[Congressional Record Volume 143, Number 105 (Wednesday, July 23, 1997)]
[Senate]
[Pages S7950-S7965]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mr. DURBIN (for himself, Ms. Moseley-Braun and Mr. Reid):
[[Page S7951]]
S. 1055. A bill to amend title 23, United States Code, to extend the
Interstate 4R discretionary program; to the Committee on Environment
and Public Works.
THE INTERSTATE SYSTEM IMPROVEMENT ACT OF 1997
Mr. DURBIN. Mr. President, today I am introducing legislation that
would help improve our country's aging Interstate System--the
Interstate System Improvement Act of 1997. My colleagues, Senators
Moseley-Braun and Reid have joined me as original cosponsors.
This bill is simple. It would fund the discretionary Interstate 4R
[I-4R] program at a level of $800 million annually, a significant
increase from the current level of $66 million in fiscal year 1997. I
believe that the I-4R program is one of the most crucial aspects of the
upcoming Intermodal Surface Transportation and Efficiency Act [ISTEA]
reauthorization. And, I hope to work with my colleagues on the
Environment and Public Works Committee to incorporate this important
measure into ISTEA legislation later this year.
The I-4R program is critical to the resurfacing, restoration,
rehabilitation, and reconstruction of our country's vital
infrastructure. This year, the program is funded at $66 million.
However, demand for funds has outpaced available money by more than 9
to 1. For example, in fiscal year 1997, 25 States requested $1.2
billion in I-4R funds under the discretionary program. Only six States
received assistance, most at greatly reduced levels. Nineteen States
will receive no I-4R discretionary funds in fiscal year 1997 and over
$1 billion in funding requests have gone unanswered.
States with major interstate projects would benefit greatly from this
legislation. In Illinois alone, the State faces a highway funding
shortage because of crucial projects like the Stevenson Expressway in
Chicago and I-74 in Peoria. These projects are simply too important to
delay. A healthy I-4R discretionary program is necessary in order to
rebuild this vital infrastructure.
Mr. President, I urge my colleagues to join me in advancing this
important legislation.
Ms. MOSELEY-BRAUN. Mr. President, I am pleased to introduce the
Interstate System Improvement Act of 1997 with my colleague from
Illinois, Senator Durbin.
This legislation would increase the authorization for the
discretionary I-4R program from its current level of around $60 to $800
million annually. This change would allow States with large interstate
improvement projects to compete for discretionary grants at the Federal
level.
As our Nation's interstate system ages, it is going to become more
important for many States to have access to large, discretionary grants
for major interstate improvement projects. For my home State of
Illinois, this legislation would provide an opportunity to compete for
funds to reconstruct a 15-mile segment of the aging Stevenson
Expressway, one of the Chicago area's most important arteries, and one
that is badly in need of repair.
I believe this change is important to improve our current system of
highway funding, and I urge my colleagues on the Environment and Public
Works Committee who are involved in drafting legislation to reauthorize
the Intermodal Surface Transportation and Efficiency Act to include
this legislation as part of their reauthorization bill.
______
By Mr. BURNS (for himself, Mr. Coats, and Mr. Lugar):
S. 1056. A bill to provide for farm-related exemptions from certain
hazardous materials transportation requirements; to the Committee on
Commerce, Science, and Transportation.
farm-related exemptions legislation
Mr. BURNS. Mr. President, I am introducing today a bill to provide
for farm-related exemptions for certain hazardous materials and
transportation requirements. I send it to the desk and ask for its
appropriate referral.
The PRESIDING OFFICER. The bill will be read twice and then referred
to the appropriate committee.
Mr. BURNS. Mr. President, today, I rise to introduce a bill that will
provide further regulatory relief for our farmers and ranchers.
Let me give you some background on this issue. Earlier this year, the
U.S. Department of Transportation published a rule under the HM-200
docket which severely restricts the transportation of agricultural
products classified as hazardous materials.
This aspect of the HM-200 rule could cost the agricultural retail
industry and the farm economy millions of dollars every year.
Currently, States model their regulations concerning the transport of
hazardous materials on Federal Hazardous Materials Regulations [HMR's].
However, some States with large farm economies provide exceptions from
the State HMR's to the agricultural industry for the short-haul,
intrastate, retail-to-farm transport of agricultural inputs.
HM-200 would supersede all State HMR's, eliminate these exceptions,
and apply Federal regulations to the short-haul, seasonal and mostly
rural transport of farm products.
The cost of this regulatory burden is estimated to be in excess of
$12,300 a year for each agricultural retailer. Industrywide, it is
estimated that it could cost the agricultural economy nearly $62
million annually.
We all want safe highways, safe food production, and a safe
workplace, but when DOT, OSHA, and EPA regulations are stirred together
in a pot, the stew can turn out to be quite rancid. Placing these
Federal burdens on the backs of farmers and ranchers in Montana's rural
communities, can mean the difference between flying or dying.
HM-200 will require agricultural retailers to comply with time
consuming and costly regulations that will not make our rural roads
safer, but only increase the cost of doing business, cause confusion,
and require unnecessary paperwork. These expenses will be passed on to
farmers who already are burdened with slimming margins and ever higher
cost of production.
States and the agricultural community have an excellent track record
for protecting the environment and keeping the public safe. The
agricultural retail industry complies with numerous safety measures
such as requiring all drivers to have Commercial Drivers Licenses
[CDL's] drug and alcohol testing for drivers, HAZMAT handling
experience, and so forth.
Additionally, States which do not provide exceptions to their own
HMR's for the agricultural community will face a new regulatory burden
since these States rarely enforce the regulations that they have in
place. The U.S. DOT has made it abundantly clear that they will expect
all States to actively enforce HM-200, thereby making it an unfunded
mandate.
Despite petitions for reconsideration from the agricultural
community--all of which have gone unanswered by DOT--HM-200 is due to
be implemented on October 1, 1997--it was published in February of this
year.
This legislation seeks to delay implementation of HM-200 with respect
to agricultural transports, until October 1, 1999, or until the
reauthorization of Federal Hazardous Materials legislation. By allowing
for a delay in HM-200 implementation, I believe we can properly address
and examine the facts as they stand with regard to the need for this
new regulation.
I urge my colleagues to support this vital legislation, and help keep
our agricultural community from having to bear a needless expense which
has little safety value to the public.
______
By Mr. REED (for himself, Mr. Bryan, Mr. Hollings, and Mr.
Johnson):
S. 1057. A bill to amend the Federal Election Campaign Act of 1971 to
require mandatory spending limits for Senate candidates and limits on
independent expenditures, to ban soft money, and for other purposes; to
the Committee on Rules and Administration.
THE CAMPAIGN SPENDING CONTROL ACT OF 1997
Mr. REED. Mr. President, I rise today to discuss legislation I have
just introduced, the Campaign Spending Control Act of 1997. The 1996
elections, unfortunately, will be remembered for two remarkable facts.
First, Federal campaigns produced record spending; over $2.7 billion or
almost $28 for every voter. Second, the election produced record-low
voter participation: less than half of those eligible chose to vote.
These two tragic facts are inextricably linked.
Due to the vast sums of money spent on campaigns, most Americans
believe
[[Page S7952]]
our current campaign system is tainted by special interest money. Under
a flood of money and television ads, voters view their voice as
meaningless, their concerns as unaddressed, and their votes as
unimportant. In order to restore public confidence, campaign finance
reform must accomplish three goals. It must significantly reduce
campaign spending; level the playing field for those who challenge
incumbents; and, finally, encourage greater public participation and
debate.
These goals cannot be successfully addressed without significantly
changing the rules which govern campaigns. Campaign scandals have posed
a threat to the health of our democracy throughout our Nation's
history. In 1907, after enduring embarrassment over a campaign scandal,
President Teddy Roosevelt championed legislation prohibiting
corporations from financing Federal candidates. In 1974, responding to
the scandals of the 1972 elections and the resignation of President
Nixon, Congress overwhelmingly passed legislation limiting spending by
candidates, parties, and wealthy individuals.
In 1996, all the past campaign reforms imploded, with a flood of
corporate and individual money overwhelming legal limits. Million-
dollar corporate contributions funded advertisements to impact
Presidential and congressional campaigns. Well-funded individuals and
organizations also got into the act. By spending a record $70 million
on so-called issue advertising, labor unions, business organizations,
and ideological groups circumvented limits on direct contributions to
candidates. Thus, candidates, awash in a sea of outside money, were
pushed to not only trounce their opponents in fundraising, but to match
outside groups. The chase for dollars sapped candidates' time which
could have been spent debating, attending forums, and otherwise
engaging voters. Once solicited, most of these millions were spent on
uninformative, 30-second advertisements, which only served to further
alienate the electorate. Unchecked, this campaign system will spiral
into exponential spending increases, further disenfranchisement, and
less dialog. The system is already close to collapsing under its own
weight; the time to act is now.
The roots of this abysmal situation can be traced to a misguided
Supreme Court decision. In Buckley versus Valeo, a 1976 case which
challenged the 1974 campaign reform legislation, the Court held that,
in order to avoid corruption, contributions to candidates and
committees could be limited. However, the Court invalidated expenditure
limits on candidates and independent entities as infringements on free
speech rights. The Court surmised that unlimited spending would
increase the number and depth of issues discussed. Twenty years of
campaign spending has proven the Court's decision fatally flawed: fewer
issues are discussed, less debate occurs, and voter participation has
declined. The single most important step to reform elections and
revitalize our democracy is to reverse the Buckley decision by limiting
the amount of money that a candidate or his allies can spend.
For this reason, Senators Bryan, Hollings, Johnson, and I are
introducing legislation which directly challenges the Buckley decision
and places mandatory limits on all campaign expenditures. These limits
do not favor incumbents. Over the last three elections, these limits
would have restricted 80 percent of incumbents, while only impacting 18
percent of those who challenged incumbents. Additionally, this
legislation would fully ban corporate contributions, as well as
unlimited and unregulated contributions by wealthy individuals and
organizations. Further, our bill would limit campaign expenditures by
supposedly, neutral, independent groups, and restrict corporations,
labor unions, and other organizations from influencing campaigns under
the guise of issue advocacy. The end result of this legislation would
be to eliminate over $500 million from the system, discourage
violations, encourage challenges to incumbents, and further promote
debate among both candidates and the electorate.
What effect would these limits have on political debate? Contrary to
the Supreme Court, I believe such limits would increase dialog.
Candidates would be free from the burdens of unending fundraising and
thus be available to participate in debates, forums, and interviews.
With greater access to candidates and less reason to believe that
candidates were captives of their contributors, voters might well be
more prepared to invest the time needed to be informed on issues of
concern and ask candidates to address them.
Some will argue that this legislation impinges upon freedom of
speech. The bill will marginally restrict the rights of a few to spend
money--not speak--so that the majority of voters might restore their
faith in the process. Thus, speech will be restricted no more than
necessary to fulfill what I believe to be several compelling interests.
Such a restriction conforms with constitutional jurisprudence and has
been demonstrated necessary by history. The fact is all democratic
debates are restricted by rules. My legislation would simply implement
necessary rules into our campaign system. Finally, it is important to
remember that the vast majority of Americans, 96 percent, have never
made a political contribution at any level of government. Capping
expenditures will truly impact very few individuals, and that
restriction will be marginal, but necessary.
Implementing spending caps is a grass-roots initiative. Elected
officials from 33 States have urged that the Buckley decision be
revisited and limits implemented. Legislative bodies in Ohio and
Vermont have implemented sweeping reform by enacting mandatory caps on
candidate expenditures. Other States, such as my own, have embraced
public financing as a means of reform. Yet, today, Congress struggles
to even consider the most modest of reforms, such as banning so called
soft money: unlimited donations by corporations, labor unions, and
wealthy individuals to political party committees. Unfortunately,
because most of the current reform proposals accept the reasoning
enunciated in the Buckley decision, they will only serve to redirect an
unlimited flow of cash. While I enthusiastically support any
substantive reform, if we are to address the underlying cancer which
has disintegrated voter trust and participation, the problem of
unlimited expenditures must be directly confronted. This is a step that
one municipality and two States have embraced. Many more State
officials as well as prominent constitutional law scholars have urged
such a course. Expenditure limitations have been proposed by
congressional reformers in the past, and it is time to rededicate
ourselves to this goal.
Mr. President, I have a list of the 33 State officials and 24 State
attorneys general who have urged the reversal of Buckley. I ask
unanimous consent that these documents be printed in the Record.
The PRESIDING OFFICER. Without objection, it is so ordered. (See
exhibit 1.)
Mr. REED. Mr. President, our democracy is dependent upon
participation, stimulated by a belief that the system works for
everyone. Just as scandals led to reform in 1907 and 1974, Congress
must now rise to the task once again to address a threat to our
democratic process. Polls continue to demonstrate that a majority of
Americans believe the political process is controlled by wealthy
interests. The most dangerous aspect of the current situation is that
polls also show that voters have no faith in the ability of their
representatives to implement reform. If we do not address the influence
of money in our electoral system, the health of our democracy will
endure increasing risk. It is time to begin true, comprehensive reform.
I would like to thank Senators Bryan, Hollings, and Johnson for joining
me in this endeavor. Their leadership on this issue in the past has
proven invaluable, and I am proud that they have chosen to join me in
this important effort. It is my hope that the Senate will now move to
address the problem of our campaign system at its root. Finally, Mr.
President, I ask unanimous consent that the text of this bill be
printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
S. 1057
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
[[Page S7953]]
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Campaign
Spending Control Act of 1997''.
(b) Table of Contents.--The table of contents of this Act
is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Statement of purpose.
Sec. 3. Findings of fact.
TITLE I--SENATE ELECTION SPENDING LIMITS
Sec. 101. Senate election spending limits.
TITLE II--COORDINATED AND INDEPENDENT EXPENDITURES
Sec. 201. Adding definition of coordination to definition of
contribution.
Sec. 202. Treatment of certain coordinated contributions and
expenditures.
Sec. 203. Political party committees.
Sec. 204. Limit on independent expenditures.
Sec. 205. Clarification of definitions relating to independent
expenditures.
Sec. 206. Elimination of leadership PACs.
TITLE III--SOFT MONEY
Sec. 301. Soft money of political party committee.
Sec. 302. State party grassroots funds.
Sec. 303. Reporting requirements.
Sec. 304. Soft money of persons other than political parties.
TITLE IV--ENFORCEMENT
Sec. 401. Filing of reports using computers and facsimile machines.
Sec. 402. Audits.
Sec. 403. Authority to seek injunction.
Sec. 404. Increase in penalty for knowing and willful violations.
Sec. 405. Prohibition of contributions by individuals not qualified to
vote.
Sec. 406. Use of candidates' names.
Sec. 407. Expedited procedures.
TITLE V--SEVERABILITY; REGULATIONS; EFFECTIVE DATE
Sec. 501. Severability.
Sec. 502. Regulations.
Sec. 503. Effective date.
SEC. 2. STATEMENT OF PURPOSE.
The purposes of this Act are to--
(1) restore the public confidence in and the integrity of
our democratic system;
(2) strengthen and promote full and free discussion and
debate during election campaigns;
(3) relieve Federal officeholders from limitations on their
attention to the affairs of the Federal government that can
arise from excessive attention to fundraising;
(4) relieve elective office-seekers and officeholders from
the limitations on purposeful political conduct and discourse
that can arise from excessive attention to fundraising;
(5) reduce corruption and undue influence, or the
appearance thereof, in the financing of Federal election
campaigns; and
(6) provide non-preferential terms of access to elected
Federal officeholders by all interested members of the public
in order to uphold the constitutionally guaranteed right to
petition the Government for redress of grievances.
SEC. 3. FINDINGS OF FACT.
Congress finds the following:
(1) The current Federal campaign finance system, with its
perceived preferential access to lawmakers for interest
groups capable of contributing sizable sums of money to
lawmakers' campaigns, has caused a widespread loss of public
confidence in the fairness and responsiveness of elective
government and undermined the belief, necessary to a
functioning democracy, that the Government exists to serve
the needs of all people.
(2) The United States Supreme Court, in Buckley v. Valeo,
424 U.S. 1 (1976), disapproved the use of mandatory spending
limits as a remedy for such effects, while approving the use
of campaign contribution limits.
(3) Since that time, campaign expenditures have risen
steeply in Federal elections with spending by successful
candidates for the United States Senate between 1976 and 1996
rising from $609,100 to $3,775,000, an increase that is twice
the rate of inflation.
(4) As campaign spending has escalated, voter turnout has
steadily declined and in 1996 voter turnout fell to its
lowest point since 1924, and stands now at the lowest level
of any democracy in the world.
(5) Coupled with out-of-control campaign spending has come
the constant necessity of fundraising, arising, to a large
extent, from candidates adopting a defensive ``arms race''
posture of constant readiness against the risk of massively
financed attacks against whatever the candidate may say or
do.
(6) The current campaign finance system has had a
deleterious effect on those who hold public office as endless
fundraising pressures intrude upon the performance of
constitutionally required duties. Capable and dedicated
officials have left office in dismay over these distractions
and the negative public perceptions that the fundraising
process engenders and numerous qualified citizens have
declined to seek office because of the prospect of having to
raise the extraordinary amounts of money needed in today's
elections.
(7) The requirement for candidates to fundraise, the
average 1996 expenditure level required a successful Senate
candidate to raise more than $12,099 a week for 6 years,
significantly impedes on the ability of Senators and other
officeholders to tend to their official duties, and limits
the ability of candidates to interact with the electorate
while also tending to professional responsibilities.
(8) As talented incumbent and potential public servants are
deterred from seeking office in Congress because of such
fundraising pressures, the quality of representation suffers
and those who do serve are impeded in their effort to devote
full attention to matters of the Government by the campaign
financing system.
(9) Contribution limits are inadequate to control all of
these trends and as long as campaign spending is effectively
unrestrained, supporters can find ways to protect their
favored candidates from being outspent. Since 1976 major
techniques have been found and exploited to get around and
evade contribution limits.
(10) Techniques to evade contribution limits include
personal spending by wealthy candidates, independent
expenditures that assist or attack an identified candidate,
media campaigns by corporations, labor unions, and nonprofit
organizations to advocate the election or defeat of
candidates, and the use of national, State, or local
political parties as a conduit for money that assists or
attacks such candidates.
(11) Wealthy candidates may, under the present Federal
campaign financing system, spend any amount they want out of
their own resources and while such spending may not be self-
corrupting, it introduces the very defects the Supreme Court
wants to avoid. The effectively limitless character of such
resources obliges a wealthy candidate's opponent to reach for
larger amounts of outside support, causing the deleterious
effects previously described.
(12) Experience shows that there is an identity of interest
between candidates and political parties because the parties
exist to support candidates, not the other way around. Party
expenditures in support of, or in opposition to, an
identifiable candidate are, therefore, effectively spending
on behalf of a candidate.
(13) Political experience shows that so-called
``independent'' support, whether by individuals, committees,
or other entities, can be and often is coordinated with a
candidate's campaign by means of tacit understandings without
losing its nominally independent character and, similarly,
contributions to a political party, ostensibly for ``party-
building'' purposes, can be and often are routed, by
undeclared design, to the support of identified candidates.
(14) The actual, case-by-case detection of coordination
between candidate, party, and independent contributor is, as
a practical matter, impossible in a fast-moving campaign
environment.
(15) So-called ``issue advocacy'' communications, by or
through political parties or independent contributors, need
not, as a practical matter, advocate expressly for the
election or defeat of a named candidate in order to cross the
line into election campaign advocacy; any clear, objective
indication of purpose, such that voters may readily observe
where their electoral support is invited, can suffice as
evidence of intent to impact a Federal election campaign.
(16) When State political parties or other entities
operating under State law receive funds, often called ``soft
money'', for use in Federal elections, they become de facto
agents of the national political party and the inclusion of
these funds under applicable Federal limitations is necessary
and proper for the effective regulation of Federal election
campaigns.
(17) The exorbitant level of money in the political system
has served to distort our democracy by giving some
contributors, who constitute less than 3 percent of the
citizenry, the appearance of favored access to elected
officials, thus undermining the ability of ordinary citizens
to petition their Government. Concerns over the potential for
corruption and undue influence, and the appearances thereof,
has left citizens cynical, the reputation of elected
officials tarnished, and the moral authority of Government
weakened.
(18) The 2 decades of experience since the Supreme Court's
Buckley v. Valeo ruling in 1976 have made it evident that
reasonable limits on election campaign expenditures are now
necessary and these limits must comprehensively address all
types of expenditures to prevent circumvention of such
limits.
(19) The Supreme Court based its Buckley v. Valeo decision
on a concern that spending limits could narrow political
speech ``by restricting the number of issues discussed, the
depth of their exploration, and the size of the audience
reached''. The experience of the past 20 years has been
otherwise as experience shows that unlimited expenditures can
drown out or distort political discourse in a flood of
distractive repetition. Reasonable spending limits will
increase the opportunity for previously muted voices to be
heard and thereby increase the number, depth, and diversity
of ideas presented to the public.
(20) Issue advocacy communications that do not promote or
oppose an identified candidate should remain unregulated, as
should the traditional freedom of the press to report and
editorialize about candidates and campaigns.
(21) In establishing reasonable limits on campaign
spending, it is necessary that the limits reflect the
realities of modern campaigning in a large, diverse
population with sophisticated and expensive modes of
communication. The limits must allow citizens to benefit from
a full and free debate of issues and permit candidates to
garner the resources necessary to engage in that debate.
[[Page S7954]]
(22) The expenditure limits established in this Act for
election to the United States Senate were determined after
careful review of historical spending patterns in Senate
campaigns as well as the particular spending level of the 3
most recent elections as evidenced by the following:
(A) The limit formula allows candidates a level of spending
which guarantees an ability to disseminate their message by
accounting for the size of the population in each State as
well as historical spending trends including the demonstrated
trend of lower campaign spending per voter in larger States
as compared to voter spending in smaller States.
(B) The candidate expenditure limits included in this
legislation would have restricted 80 percent of the incumbent
candidates in the last 3 elections, while only impeding 18
percent of the challengers.
(C) It is clear from recent experience that expenditure
limits as set by the formula in this Act will be high enough
to allow an effective level of competition, encourage
candidate dialogue with constituents, and circumscribe the
most egregiously high spending levels, so as to be a bulwark
against future campaign finance excesses and the resulting
voter disenfranchisement.
TITLE I--SENATE ELECTION SPENDING LIMITS
SEC. 101. SENATE ELECTION SPENDING LIMITS.
(a) In General.--Title III of the Federal Election Campaign
Act of 1971 (2 U.S.C. 431 et seq.) is amended by adding at
the end the following:
``SEC. 324. SPENDING LIMITS FOR SENATE ELECTION CAMPAIGNS
``(a) In General.--The amount of funds expended by a
candidate for election to the Senate and the candidate's
authorized committees with respect to an election may not
exceed the election expenditure limits of subsections (b),
(c), and (d).
``(b) Primary Election Expenditure Limit.--The aggregate
amount of expenditures for a primary election by a Senate
candidate and the candidate's authorized committees shall not
exceed 67 percent of the general election expenditure limit
under subsection (d).
``(c) Runoff Election Expenditure Limit.--The aggregate
amount of expenditures for a runoff election by a Senate
candidate and the candidate's authorized committees shall not
exceed 20 percent of the general election expenditure limit
under subsection (d).
``(d) General Election Expenditure Limit.--
``(1) In general.--The aggregate amount of expenditures for
a general election by a Senate candidate and the candidate's
authorized committees shall not exceed the greater of--
``(A) $1,182,500; or
``(B) $500,000; plus
``(i) 37.5 cents multiplied by the voting age population
not in excess of 4,000,000; and
``(ii) 31.25 cents multiplied by the voting age population
in excess of 4,000,000.
``(2) Exception.--In the case of a Senate candidate in a
State that has not more than 1 transmitter for a commercial
Very High Frequency (VHF) television station licensed to
operate in that State, paragraph (1)(B) shall be applied by
substituting--
``(A) `$1.00' for `37.5 cents' in clause (i); and
``(B) `87.5 cents' for `31.25 cents' in clause (ii).
``(3) Indexing.--The monetary amounts in paragraphs (1) and
(2) shall be increased as of the beginning of each calendar
year based on the increase in the price index determined
under section 315(c), except that the base period shall be
calendar year 1997.
``(e) Exempted Expenditures.--In determining the amount of
funds expended for purposes of this section, there shall be
excluded any amounts expended for--
``(1) Federal, State, or local taxes with respect to
earnings on contributions raised;
``(2) legal and accounting services provided solely in
connection with complying with the requirements of this Act;
``(3) legal services related to a recount of the results of
a Federal election or an election contest concerning a
Federal election; or
``(4) payments made to or on behalf of an employee of a
candidate's authorized committees for employee benefits--
``(A) including--
``(i) health care insurance;
``(ii) retirement plans; and
``(iii) unemployment insurance; but
``(B) not including salary, any form of compensation, or
amounts intended to reimburse the employee.''.
TITLE II--COORDINATED AND INDEPENDENT EXPENDITURES
SEC. 201. ADDING DEFINITION OF COORDINATION TO DEFINITION OF
CONTRIBUTION.
(a) Definition of Contribution.--Section 301(8) of the
Federal Election Campaign Act of 1971 (2 U.S.C. 431(8)) is
amended--
(1) in subparagraph (A)--
(A) in clause (i), by striking ``or'' at the end;
(B) in clause (ii) by striking the period and inserting ``;
or''; and
(C) by adding at the end the following:
``(iii) a payment made for a communication or anything of
value that is for the purpose of influencing an election for
Federal office and that is a payment made in coordination
with a candidate.''; and
(2) by adding at the end the following:
``(C) Payment made in coordination with.--The term `payment
made in coordination with' means--
``(i) a payment made by any person in cooperation,
consultation, or concert with, at the request or suggestion
of, or pursuant to any general or particular understanding
with, a candidate, a candidate's authorized committees, an
agent acting on behalf of a candidate or a candidate's
authorized committee, or (for purposes of paragraphs (9) and
(10) of section 315(a)) another person;
``(ii) the financing by any person of the dissemination,
distribution, or republication, in whole or in part, of any
broadcast or any written, graphic, or other form of campaign
materials prepared by the candidate or the candidate's
authorized committees (not including a communication
described in paragraph (9)(B)(i) or a communication that
expressly advocates the candidate's defeat); or
``(iii) payments made based on information about the
candidate's plans, projects, or needs provided to the person
making the payment by the candidate, the candidate's
authorized committees, or an agent of a candidate or a
candidate's authorized committees.''.
(b) Conforming Amendments.--
(1) Section 315.--Section 315(a)(7)(B) of the Federal
Election Campaign Act of 1971 (2 U.S.C. 441a(a)(7)(B)) is
amended to read as follows:
``(B) expenditures made in coordination with a candidate,
within the meaning of section 301(8)(C), shall be considered
to be contributions to the candidate and, in the case of
limitations on expenditures, shall be treated as an
expenditure for purposes of this section; and''.
(2) Section 316.--Section 316(b)(2) of the Federal Election
Campaign Act of 1971 (2 U.S.C. 441b(b)(2)) is amended by
striking ``shall include'' and inserting ``shall have the
meaning given those terms in paragraphs (8) and (9) of
section 301 and shall also include''.
SEC. 202. TREATMENT OF CERTAIN COORDINATED CONTRIBUTIONS AND
EXPENDITURES.
Section 315(a) of the Federal Election Campaign Act of 1971
(2 U.S.C. 441a(a)) is amended by adding at the end the
following:
``(9) For purposes of this section, contributions made by
more than 1 person in coordination with each other (within
the meaning of section 301(8)(C)) shall be considered to have
been made by a single person.
``(10) For purposes of this section, an independent
expenditure made by a person in coordination with (within the
meaning of section 301(8)(C)) another person shall be
considered to have been made by a single person.''.
SEC. 203. POLITICAL PARTY COMMITTEES.
(a) Limit on Coordinated and Independent Expenditures by
Political Party Committees.--Section 315(d) of the Federal
Election Campaign Act of 1971 (2 U.S.C. 441a(d)) is amended--
(1) in paragraph (1), by inserting ``and independent
expenditures'' after ``Federal office''; and
(2) in paragraph (3)--
(A) by inserting ``, including expenditures made'' after
``make any expenditure''; and
(B) by inserting ``and independent expenditures advocating
the election or defeat of a candidate,'' after ``such
party''.
(b) Rules Applicable When Limits not in Effect.--For
purposes of the Federal Election Campaign Act of 1971 (2
U.S.C. 431 et seq.), during any period beginning after the
effective date of this Act in which the limitation under
section 315(d)(3) (as amended by subsection (a)) is not in
effect the following amendments shall be effective:
(1) Independent versus coordinated expenditures by a
political party committee.--Section 315(d) of the Federal
Election Campaign Act of 1971 (2 U.S.C. 441a(d)) is amended--
(A) in paragraph (1)--
(i) by striking ``(2) and (3) of this subsection'' and
inserting ``(2), (3), and (4) of this subsection''; and
(ii) by inserting ``coordinated'' after ``make'';
(B) in paragraph (3), by inserting ``coordinated'' after
``make''; and
(C) by adding at the end the following:
``(4) Prohibition against making both coordinated
expenditures and independent expenditures.--
``(A) In general.--A committee of a political party shall
not make both a coordinated expenditure in excess of $5,000
and an independent expenditure with respect to the same
candidate during an election cycle.
``(B) Certification.--Before making a coordinated
expenditure in excess of $5,000 in connection with a general
election campaign for Federal office, a committee of a
political party that is subject to this subsection shall file
with the Commission a certification, signed by the treasurer,
stating that the committee will not make independent
expenditures with respect to such candidate.
``(C) Transfers.--A party committee that certifies under
this paragraph that the committee will make coordinated
expenditures with respect to any candidate shall not, in the
same election cycle, make a transfer of funds to, or receive
a transfer of funds from, any other party committee unless
that committee has certified under this paragraph that it
will only make coordinated expenditures with respect to
candidates.
``(D) Definition of coordinated expenditure.--In this
paragraph, the term `coordinated expenditure' shall have the
meaning given the term `payments made in coordination with'
in section 301(8)(C).''.
(2) Limit on contributions to political party committees.--
Section 315(a) of Federal Election Campaign Act of 1971 (2
U.S.C. 441a(a)) is amended--
[[Page S7955]]
(A) in paragraph (1)(B), by striking ``which, in the
aggregate, exceed $20,000'' and inserting ``that--
``(i) in the case of a political committee that certifies
under subsection (d)(4) that it will not make independent
expenditures in connection with the general election campaign
of any candidate, in the aggregate, exceed $20,000; or
``(ii) in the case of a political committee that does not
certify under subsection (d)(4) that it will not make
independent expenditures in connection with the general
election campaign of any candidate, in the aggregate, exceed
$5,000''; and
(B) in paragraph (2)(B), by striking ``which, in the
aggregate, exceed $15,000'' and inserting ``that--
``(i) in the case of a political committee that certifies
under subsection (d)(4) that it will not make independent
expenditures in connection with the general election campaign
of any candidate, in the aggregate, exceed $15,000; or
``(ii) in the case of a political committee that does not
certify under subsection (d)(4) that it will not make
independent expenditures in connection with the general
election campaign of any candidate, in the aggregate, exceed
$5,000''.
(c) Definition of Election Cycle.--Section 301 of the
Federal Election Campaign Act of 1971 (2 U.S.C. 431) is
amended by adding at the end the following:
``(20) Election cycle.--The term `election cycle' means--
``(A) in the case of a candidate or the authorized
committees of a candidate, the period beginning on the day
after the date of the most recent general election for the
specific office or seat that the candidate is seeking and
ending on the date of the next general election for that
office or seat; and
``(B) in the case of all other persons, the period
beginning on the first day following the date of the last
general election and ending on the date of the next general
election.''.
SEC. 204. LIMIT ON INDEPENDENT EXPENDITURES.
(a) In general.--Section 315 of the Federal Election
Campaign Act of 1971 (2 U.S.C. 441a) is amended by adding at
the end the following:
``(i) Limit on Independent Expenditures.--No person shall
make an amount of independent expenditures advocating the
election or defeat of a candidate during an election cycle in
an aggregate amount greater than the limit applicable to the
candidate under section 315(d)(3).''.
(b) Rules Applicable When Rules in Subsection (a) Not in
Effect.--For purposes of the Federal Election Campaign Act of
1971, during any period beginning after the effective date of
this Act in which the limit on independent expenditures under
section 315(i) of the Federal Election Campaign Act of 1971,
as added by subsection (a), is not in effect section 324 of
such Act, as added by section 101(a), is amended by adding at
the end the following:
``(f) Increase in Expenditure Limit in Response to
Independent Expenditures.--
``(1) In general.--The applicable election expenditure
limit for a candidate shall be increased by the aggregate
amount of independent expenditures made in excess of the
limit applicable to the candidate under section 315(d)(3)--
``(A) on behalf of an opponent of the candidate; or
``(B) in opposition to the candidate.
``(2) Notification.--
``(A) In general.--A candidate shall notify the Commission
of an intent to increase an expenditure limit under paragraph
(1).
``(B) Commission response.--Within 3 business days of
receiving a notice under subparagraph (A), the Commission
must approve or deny the increase in expenditure limit.
``(C) Additional notification.--A candidate who has
increased an expenditure limit under paragraph (1) shall
notify the Commission of each additional increase in
increments of $50,000.''.
SEC. 205. CLARIFICATION OF DEFINITIONS RELATING TO
INDEPENDENT EXPENDITURES.
(a) Definition of Independent Expenditure.--Section 301 of
the Federal Election Campaign Act of 1971 (2 U.S.C. 431) is
amended by striking paragraph (17) and inserting the
following:
``(17) Independent expenditure.--The term `independent
expenditure' means an expenditure that--
(A) contains express advocacy; and
(B) is made without the participation or cooperation of, or
without consultation with, or without coordination with a
candidate or a candidate's authorized committee or agent
(within the meaning of section 301(8)(C)).''.
(b) Definition of Express Advocacy.--Section 301 of Federal
Election Campaign Act of 1971 (2 U.S.C. 431), as amended by
section 202(c), is amended by adding at the end the
following:
``(21) Express advocacy.--The term `express advocacy'
includes--
``(i) a communication that conveys a message that advocates
the election or defeat of a clearly identified candidate for
Federal office by using an expression such as `vote for,'
`elect,' `support,' `vote against,' `defeat,' `reject,'
`(name of candidate) for Congress,' `vote pro-life,' or `vote
pro-choice,' accompanied by a listing or picture of a clearly
identified candidate described as `pro-life' or `pro-choice,'
`reject the incumbent,' or an expression susceptible to no
other reasonable interpretation but an unmistakable and
unambiguous exhortation to vote for or against a specific
candidate; or
``(ii) a communication that is made through a broadcast
medium, newspaper, magazine, billboard, direct mail, or
similar type of general public communication or political
advertising--
``(A) that is made on or after a date that is 90 days
before the date of a general election of the candidate;
``(B) that refers to the character, qualifications, or
accomplishments of a clearly identified candidate, group of
candidates, or candidate of a clearly identified political
party; and
``(C) that does not have as its sole purpose an attempt to
urge action on legislation that has been introduced in or is
being considered by a legislature that is in session.''.
SEC. 206. ELIMINATION OF LEADERSHIP PACS.
(a) Designation and Establishment of Authorized
Committee.--Section 302(e) of the Federal Election Campaign
Act of 1971 (2 U.S.C. 432(e)) is amended by--
(1) striking paragraph (3) and inserting the following:
``(3) No political committee that supports, or has
supported, more than one candidate may be designated as an
authorized committee, except that--
``(A) a candidate for the office of President nominated by
a political party may designate the national committee of
such political party as the candidate's principal campaign
committee, if that national committee maintains separate
books of account with respect to its functions as a principal
campaign committee; and
``(B) a candidate may designate a political committee
established solely for the purpose of joint fundraising by
such candidates as an authorized committee.''; and
(2) adding at the end the following:
``(6)(A) A candidate for Federal office or any individual
holding Federal office may not directly or indirectly
establish, finance, maintain, or control any political
committee other than a principal campaign committee of the
candidate, designated in accordance with paragraph (3). A
candidate for more than one Federal office may designate a
separate principal campaign committee for each Federal
office. This paragraph shall not preclude a Federal
officeholder who is a candidate for State or local office
from establishing, financing, maintaining, or controlling a
political committee for election of the individual to such
State or local office.
``(B) A political committee prohibited by subparagraph (A),
that is established before the date of enactment of this Act,
may continue to make contributions for a period that ends on
the date that is 1 year after the date of enactment of this
paragraph. At the end of such period the political committee
shall disburse all funds by 1 or more of the following means:
``(1) Making contributions to an entity described in
section 501(c)(3) of the Internal Revenue Code of 1986 and
exempt from taxation under section 501(a) of such Act that is
not established, maintained, financed, or controlled directly
or indirectly by any candidate for Federal office or any
individual holding Federal office.
``(2) Making a contribution to the Treasury.
``(3) Making contributions to the national, State, or local
committees of a political party.
``(4) Making contributions not to exceed $1,000 to
candidates for elective office.''.
TITLE III--SOFT MONEY
SEC. 301. SOFT MONEY OF POLITICAL PARTY COMMITTEE.
Title III of the Federal Election Campaign Act of 1971 (2
U.S.C. 431 et seq.) is amended by adding at the end the
following:
``SEC. 325. SOFT MONEY OF PARTY COMMITTEES.
``(a) National Committees.--A national committee of a
political party (including a national congressional campaign
committee of a political party), an entity that is directly
or indirectly established, financed, maintained, or
controlled by a national committee or its agent, an entity
acting on behalf of a national committee, and an officer or
agent acting on behalf of any such committee or entity (but
not including an entity regulated under subsection (b)) shall
not solicit or receive any contributions, donations, or
transfers of funds, or spend any funds, that are not subject
to the limitations, prohibitions, and reporting requirements
of this Act.
``(b) State, District, and Local Committees.--
``(1) In general.--Any amount that is expended or disbursed
by a State, district, or local committee of a political party
(including an entity that is directly or indirectly
established, financed, maintained, or controlled by a State,
district, or local committee of a political party and an
officer or agent acting on behalf of any such committee or
entity) during a calendar year in which a Federal election is
held, for any activity that might affect the outcome of a
Federal election, including any voter registration or get-
out-the-vote activity, any generic campaign activity, and any
communication that refers to a candidate (regardless of
whether a candidate for State or local office is also
mentioned or identified) shall be made from funds subject to
the limitations, prohibitions, and reporting requirements of
this Act.
``(2) Activity excluded from paragraph (1).--
``(A) In general.--Paragraph (1) shall not apply to an
expenditure or disbursement made by a State, district, or
local committee of a political party for--
[[Page S7956]]
``(i) a contribution to a candidate for State or local
office if the contribution is not designated or otherwise
earmarked to pay for an activity described in paragraph (1);
``(ii) the costs of a State, district, or local political
convention;
``(iii) the non-Federal share of a State, district, or
local party committee's administrative and overhead expenses
(but not including the compensation in any month of any
individual who spends more than 20 percent of the
individual's time on activity during the month that may
affect the outcome of a Federal election) except that for
purposes of this paragraph, the non-Federal share of a party
committee's administrative and overhead expenses shall be
determined by applying the ratio of the non-Federal
disbursements to the total Federal expenditures and non-
Federal disbursements made by the committee during the
previous presidential election year to the committee's
administrative and overhead expenses in the election year in
question;
``(iv) the costs of grassroots campaign materials,
including buttons, bumper stickers, and yard signs that name
or depict only a candidate for State or local office; and
``(v) the cost of any campaign activity conducted solely on
behalf of a clearly identified candidate for State or local
office, if the candidate activity is not an activity
described in paragraph (1).
``(B) Fundraising costs.--Any amount spent by a national,
State, district, or local committee, by an entity that is
established, financed, maintained, or controlled by a State,
district, or local committee of a political party, or by an
agent or officer of any such committee or entity to raise
funds that are used, in whole or in part, to pay the costs of
an activity described in paragraph (1) shall be made from
funds subject to the limitations, prohibitions, and reporting
requirements of this Act.
``(c) Tax-exempt organizations.--A national, State,
district, or local committee of a political party (including
a national congressional campaign committee of a political
party, an entity that is directly or indirectly established,
financed, maintained, or controlled by any such national,
State, district, or local committee or its agent, an agent
acting on behalf of any such party committee, and an officer
or agent acting on behalf of any such party committee or
entity), shall not solicit any funds for or make any
donations to an organization that is exempt from Federal
taxation under section 501(c) of the Internal Revenue Code of
1986.
``(d) Candidates.--
``(1) In general.--A candidate, individual holding Federal
office, or agent of a candidate or individual holding Federal
office shall not--
``(A) solicit, receive, transfer, or spend funds in
connection with an election for Federal office unless the
funds are subject to the limitations, prohibitions, and
reporting requirements of this Act;
``(B) solicit, receive, or transfer funds that are to be
expended in connection with any election other than a Federal
election unless the funds--
``(i) are not in excess of the amounts permitted with
respect to contributions to candidates and political
committees under section 315(a) (1) and (2); and
``(ii) are not from sources prohibited by this Act from
making contributions with respect to an election for Federal
office; or
``(C) solicit, receive, or transfer any funds on behalf of
any person that are not subject to the limitations,
prohibitions, and reporting requirements of the Act if the
funds are for use in financing any campaign-related activity
or any communication that refers to a clearly identified
candidate for Federal office.
``(2) Exception.--Paragraph (1) does not apply to the
solicitation or receipt of funds by an individual who is a
candidate for a State or local office if the solicitation or
receipt of funds is permitted under State law for the
individual's State or local campaign committee.''.
SEC. 302. STATE PARTY GRASSROOTS FUNDS.
(a) Individual Contributions.--Section 315(a)(1) of the
Federal Election Campaign Act of 1971 (2 U.S.C. 441a(a)(1))
is amended--
(1) in subparagraph (B), by striking ``or'' at the end;
(2) in subparagraph (C), by striking the period at the end
and inserting ``; or''; and
(3) by inserting after subparagraph (C) the following:
``(D) to--
``(i) a State Party Grassroots Fund established and
maintained by a State committee of a political party in any
calendar year which, in the aggregate, exceed $20,000;
``(ii) any other political committee established and
maintained by a State committee of a political party in any
calendar year which, in the aggregate, exceed $5,000;
except that the aggregate contributions described in this
subparagraph that may be made by a person to the State Party
Grassroots Fund and all committees of a State Committee of a
political party in any State in any calendar year shall not
exceed $20,000.''.
(b) Limits.--
(1) In general.--Section 315(a) of the Federal Election
Campaign Act of 1971 (2 U.S.C. 441a(a)) is amended by
striking paragraph (3) and inserting the following:
``(3) Overall limits.--
``(A) Individual limit.--No individual shall make
contributions during any calendar year that, in the
aggregate, exceed $30,000.
``(B) Calendar year.--No individual shall make
contributions during any calendar year--
``(i) to all candidates and their authorized political
committees that, in the aggregate, exceed $25,000; or
``(ii) to all political committees established and
maintained by State committees of a political party that, in
the aggregate, exceed $20,000.
``(C) Nonelection years.--For purposes of subparagraph
(B)(i), any contribution made to a candidate or the
candidate's authorized political committees in a year other
than the calendar year in which the election is held with
respect to which the contribution is made shall be treated as
being made during the calendar year in which the election is
held.''.
(c) Definitions.--Section 301 of the Federal Election
Campaign Act of 1970 (2 U.S.C. 431), as amended by section
205(b), is amended by adding at the end the following:
``(22) Generic campaign activity.--The term `generic
campaign activity' means a campaign activity that promotes a
political party and does not refer to any particular Federal
or non-Federal candidate.
``(23) State Party Grassroots Fund.--The term `State Party
Grassroots Fund' means a separate segregated fund established
and maintained by a State committee of a political party
solely for purposes of making expenditures and other
disbursements described in section 326(d).''.
(d) State Party Grassroots Funds.--Title III of the Federal
Election Campaign Act of 1971 (2 U.S.C. 431 et seq.), as
amended by section 301, is amended by adding at the end the
following:
``SEC. 326. STATE PARTY GRASSROOTS FUNDS.
``(a) Definition.--In this section, the term `State or
local candidate committee' means a committee established,
financed, maintained, or controlled by a candidate for other
than Federal office.
``(b) Transfers.--Notwithstanding section 315(a)(4), no
funds may be transferred by a State committee of a political
party from its State Party Grassroots Fund to any other State
Party Grassroots Fund or to any other political committee,
except a transfer may be made to a district or local
committee of the same political party in the same State if
the district or local committee--
``(1) has established a separate segregated fund for the
purposes described in subsection (d); and
``(2) uses the transferred funds solely for those purposes.
``(c) Amounts Received by Grassroots Funds From State and
Local Candidate Committees.--
``(1) In general.--Any amount received by a State Party
Grassroots Fund from a State or local candidate committee for
expenditures described in subsection (d) that are for the
benefit of that candidate shall be treated as meeting the
requirements of 325(b)(1) and section 304(e) if--
``(A) the amount is derived from funds which meet the
requirements of this Act with respect to any limitation or
prohibition as to source or dollar amount specified in
section 315(a) (1)(A) and (2)(A); and
``(B) the State or local candidate committee--
``(i) maintains, in the account from which payment is made,
records of the sources and amounts of funds for purposes of
determining whether those requirements are met; and
``(ii) certifies that the requirements were met.
``(2) Determination of compliance.--For purposes of
paragraph (1)(A), in determining whether the funds
transferred meet the requirements of this Act described in
paragraph (1)(A)--
``(A) a State or local candidate committee's cash on hand
shall be treated as consisting of the funds most recently
received by the committee; and
``(B) the committee must be able to demonstrate that its
cash on hand contains funds meeting those requirements
sufficient to cover the transferred funds.
``(3) Reporting.--Notwithstanding paragraph (1), any State
Party Grassroots Fund that receives a transfer described in
paragraph (1) from a State or local candidate committee shall
be required to meet the reporting requirements of this Act,
and shall submit to the Commission all certifications
received, with respect to receipt of the transfer from the
candidate committee.
``(d) Disbursements and Expenditures.--A State committee of
a political party may make disbursements and expenditures
from its State Party Grassroots Fund only for--
``(1) any generic campaign activity;
``(2) payments described in clauses (v), (ix), and (xi) of
paragraph (8)(B) and clauses (iv), (viii), and (ix) of
paragraph (9)(B) of section 301;
``(3) subject to the limitations of section 315(d),
payments described in clause (xii) of paragraph (8)(B), and
clause (ix) of paragraph (9)(B), of section 301 on behalf of
candidates other than for President and Vice President;
``(4) voter registration; and
``(5) development and maintenance of voter files during an
even-numbered calendar year.''.
SEC. 303. REPORTING REQUIREMENTS.
(a) Reporting Requirements.--Section 304 of the Federal
Election Campaign Act of 1971 (2 U.S.C. 434) is amended by
adding at the end the following:
``(e) Political Committees.--
``(1) National and congressional political committees.--The
national committee of
[[Page S7957]]
a political party, any congressional campaign committee of a
political party, and any subordinate committee of either,
shall report all receipts and disbursements during the
reporting period, whether or not in connection with an
election for Federal office.
``(2) Other political committees to which section 325
applies.--A political committee (not described in paragraph
(1)) to which section 325(b)(1) applies shall report all
receipts and disbursements made for activities described in
paragraphs (1) and (2)(iii) of section 325(b).
(3) Other political committees.--Any political committee to
which paragraph (1) or (2) does not apply shall report any
receipts or disbursements that are used in connection with a
Federal election.
``(4) Itemization.--If a political committee has receipts
or disbursements to which this subsection applies from any
person aggregating in excess of $200 for any calendar year,
the political committee shall separately itemize its
reporting for such person in the same manner as required in
paragraphs (3)(A), (5), and (6) of subsection (b).
``(5) Reporting periods.--Reports required to be filed
under this subsection shall be filed for the same time
periods required for political committees under subsection
(a).''.
(b) Building Fund Exception to the Definition of
Contribution.--Section 301(8) of the Federal Election
Campaign Act of 1971 (2 U.S.C. 431(8)) is amended--
(1) by striking clause (viii); and
(2) by redesignating clauses (ix) through (xiv) as clauses
(viii) through (xiii), respectively.
(c) Reports by State Committees.--Section 304 of the
Federal Election Campaign Act of 1971 (2 U.S.C. 434), as
amended by subsection (a), is amended by adding at the end
the following:
``(f) Filing of State Reports.--In lieu of any report
required to be filed by this Act, the Commission may allow a
State committee of a political party to file with the
Commission a report required to be filed under State law if
the Commission determines such reports contain substantially
the same information.''.
(d) Other Reporting Requirements.--
(1) Authorized committees.--Section 304(b)(4) of the
Federal Election Campaign Act of 1971 (2 U.S.C. 434(b)(4)) is
amended--
(A) by striking ``and'' at the end of subparagraph (H);
(B) by inserting ``and'' at the end of subparagraph (I);
and
(C) by adding at the end the following new subparagraph:
``(J) in the case of an authorized committee, disbursements
for the primary election, the general election, and any other
election in which the candidate participates;''.
(2) Names and addresses.--Section 304(b)(5)(A) of the
Federal Election Campaign Act of 1971 (2 U.S.C. 434(b)(5)(A))
is amended by inserting ``, and the election to which the
operating expenditure relates'' after ``operating
expenditure''.
SEC. 304. SOFT MONEY OF PERSONS OTHER THAN POLITICAL PARTIES.
Section 304 of the Federal Election Campaign Act of 1971 (2
U.S.C. 434), as amended by subsection 303, is amended by
adding at the end the following:
``(g) Election Activity of Persons Other Than Political
Parties.--
``(1) In general.--A person other than a committee of a
political party that makes aggregate disbursements totaling
in excess of $10,000 for activities described in paragraph
(2) shall file a statement with the Commission--
``(A) within 48 hours after the disbursements are made; or
``(B) in the case of disbursements that are made within 20
days of an election, within 24 hours after the disbursements
are made.
``(2) Activity.--The activity described in this paragraph
is--
``(A) any activity described in section 316(b)(2)(A) that
refers to any candidate for Federal office, any political
party, or any Federal election; and
``(B) any activity described in subparagraph (B) or (C) of
section 316(b)(2).
``(3) Additional statements.--An additional statement shall
be filed each time additional disbursements aggregating
$10,000 are made by a person described in paragraph (1).
``(4) Applicability.--This subsection does not apply to--
``(A) a candidate or a candidate's authorized committees;
or
``(B) an independent expenditure.
``(5) Contents.--A statement under this section shall
contain such information about the disbursements as the
Commission shall prescribe, including--
``(A) the name and address of the person or entity to whom
the disbursement was made;
``(B) the amount and purpose of the disbursement; and
``(C) if applicable, whether the disbursement was in
support of, or in opposition to, a candidate or a political
party, and the name of the candidate or the political
party.''.
TITLE IV--ENFORCEMENT
SEC. 401. FILING OF REPORTS USING COMPUTERS AND FACSIMILE
MACHINES.
Section 302(a) of the Federal Election Campaign Act of 1971
(2 U.S.C. 434(a)) is amended by striking paragraph (11) and
inserting the following:
``(11) Filing of reports using computers and facsimile
machines.--
``(A) Required filing.--The Commission may promulgate a
regulation under which a person required to file a
designation, statement, or report under this Act--
``(i) is required to maintain and file a designation,
statement, or report for any calendar year in electronic form
accessible by computers if the person has, or has reason to
expect to have, aggregate contributions or expenditures in
excess of a threshold amount determined by the Commission;
and
``(ii) may maintain and file a designation, statement, or
report in that manner if not required to do so under
regulations prescribed under clause (i).
``(B) Facsimile machine.--The Commission shall promulgate a
regulation that allows a person to file a designation,
statement, or report required by this Act through the use of
facsimile machines.
``(C) Verification of signature.--
``(i) In general.--In promulgating a regulation under this
paragraph, the Commission shall provide methods (other than
requiring a signature on the document being filed) for
verifying a designation, statement, or report covered by the
regulations.
``(ii) Treatment of verification.--A document verified
under any of the methods shall be treated for all purposes
(including penalties for perjury) in the same manner as a
document verified by signature.''.
SEC. 402. AUDITS.
(a) Random Audits.--Section 311(b) of the Federal Election
Campaign Act of 1971 (2 U.S.C. 438(b)) is amended--
(1) by inserting ``(1)'' before ``The Commission''; and
(2) by adding at the end the following:
``(2) Random audits.--
``(A) In general.--Notwithstanding paragraph (1), the
Commission may conduct random audits and investigations to
ensure voluntary compliance with this Act.
``(B) Limitation.--The Commission shall not institute an
audit or investigation of a candidate's authorized committee
under subparagraph (A) until the candidate is no longer a
candidate for the office sought by the candidate in that
election cycle.
``(C) Applicability.--This paragraph does not apply to an
authorized committee of a candidate for President or Vice
President subject to audit under section 9007 or 9038 of the
Internal Revenue Code of 1986.''.
(b) Extension of Period During Which Campaign Audits May Be
Begun.--Section 311(b) of the Federal Election Campaign Act
of 1971 (2 U.S.C. 438(b)) is amended by striking ``6 months''
and inserting ``12 months''.
SEC. 403. AUTHORITY TO SEEK INJUNCTION.
Section 309(a) of the Federal Election Campaign Act of 1971
(2 U.S.C. 437g(a)) is amended--
(1) by adding at the end the following:
``(13) Authority to seek injunction.--
``(A) In general.--If, at any time in a proceeding
described in paragraph (1), (2), (3), or (4), the Commission
believes that--
``(i) there is a substantial likelihood that a violation of
this Act is occurring or is about to occur;
``(ii) the failure to act expeditiously will result in
irreparable harm to a party affected by the potential
violation;
``(iii) expeditious action will not cause undue harm or
prejudice to the interests of others; and
``(iv) the public interest would be best served by the
issuance of an injunction;
the Commission may initiate a civil action for a temporary
restraining order or a preliminary injunction pending the
outcome of the proceedings described in paragraphs (1), (2),
(3), and (4).
``(B) Venue.--An action under subparagraph (A) shall be
brought in the United States district court for the district
in which the defendant resides, transacts business, or may be
found, or in which the violation is occurring, has occurred,
or is about to occur.'';
(2) in paragraph (7), by striking ``(5) or (6)'' and
inserting ``(5), (6), or (13)''; and
(3) in paragraph (11), by striking ``(6)'' and inserting
``(6) or (13)''.
SEC. 404. INCREASE IN PENALTY FOR KNOWING AND WILLFUL
VIOLATIONS.
Section 309(a)(5)(B) of the Federal Election Campaign Act
of 1971 (2 U.S.C. 437g(a)(5)(B)) is amended by striking ``the
greater of $10,000 or an amount equal to 200 percent'' and
inserting ``the greater of $15,000 or an amount equal to 300
percent''.
SEC. 405. PROHIBITION OF CONTRIBUTIONS BY INDIVIDUALS NOT
QUALIFIED TO VOTE.
(a) Prohibition.--Section 319 of the Federal Election
Campaign Act of 1971 (2 U.S.C. 441e) is amended--
(1) in the heading by adding ``AND INDIVIDUALS NOT
QUALIFIED TO REGISTER TO VOTE'' at the end; and
(2) in subsection (a)--
(A) by striking ``(a) It shall'' and inserting the
following:
``(a) Prohibitions.--
``(1) Foreign nationals.--It shall''; and
(B) by adding at the end the following:
``(2) Individuals not qualified to vote.--It shall be
unlawful for an individual who is not qualified to register
to vote in a Federal election to make a contribution, or to
promise expressly or impliedly to make a contribution, in
connection with a Federal election; or for any person to
knowingly solicit, accept, or receive a contribution in
connection with a Federal election from an individual who is
not qualified to register to vote in a Federal election.''.
(b) Inclusion in Definition of Identification.--Section
301(13) of the Federal Election
[[Page S7958]]
Campaign Act of 1971 (2 U.S.C. 431(13)) is amended--
(1) in subparagraph (A)--
(A) by striking ``and'' the first place it appears; and
(B) by inserting ``, and an affirmation that the individual
is an individual who is not prohibited by section 319 from
making a contribution'' after ``employer''; and
(2) in subparagraph (B) by inserting ``and an affirmation
that the person is a person that is not prohibited by section
319 from making a contribution'' after ``such person''.
SEC. 406. USE OF CANDIDATES' NAMES.
Section 302(e) of the Federal Election Campaign Act of 1971
(2 U.S.C. 432(e)) is amended by striking paragraph (4) and
inserting the following:
``(4)(A) The name of each authorized committee shall
include the name of the candidate who authorized the
committee under paragraph (1).
``(B) A political committee that is not an authorized
committee shall not--
``(i) include the name of any candidate in its name, or
``(ii) except in the case of a national, State, or local
party committee, use the name of any candidate in any
activity on behalf of such committee in such a context as to
suggest that the committee is an authorized committee of the
candidate or that the use of the candidate's name has been
authorized by the candidate.''.
SEC. 407. EXPEDITED PROCEDURES.
Section 309(a) of the Federal Election Campaign Act of 1971
(2 U.S.C. 437g(a)), as amended by section 403, is amended by
adding at the end the following:
``(14) Expedited procedure.--
``(A) 60 days preceding an election.--If the complaint in a
proceeding was filed within 60 days immediately preceding a
general election, the Commission may take action described in
this subparagraph.
``(B) Resolution before election.--If the Commission
determines, on the basis of facts alleged in the complaint
and other facts available to the Commission, that there is
clear and convincing evidence that a violation of this Act
has occurred, is occurring, or is about to occur and it
appears that the requirements for relief stated in paragraph
(13)(A) (ii), (iii), and (iv) are met, the Commission may--
``(i) order expedited proceedings, shortening the time
periods for proceedings under paragraphs (1), (2), (3), and
(4) as necessary to allow the matter to be resolved in
sufficient time before the election to avoid harm or
prejudice to the interests of the parties; or
``(ii) if the Commission determines that there is
insufficient time to conduct proceedings before the election,
immediately seek relief under paragraph (13)(A).
``(C) Complaint without merit.--If the Commission
determines, on the basis of facts alleged in the complaint
and other facts available to the Commission, that the
complaint is clearly without merit, the Commission may--
``(i) order expedited proceedings, shortening the time
periods for proceedings under paragraphs (1), (2), (3), and
(4) as necessary to allow the matter to be resolved in
sufficient time before the election to avoid harm or
prejudice to the interests of the parties; or
``(ii) if the Commission determines that there is
insufficient time to conduct proceedings before the election,
summarily dismiss the complaint.''.
TITLE V--SEVERABILITY; REGULATIONS; EFFECTIVE DATE
SEC. 501. SEVERABILITY.
If any provision of this Act or amendment made by this Act,
or the application of a provision or amendment to any person
or circumstance, is held to be unconstitutional, the
remainder of this Act and amendments made by this Act, and
the application of the provisions and amendment to any person
or circumstance, shall not be affected by the holding.
SEC. 502. REGULATIONS.
The Federal Election Commission shall promulgate any
regulations required to carry out this Act and the amendments
made by this Act.
SEC. 503. EFFECTIVE DATE.
Except as otherwise provided in this Act, this Act and the
amendments made by this Act take effect on the date that is
30 days after the date of enactment of this Act.
Exhibit 1
[From the Secretary of State, State of West Virginia]
On May 20, officials of 33 states, including secretaries of
state, attorneys general and state regulators of campaign
finance (in those states where the secretary of state does
not have that responsibility) registered their support of a
court challenge to the 1976 U.S. Supreme Court decision in
the case of Buckley v. Valeo. The officials in these 33
states made known their support as amicus curiae in a pending
appeal in the 6th Circuit Court of Appeals in a case entitled
Kruse v. City of Cincinnati, which concerns a Cincinnati
ordinance limiting candidates for the city council to
spending no more than three times their annual salary. The
ordinance was declared unconstitutional by a Federal district
court, based on the Buckley v. Valeo decision, which ruled
that such limits violated First Amendment freedom of speech
protection. Whichever way the 6th Circuit Court of Appeals
rules, it is almost certain to be appealed to the U.S.
Supreme Court, thus paving the way for a re-argument of
Buckley v. Valeo.
Officials in the following states filed the amicus brief:
Arizona--A.G.
Arkansas--SOS and A.G.
Connecticut--SOS and A.G.
Florida--SOS and A.G.
Georgia--SOS.
Hawaii--Campaign Spending Commisison and A.G.
Indiana--A.G.
Iowa--A.G.
Kansas--A.G.
Kentucky--Registry of Campaign Finance and A.G.
Maine--SOS.
Massachusetts--SOS and A.G.
Michigan--A.G.
Minnesota--SOS and A.G.
Mississippi--SOS.
Montana--SOS and A.G.
Nevada--SOS and A.G.
New Hampshire--SOS and A.G.
New Mexico--SOS.
North Carolina--Chief Elections Officer.
North Dakota--A.G.
Ohio--A.G.
Oklahoma--Ethics Commission and A.G.
Oregon--SOS and A.G.
Rhode Island--SOS.
South Carolina--SOS.
South Dakota--A.G.
Tennessee--SOS.
Utah--A.G.
Vermont--A.G.
Washington--SOS and A.G.
West Virginia--SOS and A.G.
Wisconsin--SOS.
Territory of Guam--Lt. Gov. and A.G.
____
[From the Department of Justice, State of Iowa]
24 state attorneys general issue call for the reversal of buckley v.
valeo
Des Moines, Iowa--The attorneys general for twenty-four
states released a joint statement Tuesday calling for the
reversal of a 1976 Supreme Court decision which struck down
mandatory campaign spending limits on free speech grounds.
The attorneys general statement comes amidst a growing
national debate about the validity of that court ruling,
Buckley v. Valeo.
Former U.S. Senator Bill Bradley has denounced the decision
and has helped lead the recent push in the U.S. Congress for
a constitutional amendment to allow for mandatory spending
limits in federal elections. The City of Cincinnati is
litigating the first direct court challenge to the ruling,
defending an ordinance passed in 1995 by the City Council
which sets limits in city council races. And, in late October
1996, a group of prominent constitutional scholars from
around the nation signed a statement calling for the reversal
of Buckley.
The attorneys general statement reads as follows:
``Over two decades ago, the United States Supreme Court, in
Buckley v. Valeo, 424 U.S. 1 (1976), declared mandatory
campaign expenditure limits unconstitutional on First
Amendment grounds. We, the undersigned state attorneys
general, believe the time has come for that holding to be
revisited and reversed.
``U.S. Supreme Court Justice Louis Brandeis once wrote
`[I]n cases involving the Federal Constitution, where
correction through legislative action is practically
impossible, this court has often overruled its earlier
decision. The court bows to the lessons of experience and the
force of better reasoning . . .' Burnet v. Coronado Oil & Gas
Co., 285 U.S. 393, 406-408 (1932) (Brandeis, J., dissenting).
``As state attorneys general--many of us elected--we
believe the experience of campaigns teaches the lesson that
unlimited campaign spending threatens the integrity of the
election process. As the chief legal officers of our
respective states, we believe that the force of better
reasoning compels the conclusion that it is the absence of
limits on campaign expenditures--not the restrictions--which
strike `at the core of our electoral process and of the First
Amendment freedoms.' Buckley v. Valeo, 424 U.S. 1, 39 (1976)
(quoting Williams v. Rhodes, 393 U.S. 23, 32 (1968).''
The United States has witnessed a more than a 700% increase
in the cost of federal elections since the Buckley ruling.
The presidential and congressional campaigns combined spent
more than $2 billion this past election cycle, making the
1996 elections the costliest ever in U.S. history.
Iowa Attorney General Tom Miller, Nevada Attorney General
Frankie Sue Del Papa, Arizona Attorney General Grant Woods,
and the National Voting Rights Institute of Boston initiated
Tuesday's statement. The Institute is a non-profit
organization engaged in constitutional challenges across the
country to the current campaign finance system. The Institute
serves as special counsel for the City of Cincinnati in its
challenge to Buckley, now in federal district court in
Cincinnati and due for its first court hearing on January 31,
``Buckley stands today as a barrier to American
democracy,'' says Attorney General Del Papa. ``As state
attorneys general, we are committed to helping remove that
barrier.'' Del Papa says the twenty-four state attorneys
general will seek to play an active role in efforts to
reverse the Buckley decision, including the submission of
friend-of-the-court briefs in emerging court cases which
address the ruling.
``Maybe it wasn't clear in 1976, but it is clear today that
financing of campaigns has gotten totally out of control,''
says Iowa Attorney General Tom Miller. ``The state has a
compelling interest in bringing campaign finances back under
control and protecting the integrity of the electoral
process.''
[[Page S7959]]
Arizona Attorney General Grant Woods adds, ``I believe that
it is a major stretch to say that the First Amendment
requires that no restrictions be placed on individual
campaign spending. The practical results, where millionaires
dominate the process to the detriment of nearly everyone who
cannot compete financially, have perverted the electoral
process in America.''
The full listing of signatories is as follows:
Attorney General Grant Woods of Arizona (R).
Attorney General Richard Blumenthal of Connecticut (D).
Attorney General Robert Butterworth of Florida (D).
Attorney General Alan G. Lance of Idaho (R).
Attorney General Tom Miller of Iowa (D).
Attorney General Carla J. Stovall of Kansas (R).
Attorney General Albert B. Chandler III of Kentucky (D).
Attorney General Andrew Ketterer of Maine (D).
Attorney General Scott Harshbargor of Massachusetts (D).
Attorney General Frank Kelley of Michigan (D).
Attorney General Hubert H. Humphrey of Minnesota (D).
Attorney General Mike Moore of Mississippi (D).
Attorney General Joseph P. Mazurek of Montana (D).
Attorney General Frankie Sue Del Papa of Nevada (D).
Attorney General Jeff Howard of New Hampshire (R).
Attorney General Tom Udall of New Mexico (D).
Attorney General Heidi Heitkamp of North Dakota (D).
Attorney General Drew Edmondson of Oklahoma (D).
Attorney General Charles W. Burson of Tennessee (D).
Attorney General Jan Graham of Utah (D).
Attorney General Wallace Malley of Vermont (R).
Attorney General Darrel V. McGraw of West Virginia (D).
Attorney General Christine O. Gregoire of Washington (D).
Attorney General James Doyle of Wisconsin (D).
______
By Mr. LAUTENBERG (for himself, Mr. Wyden, Mr. Durbin, and Mr.
Harkin):
S. 1060. A bill to restrict the activities of the United States with
respect to foreign laws that regulate the marketing of tobacco products
and to subject cigarettes that are exported to the same restrictions on
labeling as apply to the sale or distribution of cigarettes in the
United States; to the Committee on Commerce, Science, and
Transportation.
the worldwide tobacco disclosure act of 1997
Mr. LAUTENBERG. Mr. President, today I am introducing the Worldwide
Tobacco Disclosure Act of 1997. I am joined by Senators Wyden, Durbin,
and Harkin. Our bill will address a loophole in current law that
enables packages of cigarettes to be exported from this country without
warning labels and to prevent the executive branch from undermining
other countries' restrictions on tobacco.
Within a few decades, the World Health Organization estimates that 10
million people will die annually from tobacco-related disease, up from
3 million per year. An astonishing 70 percent of those deaths will be
in developing countries. To give my colleagues a basis for comparison,
in America, today, approximately 400,000 die a year from tobacco. While
smoking has declined 10 percent since 1990 in developed countries, the
WHO concludes it has risen an alarming 67 percent in developing
countries during that same period. American tobacco exports have
increased by almost 340 percent since the mid-1970's, and these exports
now account for more than half of our tobacco companies' sales.
America is rightfully proud of its exports and the standards it
upholds in international trade. But with tobacco, we're exporting
death. We are the largest exporter of a product we know kills, and that
is not something about which we should be proud. With marketing savvy
and millions of dollars, American tobacco companies have significantly
increased cigarette consumption in developing countries. It is
estimated that cigarette consumption increased by 10 percent as a
direct result of American tobacco companies entering the markets of
Japan, South Korea, Thailand, and Taiwan.
Why should Congress care if hundreds of thousands of teenage boys and
girls in China become addicted to nicotine? Why not let their
government deal with this matter? Mr. President, morally, we are
obligated to warn them, to the extent we know of tobacco's dangers. We
are obligated to support the efforts of our trading partners to protect
the health of their citizens.
Mr. President, cigarettes kill and the label should clearly state
that. One component of the proposed tobacco settlement between the
State attorneys general and the tobacco industry was stronger warning
labels on cigarette packages, similar to those I included in
legislation introduced earlier this year. While we are taking
additional steps to make our citizens more aware of the dangers of
tobacco, my colleagues may be surprised to know that our Government
requires no warning on exported cigarette packages. We know that
smoking is addictive and can kill, but you would never guess that by
looking at a pack of Camels exported from this country into Africa or
Eastern Europe. When we enacted the Federal Cigarette Labeling and
Advertising Act of 1965, we may have thought that other countries would
require their own warning labels and these would be adequate. We know,
Mr. President, that this is simply not the case.
Too many countries, especially in the developing world, have no
warning labels on cigarette packages, and those that do, are inadequate
to fully alert their citizens to the dangers of tobacco. Coupled with a
poor national health system, citizens in these countries have no chance
against tobacco promotional giveaways or slick advertising. Not knowing
of the health risks associated with cigarettes, they are easily
addicted and a significant percentage of them will die from this
product.
Mr. President, barring further steps, a health crisis resulting from
tobacco will occur in the developing world within the next few decades.
Our country alone spends $50 billion a year more on health care as a
result of tobacco. Imagine what the worldwide cost of tobacco related
illness will be in 20 years. Today limited funds are spent combating
hunger, AIDS and other infectious diseases, and infant mortality
worldwide. In about 10 years, we can add tobacco related illnesses to
the list.
One part of this legislation, Mr. President, requires exported
packages of cigarettes to have warning labels in the language of the
country where the cigarette will be consumed. Before exporting
hazardous materials, Congress requires exports to alert our Government
prior to export so that we might warn the government of the importing
country that a certain product is being shipped to its borders.
Cigarettes are a hazardous product and should be treated differently
than an exported widget. Foreign subsidiaries of American tobacco
companies will also be required to comply with this legislation because
we do not want to put our farmers at a competitive disadvantage. This
is a global problem that must be addressed by whatever means we have
available. Should a country require more stringent labels than ours,
the administration could grant a waiver of this provision for that
country.
Mr. President, the success tobacco companies have had selling death
overseas is not solely due to their own own efforts. In the past, the
U.S. Government assisted U.S. tobacco companies in hooking foreigners
by using trade policy to dismantle foreign tobacco regulations, such as
advertising bans, in several key markets. While most of this assistance
occurred in the 1980's, its effects are felt today. Japan, South Korea,
Thailand, and Taiwan were on the other side of this dispute with our
Government over their antitobacco laws. They lost, their citizens lost,
and the U.S. tobacco companies won. Smoking in those countries is
higher as a result of past action by the U.S. Trade Representative.
Our bill will prevent the USTR from undermining another country's
tobacco restrictions if those restrictions are applied to both foreign
and domestic products in the same manner. If a country has an
advertising ban on tobacco products, our Government should not be
spending money trying to dismantle that law if it equally affects
foreign and domestic companies.
This legislation is consistent with a GATT decision from 1990, which
held that member nations can use various policies to protect health as
long as they are applied evenly to domestic and foreign products, and
with statements made by our current U.S. Trade Representative. Charlene
Barshefsky
[[Page S7960]]
stated last year that the U.S. Government should not object when
foreign government take steps to protect their citizens by adopting
health measures to restrict the consumption of tobacco.
Mr. President, I hope my colleagues would agree that we should not,
in good conscience, turn a blind eye to the untold suffering caused by
U.S. exports of this deadly product. We know too much about tobacco to
sit idly by while our companies poison tens of millions throughout the
world. And if foreign governments do not warn their citizens of
tobacco's dangers, enacting this legislation is the very least we can
and should do.
Mr. President, I ask unanimous consent that the full text of my
legislation be printed in the Congressional Record along with letters
of support for this legislation from the American Lung Association, the
National Center for Tobacco-Free Kids, and the American Heart
Association, and two articles from the Washington Post documenting our
Government's actions in Asia in the 1980's and how U.S. tobacco
companies are targeting overseas markets.
There being no objection, the material was ordered to be printed in
the Record, as follows:
S. 1060
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 ``Worldwide Tobacco Disclosure
Act of 1997''.
SEC. 2. DEFINITIONS.
In this Act:
(1) Cigarette.--The term ``cigarette'' means--
(A) any roll of tobacco wrapped in paper or in any
substance not containing tobacco which is to be burned,
(B) any roll of tobacco wrapped in any substance containing
tobacco which, because of its appearance, the type of tobacco
used in the filler, or its packaging and labeling is likely
to be offered to, or purchased by consumers as a cigarette
described in subparagraph (A),
(C) little cigars which are any roll of tobacco wrapped in
leaf tobacco or any substance containing tobacco (other than
any roll of tobacco which is a cigarette within the meaning
of subparagraph (A)) and as to which 1000 units weigh not
more than 3 pounds, and
(D) loose rolling tobacco and papers or tubes used to
contain such tobacco.
(2) Domestic concern.--The term ``domestic concern''
means--
(A) any individual who is a citizen, national, or resident
of the United States; and
(B) any corporation, partnership, association, joint-stock
company, business trust, unincorporated organization, or sole
proprietorship which has its principal place of business in
the United States, or which is organized under the laws of a
State of the United States or a territory, possession, or
commonwealth of the United States.
(3) Nondiscriminatory law or regulation.--The term
``nondiscriminatory law or regulation'' means a law or
regulation of a foreign country that adheres to the principle
of national treatment and applies no less favorable treatment
to goods that are imported into that country than it applies
to like goods that are the product, growth, or manufacture of
that country.
(4) Package.--The term ``package'' means a pack, box,
carton, or other container of any kind in which cigarettes or
other tobacco products are offered for sale, sold, or
otherwise distributed to customers.
(5) Sale or distribution.--The term ``sale or
distribution'' includes sampling or any other distribution
not for sale.
(6) State.--The term ``State'' includes, in addition to the
50 States, the District of Columbia, Guam, the Commonwealth
of Puerto Rico, the Commonwealth of the Northern Mariana
Islands, the Virgin Islands, American Samoa, the Republic of
the Marshall Islands, the Federated States of Micronesia, and
the Republic of Palau.
(7) Tobacco product.--The term ``tobacco product'' means--
(A) cigarettes;
(B) little cigars;
(C) cigars as defined in section 5702 of the Internal
Revenue Code of 1986;
(D) pipe tobacco;
(E) loose rolling tobacco and papers used to contain such
tobacco;
(F) products referred to as spit tobacco; and
(G) any other form of tobacco intended for human use or
consumption.
(8) United states.--The term ``United States'' includes the
States and installations of the Armed Forces of the United
States located outside a State.
SEC. 3. RESTRICTIONS ON NEGOTIATIONS REGARDING FOREIGN LAWS
REGULATING TOBACCO PRODUCTS.
No funds appropriated by law may be used by any officer,
employee, department, or agency of the United States--
(1) to seek, through negotiation or otherwise, the removal
or reduction by any foreign country of any nondiscriminatory
law or regulation, or any proposed nondiscriminatory law or
regulation, in that country that restricts the advertising,
manufacture, packaging, taxation, sale, importation,
labeling, or distribution of tobacco products; or
(2) to encourage or promote the export, advertising,
manufacture, sale, or distribution of tobacco products.
SEC. 4. CIGARETTE EXPORT LABELING.
(a) Labeling Requirements for Export of Cigarettes.--
(1) In general.--It shall be unlawful for any domestic
concern to export from the United States, or to sell or
distribute in, or export from, any other country, any
cigarettes whose package does not contain a warning label
that--
(A) complies with Federal labeling requirements for
cigarettes manufactured, imported, or packaged for sale or
distribution within the United States; and
(B) is in the primary language of the country in which the
cigarettes are intended for consumption.
(2) Labeling format.--Federal labeling format requirements
shall apply to a warning label described in paragraph (1) in
the same manner, and to the same extent, as such requirements
apply to cigarettes manufactured, imported, or packaged for
sale or distribution within the United States.
(3) Rotation of labeling.--Federal rotation requirements
for warning labels shall apply to a warning label described
in paragraph (1) in the same manner, and to the same extent,
as such requirements apply to cigarettes manufactured,
imported, or packaged for sale or distributed within the
United States.
(4) Waivers.--
(A) In general.--The President may waive the labeling
requirements required by this Act for cigarettes, if the
cigarettes are exported to a foreign country included in the
list described in subparagraph (B) and if that country is the
country in which the cigarettes are intended for consumption.
A waiver under this subparagraph shall be in effect prior to
the exportation of any cigarettes not in compliance with the
requirements of this section by a person to a foreign country
included in the list.
(B) List of eligible countries for waiver.--
(i) In general.--Not later than 90 days after the date of
enactment of this Act, the President shall develop and
publish in the Federal Register a list of foreign countries
that have in effect requirements for the labeling of
cigarette packages substantially similar to or more stringent
than the requirements for labeling of cigarette packages set
forth in paragraphs (1) through (3). The President shall use
the list to grant a waiver under subparagraph (A).
(ii) Update of list.--The President shall--
(I) update the list described in clause (i) to include a
foreign country on the list if the country meets the criteria
described in clause (i), or to remove a foreign country from
the list if the country fails to meet the criteria; and
(II) publish the updated list in the Federal Register.
(b) Penalties.--
(1) Fine.--Any person who violates the provisions of
subsection (a) shall be fined not more than $100,000 per day
for each such violation. Any person who knowingly reexports
from or transships cigarettes through a foreign country
included in the list described in subsection (a)(4)(B) to
avoid the requirements of this Act shall be fined not more
than $150,000 per day for each such occurrence.
(2) Injunction proceedings.--The district courts of the
United States shall have jurisdiction, for cause shown, to
prevent and restrain violations of subsection (a) upon the
application of the Attorney General of the United States.
(c) Repeal.--Section 12 of the Federal Cigarette Labeling
and Advertising Act (15 U.S.C. 1340) is repealed.
(d) Regulatory Authority.--Not later than 90 days after the
date of enactment of this Act, the President shall promulgate
such regulations and orders as may be necessary to carry out
this section.
(e) Effective Date.--The provisions of subsections (a)
through (c) shall take effect upon the effective date of the
regulations promulgated under subsection (d).
____
American Lung Association,
Washington, DC, July 22, 1997.
Hon. Frank Lautenberg,
U.S. Senate,
Washington, DC.
Dear Senator Lautenberg: The American Lung Association
supports your legislation addressing U.S. economic and
foreign policy towards the international sale and labeling of
tobacco products.
Tobacco use continues to be the single most preventable
cause of premature death and disease in the United States.
Worldwide, smoking causes one death every ten seconds, 3
million people a year. Unless strong measures are taken, it
is estimated that in three decades the death toll will rise
to about 10 million people each year, with 70 percent of
those deaths occurring in developing countries.
In the past, the United States government has assisted U.S.
tobacco companies in their efforts to expand tobacco
advertising, promotion and exports. Using Section 301 of the
Trade Act of 1974, previous administrations have issued
formal threats to force other nations to import U.S. tobacco
products and to weaken health laws that would reduce tobacco
use. Your legislation would end the
[[Page S7961]]
U.S. government's proactive involvement in the exportation of
tobacco's death and disease to other countries by curtailing
federal agencies from intervening internationally on behalf
of the industry.
The American Lung Association believes the United States
should be a world leader in tobacco control and that the U.S.
should not help open international markets so companies here
can profit from death and disease elsewhere. This policy is
unacceptable and must end. The adoption of your legislation
would be a major step in the right direction.
Thank you for your leadership on this and other tobacco
control-related issues.
Sincerely,
Fran Du Melle,
Deputy Managing Director.
____
National Center for
Tobacco-Free Kids,
Washington, DC, July 23, 1997.
Hon. Frank Lautenberg,
U.S. Senate,
Washington, DC.
Dear Senator Lautenberg: We are writing on behalf of the
National Center for Tobacco Free Kids to express the center's
strong support for your effort, as a part of the Worldwide
Tobacco Disclosure Act, to ensure that the United States does
not interfere with actions taken by foreign governments to
reduce the dangers that tobacco products pose to their
citizens. This would help to save lives and improve the
public health of people around the world.
There is clear need for action to be taken to prevent the
spread of tobacco caused disease throughout the world. In
1994, over 4.6 trillion cigarettes were consumed in foreign
nations. In 1995, over 3.1 million people died as a result of
tobacco use, with over 1.2 million of those deaths occurring
in developing countries. As worldwide tobacco use and tobacco
related disease has reached astronomical levels, U.S. tobacco
exports have continued to climb. In 1995, the U.S. exported
an estimated 240 billion cigarettes, up from less than 60
billion ten years earlier.
In the past, America has taken action against governments
that promulgate rules to curb tobacco caused disease. During
the previous administration, the U.S. pressured Thailand,
Taiwan, South Korea and other countries not to enact tough
new laws to curb tobacco marketing, even though these laws
were to be applied in a non-discriminatory manner. The U.S.
also encouraged Taiwan to repeal new requirements for
cigarette warning labels. The Worldwide Tobacco Disclosure
Act would prevent American officials from using economic
muscle to promote higher cigarette exports by blocking
legitimate health laws in other countries.
We commend you for taking the lead in introducing this
important piece of legislation and urge the Senate to stand
up for the health of millions of people around the world.
Sincerely Yours,
William D. Novelli,
President.
Matthew L. Myers,
Executive Vice President and General Counsel.
____
American Heart Association,
Washington, DC, July 23, 1997.
Hon. Frank Lautenberg,
U.S. Senate,
Washington, DC.
Dear Senator Lautenberg: The American Heart Association
(AHA) is pleased to express its strong support for your
legislation, the Worldwide Tobacco Disclosure Act of 1997, a
critical step in addressing the inadequacy of current laws on
U.S. economic and foreign policy regarding the international
sale of tobacco products. In general, we believe that the
U.S. should actively promote the global adoption of U.S.
domestic tobacco control policies.
The AHA is a non-profit organization representing the
interests of over 4.6 million volunteers nationwide who give
their time and energies to reducing cardiovascular disease
and stroke, this nation's number one and three killers
respectively. Despite our efforts, and the efforts of our
partners in tobacco control, tobacco use continues to be the
number one preventable cause of premature death and disease
in the United States.
Worldwide, smoking causes one death every 10 seconds. The
global smoking rate is increasing steadily, despite decreases
in the United States and other developed nation. The World
Health Organization (WHO) predicts that more than 500 million
people alive today eventually will die of diseases caused by
smoking, unless strong action is taken to stem this epidemic.
Historically, U.S. government agencies and Congress have
assisted U.S. tobacco companies in their efforts to expand
tobacco advertising, promotion and exports around the world.
Previous administrations have issued formal trade threats
under Section 301 of the Trade Act of 1974, to force other
nations to import U.S. tobacco products and to weaken health
laws that would reduce tobacco use.
The AHA supports the primary goals of this legislation:
That exported cigarettes carry the same federal labeling
format requirements as those manufactured, imported or
packaged for sale or distribution within the United States,
and that there be a prohibition on the use of federal funds
to aid any effort by the United States, through negotiation
or otherwise, to weaken the tobacco control laws of foreign
countries.
Sincerely,
Martha, N. Hill, R.N., Ph.D.,
President.
____
[From the Washington Post, Nov. 17, 1996]
U.S. Aided Cigarette Firms In Conquests Across Asia
Aggressive Strategy Forced Open Lucrative Markets
(By Glenn Frankel)
On the streets of Manila, ``jump boys'' as young as 10 hop
in and out of traffic selling Marlboros and Lucky Strikes to
passing motorists. In the discos and coffee shops of Seoul,
young Koreans light up foreign brands that a decade ago were
illegal to possess. Downtown Kiev has become the Ukrainian
version of Marlboro Country, with the gray socialist
cityscape punctuated with colorful billboards of cowboy
sunsets and chiseled faces. And in Beijing, America's biggest
tobacco companies are competing for the right to launch
cooperative projects with the state-run tobacco monopoly in
hopes of capturing a share of the biggest potential market in
the world.
Throughout the bustling cities of a newly prosperous Asia
and the ruined economies of the former Soviet Bloc, the
American cigarette is king. It has become a symbol of
affluence and sophistication, a statement and an aspiration.
At home--where the American tobacco industry is besieged by
anti-smoking activists, whistle-blowers, government
regulators, grand juries and plaintiffs' lawyers--cigarette
consumption has undergone a 15-year decline. Thanks to
foreign sales, however, the companies are making larger
profits than ever before.
But the industry did not launch its campaign for new
overseas markets alone. The Reagan and Bush administrations
used their economic and political clout to pry open markets
in Japan, South Korea, Taiwan, Thailand and China for
American cigarettes. At a time when one arm of the government
was warning Americans about the dangers of smoking, another
was helping the industry recruit a new generation of smokers
abroad.
To this day, many U.S. officials see cigarette exports as
strictly an issue of free trade and economic fairness, while
tobacco industry critics and public health advocates consider
it a moral question. Even the Clinton administration finds
itself torn: It is the most vocally anti-smoking
administration in U.S. history, yet it has been in the
uncomfortable role of challenging or delaying some anti-
smoking efforts overseas.
At the same time, fledgling anti-smoking movements are
rising up with support from American activists, passing
restrictions that in some cases are tougher than those in the
United States.
Having exported its cigarette industry, the United States
is now in effect exporting its anti-smoking movement as well.
Just as the industry's overseas campaign has produced new
smokers and new profits, it has also produced new
consequences. International epidemiologist Richard Peto of
Oxford University estimates that smoking is responsible for 3
million deaths per year worldwide; he projects that 30 years
from now the number will have reached 10 million, most of
them in developing nations. In China alone, Peto says 50
million people who are currently 18 or younger eventually
will die from smoking-related diseases. ``In most countries,
the worst is yet to come,'' he warned.
Asia is where tobacco's search for new horizons began and
where the industry came to rely most on Washington's help.
U.S. officials in effect became the industry's lawyers,
agents and collaborators. Prominent politicians such as
Robert J. Dole, Jesse Helms, Dan Quayle and Al Gore played a
role. ``No matter how this process spins itself out,'' George
Griffin, commercial counselor at the U.S. Embassy in Seoul,
told Matthew N. Winokur, public affairs manager of Philip
Morris Asia, in a ``Dear Matt'' letter in January 1986, ``I
want to emphasize that the embassy and the various U.S.
government agencies in Washington will keep the interests of
Philip Morris and the other American cigarette manufacturers
in the forefront of our daily concerns.''
U.S. officials not only insisted that Asian countries allow
American companies to sell cigarettes, they also demanded
that the companies be allowed to advertise, hold giveaway
promotions and sponsor concerts and sports events in what
critics say was a blatant appeal to women and young people.
They regularly consulted with company representatives and
relied upon the industry's arguments and research. They
ignored the protests of public health officials in the United
States and Asia who warned of the consequences of the market
openings they sought. Indeed, their constant slogan was that
health factors were irrelevant. This was, they insisted,
solely an issue of free trade.
But then-Vice President Quayle suggested another motive
when he told a North Carolina farming audience in 1990 that
the government also was seeking to help the tobacco industry
compensate for shrinking markets at home. ``I don't think
it's any news to North Carolina tobacco farmers that the
American public as a whole is smoking less,'' said Quayle.
``We ought to think about the exports. We ought to think
about opening up markets, breaking down the barriers.''
A handful of American health officials vigorously opposed
the government's campaign, yet were either stymied or
ignored. ``I feel
[[Page S7962]]
the most shameful thing this country did was to export
disease, disability and death by selling our cigarettes to
the world,'' said former surgeon general C. Everett Koop.
``What the companies did was shocking, but even more
appalling was the fact that our own government helped make it
possible.''
waging the war
Clayton Yeutter, an affable, high octane Nebraska
Republican with a wide smile and serious political
aspirations, came to the Office of the U.S. Trade
Representative in 1985 with a mission: to put a dent in the
record U.S. trade deficit by forcing foreign countries to
lower their barriers against American products.
Yeutter (prounced ``Yi-ter'') took office at a time when
Washington was on the verge of declaring a trade war against
some of its staunchest allies in the Far East. Asian tigers
such as Japan, South Korea, Taiwan and Thailand were running
up huge trade surpluses with the United States on goods
ranging from T-shirts to computer chips to luxury sedans. The
U.S. annual trade deficit in 1984 totaled a record $123
billion. Congressional Democrats proposed a 25 percent
surcharge on products from Japan, Taiwan, South Korea and
Brazil, while the House and Senate overwhelmingly approved
resolutions calling for retaliation against Japan if it
didn't increase its purchases of exports.
In heeding that warning, the Reagan administration turned
to a small, elite and little-known federal agency. The Office
of the U.S. Trade Representative (USTR) had only 164
permanent employees, but it enjoyed cabinet-level status and
a self-styled half-joking, half-serious reputation as ``the
Jedi knights of the trade world.'' Operating out of the four-
story, Civil War-era Winder Building on 17th Street NW,
USTR's staff was known for its dedication and aggressiveness.
Most staff members came from departments such as Commerce,
State and Agriculture, and they saw the trade rep's office as
a place where they could practice their craft free from the
fetters of larger, more rigid bureaucracies. They worked long
hours and displayed a fierce loyalty to each other and the
agency they served.
In 1985 they got a new boss to match their mood. Yeutter
had worked as a deputy trade representative during the Ford
administration, then went on to become president of the
Chicago Mercantile Exchange. He came back to Washington with
an eye toward using USTR as a launching pad for becoming a
U.S. senator, secretary of agriculture or even vice
president, according to friends. Yeutter was not a member of
Ronald Reagan's inner circle, and he was eager to show the
president what he could do. ``They told me they needed a
high-energy person,'' he recalled in a interview. ``I told
them I was ready to hit the ground running.''
Yeutter knew that USTR had a weapon in its arsenal that was
tailor-made for softening up recalcitrant trading partners.
Section 301 of the 1974 Trade Act empowered USTR to launch a
full-scale investigation of unfair trading practices and
required that Washington invoke retaliatory sanctions within
a year if a targeted government did not agree to change its
ways. Launching a 301 was like setting a time bomb; both
sides could hear the clock ticking.
Yeutter had no trouble persuading the administration to
allow him to use Section 301 aggressively. ``There was a lot
of momentum for attempting something new,'' he said.
The U.S. tobacco industry had been trying for years to get
a foothold in these promising new Asian markets. In 1981 the
big three--Philip Morris Inc., R.J. Reynolds Tobacco Co. and
Brown & Williamson--had formed a trade group called the U.S.
Cigarette Export Association to pursue a joint industry-wide
policy on the issue. But the companies had felt frustrated
during the first term of the Reagan administration.
Japan, the West's second largest market for cigarettes,
remained virtually closed to American brands due to high
tariffs and discriminatory distribution. South Korean law
effectively made it a crime to buy or sell a pack of foreign
cigarettes. Taiwan and Thailand remained tightly shut. All of
these countries but Taiwan were signatories to the General
Agreement on Tariffs and Trade, and Taipei hoped to join
soon. Yet each appeared to violate free trade principles.
``In international trade terms, it's really very rare that
the issues are so clear-cut and so blatant,'' recalled Owen
C. Smith, a Philip Morris foreign trade expert who serves as
president of the association. ``These countries were sitting
with published laws which on their face discriminated against
American products. It was an untenable situation. . . . These
were, frankly, open-and-shut cases.''
When Yeutter and his staff looked at the cigarette business
in these countries, they saw blatant hypocrisy. Each Asian
government sought to justify its ban on imported cigarettes
in the name of public health, yet each had its own protected,
state-controlled tobacco monopoly that manufactured and sold
cigarettes--and provided large amounts of tax revenue to the
government. The state companies' marketing techniques were in
many ways just as cynical as those of the American companies.
In Taiwan, for example, the most popular state brand was
called Long Life. These were classic, state-run companies;
bloated and inefficient, they produced overpriced, low-
quality and poorly marketed cigarettes that could never
compete with jazzier American brands in free competition.
Health was simply a smoke screen, Yeutter quickly decided,
raised by recalcitrant foreign governments hooked on
cigarette profits. ``I would have had no problem with Japan
or Korean or Taiwan putting up genuine health restrictions,''
he insisted. ``But that's not what these governments were
doing. They were restricting trade, and it was just
blatant.''
What Yeutter didn't seem to appreciate was that the very
flaws of the state-run monopolies were exactly what a doctor
might have ordered: Their high price and poor quality had
helped limit smoking mostly to older men who had the money
and taste for harsh, tar-heavy local brands. The monopolies
seldom, if ever, advertised and did not target the great
untapped markets of women and young people. Per capita sales
remained low in every country except Japan. From a public
health standpoint, maintaining the monopolies was far
preferable to opening the gates to American companies with
their milder blends and state-of-the-art marketing.
``When the multinational companies penetrate a new country,
they not only sell U.S. cigarettes but they transform the
entire market,'' said Gregory Connolly, a veteran anti-
smoking activist who heads the Massachusetts Tobacco Control
Program. ``They transform how tobacco is presented, how it's
advertised, how it's promoted. And the result is the creation
of new demand, especially among women and young people.''
Connolly, who traveled widely through Asia, documented how
American companies skirted advertising restrictions by
sponsoring televised rock concerts and sporting events,
placing cigarette brands in movies and lending their brand
names to non-tobacco products such as clothing and sports
gear. A Madonna concert in Spain became a ``Salem Madonna
Concert'' when televised in Hong Kong, while the U.S. Open
tennis tournament in New York became the ``Salem Tennis
Open'' in Malaysia. Tennis stars Pat Cash, Michael Chang,
Jimmy Connors and John McEnroe appeared in live matches in
Malaysia sponsored by RJR.
None of this troubled Yeutter and his trade warriors. They
saw foreign advertising restrictions as one more form of
trade discrimination. The interagency committee that advised
Yeutter on the issue consisted of representatives from State,
Agriculture, Commerce, Labor and Treasury, but not from
Health and Human Services. There was no one with a public
health or tobacco control background to argue that there was
a link between advertising and health.
The companies convinced Yeutter that helping them sell
cigarettes meant helping American trade. They produced
studies showing that aside from heavy aviation parts,
cigarettes were America's most successful manufactured export
in terms of the net balance of trade. They estimated that
cigarette exports--largely to Western Europe and Latin
America--accounted for 250,000 full-time jobs in the United
States and contributed more than $4 billion to the positive
side of the trade ledger.
The industry also turned up the political heat. In a
January 1984 letter to an official in the Commerce
Department, Robert H. Bockman, then director of corporate
affairs for Philip Morris Asia, described trade barriers
against his company's products in South Korea. He then went
on to discuss what he called ``the politics of tobacco in
this election year. Attached please find a listing of the
1980 election results in the major tobacco-growing areas in
the United States. You will note that the margin of victory
for the president [Ronald Reagan] was narrow in some key
areas.''
Jesse Helms (R-N.C.), who at the time chaired the Senate
Agriculture Committee, also intervened. In July 1986 Helms
wrote to Japanese Prime Minister Yasuhiro Nakasone
congratulating him on his recent election victory and
pointing out that American cigarettes accounted for less than
2 percent of the Japanese market. ``Your friends in Congress
will have a better chance to stem the tide of anti-Japanese
trade sentiment if and when they can cite tangible examples
of your doors being opened to American products,'' wrote
Helms. ``I urge that you make a commitment to establish
timetable for allowing U.S. cigarettes a specific share of
your market. May I suggest a goal of 20 percent within the
next 18 months.''
At Yeutter's urging, Reagan decided not to wait for a
formal filing from the industry against Japan. Instead, for
the first time the White House filed three 301 complaints
with USTR in September 1985, one of them against Japanese
restrictions on the sale of U.S. cigarettes.
According to the USTR log of the case, U.S. officials
presented a lengthy questionnaire at their opening session
with Japanese trade representatives, demanding detailed data
on the Japanese market. Meanwhile, other U.S. bureaucrats
began drawing up lists of products for possible retaliation--
all part of what one negotiator called the ``ratcheting-up
process.''
Japanese negotiators hung tough over the course of 14
sessions. Joseph A. Massey, who was in charge of trade
negotiations with Japan, recalled they argued that Japan
Tobacco, the state-run cigarette monopoly, was too
inefficient to withstand U.S. competition, and that in any
case the Americans should continue the previous long-standing
practice of giving Japan an indefinite time period to comply.
Massey recalled one other unusual aspect of the
negotiation: Industry representatives
[[Page S7963]]
from both sides sat in on bargaining sessions. ``The Japanese
insisted that Japan Tobacco should be in the room,'' he said.
``We said, `If that's the case, there needs to be
parallelism.' . . . They did not sit at the table. They sat
quietly along the back wall.''
Finally in late September 1986, a year after the 301
complaint was filed, Yeutter received a phone call at his
McLean home late one evening from Japanese Finance Minister
Kiichi Miyazawa. The minister wanted more time, but Yeutter
was unrelenting. He recalls telling Miyazawa that the
completed retaliation documents were to be forwarded to the
White House the following day. ``I said, `I'm sorry, Mr.
Minister, but your government has run out of time,' ''
Yeutter recalled.
Within days the Japanese capitulated, signing an agreement
allowing in American-made cigarettes. By giving in on such a
politically well-connected product as cigarettes, Japanese
commentators said, Tokyo hoped to buy time on other trade
issues. It was, commented the Asahi Shimbun newspaper, a
``blood offering.''
And so Japan was transformed into a battleground for the
world's biggest tobacco companies. Philip Morris aimed at
Japanese women with Virginia Slims; Japan Tobacco fought back
with Misty, a thin, mildblended cigarette. When RJR wooed
young smokers with Joe Camel, JT countered with Dean, named
after fabled actor James Dean. Cigarettes became the second
most-advertised product on television in Tokyo--up from 40th
just a year earlier.
Today, imported brands control 21 percent of the Japanese
market and earn more than $7 billion in annual sales. Female
smoking is at an all-time high, according to Japan Tobacco's
surveys, and one study showed female college freshmen four
times more likely to smoke than their mothers.
Yeutter and his colleagues insisted they had done nothing
for tobacco they would not have done for any other industry.
But the fact remained that at a time when the United States
could not overcome Japan's resistance on a broad range of
exports--from beef to cars to super-computers--U.S.
cigarettes flourished, thanks to the perseverance of the
trade warriors.
Into South Korea
The next target was South Korea, which had a $1.7 billion
domestic tobacco market. The U.S. tobacco industry filed a
301 complaint against Seoul in January 1988, and USTR
initiated its investigation a month later, South Korea's
state cigarette monopoly had done little advertising over the
years, and a few months before the 301 case, the Seoul
government had formally outlawed cigarette ads. But the
United States insisted on defining ``fair access'' as
including the right to advertise.
Even before the formal complaint was filed, tobacco state
lawmakers and their allies had supported opening South
Korea's market. Senators Dole (R-Kan.) and Helms and 14
others--including Gore, then a senator from Tennessee--wrote
to South Korean President Chun Doo Hwan in July 1987
demanding that tobacco companies be allowed ``the right to
import and distribute without discriminatory taxes and
duties, as well as the right to advertise and promote their
products.''
The companies did their own work as well. RJR hired former
Reagan national security adviser Richard Allen to lobby the
government in Seoul and give the company more influence than
its corporate rivals. Philip Morris gave a $250,000 contract
to former White House aide Michael Deaver, who hired two
former USTR officials and later obtained a $475,000 lobbying
contract with the South Korean government, according to
testimony at his 1987 trial for perjury. (Deaver was
convicted of lying to Congress about his lobbying activities
after he left the White House.)
In May 1988 Seoul formally agreed to open its doors to
American brands. The deal allowed cigarette signs and
promotions at shops, 120 pages of advertisements in magazines
and cigarette company sponsorship of social, cultural and
sporting events. Cigarettes quickly became one of the most
heavily advertised products in South Korea; from no
advertising in 1986, American tobacco companies spent $25
million in 1988. Student activists, anti-smoking groups, the
South Korean consumers' union and the local cigarette retail
association all staged protests against ``tobacco
imperialism'' and boycotted American cigarettes, and the
companies accused the state cigarette monopoly of constant
violations of the agreement. Still, within a year, American
companies had captured 6 percent of the market.
USTR also made fast work of Taiwan. On the heels of the
Japanese agreement, Taiwan had agreed in October 1985 to
liberalize barriers to wine, beer and cigarettes. But a year
passed and the market remained effectively closed. Reagan
then ordered Yeutter to propose ``proportional
countermeasures,'' while U.S. officials threatened to oppose
Taiwan's application for membership in GATT.
``Since Taiwan wasn't a GATT member, we were not under GATT
constraints,'' said a senior USTR negotiator. ``I hate to say
it, but you can do whatever you want with Taiwan and Taiwan
knows it. They're much more vulnerable than other
countries.''
Six weeks after Reagan's order, Taiwan folded. ``The
atmosphere in the negotiations was very bad for us,''
recalled Chien-Shien Wang, then deputy minister of commerce,
who was Taiwan's chief negotiator. ``We were told the U.S.
had lost patience with us and was about to put us on the 301
list. So we had no choice but to agree.''
While some USTR officials now concede they were uneasy
about using their power on behalf of America's most
controversial industry, they say they had no choice.
``For us it was an issue of, it's a U.S. product and it
deserves fair market access,'' said Robert Cassidy, the
current assistant U.S. trade representative for Asia and the
Pacific. ``There are lots of products people here might
prefer not to pursue--I myself didn't much like exporting
machines to manufacture bullets. But that's not the issue.
The issue was, is this discriminatory treatment or not?''
Following the agreement, consumption of imported cigarettes
in Taiwan soared. According to one industry trade journal,
foreign brands went from 1 percent of annual cigarette sales
to more than 20 percent in less than two years, while state-
manufactured brands declined accordingly. RJR sponsored a
dance at a Taipei disco popular with teenagers and offered
free admission for five empty packs of Winstons. Studies by
Taiwanese public health specialist Ted Chen, now a professor
at Tulane University Medical Center, tracked a steadily
rising rate of smoking among high schoolers.
the anti-smoking crusade
The 301 cases were a boon to the industry. The Boston-based
National Bureau of Economic Research estimated in a recent
report that sales of American cigarettes were 600 percent
higher in the targeted countries in 1991 then they would have
been without U.S. intervention. In 1990, after he became
secretary of agriculture, Yeutter told a news conference, ``I
just saw the figures on tobacco exports here a few days ago
and, my, have the turned out to be a marvelous success
story.''
The tobacco companies insist that the government's efforts
merely allowed them to gain a fair share of existing markets.
But the National Bureau projected that American entry pushed
up average cigarette consumption per capita by nearly 10
percent in the targeted countries. The report said fiercer
price competition and sophisticated advertising campaigns had
stimulated the increase.
Then-surgeon general Koop, a fierce critic of the industry,
first heard about the 301s when he visited the Japanese
Health Ministry during the swing through the Far East in the
mid-1980s. ``They greeted me with, `What are you trying to do
for us? We will never be able to pay the medical bill,' '' he
recalled. ``I had no idea what they were talking about.''
Koop soon found out that USTR was, in his words, ``trading
Marlboros for Toyotas.'' But it took several years for anti-
smoking activists to become mobilized. In 1988 Koop attempted
to hold a hearing on cigarette exports in his Interagency
Committee on Smoking and Health, but said he was advised a
few days before that the Reagan White House wanted him to
drop the subject and uninvite witnesses such as Judith
Mackay, a prominent anti-smoking activist from Hong Kong.
Koop refused. Officials from State and Commerce who had
agreed to appear suddenly withdrew, but Mackay and a parade
of critics testified. She accused the United States of waging
``a new Opium War'' against Asia, an allusion to Britain's
19th-century effort to force China to allow trade of the
addictive drug.
When Yeutter learned of the criticism, he wrote to Koop to
defend his record. ``I have never smoked, have no desire to
do so and believe this addiction to be a terrible human
tragedy,'' he told Koop. ``However, what we are about in our
trade relationships is something entirely different.''
Koop found Yeutter's letter unconvincing. ``I'm a firm
believer in the difference between a moral compromise and a
political compromise,'' Koop said in a recent interview. ``I
suppose Yeutter can say he was just doing his job, but when
you really are exporting death and disease to the Third
World, that's a moral compromise that I would never make.''
During congressional hearings on the trade issue in May
1990, the government's sole witness was Sandra Kristoff, then
assistant trade representative for Asia and the Pacific, who
had negotiated the agreements with South Korea and Taiwan and
who vigorously defended USTR's role. She mocked the idea of
taking into account health issues in trade policy matters,
saying such considerations might result in banning trade in
cholesterol-laden cookies ``or hormones in red meat. . . .
U.S. trade policy is not in the business of picking winners
or losers in terms of products.''
After the hearing, two lobbyists for Philip Morris wrote a
memo to their boss praising her testimony. ``The best witness
we had was USTR Representative Sandy Kristoff . . . ,'' they
wrote. ``She was tremendously effective.'' Kristoff, who now
serves on the staff of the National Security Council,
declined to be interviewed.
eyeing new markets
When anti-smoking activist Gregory Connolly toured Asia in
1988 he was astonished by how entrenched American cigarettes
already had become. In Taipei he discovered 17 billboards
advertising foreign cigarettes within sight of a local high
school. In Bangkok he was shown student notebooks decorated
with the Marlboro logo. In Manila he took photographs of jump
boys huddling
[[Page S7964]]
in an alley smoking Marlboros. Afterward, he protested to
Filipino health activist Phyllis Tabla: ``You've got to do
something about this!''
Her reply: ``Don't lecture us! It's not us! It's you!''
Philip Morris was so delighted with the success of the 301
cases that when Yeutter left USTR in 1989 to become secretary
of agriculture in the Bush administration, the company threw
a celebration in his honor at the Decatur Club here. When
critics raised questions about the reception, Yeutter told
the Senate Agriculture Committee: ``It's unfortunate that
when people try to say thank you, it becomes a potential
conflict of interest issue, but that's the way the world is
these days.''
Looking back, Yeutter said he now feels the reception was a
mistake. ``Philip Morris shouldn't have done it,'' he said,
``They were simply trying to be gracious. . . . It simply was
not good judgment on their part. And in retrospect I probably
should have done more to discourage it.''
Today Yeutter practices international trade law from a
corner office at Hogan & Hartson, Washington's largest law
firm. He also sits on the board of British-American Tobacco
(BAT), the British-based tobacco conglomerate that owns Brown
& Williamson, the Louisville-based cigarette manufacturer
that was one of the participants in the 301s. He insists he
has not changed his mind about the dangers of smoking. But
cigarettes remain a legal product, and, he says, BAT is an
excellent, well-run company that he is proud to serve.
When Yeutter moved to Agriculture, incoming President Bush
appointed Carla Hills, a highly regarded lawyer and former
housing and urban development secretary, to succeed him at
USTR. One canny political pro replaced another. And USTR set
its sights on opening more cigarette markets in Asia.
Next on the agenda was Thailand.
Conditions there were similar to those in Japan, South
Korea and Taiwan: a very promising market in a country
undergoing explosive economic growth; a state-run monopoly:
tight restrictions on imported cigarettes; an advertising ban
purportedly based on health claims.
After their success in Japan, South Korea and Taiwan,
officials were highly optimistic about Thailand.
The Thai Finance Ministry already was holding discussions
about opening its market.
Thailand, both U.S. officials and industry representatives
agreed, would be easy.
Only they were wrong. As they were about to find out, in
pressing on into Thailand, Washington and the industry had
gone a country too far.
____
Two on Top of the World
the largest independent tobacco merchants are based in va. but their
growth is abroad
(By Frank Swoboda and Martha M. Hamilton)
Richmond.--The faint, pungent smell of tobacco leaf is the
first thing you notice when you enter the second-floor
executive offices of Universal Corp., the world's largest
independent tobacco leaf merchant.
At Universal, as at the Danville, Va., headquarters of its
second largest rival, Dimon, Inc., the smell of tobacco is
the smell of money.
The two companies (and their only other major competitor,
Standard Universal Corp. of North Carolina) are the middlemen
in the world tobacco industry. They don't make cigarettes or
other consumer tobacco products. Instead, they buy, ship,
process, pack, store and finance leaf tobacco for sale to
cigarette manufacturers.
Together the two had $5.7 billion in revenue in 1996 from
operations in locations that included the United States,
Brazil, Tanzania, Zimbabwe, Italy, Bulgaria and China.
Despite declining U.S. consumption, and a multibillion-dollar
legal settlement by manufacturers that is apt to cut domestic
consumption even further, there is no sense of panic in the
corridors of these tobacco merchants. Universal and Dimon
know the world market--it's enormous and still growing.
``The world market is where the bulk of the growth is,''
said Universal Vice President James H. Starkey III. Worldwide
tobacco consumption has been rising by 1.2 percent to 1.5
percent a year, providing Universal with a consistent 18
percent to 19 percent annual return on equity.
About a third of the tobacco grown in the United States is
exported. Last year, that came to 340 million tons of flue-
cured tobacco, which is harvested over a several-week period
and cured by heat, and about 160 million tons of burley
tobacco, which is hung to dry and cure, according to Randy
Weber, associate administrator for the Farm Service Agency of
the U.S. Department of Agriculture.
``I don't see us shifting away from tobacco. We have
continued to reinvest in tobacco as opportunities arise.
We're constantly looking for opportunities for expansion,''
said Starkey.
His optimism is echoed by those who follow the industry,
``I'd say the future is very strong, although there are going
to be short-term ripples because of the cigarette settlement
and the imposition of higher prices,'' said David A. Goldman,
an industry analyst with Robinson-Humphrey in Atlanta.
Universal noted in its annual report to stockholders that
``demand for leaf continues to increase in response to an
estimated 1 percent annual growth in world cigarette
consumption and consumption of American-blend cigarettes is
increasing by 3 to 4 percent annually.''
There is a growing global market for the mild tobacco
mixture known as ``American blend'' and for American-style
cigarettes, of which Universal is a major supplier. More and
more of the leaf that goes into those products is being
harvested abroad, putting pressure on U.S. growers but
increasing profitability for processors by lowering the price
of tobacco. As an example of the shift, Starkey points to
France, where, he said, the public is beginning to move away
from ``dark tobacco'' cigarettes such as the well-known
Gaulois to milder, American blend cigarettes as manufacturers
introduce low-cost, generic brands to cultivate a taste for
the new blend with the smoking public.
Universal has operations in 30 countries around the globe.
It first went into China in the 1920s, and there and
elsewhere it has survived civil wars, communist takeovers and
political unrest. ``The one thing we've been good at is
managing through instability. We stick to our knitting. We
don't get involved in politics,'' Starkey said.
Karen W.L. Whelan, Universal's treasurer, said the company
keeps ``liaison people'' at its headquarters who travel back
and forth to various countries to help it keep track of
changes overseas.
The search for new markets has taken Universal from Eastern
Europe to the emerging nations of Africa. In the early 1990s,
Universal and Philip Morris purchased the largest tobacco
processing company in Kazakhstan from the government. In
China--the world's largest tobacco producer, growing more
than half the world's supply of flue-cured tobacco--Universal
manages a new leaf processing plant near Bengbu for the
Shanghai Tobacco Co.
Universal buys the leaf processed at the Chinese plant and
has agreed to export a minimum of 70 percent of the tobacco.
``It's the only export operation in China managed by a
foreign company,'' Starkey said.
The company first entered China in 1925, and it remained
until the communist takeover. It returned to China when the
Nixon administration reopened relations with the Asian nation
in the 1970s.
Like almost all the other U.S.-based multinationals,
America's tobacco merchants are watching the vast Chinese
market closely, for an obvious reason: Smokers in China
consume approximately 1.7 trillion cigarettes a year, far
more than the 450 billion a year smoked by U.S. consumers,
according to Scott & Stringfellow analyst John F. Kasprzak.
More than just a tobacco merchant, Universal's interests
include lumber and building products distribution in the
Netherlands and Belgium. It also buys, processes and
distributes tea, rubber, sunflower seeds, dried fruits and
seasonings as part of a joint venture with COSUN, a Dutch
sugar cooperative. But tobacco is by far its biggest
business, accounting for 71 percent of the company's revenues
and 83 percent of its operating profits.
Rival Dimon Inc. is also enjoying an up-curve, reaching
almost $2.2 billion in sales last year. Dimon operates in 36
countries, and like its Richmond competitor its business is
not one-dimensional: It ranks as the world's largest exporter
and distributor of fresh-cut flowers. Dimon was formed in
1995 by a merger of 120-year-old Dibrell Bros. Inc. of
Danville with tobacco processor Monk-Austin of Farmville,
N.C. That union created a company that ranked second in its
industry to Universal; a deal consummated earlier this year
in which Dimon acquired British-based Intabex Holdings
Worldwide SA narrowed the gap between the two companies.
Intabex was a privately-owned company that was the fourth-
largest leaf tobacco dealer in the world. It owned tobacco
buying, processing and exporting operations in the United
States, Brazil, Argentina, Malawi, Italy and Thailand and was
affiliated with a Zimbabwe company that Dimon also acquired.
Its acquisition will offer Dimon considerable opportunity to
cut costs, Kasprzak said, by consolidating operations and
refinancing Intabex's considerable debt.
Officials from Dimon declined to be interviewed for this
story.
Both Universal and Dimon have benefited from industry
consolidation, which has in the past several years cut the
number of major leaf merchants from eight to three. But the
same consolidation has hurt U.S. tobacco growers, said Jerry
Jenkins, a grower in Lunenberg County, Va., who is also
chairman of Tobacco Associates, the export promotion
organization for the nation's flue-cured growers.
``The problem with the recent mergers and consolidations in
the industry is that they reduce competition,'' said Jenkins,
who farms about 30 acres of flue-cured tobacco and 3.5 acres
of dark fire-cured tobacco. ``It's generally not to the
benefit of the seller of the product.''
Virginia farmers grow flue-cured tobacco on approximately
40,000 acres and burley tobacco on about 10,000 acres.
Maryland is also a tobacco-growing state but on a much
smaller level. Only about 8,000 acres there are devoted to
tobacco cultivation, according to the USDA's Weber.
The increasing worldwide demand for tobacco that is filling
the coffers of Universal and Dimon may not be the long-term
salvation of these farmers. Although the world's
[[Page S7965]]
smokers are developing a taste for American blend, U.S.-grown
tobacco is simply too expensive for many world markets. U.S.
tobacco is still as much as 30 percent higher in price than
competitive tobacco products from Brazil and Zimbabwe,
according to Universal's Starkey.
Perhaps an even greater problem for American growers is the
financing role the processing companies play in overseas
markets. According to analyst Goldman, companies like Dimon
contract with a cigarette maker like R.J. Reynolds Tobacco
Co. to deliver a certain grade of tobacco a year from now and
ask for a down payment. They then use that down payment to
provide cash advances to growers in countries such as Brazil,
helping to finance farmers there without putting their own
funds at risk.
``When you're loaning a man money to grow a crop or
underwriting his loan and furnishing technical advice, it
only seems natural that you're going to want to buy his crop
first to recoup that investment,'' said tobacco grower
Jenkins. To compete, tobacco growers in Virginia have had to
cultivate larger acreages to achieve efficiencies of scale,
he said.
``We don't like to buy without having an order,'' said
Universal's Whelan, adding that most of the company's tobacco
purchases are made at local auction, which is how tobacco is
sold in this country. She said that in only a handful of
countries does Universal have advance contracts with growers,
in countries such as Brazil, Guatemala, Mexico and Italy.
The next possible target for expansion for Universal, Dimon
and Standard may be processing tobacco for U.S. cigarette
manufacturers who now do their own processing, said Scott &
Stringfellow's Kasprzak. In recent years Lorillard Tobacco
and RJR turned over their leaf purchasing and some processing
to Dimon's predecessors, and others may follow suit.
In the meantime, Virginia's tobacco merchants can look
forward to doing business in a world that every year consumes
more cigarettes with no sign of slowing down.
____________________