[House Report 104-160]
[From the U.S. Government Publishing Office]
104th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 104-160
_______________________________________________________________________
MOST-FAVORED-NATION TREATMENT FOR CAMBODIA
_______
June 27, 1995.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______________________________________________________________________
Mr. Archer, from the Committee on Ways and Means, submitted the
following
R E P O R T
[To accompany H.R. 1642]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
bill (H.R. 1642) to extend nondiscriminatory treatment (most-
favored-nation treatment) to the products of Cambodia, and for
other purposes, having considered the same, report favorably
thereon without amendment and recommend that the bill do pass.
I. Introduction
A. PURPOSE AND SUMMARY
H.R. 1642 provides for the extension of nondiscriminatory
treatment (most-favored-nation treatment) to the products of
Cambodia upon the effective date of a notice published in the
Federal Register that a trade agreement obligating reciprocal
most-favored-nation treatment between Cambodia and the United
States has entered into force. The bill also requires the
President to submit a report to Congress, no later than 18
months after the date of enactment of the Act, on trade
relations between the United States and Cambodia pursuant to
the bilateral trade agreement.
B. BACKGROUND AND NEED FOR LEGISLATION
Prior to 1951, the United States extended
nondiscriminatory, or most-favored-nation (MFN), treatment to
all of its trading partners, in accord with obligations
undertaken when the United States joined the General Agreement
on Tariffs and Trade (GATT) in 1948. However, Section 5 of the
Trade Agreements Extension Act of 1951 directed the President
to withdraw or suspend the MFN status of the Soviet Union and
all countries under the domination of international communism.
As implemented, the directive was applied to all then-existing
communist countries, except Yugoslavia, as well as ``any part
of Cambodia, Laos, or Vietnam which may be under Communist
domination or control.''
Section 231 of the Trade Expansion Act of 1962 broadened
the 1951 suspension without fundamentally changing the nature
of that authority by applying the suspension to ``any country
or area dominated by Communism.'' Subsequently, Section 602(d)
of the Trade Act of 1974 repealed Section 231 of the Trade
Expansion Act of 1962. Title IV of the Trade Act of 1974, which
governs the MFN status of nonmarket economies not receiving MFN
tariff treatment as of January 5, 1975, does not apply to
Cambodia because portions of the country not under communist
control were still receiving MFN tariff treatment by the date
stipulated in the statute. MFN status was withdrawn from
Cambodia once the country fell to communism after March of
1975. At the time of the enactment of the Harmonized Tariff
Schedule (HTS) in the Omnibus Trade and Competitiveness Act of
1988, ``Kampuchea'' was included in General note 3(b) on the
list of countries whose products are denied MFN tariff
treatment.
After 20 years of undemocratic regimes and civil war,
Cambodia held democratic elections in May of 1993 that were
sponsored by the United Nations. Upon the formation of the
freely elected Royal Cambodian Government on September 24,
1993, the United States and Cambodia immediately established
full diplomatic relations. Subsequently, the United States
concluded a bilateral agreement with Cambodia in the Spring of
1994 on bilateral trade relations and intellectual property
rights protection that calls for a reciprocal extension of MFN
status.
Since taking office, the Cambodian government has taken
steps, and planned additional action, to convert the Cambodian
economy from one based on central planning to one based on
market-oriented principles. The Committee believes that the
extension of MFN tariff treatment to the products of Cambodia
would assist in this transformation by making Cambodian exports
to the United States more competitive in the global
marketplace. In addition, establishing normal commercial
relations with Cambodia on a reciprocal basis will promote U.S.
exports to the rapidly growing Southeast Asian region and
expand opportunities for U.S. businesses and investment in the
Cambodian economy. The Committee also believes that expanding
U.S. bilateral trade relations with Cambodia to include a
commercial agreement will promote further progress by Cambodia
on human rights and toward the adoption of regional and world
trading rules and principles.
C. LEGISLATIVE HISTORY
Committee bill
H.R. 1642 was introduced on May 16, 1995, by Mr. Crane of
Illinois and Mr. Rangel of New York and referred to the
Committee on Ways and Means. The bill as introduced contained
two provisions: (1) amending General note 3(b) of the HTS by
striking ``Kampuchea'' upon the effective date of a notice
published in the Federal Register by the United States Trade
Representative that a trade agreement obligating reciprocal MFN
treatment between Cambodia and the United States has entered
into force; and (2) requiring the President to submit a report
to Congress, no later than 18 months after the date of
enactment of the Act, on trade relations between the United
States and Cambodia pursuant to the bilateral trade agreement.
The Subcommittee on Trade of the Committee on Ways and
Means marked up the bill on May 18, 1995, and ordered the bill
to be favorably reported without amendment by a voice vote.
The Committee on Ways and Means marked up the bill on June
20, 1995, and ordered the bill to be favorably reported without
amendment by a voice vote.
Legislative hearing
The Subcommittee on Trade of the Committee on Ways and
Means issued a request for written public comment on the
extension of permanent and unconditional MFN to the products of
Cambodia on February 23, 1995. The deadline for submission of
comment was April 28, 1995. The Subcommittee received comments
in favor of the proposed extension and no comments in
opposition to it.
II. Explanation of the Bill
a. congressional findings (sec. 1 of the bill)
Present law
``Kampuchea'' is listed in General note 3(b) of the HTS
among the countries whose products are denied MFN tariff
treatment.
Explanation of provision
The provision contains the findings of the Congress that:
(1) Cambodia is now under democratic rule after 20 years of
undemocratic regimes and civil war, and is striving to rebuild
its market economy; (2) extension of unconditional MFN
treatment would assist Cambodia in developing its economy based
on free market principles and becoming competitive in the
global marketplace; (3) establishing normal commercial
relations on a reciprocal basis with Cambodia will promote U.S.
exports to the rapidly growing Southeast Asian region and
expand opportunities for U.S. business and investment in the
Cambodian economy; and (4) expanding bilateral trade relations
with Cambodia to include a commercial agreement will promote
further progress by Cambodia on human rights and toward
adoption of regional and world trading rules and principles.
Reasons for change
The provision makes reference to the domestic political and
economic developments in Cambodia and notes that the
normalization of trade relations between the United States and
Cambodia will benefit both nations and encourage further
progress by Cambodia on human rights and toward the adoption of
multilateral trading principles.
Effective date
The provision is effective upon enactment.
b. extension of nondiscriminatory treatment to the products of cambodia
(sec. 2)
Present law
``Kampuchea'' is listed in General note 3(b) of the HTS
among the countries whose products are denied MFN tariff
treatment.
Explanation of provision
The provision amends General note 3(b) of the HTS by
striking ``Kampuchea.''
Reasons for change
Amending the HTS by striking ``Kampuchea'' from the
relevant portion of General note 3(b) will enable the products
of Cambodia to receive permanent MFN tariff treatment. Since
the HTS was enacted in 1988, the domestic political and
economic situation in Cambodia has changed considerably. In
1993, Cambodia held democratic elections sponsored by the
United Nations which led to the establishment of full
diplomatic relations between Cambodia and the United States.
The Committee believes that the extension of MFN tariff
treatment to the products of Cambodia would assist that country
in its effort to develop its free market economy by making
Cambodian exports to the United States more competitive in the
global marketplace. In addition, establishing normal commercial
relations with Cambodia on a reciprocal basis will promote U.S.
exports to the rapidly growing Southeast Asian region and
expand opportunities for U.S. businesses and investment in the
Cambodian economy. The Committee also believes that expanding
U.S. bilateral trade relations with Cambodia to include a
commercial agreement will promote further progress by Cambodia
on human rights and toward the adoption of regional and world
trading rules and principles.
Effective date
The provision is effective upon the publication of a notice
in the Federal Register by the U.S. Trade Representative that a
trade agreement obligating reciprocal MFN treatment between
Cambodia and the United States has entered into force.
c. report to congress (sec. 3)
Present law
No provision.
Explanation of provision
The provision requires the President to submit a report to
the Congress, no later than 18 months after the date of
enactment of the Act, on trade relations between the United
States and Cambodia pursuant to the bilateral trade agreement.
Reasons for change
The provision requires the President to submit a report as
described to assist Congress in its oversight of bilateral
trade relations between the United States and Cambodia.
Effective date
The provision is effective upon enactment.
III. Votes of the Committee
In compliance with clause 2(l)(2)(B) of the Rules of the
House of Representatives, the following statements are made
concerning the votes of the Committee in its consideration of
the bill, H.R. 1642.
Motion to report the bill
The bill, H.R. 1642, was ordered favorably reported,
without amendment, by voice vote on June 20, 1995, with a
quorum present.
IV. Budget Effects
a. committee estimate of budgetary effects
In compliance with clause 7(a) of rule XIII of the Rules of
the House of Representatives, the following statement is made
concerning the effects on the budget of this bill, H.R. 1642,
as reported:
The Committee agrees with the estimate prepared by CBO,
which is included below.
b. statement regarding new budget authority and tax expenditures
In compliance with subdivision (B) of clause 2(l)(3) of
rule XI of the Rules of the House of Representatives, the
Committee states that the provisions of H.R. 1642 do not
involve any new big authority, or any increase or decrease in
revenues or tax expenditures.
c. cost estimate prepared by the congressional budget office
In compliance with subdivision (C) of clause 2(l)(3) of
rule XI of the Rules of House of Representatives, requiring a
cost estimate prepared by the Congressional Budget Office, the
following report prepared by CBO is provided.
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 22, 1995.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
reviewed H.R. 1642, a bill to extend nondiscriminatory
treatment (most-favored-nation treatment) to the products of
Cambodia, as ordered reported on June 20, 1995, by the
Committee on Ways and Means. CBO estimates that extending most-
favored-nation (MFN) status to the products of Cambodia would
not significantly affect federal government receipts. Because
H.R. 1642 could affect receipts, pay-as-you-go procedures would
apply to the bill.
Under current law, general note 3(b) of the Harmonized
Tariff Schedule of the United States (HTSUS) excludes the
products of Cambodia from receiving nondiscriminatory
treatment. H.R. 1642 would amend general note 3(b) of the HTSUS
by deleting ``Kampuchea.'' Removing Kampuchea from the list
would allow the United States Trade Representative (USTR) to
negotiate a trade agreement obligating reciprocal MFN treatment
between Cambodia and the United States.
Granting MFN status would lower tariff rates on imports
from Cambodia. CBO estimates that lowering tariff rates would
reduce customs duty revenues below the level projected under
current import levels and tariff rates. However, we expect that
imports would rise in response to the lower domestic price
resulting from the lower tariffs. The negative effect on
revenues from the lower rates would virtually be offset by the
positive effect on revenues from the greater volume of
Cambodian imports. CBO estimates that granting MFN status to
the products of Cambodia would not significantly affect federal
government receipts.
This estimate is based on 1994 Census data on imports from
Cambodia. The increase in imports of goods from Cambodia
resulting from the reduced prices of the imported products in
the U.S.-reflecting the lower MFN tariff rates--has been
calculated using estimates of the substitution between U.S.
products and imports of the same goods. Also, the calculation
assumes that the economy of Cambodia will function in the next
year in a manner similar to that of the recent past. Obviously,
political and economic changes could affect its ability to
produce and export goods, its need to import goods from the
U.S. and other countries, and the exchange rate between its
currency and that of the U.S. However, we believe that the
assumption of relatively constant economic performance is
appropriate.
If you wish further details, please feel free to contact me
or your staff may wish to contact Melissa Sampson.
Sincerely,
James L. Blum,
For June E. O'Neill, Director.
V. Other Matters To Be Discussed Under the Rules of the House
A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS
With respect to subdivision (A) of clause 2(l)(3) of rule
XI of the Rules of the House of Representatives (relating to
oversight findings), the Committee advises that it was as a
result of the Committee's oversight activities concerning
bilateral trade relations between the United States and
Cambodia that the Committee concluded that it is appropriate to
enact the provisions contained in the bill.
B. SUMMARY OF FINDINGS AND RECOMMENDATIONS OF THE COMMITTEE ON
GOVERNMENT REFORM AND OVERSIGHT
With respect to subdivision (D) of clause 2(l)(3) of rule
XI of the Rules of the House of Representatives (relating to
oversight findings), the Committee advises that no oversight
findings or recommendations have been submitted to this
Committee by the Committee on Government Reform and Oversight
with respect to the provisions contained in this bill.
C. INFLATIONARY IMPACT STATEMENT
In compliance with clause 2(l)(4) of rule XI of the Rules
of the House of Representatives, the Committee states that the
provisions of the bill are not expected to have an overall
inflationary impact on prices and costs in the operation of the
national economy. As is indicated above (in Part IV of this
report), the bill is projected to be deficit neutral over
fiscal years 1995-2000.
VI. Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3 of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, existing
law in which no change is proposed is shown in roman):
HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES
* * * * * * *
GENERAL NOTES
3. Rates of Duty. The rates of duty in the ``Rates of
Duty'' columns designated 1 (``General'' and ``Special'') and 2
of the tariff schedule apply to goods imported into the customs
territory of the United States as hereinafter provided in this
note:
(a) * * *
(b) Rate of Duty Column 2. Notwithstanding any of the
foregoing provisions of this note, the rates of duty shown in
column 2 shall apply to products, whether imported directly or
indirectly, of the following countries and areas pursuant to
section 401 of the Tariff Classification Act of 1962, to
section 231 or 257(e)(2) of the Trade Expansion Act of 1962, to
section 404(a) of the Trade Act of 1974 or to any other
applicable section of law, or to action taken by the President
thereunder: Afghanistan, Azerbaijan, Cuba, [Kampuchea], Laos,
North Korea, Vietnam.
* * * * * * *