Calendar No. 517 105TH CONGRESS REPORT 2d Session SENATE 105±280 "! TRADE AND TARIFF ACT OF 1998 JULY 31, 1998.ÐOrdered to be printed Mr. ROTH, from the Committee on Finance, submitted the following REPORT [To accompany 2400] [Including cost estimate of the Congressional Budget Office] The Committee on Finance, having considered legislation to pro- vide certain tariff preferences to the countries of sub-Saharan Afri- ca and the Caribbean Basin, to renew the Generalized System of Preferences, to renew the President's authority to proclaim changes in tariffs resulting from the negotiation of reciprocal trade agree- ments and to renew congressional procedures for implementing provisions of such agreements in United States law, to reauthorize existing trade adjustment assistance programs, to introduce a mechanism for investigating foreign barriers to United States agri- cultural exports, to implement an international agreement impos- ing disciplines on shipbuilding subsidies, to normalize trade rela- tions with Mongolia, and to make minor changes to the customs laws of the United States, reports favorably thereon and refers the bill to the full Senate with a recommendation that the bill do pass. CONTENTS Page I. BACKGROUND .................................................................................................. 2 II. SUMMARY OF BILL .......................................................................................... 3 III. GENERAL DESCRIPTION OF BILL .................................................................... 4 A. TITLE IÐTRADE AND DEVELOPMENT .................................................... 4 1. Subtitle AÐLegislation Authorizing a New Trade Policy for Sub- Saharan Africa ................................................................................ 4 a. Background ................................................................................. 4 b. Summary of Subtitle .................................................................. 5 c. General Description of Subtitle ................................................. 6 2. Subtitle BÐLegislation Extending Duty-Free Treatment Under the Generalized System of Preferences ......................... 10 59±010 2 a. Background ................................................................................. 11 b. General Description of Subtitle ................................................. 11 3. Subtitle CÐLegislation Authorizing the United States-Carib- bean Basin Trade Enhancement Act ......................................... 11 a. Background ................................................................................. 11 b. General Description of Subtitle ................................................. 13 B. TITLE II LEGISLATION TO EXTEND TARIFF PROCLAMATION AUTHOR- ITY AND FAST TRACK PROCEDURES FOR CONGRESSIONAL CONSID- ERATION OF TRADE AGREEMENTS ...................................................... 16 1. Background ..................................................................................... 16 2. Summary of Title ........................................................................... 18 3. General Description of Title .......................................................... 19 C. TITLE III LEGISLATION REAUTHORIZING THE TRADE ADJUSTMENT ASSISTANCE PROGRAMS ...................................................................... 34 1. Background ..................................................................................... 34 2. General Description of Title .......................................................... 35 D. TITLE IVÐLEGISLATION ESTABLISHING A MECHANISM FOR IDENTI- FYING MARKET ACCESS BARRIERS FOR AGRICULTURAL PRODUCTS .. 35 1. Background ..................................................................................... 35 2. General Description of Title .......................................................... 36 E. TITLE VÐLEGISLATION TO IMPLEMENT THE OECD SHIPBUILDING AGREEMENT ......................................................................................... 37 1. Background ..................................................................................... 37 2. Summary of Title ........................................................................... 38 a. Injurious Pricing and Countermeasures ................................... 39 b. Other Provisions ......................................................................... 39 3. General Description of Title .......................................................... 40 F. TITLE VIÐMISCELLANEOUS TRADE AND TARIFF PROVISIONS ............. 62 1. Subtitle AÐLegislation to Extend Permanent Normal Trade Relations (NTR) Tariff Treatment to Imports from Mongolia . 62 a. Background ................................................................................. 62 b. General Description of Subtitle ................................................. 63 2. Subtitle BÐLegislation Implementing Certain Miscellaneous Tariff Provisions .......................................................................... 63 G. TITLE VIIÐLEGISLATION IMPLEMENTING REVENUE PROVISIONS ....... 67 IV. CONGRESSIONAL ACTION ................................................................................ 69 V. VOTES OF THE COMMITTEE ............................................................................ 69 A. Motion to Report the Bill ..................................................................... 69 B. Votes on Amendments .......................................................................... 69 VI. BUDGETARY IMPACT ........................................................................................ 70 A. Committee Estimates ........................................................................... 70 B. Budget Authority and Tax Expenditures ........................................... 72 1. Budget Authority ........................................................................... 72 2. Tax Expenditures ........................................................................... 72 C. Consultation with Congressional Budget Office ................................ 72 VII. REGULATORY IMPACT AND UNFUNDED MANDATES ....................................... 79 A. Regulatory Impact ................................................................................ 79 1. Impact on Regulations ................................................................... 79 2. Impact on Personal Privacy and Paperwork ............................... 81 B. Unfunded Mandates ............................................................................. 81 VIII. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED .................. 82 I. BACKGROUND The Finance Committee's work on the Trade and Tariff Act of 1998 takes place against the backdrop of dramatic events unfolding in the global economy. As the Committee's recent hearings have underscored, the Asian financial crisis in particular is dampening the prospects for economic growth at home and abroad. The impact has been felt most dramatically in our agricultural sector. American farmers depend on export markets for forty per- cent of their family income. The decline in international demand, combined with other factors, has forced a sharp decline in commod- ity prices and farm income. 3 Other sectors of the economy have been affected as well. United States manufacturers face both a decline in their export markets and strong price competition at home as the dollar has continued to appreciate against foreign currencies. Service providers have faced a decline in export demand as well. In the past, economic events such as these have frequently led to calls both at home and abroad for increased protection against foreign competition. As history has proved, those calls have led to disastrous consequences for both the United States and world economies. In the Committee's view, what is needed, instead, is strong inter- national leadership to prevent a rising tide of protectionism from washing away the benefits the international trading system has af- forded both producers and consumers in the United States. Amer- ican farmers, manufacturers and service providers can expect little in the way of progress in reclaiming and expanding markets for their goods and services unless the United States provides that leadership. Recent events underscore the need for a strong, unequivocal statement of the United States' commitment to a free and open trading system that will provide a rising standard of living for both U.S. and foreign workers. The Trade and Tariff Act of 1998 makes that statement. Trade is a positive-sum game from which both the United States and its trading partners can benefit if the United States can move aggressively ahead with its trade agenda. The Trade and Tariff Act of 1998 helps establish that agenda and pro- vides the President with the tools he needs to implement it. II. SUMMARY OF BILL The Trade and Tariff Act of 1998 is divided into seven titles, a number of which incorporate legislation previously reported favor- ably by the Committee. Title I establishes a new program of trade preferences for the countries of sub-Saharan Africa in order to en- courage investment and trade in one of the poorest regions in the world. Title I also renews the existing Generalized System of Pref- erences program and affords additional trade benefits to the eligi- ble beneficiary countries under the Caribbean Basin Economic Re- covery Act. Title II of the Trade and Tariff Act of 1998 would renew the President's authority to proclaim changes