49–006 

109TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 109–318 

UNITED STATES-BAHRAIN FREE TRADE AGREEMENT 

IMPLEMENTATION ACT 

DECEMBER 6, 2005.—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 

ADDITIONAL VIEWS 

[To accompany H.R. 4340] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Ways and Means, to whom was referred the 

bill (H.R. 4340) to implement the United States-Bahrain 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 ........................................................................... 8 

II. Section-by-Section Summary ........................................................................ 9 

A. Title I: Approval and General Provisions ....................................... 9 

B. Title II: Customs Provisions ............................................................ 11 

C. Title III: Relief from Imports .......................................................... 14 

D. Title IV: Government Procurement ................................................ 16 

III. Vote of the Committee ................................................................................... 17 

IV. Budget Effects of the Bill .............................................................................. 17 

A. Committee Estimate of Budgetary Effects ..................................... 17 

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 

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D. Information Relating to Unfunded Mandates ............................... 20 

VI. Changes in Existing Law Made by the Bill, as Reported ........................... 20 

VII. Executive Correspondence ............................................................................ 23 

VIII. Views ............................................................................................................... 31 

I. INTRODUCTION 

A. PURPOSE AND SUMMARY

H.R. 4340 would implement the September 14, 2004 Agreement 

establishing a free trade area between the United States and Bahrain. 

B. BACKGROUND

I. The United States-Bahrain Free Trade Agreement 

The Committee believes that the Agreement meets the objectives 

and priorities set forth in the Bipartisan Trade Promotion Authority Act of 2002 (TPA). The Agreement covers all agricultural and 

industrial sectors, provides for the greatest market access for U.S. 

services of any Free Trade Agreement (FTA), contains robust protections for U.S. intellectual property rights holders, and includes 

strong labor and environment provisions. In addition to the new 

commercial opportunities it provides, the Agreement will support 

many of the recent governance, legal, and economic reforms in Bahrain. 

Trade Impact.—All bilateral trade in consumer and industrial 

products will become duty-free immediately upon entry into force 

of the Agreement. Because most of the United States’ tariffs are already low, the Office of the U.S. Trade Representative (USTR) estimates that the Agreement will have little impact on overall U.S. 

imports. 

Agriculture.—All agricultural products are covered by the Agreement, which will provide immediate duty-free access for U.S. agricultural exports in 98% of the agricultural tariff lines. Bahrain will 

phase out remaining tariffs, primarily on alcohol and tobacco products, within ten years. Bahrain has not traditionally been a large 

agricultural exporter to the U.S. market, and USTR reports that 

the United States imported no agricultural products from Bahrain 

in 2004. The United States exported $22 million in agricultural 

products to Bahrain in 2004, including cotton, poultry meat, processed fruits and vegetables, and snack foods. Accordingly, the 

Agreement does not contain an agricultural safeguard. 

Textiles and Apparel.—The Agreement contains a yarn-forward 

rule of origin for textiles. Like other FTAs (including Morocco, 

NAFTA, Singapore, and Chile), the Agreements contains limited, 

temporary allowances for the use of yarn and fabric from a nonparty under a Tariff Preference Level (TPL). It is set at a level of 

65 million square meters equivalent (SMEs) for the first ten years 

and is equal to 0.1% of total U.S. imports of textile and apparel. 

United States exporters are provided with the same TPL access to 

Bahrain’s market. After this TPL expires, all trade under the 

United States-Bahrain FTA must adhere to the yarn-forward rule 

of origin. While the International Trade Commission estimates that 

the Agreement will result in an increase in Bahrain’s textile exports to the United States, it also estimates that this will not have 

a significant impact on overall U.S. imports of textiles because inVerDate Aug 31 2005 06:04 Dec 07, 2005 Jkt 049006 PO 00000 Frm 00002 Fmt 6659 Sfmt 6602 E:\HR\OC\HR318.XXX HR318
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creased levels of imports from Bahrain will be offset by reduced 

levels of imports from other nations. 

In addition, the Agreement contains a special textile safeguard 

which allows either party to re-impose Most Favored Nation (MFN) 

tariffs if imports from the other party cause or threaten to cause 

serious damage to the domestic industry. Furthermore, the FTA 

has special, state-of-the-art customs enforcement and cooperation 

provisions for textiles, allowing the customs authorities of the parties to verify production and ultimately to deny duty preferences or 

entry if production cannot be authenticated. 

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, contemplates items only being added to the list 

of short supply items, with a limited exception for in the Dominican Republic-Central America FTA (DR–CAFTA). In other words, 

once an item is designated as being in short supply, the item is 

permanently designated as such unless otherwise provided for by 

the statute implementing the FTA or trade preference program. Indeed, the fact that Congress specifically designated procedures for 

removal of products from the list in DR–CAFTA signifies that the 

authority to do so does not exist in implementing legislation or 

trade preference programs where that authority is not explicitly 

provided. 

Furthermore, the Committee expects that all short supply parties 

will be able to participate in an open and transparent process. Specifically, the Committee for the Implementation of Textile Agreements (CITA) should publish procedures that clearly explain the 

criteria it uses to make its determinations on whether and why a 

good is or is not available in commercial quantities. At the very 

least, when CITA determines that a good is available in commercial quantities, a sample of the good should be readily available for 

physical inspection by all parties as well as by evidence of some effort to market the good in the United States. Moreover, all parties 

should have open access to the full evidence being considered by 

CITA as well as the opportunity to respond to the full evidence before a determination is made. 

Services.—Under the Agreement, Bahrain will accord broad market access across its services industries and, according to USTR, is 

making commitments that are among the highest ever included in 

a U.S. FTA. The Agreement will provide increased market access 

and regulatory transparency in most industries. The Agreement 

utilizes the negative list approach for coverage with very few reservations, which means that all services are covered except those 

few specifically excluded. USTR reports that all of the major areas 

where U.S. services firms expressed interest will be liberalized 

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under the Agreement. The few exceptions taken by Bahrain include 

areas such as the ownership of local newspapers and periodicals, 

cargo handling at government-owned ports, certain government infrastructure services (including water and electricity distribution), 

certain requirements on real estate services, and Islamic pilgrimage services. The Agreement offers new access in key sectors such 

as audiovisual, express delivery, telecommunications, computer and 

related services, distribution, healthcare, services incidental to 

mining, construction, architecture, and engineering. Benefits are 

provided for businesses that wish to supply services cross-border 

(for example, by electronic means over the Internet) as well as 

those that wish to establish a local presence in Bahrain. The International Trade Commission (ITC) report on the Agreement states 

that the Agreement will provide substantial market access to U.S. 

services firms, and their affiliates in Bahrain will likely benefit 

from the improved transparency and market access. 

Investment.—The Agreement does not contain an investment 

chapter because the United States and Bahrain have elected to use 

the existing Bilateral Investment Treaty (BIT), the first with a 

Gulf Cooperation Council (GCC) country, entered into in 2001. The 

BIT includes an investor-state dispute settlement provision, which 

allows investors alleging a breach in investment obligations to seek 

binding arbitration with the country directly, giving U.S. foreign 

investors enhanced protections. 

Labor and Environment.—Labor and environmental obligations 

are part of the core text of the trade agreement, consistent with 

Trade Promotion Authority (TPA) requirements, and are similar to 

provisions in all prior FTAs covered by TPA. Like those FTAs, the 

Agreement states that both parties shall strive to ensure that their 

domestic labor laws provide for labor standards consistent with 

internationally recognized labor principles, and that environmental 

laws provide for high levels of environmental protection. The 

Agreement also provides that parties shall strive to continue to improve such laws. The Agreement states that it is inappropriate to 

weaken or reduce domestic labor or environmental protections to 

encourage trade or investment. The core commitment—that a party 

shall not fail to effectively enforce its labor or environmental laws, 

through a sustained or recurring course of action or inaction, in a 

manner affecting trade between the parties—is subject to dispute 

settlement under the Agreement. Bahrain and the United States 

will pursue a number of cooperative projects to promote environmental protection, and the Agreement contains a cooperative mechanism to promote respect for the principles embodied in the ILO 

Declaration on Fundamental Principles and Rights at Work and 

compliance with ILO Convention 182 on the Worst Forms of Child 

Labor. The labor provisions of the Agreement are similar to those 

in the DR–CAFTA and other recent FTAs. 

Bahrain has been a leader in the Persian Gulf region in labor 

and governance reforms. Bahrain enacted significant labor law reforms both in 1993 and in 2002, when a new Trade Union Law was 

promulgated allowing independent labor for the first time since the 

early 1970s. Both domestic and foreign workers are allowed to form 

trade unions under the new law. Bahrain’s 2002 Constitution recognizes the right of association, and there are now approximately 

forty private sector labor unions representing over 10,000 workers 

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operating in Bahrain. The General-Secretary of the International 

Confederation of Free Trade Unions (ICFTU) praised Bahrain, stating that the ICFTU ‘‘will be encouraging other Gulf states to follow 

the example of Bahrain in working towards a truly independent 

labor movement in the region.’’ Bahrain’s Ministry of Labor has 

also increased the number of inspectors, upgraded training for inspectors and worker education, and established a more responsive 

system for complaints, including the establishment of a 24-hour 

hotline that workers can call for advice. 

During the Committee’s September 29, 2005 hearing on the U.S.- 

Bahrain FTA, Members asked Bahrain to go on record committing 

to continue its reform efforts and further strengthening its labor 

laws. In two letters, on October 10th and November 10th, from 

Bahrain’s Finance Minister to USTR Portman, Bahrain committed 

to seek to amend its laws and take other actions to: • Accede to two additional International Labor Organization 

(ILO) core labor conventions, incorporating them into Bahrain’s 

law under its constitution; • Provide the option of reinstatement to workers dismissed 

due to union activities; • Require employers that delay payment of wages to pay 

statutory damages and ensure that workers are paid wages 

due in a timely fashion; • Abolish the requirement to have only a single union per 

enterprise; • Ensure that Bahrain’s technical requirements for strikes 

do not exceed ILO standards; • Repeal the requirement that all unions join a single federation; and • Ensure that penalties for anti-union discrimination meet 

ILO standards. 

The Committee applauds these commitments by Bahrain to 

strive to improve its labor standards in accordance with internationally recognized labor rights. The Committee believes that 

these commitments relate to the FTA Parties’ obligation to ‘‘strive 

to improve’’ their labor standards under Article 15.1 of the Agreement, an obligation contained in all FTAs negotiated under Trade 

Promotion Authority (TPA). The Committee notes that Ambassador 

Portman’s Letter of November 16, 2005 underscores his understanding that the commitments set forth in the letter of Bahrain’s 

Finance Minister of November 10, 2005 constitute ‘‘a matter arising under [the Chapter on Labor]’’ pursuant to the labor consultation mechanism established in the Agreement. These labor consultation provisions, established in Article 15.6 of the Bahrain 

FTA, are also similar to those contained in all FTAs negotiated 

under TPA. The Committee notes with approval Ambassador 

Portman’s commitment, also included in his letter of December 16, 

to update Congress periodically on the progress that Bahrain has 

achieved in realizing the commitments to its labor law reform. 

Dispute Settlement.—The Agreement sets out detailed procedures 

for the resolution of disputes over compliance, with high standards 

of openness and transparency, using the same basic procedures and 

obligations as prior free trade agreements. Dispute settlement procedures promote compliance through consultation and trade-enhancing remedies, rather than relying solely on trade sanctions. 

6 

The Agreement’s dispute settlement procedures also provide for 

‘‘equivalent’’ remedies for commercial and labor or environmental 

disputes. In addition to the use of trade sanctions in commercial 

disputes, the Agreement provides the parties the option of using 

monetary assessments to enforce commercial, labor, and environmental obligations of the Agreement, with the possibility that assessments from labor or environmental cases may be used to fund 

labor or environmental initiatives. If a party does not pay its annual assessment in a labor or environmental dispute, the complaining party may suspend tariff benefits, while bearing in mind 

the objective of eliminating barriers to trade and while seeking not 

to unduly affect parties or interests not party to the dispute. 

Intellectual Property Rights.—Because the WTO agreement on intellectual property contains only rudimentary intellectual property 

protection requirements, bilateral free trade agreements are an important means of raising international practices to the higher U.S. 

standards. The U.S.-Bahrain FTA requires virtually no change to 

the already highly developed U.S. law and practice. U.S. authors, 

performers, inventors, and other producers of creative material will 

benefit from the higher and extended standards that the FTA requires of Bahrain for protecting intellectual property rights such as 

copyrights, patents, trademarks, and trade secrets and enhanced 

means for enforcing those rights. National treatment must be 

granted by each partner country to nationals of the other, and all 

laws, regulations, procedures, and final judicial decisions must be 

in writing and published or made publicly available. The Agreement lengthens terms for copyright protection, covering electronic 

and digital media, and increases enforcement to go beyond the 

WTO obligations. Each party is obliged to provide appropriate civil 

and criminal remedies for willful violators, and parties must provide legal incentives for service providers to cooperate with rights 

holders and limitations on liability. 

Government Procurement.—Bahrain is not a party to the WTO 

Agreement on Government Procurement, but the U.S.-Bahrain 

FTA provides comparable benefits to U.S. interests, putting them 

at an advantage over other U.S. trading partners. Specifically, the 

Agreement grants non-discriminatory rights to bid on most contracts offered by Bahrain’s ministries, agencies, and departments. 

It calls for transparent and fair procurement procedures including 

clear advanced notice of purchases and effective review. The parties 

are obliged to make bribery a criminal offense in matters affecting 

international trade and investment. 

9/11 Commission Report Recommendations.—The 9/11 Commission report specifically noted the importance of the FTA signed 

with Bahrain, stating that the FTA and the Morocco FTA are 

‘‘models [that] are drawing the interest of their neighbors.’’ Citing 

the Administration’s strategy for creating a Middle East Free 

Trade Area, the 9/11 Commission specifically recommended that a 

‘‘comprehensive U.S. strategy to counter terrorism should include 

economic policies that encourage development, more open societies, 

and opportunities for people to improve the lives of their families 

and to enhance prospects for their children’s future.’’ 

U.S.-Bahrain Cooperation in the War on Terrorism and International Security.—The Committee notes that Bahrain has long 

been a committed ally of the United States, hosting a U.S. naval 

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presence going back to World War II. Bahrain currently hosts the 

U.S. Fifth Fleet, which is the headquarters for U.S. naval operations in the Persian Gulf, with a constant presence of approximately 1,200 naval personnel over more than a 60 acre area. The 

United States and Bahrain signed an agreement in 1991 granting 

U.S. access to Bahrain’s facilities and ensuring the right to pre-position materials to respond to any crises in the region. In October 

2001, Bahrain was designed a Major Non-NATO Ally (MNNA) of 

the United States. 

Political and Economic Reforms.—Bahrain has been a regional 

leader in promoting economic and governance reforms, with Bahrain’s King al-Khalifa pushing reforms following his installation in 

1999. Bahrain passed the centerpiece of its political reforms, the 

National Action Charter, in February 2001. Parliamentary elections were held in October 2002, and the first Parliamentary session since 1975 was held in Bahrain in December 2002. Bahrain 

has also liberalized its financial markets, with no restrictions on 

capital flows, and has become a major financial center for the region. Financial institutions operate in Bahrain without major impediments, and the financial sector is currently the second largest 

contributor to Bahrain’s GDP. More than 100 offshore banking 

units operate in Bahrain, as well as more than sixty U.S. firms. 

Bahrain has also taken steps to liberalize its foreign ownership 

rules and strengthen its anti-money laundering laws over the past 

two years. 

Arab League Boycott of Israel.—Bahrain has eliminated all aspects of the secondary and tertiary Arab League Boycott of Israel. 

The secondary boycott bans entities in the Arab League States 

where it is applied from doing business with firms that contribute 

to Israel’s military or economic development, while the tertiary boycott prohibits business dealings with U.S. and other firms that do 

business with blacklisted companies. In a September 5th, 2005 letter to U.S. Trade Representative Portman, Bahrain’s Finance Minister reiterated that Bahrain has eliminated the secondary and tertiary aspects of the boycott and stated that ‘‘the Kingdom of Bahrain recognizes the need to dismantle the primary [b]oycott of 

Israel’’ and is ‘‘fully committed to complying with WTO requirements.’’ USTR has informed the Committee that it is satisfied that 

Bahrain has ended the primary boycott of Israel. In addition, 

USTR has also committed, as part of its annual National Trade Estimates Report, to monitor and report on Bahrain’s actions in this 

area. 

II. TPA Procedures 

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. 

8 

The President must notify 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 into the agreement, the 

President must submit to Congress a description of those changes 

to existing laws that the President considers would be required to 

bring the United States into compliance with the agreement. After 

entering into the agreement, the President must also submit to 

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. 

III. Status of implementation by Bahrain 

On July 6th, 2005, both the upper and lower houses of Bahrain’s 

Parliament overwhelmingly approved the U.S.-Bahrain FTA. 

C. LEGISLATIVE HISTORY

On August 4, 2003, the President first notified Congress of his 

intent to negotiate an FTA with Bahrain. FTA negotiations between the United States and Bahrain began in January 2004 and 

concluded in May 2004. During and after the negotiations, the 

President continued his consultations with Congress pursuant to 

the letter and spirit of the TPA requirements. On June 15, 2004, 

the President notified the Congress of his intent to enter into an 

FTA with Bahrain. Under TPA procedures, the President is able to 

sign an FTA ninety calendar days after he has notified Congress. 

On September 14, 2004, then-U.S. Trade Representative Robert 

Zoellick signed the U.S.-Bahrain FTA. 

On September 29, 2005, the Committee on Ways and Means held 

a hearing on the United States-Bahrain FTA. The Committee received testimony supporting the Agreement from the Administration and U.S. private sector entities. On November 1, 2005, the 

Committee on Ways and Means considered in an informal markup 

session draft legislation to implement the Bahrain FTA. The Committee approved the draft implementing legislation by a recorded 

vote of 23 yeas to 0 nays with 15 Members voting present, without 

amendment. 

In accordance with TPA requirements, President Bush submitted 

to Congress on October 29, 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. 

On November 16, 2005, President Bush formally transmitted to 

Congress the formal legal text of the United States-Bahrain 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 November 16, 2005, Majority Whip and Interim Majority Leader Roy Blunt introduced, by request, H.R. 4340 

to implement the United States-Bahrain FTA. The bill was referred 

to the Committee on Ways and Means. 

9 

On November 18, 2005, the Committee on Ways and Means formally met to consider H.R. 4340. The Committee ordered H.R. 4340 

favorably reported to the House of Representatives by voice vote; 

under the requirements of TPA, amendments were not permitted. 

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 

Bahrain 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 AdVerDate Aug 31 2005 06:04 Dec 07, 2005 Jkt 049006 PO 00000 Frm 00009 Fmt 6659 Sfmt 6602 E:\HR\OC\HR318.XXX HR318
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ministrative Action shall, to the maximum extent 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 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 if the President implements by proclamation authority subject to consultation and layover, the President 

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 Ways and Means 

and Finance Committees concerning the reasons for the action, and 

consulted with the Committees. The action takes effect 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 Department of Commerce responsible for providing administrative assistance to any panels that may be established under chapter 19 of 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 Department of Commerce is the 

appropriate agency to provide administrative assistance to panels. 

Section 106: Effective dates; effect of termination 

Current law 

No provision. 

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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 through 

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 and requires 

the President to terminate Bahrain’s designation as a beneficiary 

developing country for the purposes of the Generalized System of 

Preferences program. 

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 Bahrain 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: Rules of origin 

Current law 

No provision. 

Explanation of provision 

Section 202 codifies the rules of origin set out in chapter 4 of the 

Agreement. Under the general rules, there are four basic ways for 

a good of Bahrain 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 it is imported 

directly from the territory of Bahrain into the territory of the 

United States and: (1) It is ‘‘wholly the growth, product, or manuVerDate Aug 31 2005 06:04 Dec 07, 2005 Jkt 049006 PO 00000 Frm 00011 Fmt 6659 Sfmt 6602 E:\HR\OC\HR318.XXX HR318
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facture of Bahrain or the United States, or both’’; (2) it is a new 

or different good that has been ‘‘grown, produced, or manufactured 

in Bahrain or the United States, or both’’ and the value of the materials produced and the direct cost of processing operations performed in Bahrain or the United States, or both is not less than 

35% of the appraised value of the good; (3) it satisfies certain rules 

of origin for textile or apparel goods specified in Annex 3–A of the 

Agreement; or (4) it satisfies certain product-specific rules of origin 

specified in Annex 4–A of the Agreement. 

Under the rules in chapter 3.2 and Annex 3–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 Bahrain, 

an apparel product must have been cut (or knit to shape) and sewn 

or otherwise assembled in Bahrain from yarn, or fabric made from 

yarn, that originates in Bahrain or the United States, or both. 

However, Article 3.2.9 provides a limited exception to this general 

rule allowing access for 65 million SMEs of apparel that does not 

meet the yarn forward rule of origin for each of the first ten years 

of the Agreement. Section 202 also includes a de minimis exemption providing that in most cases a textile or apparel good will be 

considered originating if the total weight of all nonoriginating fibers or yarns is not more than 7 percent of the total weight of the 

good. 

The remainder of section 202 addresses valuation of materials 

and special definitions. 

Reason for change 

Rules of origin are needed to confine Agreement benefits, such as 

tariff cuts, to Bahraini goods and to prevent third-country goods 

from being transshipped through Bahrain and claiming benefits 

under the Agreement. Section 202 puts the United States in compliance with the rules of origin provisions of the agreement. The 

Committee notes that the limited exception to the textile and apparel yarn forward rule of origin is phased down over ten years and 

covers approximately 0.1 percent of U.S. textile and apparel imports by volume. 

Section 203: Customs user fees 

Current law 

Section 58c of the title 19 of the U.S. Code 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 203 of the bill implements U.S. commitments under Article 2.9 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 

America Free Trade Agreement, the U.S.-Singapore Free Trade 

Agreement, the U.S.-Chile Free Trade Agreement, the U.S.-Australia Free Trade Agreement, and the U.S.-Dominican RepublicCentral America Free Trade Agreement. The provision also proVerDate Aug 31 2005 06:04 Dec 07, 2005 Jkt 049006 PO 00000 Frm 00012 Fmt 6659 Sfmt 6602 E:\HR\OC\HR318.XXX HR318
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hibits 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 Bahrain. 

Other customs user fees remain in place. Section 203 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 204: Enforcement relating to trade in textile and apparel 

goods 

Current law 

No provision. 

Explanation of provision 

Section 204 implements the verification provisions of the Agreement at Article 3.3 and authorizes the President to take appropriate action while the verification is being conducted. Such appropriate action includes suspending liquidation of the textile or apparel goods 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 of the Treasury determines that the 

information obtained from verification is insufficient to make a determination, the President may take appropriate action described 

in section 204(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 204 

is necessary to authorize these enforcement mechanisms for use by 

U.S. authorities. 

Section 205: Regulations 

Current law 

No provision. 

Explanation of provision 

Section 205 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. 

14 

Reason for change 

Because the implementing bill involves lengthy and complex implementation procedures by customs officials, section 205 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 (ITC) or a determination that the President may consider to be affirmative under paragraph (1) of section 330(d) of the 

Tariff Act of 1930 (19 U.S.C. 1330(d)), to impose specified import 

relief when, as a result of the reduction or elimination of a duty 

under the Agreement, a Bahraini 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 202 of the 

Trade Act of 1974. 

Section 311(d) exempts from investigation under this section 

Bahraini 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 shall 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)(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, in the aggregate, exceed three 

years. 

15 

Section 314 provides that no relief may be provided under this 

subtitle after ten years from the date on which the Agreement enters into force, unless the President determines under section 

314(b) that Bahrain has consented to such relief. 

Section 315 authorizes the President to provide compensation to 

Bahrain consistent with article 8.3 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 Bahrain 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 8 (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 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, a Bahraini 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 323 of the bill provides that the period of relief shall be 

no longer than three years. The President may extend the relief if 

the initial period for relief was less than three years, but the aggregate period of relief, including extensions, may not exceed three 

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 chapter 1 of title II of the Trade Act of 1974. 

16 

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 Bahrain 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 3.1 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 section 

322(b). 

TITLE IV: GOVERNMENT PROCUREMENT 

Section 401: Eligible products 

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 is party to a bilateral or multilateral procurement 

agreement, such as the WTO Agreement on Government Procurement and the North American Free Trade Agreement. 

Explanation of provision 

Section 401 implements chapter 9 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, 2005 and prior to July 2, 

2006, 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 Bahrain, assuming that the 

FTA enters into force during the specified time period. 

17 

Reason for change 

This provision implements U.S. obligations with respect to FTAs 

that enter into force for the United States after December 31, 2005 

and prior to July 2, 2006. 

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. 4340. 

MOTION TO REPORT THE BILL

The bill, H.R. 4340 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. 4340, 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 clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee states that enactment of 

H.R. 4340 would reduce customs duty receipts due to lower tariffs 

imposed on goods from Bahrain. 

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 CBO, the following report prepared by the CBO is provided. 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, November 22, 2005. 

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. 4340, a bill to implement 

the United States-Bahrain Free Trade Agreement. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Emily Schlect. 

Sincerely, 

DONALD B. MARRON

(For Douglas Holtz-Eakin, Director). 

Enclosure. 

18 

H.R. 4340—United States-Bahrain Free Trade Agreement Implementation Act 

Summary: H.R. 4340 would approve the free trade agreement between the government of the United States and the government of 

Bahrain that was entered into on September 14, 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 $20 million in 2006, by $143 million over 

the 2006–2010 period, and by $341 million over the 2006–2015 period, net of income and payroll tax offsets. CBO estimates that enacting H.R. 4340 also would increase direct spending by $1 million 

in 2006, $3 million over the 2006–2010 period, and $6 million over 

the 2006–2015 period. 

CBO has determined that H.R. 4340 contains no intergovernmental or private-sector mandates as defined in the Unfunded 

Mandates Reform Act (UMRA) and would not directly affect the 

budgets of State, local, or tribal governments. 

Estimated cost to the Federal Government: The estimated budgetary impact of H.R. 4340 over the 2006–2015 period is shown in 

the following table. The cost for spending under this legislation 

falls within budget function 750 (administration of justice). 

By fiscal year, in millions of dollars— 

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 

CHANGES IN REVENUES 

Estimated Revenues .. ¥20 ¥28 ¥30 ¥32 ¥34 ¥35 ¥37 ¥39 ¥42 ¥45 

CHANGES IN DIRECT SPENDING 

Estimated Budget Authority .................... 1 1 1 1 1 1 1 1 1 0 

Estimated Outlays ..... 1 1 1 1 1 1 1 1 1 0 

Note.—Negative changes in revenues and positive changes in direct spending correspond to increase in budget deficits. 

Basis of Estimate 

Revenues 

Under the United States-Bahrain agreement, tariffs on U.S. imports from Bahrain 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 on the date the agreement enters into force, to 

gradual elimination over 10 years. According to the U.S. International Trade Commission, the United States collected $29 million 

in customs duties in 2004 on $406 million of imports from Bahrain. 

Those imports consist largely of various types of apparel articles, 

oils, aluminum, and chemicals. Based on these data, CBO estimates that phasing out tariff rates as outlined in the U.S.-Bahrain 

agreement would reduce revenues by $20 million in 2006, by $143 

million over the 2006–2010 period, and by $341 million over the 

2006–2015 period, net of income and payroll tax offsets. 

This estimate includes the effects of increased imports from Bahrain 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 Bahrain would displace imports from other countries. In the absence of specific data 

19 

on the extent of this substitution effect, CBO assumes that an 

amount equal to one-half of the increase in U.S. imports from Bahrain would displace imports from other countries. 

Direct spending 

This legislation would exempt certain goods imported from Bahrain from merchandise processing fees collected by the Department 

of Homeland Security. Such fees are recorded as offsetting receipts 

(a credit against direct spending). Based on the value of goods imported from those countries in 2004, CBO estimates that implementing this provision would reduce fee collections by under $1 

million in fiscal year 2006 and in each year through 2014, for a 

total of $6 million over the 2006–2014 period. There would be no 

effects in later years because the authority to collect merchandise 

processing fees expires at the end of 2014. 

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: Emily Schlect. Federal 

Spending: Mark Grabowicz. Impact on State, Local, and Tribal 

Governments: Melissa Merrill. Impact on the Private Sector: Craig 

Cammarata. 

Estimate approved by: G. Thomas Woodward, Assistant Director 

for Tax Analysis; and Peter H. Fontaine, Deputy 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 H.R. 

3045 makes de minimis authorization of funding, and the Administration has in place program goals and objectives, which have been 

reviewed by the Committee. 

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.’) 

20 

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) * * * 

* * * * * * * 

(13) No fee may be charged under subsection (a) (9) or (10) with 

respect to goods that qualify as originating goods under section 202 

of the United States-Singapore 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. 

* * * * * * * 

(15) 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 Dominican Republic-Central America-United States 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. 

(16) No fee may be charged under subsection (a) (9) or (10) with 

respect to goods that qualify as originating goods under section 202 

of the United States-Bahrain 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 202 OF THE TRADE ACT OF 1974 

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

(a) * * * 

(1) * * * 

* * * * * * * 

21 

(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, title III of the United States-Singapore Free 

Trade Agreement Implementation Act, title III of the United 

States-Australia Free Trade Agreement Implementation Act, 

øand¿ title III of the United States-Morocco Free Trade Agreement Implementation Act, and title III of the United StatesBahrain 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) * * * 

* * * * * * * 

(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; øor¿ 

(iv) a party to the Dominican Republic-Central 

America-United States Free Trade Agreement, a product or service of that country or instrumentality which 

is covered under that Agreement for procurement by 

the United Statesø.¿; or 

(v) a party to a free trade agreement that entered into 

force with respect to the United States after December 

31, 2005, and before July 2, 2006, a product or service 

of that country or instrumentality which is covered 

22 

under the free trade agreement for procurement by the 

United States. 

* * * * * * * 

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(31) 

VIII. VIEWS 

The U.S.-Bahrain Free Trade Agreement (FTA) is an important 

trade agreement for the United States and Bahrain, and will bring 

useful benefits to the people of both countries. Bahrain has been 

a steadfast friend and ally to the United States over many years, 

including hosting a U.S. military presence since 1949. In recent 

years, Bahrain has undertaken major—and often difficult—economic, social and political reforms to improve its society and the 

life of its people. 

Most recently, Bahrain took the important step of renouncing 

and terminating its participation in the Arab League Boycott of 

Israel. Renouncing this boycott, which should never have been imposed in the first place, is a difficult and important step toward expanding the circle of economic opportunity in the Middle East and 

building a stable and lasting peace between Israel and its neighbors. 

Overall, this trade agreement contains numerous important benefits for the people of both countries, including: substantial market 

access to U.S. services providers, including in financial services; 

immediate duty-free access for consumer and industrial products; 

and duty-free access for 98 percent of tariff lines for U.S. agriculture exports. 

AGREEMENT PROMOTES BASIC LABOR STANDARDS

As in all other U.S. Free Trade Agreements (FTAs) negotiated by 

the Bush Administration, the text of the U.S.-Bahrain Free Trade 

Agreement (FTA) requires only that the two countries enforce their 

own labor laws. 

In 2002, Bahrain completed a major revision to its own labor law 

to comply with internationally-recognized standards and to ensure 

that working people in its country share fully in the benefits of 

globalization. However, six provisions of Bahrain’s law, as currently written, raise concerns with regard to basic international 

labor standards. These six provisions have been identified by the 

U.S. Department of State and the International Labor Organization (ILO). 

As a result, the U.S. Government and the Government of Bahrain have agreed to additional commitments on labor in order to 

advance the adoption and application of internationally-recognized 

labor standards in Bahrain. 

These commitments are contained in an exchange of letters between Bahrain’s Finance Minister, the Honorable Ahmed bin Mohammed Al Khalifa, and U.S. Trade Representative Rob Portman, 

as well as in additional letters and directives issued by the Government of Bahrain. All letters and directives are attached. 

32 

As detailed below, the agreement between the Governments of 

the United States and Bahrain addresses the concerns about these 

six deficiencies that Congressman Rangel and others have raised: 

• First, Finance Minister Al Khalifa has written a letter to 

U.S. Trade Representative Portman, in which the Government 

of Bahrain commits to submit to Parliament within a week 

proposed amendments in four of the six areas where Bahrain’s 

laws fall short of ILO standards and commits to seek expedited 

enactment. In the letter to USTR Portman and accompanying 

directives and letters, the Government of Bahrain also states 

its commitment to continue implementing these four provisions 

in a manner consistent with ILO standards pending formal 

changes to law. 

• Second, in the letter to U.S. Trade Representative 

Portman, Finance Minister AI Khalifa commits Bahrain to 

submit to Parliament proposed amendments for the two remaining areas within a week, and commits to seek expedited 

enactment of those two remaining changes to law. It is notable 

that, of the two remaining provisions of law, one is an area in 

which Bahrain is prepared to change its law immediately; however, Bahrain must consult with its unions first to address 

their concerns. 

• Third, the exchange of letters between U.S. Trade Representative Portman and Bahrain Finance Minister Al Khalifa 

expressly links Bahrain’s commitments as to its existing law as 

well as its forthcoming changes to law to Article 15.6 of the 

U.S.-Bahrain FTA. In particular, the exchange of letters conveys the understanding of the two governments that Bahrain’s 

commitments to continue to apply its laws in a WTO-compliant 

manner and to make all necessary changes to its laws to bring 

them formally into compliance with basic ILO standards constitute ‘‘matters arising under’’ the labor chapter of the FTA. 

Article 15.6 allows a Party to initiate formal consultations 

with the other Party with regard to a labor issue. If consultations fail to resolve the matter, either Party may request that 

a ‘‘Subcommittee on Labor Affairs,’’ comprised of officials of the 

Parties’ labor ministries and other appropriate agencies, be 

convened. The Subcommittee ‘‘shall endeavor to resolve the 

matter expeditiously,’’ and may consult with governmental and 

non-governmental experts and have recourse to procedures 

such as conciliation or mediation. Linking Bahrain’s commitments with regard to its labor laws to Article 15.6 is Bahrain’s 

commitment in the text of the FTA to comply with basic ILO 

standards. 

• Fourth, the U.S. Trade Representative has committed to 

report periodically to Congress on the progress—or lack thereof—of the Government of Bahrain in continuing to implement 

its laws in an ILO-compliant manner and make necessary 

changes to its laws. If there are problems with the continued 

application of laws, or the modifications to laws, USTR will invoke the consultative procedures under Article 15.6 to raise 

these matters with Bahrain, call attention to the matters, and 

seek their immediate successful resolution. 

33 

CONCLUSION

Trade agreements entered into by the United States must be 

judged on their own merits and in the context of the economic realities that exist between countries and in the trading partner’s 

country. We must seek to advance the interests of U.S. businesses, 

workers and farmers, and to ensure that the benefits of 

globalization are broadly shared, including with full and fair participation in the workplace. 

The U.S-Bahrain Free Trade Agreement constitutes, in the case 

of Bahrain, a step forward in the adoption and enforcement of 

internationally-recognized basic standards for working people. We 

hope that further steps can be taken in future FTAs so there may 

be the necessary restoration of a true and broadly bipartisan approach on trade. 

LIST OF ATTACHED DOCUMENTS

1. Letter from Bahrain Finance Minister to Portman. This letter 

contains (1) Bahrain’s specific descriptions of how it is currently 

applying its labor laws in an ILO-consistent manner (including four 

of the six provisions of law as to which the U.S. State Department 

and ILO have identified ILO-related concerns), and (2) Bahrain’s 

further commitment to change within a short period of time all six 

labor laws as to which concerns have been raised. 

2. Bahraini Letter to International Labor Organization. This letter fulfills one aspect of Bahrain’s commitment to eliminate the requirement that unions belong to only one national confederation by 

requesting the ILO’s help to work with Bahrain’s unions on this 

point. (Unions in Bahrain like the existing requirement.) 

3. Ministry Directive on Reinstatement. This directive fulfills Bahrain’s commitment to make clear that under current Bahrain law, 

the Government of Bahrain strongly prefers—and has used, is 

using and will continue to use its good offices to achieve—reinstatement as the appropriate remedy for workers dismissed for unionrelated activities, even though formal Bahrain law does not provide 

this right. The directive states that Bahrain will seek to continue 

the application of its law in this manner until the law is formally 

amended. 

4. Letter to Conciliation Panels regarding Penalties. This letter 

fulfills Bahrain’s commitment to advise labor conciliation panels of 

the Government’s view that adequate penalties—as reflected in a 

new draft labor law—should be observed as necessary to adequately enforce Bahrain’s labor laws. The letter further states that 

the Government of Bahrain recommends using these penalties 

until the law is formally changed. 

5. Ministry Directive on Strike Requirements. This directive fulfills Bahrain’s commitment to urge continuation of current practice 

in Bahrain not to dismiss a worker even though the worker may 

have participated in a strike that does not technically meet the requirements of Bahrain law. This is meant specifically to address 

the formal requirement in Bahrain’s law that a strike be authorized by a three-fourths vote of workers in a union. The directive 

further states that the government believes that the practice of not 

34 

dismissing a worker on the basis of technical strike requirements 

should continue until Bahrain’s laws have been formally changed. 

6. Portman Letter to Bahrain Finance Minister. Finally, USTR 

Portman has sent Bahrain’s Finance Minister a letter that expressly links Bahrain’s commitments as to its existing law as well 

as its forthcoming changes to law to Article 15.6 of the U.S.-Bahrain FTA. In particular, the exchange of letters conveys the understanding of the two governments that Bahrain’s commitments to 

continue to apply its laws in a WTO-compliant manner and to 

make all necessary changes to its laws to bring them fully and formally into compliance with basic ILO standards constitute ‘‘matters 

arising under’’ the labor chapter of the FTA. 

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43 

CHARLES B. RANGEL. XAVIER BECERRA. JOHN B. LARSON. STEPHANIE TUBBS JONES. SANDER LEVIN. BEN CARDIN. JOHN LEWIS. 

Æ