking or conditioning MFN 
will not help achieve that goal. Rather the reverse, to put it mildly. 
And if such an event were to occur, a policy based on MFN would be far 
too weak.
  In fact, there is no situation to which revoking MFN status would be 
the appropriate response. And thus, after 6 years, it is time to end 
the debate. It has become simply an artificial, annual crisis at a time 
when we have all too many real ones.
  So this year, the administration should show strength and confidence 
in its basically sound policy.
  We should not revoke MFN status. We should not try a split-the-baby 
half measure like revoking MFN for state-owned industry or bringing 
China back to Tokyo round tariffs. Nor should we use new conditions to 
postpone the decision a few months or a year. We should just leave MFN 
alone.
  And next year, we should move on. It is time to bring China out of 
the Jackson-Vanik amendment, extend MFN permanently, and close this 
debate for good.

[[Page S5644]]



                 VOLUNTARY ENVIRONMENTAL SELF-AUDITING

  Mr. LOTT. Mr. President, this week the Senate Judiciary Subcommittee 
on Administrative Oversight and the Courts held a hearing on voluntary 
environmental self-auditing. The hearing was held to explore the State 
experience with laws to encourage self-audits and why it is necessary 
to enact Federal legislation to complement these State laws.
  I want to take this opportunity today to share with you the 
importance of what was said at this hearing.
  First, an explanation of what voluntary environmental self-auditing 
is; why companies do it; and what the problems are.
  In the past 10 years, the number of environmental statutes and 
regulations that impose compliance obligations, and the corresponding 
increase in civil and criminal penalties and sanctions for violations 
of those obligations, have dramatically increased. Furthermore, thanks 
in part to these laws, social mores that value environmentally 
responsible business practices also compel environmental awareness by 
businesses. In response to these developments, more and more companies 
use environmental self-audit programs as a tool to ensure compliance 
with this complex and litigious system.
  Generally, an environmental audit is a means of reviewing a business 
in order to get a snapshot of its overall compliance with environmental 
laws and to troubleshoot for potential future problems. EPA defines an 
audit as a systematic, documented, periodic, and objective review by 
regulated entities of facility operations and practices related to 
meeting environmental requirements. Audits can include inspections of 
equipment to ensure that permit requirements are being met; assessment 
of future and present risks of regulated and unregulated materials used 
at the facility; and assessment of day-to-day operation of its 
environmental management structure and resources. Some companies have 
compliance management systems that can include day-to-day, even shift-
to-shift voluntary activities to assure compliance.
  No State or Federal law requires companies to undertake comprehensive 
environmental self-auditing. This is a voluntary, good business 
practice initiated by companies that are taking extra steps to be in 
full compliance with environmental law.
  There are no guidelines or standard practices--audits vary 
considerably because they are done voluntarily and because they must 
accommodate the individual needs of companies or specific facilities to 
be most effective. They are typically much more extensive than an 
inspection by a State or Federal regulator because they are done more 
often and because companies simply know much more about their 
operations and permit obligations than the regulator can.
  So, a company conducting its own audit can identify and correct a 
much wider range of potential violations.
  Sounds like a great idea, doesn't it?
  Unfortunately, many companies do not do voluntary self-audits because 
the information contained in the audit document can be obtained by 
regulators, prosecutors, citizens' groups, or private citizens and used 
to sue the company.
  Remember that we have an incredibly complex compliance system. A 
recent survey by Arthur Anderson Environmental Services and the 
National Law Journal found that nearly 70 percent of 200 corporate 
attorneys interviewed said that they did not believe total compliance 
with the law was achievable--due to the complexity of the law, the 
varying interpretations of the regulators, the ever-present role of 
human error, and the cost. Because of this complexity, it is possible 
and logical that companies that take on the task of self-evaluation 
will find volations--that is what we want them to do. Find problems and 
fix them without waiting a year for a government inspection. 
Unfortunately, the audit documents are a vehicle for anyone to use to 
sue. Companies completing environmental audits develop documentation of 
their instances of noncompliance or areas of potential concern. These 
documents, if made public, are a roadmap for third parties or 
governments to use to sue the company even if the problem has already 
been corrected and no environmental harm has occurred.
  Companies are already vulnerable to extensive liability under 
environmental laws. Under the Clean Air Act amendments of 1990, for 
example, the maximum civil penalty that may be assessed is now $25,000 
per day per violation. EPA's fiscal year 1994 enforcement and 
compliance assurance accomplishments report shows that 166 civil 
judicial penalties were brought in 1994 totaling $65.6 million. On 
average, that is about $400,000 a case. Administrative penalty orders 
for the same year numbered 1,433 actions, which totaled $48 million.
  That's a lot of money and a pretty powerful disincentive to self-
auditing.
  Seventeen States have recognized this disincentive to self-auditing 
and have enacted laws to fix the problem so more companies will self-
audit.
  Mississippi is one of those States that has acted on this issue.
  These laws typically do two things:
  First, provide a qualified evidentiary privilege for internal company 
audit documents, and second, grant penalty immunity to companies that 
conduct audits, voluntarily disclose any violations they discover in 
their audit, and promptly clean up or fix the violation.
  In other words, if you are a responsible company that does self-
auditing to find out where you have problems, and you tell the State 
authority that you found it and fixed it, you are rewarded by not 
having to pay a fine and by getting protection from use of an internal 
company audit in court.
  Better environmental compliance using a voluntary flexible approach: 
this is what we all--both Republicans and Democrats alike--believe to 
be the new environmentalism.
  This is common sense--companies have an incentive to find and fix 
their problems right away.
  That's better for the environment: State officials benefit because 
they can establish cooperative relationships with companies instead of 
the current adversarial enforcement first system; Taxpayers get better 
return from their tax dollars because enforcement resources can be 
redirected toward the bad guys who are not following the law; and of 
course, best of all, we are all rewarded with greater compliance with 
environmental law.
  These laws are not about secrecy and letting polluters off the hook--
you'll hear that from the opponents of these laws.
  Opponents will say that these laws make it more difficult to 
prosecute and that they will interfere with enforcement actions or 
compromise the public's right to know.
  Not true. These laws protect only the voluntary self-audit document--
they do not protect any information required by law to be collected, 
developed, maintained, reported, or otherwise made available to a 
government agency. The opponents are saying that protection of the 
audit document will allow bad actors to hide violations and endanger 
human health. Of course, that is not true: you gain nothing from these 
laws if you are using an audit for a fraudulent purpose, or if you find 
a violation and don't fix it, or if you have a pattern of repeat 
violations.
  If you're cheating, you're out, as it should be. These laws are about 
a new way to do things with all the safeguards you would expect a State 
legislature would insist upon to protect its citizens.
  Again, 17 States think this is a better way to get things done. And 
by the way, 25 other State legislatures are considering this voluntary 
self-audit legislation--that is a grand total of 42 States.
  I'd say this is a definite trend.
  We need to enact similar legislation on the Federal level to 
complement and assist these States with full and effective 
implementation of this concept. This is what the hearing was all about: 
the need for Federal legislation.
  Why not let the States continue to show us innovative ways to achieve 
environmental progress? Because the way our system of environmental law 
is set up, EPA retains the right to enforce the law after it delegates 
program authority to a State. This means that without a Federal law 
granting a qualified privilege and immunity for voluntary self-audits, 
the EPA can take separate enforcement actions--or overfile--regardless 
of any State action. So, a company that wishes to

[[Page S5645]]

take advantage of a State audit law which provides it with enforcement 
protections from State action, is not protected from Federal 
enforcement actions.
  Why would a company voluntarily disclose violations to a State when 
the feds can come after them for the same thing? It would be asking 
them to be hit with a lawsuit.
  EPA has been very clear about its intent to scrutinize actions in 
States which have enacted laws and in States which are currently 
addressing audit bills in their legislatures. EPA has set up a task 
force to monitor the approval of State delegated programs under the 
Clean Air Act for States with voluntary environmental audit statutes. 
The Agency has indicated that approval of certain State programs may be 
delayed or denied because of their State audit privilege statutes. EPA 
has used this threat to withhold Federal program delegation in order to 
influence pending State legislation.
  This is an astonishing breach of States' rights, if you ask me.
  Threatening States because of laws their citizens' representatives 
have enacted. Governor Merrill of New Hampshire said it best in 
responding to EPA's opposition to that State's law:

       I reject the suggestion that States like New Hampshire must 
     recognize the primacy of Federal laws in order to 
     successfully design and implement effective environmental 
     laws. In fact, States have proven time and time again that 
     the Federal Government does not know best and does not get 
     the job done for the citizens of the several States. I hope 
     that the EPA does not intend to minimize the independent 
     sovereign rights of States to adopt and enforce environmental 
     laws that protect our environment and add to our quality of 
     life.

  Full use of these State laws will never happen in this adversarial 
climate and an opportunity to encourage this creative and cost-
effective approach to environmental problems will be missed if we do 
not take action on the Federal level.
  Even the Clinton administration has recognized the value of promoting 
environmental self-auditing, having issued a policy statement in 
December 1995. It is a good step forward by this administration; 
unfortunately, it does not really do the job.
  Basically, the administration policy says if companies come forward 
and voluntarily disclose violations, then EPA will not prosecute them 
as aggressively as they could otherwise. Not a real bonus. No 
evidentiary protection, no protection against citizen suits, and it is 
only a policy, not a rule, so it does not have the force of law nor 
does it have any impact on what the Justice Department or the FBI can 
do.
  A nice gesture but that's about it.
  The hearing makes a compelling case for enactment of Federal 
legislation. Senators Brown and Hatfield have introduced legislation, 
S. 582, to encourage environmental self-auditing by setting up parallel 
protections and incentives on the Federal level that parallel those on 
the State level.
  Enactment of S. 582 will allow these 17 States to fully implement 
their laws. We here in Congress can put our money where our mouth is by 
enacting the kind of flexible, voluntary environmental statutes that we 
have all been talking about for a year. And it presents the EPA with 
the opportunity to work with instead of against our States. This is the 
best reason yet to pass the Brown-Hatfield bill.
  We all get better environmental compliance.

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