[House Report 108-597]
[From the U.S. Government Publishing Office]



108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     108-597

======================================================================
 
    UNITED STATES-AUSTRALIA FREE TRADE AGREEMENT IMPLEMENTATION ACT

                                _______
                                

 July 12, 2004.--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

                              R E P O R T

                             together with

                    DISSENTING AND ADDITIONAL VIEWS

                        [To accompany H.R. 4759]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 4759) to implement the United States-Australia Free 
Trade Agreement, having considered the same, report favorably 
thereon without amendment and recommend that the bill do pass.

                                CONTENTS

                                                                   Page
  I. Introduction.....................................................2
          A. Purpose and Summary.................................     2
          B. Background..........................................     2
          C. Legislative History.................................     5
 II. Section-by-Section Summary.......................................6
          A. Title I: Approval and General Provisions............     6
          B. Title II: Customs Provisions........................     8
          C. Title III: Relief from Imports......................    12
          D. Title IV: Procurement...............................    16
III. Vote of the Committee...........................................16
 IV. Budget Effects of the Bill......................................16
          A. Committee Estimate of Budgetary Effects.............    16
          B. Budget Authority and Tax Expenditures...............    17
          C. Cost Estimate Prepared by the Congressional Budget 
              Office.............................................    17
  V. Other Matters to be Discussed Under the Rules of the House......19
          A. Committee Oversight Findings and Recommendations....    19
          B. Statement of General Performance Goals and 
              Objectives.........................................    19
          C. Constitutional Authority Statement..................    19
          D. Information Relating to Unfunded Mandates...........    19
 VI. Changes in Existing Law Made by the Bill, as Reported...........20
VII. Views...........................................................23

                            I. INTRODUCTION


                         A. Purpose and Summary

    H.R. 4759 would implement the May 18, 2004 Agreement 
establishing a free trade area between the United States and 
Australia.

                             B. Background

    The U.S.-Australia Free Trade Agreement (FTA) is the third 
trade agreement considered by the Congress under the Trade 
Promotion Authority (TPA) procedures outlined in the Bipartisan 
Trade Promotion Authority Act of 2002 signed into law in August 
2002 (P.L. 107-210). The United States and Australia have a 
strong bilateral economic relationship. The two countries share 
similar economic and trade goals. Both are strong supporters of 
achieving significant trade liberalization in agriculture and 
services in the current round of multilateral negotiations in 
the World Trade Organization (WTO), while at the same time, 
both are pursuing market access through regional and bilateral 
free trade agreements.
    The U.S.-Australia FTA is the first FTA between the United 
States and a developed country since the U.S.-Canada Free Trade 
Agreement in 1988. It is a 21st century agreement that reflects 
the modern globalized economy, opens markets, and provides 
mutual benefits in intellectual property, services, government 
procurement, and e-commerce.
    The Committee believes that the Agreement meets the 
objectives and priorities set forth in the Bipartisan Trade 
Promotion Authority Act of 2002. For example, more than 99 
percent of tariff lines for U.S. manufactured exports to 
Australia will become duty free immediately upon entry into 
force of the Agreement, representing the most significant 
immediate reduction of industrial tariffs ever achieved in a 
U.S. FTA and providing immediate benefits for America's 
manufacturing workers, consumers, and companies. Because 
Australian tariffs are much higher than U.S. average tariffs, 
American firms today pay 10 times as much in total annual 
import tariffs to Australia as the United States collects from 
Australian imports, according to a USTR report. There will be 
significant benefits for key U.S. manufacturing sectors such as 
autos and auto parts; chemicals, plastics and soda ash; 
information technology products; electrical equipment and 
appliances; non-electrical machinery; fabricated metal 
products; construction equipment; paper and wood products; 
furniture and fixtures; and medical and scientific equipment.
    Notwithstanding the outstanding provisions on industrial 
market access noted above, one sector that warrants special 
discussion is textiles and apparel, for which the market access 
provisions in the Agreement are considerably less ambitious. 
Specifically, the FTA requires a yarn-forward rule of origin 
which, in the case of Australia, provides little benefit to 
Australia because it produces minimal quantities of yarn. As a 
result, the Committee understands that at Australia's request, 
the duties on over 90 percent of textile and apparel trade will 
not be eliminated until year ten of the Agreement. The 
Committee notes that, by contrast, the Chile and Singapore FTAs 
provide immediate duty-free treatment for all qualifying 
textile and apparel goods, as do the recently negotiated 
Bahrain FTA and the Central American FTA. The Committee expects 
that the immediate liberalization for qualifying goods included 
in these other agreements will be the model for future 
agreements.
    In addition, the Committee believes that maintaining a 
current short supply list under the FTA is integral to the 
effective functioning of the rule of origin for textiles and 
apparel. The Committee expects the President to seek to 
incorporate all existing and future affirmative short supply 
determinations from other trade agreements and trade preference 
programs into the textile and apparel rule of origin for this 
FTA. Moreover, given that prior short supply designations have 
already undergone public comment and consultation with domestic 
parties, the President should apply those designations to this 
FTA without further public investigation. Finally, the 
Committee clarifies that the short supply provision included in 
this FTA, as well as previous FTAs and trade preference 
programs enacted by Congress, only contemplates items being 
added to the list of short supply items. In other words, once 
an item is designated as being in short supply under this FTA, 
other FTAs, and trade preference programs, the item is 
permanently designated as such unless otherwise provided for by 
the statute implementing the FTA or trade preference program.
    On agriculture market access, all U.S. agricultural exports 
to Australia will receive immediate duty-free access under the 
Agreement. About 67 percent of U.S. tariffs are immediately 
reduced to zero, and most remaining agriculture tariffs are 
phased out in three baskets: 4 years, 10 years, and 18 years. 
There is less liberalized treatment for imports of Australian 
beef and dairy. The Committee notes with particular 
disappointment the exclusion of sugar liberalization in the FTA 
and expects that this omission will not be reflected in future 
FTAs brought before the Committee.
    In services, the Committee is pleased that the Agreement 
utilizes a trade-enhancing ``negative list'' approach to ensure 
maximum market access for services providers. Australia will 
accord substantial market access across its entire services 
regime, offering access in sectors such as telecommunications, 
express delivery, computer and related services, tourism, 
energy, construction and engineering, financial services, 
insurance, audio/visual and entertainment, professional, 
environmental, education and training, and other services 
sectors.
    The FTA calls for higher standards for protecting 
intellectual property rights such as copyrights, patents, 
trademarks, and trade secrets, as well as enhanced means for 
enforcing those rights. Both Parties also agree to adopt state-
of-the-art protection for digital products such as software, 
music, text, and videos, and to ratify or accede to theWorld 
Intellectual Property Organization (WIPO) Copyright Treaty and the WIPO 
Performances and Phonograms Treaty by the date of entry into force of 
the agreement.
    During consideration of the implementing bill in Committee, 
some Members raised concerns that the FTA could limit Congress' 
ability to enact legislation to allow drug reimportation. The 
Committee strongly believes that these concerns are groundless 
because the FTA does not prevent Congress from changing U.S. 
laws, including allowing reimportation of prescription drugs. 
The Agreement includes a provision whereby both nations agree 
to protect patent owners' rights to determine how, by contract 
or other means, their patent is used by a licensed third party. 
This provision is not specific to pharmaceuticals nor is it a 
new provision in trade agreements. It reiterates and is 
consistent with existing U.S. patent laws. That is, under U.S. 
law patent holders already have the right through contracts and 
by other means to limit the use of their products. H.R. 4759 
does not change U.S. patent laws or the Federal Food, Drug, and 
Cosmetic Act.
    Further, Australian law already prohibits the exportation 
of drugs dispensed under the Pharmaceutical Benefits Scheme 
(PBS) to other nations. The PBS subsidizes the cost of a 
comprehensive range of medicines for all Australian residents 
and covers over 90% of the Australian pharmaceutical market. 
Australian law does allow exportation of non-PBS dispensed 
drugs, regardless of whether they are generics or brand name, 
but only by the original manufacturer or its Australian 
licensed distributor. Thus any change in U.S. law would have no 
practical effect on reimportation from Australia due to 
Australian domestic law--not the FTA--and therefore Australia 
would have no plausible basis to claim harm or pursue 
sanctions.
    The government procurement commitments in the FTA are 
particularly significant and commercially important to the 
United States because Australia is one of the only developed 
countries that is not a party to the WTO Agreement on 
Government Procurement. U.S. suppliers are granted rights to 
bid on contracts to supply Australian government ministries, 
agencies and departments above certain contract values 
specified in the Agreement (low-value contracts/micro purchases 
are excluded). The Agreement covers the purchases of 80 
Australian central government entities, including key 
ministries and government enterprises. The Australian central 
government will eliminate its industry development programs 
under which suppliers have had to provide various types of 
offsets like local content or local manufacturing requirements 
as a condition of their contracts. Procurement by Australia's 
states and territories is also covered under the FTA. 
Australia's states have agreed to phase-out ``off set'' 
requirements and state procurement presents significant market 
opportunities for U.S. companies.
    The Committee strongly supports the inclusion of an 
investor-state dispute resolution mechanism in every FTA, but 
notes that the Australia FTA does not include such a mechanism. 
The Committee acknowledges the Administration's belief that 
Australia presents a unique set of circumstances and that very 
few other countries in the world are in similar circumstances. 
Certainly none of the other countries that is currently being 
considered for FTAs fall within this category. Moreover, the 
United States retains the right to revisit inclusion of an 
investor-state dispute resolution mechanism in the FTA should 
circumstances change. Specifically, there is a provision in the 
FTA stating that if one of the Parties believes there are 
changed circumstances, it can request consultations with an eye 
to negotiating an investor-state dispute resolution mechanism. 
The United States also retains the right to address investment 
disputes in the FTA through the state-to-state dispute 
resolution mechanism available under the Agreement.
    All U.S. investment in new businesses in Australia will be 
exempted from screening under Australia's Foreign Investment 
Promotion Board (FIRB). Thresholds for acquisitions by U.S. 
investors in nearly all sectors will be raised significantly, 
from A$50 million to A$800 million. This higher threshold would 
have exempted nearly 90 percent of U.S. investment transactions 
from screening over the past three years.
    The Agreement also contains obligations under which each 
government commits to enforce its domestic labor and 
environmental laws, as required by TPA. The Committee notes 
that Australian labor laws comply with core labor standards set 
forth by the International Labor Organization (ILO). 
Accordingly, requiring that each government enforce its labor 
laws is tantamount to an enforceable ILO standard. Similarly, 
Australia's environmental laws are world class.
    As noted above, this legislation is being considered by 
Congress under TPA procedures. As such, the Agreement has been 
negotiated by the President in close consultation with 
Congress, and it can be approved and implemented through 
legislation using streamlined procedures. Pursuant to TPA 
requirements, the President is required to provide written 
notice to Congress of the President's intention to enter into 
the negotiations. Throughout the negotiating process, and prior 
to entering into an agreement, the President is required to 
consult with Congress regarding the ongoing negotiations.
    The President must notify the Congress of his intent to 
enter into a trade agreement at least 90 calendar days before 
the agreement is signed. Within 60 days after entering in the 
Agreement, the President must submit to the Congress a 
description of those changes to existing laws that the 
President considers would be required in order to bring the 
United States into compliance with the Agreement. After 
entering into the Agreement, the President must also submit to 
the Congress the formal legal text of the agreement, draft 
implementing legislation, a statement of administrative action 
proposed to implement the Agreement, and other related 
supporting information as required under section 2105(a) of 
TPA. Following submission of these documents, the implementing 
bill is introduced, by request, by the Majority Leader in each 
chamber. The House then has up to 60 days to consider 
implementing legislation for the Agreement (the Senate has up 
to an additional 30 days). No amendments to the legislation are 
allowed under TPA requirements.

                         C. Legislative History

    On November 13, 2002, the President first notified Congress 
of his intent to negotiate an FTA with Australia. FTA 
negotiations between the United States and Australia began in 
March 2003 and concluded in February 2004. During and after the 
negotiations, the President continued his consultations with 
Congress pursuant to the letter and spirit of the TPA 
requirements. On February 13, 2004, the President notified 
Congress of his intent to enter into the U.S.-Australia FTA. 
The text of the U.S.-Australia FTA was released to the public 
on March 3, 2004. Under TPA procedures, the President is able 
to sign an FTA ninety calendar days after he has notified 
Congress. Accordingly, the FTA was signed on May 18 by U.S. 
Trade Representative Robert B. Zoellick and Australian Minister 
for Trade Mark Vaile.
    On June 16, 2004, the Committee on Ways and Means held a 
hearing on the U.S.-Australia FTA. The Committee received 
testimony supporting the Agreement from the Administration and 
numerous U.S. private sector companies and organizations. On 
June 23, 2004, the Committee on Ways and Means considered in an 
informal markup session draft implementing legislation for the 
Australia FTA. The Committee approved the draft implementing 
legislation by voice vote, without amendment.
    On July 6, 2004, President Bush formally transmitted to 
Congress the formal legal text of the U.S.-Australia FTA, 
implementing legislation, a statement of administrative action 
proposed to implement the Agreement, and other related 
supporting information as required under section 2105(a) of 
TPA. Following this transmittal, on July 6, 2004, Majority 
Leader DeLay introduced, by request, H.R. 4759 to implement the 
U.S.-Australia FTA. The bill was referred to the Committee on 
Ways and Means.
    On July 8, 2004, the Committee on Ways and Means formally 
met to consider H.R. 4759. The Committee ordered H.R. 4759 
favorably reported to the House of Representatives by voice 
vote, without amendment; under the requirements of TPA, 
amendments were not permitted.
    In accordance with TPA requirements, President Bush 
submitted to Congress on July 9, 2004 a description of the 
changes to existing U.S. laws that would be required to bring 
the United States into compliance with the Agreement.

                     II. SECTION-BY-SECTION SUMMARY


                Title I: Approval and General Provisions


               SECTION 101: APPROVAL AND ENTRY INTO FORCE

Current law

    No provision.

Explanation of provision

    Section 101 states that Congress approves the Agreement and 
the Statement of Administrative Action and provides that the 
Agreement enters into force when the President determines that 
Australia is in compliance and has exchanged notes, on or after 
January 1, 2005.

Reason for change

    Approval of the Agreement and the Statement of 
Administrative Action is required under the procedures of 
section 2103(b)(3) of the Bipartisan Trade Promotion Authority 
Act of 2002. The remainder of section 101 provides for entry 
into force of the Agreement.

    SECTION 102: RELATIONSHIP OF THE AGREEMENT TO U.S. AND STATE LAW

Current law

    No provision.

Explanation of provision

    Section 102 provides that U.S. law is to prevail in a 
conflict and states that the Agreement does not preempt state 
rules that do not comply with the Agreement. Only the United 
States is entitled to bring a court action to resolve a 
conflict between a state law and the Agreement.

Reason for change

    Section 102 is necessary to make clear the relationship 
between the Agreement and federal and state law, respectively.

 SECTION 103: IMPLEMENTING ACTIONS IN ANTICIPATION OF ENTRY INTO FORCE 
                        AND INITIAL REGULATIONS

Current law

    No provision.

Explanation of provision

    Section 103(a) provides that after the date of enactment, 
the President may proclaim actions and issue regulations as 
necessary to ensure that any provision of this Act that takes 
effect on the date that the Agreement is entered into force is 
appropriately implemented, but not before the date the 
Agreement enters into force.
    Section 103(b) establishes that regulations necessary or 
appropriate to carrying out the actions proposed in the 
Statement of Administrative Action shall, to the maximumextent 
feasible, be issued within one year of entry into force or the 
effective date of the provision.

Reason for change

    Section 103 provides for the issuance of regulations. The 
Committee strongly believes that regulations should be issued 
in a timely manner in order to provide maximum clarity to 
parties claiming benefits under the Agreement. As noted in the 
Statement of Administrative Action, the regulation-issuing 
agency will provide a report to Congress not later than thirty 
days before one year elapses on any regulation that is going to 
be issued later than one year.

      SECTION 104: CONSULTATION AND LAYOVER FOR PROCLAIMED ACTIONS

Current law

    No provision.

Explanation of provision

    Section 104 provides that where the President is given 
proclamation authority subject to consultation and layover, he 
may proclaim action only after he has: obtained advice from the 
International Trade Commission and the appropriate private 
sector advisory committees; submitted a report to the House 
Ways and Means and Senate Finance Committees concerning the 
reasons for the action; and consulted with the Committees. The 
President may proclaim the proposed action after 60 days have 
elapsed.

Reason for change

    The bill gives the President certain proclamation authority 
but requires extensive consultation with Congress before such 
authority may be exercised. The Committee believes that such 
consultation is an essential component of the delegation of 
authority to the President and expects that such consultations 
will be conducted in a thorough manner.

     SECTION 105: ADMINISTRATION OF DISPUTE SETTLEMENT PROCEEDINGS

Current law

    No provision.

Explanation of provision

    Section 105 authorizes the President to establish an office 
within the Commerce Department responsible for providing 
administrative assistance to any panels that may be established 
under the Agreement and authorizes appropriations for the 
office and for payment of the U.S. share of expenses.

Reason for change

    The Committee believes that the Commerce Department is the 
appropriate agency to provide administrative assistance to 
panels.

          SECTION 106: EFFECTIVE DATES; EFFECT OF TERMINATION

Current law

    No provision.

Explanation of provision

    The effective date of this Act is date the Agreement enters 
into force with respect to the United States except sections 1-
3 and Title I take effect upon the date of enactment. The 
provisions of the Act terminate on the date on which the 
Agreement terminates.

Reason for change

    Section 106 implements U.S. obligations under the 
Agreement.

                      Title II: Customs Provisions


                   SECTION 201: TARIFF MODIFICATIONS

Current law

    No provision.

Explanation of provision

    Section 201(a) provides the President with the authority to 
proclaim tariff modifications to carry out the Agreement.
    Section 201(b) gives the President the authority to 
proclaim further tariff modifications, subject to consultation 
and layover, as the President determines to be necessary or 
appropriate to maintain the general level of reciprocal and 
mutually advantageous concessions with respect to Australia 
provided for by the Agreement.
    Section 201(c) allows the President, for any goods for 
which the base rate is a specific or compound rate of duty, to 
substitute for the base rate an ad valorem rate to carry out 
the tariff modifications in subsections (a) and (b).

Reason for change

    Section 201(a) is necessary to put the United States in 
compliance with the market access provisions of the Agreement. 
Section 201(b) gives the President flexibility to maintain the 
trade liberalizing nature of the Agreement. The Committee 
expects the President to comply with the letter and spirit of 
the consultation and layover provisions of this Act in carrying 
out this subsection. Section 201(c) allows the President to 
convert tariffs to ad valorem rates to carry out the tariff 
modifications in the Agreement.

      SECTION 202: ADDITIONAL DUTIES ON CERTAIN AGRICULTURAL GOODS

Current law

    No provision.

Explanation of provision

    Section 202 of the bill implements the agricultural 
safeguard provisions of article 3.4 and Annex 3-A of the 
Agreement. Article 3.4 permits the United States to impose an 
agricultural safeguard measure, in the form of additional 
duties, on imports from Australia of an agricultural good 
listed in the U.S. schedule to Annex 3-A of the Agreement. The 
bill provides for three different types of agricultural 
safeguards. The first applies to certain horticulture goods 
specified in Annex 3-A of the Agreement. The second applies to 
certain beef goods imported into the United States above 
specified quantities (``quantity-based safeguard'') during the 
period from January 1, 2013 through December 31, 2022. The 
third applies to the same categories of beef goods if they are 
imported into the United States above specified quantities and 
the monthly average index price in the United States falls 
below the specified ``trigger'' price (``price-based 
safeguard'') beginning January 1, 2023.
    No additional duty may be applied under section 202 if, at 
the time of entry, the good is subject to import relief under 
subtitle A of title III of this bill (the general safeguard) or 
chapter 1 of title II of the Trade Act of 1974 (``section 201'' 
relief). The assessment of an additional duty under either the 
horticulture safeguard or the quantity-based beef safeguard 
shall cease to apply to a good on the date on which duty-free 
treatment must be provided to that good. There is no 
termination date for the price-based beef safeguard. The sum of 
the duties assessed under an agricultural safeguard and the 
applicable rate of duty in the U.S. schedule may not exceed the 
lesser of the existing normal trade relation (NTR)/most favored 
nation (MFN) rate or the NTR/MFN rate imposed when the 
Agreement entered into force.
    Sections 202(c)(4) and (d)(5) provide that the United 
States Trade Representative may waive the application of the 
quantity-based beef safeguard and the price-based beef 
safeguard if he determines that extraordinary market conditions 
demonstrate that a waiver would be in the U.S. national 
interest, after notice and consultation with the House Ways and 
Means and Senate Finance Committees and the appropriate private 
sector advisory committees.

Reason for change

    Section 202 implements the agriculture safeguard provisions 
of article 3.4 and Annex 3-A of the Agreement and provides 
important security to U.S. farmers.

                      SECTION 203: RULES OF ORIGIN

Current law

    No provision.

Explanation of provision

    Section 203 codifies the rules of origin set out in chapter 
5 of the Agreement. Under the general rules, there are four 
basic ways for a good of Australia to qualify as an 
``originating good'' and therefore be eligible for preferential 
tariff treatment when it is imported into the United States. A 
good is an originating good if: (1) it is ``wholly obtained or 
produced entirely in the territory of Australia, the United 
States, or both''; (2) those materials used to produce the good 
that are not themselves originating goods are transformed in 
such a way as to cause their tariff classification to change or 
meet other requirements, as specified in Annex 4-A or Annex 5-A 
of the Agreement; (3) it is produced entirely in the territory 
of Australia, the United States, or both exclusively from 
originating materials; or (4) it otherwise qualifies as an 
originating good under chapter 4 or chapter 5 of the Agreement.
    Under the rules in chapter 5.1 and Annex 4-A of the 
Agreement, an apparel product must generally meet a tariff 
shift rule that implicitly imposes a ``yarn forward'' 
requirement. Thus, to qualify as an originating good imported 
into the United States from Australia, an apparel product must 
have been cut (or knit to shape) and sewn or otherwise 
assembled in Australia from yarn, or fabric made from yarn, 
that originates in Australia or the United States, or both.
    The remainder of section 203 of the implementing bill sets 
forth more detailed rules for determining whether a good meets 
the Agreement's requirements under the second method of 
qualifying as an originating good. These provisions include 
rules pertaining to de minimis quantities of non-originating 
materials that do not undergo a tariff transformation, 
transformation by regional content, and the alternative methods 
for calculating regional value content. Other provisions in 
section 203 address valuation of materials and determination of 
the originating or non-originating status of fungible goods and 
materials.

Reason for change

    Rules of origin are needed in order to confine Agreement 
benefits, such as tariff cuts, to Australian goods and to 
prevent third-country goods from being transshippedthrough 
Australia and claiming benefits under the Agreement. Section 203 puts 
the United States in compliance with the rules of origin provisions of 
the agreement.

                     SECTION 204: CUSTOMS USER FEES

Current law

    Section 58c of the Title 19 lays out various user fees 
applied by customs officials to imports, including the 
Merchandise Processing Fee (MPF), which is applied on an ad 
valorem basis subject to a cap.

Explanation of provision

    Section 204 implements U.S. commitments under article 
3.12(4) of the Agreement regarding the exemption of the 
merchandise processing fee on originating goods. This provision 
is similar to those included in the implementing legislation 
for the North American Free Trade Agreement, the U.S.-Singapore 
Free Trade Agreement, and the U.S.-Chile Free Trade Agreement. 
The provision also prohibits use of funds in the Customs User 
Fee Account to provide services related to entry of originating 
goods, in accordance with U.S. obligations under the General 
Agreement on Tariffs and Trade 1994.

Reason for change

    As with other free trade agreements, the Agreement 
eliminates the merchandise processing fee on qualifying goods 
from Australia. Other customs user fees remain in place. 
Section 204 is necessary to put the United States in compliance 
with the user fee elimination provisions of the Agreement. The 
Committee expects that the President, in his yearly budget 
request, will take into account the need for funds to pay 
expenses for entries under the Agreement given that MPF funds 
will not be available.

            SECTION 205: DISCLOSURE OF INCORRECT INFORMATION

Current law

    No provision.

Explanation of provision

    Section 205, which implements article 5.13(4) of the 
Agreement, prohibits the imposition of a penalty upon importers 
who make an invalid claim for preferential tariff treatment 
under the Agreement if the importer acts promptly and 
voluntarily to correct the error and pays any duty owing. 
Importers have at least a 12-month grace period after 
submitting an invalid claim in which to correct it.

Reason for change

    Section 205 is necessary to put the United States into 
compliance with Article 5.13(4) of the Agreement.

SECTION 206: ENFORCEMENT RELATING TO TRADE IN TEXTILE AND APPAREL GOODS

Current law

    No provision.

Explanation of provision

    Section 206 implements the verification provisions of the 
Agreement at article 4.3 and authorizes the President to take 
appropriate action while the verification is being conducted. 
Such appropriate action includes suspending preferential tariff 
treatment to the textile or apparel good for which a claim of 
origin has been made or, in a case where the request for 
verification was based on a reasonable suspicion of unlawful 
activity related to such goods, for textile or apparel goods 
exported or produced by the person subject to a verification. 
If the Secretary determines that the information obtained from 
verification is insufficient to make a determination, the 
President may take appropriate action described in section 
206(d), including publishing the name and address of the person 
subject to the verification and denial of preferential 
treatment and denial of entry to certain textile and apparel 
goods produced or exported by the person subject to the 
verification.

Reason for change

    In order to ensure that only qualifying textile and apparel 
goods receive preferential treatment under the Agreement, 
special textile enforcement provisions are included in the 
Agreement. Section 208 is necessary to authorize these 
enforcement mechanisms for use by U.S. authorities.

                        SECTION 207: REGULATIONS

Current law

    No provision.

Explanation of provision

    Section 207 provides that the Secretary of the Treasury 
shall issue regulations to carry out provisions of this bill 
related to rules of origin and Customs user fees.

Reason for change

    Because the implementing bill involves lengthy and complex 
implementation procedures by customs officials, section 207 is 
necessary in order to authorize the Secretary of the Treasury 
to carry out provisions of the implementing bill through 
regulations.

                     Title III: Relief From Imports


Subtitle A: Relief From Imports Benefiting From the Agreement (Sections 
                                311-316)


Current law

    No provision.

Explanation of provision

    Sections 311-316 authorize the President, after an 
investigation and affirmative determination by the U.S. 
International Trade Commission, to impose specified import 
relief when, as a result of the reduction or elimination of a 
duty under the Agreement, an Australian product is being 
imported into the United States in such increased quantities 
and under such conditions as to be a substantial cause of 
serious injury or threat of serious injury to the domestic 
industry.
    Section 311(c) defines ``substantial cause'' and applies 
factors in making determinations in the same manner as section 
201 of the Trade Act of 1974.
    Section 311(d) exempts from investigation under this 
section Australian articles for which import relief has been 
provided under this safeguard since the Agreement entered into 
force.
    Under sections 312(b) and (c), if the ITC makes an 
affirmative determination, it must find and recommend to the 
President the amount of import relief that is necessary to 
remedy or prevent serious injury and to facilitate the efforts 
of the domestic industry to make a positive adjustment to 
import competition.
    Under section 313(a), the President may provide import 
relief to the extent that the President determines is necessary 
to remedy or prevent the injury found by the ITC and to 
facilitate the efforts of the domestic industry to make a 
positive adjustment to import competition.
    Under section 313(b), the President is not required to 
provide import relief if the President determines that the 
relief will not provide greater economic and social benefits 
than costs.
    Section 313(c) sets forth the nature of the relief that the 
President may provide as: a suspension of further reductions 
for the article; or an increase to a level that does not exceed 
the lesser of the existing NTR/MFN rate or the NTR/MFN rate 
imposed when the Agreement entered into force. Section 
313(c)(1)(C) specifies that if a duty is applied on a seasonal 
basis, then the NTR/MFN rate corresponds to the immediately 
preceding season. Section 313(c)(2) states that if the 
President provides relief for greater than one year, it must be 
subject to progressive liberalization at regular intervals over 
the course of its application.
    Section 313(d) states that the import relief that the 
President is authorized to provide may not exceed two years. If 
the President determines that import relief continues to be 
necessary and there is evidence that the industry is making 
positive adjustment to import competition, then he may extend 
the relief, but the aggregate period of relief, including 
extensions, may not exceed four years.
    Section 314 provides that no relief may be provided under 
this subtitle after ten years from the date the Agreement 
enters into force, unless the tariff elimination for the 
article under the Agreement is greater than ten years, in which 
case relief may not be provided for that article after the 
period for tariff elimination for that article ends.
    Section 315 authorizes the President to provide 
compensation to Australia consistent with article 9.4 of the 
Agreement.
    Section 316 provides for the treatment of confidential 
business information.

Reason for change

    The Committee believes that it is important to have in 
place a temporary, extraordinary mechanism if a U.S. industry 
experiences injury by reason of increased import competition 
from Australia in the future, with the understanding that the 
President is not required to provide relief if the relief will 
not provide greater economic or social benefits than costs. The 
Committee intends that administration of this safeguard be 
consistent with U.S. obligations under Chapter Nine 
(Safeguards) of the Agreement.

      Subtitle B: Textile and Apparel Safeguard (Sections 321-328)


Current Law

    No provision.

Explanation of provision

    Section 321 provides that a request for safeguard relief 
under this subtitle may be filed with the President by an 
interested party. The President is to review the request and 
determine whether to commence consideration of the request. If 
the President determines to commence consideration of the 
request, he is to publish a notice commencing consideration and 
seeking comments. The notice is to include a summary of the 
request.
    Section 321(b) allows an interested party to allege 
critical circumstances (such that delay in the provision of 
relief would cause damage that would be difficult to repair) 
and request that relief be provided on a provisional basis.
    Section 322(a) of the Act provides for the President to 
determine, pursuant to a request by an interested party, 
whether, as a result of the elimination of a duty provided 
under the Agreement, an Australian textile or apparel article 
is being imported into the United States in such increased 
quantities, in absolute terms or relative to the domestic 
market for that article, and under such conditions as to cause 
serious damage, or actual threat thereof, to a domestic 
industry producing an article that is like, or directly 
competitive with, the imported article.
    Section 322(b) identifies the relief that the President may 
provide, which is the lesser of the existing NTR/MFN rate or 
the NTR/MFN rate imposed when the Agreement entered into force. 
Section 322(c) provides that when an allegation of critical 
circumstances is made, the President shall make a determination 
whether there is clear evidence that critical circumstances 
exist. If the determination is affirmative, he may provide 
provisional relief for up to 200 days.
    Section 323 of the bill provides that the period of relief 
shall be no longer than two years (including any provisional 
relief). The President may extend the relief, but the aggregate 
period of relief, including extensions, may not exceed four 
years.
    Section 324 provides that relief may not be granted to an 
article under this safeguard if relief has previously been 
granted under this safeguard, or the article is subject to 
import relief under subtitle A of title III of this bill or 
under chapter 1 of title II of the Trade Act of 1974.
    Under section 325, after a safeguard expires, the rate of 
duty on the article that had been subject to the safeguard 
shall be the rate that would have been in effect but for the 
safeguard action.
    Section 326 states that the authority to provide safeguard 
relief under this subtitle expires ten years after the date on 
which duties on the article are eliminated pursuant to the 
Agreement. Section 327 of the Act gives authority to the 
President to provide compensation to Australia if he orders 
relief. Section 328 provides for the treatment of business 
confidential information.

Reason for change

    The Committee intends that the provisions of subtitle B be 
administered in a manner that is in compliance with U.S. 
obligations under Article 4.1 of the Agreement. In particular, 
the Committee expects that the President will implement a 
transparent process that will serve as an example to our 
trading partners. For example, in addition to publishing a 
summary of the request for safeguard relief, the Committee 
notes that the President plans to make available the full text 
of the request, subject to the protection of business 
confidential data, on the Department of Commerce, International 
Trade Administration's website. In addition, the Committee 
encourages the President to issue regulations on procedures for 
requesting such safeguard measures, for making its 
determinations under section 322(a), and for providing relief 
under sections 322(b) and (c).
    The Agreement and implementing bill include a critical 
circumstance provision which allows provisional safeguard 
relief to be granted under the textile and apparel safeguard. 
The Committee notes that this provision was included at 
Australia's request, and this Agreement is the only FTA 
negotiated by the United States that includes such a provision. 
USTR has assured the Committee that this language is not a 
precedent for future FTAs. The Committee will be mindful of 
those assurances in future negotiations.

Subtitle C: Cases Under Title II of the Trade Act of 1974 (Section 331)


Current law

    The President has no authority under Title II of the Trade 
Act of 1974 (``section 201'') to exclude Australian articles 
from the application of a safeguard remedy. A similar authority 
is granted with respect to Singaporean articles in section 331 
of the United States-Singapore Free Trade Area Implementation 
Act and to articles from Jordan in section 221 of the U.S.-
Jordan Free Trade Area Implementation Act.

Explanation of provision

    If, in any investigation initiated under title II of the 
Trade Act of 1974 (``section 201'' action), the ITC makes an 
affirmative determination, the ITC shall also find and report 
to the President whether imports of the article from Australia 
are a substantial cause of serious injury or threat thereof. In 
determining relief to be taken under section 201, the President 
shall determine whether imports from Australia are a 
substantial cause of the serious injury or threat thereof found 
by the Commission and, if such determination is negative, may 
exclude from such actions products from Australia.

Reason for change

    This provision implements U.S. obligations under Article 
9.5 of the Agreement.

                         Title IV: Procurement


Current law

    U.S. procurement law (the Buy American Act of 1933 and the 
Buy American Act of 1988) discriminates against foreign 
suppliers of goods and services in favor of U.S. providers of 
goods and services. Most discriminatory purchasing provisions 
are waived if the United States has a bilateral or multilateral 
procurement agreement, such as theWTO Agreement on Government 
Procurement or the North American Free Trade Agreement.

Explanation of provision

    Section 401 implements chapter Fifteen of the Agreement and 
amends the definition of ``eligible product'' in section 308 of 
the Trade Agreements Act of 1979. As amended, section 308(4)(A) 
will provide that, for a party to a free trade agreement that 
entered into force for the United States after December 31, 
2003 and prior to January 2, 2005, an ``eligible product'' 
means ``a product or service of that country or instrumentality 
which is covered under the free trade agreement for procurement 
by the United States.'' This amended definition coupled with 
the President's exercise of his authority under section 301(a) 
of the Trade Agreement Act will allow procurement of products 
and services of Australia and other parties to free trade 
agreements that entered into force during the specified time 
period.

Reason for change

    This provision implements U.S. obligations under Chapter 
Fifteen of the Agreement, as well as U.S. obligations with 
respect to free trade agreements that entered into force for 
the United States after December 31, 2003 and prior to January 
2, 2005.

                       III. VOTE OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII 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 the bill, H.R. 4759.

                       MOTION TO REPORT THE BILL

    The bill, H.R. 4759, was ordered favorably reported by 
voice vote (with a quorum being 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 this bill, H.R. 
4759 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.R. 4759 would reduce customs duty receipts due 
to lower tariffs imposed on goods from Australia.

      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, 2004.
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.R. 4759, a bill to 
implement the United States-Australia Free Trade Agreement.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Annabelle 
Bartsch.
            Sincerely,
                                               Douglas Holtz-Eakin.
    Enclosure.

H.R. 4759--A bill to implement the United States-Australia Free Trade 
        Agreement

    Summary: H.R. 4759 would approve the free trade agreement 
(FTA) between the government of the United States and the 
government of Australia that was entered into on May 18, 2004. 
It would provide for tariff reductions and other changes in law 
related to implementation of the agreement.
    The Congressional Budget Office estimates that enacting the 
bill would reduce revenues by $29 million in 2005, by $293 
million over the 2005-2009 period, and by $884 million over the 
2005-2014 period, net of income and payroll tax offsets. The 
bill also would increase direct spending by less than $500,000 
in 2005. Implementing the bill would cost less than $500,000 in 
each year, subject to appropriation of the necessary amounts.
    CBO has determined that H.R. 4759 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: The estimated 
budgetary impact of H.R. 4759 over the 2004-2009 period is 
shown in the following table.

----------------------------------------------------------------------------------------------------------------
                                                                  By fiscal year, in millions of dollars--
                                                           -----------------------------------------------------
                                                              2004     2005     2006     2007     2008     2009
----------------------------------------------------------------------------------------------------------------
                                               CHANGES IN REVENUES

Estimated Revenues........................................        0      -29      -47      -58      -71      -89

                                         CHANGES IN DIRECT SPENDING \1\

Estimated Budget Authority................................        0        *        0        0        0        0
Estimated Outlays.........................................        0        *        0        0        0        0
----------------------------------------------------------------------------------------------------------------
\1\ H.R. 4759 also would affect spending subject to appropriation, but the amounts of those changes would be
  less than $500,000 a year.
Note: * = increase of less than $500,000.

    Basis of estimate: For the purpose of this estimate, CBO 
assumed that H.R. 4759 would be enacted by October 1, 2004.

Revenues

    Under the United States-Australia agreement, all tariffs on 
U.S. imports from Australia would be phased out over time. The 
tariffs would be phased out for individual products at varying 
rates according to one of several different timetables ranging 
from immediate elimination to gradual elimination over 18 
years. According to the U.S. International Trade Commission 
(USITC), the United States collected $109 million in customs 
duties in 2003 on about $6.5 billion of imports from Australia. 
Those imports consist mostly of chilled and frozen meat, wine, 
certain motor vehicles and motor vehicle components, and 
various products made of metal. Based on these data, CBO 
estimates that phasing out tariff rates as outlined in the 
U.S.-Australia agreement would reduce revenues by $29 million 
in 2004, by $293 million over the 2005-2009 period, and by $884 
million over the 2005-2014 period, net of income and payroll 
tax offsets.
    This estimate includes the effects of increased imports 
from Australia that would result from the reduced prices of 
imported products in the United States, reflecting the lower 
tariff rates. It is likely that some of the increase in U.S. 
imports from Australia would displace imports from other 
countries. In the absence of specific data on the extent of 
this substitution effect, CBO assumes that an amount equal to 
one-half of the increase in U.S. imports from Australia would 
displace imports from other countries.

Direct spending

    H.R. 4759 would exempt certain Australian imported goods 
from the merchandise processing fee collected by the Bureau of 
Customs and Border Protection (CBP). Under current law, those 
fees will expire after March 1, 2005. Based on information from 
the CBP, we estimate that enacting the bill would decrease fee 
collections by less than $500,000 in fiscal year 2005.

Spending subject to appropriation

    Section 104 of H.R. 4759 would authorize the appropriation 
of whatever sums are necessary to the Department of Commerce 
(DoC) for administrative support for Chapter 21 of the 
agreement. Based on information from DoC regarding its 
experience with similar requirements in recent free trade 
agreements, CBO estimates that implementing section 104 would 
cost about $100,000 per year, assuming appropriation of the 
necessary amounts.
    Summary of effect on revenues and direct spending: The 
effects of H.R. 4759 on revenues and direct spending over the 
2005-2014 period are shown in the following table.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        By fiscal year, in millions of dollars--
                                                               -----------------------------------------------------------------------------------------
                                                                  2005     2006     2007     2008     2009     2010     2011     2012     2013     2014
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in receipts...........................................      -29      -47      -58      -71      -89     -101     -109     -118     -127     -137
Changes in outlays............................................        *        0        0        0        0        0        0        0        0        0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: * = increase of less than $500,000.

    Intergovernmental and private-sector impact: The bill 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would not affect the budgets of state, 
local, or tribal governments.
    Estimate prepared by: Federal Revenues: Annabelle Bartsch; 
Federal Costs: Mark Grabowicz and Melissa Zimmerman; Impact on 
State, Local, and Tribal Governments: Melissa Merrell; and 
Impact on the Private Sector: Crystal Taylor.
    Estimate approved by: G. Thomas Woodward, Assistant 
Director for Tax Analysis; and Robert A. Sunshine, Assistant 
Director for Budget Analysis.

     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, concluded that it is 
appropriate and timely to consider the bill as reported. In 
addition, the legislation is governed by procedures of the 
Bipartisan Trade Promotion Authority Act of 2002.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill contains no measure that authorizes funding, so no 
statement of general performance goals and objectives for which 
any measure authorizes funding is required.

                 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 1 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.')

              D. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Act of 1995 (P.L. 104-4).
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

SECTION 13031 OF THE CONSOLIDATED OMNIBUS BUDGET RECONCILIATION ACT OF 
                                  1985


SEC. 13031. FEES FOR CERTAIN CUSTOMS SERVICES.

    (a) * * *
    (b) Limitations on Fees.--(1) * * *

           *       *       *       *       *       *       *

    (14) No fee may be charged under subsection (a) (9) or (10) 
with respect to goods that qualify as originating goods under 
section 203 of the United States-Australia Free Trade Agreement 
Implementation Act. Any service for which an exemption from 
such fee is provided by reason of this paragraph may not be 
funded with money contained in the Customs User Fee Account.

           *       *       *       *       *       *       *

                              ----------                              


                 SECTION 592 OF THE TARIFF ACT OF 1930


SEC. 592. PENALTIES FOR FRAUD, GROSS NEGLIGENCE, AND NEGLIGENCE.

    (a) * * *

           *       *       *       *       *       *       *

    (c) Maximum Penalties.--
          (1) * * *

           *       *       *       *       *       *       *

          (8) Prior disclosure regarding claims under the 
        united states-australia free trade agreement.--
                  (A) In general.--An importer shall not be 
                subject to penalties under subsection (a) for 
                making an incorrect claim that a good qualifies 
                as an originating good under section 203 of the 
                United States-Australia Free Trade Agreement 
                Implementation Act if the importer, in 
                accordance with regulations issued by the 
                Secretary of the Treasury, voluntarily and 
                promptly makes a corrected declaration and pays 
                any duties owing.
                  (B) Time periods for making corrections.--In 
                the regulations referred to in subparagraph 
                (A), the Secretary of the Treasury is 
                authorized to prescribe time periods for making 
                a corrected declaration and paying duties owing 
                under subparagraph (A), if such periods are not 
                shorter than 1 year following the date on which 
                the importer makes the incorrect claim.
                  [(8)] (9) Seizure.--If the Secretary has 
                reasonable cause to believe that a person has 
                violated the provisions of subsection (a) and 
                that such person is insolvent or beyond the 
                jurisdiction of the United States or that 
                seizure is otherwise essential to protect the 
                revenue of the United States or to prevent the 
                introduction of prohibited or restricted 
                merchandise into the customs territory of the 
                United States, then such merchandise may be 
                seized and, upon assessment of a monetary 
                penalty, forfeited unless the monetary penalty 
                is paid within the time specified by law. 
                Within a reasonable time after any such seizure 
                is made, the Secretary shall issue to the 
                person concerned a written statement containing 
                the reasons for the seizure. After seizure of 
                merchandise under this subsection, the 
                Secretary may, in the case of restricted 
                merchandise, and shall, in the case of any 
                other merchandise (other than prohibited 
                merchandise), return such merchandise upon the 
                deposit of security not to exceed the maximum 
                monetary penalty which may be assessed under 
                subsection (c).

           *       *       *       *       *       *       *

                              ----------                              


                  SECTION 202 OF THE TRADE ACT OF 1974


SEC. 202. INVESTIGATIONS, DETERMINATIONS, AND RECOMMENDATIONS BY 
                    COMMISSION.

    (a) Petitions and Adjustment Plans.--
          (1) * * *

           *       *       *       *       *       *       *

          (8) The procedures concerning the release of 
        confidential business information set forth in section 
        332(g) of the Tariff Act of 1930 shall apply with 
        respect to information received by the Commission in 
        the course of investigations conducted under this 
        chapter, part 1 of title III of the North American Free 
        Trade Agreement Implementation Act, title II of the 
        United States-Jordan Free Trade Area Implementation 
        Act, title III of the United States-Chile Free Trade 
        Agreement Implementation Act, [and] title III of the 
        United States-Singapore Free Trade Agreement 
        Implementation Act, and title III of the United States-
        Australia Free Trade Agreement Implementation Act. The 
        Commission may request that parties providing 
        confidential business information furnish 
        nonconfidential summaries thereof or, if such parties 
        indicate that the information in the submission cannot 
        be summarized, the reasons why a summary cannot be 
        provided. If the Commission finds that a request for 
        confidentiality is not warranted and if the party 
        concerned is either unwilling to make the information 
        public or to authorize its disclosure in generalized or 
        summarized form, the Commission may disregard the 
        submission.

           *       *       *       *       *       *       *

                              ----------                              


            SECTION 308 OF THE TRADE AGREEMENTS ACT OF 1979


SEC. 308. DEFINITIONS.

    As used in this title--
          (1) * * *

           *       *       *       *       *       *       *

          (4) Eligible products.--
                  (A) In general.--The term ``eligible 
                product'' means, with respect to any foreign 
                country or instrumentality that is--
                          (i) a party to the Agreement, a 
                        product or service of that country or 
                        instrumentality which is covered under 
                        the Agreement for procurement by the 
                        United States; [or]
                          (ii) a party to the North American 
                        Free Trade Agreement, a product or 
                        service of that country or 
                        instrumentality which is covered under 
                        the North American Free Trade Agreement 
                        for procurement by the United 
                        States[.]; or
                          (iii) a party to a free trade 
                        agreement that entered into force with 
                        respect to the United States after 
                        December 31, 2003, and before January 
                        2, 2005, a product or service of that 
                        country or instrumentality which is 
                        covered under the free trade agreement 
                        for procurement by the United States.

           *       *       *       *       *       *       *


                               VII. VIEWS

                              ----------                              


     DISSENTING VIEWS OF REPRESENTATIVE EARL POMEROY ON H.R. 4759, 
    LEGISLATION TO IMPLEMENT THE UNITED STATES-AUSTRALIA FREE TRADE 
                               AGREEMENT

    I must express my opposition to H.R. 4759, legislation to 
implement the United States-Australia Free Trade Agreement. My 
concerns over the practices of the successor to the Australian 
Wheat Board, AWB Ltd., and over the discretionary authority 
given to waive beef safeguards have not been resolved by the 
text of this agreement.
    First, the Agreement does not address the need to reform 
unfair trading practices of the Australian Wheat Board. 
Instead, Australia has committed to working with the United 
States within the World Trade Organization to develop export 
competition disciplines that eliminate restrictions on the 
right of entities to export. I am pleased that Australia 
appears to be moving toward resolving this issue. Nevertheless, 
I remain concerned over the Australian Wheat Board's influence 
over the world wheat market. North Dakota's wheat producers 
have been disadvantaged time and again through our dealings 
with the Canadian Wheat Board. While I am well aware that the 
two entities--the Australian Wheat Board and the Canadian Wheat 
Board--are quite different from one another, I remain concerned 
that allowing this Agreement to go forward without strong 
language on the practices of this state trading enterprise is 
dangerous and sends the wrong message to our wheat producers.
    Additionally, an amendment was adopted in the Senate 
Finance Committee that would have limited the ability of U.S. 
trade officials to waive beef import safeguards. I strongly 
support this amendment and was disappointed in the later 
disapproval of the amended language by the committee. 
Unfortunately, the Administration submitted the U.S.-Australian 
free trade agreement to Congress without the amended language 
as well. I am concerned that this decision provides U.S. trade 
officials too much discretionary authority to waive the 
safeguards put in place by this agreement, thus placing the 
livelihood of our domestic cattle producers at risk.

                            ADDITIONAL VIEWS

    We support the U.S.-Australia Free Trade Agreement (FTA or 
the ``Agreement''). On the whole, we believe that workers, 
farmers, and businesses in both countries will benefit from the 
agreement. Below we note some additional views on specific 
issues.

Access to pharmaceuticals

    We have concerns about the way in which USTR approached two 
provisions in the FTA relating to access to pharmaceuticals: 
(1) Annex 2-C on government pharmaceutical programs; and (2) 
Article 17.9(4) on importation of patented products.
            Annex 2-C, the Chapter on Government Procurement, and U.S. 
                    Programs to Supply Medicines
    With respect to Annex-2C, we are pleased that the annex is 
substantially modified from USTR's original, far-reaching 
proposals. Those proposals would have required the Government 
of Australia, which provides a universal prescription drug 
benefit for all Australian residents, to significantly alter 
how it reimburses for patented, prescription drugs. In addition 
to likely raising (dramatically) the cost of patented, 
prescription drugs in Australia, USTR's initial proposals could 
have had serious repercussions for certain U.S. drug coverage 
programs, including: Medicare, Medicaid, Veteran's 
Administration health benefits, and the DOD TRICARE program. In 
addition, and at the last minute without any Congressional 
consultations, USTR tried to insert a provision that barred the 
export of all drugs covered by Australia's drug program to the 
United States.
    USTR dropped the most controversial elements of its 
proposal, including those related to pricing, promotion of 
private insurance, and the drug export ban, after significant 
push-back from the Government of Australia, and some Members of 
Congress. The provisions that were included in the final 
agreement largely relate to improving transparency in the 
Australian system, and in U.S. federal programs where coverage 
and reimbursement decisions are made at the federal level. 
USTR, in written responses to questions from Congress, has 
clarified what programs are covered. A summary of USTR's 
responses is provided below:
    The only U.S. drug coverage program acknowledged by USTR as 
potentially covered by Annex 2-C is Medicare Part B. However, 
that program already complies with the Annex 2-C requirements, 
so no change to current practice is required or will occur to 
implement U.S. obligations under the FTA. Programs not covered 
by Annex 2-C include: Medicaid (because it is administered at 
the state level, not the federal level), Medicare Part D (as 
currently configured, because coverage and pricing is not made 
by federal authorities), and any program in which federal 
matching payments are made to a state for the purchase of a 
drug, but where coverage and pricing decisions are not made at 
the federal level. Moreover, federal government procurement of 
pharmaceutical products, including procurement by the Veterans 
Administration, the Department of Defense, IndianHealth 
Services, and under the Vaccine for Children's program, are not covered 
by Annex 2-C, but are covered by the FTA's chapter on government 
procurement to the extent that this chapter imposes obligations on 
these programs. No changes to these programs was required to implement 
the agreement (other than to include Australia as one of the countries 
producers from which must be accorded non-discriminatory treatment in 
certain procurement decisions).
    Annex 2-C is an improvement over the initial proposal. We 
do, however, remain concerned about USTR's initial proposals. 
Australia's reimbursement practices appear aimed at managing 
the cost of their program--there is no evidence that 
Australia's practices are aimed at discriminating against U.S. 
firms in order to benefit a domestic industry. Congress has 
never directed USTR to address foreign reference pricing 
practices that are not intended to protect domestic producers.
            Durg ``Re-Importation'' Debate
    With respect to Article 17.9(4) on importation of patented 
products, that provision effectively bars the United States 
from allowing the import of patented drugs (from that 
country)--a provision directly inconsistent with congressional 
efforts to allow for the ``re-importation'' of patented drugs. 
USTR has noted that the provision reflects current U.S. law. 
Current law, however, is the subject of a vigorous and on-going 
debate in Congress, and in fact both Houses have recently 
passed separate bills that would change current law. If 
Congress changes U.S. law to allow the import of patented 
drugs, that revised law would be inconsistent with U.S. 
obligations under the Agreement.
    When Congress is in the midst of serious discussions about 
a change in current law, USTR should not negotiate a specific 
provision in a FTA that could create a violation of that 
provision if the pending congressional consideration leads to a 
change in the law. This is especially so where there is no 
specific mandate by Congress in trade negotiating authority to 
include such provisions in the FTA. Because there are 
significant impediments to importing drugs from Australia, 
including Australia's domestic law ban on most drug exports, 
the practical impact of the provision in this particular 
Agreement is likely to be very small. However, in consideration 
of the over-all provisions of the Australia FTA, it is 
important to make clear that this Article 17.9(4) should not be 
a standard provision in negotiating future FTAs.

Labor provisions

    In the area of internationally-recognized core labor 
standards, the FTA adopts a standard for each nation to 
effectively enforce its own laws. The reason why strong 
objections to use of this approach are not determinative in 
this specific instance is because Australia's laws basically 
reflect internationally-recognized standards. Moreover, the 
structures and enforcement in Australia, and importantly, the 
history and experience in this area--including a substantial 
percentage of Australian workers in unions and covered by 
collective bargaining agreements--are strong enough to ensure 
fair competition and a substantial middle class for the benefit 
of Australia and as a market for U.S. goods and services.

Investor-State dispute settlement

    The Australia FTA notes that due to the circumstances in 
Australia and the United States--e.g., the fact that both 
Australia and the United States provide strong legal 
protections for investors consistent with the level of 
protection required by international law and have advanced 
legal systems with independent judges and a demonstrated 
history of respect for the rule of law--no investor-state 
dispute settlement provisions are necessary in the agreement.
    The agreement includes a provision, Article 11.16, which 
states that if a party considers that there has been a change 
in circumstances, the party may request consultations on 
considering the development of an investor-state dispute 
settlement system. The Article further states that ``[o]n such 
a request, the Parties shall promptly enter into consultations 
with a view towards allowing such a claim and establishing such 
procedures.''
    It is apparently an unresolved legal question whether the 
President may agree to subject the United States to investor-
state dispute settlement without explicit approval of Congress. 
As a means of asserting its authority, Congress has established 
a practice of providing this explicit approval--either through 
Senate ratification implementing investment treaty or through 
the agreement approval provision in legislation implementing a 
trade agreement that includes an investor-state system. Due to 
the fact that the Australia FTA does not provide an investor-
state dispute settlement system, obviously there is no 
congressional approval for such a system in the Australia FTA.
    Article 11.16 does, however, envision the possibility of 
negotiations to establish an investor-state dispute settlement 
system, raising the question of whether Congress' approval of 
the FTA in section 101 of the implementing legislation can be 
read to provide implicit approval of any investor-state dispute 
settlement mechanism later negotiated under Article 11.16.
    As a matter of congressional authority and jurisdiction and 
basic respect for the system of checks and balances in the U.S. 
Constitution, we think it is clear that were the President to 
agree to an investor-state dispute settlement system after 
negotiations under Article 11.16, the explicit approval of 
Congress would still be needed for this system. This position 
is supported by other provisions in the implementing 
legislation--where Congress wants to give the President 
authority to amend provisions of the FTA it has given explicit 
authority to do so. See section 203(o)(2)(A) of the 
legislation. This is so even where the FTA specifically 
envisions a future amendment. See section 203(o)(2)(B) of the 
legislation (providing authority to implement an amendment to 
the agreement pursuant to the negotiations provided for under 
section 4.2.5 of the Agreement).

                                   Charles B. Rangel.
                                   Robert T. Matsui.
                                   Jerry Kleczka.
                                   Xavier Becerra.
                                   Sander Levin.
                                   Stephanie Tubbs Jones.
                                   John Lewis.
                                   Max Sandlin.

                                  
