[Congressional Record Volume 142, Number 123 (Tuesday, September 10, 1996)]
[Senate]
[Pages S10239-S10240]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          CLARIFYING THE DESIGNATION OF NORMAL TRADE RELATIONS

  Mr. SHELBY. Mr. President, I ask unanimous consent the Finance 
Committee be discharged from further consideration of S. 1918, and 
further that the Senate proceed to its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       A bill (S. 1918) to amend trade laws and related provisions 
     to clarify the designation of normal trade relations.

  The PRESIDING OFFICER. Is there objection to the immediate 
consideration of the bill?
  There being no objection, the Senate proceeded to consider the bill.
  Mr. MOYNIHAN. Mr. President, I rise in strong support of S. 1918, 
legislation aimed at bringing a modicum of clarity to our trade laws. 
This bill, cosponsored by all 20 members of the Senate Committee on 
Finance, would replace the term ``most-favored-nation'' with a more 
direct, more accurate, less muddled phrase to describe the basis of our 
trade policy.
  Since the 18th century, American trade policy has been one of 
nondiscrimination: the vast majority of our trading partners receive 
treatment equal to all others. Not most-favored treatment, but normal 
treatment. And hence, we propose the term ``normal trade relations'' in 
the hopes that it will lessen the confusion when we discuss trade 
matters.
  At the root of the problem is that we continue to use a term that 
first appeared at the end of the 17th century--``most-favored-
nation''--in our treaties and agreements, in our trade laws and 
executive orders, a term that, even then, was a misnomer.
  There is, Mr. President, no single most favored nation. As noted in a 
1919 report to the Congress by the United States Tariff Commission 
(known today as the U.S. International Trade Commission):

       It is neither the purpose nor the effect of the most-
     favored-nation clause to establish a ``most favored nation;'' 
     on the contrary its use implies the intention that the 
     maximum of advantages which either of the parties to a treaty 
     has extended or shall extend to any third State--for the 
     moment the ``most-favored''--shall be given or be made 
     accessible to the other party.''

  That is, the most favored nation is not the nation with which we are 
negotiating, but rather a third nation altogether that happens to 
benefit from the lowest tariffs or smallest trade barriers with respect 
to some particular product. The most-favored-nation principle means 
merely that we will grant to the country with which we are negotiating 
the same terms that we give to that third country, for the moment the 
most favored.
  Little wonder, then, that the term, though used for more than two 
centuries, has increasingly caused public confusion. And yet we must 
have a term to describe our normal trade relations for the simple 
reason that there is still in law a very unfavorable tariff--that is, 
the Smoot-Hawley Tariff Act of 1930, the last tariff schedule enacted 
line-by-line by the Congress, producing the highest tariff rates, 
overall, in our history.
  In response to the disaster that followed, the Roosevelt 
administration negotiated a series of trade agreements--agreements with 
individual countries as well as multilateral agreements negotiated 
under the auspices of the General Agreement on Tariffs and Trade. These 
agreements brought down our tariffs, as they brought down tariffs 
worldwide.
  These are the tariffs that we call our most-favored-nation tariff 
rates, which, in fact, apply to the vast majority of our trading 
partners. They are thus the norm, and not in any way more favorable 
than the tariffs that apply to nearly all other countries.
  Nor are they, in fact, the lowest tariff rates the United States 
applies. We have free trade arrangements with Canada, Israel, and 
Mexico. We grant other tariff preferences to developing countries under 
the Generalized System of Preferences, to Caribbean nations under the 
Caribbean Basin Initiative and to Andean countries under the Andean 
Trade Preferences Act. The tariff rates under all of these regimes are 
lower than the most-favored-nation rates referred to in our laws and 
treaties. Hence the confusion, and hence the need to change the 
terminology to clarify that our most-favored-nation

[[Page S10240]]

tariff rates represent, in fact, our normal trade relations.
  Mr. President, this legislation in no way intends to alter our 
fundamental international obligations. The term ``most-favored-nation'' 
has a long history of application and interpretation, and that will 
stand. This legislation is not intended as a substantive change in our 
trade policy. Rather, it is intended only as a change in nomenclature 
with the sole purpose of making our trade policy more comprehensible.
  Mr. President, it is rare that legislation before the Senate has the 
cosponsorship of the entire membership of the committee of 
jurisdiction. That is the case with S. 1918, which strikes a bipartisan 
blow for clarity in our trade laws.
  Mr. SHELBY. I ask unanimous consent the bill be deemed read a third 
time, passed, the motion to reconsider be laid upon the table, and that 
any statements relating to the bill be placed at the appropriate place 
in the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The bill (S. 1918) was deemed read for a third time and passed, as 
follows:

                                S. 1918

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

     SECTION 1. FINDINGS AND POLICY.

       (a) Findings.--The Congress makes the following findings:
       (1) Since the 18th century, the principle of 
     nondiscrimination among countries with which the United 
     States has trade relations, commonly referred to as ``most-
     favored-nation'' treatment, has been a cornerstone of United 
     States trade policy.
       (2) Although the principle remains firmly in place as a 
     fundamental concept in United States trade relations, the 
     term ``most-favored-nation'' is a misnomer which has led to 
     public misunderstanding.
       (3) It is neither the purpose nor the effect of the most-
     favored-nation principle to treat any country as ``most 
     favored''. To the contrary, the principle reflects the 
     intention to confer on a country the same trade benefits that 
     are conferred on any other country, that is, the intention 
     not to discriminate among trading partners.
       (4) The term ``normal trade relations'' is a more accurate 
     description of the principle of nondiscrimination as it 
     applies to the tariffs applicable generally to imports from 
     United States trading partners, that is, the general rates of 
     duty set forth in column 1 of the Harmonized Tariff Schedule 
     of the United States.
       (b) Policy.--It is the sense of the Congress that--
       (1) the language used in the United States laws, treaties, 
     agreements, executive orders, directives, and regulations 
     should more clearly and accurately reflect the underlying 
     principles of United States trade policy; and
       (2) accordingly, the term ``normal trade relations'' 
     should, where appropriate, be substituted for the term 
     ``most-favored-nation''.

     SEC 2. CHANGE IN TERMINOLOGY.

       (a) Trade Expansion Act of 1962.--The heading for section 
     251 of the Trade Expansion Act of 1962 (19 U.S.C. 1881) is 
     amended to read as follows: ``NORMAL TRADE RELATIONS''.
       (b) Trade Act of 1974.--(1) Section 402 of the Trade Act of 
     1974 (19 U.S.C. 2432) is amended by striking ``(most-favored-
     nation treatment)'' each place it appears and inserting 
     ``(normal trade relations)''.
       (2) Section 601(9) of the Trade Act of 1974 (19 U.S.C. 
     2481(9)) is amended by striking ``most-favored-nation 
     treatment'' and inserting ``trade treatment based on normal 
     trade relations (known under international law as most-
     favored-nation treatment)''.
       (c) CFTA.--Section 302(a)(3)(C) of the United States Canada 
     Free-Trade Agreement Implementation Act of 1988 (19 U.S.C. 
     2112 note) is amended by striking ``the most-favored-
     nation rate of duty'' each place it appears and inserting 
     ``the general subcolumn of the column 1 rate of duty set 
     forth in the Harmonized Tariff Schedule of the United 
     States''.
       (d) NAFTA.--Section 202(n) of the North American Free Trade 
     Agreement Implementation Act (19 U.S.C. 3332(n)) is amended 
     by striking ``most-favored-nation''.
       (e) SEED Act.--Section 2(c)(11) of the Support for East 
     European Democracy (SEED) Act of 1989 (22 U.S.C. 5401 
     (c)(11)) is amended--
       (1) by striking ``(commonly referred to as `most favored 
     nation status')'', and
       (2) by striking ``Most Favored Nation Trade Status'' in the 
     heading and inserting ``Normal Trade Relations''.
       (f) United States-Hong Kong Policy Act of 1992.--Section 
     103(4) of the United States-Hong Kong Policy Act of 1992 (22 
     U.S.C. 5713(4)) is amended by striking ``(commonly referred 
     to as most-favored-nation status')''.

     SEC. 3. SAVINGS PROVISIONS

       Nothing in this Act shall affect the meaning of any 
     provision of law, Executive order, Presidential proclamation, 
     rule, regulation, delegation of authority, other document, or 
     treaty or other international agreement of the United States 
     relating to the principle of ``most-favored-nation'' (or 
     ``most favored nation'') treatment. Any Executive order, 
     Presidential proclamation, rule, regulation, delegation of 
     authority, other document, or treaty or other international 
     agreement of the United States that has been issued, made, 
     granted, or allowed to become effective and that is in effect 
     on the effective date of this Act, or was to become effective 
     on or after the effective date of this Act, shall continue in 
     effect according to its terms until modified, terminated, 
     superseded, set aside, or revoked in accordance with law.

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