TITLE IV. TRADE RELATIONS WITH COUNTRIES WHOSE PRODUCTS ARE NOT CURRENTLY RECEIVING MOST-FAVORED-NATION (NONDISCRIMINATORY) TREATMENT IN THE U.S. MARKET

Title IV of the Act authorizes the President to extend, under certain circumstances, most-favored-nation (nondiscriminatory) trade concessions to countries whose products do not currently receive such treatment. The only countries not receiving nondiscriminatory treatment in the U.S. market are the communist nations with the exception of Poland and Yugoslavia, whose products do receive such treatment). Under Section 231 (a) of the Trade Expansion Act of 1962, the President is precluded from extending nondiscriminatory or column 1 treatment to countries not currently receiving such treatment.

Title IV imposes several conditions on the delegation of authority to the President to extend nondiscriminatory treatment. Section 402 provides that no country would be eligible to receive nondiscriminatory tariff treatment or U.S. Government credits, credit guarantees or investment guarantees if the President determines such country: (1) denies its citizens the right or opportunity to emigrate; (2) imposes more than a nominal tax on emigration or on the visas on other documents required for emigration, for any purpose or cause whatsover; 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.

A country would become eligible for nondiscriminatory treatment under this title only after the President determined that it was not violating any of the above conditions and so reported his determination to the Congress. Any country which was found to be denying its citizens the right to emigrate would also be prohibited from receiving any U.S. Government credits, credit guarantees, or investment guarantees, and from entering into a bilateral trade agreement under section 403. Following receipt of the initial report by the President to the Congress under section 402, either House can veto the extension of Government credits and guarantees to the country concerned by a majority vote within 90 days.

Under the Act, only countries entering into bilateral agreements with the United States could receive nondiscriminatory treatment. Nondiscriminatory treatment would remain in effect only so long as a trade agreement remained in force between the United States and the country concerned. The President, however, has the authority to suspend or withdraw nondiscriminatory treatment to any country at any time.

Under section 403, nondiscriminatory treatment for any country which has entered into an agreement with the United States for the settlement of lend-lease debts would be limited to periods in which the country was not in arrears on its obligations under the agreement. (The Soviet-American lend-lease settlement agreement, on the other hand, conditions the Soviet Union's fourth and all subsequent

lend-lease payments upon the extension of nondiscriminatory treatment by the United States.)

All future bilateral agreements entered into between the United States and a nonmarket economy nation are subject to approval by both Houses of Congress before the President could proclaim trade concessions. The one-House veto provision would apply to the extension of nondiscriminatory treatment under the U.S.-Soviet commercial agreement. Furthermore, following receipt of the annual December report of the President under sections 402 and 403, either House can, within 90 days, veto the continued extension of MFN treatment or granting of government credits or guarantees to any country receiving nondiscriminatory treatment under Title IV. Trade benefits under any bilateral agreement would be limited to an initial period not exceeding three years. Thereafter, an agreement could be renewed for additional periods, each of not more than three years, providing that a satisfactory balance of concessions in trade and services had been maintained and that U.S. reductions in trade barriers had been reciprocated by the other party. Services include transportation and insurance and other commercial services associated with international trade.

Bilateral agreements are required to include provisions for: (1) suspension or termination for reasons of national security, (2) safeguards against disruption of domestic markets, (3) protection of patents if the other party is not a member of the Paris Convention for the Protection of Industrial Property, (4) settlement of commercial disputes, and (5) consultations for reviewing the operation of the agreement and relevant aspects of relations between the United States and the other party. Bilateral agreements must also include arrangements for the protection of industrial rights such as copyrights, promotion of trade, and other commercial arrangements promoting the purposes of the Act.

Freedom of Emigration Waiver.-The Act contains a provision allowing the President to waive the freedom-of-emigration requirement for any country, if he reports to Congress that (1) he has determined that such a waiver would promote the objectives of freer emigration, and (2) he has received assurances that the emigration practices of such country will lead substantially to free emigration. The waiver authority extends for an 18-month period after the date of enactment of the Act, and may be renewed for one year periods thereafter subject to congressional review. The President may terminate nondiscriminatory treatment at any time.

Market disruption.-The Act contains significant improvements in the provisions to avert disruption of U.S. markets by imports from nonmarket economies:

1. Safeguard provisions in commercial agreements.-Under the Act, consultation procedures and rules would be written into all commercial agreements with nonmarket countries similar to Article 3 and Annex I of the U.S.-U.S.S.R. Trade Agreement.

2. Petition for consultation.-The Act would permit trade associations, firms, and unions to petition the President to initiate

consultation procedures between the U.S. and the particular nonmarket economy upon a showing of likelihood of market disruption as a result of imports entering under a commercial agreement negotiated pursuant to Title IV.

3. Relief from market disruption.-The Act provides that market disruption may be found to exist upon a determination by the International Trade (Tariff) Commission that imports of an article like or directly competitive with an article produced in a domestic industry from any communist country are increasing rapidly so as to be a significant cause of material injury, or the threat thereof, to the domestic industry. The Commission would have three months to conclude its investigation under section 406. These provisions apply to all communist countries.

4. Expedited relief.-The Act authorizes the President to take immediate action whenever he determines that a condition exists requiring emergency treatment. This "fast track" authority would apply to both the consultative procedures and the market disruption relief provisions in section 406.

5. Selective application.-The Act limits the President's authority to impose import restrictions only to the products from nonmarket countries which are causing the market disruption. Claims Settlement with Czechoslovakia.-Under the Act, the President is directed to renegotiate the agreement with Czechoslovakia on the settlement of U.S. claims. There must be a full and fair settlement before most-favored-nation treatment will be granted. Czechoslovakian gold held by the United States will remain in the United States until a settlement is negotiated and submitted to Congress as part of any bilateral commercial agreement with Czechoslovakia. Both must be approved by both Houses of Congress before nondiscriminatory treatment and credits may be extended.

Emigration to Join a Close Relative.-The Act contains a provision refusing government credits, and MFN treatment to a nonmarket country which refuses to permit its citizens to emigrate to visit a close relative. The provision would not apply to Poland and Yugoslavia and would be subject to the waiver.

Cooperation in locating MIA's in Southeast Asia.-Title IV of the Act includes a provision which directs the President to deny the extension of MFN treatment and government credits to nonmarket economies upon his determination that such countries have not undertaken to obtain the cooperation of the pertinent governments in Southeast Asia in locating U.S. personnel missing in action, in repatriating those who are alive, and recovering the remains of those who are dead.

East-West Foreign Trade Board.-The Act directs the President to establish an East-West Foreign Trade Board within the Executive branch to monitor trade, credits and technology transfers between the United States and nonmarket economy countries.

The Board would review significant transactions involving (1) the transfer of U.S. Government credits, guarantees or insurance; (2) sizable trade contracts; and (3) transfer of sensitive-technology, to determine whether such transactions are in the U.S. national

interest. The Board would report on a quarterly basis to the Congress on East-West trade developments.

TITLE V. GENERALIZED SYSTEM OF PREFERENCES

General Authority.-Title V of the Act authorizes the President to extend duty-free treatment to certain eligible products imported into the United States from beneficiary developing countries for a 10-year period. The essential features of the program are as follows: -The President is authorized to extend duty free treatment to specified products imported from developing countries;

-The President designates beneficiary developing countries; 26 countries are expressly excluded;

-Eligible articles must be imported directly from the developing country; the value added in that country must be at least a minimum percentage (35%) of the value of the article, except in those cases where the country is a member of a free trade association in which case the local content from two or more associated countries must be 50%;

-Articles subject to import relief or national security relief actions are excluded;

-Articles imported from any one country are excluded if the imports of the article from that country exceed $25 million or 50% of total U.S. imports of that article, with certain limited exceptions; -The system will be reviewed in a report to Congress after five years and will expire after ten years.

In addition, the Act includes the following provisions:

1. Beneficiary developing countries.-The Act excludes countries within the following categories from eligibility to receive generalized preference under Title V:

a. All Communist countries, except those which receive MFN treatment, which are members of the GATT and the IMF, and which are not dominated by international communism.

b. Any country which is a member of OPEC or has entered into any other cartel-type arrangement, and acts to withhold supplies of vital materials or to charge a monopolistic price which creates serious disequilibrium in the world economy. Countries which are members of such cartels or OPEC and which act to withhold supplies or charge unreasonable prices may only qualify for preferential treatment in the U.S. market only if they entered into an agreement with the United States or an agreement to which the United States is a party, which assures U.S. access to essential articles at reasonable prices.

c. Any country which has expropriated the property of a U.S. national without provision for prompt, adequate, and effective compensation or without submitting the dispute to arbitration or carrying on good-faith negotiations.

d. Any country which has not taken adequate steps to cooperate with the United States to prevent narcotics and other controlled substances from unlawfully entering the United States.

e. Countries which do not eliminate reverse preferences by January 1, 1976, or do not take steps to assure that such preferences do not have a significant adverse effect on U.S. commerce by January 1, 1976.

f. Countries which do not recognize arbitral awards to U.S. citizens issued by arbitral bodies to which the parties have submitted their dispute.

In the case of items d., e. and f., the President may make an exception for particular countries when he deems it to be in the national economic interest and reports such determination to Congress.

2. Insular possessions.-The Act stipulates that insular possessions of the United States must receive treatment no less favorable than that accorded any other developing country with respect to any eligible product under Title V.

3. Sensitive products.-The Act specifies certain sensitive articles, which will be excluded from preference eligibility under Title V. The President may exclude additional products as he deems to be sensitive after receiving the Commission's report following the renegotiation procedures and Commission investigation provided for in Title I.

4. Access to markets and commodity resources.-The Act requires the President to take into account the extent to which a developing country is providing the United States equitable and reasonable access to its markets and basic commodity resources in determining whether to designate such country as eligible to receive preferences under Title V.

5. Termination of preferential treatment. Under the Act, notification to the Congress of a Presidential decision to terminate preferential treatment for a developing country must be made 60 days prior to the time the determination takes effect. Furthermore, the Act requires that the country involved also be notified within 60 days prior to the effective date of the termination of its preferential treatment.

6. Local content (value added) requirement.—Under the Act, a developing country exporting a product to the United States must provide 35 percent of the value of the product upon importation into the United States in order to be eligible for duty-free treatment. Less developed countries which are members of a free trade area or customs union and designated by the President may be aggregated in applying the local content requirement under Title V. Such countries may also be aggregated for purposes of the competitive need formula. However, in any case where more than one developing country has contributed to the value of a product, a flat local content requirement of 50 percent is applied.

7. Increases in gross national product.-Under the Act, any product which is imported into the United States from any developing country in an amount equal to more than $25 million in value in any one calendar year loses its eligibility for duty-free treatment under Title V. The Act includes an escalator provision which provides for an annual percentage increase in the $25 million figure equal to the percentage increase in the U.S. gross national product for the year preceding the year in question over the U.S. gross national product in 1974.