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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 
                               following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                      [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.

                                CONTENTS

                                                                   Page
 I. Introduction......................................................2
        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 
            Expenditures.........................................     6
        C. Cost Estimate Prepared by the Congressional Budget 
            Office...............................................     6
 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

                            I. INTRODUCTION


                         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.

                             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 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-
82).

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 
regulations.

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 
cashews.

                         C. Legislative History


Committee action

    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.

Legislative hearing

    During Committee consideration of the legislation, the 
Administration presented its views about the importance of 
Congressional approval of the BTA and responded to Member 
questions.

                   II. EXPLANATION OF THE RESOLUTION


Present law

    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 
        disruption;
          (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 
        Convention;
          (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 
        agreement; and
          (10) provide for such other arrangements of a 
        commercial nature as will promote the purpose of the 
        Act.
    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 
reforms.
    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 
Organization.
    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.

Effective date

    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 
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 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 
from Vietnam.

      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 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 
Vietnam..
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Erin 
Whitaker.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

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 
tribal governments.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.J. Res. 51 is shown in the following 
table.

------------------------------------------------------------------------
                                      By fiscal year, in millions of
                                                 dollars--
                                 ---------------------------------------
                                   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 
countries.
    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-
2011 period.
    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 
are counted.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                          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.
                                   Jerry Kleczka.
                                   Karen L. Thurman.
                                   Xavier Becerra.
                                   Sander Levin.
                                   Wm. J. Jefferson.
                                   Robert T. Matsui.
                                   Earl Pomeroy.