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104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2d Session                                                     104-629
_______________________________________________________________________


 
               MOST-FAVORED-NATION TREATMENT FOR ROMANIA

                                _______


 June 18, 1996.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

_______________________________________________________________________


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

                              R E P O R T

                        [To accompany H.R. 3161]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 3161) to authorize the extension of 
nondiscriminatory treatment (most-favored-nation treatment) to 
the products of Romania, having considered the same, report 
favorably thereon without amendment and recommend that the bill 
do pass.

                            I. INTRODUCTION

                         a. purpose and summary

    H.R. 3161 would authorize the extension of 
nondiscriminatory treatment (most-favored-nation treatment) to 
the products of Romania.

                 b. background and need for legislation

    At present, Romania's most-favored-nation (MFN) status is 
subject to Title IV of the Trade Act of 1974, the provision of 
U.S. law which contains the so-called Jackson-Vanik amendment 
governing the MFN status of nonmarket economy countries not 
eligible for such treatment as of January 3, 1975. Romania 
began receiving MFN treatment on an annual basis under a 
Presidential waiver from the freedom-of-emigration requirements 
in the Jackson-Vanik amendment on August 3, 1975. On June 28, 
1988, the President announced his decision to allow the waiver 
to expire in response to the Romanian government's decision to 
renounce the renewal of its MFN status subject to the terms of 
Jackson-Vanik. Romania's MFN status and its eligibility for 
export credits expired on July 3, 1988.
    Romania emerged from its brutal communist dictatorship in 
1989 and approved a new constitution, laying the foundation for 
a modern parliamentary democracy charged with guaranteeing 
fundamental human rights, freedom of expression, and respect 
for private property. Since then, Romania has held local, 
parliamentary, and presidential elections. In addition to 
democratic reform, Romania has undertaken significant market-
oriented economic reforms, including the establishment of a 
two-tier banking system, the introduction of a modern tax 
system, the freeing of most prices and elimination of most 
subsidies, the adoption of a tariff-based trade regime, and the 
rapid privatization of industry and nearly all agriculture.
    In light of Romania's progress toward democratic pluralism 
and a market economy, as well as its desire for closer 
bilateral relations, the President issued a waiver for Romania 
from the Jackson-Vanik requirements on August 17, 1991, and 
signed the United States-Romania Trade Agreement on April 3, 
1992. On November 2, 1993, the President signed into law P.L. 
103-133, a joint resolution approving the extension of MFN to 
Romania under the new bilateral trade agreement. The President 
found Romania to be in full compliance with the conditions in 
the Jackson-Vanik amendment on May 19, 1995. Consequently, an 
annual waiver is no longer necessary for Romania to receive MFN 
treatment, but that country remains subject to semi-annual 
reports by the President on compliance and the December report 
can be disapproved by Congress.
    Trade between the United States and Romania has increased 
since Romania's MFN status was reinstated in 1993. In 1995, 
two-way trade between the countries totalled $478 million, up 
from $392 million in 1993. Last year, U.S. exports to Romania 
were valued at $256 million, while imports from Romania 
totalled $222 million.
    H.R. 3161 authorizes the extension of unconditional MFN 
treatment to the products of Romania by granting the President 
the authority to determine that Title IV of the Trade Act of 
1974 should no longer apply with respect to that country. After 
making such a determination, the bill authorizes the President 
to proclaim the extension of nondiscriminatory treatment to the 
products of Romania. On and after the effective date of the 
President's proclamation, H.R. 3161 provides that Title IV of 
the Trade Act of 1974 shall cease to apply with respect to 
Romania.
    Normalizing U.S. trade relations with Romania, by removing 
the conditionality imposed on that country's MFN status, would 
enhance our bilateral trade relations with that country and 
foster the economic development of the region by providing 
greater certainty with respect to Romania's status under U.S. 
law. In addition, Romania is a member of the World Trade 
Organization (WTO) and an extension of unconditional MFN 
treatment to Romania is necessary in order for the United 
States to avail itself of all rights with respect to Romania 
under the WTO.

                         c. legislative history

Subcommittee bill

    H. R. 3161 was introduced on March 26, 1996, by Mr. Crane 
of Illinois, Mr. Gibbons of Florida, and Mrs. Kennelly of 
Connecticut and referred to the Committee on Ways and Means. 
The bill contains two provisions: (1) granting the President 
the authority to determine that Title IV of the Trade Act of 
1974 should no longer apply with respect to Romania and to 
proclaim the extension of nondiscriminatory treatment to the 
products of that country; and (2) providing that Title IV of 
the Trade Act of 1974 shall cease to apply with respect to 
Romania on and after the effective date of the President's 
proclamation.
    On May 9, 1996, the Subcommittee on Trade of the Committee 
on Ways and Means ordered the bill favorably reported, by voice 
vote, to the Full Committee, without amendment.
    The Committee on Ways and Means marked up H.R. 3161 on June 
13, 1996 and ordered the bill to be favorably reported without 
amendment by a voice vote.

Legislative hearing

    The Subcommittee on Trade of the Committee on Ways and 
Means issued a request for written public comment on the 
extension of unconditional MFN to the products of Romania on 
April 1, 1996. The deadline for submission of comments was May 
3, 1996. The Subcommittee received a significant number of 
comments in favor of the proposed MFN extension, primarily from 
business groups and individual firms, and a few comments in 
opposition to it, primarily from groups concerned about 
minority rights in Romania. The Administration supports the 
legislation.

                      II. EXPLANATION OF THE BILL

      a. congressional findings and supplemental actions (sec. 1)

Present law

    Romania's MFN status is subject to Title IV of the Trade 
Act of 1974, the provision of U.S. law which contains the so-
called Jackson-Vanik amendment governing the extension of MFN 
tariff treatment to nonmarket economy countries not eligible 
for such treatment as of January 3, 1975.

Explanation of provision

    The provision contains findings of the Congress that (1) 
Romania emerged from years of brutal Communist dictatorship in 
1989 and approved a new Constitution and elected a Parliament 
by 1991, laying the foundation for a modern parliamentary 
democracy charged with guaranteeing fundamental human rights, 
freedom of expression, and respect for private property; (2) 
local elections, parliamentary elections, and presidential 
elections have been held in Romania and 1996 will mark the 
second nationwide presidential elections under the new 
Constitution; (3) Romania has undertaken significant economic 
reforms, including the establishment of a two-tier banking 
system, the introduction of a modern tax system, the freeing of 
most prices and elimination of most subsidies, the adoption of 
a tariff-based trade regime, and the rapid privatization of 
industry and nearly all agriculture; (4) Romania concluded a 
bilateral investment treaty with the United States in 1993, and 
both United States investment in Romania and bilateral trade 
are increasing rapidly; (5) Romania has received MFN treatment 
since 1993, and has been found by the President to be in full 
compliance with the freedom of emigration requirements under 
Title IV of the Trade Act of 1974; (6) Romania is a member of 
the World Trade Organization (WTO) and extension of MFN 
treatment to the products of Romania would enable the United 
States to avail itself of all rights under the WTO with respect 
to Romania; and (7) Romania has demonstrated a strong desire to 
build friendly relationships and to cooperate fully with the 
United States on trade matters.

Reasons for change

    The provision notes developments in Romania's domestic 
political and economic systems, as well as developments in the 
country's bilateral trade relations with the United States and 
its membership in the WTO, as reasons for enacting this 
legislation.

Effective date

    The provision is effective upon enactment.

 b. termination of application of title iv of the trade act of 1974 to 
                            romania (sec. 2)

Present law

    Romania's MFN status is subject to Title IV of the Trade 
Act of 1974, the provision of U.S. law which governs the 
extension of MFN tariff treatment to nonmarket economy 
countries not eligible for such treatment as of January 3, 
1975. Section 402 sets forth three requirements relating to 
freedom of emigration which must be met, or waived by the 
President, in order for him to grant MFN status to a nonmarket 
economy. Specifically, those requirements prohibit the 
President from extending MFN to ``any nonmarket economy country 
[that]....(1) denies its citizens the right or opportunity to 
emigrate; (2) imposes more than a nominal tax on emigration or 
on the visas or other documents required for emigration, for 
any purpose or cause whatsoever; or (3) imposes more than a 
nominal tax, levy, fine, fee, or other charge on any citizen as 
a consequence of the desire of such citizen to emigrate to the 
country of his choice''. Title IV also requires that a trade 
agreement providing MFN status remain in force between the 
United States and the nonmarket economy country receiving MFN, 
and sets forth minimum provisions which must be included in 
such an agreement.

Explanation of provision

    This section grants authority to the President to determine 
that Title IV of the Trade Act of 1974 should no longer apply 
with respect to Romania and, after making such a determination, 
to proclaim the extension of nondiscriminatory treatment to the 
products of Romania. Once the President has issued this 
proclamation, the provision removes the application of Title IV 
of the Trade Act of 1974 from Romania.

Reasons for change

    Since the collapse of its communist dictatorship, Romania 
has approved a new constitution, laying the foundation for a 
modern parliamentary democracy charged with guaranteeing 
fundamental human rights, freedom of expression, and respect 
for private property. In 1996, Romania will hold its second 
presidential election under the new constitution. In addition, 
Romania has undertaken significant market-oriented reforms in 
its economy, including privatization. Normalizing U.S. trade 
relations with Romania by removing the conditionality imposed 
on its MFN status would enhance our bilateral trade relations 
and foster the economic development of the region by providing 
greater certainty about Romania's status under U.S. law. 
Romania is also a member of the WTO and an extension of 
unconditional MFN is necessary in order for the United States 
to avail itself of all rights with respect to Romania under the 
WTO.

Effective date

    The provision is effective upon enactment.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 2(l)(2)(B) of rule XI of the 
Rules of the House of Representatives, the following statements 
are made concerning the votes of the Committee in its 
consideration of the bill, H.R. 3161.
    Motion to Report H.R. 3161.--H.R. 3161 was ordered 
favorably reported, without amendment, by voice vote, on June 
13, 1996, with a quorum present.

                     IV. BUDGET EFFECTS OF THE BILL

               a. committee estimate of budgetary effects

    In compliance with clause 7(a) of rule XIII of the Rules of 
the House of Representatives, the following statement is made:
    The Committee agrees with the estimate prepared by the 
Congressional Budget Office (CBO), which is included below.

    b. statement regarding new budget authority and tax expenditures

    In compliance with subdivision (B) of clause 2(l)(3) of 
Rule XI of the Rules of the House of Representatives, the 
Subcommittee states that the provisions of H.R. 3161 do not 
involve any new budget authority, or any increase or decrease 
in revenues or tax expenditures.

      c. cost estimate prepared by the congressional budget office

    In compliance with subdivision (C) of clause 2(l)(3) of 
Rule XI of the Rules of the House of Representatives, requiring 
a cost estimate prepared by the Congressional Budget Office, 
the following report prepared by CBO is provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 14, 1996.
Hon. Bill Archer,
Chairman, Committee on Ways and Means, House of Representatives, 
        Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
reviewed H.R. 3161, a bill to authorize the extension of 
nondiscriminatory treatment (most-favored-nation treatment) to 
the products of Romania, as ordered reported by the Committee 
on Ways and Means on June 13, 1996. CBO estimates that 
extending most-favored-nation (MFN) status to the products of 
Romania would have no budgetary effect over fiscal year 1996 
through 2002. Because H.R. 3161 could affect receipts, pay-as-
you-go procedures would apply to the bill.
    Under Title IV of the Trade Act of 1974, MFN status may not 
be conferred on a country with a nonmarket economy if that 
country maintains restrictive emigration policies. The 
President may waive this prohibition on an annual basis if he 
certifies that granting MFN status would promote freedom of 
emigration in that country. Under current law, Romania is 
subject to the requirements of Title IV. However, Romania has 
received MFN treatment since 1993 on a conditional basis.
    H.R. 3161 would grant the President the authority to stop 
applying Title IV of the Trade Act of 1974 to Bulgaria, thereby 
allowing Romania to receive MFN status on a permanent basis. 
The CBO baseline revenue projections assume that MFN status for 
Romania will be extended on an annual basis. Therefore, 
enacting H.R. 3161 would have no budgetary impact when measured 
relative to the CBO baseline.
    If you wish further details, please feel free to contact me 
or your staff may wish to contact Stephanie Weiner.
            Sincerely,
                                         June E. O'Neill, Director.

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

          a. committee oversight findings and recommendations

    With respect to subdivision (A) of clause 2(l)(3) of Rule 
XI of the Rules of the House of Representatives, the Committee 
advises that it was as a result of the Committee's oversight 
activities concerning Romania's MFN status that the Committee 
concluded that it is appropriate to enact the provisions 
contained in the bill.

b. summary of findings and recommendations of the government reform and 
                          oversight committee

    With respect to subdivision (D) of clause 2(l)(3) of Rule 
XI of the Rules of the House of Representatives, the Committee 
advises that no oversight findings or recommendations have been 
submitted by the Committee on Government Reform and Oversight 
with respect to the provisions contained in this bill.

                    c. inflationary impact statement

    In compliance with clause 2(l)(4) of Rule XI of the Rules 
of the House of Representatives, the Committee states that the 
provisions of the bill are not expected to have an overall 
inflationary impact on the national economy. As is indicated 
above, the bill is projected to be deficit neutral over fiscal 
years 1996-2002.