[House Report 104-466]
[From the U.S. Government Publishing Office]



104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2d Session                                                     104-466
_______________________________________________________________________


 
               MOST-FAVORED-NATION TREATMENT FOR BULGARIA

                                _______


 February 29, 1996.--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. 2853]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 2853) 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.

   H.R. 2853, A BILL TO AUTHORIZE THE EXTENSION OF NONDISCRIMINATORY 
                 TREATMENT TO THE PRODUCTS OF BULGARIA

                            I. INTRODUCTION

                         a. purpose and summary

    H.R. 2853 would authorize 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, including Bulgaria, except Yugoslavia. 
Poland's MFN status was restored by Presidential directive in 
1960.
    Section 401 of the Trade Act of 1974 directed the President 
to continue to deny MFN treatment to any county to which it was 
denied on the date of enactment of the Act. At present, 
Bulgaria's MFN status is regulated by Title IV of the Trade 
Act, the provision of U.S. law which contains the so-called 
Jackson-Vanik amendment governing the extension of MFN to 
nonmarket economies. A country subject to the ban imposed by 
section 401 of the Trade Act 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 he emigration practices of the country will 
lead substantially to the achievement of those objectives.
    Bulgaria first received MFN status from the United States 
under the Trade Act in 1991 through a Presidential waiver from 
the Title IV freedom-of-emigration requirements. Since 1993, 
Bulgaria has received MFN treatment pursuant to the President's 
determination that the country is in full compliance with the 
Title IV requirements.
    The political and economic circumstances in Bulgaria have 
changed considerably since the enactment of the Trade Act of 
1974. 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 cooperate fully 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 had 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 GATT and 
the World Trade Organization (WTO). For this reason, the 
extension of unconditional MFN treatment to Bulgaria also 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 that 
country's accession to the agreements.

                         c. legislative history

Committee bill

    H.R. 2853 was introduced on January 5, 1996, 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 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.
    On February 28, 1996, the Committee on Ways and Means 
ordered the bill favorably reported, by voice vote, to the 
House, without amendment.
    Previously, on June 20, 1995, the Committee on Ways and 
Means favorably reported H.R. 1643, a measure identical to H.R. 
2853. The House subsequently passed this same bill on July 11, 
1995, by voice vote. However, the provisions on Bulgaria were 
removed from the bill by the Senate when they used it as a 
vehicle to proceed on unrelated matters.

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 
comments 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. 
Section 402 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. 
Specifically, those requirements prohibit the President from 
extending MFN to ``any nonmarket economy country [that] * * * 
(1) denies its citizens the right or opportunity to emigrate; 
(2) imposes more than a nominal tax on emigration or on the 
visas or other documents required for emigration, for any 
purpose or cause whatsoever; or (3) imposes more than a nominal 
tax, levy, fine, fee, or other charge on any citizen as a 
consequence of the desire of such citizen to emigrate to the 
country of his choice''. Title IV 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 GATT and the 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 system and economy, as well as developments in the 
country's bilateral trade relations with the United States and 
its commitment to multilateral processes, as reasons for 
enacting this legislation.

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

    This section would grant 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 would remove 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 of Bulgaria, as has been done for other East 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 cooperative fully with the United States on trade matters. 
At present, Bulgaria is in the process of acceding to the GATT 
and the 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(l)(2)(B) of rule XI 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. 2853:

                       motion to report h.r. 2853

    H.R. 2853 was ordered favorably reported, without 
amendment, by voice vote on February 28, 1996, with a quorum 
present.

                     IV. BUDGET EFFECTS OF THE BILL

               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:
    The Committee agrees with the estimate prepared by the 
Congressional Budget Office (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. 2853 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 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, D.C, February 27, 1996.
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. 2853, a bill to authorize the extension of 
nondiscriminatory treatment (most-favored-nation treatment) to 
the products of Bulgaria. CBO estimates that extending most-
favored-nation (MFN) status to the products of Bulgaria would 
have no budgetary effect over fiscal years 1996 through 2000. 
Because H.R. 2853 could affect receipts, pay-as-you-go 
procedures would apply to the bill.
    Under Title 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 this 
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. 2853 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. Therefore, 
enacting H.R. 2853 would have no budgetary impact when measured 
relative to the CBO baseline.
    If you with further details, please feel free to contract 
me or your staff may wish to contact Stephanie Weiner.
            Sincerely,
                                         June E. O'Neill, Director.

 V. OTHER MATTERS REQUIRED 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, the Committee 
advises that it was 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 GOVERNMENT REFORM AND 
                          OVERSIGHT COMMITTEE

    With respect to subdivision (D) of clause 2(l)(3) of rule 
XI of the Rules of the House of Representatives, the Committee 
advises that no oversight findings or recommendations have been 
submitted 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 the national economy. As is indicated 
above, the bill is projected to be deficit neutral over fiscal 
years 1996-2001.