[House Report 104-162]
[From the U.S. Government Publishing Office]



104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                    104-162
_______________________________________________________________________


 
               MOST-FAVORED-NATION TREATMENT FOR BULGARIA

                                _______


 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. 1643]

      [Including cost estimate of the Congressional Budget Office]
    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 1643) to authorize the extension of 
nondiscriminatory treatment (most-favored-nation treatment) to 
the products of Bulgaria, having considered the same, report 
favorably thereon without amendment and recommend that the bill 
do pass.

                            I. Introduction

                         a. purpose and summary

    H.R. 1643 authorizes the extension of nondiscriminatory 
treatment (most-favored-nation treatment) to the products of 
Bulgaria.

                 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, 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. Poland's MFN status was 
restored by Presidential directive in 1960.
    At present, Bulgaria's MFN status is regulated by Title IV 
of the Trade Act of 1974, the provision of U.S. law which 
contains the so-called Jackson-Vanik amendment. Section 401 of 
the Act directs the President to continue to deny MFN treatment 
to any country to which it was denied on the date of the 
enactment of the Trade Act. A country subject to the ban 
imposed by section 401 may gain MFN status only by fulfilling 
two basic conditions: (1) compliance with the requirements of 
the freedom-of-emigration provisions under section 402 of the 
Trade Act; and (2) conclusion of a bilateral commercial 
agreement with the United States under section 405 of the Trade 
Act providing for reciprocal nondiscriminatory treatment. 
Section 402 also authorizes the President to waive the 
requirements for full compliance of the particular country with 
the Jackson-Vanik requirements, if he determines that such 
waiver will substantially promote the objectives of the 
freedom-of-emigration provisions and if he has received 
assurances that the emigration practices of the country will 
lead substantially to the achievement of those objectives.
    Bulgaria first received MFN status from the United States 
under a Presidential waiver from the Title IV freedom-of-
emigration requirements in 1991. Since 1993, Bulgaria has 
received nondiscriminatory treatment pursuant to the 
President's determination that the country is in full 
compliance with the Title IV freedom of emigration 
requirements.
    The political and economic circumstances in Bulgaria has 
changed considerably since the enactment of Title IV. The 
communist government in Bulgaria has collapsed and a 
constitutional republic has been established. A democratically 
elected government has taken office which has instituted basic 
market-oriented principles, including privatization, in the 
Bulgarian economy. In its bilateral relations with the United 
States, Bulgaria has indicated a strong desire to build 
friendly relationships and to cooperated full with the United 
States on trade matters. The Committee believes that these 
developments in Bulgaria justify the normalization of U.S. 
trade relations with Bulgaria by authorizing the removal of the 
application of Title IV from Bulgaria.
    Moreover, the extension of permanent and unconditional MFN 
status to Bulgaria, as has been done for other Eastern European 
countries, would enhance our bilateral trade relations with 
that country and foster the economic development of the region 
by providing the business community with greater certainty with 
respect to Bulgaria's status under U.S. law. At the present 
time, Bulgaria is in the process of acceding to the General 
Agreement on Tariffs and Trade (GATT) and the World Trade 
Organization (WTO). For this reason, the extension of 
unconditional MFN treatment to Bulgaria is also necessary in 
order for the United States to avail itself of all GATT and WTO 
rights vis-a-vis Bulgaria at the time of the country's 
accession to the agreements.

                         c. legislative history

Committee bill
    H.R. 1643 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) granting the President the authority to 
determine that Title IV of the Trade Act of 1974 should no 
longer apply with respect to that Bulgaria and to proclaim the 
extension of nondiscriminatory treatment to the products of 
that country; and (2) providing that Title IV of the Trade Act 
of 1974 shall cease to apply with respect to Bulgaria on and 
after the effective date of the President's proclamation.
    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 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 
Bulgaria on April 19, 1995. The deadline for submission of 
comment was May 11, 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 and supplemental actions (sec. 1 of the bill)

Present law

    Bulgaria's MFN status is regulated by Title IV of the Trade 
Act of 1974, the provision of U.S. law which governs the 
extension of MFN tariff treatment to nonmarket economies. Title 
IV sets forth three requirements relating to freedom of 
emigration which must be met, or waived by the President, in 
order for him to grant MFN status to a nonmarket economy. The 
law also requires that a trade agreement providing MFN status 
remain in force between the United States and the nonmarket 
economy country receiving MFN and sets forth minimum provisions 
which must be included in such an agreement.

Explanation of provision

    The provision contains the findings of the Congress that 
Bulgaria: (1) has received MFN treatment since 1991 and has 
been found to be in full compliance with the freedom of 
emigration requirements under Title IV of the Trade Act of 
1974; (2) has reversed many years of communist dictatorship and 
instituted a constitutional republic ruled by a democratically-
elected government as well as basic market-oriented reforms, 
including privatization; (3) is in the process of acceding to 
the General Agreement on Tariffs and Trade (GATT) and the World 
Trade Organization (WTO) and extension of unconditional MFN 
treatment would enable the United States to avail itself of all 
rights under the GATT and WTO with respect to Bulgaria; and (4) 
has demonstrated a strong desire to build friendly 
relationships and to cooperate fully with the United States on 
trade matters.
    Congress also notes in this provision that the United 
States Trade Representative intends to negotiate with Bulgaria 
in order to preserve the commitments of that country under the 
bilateral commercial agreement in effect between that country 
and the United States that are consistent with the GATT and the 
WTO.

Reasons for change

    The provision notes developments in Bulgaria's domestic 
political and economic situation, as well as developments in 
the country's bilateral trade relations with the United States 
and its multilateral trade objectives.

Effective date

    The provision is effective upon enactment.

 b. termination of application of title iv of the trade act of 1974 to 
                           bulgaria (sec. 2)

Present law

    Bulgaria's MFN status is regulated by Title IV of the Trade 
Act of 1974, the provision of U.S. law which governs the 
extension of MFN tariff treatment to nonmarket economies. Title 
IV sets forth three requirements relating to freedom of 
emigration which must be met, or waived by the President, in 
order for him to grant MFN status to a nonmarket economy. The 
law also requires that a trade agreement providing MFN status 
remain in force between the United States and the nonmarket 
economy country receiving MFN and sets forth minimum provisions 
which must be included in such an agreement.

Explanation of provision

    The provision grants the President the authority to 
determine that Title IV of the Trade Act of 1974 should no 
longer apply to Bulgaria and after making such a determination 
to proclaim the extension of nondiscriminatory treatment to the 
products of Bulgaria. Once the President has issued this 
proclamation, the provision removes the application of Title IV 
of the Trade Act of 1974 from Bulgaria.

Reasons for change

    Since the collapse of its communist dictatorship, Bulgaria 
has established a constitutional republic, held democratic 
elections and adopted basic market-oriented reforms, including 
privatization. Extension of permanent and unconditional MFN 
status to Bulgaria, as has been done for other Eastern European 
countries, would enhance our bilateral trade relations with 
that country and foster the economic development of the region 
by providing the business community with greater certainty with 
respect to Bulgaria's status under U.S. law. Bulgaria has also 
indicated a strong desire to build friendly relationships and 
to cooperate fully with the United States on trade matters. At 
present, Bulgaria is in the process of acceding to the General 
Agreement on Tariffs and Trade (GATT) and the World Trade 
Organization (WTO). For this reason, the extension of 
unconditional MFN treatment to Bulgaria is necessary in order 
for the United States to avail itself of all GATT and WTO 
rights vis-a-vis Bulgaria at the time of the country's 
accession to the agreements.

Effective date

    The provision is effective upon enactment.

                      III. Votes of the Committee

    In compliance with clause 2(1)(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. 1643.

Motion to report the bill

    The bill, H.R. 1643, 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. 1643, 
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(1)(3) of 
rule XI of the Rules of the House of Representatives, the 
Committee states that the provisions of H.R. 1643 do not 
involve any new budget 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 Rules of the 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. 1643, a bill to authorize the extension of 
nondiscriminatory treatment (most-favored-nation treatment) to 
the products of Bulgaria, 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 
Bulgaria would have no budgetary effect over fiscal years 1995 
through 2000. Because H.R. 1643 could affect receipts, pay-as-
you-go procedures would apply to the bill.
    Under Title IV of the Trade Act of 1974, MFN status may not 
be conferred on a country with a nonmarket economy if that 
country maintains restrictive emigration policies. The 
President may waive this prohibition on an annual basis if he 
certifies that granting MFN status would promote freedom of 
emigration in that country. Under current law, Bulgaria is 
subject to the requirements of Title IV. However, it has 
received MFN treatment since 1991 through a Presidential waiver 
and has fully complied with the freedom of emigration 
requirements since 1993.
    H.R. 1643 would grant the President the authority to stop 
applying Title IV of the Trade Act of 1974 to Bulgaria, thereby 
allowing Bulgaria to receive MFN status on a permanent basis. 
The CBO baseline revenue projections assume that MFN status for 
Bulgaria will be extended on an annual basis through a 
Presidential waiver. Therefore, enacting H.R. 1643 would have 
no budgetary impact when measured relative to the CBO baseline.
    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 
Bulgaria's MFN status 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 year 1995-2000.