[Senate Report 105-81]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 162
105th Congress                                                   Report
                                 SENATE

 1st Session                                                     105-81
_______________________________________________________________________


 
     EXTENSION OF NONDISCRIMINATORY TREATMENT (MOST-FAVORED-NATION 
                 TREATMENT) TO THE PRODUCTS OF MONGOLIA

                                _______
                                

               September 12, 1997.--Ordered to be printed

_______________________________________________________________________


    Mr. Roth, from the Committee on Finance, submitted the following

                              R E P O R T

                         [To accompany S. 343]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Finance, to which was referred the bill 
(S. 343) to authorize the extension of unconditional most-
favored-nation (MFN) tariff treatment (i.e., permanent normal 
trade relations), to the products of Mongolia, having 
considered the same, reports favorably thereon without 
amendment and recommends that the bill do pass.

                             I. Background

    Mongolia's MFN status is currently governed by Title IV of 
the Trade Act of 1974, as amended by the Customs and Trade Act 
of 1990 (``Title IV''). Section 402 of Title IV (also known as 
the Jackson-Vanik amendment) sets forth requirements relating 
to freedom of emigration, which must be met or waived by the 
President in order for the President to grant 
nondiscriminatory, MFN status to nonmarket-economy countries. 
Title IV also requires that a trade agreement remain in force 
between the United States and a nonmarket-economy country 
receiving MFN status and sets forth minimum provisions which 
must be included in such agreement.
    The United States and Mongolia concluded a trade agreement 
on January 23, 1991, which, among other things, provides for 
the protection of intellectual property and the promotion and 
facilitation of trade between the two countries. The United 
States and Mongolia also signed a bilateral investment treaty 
on October 6, 1994.
    Mongolia joined the World Trade Organization (WTO) on 
January 29, 1997. Because the conditional treatment afforded by 
Title IV is inconsistent with the obligation under WTO rules to 
give all WTO member countries unconditional MFN treatment, the 
United States invoked Article XIII of the Agreement 
Establishing the World Trade Organization, which allows the 
United States to withhold application of the WTO Agreements 
with respect to Mongolia. Non-application will continue for as 
long as Mongolia remains subject to Title IV.

                        II. Summary of the Bill

    Section 1 of S. 343 sets forth seven Congressional findings 
that support removing Mongolia from the requirements of Title 
IV and extending to Mongolia permanent unconditional non-
discriminatory MFN status. First, Mongolia has received 
conditional MFN under Title IV since 1991 and has been found to 
be in full compliance with the requirements of Title IV. 
Second, Mongolia has made substantial progress in building a 
democratic political system and a free-market economic system. 
Third, Mongolia had its third election under its new 
constitution in 1996, which resulted in a peaceful transfer of 
governmental power. Fourth, Mongolia and the United States 
signed a bilateral trade agreement in 1991 and a bilateral 
investment treaty in 1994. Fifth, Mongolia has joined the WTO. 
Sixth, Mongolia has demonstrated a strong desire to build a 
friendly and cooperative relationship with the United States. 
Seventh, by extending unconditional MFN to Mongolia, the United 
States would be able to avail itself of all rights under the 
WTO with respect to that country.
    Section 2 of S. 343 would grant the President authority to 
determine that Title IV should no longer apply to Mongolia. 
After making such a determination, the President would have the 
authority to proclaim the permanent extension of unconditional 
MFN treatment to the products of Mongolia.

                        III. General Explanation

A. Presidential and Congressional Action
    1. Presidential Action.--On January 23, 1991, the President 
issued a waiver of the Jackson-Vanik freedom-of-emigration 
requirements for Mongolia. On June 24, 1991, the President 
transmitted the trade agreement between the United States and 
Mongolia to Congress for approval. On November 13, 1991, the 
President signed H.J. Res. 281 (P.L. 102-157), which approved 
the trade agreement with Mongolia and the extension of 
nondiscriminatory MFN status for Mongolia. Nondiscriminatory 
treatment for products from Mongolia became effective on 
November 27, 1991, and has been renewed annually by the 
President according to the requirements of Title IV.
    On September 4, 1996, the President determined that 
Mongolia is in full compliance with the freedom-of-emigration 
criteria listed in sections 402 and 409 of Title IV. Under 
Title IV, this finding allows for the continuation of MFN 
status for Mongolia without the requirement of a waiver, but 
requires the President to submit semiannual reports to Congress 
regarding Mongolia's continued compliance with the freedom-of-
emigration requirements of Title IV. The President has 
submitted two such reports on January 3, 1997 and July 21, 
1997, both of which found Mongolia to be in continued 
compliance with Title IV.
    In 1996, the President found that freedom of movement 
within Mongolia and the right to leave and return to the 
country have been enshrined in law since February 1, 1994, and 
are not limited in practice. A passport and exit visa are the 
only requirements to leave Mongolia, and no more than nominal 
fees must be paid by potential emigres. In addition, citizens 
may not be forcibly expatriated or deprived of citizenship 
acquired by birth. Furthermore, there are no outstanding 
emigration cases involving the United States and no divided-
family cases in Mongolia.
    The President also found that: (1) Mongolia has made 
continued progress towards a stable democratic political 
system; (2) Mongolia held several free elections; (3) all 
political parties in Mongolia are publicly committed to 
democracy and participating in democratic institutions; and (4) 
there are no impediments to monitoring human-rights 
developments in Mongolia.
    2. Congressional Action.--On October 31, 1991, Congress 
passed H.J. Res. 281, which approved the trade agreement with 
Mongolia and the extension of nondiscriminatory MFN treatment 
to products of Mongolia according to the requirements of Title 
IV.
    On February 24, 1997, S. 343 was introduced in the Senate 
and referred to the Committee on Finance. The Committee on 
Finance requested public comments on S. 343 on June 20, 1997. 
As of the deadline of July 18, 1997, the Committee had received 
no comments in opposition to granting Mongolia unconditional 
MFN status.
B. U.S.-Mongolian Trade
    Since Mongolia first received MFN tariff treatment under 
Title IV in 1991, two-way trade between the United States and 
Mongolia has expanded from over $9 million in 1992 to $35 
million in 1996. During this period, the United States' balance 
in merchandise trade with Mongolia has gone from a deficit of 
approximately $4 million in 1992 to a deficit of $26.6 million 
in 1996. U.S. exports to Mongolia have risen from over $2 
million in 1992 to $4.2 million in 1996. Leading U.S. exports 
included motor vehicles, machinery, and boiler equipment. U.S. 
imports from Mongolia have risen from approximately $7 million 
in 1992 to $30.8 million in 1996. Principal imports were 
textiles and apparel, most of which were of wool and cashmere.
C. Committee Views
    The Committee believes that, as a result of providing 
Mongolia MFN status in 1991, U.S. companies have been in a 
position to provide substantial assistance for Mongolia's 
transition to a market-based economy. The Committee expects 
that granting Mongolia unconditional MFN will help to 
accelerate trade and investment between the United States and 
Mongolia. Growth in trade and investment will, in turn, further 
promote the development of the Mongolian economy, help to 
improve the productivity of Mongolian companies, allow for an 
improving standard of living for the Mongolian people, and 
facilitate Mongolia's integration into the world economy.
    Accordingly, the Committee strongly supports enactment of 
S. 343 and the extension of unconditional MFN treatment to 
Mongolia.

                       IV. Vote of the Committee

    In compliance with section 133 of the Legislative 
Reorganization Act of 1946, the Committee states that S. 343 
was ordered favorably reported unanimously by voice vote on 
September 11, 1997.

                          V. Budgetary Impact

    In compliance with sections 308 and 403 of the 
Congressional Budget Act of 1974, and paragraph 11(a) of Rule 
XXVI of the Standing Rules of the Senate, the following letter 
has been received from the Congressional Budget Office stating 
that the bill would have no budgetary impact:





                         VI. Regulatory Impact

    In compliance with paragraph 11(b) of Rule XXVI of the 
Standing Rules of the Senate, the Committee states that the 
bill will not significantly regulate any individuals or 
businesses, will have no impact on the personal privacy of 
individuals, and will result in no significant additional 
paperwork.

                      VII. Changes in Existing Law

    In compliance with paragraph 12 of Rule XXVI of the 
Standing Rules of the Senate, the Committee finds no changes in 
existing law caused by passage of S. 343.

                                 
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