[Congressional Record Volume 143, Number 37 (Thursday, March 20, 1997)]
[Senate]
[Pages S2650-S2651]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BROWNBACK (for himself, Mr. Grassley, Mr. Hagel and Mr. 
        Johnson):
  S. 486. A bill to amend the Omnibus Trade and Competitiveness Act of 
1988 to clarify the limitation for accession to the GATT and the WTO of 
foreign countries that have state trading enterprises; to the Committee 
on Finance.


               THE FAIRNESS IN STATE TRADING ACT OF 1997

  Mr. BROWNBACK. Mr. President, I rise today to introduce the Fairness 
in State Trading Act of 1997. This bill, which is cosponsored by 
Senators Grassley, Hagel, and Johnson, is a bipartisan approach to 
addressing the problem faced by U.S. exporters in countries in which 
state trading enterprises [STE's] dominate the economy.

  The Fairness in State Trading Act would subject the import activities 
of STE's to the jurisdiction of section 1106 of the 1988 Omnibus Trade 
and Competitiveness Act of 1988, (19 U.S.C. 2905). If this bill passes, 
the President would have to determine whether the import activities of 
the state trading enterprises of an applicant to the WTO impede, or are 
likely to impede, U.S. exports to that country. If the President makes 
such a determination, the WTO Agreement cannot apply between the United 
States and that nation until the latter agrees that its STE's will make 
decisions based exclusively on commercial considerations.
  The Brownback bill is designed to ensure that the WTO accession 
protocol agreements of such countries as China, Russia, and the Ukraine 
include a provision in which these countries specifically agree that 
their STE's will make purchasing decisions based solely on commercial 
considerations. This provision is important because these WTO 
applicants have indicated that they intend to continue to purchase 
commodities such as wheat, corn, rice, vegetable oils, and sugar 
exclusively or almost exclusively through STE's.
  Without a strong commitment from these countries to depoliticize 
their import practices, the United States would only have recourse to 
GATT article XVII for questionable activities undertaken by China's 
STE's. In 1995, the GAO determined that article XVII is an ineffective 
mechanism for policing the activities of STE's, and that the state 
trading activities of China, Russia, and the Ukraine present problems 
that article XVII is not capable of addressing.
  Weak enforcement of STE activities would enable the STE's of new WTO 
members to continue to employ a politicized procurement process. Why 
should the United States be more concerned about the state trading 
activities of new members of the WTO rather than the activities of 
current members? Because the state trading activities of current WTO 
members pale in comparison to the state trading activities of nations 
such as China, Russia, and the Ukraine.
  Import decisions must be made on purely commercial considerations. 
GATT article XVII is not capable of effectively policing the state 
trading activities of countries accustomed to a command-and-control 
economic model. Before we apply the WTO Agreement between the United 
States and these countries, we must ensure that they agree to 
depoliticize their import practices.
  Kansas, Iowa, Nebraska, South Dakota, and States across the Nation 
grow the best crops in the world. Exports of these and other U.S. 
commodities have skyrocketed as tariff and nontariff barriers to these 
goods have been reduced worldwide. We cannot allow state trading 
activities to supplant tariff and other nontariff measures as the new 
barriers to U.S. exports. Let's make sure that U.S. goods can compete 
on a level playing field in the markets of new members of the WTO 
before we lock in reductions in our barriers to goods from these 
countries. Please print statement and bill in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 486

       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 ``Fairness in State Trading 
     Act''.

     SEC. 2. FINDINGS.

       Congress makes the following findings:
       (1) State trading enterprises play a significant role in 
     the economies of several countries that have applied to the 
     World Trade Organization (referred to in this Act as the 
     ``WTO'').
       (2) The General Agreement on Tariffs and Trade (referred to 
     in this Act as the ``GATT''), and especially GATT Article 
     XVII, does not adequately prevent countries from using state 
     trading enterprises as a disguised barrier to imports from 
     the United States.
       (3) The United States economy will be adversely affected by 
     the accession to the WTO of foreign countries that have state 
     trading enterprises that make production or procurement 
     decisions based upon noncommercial considerations.
       (4) State trading enterprises have a particularly negative 
     impact on United States farmers.

     SEC. 3. ACCESSION OF COUNTRIES WITH STATE TRADING ENTERPRISES 
                   TO GENERAL AGREEMENT ON TARIFFS AND TRADE OR 
                   WORLD TRADE ORGANIZATION.

       Section 1106 of the Omnibus Trade and Competitiveness Act 
     of 1988 (19 U.S.C. 2905) is amended--
       (1) by striking ``major foreign country'' each place it 
     appears and inserting ``foreign country'';
       (2) in subsection (a), by amending paragraph (1) to read as 
     follows:
       ``(1) whether state trading enterprises produce or procure 
     a significant share of--
       ``(A) the goods exported from such foreign country;
       ``(B) the goods imported into such foreign country; or
       ``(C) the goods produced domestically in such foreign 
     country; and''; and
       (3) in subsection (b)(2)(A)--
       (A) by amending clause (i) to read as follows:
       ``(i) will make purchases and sales in international trade 
     based solely on commercial considerations (including price, 
     quality, availability, marketability, and transportation), 
     and''; and
       (B) in clause (ii), by striking ``, in accordance with 
     customary practice,''.

  Mr. HAGEL. Mr. President, I rise today as an original cosponsor of 
the legislation introduced by my distinguished colleague from Kansas, 
Senator Brownback. This bill is an important step toward opening 
foreign markets to American products--especially our agricultural 
products.
  Several countries have State Trading Enterprises that control all 
imports of certain products. These trading enterprises create a 
bottleneck in trade--a bottleneck controlled by the Government, not by 
free enterprise. The result is that foreign politics end up controlling 
trade decisions, and American exporters get hurt.
  This bill would require the United States to oppose membership in the 
World Trade Organization for any country that has a State Trading 
Enterprise that refuses to buy our products for reasons other than 
market conditions. Its purpose is simple: It

[[Page S2651]]

gives America leverage against countries that shut out our exporters 
for political reasons.
  This is important for all of America's exporters, who benefit from 
having a level playing field. It is especially important for American 
farmers. This bill will give our negotiators an important new tool to 
use as they oppose the unjustified actions of State trading enterprises 
around the world. It will help us get American dairy products into New 
Zealand and American wheat into Canada.
  But its most important effect will be in regard to China. China is an 
enormous and growing market. As China emerges economically, we must do 
all we can to bring China into the world trading system as a full 
partner. If we want our exporters to do business in China's emerging 
market, we need to ensure that China plays by all the rules of trade 
that govern the rest of the world.
  The discussions about China's accession to the World Trade 
Organization are ongoing. I strongly believe China must accept all 
obligations that WTO membership entails. That includes letting the 
market, not the politicians, control its trading decisions. China must 
dismantle its remaining State Trading Enterprises--especially the 
enterprise that controls the import of wheat into the country.
  American farmers--especially our wheat producers--need full and free 
access to China's market. This bill gives our trade negotiators a small 
but important tool to help ensure that will happen.
  I urge my colleagues to support it.
                                 ______