[House Report 105-140]
[From the U.S. Government Publishing Office]



105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                    105-140
_______________________________________________________________________


 
DISAPPROVAL OF MOST-FAVORED-NATION TREATMENT FOR THE PEOPLE'S REPUBLIC 
                                OF CHINA

                                _______
                                

 June 20, 1997.--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

                            DISSENTING VIEWS

                      [To accompany H.J. Res. 79]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
joint resolution (H.J. Res. 79) disapproving the extension of 
non-discriminatory 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. 79 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 unconditional 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 May 29, 
1997, 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, during the period of 
July 3, 1997, through July 2, 1998.
    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 
can consider any veto message before the later of the end of 
the 60-day period or within 15 legislative days. 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 3, 
1997 expiration of the existing waiver authority, China's MFN 
status is automatically renewed through July 2, 1998. House 
Joint Resolution 79 was introduced by Representative Solomon 
(R., NY) on June 3, 1997. The resolution provides for 
disapproval of extension of the waiver authority recommended by 
the President on May 29, 1997 with respect to China for the 
period beginning July 3, 1997.

                         c. legislative history

Committee action

    House Joint Resolution 79 was introduced on June 3, 1997, 
by Representative Solomon (R., NY), and was referred to the 
Committee on Ways and Means. On June 18, 1997, the Committee 
ordered House Joint Resolution 79 reported adversely without 
amendment to the House by a recorded vote of 34 ayes, 5 noes.

Legislative hearing

    The Subcommittee on Trade held a hearing June 17, 1997 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 and 
religious communities expressed their views regarding U.S.-
China trade relations.

                   II. EXPLANATION OF THE RESOLUTION

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 remain 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. Congress may override a Presidential veto within the 
later of the end of the 60 calendar day period for initial 
passage or 15 legislative days.

Explanation of the resolution

    House Joint Resolution 79 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 May 29, 1997, with respect to the 
People's Republic of China.

Reasons for committee action

    The Committee reports Congressman Solomon's disapproval 
resolution adversely, primarily because the Members, in 
general, support the Administration's policy of engagement with 
China. The Committee is convinced that non-discriminatory trade 
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 
and lead eventually to political reform. 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, workers 
and consumers.
    Withdrawing MFN for China would also have a serious adverse 
effect on Hong Kong and Taiwan due to the high levels of trade 
and investment between Hong Kong and China, and between Taiwan 
and China. Finally, the majority of Members believe 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. VOTE 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 on Ways and 
Means in its consideration of H.J. Res. 79.

                       Motion to Report the Bill

    H.J. Res. 79 was ordered reported adversely without 
amendment to the House by a roll call vote of 34 yeas to 5 nays 
(with a quorum being present). The vote was as follows:

                    motion to report the resolution

    The resolution, H.J. Res. 79, was ordered adversely 
reported by a roll call vote of 34 yeas to 5 nays (with a 
quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
       Representatives            Yea        Nay      Present   Representatives     Yea        Nay      Present 
----------------------------------------------------------------------------------------------------------------
Mr. Archer...................         X   .........  .........  Mr. Rangel.....         X   .........  .........
Mr. Crane....................         X   .........  .........  Mr. Stark......  .........         X   .........
Mr. Thomas...................         X   .........  .........  Mr. Matsui.....         X   .........  .........
Mr. Shaw.....................         X   .........  .........  Mrs. Kennelly..         X   .........  .........
Mrs. Johnson.................         X   .........  .........  Mr. Coyne......  .........         X   .........
Mr. Bunning..................  .........         X   .........  Mr. Levin......         X   .........  .........
Mr. Houghton.................         X   .........  .........  Mr. Cardin.....  .........         X   .........
Mr. Herger...................         X   .........  .........  Mr. McDermott..         X   .........  .........
Mr. McCrery..................         X   .........  .........  Mr. Kleczka....         X   .........  .........
Mr. Camp.....................         X   .........  .........  Mr. Lewis......  .........         X   .........
Mr. Ramstad..................         X   .........  .........  Mr. Neal.......         X   .........  .........
Mr. Nussle...................         X   .........  .........  Mr. McNulty....         X   .........  .........
Mr. Johnson..................         X   .........  .........  Mr. Jefferson..         X   .........  .........
Ms. Dunn.....................         X   .........  .........  Mr. Tanner.....         X   .........  .........
Mr. Collins..................         X   .........  .........  Mr. Becerra....         X   .........  .........
Mr. Portman..................         X   .........  .........  Mrs. Thurman...         X   .........  .........
Mr. English..................         X   .........  .........  ...............  .........  .........  .........
Mr. Ensign...................         X   .........  .........  ...............  .........  .........  .........
Mr. Christensen..............         X   .........  .........  ...............  .........  .........  .........
Mr. Watkins..................         X   .........  .........  ...............  .........  .........  .........
Mr. Hayworth.................         X   .........  .........  ...............  .........  .........  .........
Mr. Weller...................         X   .........  .........  ...............  .........  .........  .........
Mr. Hulshof..................         X   .........  .........  ...............  .........  .........  .........
----------------------------------------------------------------------------------------------------------------

                           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 
resolution, House Joint Resolution 79 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. 79 do not 
involve any new budget authority, or any decrease in revenues 
or tax expenditures. Enactment of H.J. Res. 79 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 18, 1997.
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. 79, 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 18, 1997, 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 $106 
million in fiscal year 1997 and by $320 million in fiscal year 
1998.
    Under the Trade Act of 1974, MFN status may not be 
conferred on a country with a non-market 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 May 29, 
1997, 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, 1997. H.J. Res. 97 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 of 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 imports 
from the People's Republic would decline substantially, customs 
duties collected on Chinese imports to the U.S. would fall, but 
it is likely that some of the decline in U.S. imports from the 
People's Republic would be made up by an increase in imports 
from other MFN countries. CBO estimates that the increase in 
revenues from this effect would outweigh the reduction in 
revenues from the reduced level of imports from the People's 
Republic. The budget effects of the bill are shown in the 
following table.

                                         REVENUE EFFECTS OF H.J. RES. 79                                        
                                    [By fiscal year, in billions of dollars]                                    
----------------------------------------------------------------------------------------------------------------
                                                     1997         1998         1999         2000         2001   
----------------------------------------------------------------------------------------------------------------
Projected revenues under current law \1\.......    1,554,894    1,609,184    1,675,264    1,750,097    1,827,964
Proposed changes...............................        0.106        0.320        0.000        0.000        0.000
Projected revenues under H.J. Res. 79..........    1,555,000    1,609,504    1,675,264    1,750,097   1,827,964 
----------------------------------------------------------------------------------------------------------------
\1\ Projection consistent with the FY 1998 Budget Resolution.                                                   

    The proposed legislation contains no intergovernmental 
mandates as defined in Public Law 104-4 and would not have a 
significant impact on the budgets of state, local, or tribal 
governments. The increased tariff rates on products from the 
People's Republic caused by the loss of MFN would impose a 
private-sector mandate on importers of Chinese products into 
the United States. The private-sector mandate would exceed $100 
million in both fiscal years 1997 and 1998. Taxes would 
increase by $0.1 billion in 1997 and by $0.3 billion in 1998. 
In addition to these increased tariffs, firms would incur 
additional costs when they substitute goods from other MFN 
countries or domestic producers.
    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. 79 would affect receipts. 
Therefore, pay-as-you-go procedures would apply. The pay-as-
you-go impact is summarized below.

                      PAY-AS-YOU-GO CONSIDERATIONS                      
                [By fiscal year, in millions of dollars]                
------------------------------------------------------------------------
                                                          1997     1998 
------------------------------------------------------------------------
Changes in outlays....................................    (\1\)    (\1\)
Changes in receipts...................................      106      320
------------------------------------------------------------------------
\1\ Not applicable.                                                     

    If you wish further details, please feel free to contact me 
or your staff may wish to contact Stephanie Weiner.
            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, 1997 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 
findings or recommendations have been submitted to the 
Committee by the Committee on Government Reform and Oversight 
with respect to the subject matter contained in the resolution.

                 C. Constitutional Authority Statement

    With respect to clause 2(l)(4) of rule XI of the Rules of 
the House of Representatives relating to Constitutional 
Authority, the Committee states that the Committee's action in 
reporting the bill is derived from Article I of the 
Constitution, Section 8 (``The Congress shall have power to lay 
and collect taxes, duties, imposts and excises, to pay the 
debts and to provide for * * * the general Welfare of the 
United States * * *'').
  VI. DISSENTING VIEWS OF THE HONORABLE JIM BUNNING'S ON H.J. RES. 79

    The Committee's action in reporting unfavorably H.J. Res. 
79 sends a signal, once again, that the U.S. is unwilling to 
stand up to its commitments. By extending Most Favored Nation 
trading status to China we have neglected our responsibility to 
the American people.
    For nearly two decades we have listened to the supporters 
of MFN for China telling us how continuing Most Favored Nation 
trading status and improving commerce with Beijing is changing 
China for the better.
    They keep telling us to put profit ahead of principle. 
Unfortunately, the only ones profiting from this practice are 
the government leaders in China. In the last decade we have 
seen our trade surplus with China disappear and now we are 
faced with a $44 billion trade deficit. At the same time, the 
treatment of the Chinese people by their government continues 
to be oppressive.
    This is a country that still practices the deplorable use 
of sterilization and forced abortions to control its 
population. China still imprisons its political dissidents, 
religious leaders and those who fight to bring civil order to 
China. These continued violations of the simplest human and 
civil rights must end. Unfortunately, by continuing MFN for 
China, we are supporting their form of tyranny.
    China continues to arm other nations with modern missiles 
and provide nuclear material and technology freely throughout 
the world. The Chinese have sold nuclear technology to 
Pakistan, even in the face of a number of U.S. agreements. 
Their military spending is growing at a rate of 15% a year and 
they will soon have intercontinental ballistic missile 
capabilities, which could threaten our shores.
    The Chinese are not only expanding their own military 
capabilities, but they are enhancing those of the countries 
that stand in opposition to our way of life. They have sold 
submarines and ground-to-ship missiles to Iran, which could 
have a disastrous effect on the shipping industry in the Middle 
East. China continues to proliferate weaponry to known 
terrorist states such as Libya, Iraq and the Sudan. However, we 
are willing to close our eyes to all of this, in the name of 
profits and trade.
    By continuing to grant preferential trade treatment to 
China we are only proving that our national principles, our 
national credibility and our national integrity are for sale. 
It proves that we stand firmly for human decency unless it gets 
in the way of business. It proves that we stand firmly for fair 
trade unless it gets in the way of business. It proves that we 
stand firmly for adherence of international non-proliferation 
agreements unless it gets in the way of a quick buck.
    The Committee's vote on the disapproval resolution was an 
opportunity to reaffirm our belief in principles, human decency 
and fairness for all mankind. Unfortunately, this Committee 
chose not to take advantage of that opportunity. Hopefully, the 
full House of Representatives will take the higher road.

                                                       Jim Bunning.
VII. DISSENTING VIEW OFFERED BY REPRESENTATIVE BEN CARDIN TO COMMITTEE 
                         REPORT ON H.J. RES. 79

          Overall in 1996, the authorities stepped up efforts 
        to cut off expressions of protest or criticism. All 
        public dissent against the party and government was 
        effectively silenced by intimidation, exile, the 
        imposition of prison terms, administrative detention, 
        or house arrest. No dissidents were known to be active 
        at year's end. Even those released from prison were 
        kept under tight surveillance and often prevented from 
        taking employment or otherwise resuming a normal life. 
        Nonapproved religious groups, including Protestant and 
        Catholic groups, also experienced intensified 
        repression as the Government enforced 1994 regulations 
        that require all such groups to be registered with 
        government religious affairs bureaus and come under the 
        supervision of official ``patriotic'' religious 
        organizations. Discrimination against women, 
        minorities, and the disabled, violence against women, 
        and the abuse of children remain problems. Serious 
        human rights abuses persist in minority areas, 
        including Tibet, Xinjiang, and Inner Mongolia. Controls 
        on religion and on other fundamental freedoms in these 
        areas have also intensified.--U.S. Department of State, 
        China Country Report on Human Rights Practices for 
        1996.

    For the reasons stated above and others, I believe we must 
lead international efforts for change in the human rights 
policies of the People's Republic of China. The United States 
has led the world in past fights for freedom, democracy, and 
fundamental human rights. Trade sanctions succeeded in bringing 
change to the Soviet Union, South Africa, and other nations. If 
America leads, others will follow. We must now show leadership 
again and take a serious stand demanding change in China. 
Change will begin with a vote to end Most Favored Nation trade 
status for China.

                                                        Ben Cardin.
            VIII. DISSENTING VIEWS OF CONGRESSMAN JOHN LEWIS

    The United States should not grant China Most Favored 
Nation status. Conditions in China and Tibet have not improved. 
In fact, they are worse. According to the 1996 State 
Department, ``Overall in 1996, the authorities stepped up 
efforts to cut off expressions of protest or criticism. All 
[emphasis added] public dissent against the party and 
government was effectively silenced by intimidation, exile, the 
imposition of prison terms, administrative detention, or house 
arrest.''
    There are those who say if we do not renew MFN, we will 
lose our influence with the Chinese to help move the country 
towards a free and democratic society. And so each year MFN is 
renewed. And each year conditions in China and Tibet do not 
improve.
    I do not proposed cutting off relations with China. But I 
simply cannot accept the situation as it is in China today.
    We cannot stand by while innocent people in China and Tibet 
are fighting--and dying--for democracy. They want to practice 
their own religion. They want to speak their mind. They want to 
live in a free and democratic country.
    Christians are persecuted in China. Tibetans are not 
allowed to preserve and teach their culture and history. Hong 
Kong's democratic institutions are gravely threatened. China is 
sending nuclear technology to Iran, a terrorist nation.
    We cannot simply ignore these flagrant human and civil 
rights abuses. Renewing MFN sends the wrong message. To quote 
Mahatma Gandhi, ``Noncooperation with evil is as much a duty as 
is cooperation with good.''
    We cannot accept what is happening in China. We cannot 
forget Tiananmen Square. These students bravely stood for 
democracy, and they were slaughtered. Those students are much 
like the students of the 1960s civil rights movement here in 
the United States. I participated in that movement and fought 
for a nation free of racism and segregation.
    Some in the civil rights movement were jailed and beaten 
during that struggle. Some even died. But our struggle was not 
in vain.
    Americans saw the abuse of civil liberty and the denial of 
civil rights, and they did not stand by. Brave people--black 
and white, young and old, from the American South and across 
the country--stood with us and helped us win that struggle.
    Now it is the 1990's and China is on the other side of the 
world from us. But their struggle is just as important. Their 
lives and their struggle must not be in vain.
    In a real sense, our foreign policy, our trade policy must 
be a reflection of our own ideals, our own values. Even though 
our own government has made serious mistakes, we must still 
stand up for democracy and freedom both here and abroad.
    Renewing MFN for China allows China to continue its 
terrible abuses without any repercussions from our great 
nation. That is not right. I believe in free and fair trade, 
but it must not be trade at any price. The price of renewing 
MFN for China is too high.

                                                        John Lewis.

                                
