[House Report 106-794]
[From the U.S. Government Publishing Office]



106th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     106-794

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



 
DISAPPROVING THE EXTENSION OF THE WAIVER AUTHORITY CONTAINED IN SECTION 
        402(c) OF THE TRADE ACT OF 1974 WITH RESPECT TO VIETNAM

                                _______
                                

 July 26, 2000.--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. 99]

    The Committee on Ways and Means, to whom was referred the 
joint resolution (H.J. Res. 99) disapproving the extension of 
the waiver authority contained in section 402(c) of the Trade 
Act of 1974 with respect to Vietnam, 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 Resolution.........................................4
III.Votes of the Committee............................................6

IV. Budget Effect.....................................................6
        A. Committee Estimate of Budgetary Effects...............     6
        B. Statement Regarding New Budget Authority and Tax 
            Expenditures.........................................     6
        C. Cost Estimate Prepared by the Congressional Budget 
            Office...............................................     6
 V. Other Matters to be Discussed Under the Rules of the House........8
        A. Committee Oversight Findings and Recommendations......     8
        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

    House Joint Resolution 99 would disapprove the extension of 
the waiver authority contained in section 402(c) of the Trade 
Act of 1974 with respect to Vietnam.

                             B. Background

    Vietnam's trade status is subject to the Jackson-Vanik 
amendment to Title IV of the Trade Act of 1974. This provision 
of law governs the extension of normal trade relations (NTR), 
including normal tariff treatment, and access to U.S. 
Government credits, or credit or investment guarantees, to 
nonmarket economy countries ineligible for NTR treatment as of 
the enactment of the Trade Act. A country subject to the 
provision may gain NTR treatment and coverage by U.S. trade 
financing programs by complying with the freedom of emigration 
provisions under the Act. The extension of NTR tariff treatment 
also requires the conclusion and approval by Congress of a 
bilateral commercial agreement with the United States providing 
for reciprocal nondiscriminatory treatment. The Act authorizes 
the President to waive the freedom of emigration requirement 
with respect to a particular country if he determines that a 
waiver will substantially promote the freedom of emigration 
provisions, and if he has received assurances that the 
emigration practices of the country will lead substantially to 
the achievement of those objectives. Waiver of the emigration 
requirement allows the country to be eligible for U.S. trade 
financing programs, and, if the country has concluded a 
bilateral commercial agreement approved by Congress, to receive 
NTR tariff treatment.
    Since the early 1990s, the United States has taken gradual 
steps to improve relations with Vietnam. On February 3, 1994, 
President Clinton lifted the trade embargo on Vietnam in 
recognition of the cooperation received from the Vietnamese in 
POW/MIA accounting. On July 11, 1995, President Clinton 
announced the establishment of diplomatic relations, which was 
followed by the appointment of former Congressman Douglas 
``Pete'' Peterson as U.S. Ambassador to Vietnam. In 1997, the 
Office of the United States Trade Representative began 
negotiations toward the conclusion of a bilateral commercial 
agreement with Vietnam. An agreement in principle between the 
United States and Vietnam was reached on July 25, 1999.
    In the succeeding months, the bilateral commercial 
agreement was finalized between the United States and Vietnam. 
On July 13, 2000, the bilateral commercial agreement was 
signed. The agreement contains five major sections, including: 
(1) market access for agricultural and industrial goods; (2) 
intellectual property rights protection; (3) market access for 
services; (4) provisions to protect U.S. investments; and (5) 
measures to ensure transparency in Vietnamese laws, rules and 
regulations.
    Because Congress has not yet approved the bilateral 
commercial agreement, Vietnam is ineligible to receive NTR 
tariff treatment. However, if the President determines that a 
Jackson-Vanik waiver would substantially promote the freedom of 
emigration objectives under the Trade Act of 1974, U.S. 
exporters doing business in Vietnam are given access to U.S. 
government credits, or credit or investment guarantees, such as 
those provided by the Overseas Private Investment Corporation 
(OPIC), the Export-Import Bank (Ex-Im Bank), and the U.S. 
Department of Agriculture (USDA), provided that Vietnam meets 
the relevant program criteria. A formal agreement between OPIC 
and Vietnam was signed on March 19, 1998. On November 30, 1999, 
OPIC signed its first financing agreement since the Vietnam 
war, a $2.3 million loan to Caterpillar's authorized dealership 
in Vietnam. The Ex-Im Bank announced that it was ready to 
finance sales to Vietnam on April 10, 1998, and on December 9, 
1999, signed two framework agreements with the State Bank of 
Vietnam to facilitate project financing cooperation between the 
two agencies. Commercial sales of agricultural commodities to 
Vietnam are also eligible for coverage by USDA's Southeast Asia 
Regional GSM 102 program.
    On March 9, 1998, the President first determined that a 
Jackson-Vanik waiver for Vietnam would substantially promote 
the freedom of emigration objectives under the Trade Act of 
1974. On April 7, 1998, the President issued Executive Order 
13079, under which the waiver entered into force. The renewal 
procedure under the Trade Act of 1974 requires the President to 
submit to Congress a recommendation for a 12-month extension no 
later than 30 days prior to the waiver's expiration. On June 3, 
1998, the President renewed Vietnam's waiver for the next 12-
month period. On June 3, 1999, the President again issued 
another 12-month waiver. Most recently, the President issued a 
12-month waiver for Vietnam on June 2, 2000. This waiver 
authority will continue in effect unless disapproved by 
Congress within 60 calendar days after the expiration of the 
existing waiver. Disapproval, should it occur, would take the 
form of a joint resolution disapproving of the President's 
waiver determination.
    After the President ordered an end to the U.S. trade 
embargo, two-way trade between the United States and Vietnam 
increased steadily from $224 million in 1994 to $948 million in 
1996. In part, this rapid growth was due to a large number of 
U.S. plane sales to Vietnam in 1996. The pace of bilateral 
trade slowed in 1997, partially due to the Asian financial 
crisis, but two-way trade was still $666 million. Two-way trade 
reached $827 million in 1998, and $900 million in 1999. Last 
year, U.S. exports to Vietnam totaled $291 million, while U.S. 
imports in return were valued at $609 million. Between 1994 and 
1999, total trade between the U.S. and Vietnam increased 75 
percent. Top U.S. exports to Vietnam in 1999, included 
machinery and transportation equipment, chemicals and related 
products, and manufactured goods. The largest U.S. imports from 
Vietnam in 1999, included mineral fuels, coffee, footwear, and 
fish. U.S. investment in Vietnam has grown in tandem with 
trade. In 1999, the U.S. was the seventh largest investor in 
Vietnam with $120.2 million, while France led foreign 
investment in Vietnam with $303.4 million.

                         C. Legislative History


Committee action

    House Joint Resolution 99 was introduced on June 6, 2000, 
by Mr. Rohrabacher to disapprove the extension of the waiver 
authority contained in section 402(c) of the Trade Act of 1974, 
recommended by the President to Congress on June 2, 2000, with 
respect to Vietnam. The resolution was referred to the 
Committee on Ways and Means. On June 28, 2000, the Committee on 
Ways and Means ordered House Joint Resolution 99 reported 
adversely without amendment to the House of Representatives by 
a voice vote with a quorum present.

Legislative hearing

    On June 15, 2000, the Subcommittee on Trade of the 
Committee on Ways and Means held a hearing on the issue of 
U.S.-Vietnam trade relations. At this hearing, representatives 
of refugee organizations, Vietnamese-American groups, and U.S. 
businesses expressed their views regarding U.S.-Vietnam trade 
relations and the President's extension of the Jackson-Vanik 
waiver for Vietnam. Mr. Rohrabacher testified in support of the 
resolution of disapproval he introduced on Vietnam's Jackson-
Vanik waiver. Former Member of Congress and current U.S. 
Ambassador to Vietnam Douglas ``Pete'' Peterson presented 
testimony from the Administration in support of the President's 
waiver extension.

                   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 gain access to U.S. government 
credits, or credit or investment guarantees. Congress has not 
yet approved of the bilateral commercial agreement with Vietnam 
signed on July 13, 2000; therefore, Vietnam is not yet eligible 
to receive NTR tariff treatment. The President's waiver of the 
freedom of emigration requirements for Vietnam, however, 
currently gives U.S. exporters doing business in Vietnam access 
to U.S. government credits, or credit or investment guarantees, 
such as those administered by OPIC, the Ex-Im Bank, and USDA, 
provided that Vietnam meets the relevant program criteria.
    The President's waiver authority under Title IV expires at 
midnight on July 2 of each year. The Trade Act of 1974 also 
establishes procedures by which the President can renew his 
waiver on an annual basis and procedures for Congressional 
disapproval of the President's waiver. A waiver 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 in the Trade Act of 1974. 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. Disapproval takes the form of a joint 
resolution disapproving the extension of Presidential authority 
to waive the freedom of emigration requirements in the Trade 
Act of 1974. The resolution is referred to the Committee on 
Ways and Means, which has 30 days to consider it. The 
resolution is not amendable except to add or remove country 
names affected. If the resolution passes both Houses and is 
vetoed by the President, Congress must consider the veto 
message before the later of the end of the 60-day period or 
within 15 legislative days. The disapproval resolution is 
highly privileged.
    On June 2, 2000, the President issued an extension of the 
waiver from the Jackson-Vanik freedom of emigration 
requirements for Vietnam. If both chambers of Congress do not 
pass a resolution of disapproval within the 60 calendar days 
following the expiration of the existing waiver authority, the 
President's waiver is automatically renewed through July 2nd of 
the next year. If a resolution of disapproval is enacted, it 
becomes effective 60 days after enactment.

Explanation of resolution

    House Joint Resolution 99 states that Congress does not 
approve the extension of the authority contained in section 
402(c) of the Trade Act of 1974, recommended by the President 
to Congress on June 2, 2000, with respect to Vietnam.

Reasons for Committee action

    The Committee on Ways and Means reports House Joint 
Resolution 99 adversely primarily because the Members support 
the Administration's policy of engagement and gradual 
normalization of relations with Vietnam. In particular, the 
Committee is convinced that this policy is the cornerstone on 
which the United States will be able to continue cooperation 
with the Vietnamese government to achieve the fullest possible 
accounting of POWs and MIAs in Vietnam. In addition, engagement 
enables the United States to influence the pace and direction 
of economic and political reform in Vietnam in a manner that 
will improve respect for fundamental human rights and promote 
democratic reforms. Furthermore, termination of the President's 
Jackson-Vanik waiver for Vietnam would undermine the ability of 
the United States to influence Vietnam's re-emergence into the 
community of nations. In recent years, Vietnam has joined the 
Association of Southeast Asian Nations (ASEAN) and the Asia-
Pacific Economic Cooperation (APEC) group. Vietnam has also 
applied to become a member of the World Trade Organization 
(WTO).
    The Committee recognizes that disapproving the President's 
extension of Vietnam's Jackson-Vanik waiver would derail the 
process of normalizing U.S. trade relations with Vietnam. In 
particular, overturning the Jackson-Vanik waiver would harm 
U.S. exporters and workers by delaying the possibility for the 
extension of NTR to Vietnam under the recently signed bilateral 
commercial agreement between the United States and Vietnam, 
which Congress would have to approve separately in order to 
extend NTR to Vietnam. As a direct consequence of terminating 
the Jackson-Vanik waiver, U.S. exporters doing business in 
Vietnam would lose access to U.S. trade financing programs, 
such as those administered by OPIC, the Ex-Im Bank, and USDA, 
thereby enabling foreign competitors to gain an unfair 
advantage in exports to Vietnam.
    While emigration issues remain to be resolved, Vietnam has 
continued to make progress, and the Members of the Committee 
support the President's determination that waiving the Jackson-
Vanik freedom of emigration criteria will substantially lead to 
the achievement of those emigration objectives. The Committee 
also believes the many serious concerns that the United States 
has about human rights abuses and the need for economic and 
political reform in Vietnam are best addressed through 
expanding government and business contacts and the involvement 
of U.S. citizens in Vietnamese society, making full use of U.S. 
trade statutes where necessary.

Effective date

    The resolution is effective 60 days after enactment.

                       III. VOTE 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 votes of the Committee in its consideration of 
House Joint Resolution 99.

                    Motion to Report the Resolution

    House Joint Resolution 99 was ordered reported adversely 
without amendment by a voice vote with a quorum present.

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d)(2) of rule XIII of the Rules 
of the House of Representatives, the following statement is 
made concerning the effects on the budget of House Joint 
Resolution 99, as reported: 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 3(c)(2) of rule XIII of the 
Rules of the House of Representatives, the Committee states 
that the provisions of House Joint Resolution 99 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 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 7, 2000.
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. 99, 
disapproving the extension of the waiver authority contained in 
section 402(c) of the Trade Act of 1974 with respect to 
Vietnam.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Hester 
Grippando (for revenues), and Greg Hitz (for federal costs).
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.J. Res. 99.--Disapproving the extension of the waiver authority 
        contained in section 402(c) of the Trade Act of 1974 with 
        respect to Vietnam

    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 2, 
2000, President Clinton transmitted to the Congress his 
intention to waive the prohibition with respect to Vietnam for 
a year, beginning July 3, 2000. H.J. Res. 99 would disapprove 
the President's extension of this waiver. This legislation 
could affect direct spending if credit-guaranteed sales of farm 
products to Vietnam are prohibited. However, CBO estimates that 
such sales are likely to be insignificant. Because the bill 
could affect direct spending, pay-as-you-go procedures would 
apply.
    H.J. Res. 99 contains no intergovernmental or private-
sector mandates as defined in the Unfunded Mandates Reform Act 
(UMRA) and would not affect the budgets of state, local, or 
tribal governments.
    Estimated Cost to the Federal Government: CBO estimates 
that disapproving the extension of the waiver with respect to 
Vietnam would have no significant impact on direct spending or 
receipts. Because the waiver contained in section 402(c) of the 
Trade Act of 1974, as recommended by the President, would not 
give Vietnam normal trade relations treatment, disapproving it 
would not affect customs duties.
    Enacting H.J. Res. 99 would prohibit various U.S. 
government agencies from extending credit and insurance to 
Vietnam. CBO estimates that the resolution would have no 
significant effect on the Overseas Private Investment 
Corporation, Eximbank programs, or General Sales Manager (GSM) 
export credit guarantee programs of the U.S. Department of 
Agriculture (USDA). While Vietnam is currently eligible to 
purchase farm and food commodities backed by GSM export credit 
guarantees if the waiver is not disapproved, CBO estimates the 
likelihood that these guarantees will be offered is small. If 
USDA does offer GSM credit guarantees to Vietnam, the value of 
the sales and the associated costs during the next year are 
likely to be insignificant.
    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. Because 
H.J. Res. 99 could affect direct spending, pay-as-you-go 
procedures would apply. However, CBO estimates that 
disapproving the extension of the waiver to Vietnam would have 
no significant impact on direct spending.
    Intergovernmental and Private-Sector Impact: H.J. Res. 999 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would not affect the budgets of state, 
local, or tribal governments.
    Previous Estimate: On July 16, 1999, CBO transmitted for 
H.J. Res. 58, disapproving the extension of the waiver 
authority contained in section 402(c) with respect to Vietnam, 
as ordered reported adversely by the House Committee on Ways 
and Means. That joint resolution would have disapproved the 
extension of the President's waiver for the period beginning on 
July 3, 1999, and ending on July 2, 2000. H.J. Res. 99 would 
disapprove of the extension of the President's waiver for the 
period beginning July 3, 2000, and ending July 2, 2001. CBO's 
cost estimates for the two joint resolutions are very similar.
    Estimate Prepared by: Federal revenues: Hester Grippando. 
Federal costs: Greg Hitz.
    Estimate Approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis; G. Thomas Woodward, Assistant 
Director for Tax Analysis.

 V. OTHER MATTERS REQUIRED 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 believes, based on public hearing information and 
information from the Administration, that terminating Vietnam's 
Jackson-Vanik waiver by enacting House Joint Resolution 99 
would be unwise and counterproductive.

    B. Summary of Findings and Recommendations of the Committee on 
                           Government Reform

    With respect to clause 3(c)(4) of rule XIII 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 with respect to the subject 
matter contained in House Joint Resolution 99.

                 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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