[House Report 104-188]
[From the U.S. Government Publishing Office]
104th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 104-188
_______________________________________________________________________
DISAPPROVAL OF MOST-FAVORED-NATION TREATMENT FOR CHINA
_______
July 17, 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
ADVERSE REPORT
together with
MINORITY AND DISSENTING VIEWS
[To accompany H.J. Res. 96]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
joint resolution (H.J. Res. 96) disapproving the extension of
nondiscriminatory treatment (most-favored-nation treatment) to
the products of the People's Republic of China, having
considered the same, report unfavorably thereon and recommend
that the joint resolution do not pass.
I. INTRODUCTION
A. Purpose and Summary
H.J. Res. 96 would disapprove the extension of
nondiscriminatory treatment (most-favored-nation treatment) to
the products of the People's Republic of China.
B. Background
Prior to 1951, the United States extended
nondiscriminatory, or most-favored-nation (MFN) treatment, to
all of its trading partners, in accordance 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, this directive was applied to all then-existing
communist countries except Yugoslavia. Poland's MFN status was
restored by Presidential directive in 1960.
Title IV of the Trade Act of 1974, which includes the so-
called ``Jackson-Vanik amendment,'' represented a
liberalization of the 1951 law. Title IV authorizes the
extension of MFN treatment to nonmarket economies which meet
freedom of emigration requirements and conclude a commercial
agreement with the United States. Title IV authorizes the
President to waive the freedom-of-emigration requirements of
that title, and to grant MFN status to a nonmarket economy
country, if he determines that doing so will substantially
promote the freedom-of-emigration objectives of that title.
MFN status was first granted to the People's Republic of
China on February 1, 1980, and has been renewed annually since
then on the basis of Presidential waivers. (A bilateral
commercial agreement, as required by the Jackson-Vanik
amendment, has remained in force during that time.) On June 2,
1995, the President, formally transmitted to the Congress his
recommendation to waive, once again, the 1974 Trade Act's
freedom-of-emigration requirements and to thereby extend
China's MFN status for an additional year, beginning July 3,
1995 (H.Doc. 104-82).
The President's waiver authority under Title IV expires at
midnight on July 2 of each year. It may be extended on an
annual basis upon a Presidential determination and report to
Congress that such extension will substantially promote the
freedom-of-emigration objectives of the 1974 Trade Act. The
waiver authority continues in effect unless disapproved by the
Congress--either generally or with respect to a specific
country--within 60 calendar days after the expiration of the
existing authority. Under Title IV amendments adopted as part
of the Customs and Trade Act of 1990, disapproval takes the
form of a joint resolution disapproving the extension of
Presidential authority to waive the 1974 Trade Act's freedom-
of-emigration requirements. Under the 1990 amendments, Congress
has 15 legislative days, in addition to the 60 calendar days
for initial passage, to consider any veto message. The
disapproval resolution is privileged for a Member. This
generally guarantees a vote in the House if it is introduced.
If both chambers of Congress do not pass a resolution of
disapproval within the 60 calendar days following the July 2,
1995 expiration of the existing waiver authority, China's MFN
status is automatically renewed through July 2, 1996. House
Joint Resolution 96 was introduced by Representative Wolf (R.,
Va.) on June 16, 1995. The resolution provides for disapproval
of extension of the waiver authority recommended by the
President on June 2 with respect to China for the period
beginning July 3, 1995.
C. Legislative History
Committee bill
House Joint Resolution 96 was introduced on June 16, 1995,
by Representative Wolf (R., Va.), and was referred to the
Committee on Ways and Means. On June 20, 1995, the Committee
ordered House Joint Resolution 96 reported adversely without
amendment to the House by a recorded vote of 27 ayes, 7 noes.
Legislative hearing
The Subcommittee on Trade held a hearing May 23, 1995 on
the question of renewing China's most-favored-nation trade
status. At this hearing, Members of Congress, as well as
representatives of the Administration and the business
community expressed their views regarding U.S.-China trade
relations. Earlier in the year, on March 9, 1995 the
Subcommittee received testimony from United States Trade
Representative, Ambassador Mickey Kantor on the intellectual
property rights agreement signed with the People's Republic of
China on February 6, 1995, and on prospects for China's
accession to the World Trade Organization.
II. EXPLANATION OF THE BILL
Present law
Title IV of the Trade Act of 1974, as amended by the
Customs and Trade Act of 1990 (Public Law 101-382), sets forth
three requirements relating to freedom of emigration which must
be met, or waived by the President, in order for a nonmarket
economy country to be granted MFN treatment. Title IV also
requires that a bilateral commercial agreement that provides
for nondiscriminatory, MFN status remains in force between the
United States and the nonmarket economy country receiving MFN
status. Title IV also sets forth minimum provisions that must
be included in such an agreement.
An annual Presidential recommendation under section 402(d)
for a 12-month extension of authority to waive the Jackson-
Vanik freedom-of-emigration requirements--either generally, or
for specific countries--may be disapproved through passage by
Congress of a joint resolution of disapproval within 60
calendar days after the expiration of the previous waiver
authority. An additional 15 legislative days, following the 60
calendar day period for initial passage, is available for
consideration of any veto message.
Explanation of the resolution
House Joint Resolution 96 states that the Congress does not
approve the extension of the waiver authority contained in
section 402(c) of the Trade Act of 1974, recommended by the
President to the Congress on June 2, 1995, with respect to the
People's Republic of China.
Reasons for Committee action
The Committee reports Congressman Wolf's disapproval
resolution adversely, primarily because the Members, in
general, support the Administration's policy, which delinks MFN
status from human rights considerations. The Committee is
convinced that non-discriminatory tariff treatment is the
cornerstone of a policy of engagement and increased trade,
which enables the U.S. to influence the growth of democratic
and market-oriented policies in China, in a manner which will
improve respect for fundamental human rights. The Committee, in
general, recognizes that disapproving the President's
recommendation for an extension of China's MFN status would
permanently sacrifice U.S. leverage to bring about change in
China, while at the same time harming U.S. exporters.
Withdrawing MFN for China would also have a serious adverse
effect on Taiwan and Hong Kong due to the high level of trade
and investment between Hong Kong and China, and between Taiwan
and China. Finally, the majority of Members believed that
revoking China's MFN status as of July 3 of this year is too
blunt a sanction that would undermine U.S. Government efforts
to bring China into the global community of civilized nations.
While the U.S. has many serious problems with China, the
Committee believes they are best addressed through expanding
the involvement of U.S. citizens in Chinese society, and making
full use of U.S. trade statutes where necessary.
III. VOTES OF THE COMMITTEE
In compliance with clause 2(l)(2)(B) of rule XI of the
Rules of the House of Representatives, the following statement
is made relative to the vote of the Committee in its
consideration of House Joint Resolution 96:
Motion to Report the Bill
House Joint Resolution 96 was ordered adversely reported
without amendment by a recorded vote of 27 ayes, 7 noes on June
20, 1995, with a quorum present. The roll call vote was as
follows:
YEAS NAYS
Mr. Archer Mr. Bunning
Mr. Crane Mr. Johnson
Mr. Thomas Mr. Ensign
Mr. Shaw Mr. Christensen
Mrs. Johnson Mr. Rangel
Mr. Houghton Mr. Cardin
Mr. Herger Mr. Lewis
Mr. McCrery
Mr. Hancock
Mr. Cramp
Mr. Ramstad
Mr. Zimmer
Mr. Nussle
Ms. Dunn
Mr. Collins
Mr. Portman
Mr. English
Mr. Gibbons
Mr. Jacobs
Mr. Matsui
Mrs. Kennelly
Mr. Coyne
Mr. Levin
Mr. McDermott
Mr. Kleczka
Mr. Payne
Mr. Neal
IV. BUDGET EFFECTS
A. Committee Estimate of Budgetary Effects
In compliance with clause 7(a) of the rule XIII of the
Rules of the House of Representatives, the following statement
is made concerning the effects on the budget of this bill,
House Joint Resolution 96 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 (c) of clause 2(l)(3) of
rule XI of the Rules of the House of Representatives, the
Committee states that the provisions of H.J. Res 96 do not
involve any new budget authority, or any decrease in revenues
or tax expenditures. Enactment of H.J. Res 96 would increase
customs duty receipts due to higher tariffs imposed on goods
from China.
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 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.J. Res. 96, a joint resolution disapproving the
President's recommendation to extend most-favored-nation (MFN)
status to the People's Republic of China, as adversely reported
on June 20, 1995, by the Committee on Ways and Means. CBO
estimates that disapproving the extension of MFN status to the
People's Republic of China would increase receipts by $173
million in fiscal year 1995 and $518 million in fiscal year
1996.
Under 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. Under present law,
however, 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. The People's Republic
has received MFN status through presidential proclamation on an
annual basis beginning in 1980. On June 2, 1995, President
Clinton transmitted to Congress his intention to waive the
emigration prohibition and extend MFN status to the People's
Republic of China for an additional year, beginning July 3,
1995. H.J. Res. 96 would disapprove the President's
recommendation to extend MFN treatment.
If the People's Republic were denied MFN status, tariff
rates on its exports to the U.S. would rise substantially. The
higher tariffs on these goods would increase the prices faced
by U.S. consumers for the goods imported from the People's
Republic, reducing demand. Therefore, imports to goods from the
People's Republic would be lower than they would be if MFN
status were to be extended. CBO estimates that the increased
tariff rates caused by the loss of MFN status would cause an
overall increase in customs duty receipts measured relative to
revenues generated under continued MFN status because the
increase in revenues from the higher tariffs would outweigh the
reduction in revenues from the reduced level of imports from
the People's Republic. In addition, it is likely that some of
the decline in U.S. imports from the People's Republic will be
made up by an increase in imports from other countries. In the
absence of specific data on the likely size of this
substitution effect, CBO assumes that an amount equal to one-
half of the decline in U.S. imports from the People's Republic
will be imported, at MFN rates, from other countries. The
budget effects of the bill are shown in the following table.
REVENUE EFFECTS OF H.J. RES. 96
[By fiscal year, in billions of dollars]
----------------------------------------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000
----------------------------------------------------------------------------------------------------------------
Projected revenues under current
law\1\........................... 1,354.965 1,417.619 1,475.210 1,546.076 1,617.969 1,697.155
Proposed changes.................. 0.173 0.518 0 0 0 0
Projected revenues under H.J. Res.
96............................... 1,355.138 1,418.137 1,475.210 1,546.076 1,617.969 1,697.155
----------------------------------------------------------------------------------------------------------------
\1\ Includes the revenue effects of P.L. 104-7 (H.R. 831).
Section 252 of the Balanced Budget and Emergency Deficit
Control Act of 1985 sets up pay-as-you-go procedures for
legislation affecting direct spending or receipts through 1998.
CBO estimates that H.J. Res. 96 would affect receipts.
Therefore, pay-as-you-go would apply. The pay-as-you-go impact
is summarized below.
PAY-AS-YOU-GO CONSIDERATIONS
[By fiscal year, in millions of dollars]
----------------------------------------------------------------------------------------------------------------
1995 1996 1997 1998
----------------------------------------------------------------------------------------------------------------
Changes in outlays.................. (\1\) (\1\) (\1\) (\1\)
Changes in receipts................. 173 518 0 0
----------------------------------------------------------------------------------------------------------------
\1\ Not applicable.
If you wish further details, please feel free to contract
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, based on public hearing
testimony and information from the Administration, believes
that revoking China's MFN status as of July 3, 1995 would be
unwise and counterproductive.
B. Summary of Findings and Recommendations of the Committee on
Government Reform and Oversight
With respect to subdivision (D) of clause 21(l)(3) of rule
XI of the Rules of the House of Representatives, no oversight
finding or recommendations have been submitted to the Committee
by the Committee on Government Reform and Oversight with
respect to subject matter contained in the resolution.
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
House Joint Resolution 96 would have an inflationary impact on
prices and costs in the operation of the national economy.
MINORITY VIEWS OF CONGRESSMAN BEN CARDIN
I was most disappointed in the Committee's vote to
recommend disapproval of House Resolution 96. I remain
committed to the importance of the United States using trade as
a tool to advance human rights and freedom around the world.
Passage of H.J. Res. 96 would support the long-standing linkage
of favorable trade access to this Nation and respect for human
rights. Breaking this link would be giving up something that is
fundamental to this Nation--something that makes us unique and
successful in the world. We would be sacrificing our principles
for short term economic gains.
Tying trade to human rights has worked. A generation of
Soviet emigres prospering in new homes around the world; the
piece of the Berlin Wall I keep in my office; the historic
elections and new-found freedoms celebrated in South Africa,
all speak to the success of our Nation taking a stand. Using
access to American markets has been a crucial tool to effect
change abroad through peaceful means.
There is a reason protestors in Tiananmen Square carried a
home-made Statue of Liberty. From our founding days the United
States of America has been a beacon of freedom. Our Nation has
held out hope to freedom-loving people throughout the world.
Time and again Americans have fought and died to protect
freedom in this Nation and around the world.
We should be proud of our leadership in human rights and
support H.J. Res. 96.
Ben Cardin.
DISSENTING VIEWS OF MESSRS. BUNNING, STARK, AND LEWIS
I am disappointed that the Committee voted to report
unfavorably H.J. Res. 96. Once again, we have missed an
opportunity to send a signal to the world about the deplorable
condition of human rights in China.
I understand that the current Administration has delinked
trade policy from discussion of human rights. But, simply put,
China's record of suppressing individual liberty has been so
heinous that I feel compelled to support revoking Most Favored
Nation status for Beijing.
For years the proponents of MFN for China have told us how
expanding trade and economic investment for the Chinese are the
keys to improving the human rights situation in that nation.
This position has not been vindicated. Over six years have
passed since the horror of Tiananmen Square, but the ghosts of
this massacre still haunt the annual debate offer China and
MFN.
There are many recent examples of the same sort of
suppression of human rights that is still occurring in China as
the students in Tiananmen faced in 1989. Last April, police
detained seventeen Chinese for organizing an Easter Mass.
According to one observer group, several of the women detained
were beaten so badly they were unable to eat. Another group of
Chinese Christians was recently arrested for holding a
theological training class for new pastors. These worshipers
were reportedly kicked and beaten for their ``crimes''; some
had their heads shaved. A third group of Chinese House Church
leaders were arrested in April for holding an unregistered
religious meeting and secretly using a photocopy machine to
reproduce theological teaching material.
That photocopying material would be considered a punishable
offense is laughable were it not true.
Probably the most disturbing practice in China right now is
its forced abortion and sterilization policy. Beijing's answer
to population control is a ``one child'' per family policy that
forces sterilization and abortion on its own families.
To my mind this practice is beneath contempt, as was the
recent action by the Clinton Administration to deny recently
asylum to the small group of women who fled China because they
did not want to be forced to abort their children or give up
their ability to have more children.
Every country has the right to govern itself, but that does
not mean that we have to agree with them or tacitly support
them. By granting China another year of MFN status, we are
implicitly backing a nation that maims its own people.
Simply because there are 1.3 billion potential consumers of
American goods in China does not mean that we should sacrifice
our principles. Our support for democracy and human rights
simply should not be predicated on short-term economic gain.
China's treatment of its own people is barbarous, and granting
another year of MFN only amounts to quiet complicity with
China's barbaric policies.
The policy of attempting to foster better human rights
conditions in China by dangling the carrot of MFN status as a
reward for better behavior is not working. Instead, I believe
that it is time to try to stick. The stick that I see that the
U.S. has at its disposal is withdrawal of MFN.
China simply does not deserve any sort of preferential
trade status with the U.S. and I strongly support rejecting
extension of MFN status.
Jim Bunning.
Pete Stark.
John Lewis.
DISSENTING VIEWS OF CONGRESSMEN JOHN LEWIS AND PETE STARK
I strongly support H.J. Res. 96 and was disappointed that
it did not pass the Committee. We should not give Most Favored
Nation status to China while human rights abuses continue, and
China remains unwilling to change.
Human rights abuses have continued since Tiananmen Square.
There are slave labor camps in China and Tibet. Political
prisoners are brutally tortured. Democratic reformers are
imprisoned. Religious leaders are imprisoned
There have been no movement on beginning discussion between
the Dalai Lama and the Chinese government regarding a
satisfactory solution for Tibet. In addition, a marked
deterioration of human rights conditions since 1994 in China
and Tibet has been documented, especially regarding religious
freedom.
It has also been revealed that in the last year China has
delivered important components for missiles to Iran, one of the
world's leading terrorist nations. Furthermore, the United
States's trade deficit with China has increased from $3.5
billion before Tiananmen Square to $30 billion today.
China is not acting in good faith. We should not reward
China for doing nothing, for not moving toward democracy as it
has promised to do.
Human rights is and should be an important foreign policy
goal. China's human rights and other abuses continue, and
without a strong statement from the United States, China has no
incentive to change.
We cannot have trade at any cost, and the price for MFN for
China is too high. MFN for China should not be approved.
John Lewis.
Pete Stark.
DISSENTING VIEWS OF CONGRESSMEN PETE STARK AND JOHN LEWIS
We support the resolution to end Most Favored Nation status
for the People's Republic of China.
There are some things in life more important than trade;
there are some things more important than making an extra buck.
Trading with people who have a monstrous human rights record
betrayed the principles on which this nation was founded.
Trading with a nation that is blatantly contributing to nuclear
weapon and missile proliferation among terrorist states is
immoral--and stupid beyond words.
People say we don't have leverage with the PRC. We have
tremendous leverage with China. We are the only nation in the
world with which they run a $35-to-$37 billion trade surplus.
We are the only nation in the world that would allow such a
one-sided trade flow. We believe China's leadership is likely
to go a long way to keep access to our market. If they don't
change--if we are wrong in this view--we will still have done
the moral thing. We will still have been true to our principles
and to the long-run security needs of our nation.
We urge support of the Resolution.
Pete Stark.
John Lewis.