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                                                       Calendar No. 651
108th Congress                                                   Report
                                 SENATE
 2d Session                                                     108-317

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



 
     UNITED STATES-MOROCCO FREE TRADE AGREEMENT IMPLEMENTATION ACT

                                _______
                                

                August 25, 2004.--Ordered to be printed

   Filed, under authority of the order of the Senate of July 22, 2004

                                _______
                                

  Mr. Grassley, from the Committee on Finance, submitted the following

                              R E P O R T

                         [To accompany S. 2677]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Finance, to which was referred the bill 
(S. 2677) to implement the United States-Morocco Free Trade 
Agreement, having considered the same, reports favorably 
thereon without amendment and recommends that the bill do pass.

                                CONTENTS

                                                                   Page
 I. Report and Other Committee Material...............................2
        A. Report of the Committee on Finance....................     2
        B. Summary of Congressional Consideration of the United 
            States-Morocco Free Trade Agreement..................     2
            1. Background........................................     2
            2. Trade Promotion Authority Procedures in General...     2
            3. Notification Prior to Negotiations................     3
            4. Notification of Intent To Enter Into an Agreement.     3
            5. Development of the Implementing Legislation.......     3
            6. Formal Submission of the Agreement and 
                Implementing Legislation.........................     4
            7. Committee and Floor Consideration.................     4
        C. Trade Relations With Morocco..........................     5
            1. United States-Morocco Trade and Investment........     5
            2. Tariffs and Trade Agreements......................     6
            3. U.S. International Trade Commission Study.........     8
        D. Overview of the United States-Morocco Free Trade 
            Agreement............................................     8
            1. Overview of the Agreement.........................     8
            2. Chapter Summaries.................................    10
        E. General Description of the Bill To Implement the 
            United States-Morocco Free Trade Agreement...........    28
    Title I--Approval of, and General Provisions Relating to, the 
    Agreement........................................................28
    Title II--Customs Provisions.....................................30
    Title III--Relief From Imports...................................32
        F. Vote of the Committee in Reporting the Bill...........    37
II. Budgetary Impact of the Bill.....................................38
III.Regulatory Impact of the Bill and Other Matters..................39

IV. Changes in Existing Law Made by the Bill, as Reported............39

                 I. REPORT AND OTHER COMMITTEE MATERIAL


                 A. Report of the Committee on Finance

    The Committee on Finance, to which was referred the bill 
(S. 2677) to implement the United States-Morocco Free Trade 
Agreement, having considered the same, reports favorably 
thereon without amendment and recommends that the bill do pass.

B. Summary of Congressional Consideration of the United States-Morocco 
                          Free Trade Agreement


1. Background

    On April 23, 2002, President George W. Bush met with His 
Majesty King Mohammed VI of Morocco at the White House. In the 
Oval Office meeting, President Bush expressed his desire to 
negotiate a comprehensive free trade agreement with Morocco as 
soon as Congress granted him the authority, and King Mohammed 
likewise expressed his interest in negotiating such an 
agreement. On August 6, 2002, President Bush signed the Trade 
Act of 2002 (Pub. L. 107-210), which grants the President the 
authority to enter into trade agreements and provides expedited 
procedures for consideration of legislation implementing trade 
agreements that meet certain objectives provided for under the 
Act. On October 1, 2002, President Bush authorized and directed 
Ambassador Robert B. Zoellick, U.S. Trade Representative, to 
notify Congress of the President's intention to enter into 
negotiations for a free trade agreement with the Kingdom 
ofMorocco. In letters dated October 1, 2002, to the Honorable Robert C. 
Byrd, President Pro Tempore, U.S. Senate, and to the Honorable J. 
Dennis Hastert, Speaker, U.S. House of Representatives, Ambassador 
Zoellick notified Congress of the President's intention to negotiate a 
trade agreement with Morocco. On January 21, 2003, the United States 
and Morocco initiated negotiations for a free trade agreement, and the 
negotiations were completed on March 2, 2004. On March 8, 2004, 
President Bush notified Congress of his intention to enter into the 
United States-Morocco Free Trade Agreement. U.S. Trade Representative 
Robert B. Zoellick and Minister-Delegate of Foreign Affairs and 
Cooperation Taib Fassi-Fihiri signed the Agreement on behalf of their 
respective governments in Washington, DC, on June 15, 2004.

2. Trade Promotion Authority Procedures in General

    The requirements for Congressional consideration of the 
United States-Morocco Free Trade Agreement (the Agreement) 
under expedited procedures (known as Trade Promotion Authority 
(TPA) procedures) are set forth in sections 2103 through 2106 
of the Bipartisan Trade Promotion Authority Act of 2002 (the 
Act) (19 U.S.C. Sec. Sec. 3803-3806) and section 151 of the 
Trade Act of 1974 (19 U.S.C. Sec. 2191).
    Section 2103 of the Act authorizes the President, prior to 
June 1, 2005 (or, prior to June 1, 2007, if TPA procedures are 
extended under section 2103(c) of the Act), to enter into 
reciprocal trade agreements with foreign countries to reduce or 
eliminate tariff or nontariff barriers and other trade-
distorting measures. The purpose of section 2103 procedures is 
to provide the means to achieve U.S. negotiating objectives set 
forth under section 2102 of the Act in international trade 
negotiations.

3. Notification Prior to Negotiations

    Under section 2104(a)(1) of the Act, the President must 
provide written notice to the Congress at least 90 calendar 
days before initiating negotiations. In a Presidential 
Memorandum dated October 1, 2002, President Bush authorized and 
directed Ambassador Robert B. Zoellick, U.S. Trade 
Representative, to notify the Congress, consistent with section 
2104(a)(1) of the Act, of the President's intention to enter 
into negotiations for a free trade agreement with Morocco. 
Section 2104(a)(2) requires the President, before and after 
submission of the notice, to consult regarding the negotiations 
with the relevant Committees of Congress and the Congressional 
Oversight Group established under section 2107 of the Act. The 
Administration engaged in the requisite consultations, 
including appearances by Ambassador Zoellick at meetings of the 
Congressional Oversight Group on January 7, 2003, April 11, 
2003, July 24, 2003, and May 6, 2004.

4. Notification of Intent To Enter Into an Agreement

    Under section 2105(a)(1)(A) of the Act, the President is 
required, at least 90 days before entering into an agreement, 
to notify Congress of his intent to enter into the agreement. 
On March 8, 2004, President George W. Bush notified Congress of 
his intention to enter into the United States-Morocco Free 
Trade Agreement. The Agreement was signed on June 15, 2004.
    Section 2105(a)(1)(B) of the Act also requires the 
President, within 60 days of signing an agreement, to submit to 
Congress a description of changes to existing laws that the 
President considers would be required to bring the United 
States into compliance with such agreement. On July 15, 2004, 
the President transmitted to Congress a description of changes 
to existing laws required to comply with the Agreement.

5. Development of the Implementing Legislation

    Under TPA procedures, the Congress and the Administration 
work together to produce the legislation to implement a free 
trade agreement. Draft legislation is developed in close 
consultation between the Administration and the Committees with 
jurisdiction over the laws that must be enacted or amended to 
implement the agreement. The Committees then hold informal 
meetings to consider the draft legislation and recommend 
changes to the Administration, if any. The Administration then 
finalizes implementing legislation for formal submission to the 
Congress and referral to the Committees of jurisdiction. These 
procedures are meant to ensure that the final legislation 
reflects only those provisions that are necessary or 
appropriate to faithfully implement the agreement.
    The Senate Committee on Finance met in open executive 
session on July 14, 2004, to informally consider draft 
implementing legislation for the Agreement.

6. Formal Submission of the Agreement and Legislation

    When the President formally submits a trade agreement to 
the Congress under section 2105 of the Act, the President must 
include in the submission the final legal text of the 
agreement, together with implementing legislation, a statement 
of administrative action (describing regulatory and other 
changes that are necessary or appropriate to implement the 
agreement), a statement setting forth the reasons of the 
President regarding how and to what extent the agreement makes 
progress in achieving the applicable policies, purposes, 
priorities, and objectives set forth in the Act, and a 
statement setting forth the reasons of the President regarding 
how the agreement serves the interests of U.S. commerce.
    The implementing legislation is introduced in both Houses 
of Congress on the day it is submitted by the President and is 
referred to Committees with jurisdiction over its provisions. 
President George W. Bush transmitted the final text of the 
United States-Morocco Free Trade Agreement, along with 
implementing legislation, a Statement of Administrative Action, 
and other supporting information, as required under section 
2105 of the Trade Act of 2002, to the Congress on July 15, 
2004. The legislation was introduced that same day in both the 
House and the Senate.
    To qualify for TPA Procedures, the implementing bill itself 
must contain provisions formally approving the agreement and 
the statement of administrative action. Further, the 
implementing bill must contain only those provisions necessary 
or appropriate to implement the Agreement. The implementing 
bill reported here--which approves the United States-Morocco 
Free Trade Agreement and the Statement of Administrative Action 
and contains provisions necessary or appropriate to implement 
the Agreement into U.S. law--was referred to the Senate 
Committee on Finance.

7. Committee and Floor Consideration

    When the requirements of the Act are satisfied, 
implementing revenue bills, such as the United States-Morocco 
Free Trade Agreement Implementation Act (Implementation Act), 
are subject to the legislative procedures of section 151 of the 
Trade Act of 1974. The following schedule for Congressional 
consideration applies under these procedures:
          (i) House Committees have up to 45 days in session in 
        which to report the bill; any Committee which does not 
        do so in that period will be automatically discharged 
        from further consideration.
          (ii) A vote on final passage by the House must occur 
        on or before the 15th day in session after the 
        Committees report the bill or are discharged from 
        further consideration.
          (iii) Senate Committees must act within 15 days in 
        session of receiving the implementing revenue bill from 
        the House or within 45 days in session of Senate 
        introduction of the implementing bill, whichever is 
        later, or they will be discharged automatically.
          (iv) The full Senate then must vote within 15 days in 
        session and without amendment on the implementing bill.
    Thus, the Congress has a maximum of 90 days in session to 
complete action on the bill, although the time period can be 
shortened.
    Once the implementing bill has been formally submitted by 
the President and introduced, no amendments to the bill are in 
order in either House of Congress. Floor debate in each House 
is limited to no more than 20 hours, to be equally divided 
between those favoring the bill and those opposing the bill.

                    C. Trade Relations With Morocco


1. United States-Morocco Trade and Investment

    The World Bank ranks Morocco as a middle income developing 
country. Morocco's gross domestic product (GDP) is 1.1 percent 
of U.S. GDP, while Morocco's population is 10 percent of the 
population of the United States. Services account for almost 
one-half of Morocco's GDP, while the agriculture sector employs 
more than one-third of Morocco's labor force. Morocco is the 
leading exporter and third-largest producer of phosphates 
(after the United States and China). Related industries include 
the production of fertilizers and phosphoric acid. Morocco also 
has a diverse manufacturing base, with over one-third of 
Moroccan exports accounted for by apparel and footwear in 2002.
    Relative to other trading partners, U.S. trade with Morocco 
is small. U.S. exports to Morocco in 2003 were valued at $462 
million, ranking Morocco as the 69th largest market for U.S. 
exports that year. Foreign direct investment in Morocco 
experienced a net increase during the period 1996-2001, 
reflecting the Government's privatization efforts. The 
telecommunications sector experienced the largest share of 
foreign direct investment during this period, reflecting the 
high priority the Moroccan Government has given to developing a 
modern and competitive telecommunications sector. During 1996-
2001, the United States was Morocco's third-largest investor, 
following France and Portugal. However, U.S. service firms are 
effectively prohibited from competing in large segments of 
Morocco's service economy due to Government bans on foreign 
participation or the imposition of onerous requirements. The 
Agreement will improve regulatory transparency and open 
Morocco's market to U.S. service suppliers.
    U.S. imports from Morocco in 2003 were valued at $396 
million, ranking Morocco as the 82nd largest supplier of U.S. 
imports that year. Approximately 5 percent of U.S. imports from 
Morocco entered duty-free under the Generalized System of 
Preferences (GSP) program. However, import/export and 
investment data alone fail to capture Morocco's full importance 
as a trading partner of the United States. In May 2003, 
President Bush announced the goal of working toward a Middle 
East Free Trade Area (MEFTA) by the year 2013. On July 22, 
2004, the report of the 9/11 Commission (Final Report of the 
National Commission on Terrorist Attacks Upon the United 
States) was released; that report contains, as one of its key 
recommendations, that a ``comprehensive U.S. strategy to 
counter terrorism should include economic policies that 
encourage development, more open societies, and opportunities 
for people to improve the lives of their families and to 
enhance prospects for their children's future.'' The Agreement 
with Morocco is an important achievement in that effort.
    Moreover, Morocco is an emerging market at the crossroads 
of Europe, Africa, and the Middle East. The democratically-
elected Moroccan government has launched a comprehensive 
economic reform program that is aimed at reducing inflation, 
developing the tourism sector and liberalizing and privatizing 
key sectors, such as telecommunications. The Agreement, with 
its emphasis on the rule of law, improved competition and trade 
liberalization, will enhance and solidify those reforms. The 
Government of Morocco has also launched an initiative to 
streamline investment procedures and eliminate barriers to 
foreign and domestic investment. New investment will reinforce 
Morocco's liberalization efforts and spur economic growth and 
job creation. The Agreement will help to accelerate these 
positive developments, to the benefit of both Parties.
    The Agreement thus serves as a strong precedent and 
building block for the development of MEFTA by the year 2013. 
As the report of the 9/11 Commission notes, the Agreement 
withMorocco joins free trade agreements between the United States and 
Israel, Jordan, and Bahrain (concluded but not implemented by the date 
of this Report), to serve as models to help other nations in the Middle 
East become full participants in the rules-based global trading system. 
The Agreement is therefore an important part of a broader effort to 
encourage development, more open societies, and opportunities for 
people to improve the lives of their families and to enhance prospects 
for their children's future, throughout the Middle East.

2. Tariffs and Trade Agreements

    In the World Trade Organization (WTO), Morocco has bound 
its tariffs at ad valorem rates ranging from zero to 380 
percent. According to WTO estimates, Morocco's simple average 
bound rate is approximately 42 percent.
    Morocco has negotiated regional trade agreements with: the 
European Free Trade Association (Iceland, Liechtenstein, 
Norway, and Switzerland); the European Union; and the Arab Free 
Trade Area (Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, 
Libya, Oman, Palestinian Authority, Qatar, Saudi Arabia, Sudan, 
Syria, Tunisia, United Arab Emirates, and Yemen). A free trade 
agreement with the Gulf Cooperation Council (Bahrain, Kuwait, 
Oman, Qatar, Saudi Arabia, and the United Arab Emirates) is in 
the early stages of discussion. Morocco also has bilateral 
trade agreements with Turkey (signed April 2004), as well as 
Egypt (signed May 1998, entered into force April 1999), Jordan 
(signed June 1998, entered into force October 1999), and 
Tunisia (signed March 1999, entered into force March 1999). 
Geographic proximity and historical ties to Spain and France 
have created a longstanding trading relationship between 
Morocco and Europe. The United States-Morocco Free Trade 
Agreement will improve the competitiveness of U.S. exporters 
vis-a-vis their European competitors in the Moroccan market.
    Under the United States-Morocco Free Trade Agreement, 
immediate duty-free access will be provided to more than 90 
percent of Morocco's imports of non-agricultural goods from the 
United States. The Agreement also enhances access to the 
Moroccan market for U.S. agricultural products. Significantly, 
Morocco will provide preferential market access on all 
agricultural products according to schedules negotiated on a 
product-specific basis. Thus, as in virtually every other 
bilateral trade agreement to which the United States is a 
party, no agricultural products are excluded from trade 
liberalization commitments under the Agreement. Preferential 
tariff phase-outs on most products will occur in equal annual 
installments over the following phase-out periods: immediate, 5 
years, 8 years, 10 years, 12 years, 15 years, and 18 years. 
Tariffs on other products will be phased out using non-linear 
formulas applied over 6 years, 18 years, 19 years and 25 years. 
Additional tariff cutting formulas apply to certain items on 
which Morocco will establish preferential tariff-rate quotas 
(TRQs).
    The Agreement establishes preferential TRQs for high 
quality and standard quality beef, whole birds (chicken and 
turkey), leg quarters, durum wheat, non-durum wheat, almonds, 
and apples. The details of the preferential TRQs vary by 
product, but in general, the imported product receives a 
preferential duty reduction for a specific quantity that 
expands over time. Volumes imported over the specific amounts 
have higher tariffs. The lower in-quota tariffs are eliminated, 
except for common wheat, as are the higher over-quota tariffs, 
except for durum wheat, non-durum wheat, and standard quality 
beef. In addition, the Agreement contains a provision 
(``preference clause'') that will afford U.S. exporters of 
products such as wheat, beef, poultry, corn, soybeans, and corn 
and soybean products any better market access that Morocco 
gives to other trading partners, thereby ensuring that U.S. 
exporters will be able to continue competing with Europe and 
others in Morocco's market on an equal footing well into the 
future.

                                        U.S. EXPORTS TO MOROCCO 1998-2003
                                          [In millions of U.S. dollars]
----------------------------------------------------------------------------------------------------------------
              Top 15 products, by HTS chapter                 1998     1999     2000     2001     2002     2003
----------------------------------------------------------------------------------------------------------------
88  Aircraft..............................................    136.2    143.0    148.4     17.0    295.1    131.3
10  Cereals...............................................     75.8     93.6    126.6     59.8     50.0     75.1
12  Oil seeds.............................................     12.7     21.3     17.8     16.1     37.1     56.8
84  Machinery.............................................     68.5     53.2     52.6     40.7     39.7     37.9
27  Fuels.................................................     10.2      4.1     35.5     24.9     10.6     26.6
85  Electrical machinery..................................     18.8     30.9     35.3     21.5     16.5     19.3
90  Optical, medical equipment............................      5.0      6.4      5.7      9.3      7.7     13.8
15  Animal or vegetable fats and oils.....................     22.4     25.9      2.2      1.2     18.9     13.7
98  Special classifications...............................      4.2      5.6      4.9      8.3      7.9     13.2
25  Earths and stone......................................      3.1      1.8      6.3      3.5      6.6      9.4
39  Plastics..............................................      8.4      7.2      7.3      9.3      6.5      9.1
87  Vehicles..............................................     19.0     11.6      7.3      6.2      8.6      8.4
48  Paper and paperboard..................................      2.2      3.1      4.2      4.4      4.9      8.0
72  Iron and steel........................................      0.1      0.4      0.2      0.6      1.6      6.4
29  Organic chemicals.....................................      2.3      1.9      5.0      6.2      2.4      3.5
                                                           -----------------------------------------------------
      Subtotal for top 15 products........................    388.9    410.1    459.2    228.9    514.2    432.4
      Subtotal for all other U.S. exports.................      160    160.7     63.2     54.6     46.2     30.2
                                                           -----------------------------------------------------
      Total U.S. exports to Morocco.......................    548.9    570.8    522.4    283.5    560.4   462.6
----------------------------------------------------------------------------------------------------------------
Note: HTS is the Harmonized Tariff Schedule of the United States.

Source: U.S. International Trade Commission Dataweb.


                                       U.S. IMPORTS FROM MOROCCO 1998-2003
                                          [In millions of U.S. dollars]
----------------------------------------------------------------------------------------------------------------
              Top 15 products, by HTS chapter                 1998     1999     2000     2001     2002     2003
----------------------------------------------------------------------------------------------------------------
85  Electrical machinery..................................    103.2    122.5    163.1     97.8    119.1    107.4
25  Earths and stone......................................     62.8     78.4     60.4     66.1     85.1     69.5
62  Apparel, not knitted or crocheted.....................     67.9     69.8     79.4     73.9     52.3     49.1
 8  Fruit and nuts........................................      1.2      6.0      1.4      0.3     13.4     30.4
61  Apparel, knitted or crocheted.........................     24.7     19.8     16.0     21.9     23.1     26.7
16  Preparations of meat..................................     19.8     18.3     22.7     20.8     18.2     21.7
20  Preparations of vegetables............................     18.6     19.4     19.4     20.0     22.7     19.8
27  Fuels.................................................      6.0      7.8     30.8     54.6      8.9     18.4
 7  Vegetables............................................      3.5      8.9      7.1      6.4      7.4      7.9
13  Resins and vegetable extracts.........................      8.2      7.1      8.1      6.7      5.2      7.2
98  Special classifications...............................      6.2      6.5      5.0      8.2     11.0      5.5
94  Furniture.............................................      2.9      3.8      3.7      3.1      2.6      3.0
28  Inorganic chemicals...................................      3.6     10.5     12.7     18.7      7.3      2.8
64  Footwear..............................................      1.3      2.1      2.4      4.0      2.0      2.4
33  Essential Oils........................................      1.4      2.3      1.8      1.3      0.9      2.3
                                                           -----------------------------------------------------
      Subtotal for top 15 products........................    331.4    383.2    434.2      404    379.1    374.1
      Subtotal for all other U.S. imports.................     20.8     30.9       22     48.5     30.5       22
                                                           -----------------------------------------------------
      Total U.S. imports from Morocco.....................    352.2    414.1    456.2    452.5    409.6   396.1
----------------------------------------------------------------------------------------------------------------
Note: HTS is the Harmonized Tariff Schedule of the United States.

Source: U.S. International Trade Commission Dataweb.

3. U.S. International Trade Commission Study

    In June 2004, the U.S. International Trade Commission (ITC) 
released the results of its investigation (Investigation No. 
TA-2104-14) into the probable economic effects of a United 
States-Morocco Free Trade Agreement. The ITC concluded that 
when the economy-wide effects of the Agreement's tariff 
liberalization are fully implemented and all economic 
adjustments have occurred under the Agreement, the overall 
welfare benefit to U.S. consumers should increase in the range 
of $110.5 million to $131.6 million. The report projected that 
U.S. exports to Morocco are likely to increase by $740.0 
million, and U.S. imports from Morocco are likely to increase 
by $198.6 million after full implementation of the Agreement. 
The ITC's analysis indicates the sectors showing the greatest 
value increase in U.S. exports to Morocco under the Agreement 
are: grains; processed food and tobacco; machinery and 
equipment; petroleum, coal, chemicals, rubber, and plastic 
products; and textiles and apparel. The greatest increases in 
the value of imports from Morocco are estimated to occur in 
textiles and apparel and in processed food and tobacco.

     D. Overview of the United States-Morocco Free Trade Agreement


1. Overview of the Agreement

    The United States-Morocco Free Trade Agreement establishes 
a bilateral free trade area that eliminates tariffs on most 
bilateral merchandise trade. The Committee notes that the 
Agreement will cover trade and investment in the territory of 
Morocco as recognized by the United States, which currently 
does not include the Western Sahara. The Agreement liberalizes 
trade in services, and contains provisions that cover 
investment, intellectual property, environment, labor, and 
government procurement. The Agreement also contains a mechanism 
for settling disputes that arise under the Agreement. 
Throughout the Agreement there are important provisions that 
promote bilateral consultation and cooperation, procedural and 
substantive due process, administrative and judicial review, 
transparency, and the rule of law.
    Morocco is an emerging market that imported nearly $13 
billion worth of goods in 2003, of which the United States 
supplied over $462 million. Morocco's average bound rate of 
duty is 42 percent ad valorem, and its average applied rate for 
U.S. exports is 20 percent. By comparison, Moroccan exports to 
the United States are subject to an average tariff of 4 percent 
ad valorem because Morocco is eligible for duty-free treatment 
under the U.S. Generalized System of Preferences (GSP) program. 
The Agreement will eliminate this disparity in tariff levels. 
Under the Agreement, more than 90 percent of bilateral trade in 
consumer and industrial products will become duty-free on the 
day that the Agreement is implemented, with tariffs on the 
remaining products being eliminated in 10 years. Such 
significant market access results led the Office of the U.S. 
Trade Representative to describe the Agreement with Morocco as 
``the best market access package of any U.S. free trade 
agreement with a developing country.''
    Key U.S. export sectors that will gain immediate duty-free 
access include information technologies, machinery, 
construction equipment and chemicals. Also, textile and apparel 
articles that meet the Agreement's rule of origin will become 
duty-free. Tariffs on agricultural products such as sorghum, 
corn, soybeans and soybean products, will be cut significantly 
or eliminated immediately. U.S. producers of poultry and beef 
will benefit from new tariff-rate quotas that grow over time, 
and U.S. wheat farmers will benefit from new tariff-rate quotas 
on durum and common wheat that could lead to five-fold 
increases in U.S. exports. The American Farm Bureau Federation 
estimates that the Agreement will result in a 10-to-1 gain in 
U.S.agricultural exports, compared to increased imports of 
agricultural goods from Morocco, by the year 2015.
    The Agreement also liberalizes markets for services, 
including financial services and telecommunications, 
establishes new protections for U.S. investors, strengthens 
penalties for piracy and counterfeiting, and provides strong 
protections for labor and the environment. It is noteworthy 
that the negotiation of an FTA with the United States prompted 
the Government of Morocco to complete a comprehensive reform of 
its labor laws that took effect on June 8, 2004.
    Finally, Morocco has begun implementing an association 
agreement with the European Union (EU). The association 
agreement, which covers only industrial products, gives EU 
companies a competitive advantage in the Moroccan market. 
Importantly, the United States-Morocco Free Trade Agreement 
will give U.S. exporters of industrial products a chance to 
compete in the Moroccan market on equal terms with European 
competitors. Moreover, the Agreement gives U.S. agricultural 
producers significant tariff advantages over competitors in the 
EU and elsewhere.

2. Chapter Summaries

    Establishment of a Free Trade Area and Definitions. Chapter 
1 provides a number of general definitions that apply 
throughout the Agreement, unless otherwise specified. Chapter 1 
also provides that the Agreement establishes a free trade area 
in accordance with the provisions of the Agreement, and 
consistent with Article XXIV of the General Agreement on 
Tariffs and Trade 1994 (GATT 1994) and Article V of the General 
Agreement on Trade in Services (GATS).
    Under Chapter 1, the Parties generally affirm their rights 
and obligations under existing bilateral and multilateral 
agreements, including the Marrakesh Agreement Establishing the 
World Trade Organization (WTO). However, upon the entry into 
force of the Agreement, Article VI (Investor-State dispute 
settlement) and Article VII (State-State dispute settlement) of 
the Treaty Between the United States of America and the Kingdom 
of Morocco Concerning the Encouragement and Reciprocal 
Protection of Investments, with Protocol (signed July 22, 
1985), are suspended. Nevertheless, Articles VI and VII of the 
bilateral investment treaty with Morocco will continue to 
apply, for a period of 10 years from the date of entry into 
force of the Agreement, with respect to investments covered by 
the Treaty and with respect to disputes that arose prior to the 
date of entry into force of the Agreement.
    National Treatment and Market Access for Goods. Chapter 2 
sets forth the core obligations under the Agreement with 
respect to two-way trade in goods. Article 2.2 provides that 
each Party shall accord national treatment to the goods of the 
other Party in accordance with Article III of GATT 1994. 
Article 2.3 provides that each Party shall progressively 
eliminate its customs duties on originating goods of the other 
Party in accordance with its schedule provided for in Annex IV 
(Tariff Elimination) of the Agreement. The term ``originating 
good'' is defined in Article 5.1 of the Agreement.
    Article 2.5 provides that each Party shall grant duty-free 
temporary admission for certain types of goods, regardless of 
origin. Such types of goods include goods intended for display 
or demonstration, commercial samples and advertising films and 
recordings, and goods imported for sports purposes. Article 2.6 
provides duty-free treatment for goods that are imported after 
having been exported temporarily to the other Party for repair 
or alteration, and for goods that are imported temporarily for 
repair or alteration.
    Annex IV of the Agreement contains the general staging 
categories for tariff elimination, and a specific, item-by-item 
schedule of tariff elimination for each Party. Under the 
general staging categories, originating goods will either: (1) 
remain duty-free, if they are currently duty-free; (2) become 
duty-free on the date that the Agreement enters into force; (3) 
become duty-free after equal annual reductions over 2 to 15 
years; or, (4) become duty-free after non-linear reductions 
over 6, 10, or 18 years. In addition, there are some special 
staging categories for certain products that are set forth in 
the general notes that accompany each Party's Schedule to Annex 
IV. Finally, Morocco agreed that, for certain specified 
agricultural products, if Morocco should ever provide market 
access to another trading partner on better terms compared to 
the market access granted to the United States under the 
Agreement, then Morocco would immediately grant such better 
market access to the United States.
    A number of product-specific preferential tariff-rate 
quotas (TRQs) for certain sensitive products are included in an 
annex to the general notes accompanying the Schedule of the 
United States in Annex IV. Products covered by preferential 
TRQs include beef, cotton, dairy, dried garlic, dried onions, 
peanuts, sugar, tobacco, tomato products, and wine.
    Separately, in Annex 2-A of the Agreement, each Party 
exempts certain measures from the national treatment obligation 
of the Agreement and the prohibition on import or export 
restrictions. The United States exempts its controls on the 
export of U.S. logs and certain measures under the Merchant 
Marine Act of 1920 and the Passenger Vessel Act.
    Agriculture. Chapter 3 sets out rules for the 
administration and implementation of the Parties' tariff rate 
quotas (TRQs). Among these rules, each Party shall ensure: that 
its procedures for administering its TRQs are transparent and 
are minimally burdensome to trade; that solely government 
authorities administer its TRQs; and that in-quota quantities 
are allocated in commercially viable shipping quantities. 
Chapter 3 also provides that neither Party may condition 
application for, or use of, an import license or an allocation 
under a TRQ on the re-export of an agricultural good. Further, 
neither Party may count food aid in determining whether an in-
quota quantity under a TRQ has been filled.
    The Parties agree to work together in WTO negotiations to 
seek an agreement in the WTO to eliminate export subsidies for 
agricultural goods. Except as noted immediately below, the 
Parties agree not to introduce or maintain any export subsidy 
on any agricultural good destined for the territory of the 
other Party. Where an exporting Party considers that a non-
Partyis exporting an agricultural good to the territory of the 
other Party with the benefit of export subsidies, the importing Party 
shall, on written request of the exporting Party, consult with the 
exporting Party with a view to agreeing on specific measures that the 
importing Party may adopt to counter the effect of such subsidized 
imports. If the importing Party adopts the agreed-on measures, the 
exporting Party shall refrain from applying any export subsidy to 
exports of such good to the territory of the importing Party. The 
Parties are also committed to work together in WTO negotiations to 
bring new disciplines to state trading enterprises (STEs).
    Under the Agreement, the Parties may apply safeguard 
measures on certain agricultural products listed in each 
Party's Schedule to Annex 3-A. The United States may apply a 
price-based safeguard on certain horticultural products--
including canned olives, dried garlic, and orange juice--if the 
relevant good enters the United States at a unit import price 
below a specified trigger price. Morocco may apply quantity-
based safeguard measures to certain agricultural products if, 
in a calendar year, the volume of imports of a relevant good 
exceeds the specified volume of the good (specified volumes are 
set out in the Agreement). The products to which Morocco may 
apply these safeguards are: whole birds (chicken and turkey); 
leg quarters and wings (chicken); chickpeas; lentils; dried 
prunes; and certain bitter almonds. A side letter delineates 
the particular bitter almonds to which the safeguard may be 
applied. Morocco may maintain an agricultural safeguard measure 
on any of the above-listed products until the end of the 
calendar year in which the measure is first applied.
    The Agreement sets maximum rates for the application of 
such a safeguard, i.e., the sum of such additional duty and any 
other customs duty shall not exceed the lesser of the 
prevailing normal trade relation/most-favored-nation (NTR/MFN) 
applied rate of duty or the NTR/MFN applied rate of duty in 
effect on the day immediately preceding the date of entry into 
force of the Agreement. The Agreement stipulates that neither 
Party may apply or maintain an agricultural safeguard measure 
under the Agreement and at the same time apply or maintain, 
with respect to the same good, a safeguard measure under 
Chapter 8 (Safeguards) of the Agreement or a measure under both 
Article XIX of GATT 1994 and the Safeguards Agreement. Neither 
Party may impose an agricultural safeguard measure on a good 
once the good is subject to duty-free treatment under the 
Agreement.
    The Parties affirm their desire to provide a forum, through 
the Joint Committee established under Article 19.2 or a 
subcommittee established thereunder, to address agricultural 
trade matters under the Agreement, including sanitary and 
phytosanitary matters.
    The United States and Morocco affirm their existing rights 
and obligations under the Agreement on the Application of 
Sanitary and Phytosanitary Measures of the WTO. The Parties 
also agree that neither Party may have recourse under the 
Agreement for any disputes between them involving sanitary or 
phytosanitary measures.
    The Agreement states that Morocco may establish an import 
licensing program for imports of high-quality beef from the 
United States, to provide that the beef is sold to, or imported 
by, hotels or restaurants designated on lists agreed to by the 
Parties. The Agreement provides, inter alia, that Morocco shall 
implement and administer any such import licensing program in 
accordance with Article VIII of GATT 1994 and the WTO Agreement 
on Import Licensing Procedures, and that Morocco shall limit 
the amount of any fees charged in connection with an import 
license to the cost of services rendered in processing the 
license application. Further, the Parties shall review and 
update the lists of eligible hotels and restaurants at least 
once a year.
    Morocco may implement and administer an auction system for 
in-quota quantities of the TRQs on U.S. durum and non-durum 
wheat provided for in the Agreement. Morocco's auction policies 
and procedures shall be, inter alia, transparent and 
implemented in a manner that minimizes the cost of 
participation in the auction. Morocco shall ensure that solely 
government authorities administer its auctions and that its 
auctions are held on a regular basis. Moreover, Morocco shall 
award licenses under the auction system in commercially viable 
shipping quantities and in a manner that encourages 
competition. Morocco also shall not condition application for, 
or use of, an auction license on the re-exportation of the 
auctioned good.
    The Agreement's Side Letter on Certification Accompanying 
U.S. Beef and Poultry states that beef and poultry imports must 
be accompanied by an export certificate to be allowed entry 
into Morocco. The letter provides that Morocco's veterinary 
services, in cooperation with the Food Safety and Inspection 
Service of the U.S. Department of Agriculture, will work 
together in good faith to define the content of the 
certificates that will accompany U.S. beef and poultry imports. 
The Parties also agree upon certain acceptable language for 
inclusion in the certificates.
    Textiles and Apparel. Chapter 4 establishes the rules that 
govern bilateral trade in textile and apparel goods under the 
Agreement. Article 4.1 provides that each Party shall eliminate 
its customs duties on originating textile and apparel goods in 
accordance with its schedule in Annex IV of the Agreement. 
Tariffs on originating goods will be phased out over 10 years 
or less, though some originating apparel will be eligible for 
immediate duty-free treatment under a TRQ.
    The Agreement contains a specific safeguard mechanism for 
textiles and apparel, and specific rules of origin for textile 
and apparel goods. The rules of origin for textiles and apparel 
include a ``fiber forward'' rule of origin for yarns and knit 
fabrics, and a ``yarn forward'' rule of origin for woven 
fabrics and apparel. Under a ``fiber forward'' rule, the fiber 
must come from one of the Parties in order for the finished 
product to qualify for preferential treatment under the 
Agreement. Under a ``yarn forward'' rule, the fiber may be 
imported but the yarn must be produced in one of the Parties in 
order for the finished product to qualify for preferential 
treatment under the Agreement--as long as all processes 
subsequent to the yarn manufacturing stage occur within a Party 
to the Agreement. For apparel, the rule of origin applies only 
to the component that determines the tariff classification of 
the apparel (i.e., the component that determines the 
``essential character'' of the apparel). Visible lining fabrics 
are subject to a ``yarn forward'' rule.
    The Agreement provides for consultations, and the 
possibility of modifying the rules of origin, to address the 
availability of fibers, yarns or fabrics, and whether any given 
input is produced in sufficient commercial quantities in a 
timely manner. The Agreement contains a ``de minimis'' rule, 
which provides that a good that does not satisfy the rule of 
origin because certain fibers or yarns used in the production 
of the component that determines the tariff classification of 
the good do not undergo an applicable change in tariff 
classification, may nonetheless qualify for preferential 
treatment under the Agreement as long as the total weight of 
such fibers or yarns in that component is not more than 7 
percent of the total weight of the component. Article 4.1.7 
provides so-called tariff preference levels (TPLs) for certain 
fabric goods that are made with third-country fiber or yarn, 
and certain apparel goods that are made with third-country yarn 
or fabric, as provided in Annex 4-B. The Agreement preserves 
the Berry Amendment for U.S. military procurement, which 
provides that textiles and apparel for the military must be 
made in the United States from U.S. inputs.
    The Agreement contains a provision on customs cooperation. 
Article 4.4 provides that the Parties shall cooperate: (1) to 
enforce measures affecting trade in textile and apparel goods; 
(2) to verify the accuracy of claims of origin; (3) to enforce 
measures implementing international agreements affecting trade 
in textile and apparel goods; and (4) to prevent circumvention 
of such international agreements. Article 4.4 provides for 
facility inspections, examinations of records, and other forms 
of verification, to determine the accuracy of claims of origin 
for textile and apparel goods and to determine that exporters 
and producers are complying with applicable laws, regulations, 
and procedures regarding trade in textile and apparel goods.
    Under Articles 4.4.2 and 4.4.3, the United States may 
request that Morocco: conduct a verification; allow the United 
States to conduct a verification; or, collaborate with the 
United States in conducting a verification, with respect to a 
Moroccan exporter or producer. The object of a verification 
under Article 4.4.2 is to determine that a claim of origin for 
a textile or apparel good is accurate. The object of a 
verification under Article 4.4.3 is to determine that an 
exporter or producer is complying with applicable customs laws, 
regulations, and procedures, and that claims of origin for 
textile or apparel goods exported or produced by that person 
are accurate.
    Under Article 4.4.6 of the Agreement, the United States may 
take appropriate action during a verification, including 
suspending the application of preferential tariff treatment to 
textile or apparel goods that are subject to verification or 
that are exported or produced by a person subject to 
verification. Under Article 4.4.8, if within 12 months after 
requesting a verification, the United States is unable to make 
a determination, or the United States makes a negative 
determination, the United States may then deny preferential 
tariff treatment to the textile or apparel good that is subject 
to verification or is produced or exported by the person 
subject to verification.
    Rules of Origin. Rules of origin are used to determine 
whether a good is an originating good for purposes of the 
Agreement. A good must be an originating good in order to 
qualify for preferential treatment under the Agreement. Chapter 
5 provides the general rules of origin for goods under the 
Agreement. Under Article 5.1, a good is an originating good if: 
(1) it is wholly the growth, product, or manufacture of one or 
both Parties; (2) for a good other than goods covered by either 
Annex 4-A or Annex 5-A of the Agreement, it is a new or 
different article of commerce that has been grown, produced, or 
manufactured in the territory of one or both Parties and the 
good satisfies a 35 percent local value requirement; or (3) it 
is a good covered by Annex 4-A or Annex 5-A of the Agreement. 
The second of these rules of origin is akin to the substantial 
transformation rules of origin included in the Agreement on the 
Establishment of a Free Trade Area between the Government of 
the United States of America and the Government of Israel, 
entered into on April 22, 1985, and the Agreement between the 
United States of America and the Hashemite Kingdom of Jordan on 
the Establishment of a Free Trade Area, entered into on October 
24, 2000. Chapter 5 rules of origin apply to textile and 
apparel goods unless otherwise provided in Chapter 4 of the 
Agreement (Textiles and Apparel).
    The term ``wholly the growth, product or manufacture'' is 
defined in Article 5.14, and includes, for example, minerals 
extracted in the territory of either Party, vegetables 
harvested in the territory of either Party, and live animals 
born and raised in the territory of either Party. A new or 
different article of commerce is a good that has been 
substantially transformed from a good or material that is not 
wholly the growth, product, or manufacture of one or both 
Parties and that has a new name, character, or use distinct 
from the good or material from which it was so transformed. A 
side letter to the Agreement provides that, in determining 
whether a good is a new or different article of commerce for 
purposes of the Agreement, the Parties should be guided by the 
specific rules of origin set forth in section 102.20 of the 
U.S. Customs Regulations (19 CFR Sec. 102.20). Additional rules 
of origin for textile and apparel articles are provided for in 
Annex 4-A of the Agreement.
    An importer claiming preferential treatment under the 
Agreement shall be deemed to certify that the subject good 
qualifies for such treatment, but must be prepared to submit a 
declaration with all relevant information--including a 
description of the good, the production operations, the direct 
costs of processing, and the foreign materials used. If 
preferential treatment under the Agreement is denied, a written 
determination must be issued that contains findings of fact and 
the legal basis for the denial. The Parties shall consult and 
cooperate to ensure the effective and uniform application of 
the rules of origin.
    Customs Administration. Chapter 6 contains standard customs 
provisions that provide for transparency, due process, and the 
rule of law. These provisions concern: the prompt publication 
of customs laws, regulations, guidelines, procedures, and 
administrative rulings on the Internet and in print form; the 
designation of one or more official contacts for information 
requests; a notice and comment process prior to any regulatory 
changes; the opportunity to obtain advance written rulings 
regarding tariff classification, valuation, origin, and whether 
a product qualifies for preferential treatment under the 
Agreement; and, an opportunity for administrative and judicial 
review of administrative decisions. The Agreement provides for 
mutual cooperation in implementing the Agreement and prior 
notice of any significant modification of administrative 
policy. The Agreement includes provisions calling for the 
release of goods within 48 hours ofarrival (to the extent 
possible), risk assessment procedures to focus inspection activities on 
high-risk goods, and expedited procedures for express shipments (i.e., 
under normal circumstances, release of an express shipment no later 
than six hours after the required information has been submitted).
    Sanitary and Phytosanitary Measures. In a Joint Statement 
that is part of the Agreement, the Parties affirm their support 
for the full implementation of the WTO Agreement on the 
Application of Sanitary and Phytosanitary Measures (SPS 
Agreement) and pledge to enhance bilateral SPS cooperation. The 
Parties agree to establish a Working Group on SPS Cooperation 
and to engage in activities that promote full implementation of 
the SPS Agreement, facilitate bilateral trade, and support 
Moroccan agricultural reform.
    Technical Barriers to Trade. Chapter 7 applies to all 
standards, technical regulations and conformity assessment 
procedures of the central level of government that may, 
directly or indirectly, affect trade in goods between the 
Parties. The Agreement provides for enhanced cooperation and 
consultation with respect to technical barriers to trade. In 
Article 7.2, the Parties affirm their existing rights and 
obligations under the WTO Agreement on Technical Barriers to 
Trade (TBT Agreement). The Parties commit to intensify their 
joint work in the field of standards, technical regulations, 
and conformity assessment procedures, with a view to 
facilitating access to each other's markets.
    Article 7.5 provides that the Parties shall intensify their 
exchange of information on a broad range of mechanisms that may 
be used to facilitate the acceptance in a Party's territory of 
the results of conformity assessment procedures conducted in 
the other Party's territory. Article 7.6 provides that each 
Party shall allow persons of the other Party to participate in 
the development of standards, technical regulations, and 
conformity assessment procedures, on terms no less favorable 
than those accorded to its own persons.
    Safeguards. Chapter 8 provides for a transitional bilateral 
safeguard mechanism. If, as a result of the reduction or 
elimination of a customs duty according to the terms of the 
Agreement, an originating good of the other Party is being 
imported into the territory of a Party in such increased 
quantities, in absolute terms or relative to domestic 
production, and under such conditions that the imports of such 
originating good constitute a substantial cause of serious 
injury, or threat thereof, to a domestic industry producing a 
like or directly competitive good, that Party may: (1) suspend 
the further reduction of any rate of customs duty on the good 
provided for under the Agreement; (2) increase the rate of 
customs duty on the good, to a level not to exceed the lesser 
of the NTR/MFN rate of duty on the good in effect at the time 
the action is taken and the NTR/MFN rate of duty on the good in 
effect on the day before the Agreement enters into force; or 
(3) in the case of a customs duty applied to a good on a 
seasonal basis, increase the rate of customs duty on the good 
to a level not to exceed the lesser of the NTR/MFN rate of duty 
on the good in effect for the immediately preceding 
corresponding season and the NTR/MFN rate of duty on the good 
in effect on the day before the Agreement enters into force.
    A Party may impose a bilateral safeguard measure only after 
conducting an investigation in accordance with Articles 3 and 
4.2(a) and (c) of the WTO Agreement on Safeguards, which are 
incorporated by reference into the Agreement. A bilateral 
safeguard measure can be imposed for an initial period no 
longer than 3 years, and for safeguards applied for more than 1 
year the Party must progressively liberalize the safeguard 
measure at regular intervals. A bilateral safeguard measure may 
be extended for up to 2 additional years if the Party 
determines that the measure continues to be necessary to remedy 
or prevent serious injury and to facilitate adjustment and that 
there is evidence that the domestic industry is adjusting to 
import competition. A bilateral safeguard measure may not be 
imposed on the same good more than once.
    A Party may impose a bilateral safeguard measure on a 
provisional basis pursuant to a preliminary determination that 
there is clear evidence that imports of an originating good 
from the other Party have increased as a result of the 
reduction or elimination of a customs duty under the Agreement, 
and that such imports constitute a substantial cause of serious 
injury, or threat thereof, to a domestic industry. The duration 
of any provisional measure shall not exceed 200 days. If a 
final determination is made that such imports are not a 
substantial cause of serious injury, or threat thereof, the 
Party shall promptly refund any tariff increases imposed on a 
provisional basis. If a final determination is made that such 
imports are a substantial cause of serious injury, or threat 
thereof, the duration of any provisional measure shall be 
counted toward the 3-year limitation on the initial period of 
relief for a bilateral safeguard measure.
    Upon termination of a safeguard measure, the rate of duty 
on the good shall be the rate that would have been in effect, 
but for the safeguard measure, according to the Party's 
Schedule to Annex IV (Tariff Elimination) to the Agreement.
    The Party imposing a bilateral safeguard measure shall 
endeavor to provide mutually agreed-upon trade liberalizing 
compensation in the form of concessions having substantially 
equivalent trade effects, or equivalent value, compared to the 
value of additional duties resulting from the safeguard 
measure. If the Parties are unable to reach an agreement on 
compensation, the exporting Party may take tariff action having 
trade effects substantially equivalent to the safeguard 
measure. A Party may not impose a bilateral safeguard measure 
after 5 years from the date on which the Party must eliminate 
customs duties on the good according to that Party's Schedule 
to Annex IV to the Agreement, unless the other Party consents.
    Each Party retains its rights and obligations under Article 
XIX of GATT 1994 and the WTO Agreement on Safeguards. The 
Agreement does not confer any additional rights or obligations 
on the Parties with respect to actions taken in accordance with 
Article XIX of GATT 1994 and the WTO Agreement on Safeguards.
    Government Procurement. Morocco is not a party to the WTO 
Agreement on Government Procurement. Thus, by including strong 
provisions on government procurement, the Agreement 
significantly opens Morocco's government procurement market to 
U.S. suppliersof goods and services. Chapter 9 applies to 
``covered procurement,'' which is defined as the procurement of goods 
and services by any contractual means, above a specified threshold in 
value, by a specified procuring entity, and not otherwise excluded. 
Each Party and its procuring entities shall accord national treatment 
to the goods and services of the other Party and to the suppliers of 
the other Party offering goods and services. A procuring entity may not 
discriminate against a locally established supplier based upon that 
supplier's degree of foreign ownership or based upon the fact that 
goods or services offered by that supplier are goods or services of the 
other Party. The Agreement prohibits the use of offsets in any stage of 
a covered procurement. Offsets are defined as any conditions or 
undertakings that require use of domestic content, domestic suppliers, 
the licensing of technology, technology transfer, investment, counter-
trade, or similar actions to encourage local development or to improve 
a Party's balance-of-payments accounts.
    The Agreement requires each Party to promptly publish all 
laws, regulations, procedures and policy guidelines, as well as 
judicial decisions and administrative rulings of general 
application, related to covered procurement. Each Party shall 
ensure that suppliers may challenge and appeal procurement 
decisions before an impartial body. Under the Agreement, each 
Party shall also ensure that it is a criminal offense under its 
law, in matters affecting international trade or investment, to 
engage in or abet, or conspire to engage in, bribery, and each 
Party shall have procedures to declare a supplier ineligible 
for participation in the Party's procurements, either 
indefinitely or for a specified time, if the Party has 
determined that the supplier engaged in fraudulent or illegal 
action in relation to procurement.
    Investment. Chapter 10 applies to measures adopted or 
maintained by a Party relating to investors of the other Party 
and covered investments. Investment is defined to mean every 
asset that an investor owns or controls, directly or 
indirectly, that has the characteristics of an investment, 
including such characteristics as the commitment of capital or 
other resources, the expectation of gain or profit, or the 
assumption of risk. Forms that an investment may take include, 
inter alia: an enterprise; shares, stock, and other forms of 
equity participation in an enterprise; bonds, debentures, other 
debt instruments, and loans; futures, options, and other 
derivatives; intellectual property rights; licenses, permits, 
and similar rights conferred pursuant to domestic law; and 
other tangible or intangible property and related property 
rights, such as leases, mortgages, liens, and pledges.
    Each Party shall accord national treatment most-favored-
nation treatment to investors of the other Party, and to 
covered investments, with respect to the establishment, 
acquisition, expansion, management, conduct, operation, and 
sale or other disposition of investments. Each Party shall 
accord to covered investments treatment in accordance with 
customary international law, including fair and equitable 
treatment and full protection and security.
    Each party shall permit all transfers relating to a covered 
investment to be made freely and without delay into or out of 
its territory. Such transfers include, inter alia: 
contributions to capital; profits, dividends, capital gains, 
and proceeds from the sale or liquidation of some or all of the 
covered investment; interest, royalty payments, management 
fees, and technical assistance and other fees; payments made 
under a contract, including a loan agreement; and payments 
arising out of a dispute. Neither Party may impose or enforce 
any performance requirement in connection with the 
establishment, acquisition, expansion, management, conduct, 
operation, or sale or other disposition of an investment of an 
investor, including, inter alia: requiring an investment to 
export a given level or percentage of goods or services; 
requiring an investment to achieve a given level or percentage 
of domestic content; or, requiring an investment to transfer a 
particular technology or other proprietary knowledge to a 
person in the Party's territory.
    Article 10.12 excludes specified non-conforming measures 
and any measure that a Party adopts or maintains with respect 
to specified sectors, sub-sectors, or activities, from certain 
of the obligations in Chapter 10. Existing non-conforming 
measures that are excluded from coverage are listed for each 
Party in their respective Schedule to Annex I of the Agreement. 
Non-conforming measures adopted or maintained with respect to 
specified sectors, sub-sectors or activities that are excluded 
from coverage are listed for each Party in their respective 
Schedule to Annex II of the Agreement. Any existing non-
conforming measure maintained by a Party at a local level of 
government is similarly excluded from coverage under Article 
10.12.
    The Committee is pleased to note that the Agreement also 
includes provisions that govern the settlement of investment 
disputes between investors of a Party and the other Party. The 
Committee expects future trade agreements to contain similar 
provisions. Article 10.14 provides that, in the event of an 
investment dispute, the claimant and respondent should 
initially seek to resolve the dispute through consultation and 
negotiation. If the dispute cannot be settled through 
consultation and negotiation, a claimant may then submit the 
dispute to arbitration. Section B of Chapter 10 contains a 
number of specific obligations relating to investor-state 
dispute settlement procedures and the arbitration of investment 
disputes.
    Cross-Border Trade in Services. Chapter 11 of the Agreement 
applies to measures that affect cross-border trade in services 
by service suppliers of the other Party, including, inter alia, 
measures that affect the production, distribution, marketing, 
sale and delivery of a service, and the purchase or use of, or 
payment for, a service. The measures covered by the Agreement 
include measures adopted by central, regional, or local 
governments and authorities, and non-governmental authorities 
exercising governmental powers by delegation. Chapter 10 does 
not apply to several service sectors, including: financial 
services (which are covered in Chapter 12 of the Agreement) 
other than financial services relating to the supply of a 
service by a covered investment (as defined in Chapter 1 of the 
Agreement); government procurement (which is covered in Chapter 
9 of the Agreement); air services other than aircraft repair 
and maintenance and specialty air services; subsidies or grants 
provided by a Party; and, services supplied in the exercise of 
governmental authority. While telecommunications services are 
not excluded from the application of Chapter 11, additional 
specific commitments relating to telecommunications services 
are contained in Chapter 13 of the Agreement.
    Chapter 11 further provides that each Party shall accord 
national treatment andmost-favored-nation treatment to all 
service suppliers of the other Party. Article 11.6 excludes specified 
non-conforming measures and any measure that a Party adopts or 
maintains with respect to specified sectors, sub-sectors, or 
activities, from certain of the obligations in Chapter 11. Existing 
non-conforming measures that are excluded from coverage are listed for 
each Party in their respective Schedule to Annex I of the Agreement. 
Non-conforming measures adopted or maintained with respect to specified 
sectors, sub-sectors or activities that are excluded from coverage are 
listed for each Party in their respective Schedule to Annex II of the 
Agreement. Any existing non-conforming measure maintained by a Party at 
a local level of government is similarly excluded from coverage under 
Article 11.6.
    Except for measures, sectors, sub-sectors, and activities 
listed on a Party's Schedules to Annex I or Annex II of the 
Agreement, neither Party may impose limitations on: the number 
of service suppliers; the total value of service transactions 
or assets; the total number of service operations or the total 
quantity of services output; or, the total number of natural 
persons that may be employed in a particular service sector or 
that a service supplier may employ; nor may either Party 
restrict or require a specific type of legal entity or joint 
venture through which a service supplier may supply a service. 
Similarly, unless a measure is listed on a Party's Schedules to 
Annex I or Annex II of the Agreement, ``neither Party may 
require a service supplier of the other Party to establish or 
maintain a representative office or any form of enterprise, or 
to be resident, in its territory as a condition for the cross-
border supply of a service.''
    The Agreement provides for services liberalization beyond 
Morocco's current commitments under the WTO General Agreement 
on Trade in Services (GATS). Morocco, like the United States, 
has a large service sector accounting for a significant share 
of GDP in 2002. However, Morocco's total services exports are 
equivalent to approximately 1.5 percent of U.S. service 
exports. The Agreement will provide increased market access for 
U.S. service providers in areas such as audio-visual, express 
delivery, computer and related services, construction and 
engineering.
    Financial Services. Chapter 12 of the Agreement applies to 
measures adopted or maintained by a Party relating to: 
financial institutions of the other Party; investors and 
investments of such investors in financial institutions within 
the Party's territory; and, to cross-border trade in financial 
services. Financial services are defined to include any service 
of a financial nature, including insurance and insurance-
related services, banking and other financial services, as well 
as services incidental or auxiliary to a service of a financial 
nature. The provisions of Chapter 10 (Investment) and Chapter 
11 (Cross-Border Trade in Services) apply to financial services 
only to the extent that such provisions are incorporated into 
Chapter 12.
    The Agreement provides that each Party shall accord 
national treatment to investors, financial institutions, and 
cross-border financial service suppliers of the other Party, 
with respect to the establishment, acquisition, expansion, 
management, conduct, operation, and sale or other disposition 
of financial institutions and investments in financial 
institutions. It also provides that each Party shall accord 
most-favored-nation treatment to investors, financial 
institutions and cross-border financial services suppliers.
    Article 12.9 excludes specified non-conforming measures and 
any measure that a Party adopts or maintains with respect to 
specified sectors, sub-sectors, or activities, from certain of 
the obligations in Chapter 12. Existing non-conforming measures 
that are excluded from coverage are listed for each Party in 
Section A of their respective Schedule to Annex III of the 
Agreement. Non-conforming measures approved or maintained with 
respect to specified sectors, sub-sectors or activities that 
are excluded from coverage are listed for each Party in Section 
B of their respective Schedule to Annex III of the Agreement. 
Any existing non-conforming measure maintained by a Party at a 
local level of government is similarly excluded from coverage 
under Article 12.9. To the extent any non-conforming measure 
listed on a Party's Schedules to Annex I or Annex II of the 
Agreement is also covered by Chapter 12, such measure is also 
excluded from coverage under Article 12.9.
    Except for measures, sectors, sub-sectors, and activities 
listed in Section A or Section B of a Party's Schedule to Annex 
III of the Agreement, a Party shall not impose limitations on, 
inter alia: the number of financial institutions; the total 
value of financial service transactions or assets; the total 
number of financial service operations or the total quantity of 
financial services output; or, the total number of natural 
persons that may be employed in a particular financial service 
sector. Similarly, a Party shall not restrict or require 
specific types of legal entity or joint venture through which a 
financial institution may supply a service.
    Each Party shall permit, under terms and conditions that 
accord national treatment, cross-border financial service 
suppliers of the other Party to supply the services specified 
in Annex 12-A of the Agreement. With respect to the cross-
border supply of insurance and insurance-related services, 
Morocco listed a number of sectors under Annex 12-A, including, 
inter alia: maritime shipping and commercial aviation; goods in 
international transit; and, reinsurance. Morocco's obligations 
with respect to maritime shipping and commercial aviation take 
effect no later than two years after the Agreement enters into 
force, whereas Morocco's obligation with respect to reinsurance 
takes effect immediately upon the Agreement's entry into force. 
With respect to the cross-border supply of banking and other 
financial services (excluding insurance), Morocco listed a 
number of sectors under Annex 12-A, including, inter alia: the 
provision and transfer of financial information and financial 
data processing.
    Telecommunications. Chapter 13 of the Agreement applies to: 
measures relating to access to and use of public 
telecommunication services; measures relating to obligations of 
suppliers of public telecommunications services, including 
major suppliers; other measures relating to public 
telecommunications networks or services; and, measures relating 
to the provision of value-added services.
    In general, Chapter 13 does not apply to any measure 
relating to broadcast or cable distribution of radio or 
television programming. Article 13.17 defines the term ``public 
telecommunications service'' as any telecommunications service 
that a Party requires, explicitlyor in effect, to be offered to 
the public generally. Such services may include, inter alia, telephone 
and data transmission typically involving customer-supplied information 
between two or more points without any end-to-end change in the form or 
content of the customer's information. Public telecommunications 
services within the United States do not include value-added services.
    Article 13.2 stipulates that each Party shall ensure that 
service suppliers of the other Party have access to and use of 
any public telecommunications service, including leased 
circuits, offered in its territory or across its borders, on 
reasonable and non-discriminatory terms and conditions. Each 
Party shall also ensure that enterprises of the other Party may 
use public telecommunications services for the movement of 
information in its territory or across its borders and for 
access to information contained in databases or otherwise 
stored in machine-readable form in the territory of either 
Party. Appropriate measures shall be maintained by each Party 
to prevent suppliers that, alone or together, are a major 
supplier, from engaging in anti-competitive practices.
    Article 13.4 details the additional obligations relating to 
major suppliers of public telecommunication services. A major 
supplier is defined as being a supplier of public 
telecommunications services that has the ability to materially 
affect the terms of participation in the relevant market (with 
respect to price and supply) as a result of control over 
essential facilities or use of its position in the market. 
Major suppliers must accord suppliers of public 
telecommunications services of the other Party treatment no 
less favorable than such major suppliers accord to their 
subsidiaries, their affiliates, or non-affiliated suppliers, 
regarding the availability, provisioning, rates, or quality of 
like public telecommunications services, as well as the 
availability of technical interfaces necessary for 
interconnection. Additional provisions call for major suppliers 
to provide, on a reasonable and non-discriminatory basis: 
interconnection for the facilities and equipment of suppliers 
of public telecommunications services of the other Party; 
provisioning and pricing of leased circuits services for 
enterprises of the other Party; physical co-location of 
equipment necessary for interconnection for suppliers of the 
other Party; access to rights-of-way for suppliers of the other 
Party; and, access to submarine cable systems and satellite 
services for suppliers of the other Party. These provisions 
ensure U.S. access to former monopoly networks in Morocco at 
non-discriminatory, cost-based rates. Due to the existing level 
of openness of the U.S. market, Morocco already has market 
access on the terms outlined above. Morocco has made 
development of a competitive telecommunications sector a 
priority. Morocco fully opened its market to foreign 
competition at the end of 2002, as required under its 
commitments under the WTO Basic Telecommunications Agreement. 
The United States was Morocco's third-largest investor as a 
result of government privatization efforts.
    Significantly, neither Party may prevent suppliers of 
public telecommunications services from choosing the 
technologies that they use to supply their services, including 
commercial mobile wireless services, except that a Party shall 
be free to establish and apply spectrum and frequency 
management policies and other measures necessary to satisfy 
legitimate public policy interests.
    Electronic Commerce. In Chapter 14 the Parties acknowledge 
the value of electronic commerce, the importance of avoiding 
barriers to its use and development, and the applicability of 
WTO rules to measures affecting electronic commerce. Neither 
Party may impose customs duties, fees, or other charges on, or 
in connection with, the importation or exportation of digital 
products by electronic transmission. Digital products are 
defined as computer programs, text, video, images, sound 
recordings, and other products that are digitally encoded, 
regardless of whether they are fixed on a carrier medium or 
transmitted electronically. The customs value of an imported 
carrier medium bearing a digital product of the other Party 
shall be based on the cost or value of the carrier medium 
alone, without regard to the cost or value of the digital 
product stored on the carrier medium. Digital products must 
receive national treatment and most-favored-nation treatment 
under the Agreement, except with respect to a Party's non-
conforming measures that are identified in accordance with 
Articles 10.12, 11.6, and 12.9.
    Intellectual Property Rights. Chapter 15 governs the 
protection of intellectual property rights, including, inter 
alia, patents, copyrights, and trademarks. The Agreement builds 
on the common standards that are already codified in numerous 
international agreements, including the WTO Agreement on Trade-
Related Aspects of Intellectual Property Rights (TRIPS). 
Importantly, the provisions in the Agreement reflect the 
significant technological and commercial developments that have 
occurred since TRIPS was negotiated, particularly with respect 
to the new and rapidly-evolving digital environment in which 
music, videos, software and text can be readily copied and 
transmitted over the Internet.
    Article 15.1 provides that each Party shall ratify or 
accede to a number of international agreements, including the 
World Intellectual Property Organization (WIPO) Copyright 
Treaty (1996) and the WIPO Performances and Phonograms Treaty 
(1996), which provide the essential legal framework for digital 
products, e-commerce, and the transmission of protected 
material over the Internet. Article 15.1.3 provides that each 
Party shall make all reasonable efforts to ratify or accede to 
the Patent Law Treaty (2000) and the Hague Agreement Concerning 
the International Registration of Industrial Designs (1999). 
The United States has already ratified or acceded to each of 
the agreements identified in Article 15.1.2 and implemented 
them in domestic law, while Morocco has not. With respect to 
Article 15.1.3, the United States has not yet completed its 
process for ratifying the specified agreements. While Morocco 
is a party to the Hague Agreement on Industrial Designs, it is 
not a party to the most recent act (1999), nor is Morocco a 
party to the Patent Law Treaty (2000). Specific provisions of 
additional international intellectual property agreements are 
incorporated by reference in other Articles of Chapter 15.
    The Agreement provides that each Party shall make available 
to right holders civil judicial procedures concerning the 
enforcement of any intellectual property right, and that 
judicial authorities shall have the authority to order, inter 
alia, the infringer to pay the right holder damages adequate to 
compensate for the injury the right holder has suffered as a 
result of the infringement. The Agreement further provides that 
judicial authorities shall have the authority to order the 
seizure of suspected infringing goods and any related materials 
and implements.
    Each Party shall provide that in civil judicial 
proceedings, at the right holder's request, goods that have 
been found to be pirated or counterfeit shall be destroyed, 
except in exceptional circumstances. In addition, judicial 
authorities shall have the authority to order that materials 
and implements that were used to manufacture the pirated or 
counterfeit goods be destroyed without compensation. Judicial 
authorities shall also have the authority to order the 
infringer to disclose information about other persons involved 
in any aspect of the infringement and regarding the means of 
production or distribution. Each Party shall further provide 
that its judicial authorities have the authority to fine or 
imprison a party to a litigation who fails to abide by valid 
orders issued by such authorities, and to impose sanctions on 
parties to a litigation, their counsel, experts, or other 
persons who violate a judicial order for the protection of 
confidential business information produced or exchanged in a 
judicial proceeding.
    In addition to civil proceedings, the Agreement provides 
that each Party shall provide for criminal procedures and 
penalties to be applied at least in cases of willful trademark 
counterfeiting or copyright or related rights piracy on a 
commercial scale. In such cases, each Party shall provide 
remedies that include imprisonment as well as monetary fines 
sufficient to provide a deterrent to future infringements, 
consistent with a policy of removing the monetary incentive to 
the infringer. Judicial authorities shall have the authority to 
order the seizure, forfeiture, and destruction of counterfeit 
goods and the materials and equipment used to produce 
counterfeit goods. Each Party shall provide that its 
authorities may self-initiate criminal legal action without the 
need for a formal complaint from a private party or right 
holder. Similarly, each Party shall provide that its customs 
authorities may self-initiate border measures against imported 
merchandise suspected of infringing an intellectual property 
right, without the need for a formal complaint from a private 
party or right holder.
    Labor. In Chapter 16 of the Agreement, the Parties reaffirm 
their obligations as members of the International Labor 
Organization (ILO) and their commitments under the ILO 
Declaration on Fundamental Principles and Rights at Work and 
its Follow-up (1998) (ILO Declaration). Under the Agreement, 
each Party must strive to ensure that such labor principles and 
the internationally recognized labor rights set forth in 
article 16.7 of the Agreement are recognized and protected by 
its domestic law. Article 16.7 provides that internationally 
recognized labor rights include: ``the right of association; 
the right to organize and bargain collectively; a prohibition 
on the use of any form of forced or compulsory labor; labor 
protections for children and young people, including a minimum 
age for the employment of children and the prohibition and 
elimination of the worst forms of child labor; and acceptable 
conditions of work with respect to minimum wages, hours of 
work, and occupational safety and health.'' The Agreement 
recognizes the right of each Party to adopt or modify its 
domestic labor laws and standards.
    Under the Agreement, ``neither Party shall fail to 
effectively enforce its labor laws, through a sustained or 
recurring course of action or inaction, in a manner affecting 
trade between the Parties.'' The Agreement recognizes that each 
Party retains the right to exercise discretion with respect to 
investigatory, prosecutorial, regulatory, and compliance 
matters. Also, ``(e)ach Party recognizes that it is 
inappropriate to encourage trade or investment by weakening or 
reducing the protections afforded in domestic labor laws.'' 
Accordingly, each Party shall strive to ensure that it does not 
waive or otherwise derogate from, or offer to waive or derogate 
from, such laws in a manner that weakens or reduces adherence 
to internationally recognized labor rights. Each Party shall 
provide for appropriate access by interested persons to 
impartial and independent administrative, quasi-judicial, or 
judicial tribunals for the enforcement of its domestic labor 
laws, and that such proceedings be fair, equitable, and 
transparent.
    Article 16.4 provides that each Party shall designate an 
office to serve as the contact point for the other Party and 
the public for purposes of implementing this Chapter, and may 
convene a national labor advisory committee to advise it on the 
implementation of the Chapter. The Agreement also establishes a 
Labor Cooperation Mechanism, as set forth in Annex 16-A, 
whereby the Parties may cooperate to improve labor standards 
and to further advance common commitments with respect to labor 
matters, including the ILO Declaration and ILO Convention 182 
Concerning the Prohibition and Immediate Action for the 
Elimination of the Worst Forms of Child Labour (1999). In 
addition, the Agreement provides for consultations on any 
matter arising under Chapter 16 of the Agreement. If bilateral 
consultations do not resolve the matter, then a Subcommittee on 
Labor Affairs shall be convened under Article 19.2 to endeavor 
to resolve the matter. If a Party considers that the other 
Party is not effectively enforcing its domestic labor laws, 
through a sustained or recurring course of action or inaction, 
in a manner that affects trade between the Parties, then that 
Party may initiate dispute settlement procedures under Chapter 
20 of the Agreement.
    If, pursuant to the dispute settlement procedures of 
Chapter 20, a panel determines that a Party has not conformed 
with its obligations to effectively enforce its domestic labor 
laws, and the Parties are unable to agree on a resolution, or 
there is an agreed resolution but the complaining Party 
considers that the other Party has failed to observe the terms 
of that agreement, then the complaining Party may suspend the 
application to the other Party of benefits of equivalent 
effect. The Party complained against may choose to pay an 
annual monetary assessment in lieu of the suspension of 
benefits. If the Party complained against fails to pay the 
monetary assessment, the complaining Party may then suspend the 
application to the other Party of benefits of equivalent 
effect.
    Finally, the Committee finds noteworthy that the 
negotiation of this free trade agreement with the United States 
prompted the Government of Morocco to complete a comprehensive 
reform of its labor laws that took effect on June 8, 2004.
    Environment. Chapter 17 of the Agreement provides that each 
Party shall ensure that its domestic laws and policies provide 
for and encourage high levels of environmental protection, 
while recognizing the right of each Party to establish its own 
levels of environmental protection and to adopt or modify its 
domestic environmental laws and policies accordingly. Article 
17.9 defines ``environmental law'' to mean any statute or 
regulation of a Party, the primary purpose of which is the 
protection of the environment, or the prevention of a danger to 
human, animal, or plant life or health, through: the 
prevention, abatement, or control of the release of pollutants 
orenvironmental contaminants; the control of environmentally 
hazardous or toxic chemicals, substances, materials, and wastes; or, 
the protection or conservation of wild flora or fauna, including 
endangered species, their habitat, and specially-protected natural 
areas.
    Under the Agreement, ``neither Party shall fail to 
effectively enforce its environmental laws, through a sustained 
or recurring course of action or inaction, in a manner 
affecting trade between the Parties.'' The Agreement recognizes 
that ``each Party retains the right to exercise discretion with 
respect to investigatory, prosecutorial, regulatory, and 
compliance matters.'' Also, each Party recognizes that it is 
inappropriate to encourage trade or investment by weakening or 
reducing the protections afforded in their domestic 
environmental laws. Accordingly, each Party shall strive to 
ensure that it does not waive or otherwise derogate from, or 
offer to waive or derogate from, such laws in a manner that 
weakens or reduces the protections afforded in those laws as an 
encouragement for trade with the other Party. Each Party shall 
ensure that interested persons have access to judicial, quasi-
judicial, or administrative proceedings for the enforcement of 
its domestic environmental laws, and that such proceedings are 
fair, equitable, and transparent.
    The Agreement recognizes the importance of strengthening 
capacity to protect the environment and to promote sustainable 
development in concert with strengthening bilateral trade and 
investment relations. Pursuant to a Joint Statement on 
Environmental Cooperation, the Parties commit themselves to 
undertaking cooperative environmental activities. Such 
activities shall be coordinated by the Working Group on 
Environmental Cooperation, in accordance with the Joint 
Statement.
    The Agreement provides for consultations on any matter 
arising under Chapter 17 of the Agreement. If bilateral 
consultations do not resolve the matter, then a Subcommittee on 
Environmental Affairs shall be convened under Article 19.2 to 
endeavor to resolve the matter. If a Party considers that the 
other Party is not effectively enforcing its domestic 
environmental laws, through a sustained or recurring course of 
action or inaction, in a manner that affects trade between the 
Parties, then that Party may initiate dispute settlement 
procedures under Chapter 20 of the Agreement.
    If, pursuant to the dispute settlement procedures of 
Chapter 20, a panel determines that a Party has not conformed 
with its obligations to effectively enforce its domestic 
environmental laws, and the Parties are unable to agree on a 
resolution, or there is an agreed resolution but the 
complaining Party considers that the other Party has failed to 
observe the terms of that agreement, then the complaining Party 
may suspend the application to the other Party of benefits of 
equivalent effect. The Party complained against may choose to 
pay an annual monetary assessment in lieu of the suspension of 
benefits. If the Party complained against fails to pay the 
monetary assessment, the complaining Party may then suspend the 
application to the other Party of benefits of equivalent 
effect.
    Transparency. Chapter 18 provides that each Party shall 
ensure that its laws, regulations, procedures, and 
administrative rulings of general application regarding any 
matter covered by the Agreement are promptly published or 
otherwise made available so as to enable interested persons and 
the other Party to become acquainted with them. The Agreement 
provides that, to the extent possible, each Party shall publish 
in advance any such measures that it proposes to adopt, and 
provide interested persons and the other Party a reasonable 
opportunity to comment on such proposed measures. With respect 
to Morocco, the advance publication obligation shall apply 1 
year after the Agreement enters into force. To the maximum 
extent possible, each Party shall notify the other Party of any 
proposed or actual measure that might materially affect the 
operation of the Agreement, and on request of the other Party, 
a Party shall promptly provide information and respond to 
questions pertaining to any proposed or actual measure that the 
other Party considers might affect the operation of the 
Agreement. Wherever possible, each Party shall ensure that 
persons of the other Party directly affected by a proceeding 
are provided reasonable notice when a proceeding is initiated, 
and afforded a reasonable opportunity to present facts and 
arguments in support of their positions prior to any final 
administrative action. Moreover, each Party shall establish or 
maintain impartial and independent judicial, quasi-judicial, or 
administrative tribunals or procedures to promptly review and, 
where warranted, correct final administrative actions regarding 
matters covered by the Agreement. Chapter 18 also contains a 
provision in which the Parties reaffirm their continuing 
resolve to eliminate bribery and corruption in international 
trade and investment, and each Party shall adopt or maintain 
the necessary measures to establish that it is a criminal 
offense for a public official to solicit or accept bribes, or 
for a person to offer a bribe to a public official of the Party 
or to a foreign official, or for a person to abet or conspire 
in any of the foregoing actions.
    Administration of the Agreement. Chapter 19 provides that 
each Party shall designate a contact point to facilitate 
communication between the Parties on any matter covered by the 
Agreement. Chapter 19 also establishes a Joint Committee to 
supervise the implementation of the Agreement. The 
responsibilities of the Joint Committee include, inter alia: to 
review the general functioning of the Agreement; to facilitate 
the avoidance and settlement of disputes arising under the 
Agreement; to consider and adopt any amendment to the 
Agreement, subject to the completion of necessary domestic 
legal procedures; to issue interpretations of the Agreement; 
and to take such other action as the Parties may agree. The 
Joint Committee is empowered to establish subcommittees and 
working groups, and a side letter to the Agreement provides for 
the establishment of subcommittees on agricultural trade, 
environmental affairs, financial services, labor affairs, 
sanitary and phytosanitary matters, trade in goods, and cross-
border trade in services (excluding financial services).
    Dispute Settlement. Chapter 20 contains the general 
provisions that govern the settlement of disputes between the 
Parties. Article 20.1 provides that the Parties shall endeavor 
to agree on the interpretation and application of the 
Agreement, through cooperation and consultation, to arrive at a 
mutually satisfactory solution. The dispute settlement 
provisions apply with respect to the avoidance or settlement of 
all disputes over the consistency of a measure with the 
Agreement or the fulfillment of a Party's obligation under the 
Agreement, unless otherwise provided in the Agreement. Article 
20.5 provides that either Party may requestconsultations with 
respect to any matter under the Agreement. If consultations fail to 
resolve the matter within 60 days (or 20 days if the matter concerns 
perishable goods), then either Party may refer the matter to the Joint 
Committee for resolution. If the Joint Committee is unable to resolve 
the matter within 60 days (or 30 days if the matter concerns perishable 
goods), then the complaining Party may refer the matter to a dispute 
settlement panel. If a dispute settlement panel issues a report finding 
that a Party has not conformed with its obligations or has nullified or 
impaired a benefit to the other Party under the Agreement, the Parties 
shall try to agree on a resolution of the dispute. Whenever possible, 
the resolution shall be to eliminate the non-conformity or the 
nullification or impairment; however, if the parties are unable to 
agree on such elimination, resolution of the dispute may include 
mutually acceptable compensation, the suspension of benefits of 
equivalent effect, or an annual monetary assessment.
    Exceptions. Chapter 21 contains general exceptions to the 
Agreement. With respect to Chapters 2 through 7 (i.e., National 
Treatment and Market Access for Goods, Agriculture, Textiles 
and Apparel, Rules of Origin, Customs Administration, and 
Technical Barriers to Trade), the Agreement incorporates by 
reference the general exceptions contained in Article XX of 
GATT 1994 and its interpretive notes.
    With respect to Chapters 11, 13, and 14 (i.e., Cross-Border 
Trade in Services, Telecommunications, and Electronic 
Commerce), the Agreement incorporates by reference the general 
exceptions contained in GATS Article XIV, including its 
footnotes. The Agreement also includes exceptions regarding: 
essential security interests; taxation; disclosure of 
information; and balance of payments measures on trade in 
goods.
    Final Provisions. The Agreement provides for the accession 
of third countries to the Agreement, an amendment process, and 
entry into force and termination of the Agreement. Article 22.6 
provides that the Agreement will enter into force on the first 
day of the third month after the date on which the United 
States and Morocco exchange written notifications certifying 
that they have completed their respective legal procedures (or 
on such other date as the Parties may agree). The exchange of 
notifications is a necessary precondition for the Agreement's 
entry into force. The Agreement's entry into force is thus 
conditioned on a determination by the President that Morocco 
has taken measures necessary to comply with those of its 
obligations that are to take effect at the time the Agreement 
enters into force. Either Party may terminate the Agreement on 
180-days written notice to the other Party.

   E. General Description of the Bill To Implement the United States-
                      Morocco Free Trade Agreement


Sec. 1. Short Title; Table of Contents

    This section provides that the short title of the 
legislation implementing the United States-Morocco Free Trade 
Agreement (the Agreement) is the ``United States-Morocco Free 
Trade Agreement Implementation Act.'' Section 1 also provides 
the table of contents for the implementing legislation.

Sec. 2. Purposes

    This section provides that the purposes of the implementing 
legislation are: to approve and implement the Agreement; to 
strengthen and develop economic relations between the United 
States and Morocco; to establish free trade between the United 
States and Morocco through the reduction and elimination of 
barriers to trade in goods and services and to investment; and, 
to lay the foundation for further cooperation to expand and 
enhance the benefits of the Agreement.

Sec. 3. Definitions

    This section defines the terms ``Agreement,'' ``HTS,'' and 
``Textile or Apparel Good,'' for purposes of the implementing 
legislation.

TITLE I--APPROVAL OF, AND GENERAL PROVISIONS RELATING TO, THE AGREEMENT


Sec. 101. Approval and Entry Into Force of the Agreement

    This section provides Congressional approval for the 
Agreement and its accompanying Statement of Administrative 
Action. Section 101 also authorizes the President to exchange 
notes with the Government of Morocco to provide for entry into 
force of the Agreement on or after January 1, 2005. The 
exchange of notes is conditioned on a determination by the 
President that Morocco has taken measures necessary to comply 
with those of its obligations that take effect at the time the 
Agreement enters into force.

Sec. 102. Relationship of the Agreement to United States and State Law

    This section establishes the relationship between the 
Agreement and U.S. law. It clarifies that no provision of the 
Agreement will be given effect under domestic law if 
inconsistent with Federal law; this would include provisions of 
Federal law enacted or amended by the Act.
    Section 102 also provides that no State law may be declared 
invalid on the ground that the law is inconsistent with the 
Agreement, except in an action brought by the United States for 
the purpose of declaring such law invalid. This section 
precludes any private right of action or remedy against the 
Federal Government, or a State government, based on the 
provisions of the Agreement.

Sec. 103. Implementing Actions in Anticipation of Entry Into Force and 
        Initial Regulations

    This section authorizes the President to proclaim such 
actions, and other appropriate officers of the U.S. Government 
to issue such regulations, as may be necessary to ensure 
thatprovisions of the implementing legislation are appropriately 
implemented by the date the Agreement enters into force if such 
provisions are required to be implemented by that date. Section 103 
also provides that, with respect to any action proclaimed by the 
President that is not subject to the consultation and layover 
provisions contained in section 104, such action may not take effect 
before the 15th day after the date on which the text of the 
proclamation is published in the Federal Register. The 15-day 
restriction is waived, however, to the extent it would prevent an 
action from taking effect on the date the Agreement enters into force. 
Section 103 also specifies that initial regulations necessary or 
appropriate to carry out the provisions of the implementing legislation 
shall, to the maximum extent feasible, be issued within 1 year after 
the date on which the Agreement enters into force.

Sec. 104. Consultation and Layover Provisions for, and Effective Date 
        of, Proclaimed Actions

    This section sets forth consultation and layover steps that 
must precede the President's implementation of any tariff 
modification, continuation, or additional duty, by 
proclamation. Under the consultation and layover provisions, 
the President must obtain the advice of the relevant private 
sector advisory committees and the U.S. International Trade 
Commission (ITC) on a proposed action. The President must 
submit a report to the Senate Committee on Finance and the 
House Committee on Ways and Means setting forth the action 
proposed to be proclaimed, the reasons therefore, and the 
advice of the private sector advisors and the ITC. The Act sets 
aside a 60-day period following the date of transmittal of the 
report for the Committees to consult with the President on the 
proposed action.

Sec. 105. Administration of Dispute Settlement Proceedings

    This section authorizes the President to establish or 
designate within the Department of Commerce an office 
responsible for providing administrative assistance to dispute 
settlement panels established under Chapter 20 of the 
Agreement. This section also authorizes the appropriation of 
funds to support this office.

Sec. 106. Arbitration of Claims

    This section authorizes the United States to use binding 
arbitration to resolve claims against the United States covered 
by Art. 10.15.1 of the Agreement (addressing investment 
disputes). The United States is authorized to arbitrate 
investment disputes pursuant to the Investor-State Dispute 
Settlement procedures set forth in section B of chapter 10 of 
the Agreement.

Sec. 107. Effective Dates; Effect of Termination

    This section provides the dates that certain provisions of 
the implementing legislation will go into effect. This section 
also provides that the provisions of the implementing 
legislation (other than section 107) will cease to be in effect 
on the date on which the Agreement terminates.

                      TITLE II--CUSTOMS PROVISIONS


Sec. 201. Tariff Modifications

    Section 201(a)(1) authorizes the President to implement by 
proclamation the continuation, modification, or addition of 
tariffs, or the continuation of duty-free or excise treatment, 
as the President determines to be necessary or appropriate, to 
carry out Articles 2.3, 2.5, 2.6, 4.1, 4.3.9, 4.3.10, 4.3.11, 
4.3.13, 4.3.14, 4.3.15, and Annex IV, of the Agreement. Section 
201(a)(2) requires the President to terminate the designation 
of Morocco as a beneficiary developing country under the 
Generalized System of Preferences (GSP) program on the date of 
entry into force of the Agreement.
    Section 201(b) authorizes the President, subject to the 
consultation and layover provisions of section 104 of the bill, 
to proclaim any continuation, modification, or addition of 
tariffs, or the continuation of duty-free or excise treatment, 
as the President determines to be necessary or appropriate, to 
maintain the general level of reciprocal and mutually 
advantageous concessions with respect to Morocco provided by 
the Agreement.

Sec. 202. Additional Duties on Certain Agricultural Goods

    This section implements a safeguard mechanism for 
agricultural goods under the Agreement. Section 202(a) provides 
applicable definitions for the safeguard mechanism, including 
definitions for the terms ``agricultural safeguard good,'' 
``trigger price,'' and ``unit import price.''
    Section 202(b) provides that if the unit import price of an 
agricultural safeguard good is less than the trigger price for 
that good when the good is entered into the United States, an 
additional duty shall be assessed on the imported good based 
upon the schedule provided in section 202(b)(2). The amount of 
additional duty under section 202(b)(2) increases as the 
difference increases between the unit import price and the 
trigger price. Annex 3-A specifies trigger prices for the 
agricultural safeguard goods that are covered by the safeguard 
mechanism. The assessment of additional duty under this 
provision terminates on the date on which duty-free treatment 
must be provided to that good under the Tariff Schedule of the 
United States to Annex IV of the Agreement. No additional duty 
may be assessed on an agricultural safeguard good if that good 
is already subject to a bilateral safeguard measure under the 
Agreement, or if that good is subject to a global safeguard 
measure under chapter 1 of title II of the Trade Act of 1974 
(19 U.S.C. Sec. 2251 et seq.). Agricultural safeguard goods 
listed in Annex 3-A of the Agreement include: dried onions and 
garlic; processed tomato products; asparagus; olives; pears; 
apricots; nectarines; peaches; fruit mixtures; and orange 
juice.

Sec. 203. Rules of Origin

    This section implements the general rules of origin set 
forth in Chapter 5 of theAgreement. These rules define the 
circumstances under which a good imported from Morocco qualifies as an 
originating good and is therefore eligible for preferential tariff 
treatment, according to the terms of the Agreement.
    A good is an originating good if it is imported directly 
from Morocco, and the good is wholly the growth, product, or 
manufacture, of Morocco or the United States, or both.
    A good imported directly from Morocco that does not satisfy 
the foregoing criteria may still be an originating good if: the 
good derives from a nonoriginating good or material that has 
undergone a substantial transformation in Morocco (i.e. to 
become a new or different article of commerce) and not less 
than 35 percent of the appraised value of the good, at the time 
the good enters the United States, is attributable to the sum 
of the value of materials produced in Morocco or the United 
States, or both, plus the direct costs of processing operations 
performed in Morocco or the United States, or both. This 
``substantial transformation'' rule of origin is akin to rules 
of origin provided for in the United States-Israel Free Trade 
Area Implementation Act of 1985 and the United States-Jordan 
Free Trade Area Implementation Act.
    In addition, a good imported directly from Morocco is an 
originating good if: the good is covered by Annex 4-A or Annex 
5-A of the Agreement; each of the nonoriginating materials used 
in the production of the good undergoes an applicable change in 
tariff classification specified in such Annex as a result of 
production occurring entirely in Morocco or the United States, 
or both (or the good otherwise satisfies the requirements 
specified in such Annex); and the good satisfies all other 
applicable requirements of section 203.
    Section 203(c) provides a rule of cumulation for an 
originating good or material produced in Morocco or the United 
States, or both, that is then incorporated into a good in 
either Morocco or the United States and then exported directly 
to the other Party. Section 203(d) provides rules for valuing a 
material produced in Morocco or the United States, or both. 
Section 203(e) addresses the treatment of packaging materials 
and containers for retail sale and for shipment. Section 203(f) 
addresses indirect materials, while section 203(g) addresses 
transit and transshipment of goods. Section 203(h) provides 
specific rules of origin for textile and apparel goods, while 
section 203(i) provides definitions of terms applicable to the 
rules of origin. Section 203(j) authorizes the President to 
proclaim, as part of the Harmonized Tariff Schedule of the 
United States, the provisions set forth in Annex 4-A and Annex 
5-A of the Agreement, and to modify certain of the Agreement's 
specific rules of origin by proclamation subject to the 
consultation and layover provisions of section 104 of the 
implementing legislation.

Sec. 204. Enforcement Relating to Trade in Textile and Apparel Goods

    This section authorizes the President to apply anti-
circumvention provisions concerning trade in textile and 
apparel goods. The Secretary of the Treasury may request that 
the Government of Morocco conduct a verification to determine 
that an exporter or producer in Morocco is complying with 
applicable customs laws, regulations, procedures, requirements, 
or practices affecting trade in textile or apparel goods, or to 
determine that a claim for preferential treatment of textile or 
apparel goods is consistent with the terms of the Agreement. 
Section 204 authorizes the President to order the suspension of 
liquidation of entries from exporters or producers in Morocco 
that are subject to a verification, and the suspension of 
liquidation of any entry that is subject to verification. If 
the Secretary of the Treasury determines that information 
obtained within 12 months of a request for verification is 
insufficient to make a determination, section 204 authorizes 
the President to direct the Secretary to: publish the name and 
address of the person subject to verification; deny 
preferential tariff treatment under the Agreement to any 
textile or apparel good exported or produced by the person 
subject to verification; deny preferential tariff treatment 
under the Agreement to the entry subject to verification; deny 
entry into the United States of any textile or apparel good 
exported or produced by the person subject to verification; or, 
deny entry into the United States of the entry subject to 
verification.

Sec. 205. Regulations

    This section requires the Secretary of the Treasury to 
prescribe such regulations as may be necessary to carry out the 
provisions of section 203 (rules of origin).

                     TITLE III--RELIEF FROM IMPORTS


Sec. 301. Definitions

    This section defines the terms ``Moroccan article'' and 
``Moroccan textile or apparel article'' for purposes of the 
general bilateral safeguard provision contained in Chapter 8 of 
the Agreement and the textile and apparel bilateral safeguard 
provision contained in Chapter 4 of the Agreement. The term 
``Moroccan article'' is defined as an article that qualifies as 
an originating good under section 203(b) of the implementing 
legislation or receives preferential tariff treatment under 
paragraphs 9 through 15 of Art. 4.3 of the Agreement. The term 
``Moroccan textile or apparel article'' is defined as a 
Moroccan article that is listed in the Annex to the Agreement 
on Textiles and Clothing referred to in section 101(d)(4) of 
the Uruguay Round Agreements Act (19 U.S.C. Sec. 3511(d)(4)). 
Section 301 also defines the term ``Commission'' as the U.S. 
International Trade Commission.

     Subtitle A. Relief From Imports Benefiting From the Agreement


Sec. 311. Commencing of Action for Relief

    This section requires the filing of a petition with the 
Commission by an entity that is representative of an industry 
in order to commence a bilateral safeguard investigation. 
Section 311(a) permits a petitioning entity to request 
provisional relief as if the petition had been filed under 
section 202(a) of the Trade Act of 1974 (19 U.S.C. 
Sec. 2252(a)). Any request for provisional relief shall include 
an allegation of ``critical circumstances'' in the petition.
    Section 311(b) provides that, upon the filing of a 
petition, the Commission shall promptly initiate an 
investigation to determine whether, as a result of the 
reduction or elimination of a duty provided for under the 
Agreement, a Moroccan article is being imported into the United 
States in such increased quantities, and under such conditions, 
that imports of the Moroccan article constitute a substantial 
cause of serious injury, or threat of serious injury, to the 
domestic industry producing an article that is like, or 
directly competitive with, the imported article.
    Section 311(c) applies to any bilateral safeguard initiated 
under the Agreement certain provisions, both substantive and 
procedural, contained in subsections (b), (c), (d), and (i) of 
section 202 of the Trade Act of 1974 (19 U.S.C. Sec. 2252(b), 
(c), (d), and (i)) that apply to global safeguard 
investigations. These provisions include, inter alia, the 
requirement that the Commission publish notice of the 
commencement of an investigation; the requirement that the 
Commission hold a public hearing at which interested parties 
and consumers have the right to be present, to present 
evidence, and to respond to the presentations of other parties 
and consumers; the factors to be taken into account by the 
Commission in making its determinations; and, authorization for 
the Commission to promulgate regulations to provide access to 
confidential business information under protective order to 
authorized representatives of interested parties in an 
investigation.
    Section 311(d) precludes the initiation of an investigation 
with respect to any Moroccan article for which import relief 
has already been provided under this bilateral safeguard 
provision.

Sec. 312. Commission Action on Petition

    This section establishes deadlines for Commission 
determinations following the initiation of a bilateral 
safeguard investigation. Section 312(b) applies certain 
statutory provisions that address an equally divided vote by 
the Commission in a global safeguard investigation under 
section 202 of the Trade Act of 1974 (19 U.S.C. Sec. 2252), to 
Commission determinations under this section. If the Commission 
renders an affirmative injury determination, or a determination 
that the President may consider to be an affirmative 
determination in the event of a divided vote by the Commission, 
section 312(c) requires that the Commission also find and 
recommend to the President the amount of import relief that is 
necessary to remedy or prevent the injury found by the 
Commission and to facilitate the efforts of the domestic 
industry to make a positive adjustment to import competition. 
Section 312(d) specifies the information to be included by the 
Commission in a report to the President regarding its 
determination. Upon submitting the requisite report to the 
President, section 312(e) requires the Commission to promptly 
make public such report, except for confidential information 
contained in the report.

Sec. 313. Provision of Relief

    This section directs the President, not later than 30 days 
after receiving the report from the Commission, to provide 
relief from imports of the article subject to an affirmative 
determination by the Commission, or a determination that the 
President considers to be an affirmative determination in the 
event of a divided vote by the Commission, to the extent that 
the President determines necessary to remedy or prevent the 
injury and to facilitate the efforts of the domestic industry 
to make a positive adjustment to import competition. Under 
section 313(b), the President is not required to provide import 
relief if the President determines that the provision of the 
import relief will not provide greater economic and social 
benefits than costs.
    Section 313(c) specifies the nature of the import relief 
that the President may impose, to include: the suspension of 
any further reduction in duty provided for under Annex IV of 
the Agreement; and, an increase in the rate of duty imposed on 
such article to a level that does not exceed the lesser of (1) 
the NTR/MFN duty rate imposed on like articles at the time the 
import relief is provided, or (2) the NTR/MFN duty rate imposed 
on like articles on the day before the date on which the 
Agreement enters into force. In the case of a duty applied on a 
seasonal basis to an article, the President may increase the 
rate of duty imposed on such article to a level that does not 
exceed the lesser of (1) the NTR/MFN duty rate imposed on like 
articles for the immediately preceding corresponding season, or 
(2) the NTR/MFN duty rate imposed on like articles on the day 
before the date on which the Agreement enters into force. 
Section 313(c) also requires that, if the period for which 
import relief is provided exceeds 1 year, the President shall 
provide for the progressive liberalization of such relief at 
regular intervals during the period of its application.
    Section 313(d) provides that the initial period for import 
relief in a bilateral safeguard action shall not exceed 3 
years. The President is authorized to extend the effective 
period of such relief under section 313(d) if the President 
determines that import relief continues to be necessary to 
remedy or prevent serious injury and to facilitate adjustment 
to import competition, and that there is evidence that the 
domestic industry is making a positive adjustment to import 
competition. Before the President can extend the period of 
import relief, the President must first receive a report from 
the Commission under section 313(d)(2)(B) containing an 
affirmative determination, or a determination that the 
President may consider to be an affirmative determination in 
the event of a divided vote by the Commission, that import 
relief continues to be necessary to remedy or prevent serious 
injury and to facilitate adjustment to import competition, and 
that the domestic industry is making a positive adjustment to 
import competition. Section 313(d) also provides that the total 
period for import relief in a bilateral safeguard action, 
including any extension of such import relief, shall not exceed 
5 years.
    Section 313(e) provides that upon termination of import 
relief under the bilateral safeguard provision, the rate of 
duty to be applied is the rate of duty that would have been in 
effect on that date with respect to the article, but for the 
provision of such import relief.
    Section 313(f) provides that no import relief may be 
provided under the bilateral safeguard mechanism on any article 
that previously has been subject to import relief under the 
bilateral safeguard, or is subject to an assessment of 
additional duty under the safeguard mechanism for agricultural 
goods set forth in section 202 of the implementing legislation.

Sec. 314. Termination of Relief Authority

    This section provides that the President's authority to 
impose import relief with respect to a good under the bilateral 
safeguard mechanism ends after the date that is 5 years after 
the date on which duty-free treatment must be provided by the 
United States to that good pursuant to Annex IV of the 
Agreement. Section 314(b) provides that the President may 
provide import relief under the bilateral safeguard mechanism 
after the foregoing termination date if the President 
determines that Morocco has consented to the imposition of such 
import relief.

Sec. 315. Compensation Authority

    This section authorizes the President, under section 123 of 
the Trade Act of 1974 (19 U.S.C. Sec. 2133), to grant Morocco 
new concessions as compensation for the imposition of import 
relief in a bilateral safeguard investigation, in order to 
maintain the general level of reciprocal concessions.

Sec. 316. Confidential Business Information

    This section applies the same procedures for the treatment 
and release of confidential business information by the 
Commission in a global safeguard investigation under chapter 1 
of title II of the Trade Act of 1974 (19 U.S.C. Sec. 2251 et 
seq.) to bilateral safeguard investigations under subtitle A of 
title III of the implementing legislation.

           Subtitle B. Textile and Apparel Safeguard Measures


Sec. 321. Commencement of Action for Relief

    This section requires the filing of a request with the 
President by an interested party in order to commence action 
for relief under the textile and apparel safeguard provision. 
Upon the filing of a request, the President shall review the 
request to determine, from the information presented in the 
request, whether to commence consideration of the request. 
Section 321(b) provides that, if the President determines that 
the request provides the information necessary for the request 
to be considered, the President shall cause to be published in 
the Federal Register a notice of commencement of consideration 
of the request, and notice seeking public comments regarding 
the request. The notice shall include a summary of the request 
and the dates by which comments and rebuttals must be received.
    The Committee notes that our regulatory process should be 
administered in an open and transparent manner that can serve 
as a model for our trading partners. For example, in addition 
to publishing a summary of a request for safeguard relief, the 
Committee notes that the President plans to make available the 
full text of the request on the website of the International 
Trade Administration of the U.S. Department of Commerce, 
subject to the protection of business confidential information. 
The Committee encourages this and similar efforts to enhance 
government transparency. In particular, the Committee 
encourages the President to issue regulations on procedures 
for: requesting a textile and apparel safeguard measure; making 
a determination under section 322(a) of the implementing 
legislation; providing safeguard relief under section 322(b) of 
the implementing legislation; and extending safeguard relief 
under section 323(b) of the implementing legislation.

Sec. 322. Determination and Provision of Relief

    This section provides that following the President's 
commencement of consideration of a request, the President shall 
determine whether, as a result of the reduction or elimination 
of a duty under the Agreement, a Moroccan textile or apparel 
article is being imported into the United States in such 
increased quantities and under such conditions as to cause 
serious damage, or actual threat thereof, to a domestic 
industry producing an article that is like, or directly 
competitive with, the imported article.
    Section 322(a)(2) identifies certain economic factors that 
the President shall examine in making a determination, 
including changes in the domestic industry's output, 
productivity, capacity utilization, inventories, market share, 
exports, wages, employment, domestic prices, profits, and 
investment, none of which is necessarily decisive. Section 
322(a)(2) also provides that the President shall not consider 
changes in technology or consumer preference as factors 
supporting a determination of serious damage or actual threat 
thereof.
    Section 322(b) authorizes the President, in the event of an 
affirmative determination of serious damage or actual threat 
thereof, to provide import relief to the extent that the 
President determines necessary to remedy or prevent the serious 
damage and to facilitate adjustment by the domestic industry to 
import competition. Section 322(b) also specifies the nature of 
the import relief that the President may impose, to consist of 
an increase in the rate of duty imposed on the article to a 
level that does not exceed the lesser of: (1) the NTR/MFN duty 
rate imposed on like articles at the time the import relief is 
provided; or (2) the NTR/MFN duty rate imposed on like articles 
on the day before the date on which the Agreement enters into 
force.

Sec. 323. Period of Relief

    This section provides that the initial period for import 
relief in a textile and apparel safeguard action, including any 
provisional relief, shall not exceed 3 years. The President is 
authorized to extend the effective period of such relief by not 
more than 2 years if the President determines that import 
relief continues to be necessary to remedy or prevent serious 
damage and to facilitate adjustment by the domestic industry to 
import competition, and that there is evidence that the 
domestic industry is making a positive adjustment to import 
competition. Section 323(b) provides that the total period for 
import relief in a textile and apparel safeguard action, 
including any extension of such import relief, may not exceed 5 
years.

Sec. 324. Articles Exempt From Relief

    This section precludes the President from providing import 
relief under the textile and apparel safeguard mechanism with 
respect to any article to which import relief has already been 
provided under the textile and apparel safeguard, or any 
article that is subject to import relief under the global 
safeguard mechanism set forth in chapter 1 of title II of the 
Trade Act of 1974 (19 U.S.C. Sec. 2251 et seq.).

Sec. 325. Rate After Termination of Import Relief

    This section provides that the duty rate applicable to a 
textile or apparel article after termination of the import 
relief shall be the duty rate that would have been in effect, 
but for the provision of such import relief, on the date on 
which the relief terminates.

Sec. 326. Termination of Relief Authority

    This section provides that the President's authority to 
provide import relief under the textile and apparel safeguard 
mechanism terminates after the date that is 10 years after the 
date on which duties on the article are eliminated pursuant to 
the Agreement.

Sec. 327. Compensation Authority

    This section authorizes the President, under section 123 of 
the Trade Act of 1974 (19 U.S.C. Sec. 2133), to grant Morocco 
new concessions as compensation for the imposition of import 
relief in a textile and apparel safeguard proceeding, in order 
to maintain the general level of reciprocal concessions.

Sec. 328. Business Confidential Information

    This section precludes the President from releasing 
information that the President considers to be confidential 
business information unless the party submitting the 
confidential business information had notice, at the time of 
submission, that such information would be released, or such 
party subsequently consents to the release of the information. 
This section also provides that, to the extent business 
confidential information is provided, a nonconfidential version 
of the information shall also be provided in which the business 
confidential information is summarized or, if necessary, 
deleted.

             F. Vote of the Committee in Reporting the Bill

    In compliance with section 133 of the Legislative 
Reorganization Act of 1946, the Committee states that on July 
20, 2004, S. 2677 was ordered favorably reported, without 
amendment, by a unanimous vote of 21 ayes and 0 nays, a quorum 
being present.

                    II. BUDGETARY IMPACT OF THE BILL


               CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 21, 2004.
Hon. Charles E. Grassley,
Chairman, Committee on Finance,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 2677, a bill to 
implement the United States-Morocco Free Trade Agreement.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Annabelle 
Bartsch.
            Sincerely,
                                       Douglas Holtz-Eakin,
                                                          Director.
    Enclosure.

S. 2677.--A bill to implement the United States-Morocco Free Trade 
        Agreement

    Summary: S. 2677 would approve the free trade agreement 
between the government of the United States and the government 
of Morocco that was entered into on June 15, 2004. It would 
provide for tariff reductions and other changes in law related 
to implementation of the agreement.
    The Congressional Budget Office estimates that enacting the 
bill would reduce revenues by $5 million in 2005, by $52 
million over the 2005-2009 period, and by $144 million over the 
2005-2014 period, net of income and payroll tax offsets. The 
bill would not affect federal spending.
    CBO has determined that S. 2677 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 S. 2677 over the 2005-2014 period is shown 
in the following table.

----------------------------------------------------------------------------------------------------------------
                                                     By fiscal year, in millions of dollars--
                                 -------------------------------------------------------------------------------
                                   2005    2006    2007    2008    2009    2010    2011    2012    2013    2014
----------------------------------------------------------------------------------------------------------------
Changes in receipts.............      -5      -9     -11     -13     -15     -16     -18     -19     -19     -20
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: Under the United States-Morocco 
agreement, tariffs on U.S. imports from Morocco would be phased 
out over time. The tariffs would be phased out for individual 
products at varying rates according to one of several different 
timetables ranging from immediate elimination on January 1, 
2005, to gradual elimination over 18 years. According to the 
U.S. International Trade Commission, the United States 
collected $15 million in customs duties in 2003 on $396 million 
of imports from Morocco. Those imports consist mostly of 
various types of apparel articles and produce. Based on these 
data, CBO estimates that phasing out tariff rates as outlined 
in the U.S.-Morocco agreement would reduce revenues by $5 
million in 2005, by $52 million over the 2005-2009 period, and 
by $144 million over the 2005-2014 period, net of income and 
payroll tax offsets.
    This estimate includes the effects of increased imports 
from Morocco that would result from the reduced prices of 
imported products in the United States, reflecting the lower 
tariff rates. It is likely that some of the increase in U.S. 
imports from Morocco 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 of the increase in U.S. imports from Morocco would 
displace imports from other countries.
    Intergovernmental and private-sector impact: The bill 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would not affect the budgets of state, 
local, or tribal governments.
    Estimate prepared by: Federal Revenues: Annabelle Bartsch; 
Impact on State, Local, and Tribal Governments: Melissa 
Merrell; and Impact on the Private Sector: Crystal Taylor.
    Estimate approved by: G. Thomas Woodward, Assistant 
Director for Tax Analysis.

          III. REGULATORY IMPACT OF THE BILL AND OTHER MATTERS

    Pursuant to the requirements of paragraph 11(b) of rule 
XXVI of the Standing Rules of the Senate, the Committee states 
that the bill will not significantly regulate any individuals 
or businesses, will not affect the personal privacy of 
individuals, and will result in no significant additional 
paperwork.
    The following information is provided in accordance with 
section 423 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
(Pub. L. No. 104-04). The Committee has reviewed the provisions 
of S. 2677 as approved by the Committee on July 20, 2004. In 
accordance with the requirement of Pub. L. No. 104-04, the 
Committee has determined that the bill contains no 
intergovernmental mandates, as defined in the UMRA, and would 
not affect the budgets of State, local, or tribal governments.

       IV. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

     Pursuant to the requirements of paragraph 12 of rule XXVI 
of the Standing Rules of the Senate, changes in existing law 
made by the bill, as reported, are shown as follows (existing 
law proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

TRADE ACT OF 1974

           *       *       *       *       *       *       *



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

  (a) Petitions and Adjustment Plans.--
          (1) * * *

           *       *       *       *       *       *       *

          (8) The procedures concerning the release of 
        confidential business information set forth in section 
        332(g) of the Tariff Act of 1930 shall apply with 
        respect to information received by the Commission in 
        the course of investigations conducted under this 
        chapter, part 1 of title III of the North American Free 
        Trade Agreement Implementation Act, title II of the 
        United States-Jordan Free Trade Area Implementation 
        Act, title III of the United States-Chile Free Trade 
        Agreement Implementation Act, [and] title III of the 
        United States-Singapore Free Trade Agreement 
        Implementation Act, and title III of the United States-
        Morocco Free Trade Agreement Implementation Act. The 
        Commission may request that parties providing 
        confidential business information furnish 
        nonconfidential summaries thereof or, if such parties 
        indicate that the information in the submission cannot 
        be summarized, the reasons why a summary cannot be 
        provided. If the Commission finds that a request for 
        confidentiality is not warranted and if the party 
        concerned is either unwilling to make the information 
        public or to authorize its disclosure in generalized or 
        summarized form, the Commission may disregard the 
        submission.

           *       *       *       *       *       *       *