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107th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 107-198
APPROVAL OF THE EXTENSION OF NONDISCRIMINATORY TREATMENT WITH RESPECT
TO THE PRODUCTS OF THE SOCIALIST REPUBLIC OF VIETNAM
September 5, 2001.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
Mr. Thomas, from the Committee on Ways and Means, submitted the
R E P O R T
[To accompany H.J. Res. 51]
[Including cost estimate of the Congressional Budget Office]
The Committee on Ways and Means, to whom was referred the
joint resolution (H.J. Res. 51) approving the extension of
nondiscriminatory treatment with respect to the products of the
Socialist Republic of Vietnam, having considered the same,
report favorably thereon without amendment and recommend that
the joint resolution do pass.
A. Purpose and Summary................................... 2
B. Background............................................ 2
C. Legislative History................................... 4
II. Explanation of the Resolution.....................................4
III.Votes of the Committee............................................6
IV. Budget Effect.....................................................6
A. Committee Estimate of Budgetary Effects............... 6
B. Statement Regarding New Budget Authority and Tax
C. Cost Estimate Prepared by the Congressional Budget
V. Other Matters To Be Discussed Under the Rules of the House........8
A. Committee Oversight Findings and Recommendations..... 8
B. Statement of General Performance Goals and Objectives 9
C. Constitutional Authority Statement................... 9
VI. Additional Views.................................................10
A. Purpose and Summary
House Joint Resolution 51 would approve the extension of
nondiscriminatory treatment with respect to the products of
Vietnam through approval of the bilateral trade agreement
between the United States and Vietnam.
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 eligibility for U.S. trade financing programs by
complying with the freedom of emigration provisions under the
Act, or by receiving a Presidential waiver of such
requirements. 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.
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. 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 President has renewed Vietnam's waiver every
year since 1998, most recently on June 1, 2001 (H. Doc. 107-
U.S.-Vietnam Bilateral Trade Agreement
In 1997, the United States began negotiations with Vietnam
toward the conclusion of a U.S.-Vietnam bilateral trade
agreement (BTA). That agreement was signed by U.S. Trade
Representative Charlene Barshefsky and Vietnam's Trade Minister
Vu Khoan on July 13, 2000. On June 8, 2001, President Bush
transmitted the agreement to Congress for its approval.
The BTA is the most comprehensive trade agreement ever
negotiated with a non-market economy country. It covers most
major trade issues and should help bring about over time
significant reforms in Vietnam's trade and economic policies.
Overall, the BTA commits Vietnam to open its goods and services
markets, implement significant economic reforms, expand rule of
law, and broaden economic freedom.
The agreement contains five major sections:
(1) Market access for industrial and agricultural goods:
Vietnam has agreed to sharply lower tariffs; phase out all non-
tariff measures; and adhere to WTO standards in applying
customs, import licensing, state trading, technical standards,
and sanitary and phytosanitary measures. In addition, Vietnam
has agreed to allow all Vietnamese firms, and over time U.S.
firms, the right to import and export freely from its borders.
(2) Intellectual property rights (IPR): Vietnam has
committed to adopt WTO standards for IPR protection within 18
months and to take further measures in several other areas
(e.g., protection of satellite signals).
(3) Market access for services: Vietnam has agreed to allow
U.S. firms over time (typically three to five years) to enter
its services market in the full range of service areas,
including financial services (insurance and banking),
telecommunications, distribution, audio visual, legal,
accounting, engineering, computer and related services, market
research, construction, educational, health and related
services, and tourism.
(4) Investment provisions: Vietnam has committed to protect
U.S. investments from expropriation, to eliminate local content
and export performance requirements, and to phase out its
investment licensing regime in many sectors.
(5) Transparency provisions: Vietnam has agreed to adopt a
fully transparent regime by issuing draft laws, regulations and
other rules for comment, ensuring that advance public notice is
given for all such laws and regulations, and publishing these
documents. Vietnam will also allow U.S. citizens the right to
appeal rulings made with respect to all such relevant laws and
Trade with Vietnam
Vietnam is the world's 13th most populous country, with
nearly 80 million people. While the country has emerged as one
of Southeast Asia's more promising economies and could become a
strong trading partner for the United States, its full
potential has yet to be realized. Cumulative foreign direct
investment by U.S. companies in Vietnam is low, valued about $1
billion, making the United States the ninth-largest source of
investment in Vietnam.
After the President ordered an end to the U.S. trade
embargo in 1994, two-way trade between the United States and
Vietnam increased steadily from $223 million in 1994 to $935
million in 1996. In part, this rapid growth was due to a large
number of U.S. aircraft sales to Vietnam in 1996. Despite a
dampening effect on trade as a result of the Asian financial
crisis which began in 1997, two-way trade was still $666
million that year. Beginning in 1998, two-way trade began to
increase again and reached $828 million in 1998, $880 million
in 1999, and $1.16 billion in 2000. Last year, U.S. exports to
Vietnam totaled $331 million, while U.S. imports in return were
valued at $827 million. Between 1994 and 2000, total trade
between the United States and Vietnam increased by 420 percent.
Top U.S. exports to Vietnam include aircraft, industrial
and office machinery, footwear parts, telecommunications
equipment, and fertilizer. Major U.S. imports from Vietnam
include shrimp, footwear, coffee, petroleum products, and
C. Legislative History
On June 8, 2001, the President transmitted the BTA between
the United States and Vietnam to Congress. House Joint
Resolution 51 was then introduced on June 12, 2001, by Mr.
Armey (for himself, Mr. Gephardt, and Mr. Crane) (all by
request) to approve the extension of nondiscriminatory
treatment with respect to the products of Vietnam. The
resolution was referred to the Committee on Ways and Means. On
July 26, 2001, the Committee on Ways and Means ordered House
Joint Resolution 51 reported favorably without amendment to the
House of Representatives by a voice vote with a quorum present.
During Committee consideration of the legislation, the
Administration presented its views about the importance of
Congressional approval of the BTA and responded to Member
II. EXPLANATION OF THE RESOLUTION
Vietnam's trade status is subject to the ``Jackson-Vanik''
provisions in 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, credit guarantees, or investment guarantees, to
nonmarket economy countries ineligible for NTR treatment as of
the enactment of the Act.
In order to receive NTR tariff treatment, a country subject
to Jackson-Vanik must meet two requirements. First, a country
must either comply with the freedom of emigration requirements
under the Act, or receive an annual waiver of such requirements
by the President. On June 1, 2001, the President issued a 12-
month renewal of the waiver for Vietnam for the period July 3,
2001 through July 2, 2002. On June 21, 2001, H.J. Res. 55 was
introduced by Mr. Rohrabacher, which would have disapproved the
President's waiver with respect to Vietnam. On July 26, 2001,
the House of Representatives rejected H.J. Res. 55 by a vote of
91 to 324.
Second, the extension of NTR tariff treatment also requires
the conclusion and approval by Congress of a bilateral trade
agreement (BTA) with the United States providing for reciprocal
nondiscriminatory treatment. Without a BTA, a country is only
eligible for access to U.S. trade financing programs. A BTA was
signed by the United States and Vietnam on July 13, 2000. On
June 8, 2001, the President formally transmitted the BTA,
including related annexes and exchanges of letters, to the
Congress for its consideration, along with his proclamation
extending nondiscriminatory treatment to imports from Vietnam.
On June 12, 2001, H.J. Res. 51 was introduced by request (as
required by the Act). The resolution would extend
nondiscriminatory treatment to the products of Vietnam and
approve the BTA.
Under section 405(c) of the Trade Act of 1974, as amended
by the Customs and Trade Act of 1990 (P.L. 101-382), the trade
agreement and proclamation, and consequently normal trade
relations, may take effect only if a joint resolution approving
the agreement is enacted into law.
Section 405(b) of the Trade Act of 1974 requires that a
bilateral commercial agreement with a Jackson-Vanik country:
(1) be limited to an initial 3-year period;
(2) be subject to suspension or termination for
national security reasons;
(3) include safeguard provisions, allowing the United
States to put measures in place to prevent market
(4) provide rights to U.S. patent and trademark
holders not less than those provided for in the Paris
Convention for the Protection of Industrial Property;
(5) provide rights to U.S. copyright holders not less
than the rights provided for in the Universal Copyright
(6) provide arrangements for the protection of
industrial rights and processes;
(7) provide arrangements for the settlement of
commercial differences and disputes;
(8) provide for promotion of trade (including, e.g.,
facilitation of trade fairs and activities of
governmental commercial officers);
(9) provide for consultations on operation of the
(10) provide for such other arrangements of a
commercial nature as will promote the purpose of the
An agreement may be renewable for additional periods, each
not to exceed 3 years, and would be extended automatically
unless renounced by either party. Each extension would require
a presidential determination that Vietnam is satisfactorily
extending reciprocal NTR treatment to U.S. exports.
Explanation of resolution
H.J. Res. 51 states that Congress approves the extension of
nondiscriminatory treatment with respect to the products of
Vietnam. The effect of this resolution would be Congressional
approval of the U.S.-Vietnam BTA, which would grant temporary
NTR treatment to Vietnam, subject to an annual review by the
President (similar to the process for China prior to its
accession to the World Trade Organization).
Reasons for Committee action
The Committee on Ways and Means favorably reports H.J. Res.
51 because the Members support the Administration's policy of
engagement and 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 important U.S.
objectives, including 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
Congressional approval of the BTA would complete the
normalization of U.S.-Vietnam economic relations. Furthermore,
undoing the progress that engagement with Vietnam has had to
date would seriously undermine our bilateral relationship and
would inhibit 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
The Committee 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.
The BTA would enter into force and NTR would take effect
only after a joint resolution of approval is enacted into law
and after an exchange of letters indicating that both countries
have approved the agreement.
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 51.
motion to report the resolution
The joint resolution, H.J. Res. 51, was ordered favorably
reported, without amendment, by a voice vote and with a quorum
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 51, 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 51 would reduce
customs duty receipts due to lower tariffs imposed on goods
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.
Congressional Budget Office,
Washington, DC, July 30, 2001.
Hon. William ``Bill'' M. Thomas,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.J. Res. 51, a joint
resolution approving the extension of nondiscriminatory
treatment to the products of the Socialist Republic of
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Erin
Barry B. Anderson
(For Dan L. Crippen, Director).
H.J. Res. 51--Approving the extension of nondiscriminatory treatment to
the products of the Socialist Republic of Vietnam
Summary: H.J. Res. 51 would approve extension of
nondiscriminatory treatment, or Normal Trade Relations (NTR)
status, to the Socialist Republic of Vietnam, as recommended by
the President on June 8, 2001. CBO expects that enacting the
bill would reduce revenues by $33 million in 2002, by $181
million over the 2002-2006 period, and by $416 million over the
2002-2011 period. Since enacting H.J. Res. 51 would affect
revenues, pay-as-you-go procedures would apply.
H.J. Res. 51 contains no intergovernmental or private-
sector mandates as defined in the Unfunded Mandates Reform Act
(UMRA) and would not affect the budgets of state, local, or
Estimated cost to the Federal Government: The estimated
budgetary impact of H.J. Res. 51 is shown in the following
By fiscal year, in millions of
2002 2003 2004 2005 2006
CHANGES IN REVENUES
Estimated Revenues.............. -33 -34 -36 -38 -40
Basis of estimate: H.J. Res. 51 would immediately extend
NTR to products from Vietnam. Such products currently bear
general rates of duty which are significantly higher than the
rates applied to products from countries with NTR treatment.
Based on information from the Office of the United States Trade
Representative (USTR) and from Census Bureau data on imports
from Vietnam, CBO estimates that the reduction of tariff rates
would reduce revenues by about $33 million in 2002, net of
income and payroll tax offsets. This estimate includes the
effects of increased imports from Vietnam that would result
from the reduced prices of imported products in the United
States--reflecting the lower tariff rates--and has been
estimated based on the expected substitution between U.S.
products and imports from Vietnam. In addition, it is likely
that part of the increase in U.S. imports from Vietnam would
displace imports from other countries. In the absence of
specific data on the extent of this substitution effect, CBO
assumes that an amount equal to one-half the increase in U.S.
imports from Vietnam will displace imports from other
An extension of NTR treatment to products from Vietnam
would be subject to annual review. Under the Trade Act of 1974,
nondiscriminatory trade relations may not be conferred on a
country with a nonmarket economy if that country maintains
restrictive emigration policies. The President may waive this
prohibition on an annual basis, however, if he certifies that
doing so would promote freedom of emigration in that country.
Vietnam has received such a waiver on an annual basis since
1998, and CBO assumes that Vietnam would continue to receive
such a waiver after enactment of H.J. Res. 51. Based on
information from the USTR and the Census Bureau, CBO estimates
enacting the legislation would reduce revenues by $181 million
over the 2002-2006 period, and by $416 million over the 2002-
Pay-as-you-go considerations: The Balanced Budget and
Emergency Deficit Control Act set up procedures for legislation
affecting receipts or direct spending. The net changes in
governmental receipts that are subject to pay-as-you-go
procedures are shown in the following table. For the purposes
of enforcing pay-as-you-go procedures, only the effects in the
current year, the budget year, and the succeeding four years
By fiscal year, in millions of dollars--
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Changes in receipts.............................................. 0 -33 -34 -36 -38 -40 -42 -44 -47 -49 -52
Changes in outlays............................................... Not applicable
Intergovernmental and private sector impact: H.J. Res. 51
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: Erin Whitaker.
Impact on State, Local, and Tribal Governments: Scott Masters.
Impact on the Private Sector: Paige Piper/Bach.
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 approving the U.S.-Vietnam Bilateral Trade
Agreement and extending nondiscriminatory treatment to the
products of Vietnam by enacting House Joint Resolution 51 would
promote progress on important U.S. political, economic, and
security objectives with respect to Vietnam.
B. Statement of General Performance Goals and Objectives
With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill contains no measure that authorizes funding, so no
statement of general performance goals and objectives for which
any measure authorizes funding is required.
C. Constitutional Authority Statement
With respect to clause 3(d)(1) of rule XIII of the Rules of
the House of Representatives, relating to Constitutional
Authority, the Committee states that the Committee's action in
reporting the bill is derived from Article 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 * * *'').
VI. ADDITIONAL VIEWS
The bilateral trade agreement that the United States signed
with Vietnam in July 2000 represents a milestone in U.S.-
Vietnam relations. The agreement builds a foundation for a
strong commercial relationship with Vietnam and promotes U.S.
security and diplomatic interests. The agreement is the most
comprehensive agreement ever signed with a communist nation.
Vietnam has agreed to provide most favored nation and national
treatment to U.S. goods, services, and investments; comply with
standards of intellectual property protection that in some
cases exceed the obligations established by the World Trade
Organization Agreement on Trade-Related Aspects of Intellectual
Property Rights; and implement extensive measures to increase
transparency in its laws, regulations, and administrative
procedures. These commitments will help increase opportunities
for workers, businesses and farmers in both countries, and pave
the way for changes in the Vietnamese economy and in Vietnamese
society as a whole. For these reasons, we support H.J. Res. 51
and the approval of the U.S.-Vietnam bilateral trade agreement.
While we believe that the U.S.-Vietnam bilateral trade
agreement represents an important step toward building a strong
economic relationship between our two countries, the agreement
does not include provisions addressing labor conditions in
Vietnam. As noted by the U.S. State Department in its annual
human rights report, Vietnam's record of enforcing
internationally recognized core labor standards has been poor.
The Government of Vietnam continues to deny citizens the right
of association, allow forced labor in juvenile detention camps
and re-education/detention camps, and inadequately enforce its
child labor and worker safety laws. The Memorandum of
Understanding (MOU) that President Clinton signed with Vietnam
in December 2000 pledging that the United States would provide
technical assistance and work with Vietnam to improve its labor
conditions was a step forward. However, the MOU does not
require Vietnam to take specific steps to improve enforcement
of existing laws and regulations.
We are disappointed that the issue of labor conditions in
Vietnam has not been more fully addressed and urge the
Administration to take action as soon as possible. In
particular, we are disappointed with the unwillingness of the
Administration to pursue the inclusion of a provision providing
positive incentives for improvements in labor conditions in a
future textile and apparel agreement with Vietnam, similar to
the one negotiated with Cambodia. We recognize that there have
been some problems with the implementation of the Cambodian
agreement, including, for example, a lack of specificity as to
what steps Cambodia is required to take to obtain an increase
in quota and as to allowances for partial quota increases. That
said, we believe these problems can and should be addressed,
both in terms of renewal of the Cambodia agreement later this
year and in a textile and apparel agreement with Vietnam.
Toward that end, we will be suggesting a set of proposed
changes to the Cambodia agreement and its implementation, with
an eye toward applying these changes to an agreement with
Vietnam as well. If the United States fails to enter into a
textile and apparel agreement with Vietnam that is similar to
the one negotiated with Cambodia, Vietnam could become a
preferred location for production relative to Cambodia--for the
wrong reasons. The United States should not ignore this
opportunity to advance the issue of labor standards in Vietnam
at the same time as we work to strengthen economic relations
between the two countries.
Charles B. Rangel.
Karen L. Thurman.
Wm. J. Jefferson.
Robert T. Matsui.