Narrative of Draft Legislation for China/PNTR Framework
May 10, 2000

I. Congressional-Executive Commission on China

Proposal: As part of the framework for bringing China into the WTO, the proposal will establish a Congressional-Executive Commission on China. The Commission will consist of nine Members of each House, plus five Presidential appointees.

The Commission will have three pillars within its scope. The first pillar will be monitoring human rights in China (including religious freedoms). The second pillar will be monitoring overall aspects of labor market issues in China. The third pillar will be monitoring and encouraging the development of rule-of-law and democracy-building in China.

The Commission will submit to Congress and to the President an annual report of its findings, including as appropriate WTO-consistent recommendations for legislative and/or executive action. It will also maintain lists of victims of human rights abuses in China. Finally, the Commission will respond to information requests from individual Members of Congress.

The model for this Commission is the Commission on Security and Cooperation in Europe, a Congressional-Executive entity established in 1976 to monitor compliance by other countries with the provisions of the Helsinki Final Act.

The CSCE experience indicates that a China Commission will be an effective mechanism for maintaining pressure on China with respect to labor market issues, rule of law issues, and human rights.

From its creation in 1976 to the end of the Cold War, the CSCE was one of several important instruments for championing human rights, democracy and rule of law in the countries of the former Soviet bloc. Since the Cold War, the CSCE has monitored elections in former Soviet bloc countries.

The strengths that the CSCE has exhibited include the following:

It has pulled together large amounts of information related to human rights, regional security, and other issues, analyzed that information, and communicated it to the Administration, Congress, and the public in a manner that generally is considered impartial and authoritative. Its credibility with the Administration and Congress has given the CSCE a good deal of influence in shaping policy on issues within its areas of expertise.

The CSCE has become a reliable liaison between the U.S. Government and dissidents, human rights leaders, intellectuals and other citizens of the countries that it monitors.

The CSCE has drawn attention to particular cases of human rights violations. During the worst days of Soviet bloc repression, the Commission brought cases to the attention of governments in the Soviet bloc and worked to resolve them.

Based on the CSCE experience, there are several reasons to expect that a China Commission will be an effective means of maintaining scrutiny and pressure on China in the areas of human rights (including religious freedom), worker rights, and rule of law:

First, a bipartisan standing Commission will institutionalize Congressional examination of measures by the Government of China that affect U.S. interests. Commitment to this task will be permanent and concentrated, as opposed to sporadic and diffuse, as has been the case under current law (i.e., annual reviews).

Second, the Commission will become an effective base from which to mobilize support for particular improvements in China's policies and practices. For instance, if the Commission spotlights particularly egregious conduct by the Government of China, it will be able to rally a bipartisan consensus for pressing China to change its conduct more easily than an individual Member of Congress would otherwise be able to do.

Third, as Chinese citizens gain greater access to the outside world through the Internet and other modes of communication, the Commission will become an important conduit between Chinese citizens, on the one hand, and the U.S. Government and public, on the other. For instance, victims of human rights abuses in China and their advocates in the NGO community will be able to communicate directly with the Commission.

Fourth, the Commission will be a strong, effective, and unique point of contact on China issues between Congress and the Administration. Thus, as in the case of the CSCE, the Commission will be used to highlight for the Administration issues of particular concern to Congress. This will assist the Administration in deploying its diplomatic and other foreign policy tools most effectively.

II. Legislating the China Product-Specific, Anti-Surge Safeguard

Background: The November 1999 Agreement between the United States and China contains a product-specific safeguard, which will be included in China's protocol of accession to the WTO. The safeguard permits the United States and other WTO Members to provide relief to domestic industries and workers, "where products of Chinese origin are being imported into the territory of any WTO Member in such increased quantities or under such conditions as to cause or threaten to cause market disruption to the domestic producers of like or directly competitive products." This special anti-surge safeguard will apply to China for a period of 12 years following China's accession to the WTO.

The China safeguard contains lower causation and injury standards than ordinarily would apply between WTO Members. According to the U.S.-China Agreement, market disruption occurs when subject imports "are increasing rapidly, either absolutely or relatively, so as to be a significant cause of material injury, or threat of material injury to the domestic industry." By contrast, under the U.S. law that applies to other WTO Members (section 201 of the Trade Act of 1974), the relevant inquiry is whether goods are being imported into the United States "in such increased quantities as to be a substantial cause of serious injury."

Issue: In the U.S.-China Agreement of last November, the United States negotiated a special safeguard provision against a surge of imports from China that is a significant cause of material injury to U.S. producers and workers. This proposal would legislatively implement the special safeguard provision, as was done with earlier trade agreements provisions, (most recently, the Uruguay Round Agreements). The legislation spells out procedures for effectively invoking the safeguard.

This provision follows the standard under current law (section 406 of the Trade Act of 1974), which subjects import surges from non-market economies to a lower standard (the "market disruption" standard) than applies to import surges from market economies. In granting PNTR to China, the United States will be removing China from application of Title IV of the Trade Act, which includes section 406. The present provision spells out clearly in U.S. law the safeguard provision that will apply to China going forward.

Proposal: Under the proposed legislation, U.S. industries or workers claiming injury due to import surges from China would file a petition with the U.S. International Trade Commission ("ITC"), or the ITC would initiate an investigation at the request of the President or on motion of the House Ways & Means Committee or Senate Finance Committee. Within 60 days after receipt of the petition or request/motion, the ITC would make a determination as to whether the subject imports are causing or threatening market disruption. If the ITC determination is affirmative, the President would be required to request consultations with the Government of China. This would start a 60-day consultation period, as required by the U.S.-China Agreement.

Twenty days after the ITC made an affirmative determination with respect to market disruption (i.e., 80 days after receipt of the petition or request/motion), the ITC would make a recommendation of actions necessary to prevent or remedy the market disruption. Twenty days later, the U.S. Trade Representative would publish a notice of proposed action, seeking comments on the appropriateness of the proposed action and whether it would be in the public interest. An opportunity for hearing on that action would also be provided.

If the United States and China are unable to reach agreement within the consultation period, then the President will be required to decide what action, if any, to take within 25 days after the end of consultations. Any relief proclaimed would become effective in 15 days.

The entire period from petition (or request/motion) to proclamation of relief would be 150 days.

The proposal will make clear the standards for application of Presidential discretion in providing relief to injured industries and workers. If the ITC makes an affirmative determination on market disruption, there will be a presumption in favor of providing relief. That presumption can be overcome only if the President finds that providing relief would have an adverse impact on the United States economy substantially out of proportion to the benefits of such action, or that such action would cause serious harm to the national security of the United States.

The proposal also will authorize the President to provide a provisional safeguard in cases where "delay would cause damage which it would be difficult to repair," as permitted under the U.S.- China Agreement. If such circumstances are alleged, the ITC would be required to make a preliminary determination on market disruption and critical circumstances on an abbreviated schedule. After receiving an affirmative preliminary ITC determination, the President would be required to determine whether to provide such relief on a similarly abbreviated schedule.

Finally, the proposal will implement a provision in the U.S.-China Agreement concerning trade diversion. That provision addresses circumstances in which a safeguard applied by a third country with respect to Chinese goods "causes or threatens to cause significant diversions of trade" into the United States.

Under the proposal, if another WTO Member requests consultations with China under the product-specific safeguard, the U.S. Customs Service would begin monitoring imports of subject products into the United States. If, on the basis of this monitoring or other credible evidence, it is determined that an action by another WTO Member threatens or causes significant trade diversion, the USTR will request consultations with China and/or the Member imposing the safeguard. If, as provided in the Agreement, consultations fail to lead to an agreement to address the trade diversion within 60 days, the USTR will publish notice of proposed action and provide an opportunity for the public to provide evidence and views on the proposed action. After receiving such views, the President shall determine, within 20 days, what action, if any, to take to prevent or remedy the trade diversion.

III. Continuing Oversight of China's Compliance With WTO Obligations

A. Annual Report on China's Compliance With WTO Obligations

Proposal: This provision will require the U.S. Trade Representative to issue an annual report on China's compliance with WTO obligations. The report will cover compliance by the People's Republic of China with commitments made in connection with its accession to the World Trade Organization, including both multilateral commitments and any bilateral commitments made to the United States.

The report's contents will be more comprehensive than the China section in USTR's National Trade Estimate Report on Foreign Trade Barriers. The report will be a complete analysis of Chinese compliance with the implementation of obligations. By highlighting where China is meeting obligations and where it is falling short, the report will be a guide to where and how to commit enforcement resources.

B. Annual WTO Review of China's Compliance With WTO Obligations

Proposal: In negotiating China's Protocol of Accession, the Administration will press for a mechanism for reviewing China's compliance with WTO obligations on an annual basis.

Given the early stages of development of a free market and rule of law in China, it is necessary that China be given special scrutiny within the WTO. Paired with the annual report by the USTR (described in the immediately preceding section), there will be two mechanisms to ensure strong oversight of China's trade record.

IV. Task Force on Prohibition of Importation of Products of Forced or Prison Labor

Proposal: The import of goods made by forced or prison labor into the United States is prohibited by U.S. law (section 307 of the Tariff Act of 1930), consistent with the GATT 1994. Article XX of the GATT allows countries to take action without retaliation to prohibit import of goods made by prison labor. The proposed provision will instruct the President to establish an interagency task force, chaired by the Secretary of the Treasury or his designee, to monitor and promote effective enforcement of this prohibition, including compliance by Chinese and other foreign exporters. The task force will include officers and employees from the Departments of Treasury, Commerce, Labor, and other agencies. The task force will coordinate closely with the U.S. Customs Service to promote maximum effectiveness of Customs enforcement of Section 307 of the Tariff Act of 1930 in the following specific areas:

1) investigations of allegations of forced or prison labor imports;

2) working with the Chinese government and other foreign governments to arrange visit to suspected prison labor facilities;

3) providing technical assistance to China and other foreign governments to ensure that forced or prison labor goods are not imported into the U.S.;

4) monitoring U.S. ports for forced or prison labor goods; and 5) engaging in any other activities necessary to stringently enforce section 307 of the Tariff Act of 1930.

The task force will strengthen the ability of the U.S. Government to stop imports of goods made by forced or prison labor. The members of the task force will work with the Chinese Government and other foreign governments to ensure that this prohibition is strictly enforced.

V. Monitoring and Enforcement of China's Compliance With Trade Agreements

Proposal: This provision calls for additional resources to be allocated to the Departments of Commerce, Agriculture, and State, and to the Office of the U.S. Trade Representative to strengthen the ability of the United States to monitor and enforce Chinese compliance with trade agreements. The provision will include resources to promote the following activities, among others:

1) staffing to monitor China's compliance with the WTO Agreements;

2) defend U.S. safeguard, antidumping, and countervailing duty measures and U.S. policy to maintain strong trade remedies;

3) enforce U.S. trade laws, including import monitoring, subsidy enforcement, and prompt antidumping and countervailing duty investigations under Title VII of the Tariff Act of 1930;

4) create a Trade Law Technical Assistance Center to assist small and medium sized businesses, workers, and unions with preparation of petitions seeking remedies for alleged violations of trade laws;

5) create an Overseas Compliance Program, that will monitor compliance with international trade obligations by foreign governments;

6) commit additional funds to investigate, prosecute and defend cases before the WTO and NAFTA tribunals;

7) commit funds and resources to analyze the impact of trade on the economy of the United States;

8) increase legal and technical expertise in areas covered by trade agreements and U.S. trade law, including food safety and biotechnology.

The wide-ranging provisions will substantially increase the ability of the U.S. Government to monitor and enforce Chinese obligations in international trade agreements. In addition to calling for funds for enforcement, the framework calls for legal and technical assistance for companies and workers pursuing antidumping and countervailing remedies.

VI. Technical Assistance to Develop Rule of Law in Commercial and Labor Markets in China

Proposal: This proposal calls for the allocation of resources to the Departments of Commerce, State, and Labor to provide training and technical assistance in China for purposes of developing the rule of law with respect to commercial and labor market standards. The Departments will establish programs to assist China in bringing its laws into compliance with international requirements, including WTO rules and ILO conventions, and in developing processes to enforce the rule of law.

Program staff will attempt to develop programs with legislators, administrators, judges, lawyers, businesses, and workers in China to: help to draft laws and regulations; conduct seminars and workshops on effective administration and enforcement; support the establishment of law journals and other publications to promote discussion of legal issues; and facilitate educational and worker exchanges between the United States and China. Program staff will coordinate their efforts with international organizations, such as the ILO, WTO, and international financial institutions, and non-governmental organizations pursuing similar objectives.

VII. Accession of Taiwan to WTO

Proposal: This provision will express the sense of the Congress that the WTO General Council should approve both the PRC's accession and Taiwan's accession at the same General Council session.

For further information, please contact Hilarie Chambers (Levin) at 225-4961or Dan Maffei (Ways and Means) at 225-3526 or Carol Lawrence (Bereuter) at 225-4806.