[House Report 104-188]
[From the U.S. Government Publishing Office]

104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                    104-188



 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 

                             ADVERSE REPORT

                             together with


                      [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 
        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 
    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.
                                              James L. Blum
                                   (For June E. O'Neill, Director).

          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.

    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.

    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 
    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.

    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 
    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.

    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.