[House Report 105-638]
[From the U.S. Government Publishing Office]
105th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 105-638
_______________________________________________________________________
DISAPPROVING EXTENSION OF NONDISCRIMINATORY TREATMENT TO THE PRODUCTS
OF THE PEOPLE'S REPUBLIC OF CHINA
_______
July 20, 1998.--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. 121]
The Committee on Ways and Means, to whom was referred the
joint resolution (H.J. Res. 121) 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. 121 would disapprove the extension of
nondiscriminatory treatment (most-favored-nation or normal
tariff 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, or normal, 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 3,
1998, 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, 1998, through July 2, 1999.
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 latter of the end of
the 60-day period or within 15 legislative days. The
disapproval resolution is highly privileged, thus generally
guaranteeing 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,
1998 expiration of the existing waiver authority, China's MFN
status is automatically renewed through July 2, 1999. House
Joint Resolution 121 was introduced by Representative Solomon
on June 4, 1998. The resolution provides for disapproval of
extension of the waiver authority recommended by the President
on June 3,1998 with respect to China for the period beginning
July 3, 1998.
C. Legislative History
Committee action
House Joint Resolution 121 was introduced on June 4, 1998,
by Representative Solomon, and was referred to the Committee on
Ways and Means. On June 25, 1998, the Committee ordered House
Joint Resolution 121 reported adversely without amendment to
the House by voice vote, with a quorum present.
Legislative hearing
The Subcommittee on Trade held a hearing June 17, 1998 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 business and
religious groups, 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
latter of the end of the 60 calendar day period for initial
passage or 15 legislative days.
Explanation of the resolution
House Joint Resolution 121 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 3, 1998, 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 United States 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. By severely disrupting trade in the region,
terminating MFN would harm U.S. efforts to address the current
financial crisis in Asia and risk prompting further currency
devaluations. Finally, the majority of Members believe that
revoking China's MFN status as of July 3 of this year is too
blunt a sanction and would work against U.S. Government efforts
to bring China into the global community of civilized nations.
While the United States 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 vote of the Committee on Ways and Means
in its consideration of H.J. Res. 121.
Motion to Report the Bill
H.J. Res. 121 was ordered reported adversely without
amendment to the House by voice vote, with a quorum present.
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 121 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 enactment of H.J. Res 121 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 25, 1998.
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. 121, 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 25, 1998, 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 $135
million in fiscal year 1998 and by $405 million in fiscal year
1999.
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 3, 1998, 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,
1998. H.J. Res. 121 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 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
revenue 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. 121
[By fiscal year, in billions of dollars]
----------------------------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002
----------------------------------------------------------------------------------------------------------------
Projected revenues under current law........... 1,710.491 1,773.298 1,822.745 1,885.171 1,965,978
Proposed changes............................... 0.135 0.405 0 0 0
Projected revenues under H.J. Res. 121......... 1,710.616 1,773.703 1,822.745 1,885.171 1,965.978
----------------------------------------------------------------------------------------------------------------
\1\ Includes the revenue effects of P.L. 105-178 (H.R. 2400).
The proposed legislation contains no intergovernmental
mandates as defined in Public Law 104-4 and would impose no
direct costs on 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 1998 and 1999. Taxes would increase by $0.1 billion in
1998 and by $0.4 billion in 1999. 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. 121 would affect receipts.
Therefore, pay-as-you-go procedures would apply. They pay-as-
you-go impact is summarized below.
PAY-AS-YOU-GO CONSIDERATION
[By fiscal year, in millions of dollars]
------------------------------------------------------------------------
1998 1999 2000
------------------------------------------------------------------------
Changes in Outlays............
(2) Not Applicable
Changes in Receipts........... 135 405 0
------------------------------------------------------------------------
If you wish further details, please feel free to contact me
or your staff may wish to contact Hester Grippando.
Sincerely,
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, 1998 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 2(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
The People's Republic of China (PRC) is an
authoritarian state in which the Chinese Communist
Party (CCP) is the paramount source of power. At the
national and regional levels, party members hold almost
all top government, police, and military positions.
Ultimate authority rests with members of the Politburo.
Leaders stress the need to maintain stability and
social order and are committed to perpetuating the rule
of the CCP and its hierarchy. Citizens lack the freedom
to express peacefully opposition to the party-led
political system and the right to change their national
leaders or form of government. * * *
* * * * * * *
The Government continued to commit widespread and well-
documented human rights abuses, in violation of internationally
accepted norms stemming from the authorities' very limited
tolerance of public dissent, fear of unrest, and the limited
scope or inadequate implementation of laws protecting basic
freedoms. The Constitution and laws provide for fundamental
human rights, but they are often ignored in practice. Abuses
included torture and mistreatment of prisoners, forced
confessions, and arbitrary arrest, and lengthy incommunicado
detention. Prison conditions at many facilities remained harsh.
The Government continued tight restrictions on freedom of
speech, the press, assembly, association, religion, privacy,
and worker rights. Discrimination against women, minorities,
and the disabled, violence against women, prostitution,
trafficking in women and children, and the abuse of children
remain problems. The Government continued to restrict tightly
worker rights. Serious human rights abuses persisted in
minority areas, including Tibet and Xinjiang, where tight
controls on religion and other fundamental freedoms continued
and, in some cases, intensified--U.S. Department of State China
Country Report on Human Rights Practices for 1997.
For the reasons stated above, I believe we must lead
international and efforts to promote respect for human rights
and democratic principles in the People's Republic of China.
Countries that respect the rights of their citizens and adopt
open, democratic reforms make the best economic and political
partners. In China, only respect for the basic principles of
human rights will insure that the U.S. consumer is not
financing oppressive practices within the People's Republic of
China.
The United States has helped create a more prosperous,
democratic and equitable world by leading past fights for
freedom, democracy, and human rights. Trade sanctions succeeded
in bringing change to the Former Soviet Union, South Africa,
and other nations. American leadership can once again set the
standard for international support for reform in China. We must
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.