[House Report 107-154]
[From the U.S. Government Publishing Office]




107th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
1st Session                                                    107-154

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



 
  DISAPPROVAL OF NORMAL TRADE RELATIONS TREATMENT TO THE PRODUCTS OF 
                                VIETNAM

                                _______
                                

 July 23, 2001.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

    Mr. Thomas, from the Committee on Ways and Means, submitted the 
                               following

                             ADVERSE REPORT

                      [To accompany H.J. Res. 55]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
joint resolution (H.J. Res. 55) 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 without amendment 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...................................     4
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 55 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'' 
provisions in Title IV of the Trade Act of 1974 (the Act). This 
provision of law governs the extension of normal trade 
relations (NTR), including NTR 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 Act. A country subject to the provision 
may gain 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, 
the President lifted the trade embargo on Vietnam in 
recognition of the cooperation received from the Government of 
Vietnam in Prisoner of War/Missing in Action (POW/MIA) 
accounting. On July 11, 1995, the President 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 United States began 
negotiations with Vietnam toward the conclusion of a bilateral 
commercial agreement.
    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 Act. On April 7, 
1998, the President issued Executive Order 13079, under which 
the waiver entered into force. The renewal procedure under the 
Act 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. The President has renewed 
Vietnam's waiver every year since 1998, most recently on June 
1, 2001 (H. Doc. 107-82). This waiver authority will continue 
in effect unless disapproved by Congress within 60 calendar 
days after the expiration of the existing waiver (i.e., 
September 1). Disapproval, should it occur, would take the form 
of a joint resolution disapproving of the President's waiver 
determination.
    On July 13, 2000, the bilateral commercial agreement was 
signed by the United States and Vietnam. On June 8, 2001, 
President Bush transmitted the agreement to Congress for its 
approval. 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, the President's annual 
determinations to grant a waiver of Jackson-Vanik emigration 
requirements to Vietnam allow U.S. exporters doing business in 
Vietnam to have 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, and the Ex-Im Bank signed a framework guarantee 
agreement with the State Bank of Vietnam on December 9, 1999. 
Commercial sales of agricultural commodities to Vietnam are 
also eligible for coverage by USDA's Southeast Asia Regional 
GSM-102 program for short-term export credit guarantees.
    Vietnam is the world's 13th most populous country, with 
nearly 80 million people. While the country has emerged as one 
of Southeast Asia's more promising economies and has the 
potential to be a strong trading partner for the United States, 
its full potential has yet to be realized. Cumulative foreign 
direct investment by U.S. companies in Vietnam is low, valued 
about $1 billion, making the United States the ninth-largest 
source of investment in Vietnam. As of March 31, 2001, OPIC has 
received political risk insurance registrations for 26 
projects, representing potential U.S. investment of $900 
million. However, actual current OPIC exposure is 2 projects, 
representing $10.3 million. Since the end of 1999, the Ex-Im 
Bank has issued over fifty letters of interest, although no 
final commitment applications have been received yet.
    After the President ordered an end to the U.S. trade 
embargo in 1994, two-way trade between the United States and 
Vietnam increased steadily from $223 million in 1994 to $935 
million in 1996. In part, this rapid growth was due to a large 
number of U.S. aircraft sales to Vietnam in 1996. Despite a 
dampening effect on trade as a result of the Asian financial 
crisis which began in 1997, two-way trade was still $666 
million that year. Beginning in 1998, two-way trade began to 
increase again and reached $828 million in 1998, $880 million 
in 1999, and $1.16 billion in 2000. Last year, U.S. exports to 
Vietnam totaled $331 million, while U.S. imports in return were 
valued at $827 million. Between 1994 and 2000, total trade 
between the United States and Vietnam increased by 420 percent.
    Top U.S. exports to Vietnam include aircraft, industrial 
and office machinery, footwear parts, telecommunications 
equipment, and fertilizer. Major U.S. imports from Vietnam 
include shrimp, footwear, coffee, petroleum products, and 
cashews.

                         C. LEGISLATIVE HISTORY

Committee action

    House Joint Resolution 55 was introduced on June 21, 2001, 
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 1, 2001, with 
respect to Vietnam. The resolution was referred to the 
Committee on Ways and Means. On July 12, 2001, the Committee on 
Ways and Means ordered House Joint Resolution 55 reported 
adversely without amendment to the House of Representatives by 
a voice vote with a quorum present.

Legislative hearing

    No legislative hearing was held.

                   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 (P.L. 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 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 the Act expires at 
midnight on July 2 of each year. The Act 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 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. 
Disapproval takes the form of a joint resolution disapproving 
the extension of Presidential authority to waive the freedom of 
emigration requirements in the Act. 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 1, 2001, 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 2, 
2002. If a resolution of disapproval is enacted, it becomes 
effective 60 days after enactment.

Explanation of resolution

    House Joint Resolution 55 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 1, 2001, with respect to Vietnam.

Reasons for Committee action

    The Committee on Ways and Means reports House Joint 
Resolution 55 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 and the Asia-Pacific 
Economic Cooperation group. Vietnam has also applied to become 
a member of the World Trade Organization.
    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 bilateral commercial 
agreement between the United States and Vietnam, which was 
recently submitted to Congress for its approval. 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 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 would be 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 55.

Motion to report the resolution

    House Joint Resolution 55 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 55, 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 55 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 16, 2001.
Hon. William ``Bill'' M. Thomas,
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. 55, 
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 Erin Whitaker 
(for revenues) and Greg Hitz (for federal costs).
            Sincerely,
                                         Barry B. Anderson,
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.J. Res. 55--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. The President may waive this prohibition 
on an annual basis, however, if he certifies that doing so 
would promote freedom of emigration in that country. On June 1, 
2001, President Bush transmitted to the Congress his intention 
to waive the prohibition with respect to Vietnam for a year, 
beginning July 3, 2001. H.J. Res. 55 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. 55 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. 55 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 
ofAgriculture (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. 55 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 55 
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 7, 2000, CBO transmitted an 
estimate for H.J. Res. 99, 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. Last year's joint resolution would have 
disapproved the extension of the President's waiver for the 
period beginning on July 3, 2000, and ending on July 2, 2001. 
H.J. Res. 55 would disapprove of the extension of the 
President's waiver for the period beginning July 3, 2001, and 
ending July 2, 2002. The two CBO cost estimates for the 
disapprovals of such waivers are very similar.
    Estimate prepared by: Federal revenues: Erin Whitaker; 
Federal costs: Greg Hitz; Impact on State, local, and tribal 
governments: Elyse Goldman; Impact on the private sector: 
Lauren Marks.
    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 information from the 
Administration, that terminating Vietnam's Jackson-Vanik waiver 
by enacting House Joint Resolution 55 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 55.

                 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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