[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.