```

[House Report 108-17]
[From the U.S. Government Publishing Office]

108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     108-17

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

 
  AUTHORIZING THE PRESIDENT OF THE UNITED STATES TO AGREE TO CERTAIN 
AMENDMENTS TO THE AGREEMENT BETWEEN THE GOVERNMENT OF THE UNITED STATES 
 OF AMERICA AND THE GOVERNMENT OF THE UNITED MEXICAN STATES CONCERNING 
THE ESTABLISHMENT OF A BORDER ENVIRONMENT COOPERATION COMMISSION AND A 
        NORTH AMERICAN DEVELOPMENT BANK, AND FOR OTHER PURPOSES

                                _______
                                

 February 25, 2003.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

  Mr. Oxley, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 254]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Financial Services, to whom was referred the 
bill (H.R. 254) to authorize the President of the United States 
to agree to certain amendments to the Agreement between the 
Government of the United States of America and the Government 
of the United Mexican States concerning the establishment of a 
Border Environment Cooperation Commission and a North American 
Development Bank, and for other purposes, having considered the 
same, report favorably thereon without amendment and recommend 
that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Hearings.........................................................     2
Committee Consideration..........................................     2
Committee Votes..................................................     3
Committee Oversight Findings.....................................     3
Performance Goals and Objectives.................................     3
New Budget Authority, Entitlement Authority, and Tax Expenditures     3
Committee Cost Estimate..........................................     3
Congressional Budget Office Cost Estimate........................     3
Federal Mandates Statement.......................................     5
Constitutional Authority Statement...............................     5
Applicability to Legislative Branch..............................     5
Section-by-Section Analysis......................................     5

                          Purpose and Summary

    H.R. 254 authorizes the President of the United States to 
make certain amendments to the Agreement between the Government 
of the United States of America and the Government of the 
United Mexican States concerning the Border Environment 
Cooperation Commission and the North American Development Bank.
    These institutions were created in 1992 through the North 
American Free Trade Agreement (NAFTA) to provide financing for 
environmental projects in the regions along the border of the 
United States and Mexico. This legislation will authorize an 
agreement reached between the United States and Mexico to 
permit these institutions to make below market rate loans and 
will extend the land area in which these institutions can 
finance projects.

                  Background and Need for Legislation

    The North American Development Bank (NAD Bank) is an 
international financial institution established and capitalized 
in equal parts by the United States and Mexico for the purpose 
of financing environmental infrastructure projects. It was 
created along with its sister institution, the Border 
Environment Cooperation Commission (BECC), in 1993 under NAFTA. 
When they were established, these institutions were to operate 
in a boundary area 100 miles on either side of the U.S. Mexico 
international border.
    In March of 2002, President Bush and Mexican President 
Vincente Fox met at the U.N. International Conference on 
Financing and Development in Monterrey Mexico. At this meeting 
the two leaders agreed that the NAD Bank and the BECC need to 
improve their operations. Currently the NAD Banks has a total 
paid-in capital of $450 million with a total lending capacity 
of nearly $3 billion. However since its inception, the NAD Bank 
has approved only $23.5 million and disbursed only $11 million 
in loans.
    Representatives from the U.S. and Mexico examined several 
proposals to improve the operation of the NAD Bank and the 
BECC. The two sides agreed that in order to increase the number 
of transactions in which these institutions participate, they 
should be permitted to make below market rate loans and grants 
from their paid-in capital. Additionally, the representatives 
agreed that the boundary area on the Mexican side of the border 
should be expanded from 100 kilometers to 300 kilometers.

                                Hearings

    No hearings were held on this legislation in the 108th 
Congress.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
February 13, 2003 and ordered reported to the House H.R. 254, a 
bill to authorize the President of the United States to agree 
to certain amendments to the Agreement between the Government 
of the United States of America and the Government of the 
United Mexican States concerning the establishment of a Border 
Environment Cooperation Commission and a North American 
Development Bank, and for other purposes, by a voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. No 
record votes were taken with in conjunction with the 
consideration of this legislation. A motion by Mr. Oxley to 
report the bill to the House with a favorable recommendation 
was agreed to by a voice vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee made findings that are 
reflected in this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    The changes made by this legislation will improve the 
performance of the NAD Bank, resulting in improved economic and 
environmental conditions along the southern border between the 
United States and Mexico.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of budget authority, entitlement authority, or 
tax expenditures or revenues contained in the cost estimate 
prepared by the Director of the Congressional Budget Office 
pursuant to section 402 of the Congressional Budget Act of 
1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, February 24, 2003.
Hon. Michael G. Oxley,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 254, a bill to 
authorize the President of the United States to agree to 
certain amendments to the agreement between the government of 
the United States of America and the government of the United 
Mexican States concerning the establishment of a Border 
Environment Cooperation Commission and a North American 
Development Bank, and for other purposes.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Joseph C. 
Whitehall.
            Sincerely,
                                       Douglas Holtz-Eakin,
                                                          Director.
    Enclosure.

H.R. 254--A bill to authorize the President of the United States to 
        agree to certain amendments to the Agreement between the 
        Government of the United States of America and the Government 
        of the United Mexican States concerning the establishment of a 
        Border Environment Cooperation Commission and a North American 
        Development Bank, and for other purposes

    H.R. 254 would authorize the President to agree to a change 
in the North American Development Bank's (NADBank's) charter 
that would permit the bank to use its capital to make grants 
and below-market-rate loans to finance environmental 
infrastructure projects. The bill also would expand NADBank's 
regional focus to include the area in Mexico within 300 
kilometers of the U.S./Mexican border. CBO estimates that 
enacting the bill would not affect federal spending or 
receipts.
    The NADBank was established as a multilateral development 
bank by an agreement between the governments of the United 
States and Mexico in 1993. It has a mandate to finance 
environmental infrastructure projects in the U.S./Mexican 
border region with a particular focus on potable water, 
wastewater treatment, municipal solid waste, and related 
projects. Capitalized by appropriations of $225 million from 
each government, NADBank began operations in November 1994. In 
addition to the paid-in capital, NADBank has the authority to 
borrow an additional $2.55 billion, an amount sufficient to 
support lending operations of up to $3 billion.
    In the eight years of its existence, however, NADBank has 
financed few projects. Of the $450 million in appropriated 
funds for NADBank, 10 percent was earmarked for grant 
assistance in the two countries; the rest of the funds were 
invested in government and other income generating securities. 
As of December 31, 2002, the bank had written contracts for 
only nine loans totaling $24 million. H.R. 254 would authorize 
the bank to make grants and below-market-rate loans. NADBank 
has announced plans to use the authority to provide $90 million 
in grants from retained earnings for water conservation and 
solid-waste projects and provide $50 million in below-market-
rate loans. We estimate that expanding its regional focus would 
not greatly increase the demand for NADBank financing. Given 
the relative inactivity of the bank and the fact that it has no 
outstanding debt, CBO estimates that using its capital base in 
this manner would likely have no impact on its other financing 
operations or credit rating.
    H.R. 254 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    The CBO staff contact is Joseph C. Whitehill. This estimate 
was approved by Peter H. Fontaine, Deputy Assistant Director 
for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional Authority of Congress to enact this legislation 
is provided by Article 1, section 8, clause 1 (relating to the 
general welfare of the United States) and clause 3 (relating to 
the power to regulate interstate and foreign commerce).

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation

Section 1. Authority to agree to certain amendments to the Border 
        Environment Cooperation Agreement

    This section authorizes the President of the United States 
to make grants and non-market rate loans out of its paid in 
capital resources with approval of the board. This section 
further amends the definition of ``border region'' to include 
an area in the United States that is within 100 kilometers of 
the international boundary between the United States and Mexico 
and the area in Mexico that is within 300 kilometers of the 
international boundary between the United States and Mexico.

Section 2. Annual report

    This section requires the Secretary of the Treasury to 
submit to the Committee on Financial Services of the House of 
Representatives and the Committee on Foreign Relations of the 
Senate a written report on the performance of the North 
American Development Bank. Among other things this report will 
describe projects approved and funded as well as require 
Treasury to report on any negotiations with the Mexican 
government on expanding the range of projects financed as well 
as on improving the effectiveness of the institution.

Section 3. Sense of the Congress relating to United States support for 
        NADBank projects which finance water conservation for Texas 
        irrigators and agricultural producers in the Lower Rio Grande 
        Valley

    This section expresses the sense of Congress that water 
conservation projects are eligible for funding from the NADBank 
and that the Board should support qualified water conservation 
projects which can assist irrigators and agricultural producers 
in Texas.

Section 4. Sense of the Congress relating to United States support for 
        NADBank projects which finance water conservation in the 
        Southern California Area

    This section expresses the sense of Congress that the Board 
of the NADBanks should support the development of qualified 
water projects in Southern California, and other eligible areas 
in the 4 Border States.

Section 5. Sense of the Congress relating to United States support for 
        NADBank projects for which finance water conservation for 
        irrigators and agricultural producers in the Southwest United 
        States

    This section expresses the sense of Congress that the Board 
of the North American Development Bank should support qualified 
water conservation projects that can assist irrigators and 
agricultural producers. Additionally, this section expresses 
the sense of the Congress that the Board should take into 
consideration the needs of all the Border States before 
approving funding water projects and should strive to fund 
water conservation projects in each of the Border States.

Section 6. Additional senses of the Congress

    This section expresses the sense of Congress that the Board 
of the NADBank should support projects that address coastal 
pollution issues and projects that address air pollution in 
both Mexico and the United States.

         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 (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

         NORTH AMERICAN FREE TRADE AGREEMENT IMPLEMENTATION ACT

                          (Public Law 103-182)

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

  (a)  * * *
  (b) Table of Contents.--

Sec. 1. Short title and table of contents.
     * * * * * * *

 TITLE V--NAFTA TRANSITIONAL ADJUSTMENT ASSISTANCE AND OTHER PROVISIONS

     * * * * * * *

       Subtitle D--Implementation of NAFTA Supplemental Agreements

     * * * * * * *

     Part 2--North American Development Bank and Related Provisions

Sec. 541. North American Development Bank.
     * * * * * * *
Sec. 545. Authority to agree to certain amendments to the Border 
          Environment Cooperation Agreement.
     * * * * * * *

 TITLE V--NAFTA TRANSITIONAL ADJUSTMENT ASSISTANCE AND OTHER PROVISIONS

          * * * * * * *

      Subtitle D--Implementation of NAFTA Supplemental Agreements

          * * * * * * *

     PART 2--NORTH AMERICAN DEVELOPMENT BANK AND RELATED PROVISIONS

          * * * * * * *

SEC. 545. AUTHORITY TO AGREE TO CERTAIN AMENDMENTS TO THE BORDER 
                    ENVIRONMENT COOPERATION AGREEMENT.

  The President may agree to amendments to the Cooperation 
Agreement that--
          (1) enable the Bank to make grants and nonmarket rate 
        loans out of its paid-in capital resources with the 
        approval of its Board; and
          (2) amend the definition of ``border region'' to 
        include the area in the United States that is within 
        100 kilometers of the international boundary between 
        the United States and Mexico, and the area in Mexico 
        that is within 300 kilometers of the international 
        boundary between the United States and Mexico.

           *       *       *       *       *       *       *

                                

```