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[House Report 107-602]
[From the U.S. Government Publishing Office]

107th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     107-602

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

                                _______
                                

 July 22, 2002.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

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

                             ADVERSE REPORT

                      [To accompany H.J. Res. 101]

    The Committee on Ways and Means, to whom was referred the 
joint resolution (H.J. Res. 101) disapproving the extension of 
the waiver authority contained in section 402(c) of the Trade 
Act of 1974 with respect to Vietnam, having considered the 
same, report unfavorably thereon without amendment and 
recommend that the joint resolution do not pass.

                                CONTENTS

                                                                   Page
 I. Introduction......................................................2
        A. Purpose and Summary...................................     2
        B. Background............................................     2
    C. Legislative History............................................4
II. Explanation of the Bill...........................................4
III.Votes of the Committee............................................6

IV. Budget Effect.....................................................6
        A. Committee Estimate of Budgetary Effects...............     6
        B. Statement Regarding New Budget Authority and Tax 
            Expenditures.........................................     6
        C. Cost Estimate Prepared by the Congressional Budget 
            Office...............................................     6
 V. Other Matters To Be Discussed Under the Rules of the House........9
        A. Committee Oversight Findings and Recommendations......     9
        B. Summary of Findings and Recommendations of the 
            Committee on Government Reform and Oversight.........     9
        C. Constitutional Authority Statement....................     9

                            I. INTRODUCTION

                         A. Purpose and Summary

    House Joint Resolution 101 would disapprove the extension 
of the waiver authority contained in section 402(c) of the 
Trade Act of 1974 with respect to Vietnam.

                             B. Background

    Vietnam's trade status is subject to the ``Jackson-Vanik'' 
provisions in Title IV of the Trade Act of 1974 (the Act). This 
provision of law governs the extension of normal trade 
relations (NTR), including NTR tariff treatment, and access to 
U.S. Government credits, or credit or investment guarantees, to 
nonmarket economy countries ineligible for NTR treatment as of 
the enactment of the Act. A country subject to the provision 
may gain coverage by U.S. trade financing programs by complying 
with the freedom of emigration provisions under the Act. The 
extension of NTR tariff treatment also requires the conclusion 
and approval by Congress of a bilateral commercial agreement 
with the United States providing for reciprocal 
nondiscriminatory treatment.
    The Act authorizes the President to waive the freedom of 
emigration requirement with respect to a particular country if 
he determines that a waiver will substantially promote the 
freedom of emigration provisions, and if he has received 
assurances that the emigration practices of the country will 
lead substantially to the achievement of those objectives. 
Waiver of the emigration requirement allows the country to be 
eligible for U.S. trade financing programs and, if the country 
has concluded a bilateral commercial agreement approved by 
Congress, to receive NTR tariff treatment.
    Since the early 1990s, the United States has taken gradual 
steps to improve relations with Vietnam. On February 3, 1994, 
the President lifted the trade embargo on Vietnam in 
recognition of the cooperation received from the Government of 
Vietnam in Prisoner of War/Missing in Action (POW/MIA) 
accounting. On July 11, 1995, the President announced the 
establishment of diplomatic relations, which was followed by 
the appointment of former Congressman Douglas ``Pete'' Peterson 
as U.S. Ambassador to Vietnam. In 1997, the United States began 
negotiations with Vietnam toward the conclusion of a bilateral 
commercial agreement.
    On March 9, 1998, the President first determined that a 
Jackson-Vanik waiver for Vietnam would substantially promote 
the freedom of emigration objectives under the Act. On April 7, 
1998, the President issued Executive Order 13079, under which 
the waiver entered into force. The renewal procedure under the 
Act requires the President to submitto Congress a 
recommendation for a 12-month extension no later than 30 days prior to 
the waiver's expiration. The President has renewed Vietnam's waiver 
every year since 1998, most recently on June 3, 2002 (H. Doc. 107-221). 
This waiver authority will continue in effect unless disapproved by 
Congress within 60 calendar days after the expiration of the existing 
waiver (i.e., September 1). Disapproval, should it occur, would take 
the form of a joint resolution disapproving of the President's waiver 
determination.
    On December 10, 2001, the U.S.-Vietnam bilateral commercial 
agreement entered into force. The agreement contains five major 
sections, including: (1) market access for agricultural and 
industrial goods; (2) intellectual property rights protection; 
(3) market access for services; (4) provisions to protect U.S. 
investments; and (5) measures to ensure transparency in 
Vietnamese laws, rules and regulations.
    Because the bilateral commercial agreement is now in force, 
the President's annual determinations to grant a waiver of 
Jackson-Vanik emigration requirements to Vietnam provide NTR 
status to products imported from Vietnam, and also allow U.S. 
exporters doing business in Vietnam to have access to U.S. 
government credits, or credit or investment guarantees, such as 
those provided by the Overseas Private Investment Corporation 
(OPIC), the Export-Import Bank (Ex-Im Bank), and the U.S. 
Department of Agriculture (USDA), provided that Vietnam meets 
the relevant program criteria. A formal agreement between OPIC 
and Vietnam was signed on March 19, 1998, and the Ex-Im Bank 
signed a framework guarantee agreement with the State Bank of 
Vietnam on December 9, 1999. As of March 31, 2001, OPIC has 
received political risk insurance registrations for 20 
projects, representing potential U.S. investment of $1.2 
billion. However, actual current OPIC exposure is 2 projects, 
representing $8.8 million. At present, the Ex-Im Bank has one 
pending preliminary commitment for the sale of three 777 
aircraft to Vietnam totalling approximately $300 million, and 
the Bank has several letters of interest to various exporters 
out. As of July 18, 2002, OPIC has received political risk 
insurance registrations for 20 projects, representing potential 
U.S. investment of $1.2 billion. However, actual current OPIC 
exposure is 2 projects, representing $8.8 million. At present, 
the Ex-Im Bank has one pending preliminary commitment for the 
sale of three 777 aircraft to Vietnam totalling approximately 
$300 million, and the Bank has several letters of interest to 
various exporters out. Commercial sales of agricultural 
commodities to Vietnam are also eligible for coverage by USDA's 
Southeast Asia Regional GSM-102 program for short-term export 
credit guarantees.
    Vietnam is the world's 14th most populous country, with 
over 81 million people. While the country has emerged as one of 
Southeast Asia's more promising economies and has the potential 
to be a strong trading partner for the United States, its full 
potential has yet to be realized. Cumulative foreign direct 
investment by U.S. companies in Vietnam is low, valued about $1 
billion.
    After the President ordered an end to the U.S. trade 
embargo in 1994, two-way trade between the United States and 
Vietnam increased steadily from $223 million in 1994 to $935 
million in 1996. In part, this rapid growth was due to a large 
number of U.S. aircraft sales to Vietnam in 1996. Despite a 
dampening effect on trade as a result of the Asian financial 
crisis which began in 1997, two-way trade was still $666 
million that year. Beginning in 1998, two-way trade began to 
increase again and reached $827 million in 1998, $900 million 
in 1999, $1.19 billion in 2000, and $1.51 billion in 2001. Last 
year, U.S. exports to Vietnam totaled $461 million, while U.S. 
imports in return were valued at $1.05 billion. Between 1994 
and 2001, total trade between the United States and Vietnam 
increased by 679 percent. In the first four months of 2002, 
U.S. exports have grown by 27.5 percent compared to the same 
period last year--at a time when overall U.S. exports to Asia 
are off by nearly 15 percent.
    Top U.S. exports to Vietnam include aircraft and associated 
equipment, cotton textile fibers, fertilizers, footwear, and 
civil engineering and contractors' plant and equipment. Major 
U.S. imports from Vietnam include crustaceans, crude oil, 
footwear, fish and mollusks, coffee, and fruits and nuts.

                         C. Legislative History

                            COMMITTEE ACTION

    House Joint Resolution 101 was introduced on June 25, 2002, 
by Mr. Rohrabacher (R-CA) to disapprove the extension of the 
waiver authority contained in section 402(c) of the Trade Act 
of 1974, recommended by the President to Congress on June 3, 
2002, with respect to Vietnam. The resolution was referred to 
the Committee on Ways and Means. On July 18, 2002, the 
Committee on Ways and Means ordered House Joint Resolution 101 
reported adversely without amendment to the House of 
Representatives by a voice vote with a quorum present.

                          LEGISLATIVE HEARING

    On July 18, 2002, the Ways and Means Subcommittee held a 
hearing on Vietnam's Jackson-Vanik waiver and H.J. Res. 101, a 
resolution to disapprove such waiver. Witnesses at the hearing 
included Assistant United States Trade Representative for Asia 
and the Pacific, Mr. Ralph Ives; Acting Assistant Secretary of 
State for East Asian and Pacific Affairs Bureau, Mr. Chris 
LaFleur; and representatives from business and agriculture 
interests.

                   II. EXPLANATION OF THE RESOLUTION

                              PRESENT LAW

    Title IV of the Trade Act of 1974, as amended by the 
Customs and Trade Act of 1990 (P.L. 101-382), sets forth 
requirements relating to freedom of emigration which must be 
met or waived by the President in order for a nonmarket economy 
country to gain access to U.S. government credits, or credit or 
investment guarantees.
    The President's waiver authority under the Act expires at 
midnight on July 2 of each year. The Act also establishes 
procedures by which the President can renew his waiver on an 
annual basis and procedures for Congressional disapproval of 
the President's waiver. A waiver may be extended on an annual 
basis upon a Presidential determination and report to Congress 
that such extension will substantially promote the freedom of 
emigration objectives in the Act. The waiver authority 
continues in effect unless disapproved by the Congress, either 
generally or with respect to a specific country, within 60 
calendar days after the expiration of the existing authority. 
Disapproval takes the form of a joint resolution disapproving 
the extension of Presidential authority to waive the freedom of 
emigration requirements in the Act. The resolution is referred 
to the Committee on Ways and Means, which has 30 days to 
consider it. The resolution is not amendable except to add or 
remove country names affected. If the resolution passes both 
Houses and is vetoed by the President, Congress must consider 
the veto message before the later of the end of the 60-day 
period or within 15 legislative days. The disapproval 
resolution is highly privileged.
    On June 3, 2002, the President issued an extension of the 
waiver from the Jackson-Vanik freedom of emigration 
requirements for Vietnam. If both chambers of Congress do not 
pass a resolution of disapproval within the 60 calendar days 
following the expiration of the existing waiver authority, the 
President's waiver is automatically renewed through July 2, 
2003. If a resolution of disapproval is enacted, it becomes 
effective 60 days after enactment.
    Because the bilateral commercial agreement between the 
United States and Vietnam has entered into force, the 
President's waiver gives Vietnam continued NTR tariff treatment 
for another year and gives U.S. exporters doing business in 
Vietnam access to U.S. government credits, or credit or 
investment guarantees, such as those administered by OPIC, the 
Ex-Im Bank, and USDA, provided that Vietnam meets the relevant 
program criteria.

                       EXPLANATION OF RESOLUTION

    House Joint Resolution 101 states that Congress does not 
approve the extension of the authority contained in section 
402(c) of the Trade Act of 1974, recommended by the President 
to Congress on June 3, 2002, with respect to Vietnam.

                      REASONS FOR COMMITTEE ACTION

    The Committee on Ways and Means reports House Joint 
Resolution 101 adversely primarily because the Members support 
the Administration's policy of engagement and gradual 
normalization of relations with Vietnam. In particular, the 
Committee is convinced that this policy is the cornerstone on 
which the United States will be able to continue cooperation 
with the Vietnamese government to achieve the fullest possible 
accounting of POWs and MIAs in Vietnam. In addition, engagement 
enables the United States to influence the pace and direction 
of economic and political reform in Vietnam in a manner that 
will improve respect for fundamental human rights and promote 
democratic reforms. Furthermore, termination of the President's 
Jackson-Vanik waiver for Vietnam would undermine the ability of 
the United States to influence Vietnam's re-emergence into the 
community of nations. In recent years, Vietnam has joined the 
Association of Southeast Asian Nations and the Asia-Pacific 
Economic Cooperation group. Vietnam has also applied to become 
a member of the World Trade Organization.
    The Committee recognizes that disapproving the President's 
extension of Vietnam's Jackson-Vanik waiver would derail the 
process of normalizing U.S. trade relations with Vietnam. In 
particular, overturning the Jackson-Vanik waiver would harm 
U.S. exporters and their workers by jeopardizing the ability of 
U.S. interests to export to Vietnam and by removing access to 
U.S. trade financing programs, such as those administered by 
OPIC, the Ex-Im Bank, and USDA, thereby enabling foreign 
competitors to gain an unfair advantage in exports to Vietnam.
    While emigration issues remain to be resolved, Vietnam has 
continued to make progress, and the Members of the Committee 
support the President's determination that waiving the Jackson-
Vanik freedom of emigration criteria will substantially lead to 
the achievement of those emigration objectives. The Committee 
also believes the serious concerns that the United States has 
about human rights abuses and the need for economic and 
political reform in Vietnam are best addressed through 
expanding government and business contacts and the involvement 
of U.S. citizens in Vietnamese society, making full use of U.S. 
trade statutes where necessary.

                             EFFECTIVE DATE

    The resolution would be effective 60 days after enactment.

                       III. VOTE OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the votes of the Committee in its consideration of 
House Joint Resolution 101.

                    MOTION TO REPORT THE RESOLUTION

    House Joint Resolution 101 was ordered reported adversely 
without amendment by a voice vote with a quorum present.

                     IV. BUDGET EFFECTS OF THE BILL

               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d)(2) of rule XIII of the Rules 
of the House of Representatives, the following statement is 
made concerning the effects on the budget of House Joint 
Resolution 101, as reported: The Committee agrees with the 
estimate prepared by the Congressional Budget Office (CBO), 
which is included below.

    B. Statement Regarding New Budget Authority and Tax Expenditures

    In compliance with subdivision 3(c)(2) of rule XIII of the 
Rules of the House of Representatives, the Committee states 
that the provisions of House Joint Resolution 101 do not 
involve any new budget authority, or any increase or decrease 
in revenues or tax expenditures.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the Congressional Budget Office, the following 
report prepared by CBO is provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 22, 2002.
Hon. William ``Bill'' M. Thomas,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.J. Res. 101, 
disapproving the extension of the waiver authority contained in 
section 402(c) of the Trade Act of 1974 with respect to 
Vietnam.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Erin 
Whitaker and Annie Bartsch (for revenues) and Lauren Marks (for 
private-sector mandates).
            Sincerely,
                                        Steven M. Lieberman
                                    (For Dan L. Crippen, Director).
    Enclosure.

               CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

H.J. Res. 101--Disapproving the extension of the waiver authority 
        contained in section 402(c) of the Trade Act of 1974 with 
        respect to Vietnam

    Summary: Under the Trade Act of 1974, nondiscriminatory 
trade relations may not be conferred on a country with a 
nonmarket economy if that country maintains restrictive 
emigration policies. However, the President may waive this 
prohibition on an annual basis if he certifies that doing so 
would promote freedom of emigration in that country. On June 3, 
2002, President Bush transmitted to the Congress his intention 
to waive to waive the prohibition with respect to Vietnam for a 
year, beginning July 3, 2002. H.J. Res. 101 would disapprove 
the President's extension of this waiver. CBO estimates that 
denying nondiscriminatory tariff treatment to Vietnam would 
decrease revenues by $8 million in fiscal year 2003. Since 
adopting this resolution would affect receipts, pay-as-you-go 
procedures would apply.
    H.J. Res. 101 would impose a private-sector mandate on 
importers of Vietnamese goods that would be subject to higher 
tariffs. The higher tariff rates imposed by the bill would 
decrease tariff receipts by $8 million compared to current law 
because the quantity of imports from Vietnam would decrease as 
a consequence of increasing the cost of those goods. Importers 
of those goods would bear a cost of lost profits on about $350 
million of sales. Other goods imported from Vietnam would 
continue to enter the United States, and the importers of those 
goods would also bear a mandate imposed by the bill in the form 
of higher tariff of $13 million.
    CBO does not have sufficient information to determine 
whether the cost of the mandate in the bill would exceed the 
threshold established in UMRA ($115 million in 2002, adjusted 
annually for inflation). Specifically, CBO could not determine 
the value of profits lost because of lower imports from 
Vietnam.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.J. Res. 101 is shown in the following 
table.

----------------------------------------------------------------------------------------------------------------
                                                                  By fiscal year, in millions of dollars--
                                                           -----------------------------------------------------
                                                              2002     2003     2004     2005     2006     2007
----------------------------------------------------------------------------------------------------------------
                                               CHANGES IN REVENUES
Estimated revenues........................................        0       -8        0        0        0        0
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: Denial of nondiscriminatory trade 
relations to Vietnam would substantially increase the tariff 
rates imposed on certain exports to the United States. CBO 
asssumes that these higher tariff rates would increase U.S. 
prices of, and would decrease U.S. demand for, goods imported 
from Vietnam. CBO estimates that imports from Vietnam would 
decline by more than enough to offset the higher rates, so that 
the U.S. customs duties collections on Vietnam imports would 
fall.
    CBO also estimates that some of the decrease in trade with 
Vietnam would be offset by an increase in imports from other 
countries with nondiscriminatory trade relations status. The 
increase in revenues from this effect, however, would not 
outweigh the reduction in revenues from Vietnam. On net, CBO 
estimates that revenues would decrease by $8 million in fiscal 
year 2003. Vietnam has received nondiscriminatory trade 
relations status through Presidential proclamation on an annual 
basis beginning in 2001, and CBO assumes there would be a 
resumption of nondiscriminatory trade relations with Vietnam 
after July 3, 2003.
    Pay-as-you-go-consideration: The Balanced Budget and 
Emergency Deficit Control Act sets up pay-as-you-go-procedures 
for legislation affecting direct spending or receipts. The net 
changes in governmental receipts that are subject to pay-as-
you-go procedures are shown in the following table.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         By fiscal year, in millions of dollars--
                                                                 ---------------------------------------------------------------------------------------
                                                                   2002    2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in outlays..............................................                                      Not applicable
Changes in receipts.............................................       0      -8       0       0       0       0       0       0       0       0       0
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Estimated impact on state, local, and tribal governments: 
H.J. Res. 101 contains no intergovernmental mandates as defined 
in UMRA and would not affect the budgets of state, local, or 
tribal governments.
    Estimated impact on the private sector: H.J. Res. 101 would 
impose a private-sector mandate on importers of Vietnamese 
goods that would be subject to higher tariffs. The higher 
tariff rates imposed by the bill would decrease tariff receipts 
by $8 million compared to current law because the quantity of 
imports from Vietnam would decrease as a consequence of 
increasing the cost of those goods. Importers of those goods 
would bear a cost of lost profits on about $350 million of 
sales. Other goods imported from Vietnam would continue to 
enter the United States, and the importers of those goods would 
also bear a mandate imposed by the bill in the form of higher 
tariffs of $13 million.
    CBO does not have sufficient information to determine 
whether the cost of the mandate in the bill would exceed the 
threshold established in UMRA ($115 million in 2002, adjusted 
annually for inflation). Specifically, CBO could not determine 
the value of profits lost because of lower imports from 
Vietnam.
    Previous estimate: On July 16, 2001, CBO transmitted an 
estimate for H.J. Res. 55, disapproving the extension of the 
waiver authority contained in section 402(c) of the Trade Act 
of 1974 with respect to Vietnam as ordered reported adversely 
by the House Committee on Ways and Means. Last year's joint 
resolution would have disapproved the extension of the 
President's waiver for the period beginning on July 3, 2001, 
and ending on July 2, 2002. CBO estimated that disapproving the 
extension of the waiver would have no significant impact on 
receipts, because the waiver would not give Vietnam 
nondiscriminatory trade relations status. Since the 
transmission of the previous estimate, the Congress passed H.J. 
Res. 51, approving the extension of nondiscriminatory treatment 
to the products of the Socialist Republic of Vietnam.
    Because the bilateral trade agreement between Vietnam and 
the United States had not been ratified at the time the bill 
was ordered reported, H.J. Res. 55 did not contain a private-
sector mandate.
    Estimate prepared by: Costs: Erin Whitaker and Annie 
Bartsch; impact on private sector: Lauren Marks; impact on 
state, local, and tribal governments: Greg Waring.
    Estimate approved by: G. Thomas Woodward, Assistant 
Director for Tax Analysis.

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

          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee believes, based on information from the 
Administration, that terminating Vietnam's Jackson-Vanik waiver 
by enacting House Joint Resolution 101 would be detrimental to 
the trade policy objectives of the United States.

        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 
enacting House Joint Resolution 101 would undermine the goals 
and objectives of the Congress and the Administration in 
maintaining economic and political engagement with Vietnam.

                 C. Constitutional Authority Statement

    With respect to clause 3(d)(1) of rule XIII of the Rules of 
the House of Representatives, relating to Constitutional 
Authority, the Committee states that the Committee's action in 
reporting the bill is derived from Article I of the 
Constitution, Section 8 (``The Congress shall have power to lay 
and collect taxes, duties, imposts and excises, to pay the 
debts and to provide for * * * the general Welfare of the 
United States * * *'').

                                
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