[House Report 106-262]
[From the U.S. Government Publishing Office]



106th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    106-262

======================================================================



 
DISAPPROVAL OF NORMAL TRADE RELATIONS TREATMENT TO THE PRODUCTS OF THE 
                       PEOPLE'S REPUBLIC OF CHINA

                                _______
                                

 July 26, 1999.--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

                      [To accompany H.J. Res. 57]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
joint resolution (H.J. Res. 57) disapproving the extension of 
non-discriminatory treatment (normal trade relations 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.

                                CONTENTS

                                                                   Page
 I. Introduction......................................................2
        A. Purpose and Summary...................................     2
        B. Background............................................     2
        C. Legislative History...................................     3
II. Explanation of the Resolution.....................................3
III.Votes of the Committee............................................4

IV. Budget Effects....................................................5
        A. Committee Estimate of Budgetary Effects...............     5
        B. Statement Regarding New Budget Authority and Tax 
          Expenditures...........................................     5
        C. Cost Estimate Prepared by the Congressional Budget 
          Office.................................................     5
 V. Other Matters to be Discussed Under the Rules of the House........7
        A. Committee Oversight Findings and Recommendations......     7
        B. Summary of Findings and Recommendations of the 
          Committee on Government Reform and Oversight...........     8
        C. Constitutional Authority Statement....................     8

                            I. INTRODUCTION


                         A. PURPOSE AND SUMMARY

    H.J. Res. 57 would disapprove the extension of normal trade 
relations (NTR status) 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, now referred to as normal trade relations (NTR\1\), 
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 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.
---------------------------------------------------------------------------
    \1\ Legislation to replace the term ``most-favored-nation'' (MFN) 
in United States statutes with the term ``normal trade relations'' 
(NTR) was enacted into law as part of the Internal Revenue Service 
Restructuring and Reform Act of 1998, P.L. 105-206.
---------------------------------------------------------------------------
    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 normal trade relations treatment to nonmarket 
economies which both meet freedom-of-emigration requirements 
and conclude a commercial agreement with the United States. 
Title IV also authorizes the President to waive the freedom-of-
emigration requirements of that title and to extend NTR status 
to a nonmarket economy country if he determines that doing so 
will substantially promote the freedom-of-emigration 
objectives. 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.
    In the case of the People's Republic of China, a bilateral 
commercial agreement, as required by the Jackson-Vanik 
amendment, was concluded on July 7, 1979, and has remained in 
force since that time. NTR was first granted to China on 
February 1, 1980, and has been renewed annually since then on 
the basis of Presidential waivers. On June 3, 1999, the 
President formally transmitted to the Congress his 
recommendation to waive the 1974 Trade Act's freedom-of-
emigration requirements and to thereby extend China's NTR 
status for an additional year, during the period of July 3, 
1999, through July 2, 2000.
    The President's waiver authority continues in effect unless 
disapproved by the Congress--either generally or with respect 
to a specific country--within 60 calendar days of 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 may consider any veto message before the 
later 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 60 calendar days following the July 3, 1999, 
expiration of the existing waiver authority, China's NTR status 
is automatically renewed through July 2, 2000. House Joint 
Resolution 57 was introduced by Representative Rohrabacher on 
June 7, 1999. The resolution provides for disapproval of 
extension of the waiver authority recommended by the President 
on June 3, 1999, with respect to China for the period beginning 
July 3, 1999.

                         C. LEGISLATIVE HISTORY

Committee action

    House Joint Resolution 57 was introduced on June 7, 1999, 
by Representative Rohrabacher and was referred to the Committee 
on Ways and Means. On July 1, 1999, the Committee ordered House 
Joint Resolution 57 reported adversely without amendment to the 
House by voice vote, with a quorum present.

Legislative hearing

    The Subcommittee on Trade held a hearing June 8, 1999, on 
the question of renewing China's NTR status. At this hearing, 
Members of Congress, representatives of the Administration, and 
other interests 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 NTR. Title IV also requires that 
a bilateral commercial agreement that provides for 
nondiscriminatory, NTR status remain in force between the 
United States and the nonmarket economy country receiving NTR 
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 57 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, 1999, with respect to the 
People's Republic of China.

Reasons for Committee action

     The Committee reports Congressman Rohrabacher's 
disapproval resolution adversely, primarily because the 
Members, in general, support the Administration's policy of 
engagement with China. The Committee is convinced that normal 
trade relations, or non-discriminatory trade treatment, should 
be the cornerstone of a policy of engagement. This is because 
increased trade 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 encourage political reform. The Committee continues to view 
with deep concern widespread human rights abuses carried out by 
the Government of China against Catholic priests and bishops, 
Protestant pastors, Tibetan Buddhist clergy, and pro-democracy 
activists. Nevertheless, the Committee recognizes that 
disapproving the President's recommendation for an extension of 
China's NTR 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 NTR 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 NTR would harm U.S. efforts to address the 
current financial crisis in Asia and risk prompting further 
currency devaluations. Terminating NTR would also jeopardize 
efforts to finalize market access concessions made by Chinese 
Premier Zhu Rongji during his April 8 Summit meeting with 
President Clinton in which the two leaders negotiated China's 
accession to the World Trade Organization. If implemented, 
these commitments would represent substantial new opportunities 
for United States exports to, and investment in China. Finally, 
the Committee believes that revoking China's NTR status as of 
July 3 of this year would constitute 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 areas of U.S.-Sino disagreement are best addressed 
through expanding U.S. contact with China.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the vote of the Committee on Ways and Means in its 
consideration of the joint resolution, H.J. Res. 57.

                       MOTION TO REPORT THE BILL

    The joint resolution, H.J. Res. 57, was ordered adversely 
reported by a voice vote, with a quorum being present.

                          VOTES ON AMENDMENTS

    A roll call vote was conducted on an amendment by Mr. 
Rangel to add Cuba to the resolution disapproving the extension 
of nondiscriminatory treatment to China. The amendment was 
defeated by a roll call vote of 11 yeas to 24 nays, with 2 
members passing. 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 \1\.....  ........  ........  ........
Mr. Shaw........................  .......        X   ........  Mr. Coyne..........        X   ........  ........
Mrs. Johnson....................  .......        X   ........  Mr. Levin..........  ........        X   ........
Mr. Houghton....................  .......        X   ........  Mr. Cardin \1\.....  ........  ........  ........
Mr. Herger......................  .......        X   ........  Mr. McDermott......        X   ........  ........
Mr. McCrery.....................  .......        X   ........  Mr. Kleczka........        X   ........  ........
Mr. Camp........................  .......        X   ........  Mr. Lewis (GA).....  ........  ........  ........
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. Doggett........  ........  ........  ........
Mr. Watkins.....................  .......        X   ........  ...................  ........  ........  ........
Mr. Hayworth....................  .......        X   ........  ...................  ........  ........  ........
Mr. Weller......................  .......        X   ........  ...................  ........  ........  ........
Mr. Hulshof.....................  .......        X   ........  ...................  ........  ........  ........
Mr. McInnis.....................  .......        X   ........  ...................  ........  ........  ........
Mr. Lewis (KY)..................  .......        X   ........  ...................  ........  ........  ........
Mr. Foley.......................  .......        X   ........  ...................  ........  ........  ........
----------------------------------------------------------------------------------------------------------------
\1\ Messrs. Matsui and Cardin passed.

                           IV. BUDGET EFFECTS


               A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

    In compliance with clause 3(d)(2) 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 57 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 clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that 
enactment of H.J. Res 57 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 clause 3(c)(3) of rule XIII 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, July 12, 1999.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.J. Res. 57, 
disapproving the extension of nondiscriminatory treatment to 
the products of the People's Republic of China.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Hester 
Grippando.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.J. Res. 57: Disapproving the extension of nondiscriminatory treatment 
        to the products of the People's Republic of China

    Summary: Under the Trade Act of 1974, nondiscriminatory 
trade relations may not be conferred on a country with a 
nonmarket economy if that country maintains restrictive 
emigration policies. However, the President may waive this 
prohibition on an annual basis if he certifies that doing so 
would promote freedom of emigration in that country. On June 3, 
1999, President Clinton transmitted to Congress his intention 
to waive the prohibition with respect to the People's Republic 
of China for a year, beginning July 3, 1999. H.J. Res. 57 would 
disapprove the President's extension of this waiver. CBO 
estimates that denying the People's Republic of China would 
increase revenues by $507 million in fiscal year 2000. Since 
adopting this resolution would affect receipts, pay-as-you-go 
procedures would apply.
    The bill contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA) and would not affect 
the budgets of state, local, or tribal governments. H.J Res. 57 
would impose a private sector mandate on importers of Chinese 
goods that would be subject to higher tariffs. CBO estimates 
that the increased costs in tariffs to importers would total 
$507 million in fiscal year 2000, exceeding the threshold for 
private-sector mandates ($100 million in 1996, adjusted 
annually for inflation) established in UMRA.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.J. Res. 57 is shown in the following 
table.

----------------------------------------------------------------------------------------------------------------
                                                               By fiscal year, in millions of dollars--
                                                     -----------------------------------------------------------
                                                        1999      2000      2001      2002      2003      2004
----------------------------------------------------------------------------------------------------------------
                                               CHANGES IN REVENUES

Estimated Revenues..................................         0       507         0         0         0         0
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: Denial of nondiscriminatory trade 
relations to the People's Republic of China would substantially 
increase the tariff rates imposed on its exports to the United 
States. CBO assumes that these higher tariff rates would 
increase U.S. prices and would decrease U.S. demand of goods 
imported from the People's Republic of China. CBO estimates 
that imports from the People's Republic of China would decline, 
by more than enough to offset the higher rates so that the U.S. 
customs duties collections on Chinese imports would fall. 
However, CBO estimates that some of that drop in trade with the 
People's Republic of China would be offset by an increase in 
imports from other countries with normal trade relations 
status. The increase in revenues from this effect would 
outweigh the reduction in revenues from the People's Republic 
of China. Assuming an effective date of October 1, 1999, CBO 
estimates that revenues would increase by $507 million in 
fiscal year 2000. CBO assumes a resumption of normal trade 
relations with the People's Republic of China after September 
30, 2000.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act sets up pay-as-you-go procedures 
for legislation affecting direct spending or receipts. The net 
changes in governmental receipts that are subject to pay-as-
you-go procedures are shown in the following table. For the 
purposes of enforcing pay-as-you-go procedures, only the 
effects in the current year, the budget year, and the 
succeeding four years are counted.

----------------------------------------------------------------------------------------------------------------
                                                       By fiscal year, in millions of dollars--
                                    ----------------------------------------------------------------------------
                                      1999   2000   2001   2002   2003   2004   2005   2006   2007   2008   2009
----------------------------------------------------------------------------------------------------------------
Changes in outlays.................                                 not applicable
Changes in receipts................      0    507      0      0      0      0      0      0      0      0      0
----------------------------------------------------------------------------------------------------------------

    Estimated impact on state, local, and tribal governments: 
The bill contains no intergovernmental mandates as defined in 
UMRA and would not affect the budgets of state, local, or 
tribal governments.
    Estimated impact on the private sector: H.J. Res. 57 would 
impose a private sector mandate on importers of Chinese goods 
that would be subject to higher tariffs. CBO estimates that the 
increased costs in tariffs to importers would total $507 
million in fiscal year 2000, exceeding the threshold for 
private-sector mandates ($100 million in 1996, adjusted 
annually for inflation) established in UMRA. U.S. consumers of 
those goods would also bear indirect costs in substituting 
goods from other countries or domestic producers for Chinese 
products.
    Estimate prepared by: Federal costs: Hester Grippando; 
impact on state, local, and tribal governments: Leo Lex; impact 
on the private sector: Keith Mattrick.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


          A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

    With respect to clause 3(c)(1) of rule XIII 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 NTR status as of July 3, 1999, would be unwise and 
counterproductive.

    B. SUMMARY OF FINDINGS AND RECOMMENDATIONS OF THE COMMITTEE ON 
                    GOVERNMENT REFORM AND OVERSIGHT

    With respect to clause 3(c)(4) of rule XIII 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 3(d)(1) of rule XIII 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 * * *'').

                                  
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