House Report 108-225 - UNITED STATES-SINGAPORE FREE TRADE AGREEMENT IMPLEMENTATION ACT

[House Report 108-225]
[From the U.S. Government Publishing Office]

108th Congress Rept. 108-225
HOUSE OF REPRESENTATIVES
1st Session Part 1

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UNITED STATES-SINGAPORE FREE TRADE AGREEMENT IMPLEMENTATION ACT

_______

June 21, 2003.--Ordered to be printed

_______

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

R E P O R T

together with

DISSENTING AND ADDITIONAL VIEWS

[To accompany H.R. 2739]

[Including cost estimates of the Congressional Budget Office]

The Committee on Ways and Means, to whom was referred the
bill (H.R. 2739) to implement the United States-Singapore Free
Trade Agreement, having considered the same, report favorably
thereon without amendment and recommend that the bill do pass.

CONTENTS

Page
I. Introduction.....................................................2
A. Purpose and Summary................................. 2
B. Background.......................................... 2
C. Legislative History................................. 3
II. Section-by-Section Summary.......................................4
A. Title I: Approval and General Provisions............ 4
B. Title II: Customs Provisions........................ 7
C. Title III: Relief from Imports...................... 10
III. Vote of the Committee...........................................13
IV. Budget Effects of the Bill......................................14
A. Committee Estimates and Budgetary Effects........... 14
B. Budget Authority and Tax Expenditures............... 14
C. Cost Estimate Prepared by the Congressional Budget
Office............................................. 14
V. Other Matters to be Discussed Under the Rules of the House......17
A. Committee Oversight Findings and Recommendations.... 17
B. Statement of General Performance Goals and
Objectives......................................... 17
C. Constitutional Authority Statement.................. 17
VI. Changes in Existing Law Made by the Bill, as Reported...........17
VII. Executive Correspondence........................................20
VIII.Views...........................................................22

I. INTRODUCTION

A. Purpose and Summary

H.R. 2739 would implement the May 6, 2003 Agreement
establishing a free trade area between the United States and
Singapore.

B. Background

The United States-Singapore Free Trade Agreement (FTA),
signed May 6, 2003, is one of the first trade agreements,
together with the United States-Chile FTA, to be considered by
the Congress under the ``fast-track'' procedures outlined in
the Bipartisan Trade Promotion Authority Act (TPA), which was
approved by the 107th Congress and signed into law in August
2002 as part of the Trade Act of 2002 (P.L. 107-210).
Negotiations for a U.S.-Singapore FTA were launched in
December 2000. The final round of negotiations was held in
November 2002, and the formal Agreement was concluded on
January 15, 2003. Pursuant to requirements established under
TPA, President Bush formally notified the Congress on January
30, 2003, of his intention to sign the Agreement. On May 6,
2003, President Bush and Singaporean Prime Minister Goh Chok
Tong signed the FTA during a visit to Washington, D.C. by Prime
Minister Goh. The U.S.-Singapore FTA is the first U.S. FTA with
an Asian nation. The Agreement establishes standards for trade
that mirror U.S. law and sets a precedent for future
agreements. The U.S.-Singapore FTA will serve as the foundation
for other possible FTAs in Southeast Asia. It will also enhance
and strengthen the strong U.S.- Singapore trade relationship.
Currently, Singapore is the 11th largest trading partner of the
United States, with two-way trade approaching $40 billion in
2002. Singapore is the United States' largest trading partner
in Southeast Asia.
The Committee believes that the Agreement meets the
objectives and priorities set forth in the Trade Act of 2002.
Specifically, when the Agreement enters into force, most
tariffs will be eliminated immediately, with the remaining
tariffs phased-out over a three- to ten-year period. As most
trade in goods with Singapore is already tariff-free, the FTA
focuses on removing restrictions in trade in services, an
important sector in the United States, accounting for around 80
percent of U.S. gross domestic product. The Agreement, through
use of a ``negative list'' approach, benefits U.S. service
providers by offering new opportunities for these service
providers in the form of barrier-free market access, a
transparent regulatory environment, and non-discriminatory
treatment across many service sectors. Services firms will not
only enjoy equal treatment in cross-border supply of services
but will gain the right to invest and establish a local
services presence.
Additionally, by binding all of its tariffs at zero,
Singapore will open its markets to American agricultural
products and create new opportunities for American farmers to
sell their produce to a nation whose small size prevents it
from being able to grow enough food for consumption by its
citizens. Trade in agricultural products represents a net trade
surplus for the United States. In 2002, American farmers
exported around $259 million worth of food products to
Singapore.
The U.S.-Singapore FTA will create a secure and predictable
legal framework for U.S. investors operating in Singapore; they
will be treated fairly and equitably and will have access to
meaningful dispute settlement. These protections cover key
sectors such as agriculture, manufacturing, and services. In
addition, the Agreement makes improvements to the NAFTA
investor-state dispute settlement (``Chapter 11'') model called
for in TPA by providing more transparency, public input into
dispute settlement, mechanisms to improve the investor-state
process by eliminating frivolous claims, and a place marker for
a future appellate body or similar review mechanisms. The
Financial Services chapter provides strong protections for
existing and future U.S. investors and investments in
Singapore. The Agreement also contains obligations under which
each government commits to enforce its domestic labor and
environmental laws.
The Agreement additionally contains state of the art
protection for U.S. intellectual property, which is
increasingly vital in the digital age. The FTA includes
specific commitments regarding the conduct of Singapore's
government enterprises; reinforced commitments to strong and
transparent disciplines on government procurement procedures;
strong, simple, and transparent rules of origin; commitments to
combat illegal transshipments of traded goods and to prevent
circumvention of disciplines pertaining to trade in textiles
and apparel; and requirements to ensure effective enforcement
of domestic labor and environmental laws.
As noted above, this legislation is being considered under
the Bipartisan Trade Promotion Authority Act of 2002. Under
TPA, new trade pacts that the President negotiates in close
consultation with Congress can be approved and implemented
through legislation that Congress considers using streamlined
procedures. Pursuant to TPA procedures, the President is
required to provide written notice to Congress of the
President's intention to enter into the negotiations.
Throughout the negotiating process, and prior to entering into
an Agreement, the President is required to consult with
Congress regarding the ongoing negotiations.
The President must notify the Congress of his intent to
enter into a trade Agreement at least 90 calendar days before
the Agreement is signed. Within 60 days after entering in the
Agreement, the President must submit to the Congress a
description of those changes to existing laws that the
President considers would be required in order to bring the
United States into compliance with the Agreement. After
entering into the Agreement, the President must also submit to
the Congress the formal legal text of the Agreement, draft
implementing legislation, a statement of administrative action
proposed to implement the trade Agreement, and other related
supporting information as required under section 2105(a) of
TPA. Following submission of these documents, theimplementing
bill is introduced, by request, by the Majority Leader in each chamber.
The House then has up to 60 days to consider the bill (the Senate has
up to an additional 30 days). No amendments to the legislation are
allowed under TPA requirements.

C. Legislative History

On November 16, 2000, the President provided notification
to Congress of his intent to negotiate an FTA with Singapore.
The President provided formal notification to Congress of the
negotiations with Singapore as required under TPA (which was
enacted subsequent to the start of the U.S.-Singapore FTA
negotiations) on August 22, 2002. During and after the
negotiations, the President continued his consultations with
Congress pursuant to the letter and spirit of the TPA
requirements.
Following the May 6, 2003 signing of the U.S.-Singapore
FTA, in accordance with TPA requirements, President Bush
submitted to Congress on July 3, 2003 a description of the
changes to existing U.S. laws that would be required to bring
the United States into compliance with the Agreement.
On June 10, 2003, the Subcommittee on Trade of the
Committee on Ways and Means held a hearing on the United
States-Chile and United States-Singapore FTAs. The Subcommittee
received testimony supporting these Agreements from the
Administration and Members of Congress. The Subcommittee also
heard testimony from numerous U.S. private sector companies and
organizations.
On July 10, 2003, the Committee on Ways and Means
considered in an informal markup session draft proposals of the
implementing legislation for the Singapore and Chile FTAs
concerning matters within the jurisdiction of the Committee.
On July 15, 2003, President Bush formally transmitted to
Congress the formal legal text of the U.S.-Singapore FTA, draft
implementing legislation, a statement of administrative action
proposed to implement the trade Agreement, and other related
supporting information as required under section 2105(a) of
TPA. Following this transmittal, on July 15, 2003, Majority
Leader DeLay and Congressman Rangel introduced, by request,
H.R. 2739 to implement the U.S.-Singapore FTA. The bill was
referred to the Committee on Ways and Means and the Committee
on the Judiciary.
On July 17, 2003, the Committee on Ways and Means formally
met to consider H.R. 2739. The Committee ordered H.R. 2739
favorably reported to the House of Representatives by a roll
call vote of 32-5. Under the requirements of TPA, amendments
were not permitted.

II. SECTION-BY-SECTION SUMMARY

TITLE I: APPROVAL AND GENERAL PROVISIONS

Section 101: Approval and entry into force

Current law
No provision.
Explanation of provision
Section 101 states that Congress approves the U.S.-
Singapore Free Trade Agreement and the Statement of
Administrative Action and provides that the Agreement enters
into force when the President determines that Singapore is in
compliance with its Agreement obligations and has exchanged
notes with the United States. Section 101 provides that the
date of entry into forced will be no sooner than January 1,
2004.
Reason for change
Approval of the Agreement and the Statement of
Administrative Action is required under the procedures of
section 2103(b)(3) of the Bipartisan Trade Promotion Authority
Act of 2002. The remainder of section 101 provides for entry
into force.

Section 102: Relationship of the Agreement to U.S. and state law

Current law
No provision.
Explanation of provision
Section 102 provides that U.S. law is to prevail in a
conflict between the Agreement and such law. It also states
that the Agreement does not preempt state law that may conflict
with the Agreement. Only the United States is entitled to bring
a court action to resolve a conflict between a state law and
the Agreement.
Reason for change
Section 102 is necessary to make clear the relationship
between the Agreement and federal and state law, respectively.

Section 103: Consultation and layover for proclaimed actions

Current law
No provision.
Explanation of provision
Section 103 provides that where the President is given
proclamation authority subject to consultation and layover, he
may proclaim action only after he has: obtained advice from the
International Trade Commission and the appropriate private
sector advisory committees; submitted a report to the House
Ways & Means and Senate Finance Committees concerning the
reasons for the action; and consulted with the Committees. The
President may proclaim the proposed action after 60 days have
elapsed.
Reason for change
The bill gives the President certain proclamation authority
but requires extensive consultation with Congress before that
authority may be exercised. The Committee believes that such
consultation is an essential component of the delegation of
authority to the President and expects that such consultations
will be conducted in a thorough manner.

Section 104: Implementing actions in anticipation of entry into force
and initial regulations

Current law
No provision.
Explanation of provision
Section 104(a) provides that after the date of enactment,
the President may proclaim actions and agencies may issue
regulations as necessary to ensure that any provision of this
Act that takes effect on the date that the Agreement enters
into force is appropriately implemented, but not before the
effective date.
Section 104(b) establishes that regulations necessary or
appropriate to carrying out the actions proposed in the
Statement of Administrative Action shall, to the maximum extent
feasible, be issued within one year of entry into force of the
Agreement or the effective date of the provision, as the case
may be.
Reason for change
Section 104 provides for the issuance of regulations. The
Committee strongly believes that regulations should be issued
in a timely manner in order to provide maximum clarity to
parties claiming benefits under the Agreement. As noted in the
Statement of Administrative Action, a regulation-issuing agency
will provide a report to Congress not later than thirty days
before one year elapses on any regulation that is going to be
issued later than one year.

Section 105: Administration of dispute settlement proceedings

Current law
No provision.
Explanation of provision
Section 105 authorizes the President to establish an office
within the Commerce Department responsible for providing
administrative assistance to any state-to-state dispute
settlement panels that may be established under the Agreement
and authorizes appropriations for the office and for payment of
the U.S. share of expenses.
Reason for change
The Committee believes that the Commerce Department is the
appropriate agency to provide administrative assistance to
panels.

Section 106: Arbitration of claims

Current law
No provision.
Explanation of provision
Section 106 authorizes the United States to resolve certain
claims covered by the investor-state dispute settlement
procedures set forth in the Agreement and specifies that all
U.S. government contracts are to contain a choice of law
provision for resolving any breach of contract claim.
Reason for change
This provision is necessary to meet U.S. obligations under
Article 15.21 of the Agreement.

Section 107: Effective dates; effect of termination

Current law
No provision.
Explanation of provision
The effective date of this Act is the date of entry into
force of the Agreement. However, sections 1-3 and Title I take
effect upon enactment, and section 205 takes effect on the date
in which the textile and apparel provisions of the Agreement
take effect. The Act shall cease to be effective on the date on
which the Agreement ceases to be in effect.
Reason for change
Section 107 implements U.S. obligations under the
Agreement.

TITLE II: CUSTOMS PROVISIONS

Section 201: Tariff modifications

Current law
No provision.
Explanation of provision
Section 201(a) provides the President with the authority to
proclaim tariff modifications to carry out the Agreement.
Section 201(b) gives the President the authority, subject
to consultation and layover procedures, to proclaim further
tariff modifications as the President determines to be
necessary or appropriate to maintain the general level of
reciprocal and mutually advantageous concessions with respect
to Singapore provided for by the Agreement.
Reason for change
Section 201(a) is necessary to put the United States in
compliance with the market access provisions of the Agreement.
Section 201(b) gives the President flexibility to maintain the
trade liberalizing nature of the Agreement. The Committee
expects the President to comply with the letter and spirit of
the consultation and layover provisions of this Act in carrying
out this subsection.

Section 202: Rules of origin

Current law
No provision.
Explanation of provision
Section 202 codifies the rules of origin set out in Chapter
3 of the Agreement. Under the general rules, there are three
basic ways for a good of Singapore to qualify as an
``originating good,'' and therefore be eligible for
preferential tariff treatment when it is imported into the
United States. A good is an originating good if: (1) it is
``wholly obtained or produced entirely in the territory of
Singapore, the United States or both''; (2) those materials
used to produce the good that are not themselves originating
goods are transformed in such a way as to cause their tariff
classification to change or meet other requirements, as
specified in Annex 3A of the Agreement; or (3) it is a good
listed in Annex 3B of the Agreement and thus considered to be
an ``originating good'' if the good itself is imported into the
territory of the United States from the territory of Singapore.
Annex 3A of the Agreement sets forth product-specific rules
of origin for a wide variety of products. Under Annex 3A rules,
an apparel product must generally meet a tariff shift rule that
implicitly imposes a ``yarn forward'' requirement. Thus, to
qualify as an originating good imported into the United States
from Singapore, an apparel product must have been cut (or knit
to shape) and sewn or otherwise assembled in Singapore from
yarn, or fabric made from yarn, that originates in Singapore or
the United States. There is a limited amount of apparel that
may enter the United States duty free, subject to tariff
preference level (TPL) caps if it does not meet the rule of
origin.
The goods listed in Annex 3B (also called Integrated
Sourcing Initiative or ISI products) are predominantly
information technology goods for which the current United
States Normal Trade Relations or Most Favored Nation duty rate
is zero. In general, imports of these goods into the United
States would receive duty-free treatment regardless of origin.
The bill makes clear that the Annex 3B good ``itself, as
imported,'' is deemed to be an originating good. This means
that an Annex 3B good produced outside of Singapore is
originating only when transshipped through Singapore, not when
the good is incorporated as a component into another product,
unless the Annex 3B good is first shipped from the third
country to Singapore and then to the United States and back to
Singapore. Thus, for purposes of determining origin by way of a
transformation using the regional value content formula in
section 202(d) of the bill, an Annex 3B good would not be
``originating'' for purposes of the regional value content
calculation unless it was shipped from the United States to
Singapore, where it was then incorporated into the final
product.
The remainder of section 202 of the implementing bill sets
forth more detailed rules for determining whether a good meets
the Agreement's requirements under the second method for
qualifying as an originating good. These provisions include
rules pertaining to de minimis quantities of non-originating
materials that do not undergo a tariff transformation and the
alternative methods for calculating regional value content.
Other provisions in section 202 address valuation of materials
and determination of the originating or non-originating status
of fungible goods and materials.
Reason for change
Rules of origin are needed in order to confine Agreement
benefits, such as tariffcuts, to Singapore goods to prevent
third-country goods from being transshipped through Singapore and
claiming benefits from the United States. Section 202 puts the United
States into compliance with the rules of origin provisions of the
Agreement.
The Committee believes that the ISI provisions are
sufficiently restrictive that they will not disrupt trade. The
Committee will ask the International Trade Commission to
monitor whether trade in any regional value content good which
could contain an ISI component surges after the Agreement goes
into effect. If such a surge is detected the Commission will
examine whether the increase is due to reliance on ISI
provisions allowing third country ISI components in RVC goods
to be considered originating under the Agreement because they
were first shipped to the United States and then to Singapore
and then for final assembly.
In addition, the committee expects the President to carry
out faithfully the obligations specified in article 3.18 of the
Agreement by applying any affirmative short supply
determination in effect on November15, 2002 under another U.S.
free trade agreement or trade preference program.

Section 203: Customs user fees

Current law
Section 58c of Title 19 lays out various user fees applied
by customs officials to imports, including the Merchandise
Processing Fee, which is applied on an ad valorem basis with a
cap.
Explanation of provision
Section 203 of the bill implements U.S. commitments under
Article 2.8 of the Agreement, regarding the exemption from the
merchandise processing fee for originating goods. This
provision is similar to the one from the implementing
legislation for the North American Free Trade Agreement. The
provision also prohibits use of funds in the Customs User Fee
Account to provide services related to entry of originating
goods in accordance with U.S. obligations under the General
Agreement on Tariffs and Trade 1994.
Reason for change
As with other free trade agreements, the Agreement
eliminates the customs merchandise processing fee on qualifying
goods from Singapore. Other customs user fees remain in place.
Section 203 is necessary to put the United States in compliance
with the user fee elimination provisions of the Agreement. The
Committee expects that the President, in his yearly budget
request, will take into account the need for funds to pay
expenses for entries under the Agreement given that MPF funds
will not be available.

Section 204: Disclosure of incorrect information

Current law
No provision.
Explanation of provision
Section 204 of the bill implements Article 3.14.4(a) of the
Agreement. The provision prohibits the imposition of a penalty
upon an importer who makes an invalid claim for preferential
tariff treatment under the Agreement if the importer acts
promptly and voluntarily to disclose the error. The Secretary
of the Treasury may prescribe regulations that allow one year
or more as a time period for such voluntary disclosures.
Reason for change
Section 204 is necessary to put the United States into
compliance with Article 3.14.4(a) of the Agreement.

Section 205: Enforcement relating to trade in textile and apparel goods

Current law
No provision.
Explanation of provision
Section 205 of the bill implements the textile and apparel
good anti-circumvention enforcement provisions of the
Agreement. In accordance with Articles 5.4.5, 5.5.5, and 5.8.2
of the Agreement, the provision allows the President to exclude
from entry textile and apparel goods from any enterprise that
does not permit site visits requested by U.S. officials or that
engages in intentional circumvention. The President may also
take further action against circumventing enterprises or
related enterprises, such as barring future entries of goods,
if consultations with Singapore authorities fail to address
problems of circumvention.
Reason for change
Avoiding textile transshipment remains a concern, and for
this reason special textile enforcement provisions were
included in the Agreement. Section 205 is necessary to
authorize these enforcement mechanisms for use by U.S.
authorities.

Section 206: Regulations

Current law
No provision.
Explanation of provision
Section 206 of the implementing bill provides that the
Secretary of the Treasury shall issue regulations to carry out
provisions of this bill related to rules of origin and customs
user fees.
Reason for change
Because the implementing bill involves lengthy and complex
implementation procedures by customs officials, section 206 is
necessary in order to authorize the Secretary of the Treasury
to carry out provisions of the implementing bill through
regulations.

TITLE III: RELIEF FROM IMPORTS

Subtitle A: Relief from imports benefiting from the Agreement (sections
311-316)

Current law

No provision.

Explanation of provision

Sections 311-316 authorize the President, after an
investigation and affirmative determination by the U.S.
International Trade Commission, to impose specified import
relief when, as a result of the reduction or elimination of a
duty under the Agreement, a Singaporean product is being
imported into the United States in such increased quantities
and under such conditions as to be a substantial cause of
serious injury or threat of serious injury to the domestic
industry. Section 311(a) permits the award of provisional
relief under certain circumstances.
Section 311(c) defines ``substantial cause'' in the same
manner as section 201 of the Trade Act of 1974.
Section 311(d) exempts from investigation under this
section Singaporean articles that have previously received
relief since entry into force of the Agreement under: the
bilateral safeguard provision; the textile and apparel
safeguard set out in Subtitle B of Title III of this Act; the
global safeguard provisions in section 201 of the Trade Act of
1974; article 6 of the WTO Agreement on Textiles and Clothing;
or Article 5 of the WTO Agreement on Agriculture.
Under section 312(c), if the ITC makes an affirmative
determination, it must find and recommend to the President the
amount of import relief that is necessary to remedy or prevent
serious injury and to facilitate the efforts of the domestic
industry to make a positive adjustment to import competition.
Under section 313(a), the President must provide import
relief to the extent that the President determines is necessary
to remedy or prevent the injury found by the ITC 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 relief will not provide
greater economic or social benefits than costs. Section 313(c)
sets forth the nature of the relief that the President may
provide as: a suspension of further tariff reductions for the
article; or an increase of tariffs to a level that does not
exceed the lesser of the existing most favored nation (MFN)/
normal trade relation (NTR) rate or the MFN/NTR rate in effect
when the Agreement entered into force. The provision further
states that if the President provides relief for greater than
one year, the relief must be subject to progressive
liberalization at regular intervals over the course of its
application.
Section 313(d) provides that the import relief that the
President is authorized to provide may not exceed two years.
However, the President may extend the relief under certain
circumstances, but the aggregate period of relief, including
extensions, may not exceed four years. According to section
313(e), the rate of duty at the end of the relief period is to
be the rate that would have been in effect on that date but for
such action.
Section 314 provides that no relief may be provided under
this subtitle after ten years from the Agreement's entry into
force unless Singapore consents.
Section 315 authorizes the President to provide
compensation to Singapore consistent with Article 7.4 of the
Agreement.

Reason for change

The Committee believes that it is important to have in
place a temporary, extraordinary mechanism if a U.S. industry
experiences injury by reason of increased import competition
from Singapore in the future, with the understanding that the
President is not required to provide relief if the relief will
not provide greater economic or social benefits than costs. The
Committee intends that administration of this safeguard be
consistent with U.S. obligations under Chapter 7 of the
Agreement.

Subtitle B: Textile and Apparel Safeguard (Sections 321-328)

Current law

No provision.

Explanation of provision

Section 321 provides that a request for safeguard relief
under this subtitle may be filed with the President by an
interested party. The President is to review the request and
determine whether to commence consideration of the request. If
the President determines to commence consideration of the
request, he is to publish a notice commencing consideration and
seeking comments. The notice is to include the request itself.
Section 322(a) of the Act provides for the President to
determine, pursuant to a request by an interested party,
whether, as a result of the reduction or elimination of a duty
provided under the Agreement, a Singaporean textile or apparel
article is being imported into the United States in such
increased quantities, in absolute terms or relative to the
domestic market for that article, and under such conditions
that imports of the article constitute a substantial cause of
serious damage or actual threat thereof, to a domestic industry
producing an article that is like, or directly competitive
with, the imported article. The section defines ``substantial
cause'' as well as ``serious damage,'' directing the President
to examine the effect of increased imports on the domestic
industry producing the article that is like, or directly
competitive with, the imported article.
Section 322(b) identifies the relief that the President may
provide as either a suspension of further duty reductions or an
increase in tariffs to the normal trade relations/most-favored-
nation duty rate for the article at the time relief is granted.
Section 323 of the bill provides that the initial period of
relief will be no longer than two years, although an extension
is permitted under certain circumstances as long as total
relief, including any extension, does not exceed four years.
Section 324 provides that relief may not be granted to an
article under the textile safeguard if relief has previously
been granted under subtitle A of this title. Under section 325,
the duty rate applicable to the article after the safeguard
expires is the rate that would have been in force on that date,
but for application of the safeguard.
Section 326 of the bill provides that the authority to
provide this safeguard relief expires ten years after the
textile and apparel provisions of the Agreement take effect.
Section 327 of the Act gives authority to the President to
provide compensation to Singapore if he orders relief. Section
328 provides for the treatment of business confidential
information.

Reason for change

The Committee intends that the provisions of Subtitle B be
administered in a manner that is in compliance with U.S.
obligations under article 5.9 of the Agreement. In particular,
the Committee expects that the President will implement a
transparent process that will serve as an example to our
trading partners.

Subtitle C: Cases Under Title II of the Trade Act of 1974 (Section 331)

Current law

The President has no authority under Title II of the Trade
Act of 1974 (``section 201'') to exclude Singapore articles
from the application of a safeguard remedy.

Explanation of provision

If, in any investigation initiated under Title II of the
Trade Act of 1974 (``section 201'' action), the International
Trade Commission makes an affirmative determination, the ITC
will also find and report to the President whether imports of
the article from Singapore are a substantial cause of serious
injury or threat thereof. In determining relief to be taken
under section 201, the President will determine whether imports
from Singapore are a substantial cause of the serious injury or
threat thereof found by the Commission and, if such
determination is negative, may exclude products from Singapore
from the safeguard relief provided.

Reason for change

This provision implements U.S. obligations under Article
7.5 of the Agreement.

III. VOTE OF THE COMMITTEE

In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the following statements are made
concerning the vote of the Committee on Ways and Means in its
consideration of the bill, H.R. 2739.

MOTION TO REPORT THE BILL

The bill, H.R. 2739, was ordered favorably reported by a
rollcall vote of 32 yeas to 5 nays (with a quorum being
present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
Representatives Yea Nay Present Representative Yea Nay Present
----------------------------------------------------------------------------------------------------------------
Mr. Thomas..................... X ........ ......... Mr. Rangel....... X ........
Mr. Crane...................... X ........ ......... Mr. Stark........ ........ X
Mr. Shaw....................... X ........ ......... Mr. Matsui....... X ........
Mrs. Johnson................... X ........ ......... Mr. Levin........ X ........
Mr. Houghton................... X ........ ......... Mr. Cardin....... X ........
Mr. Herger..................... X ........ ......... Mr. McDermott.... X ........
Mr. McCrery.................... X ........ ......... Mr. Kleczka...... ........ X
Mr. Camp....................... X ........ ......... Mr. Lewis (GA)... ........ X
Mr. Ramstad.................... X ........ ......... Mr. Neal......... X ........
Mr. Nussle..................... X ........ ......... Mr. McNulty...... ........ X
Mr. Johnson.................... X ........ ......... Mr. Jefferson.... ........ ........
Ms. Dunn....................... X ........ ......... Mr. Tanner....... X ........
Mr. Collins.................... X ........ ......... Mr. Becerra...... ........ ........
Mr. Portman.................... X ........ ......... Mr. Doggett...... ........
Mr. English.................... X ........ ......... Mr. Pomeroy...... X ........
Mr. Hayworth................... X ........ ......... Mr. Sandlin...... X ........
Mr. Weller..................... X ........ ......... Ms. Tubbs Jones.. ........ X
Mr. Hulshof.................... X ........ ......... ................. ........ ........
Mr. McInnis.................... X ........ ......... ................. ........ ........
Mr. Lewis (KY)................. X ........ ......... ................. ........ ........
Mr. Foley...................... X ........ ......... ................. ........ ........
Mr. Brady...................... ........ ........ ......... ................. ........ ........
Mr. Ryan....................... X ........ ......... ................. ........ ........
Mr. Cantor..................... X ........ ......... ................. ........ ........
----------------------------------------------------------------------------------------------------------------

IV. BUDGET EFFECTS OF THE BILL

A. Committee Estimate of Budgetary Effects

In compliance with clause 3(d)(2) of rule XIII of the Rules
of the House of Representatives, the following statement is
made concerning the effects on the budget of this bill, H.R.
3009 as reported: The Committee agrees with the estimate
prepared by CBO which is included below. In addition, the
legislation is governed by procedures of the Trade Agreements
Act of 2002.

B. Statement Regarding New Budget Authority and Tax Expenditures

In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee states that
enactment of H.R. 3009 would reduce customs duty receipts due
to lower tariffs imposed on goods from Singapore.

C. Cost Estimate Prepared by the Congressional Budget Office

In compliance with clause 3(c)(3) of rule XIII 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, July 21, 2003.
Hon. William ``Bill'' M. Thomas,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 2739, a bill to
implement the United States-Singapore 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.

H.R. 2739--A bill to implement the United States-Singapore Free Trade
Agreement

Summary: H.R. 2739 would approve the free trade agreement
(FTA) between the government of the United States and the
government of Singapore that was entered into on May 6, 2003.
It would provide for tariff reductions and other changes in law
related to implementation of the agreement, such as provisions
dealing with dispute settlement, rules of origin, and safeguard
measures for textile and apparel industries. The bill also
would allow the temporary entry of certain business persons
into the United States.
The Congressional Budget Office estimates that enacting the
bill would reduce revenues by $55 million in 2004, by $410
million over the 2004-2008 period, and by about $1 billion over
the 2004-2013, net of income and payroll tax offsets. The bill
would not have a significant effect on direct spending or
spending subject to appropriation. CBO has determined that H.R.
2739 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 H.R. 2739 is shown in the following table.

----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
--------------------------------------------
2004 2005 2006 2007 2008
----------------------------------------------------------------------------------------------------------------
CHANGES IN REVENUES \1\

Estimated Revenues................................................. -55 -80 -86 -92 -98
----------------------------------------------------------------------------------------------------------------
\1\ H.R. 2739 also would affect direct spending and discretionary spending, but the amounts of those changes
would be less than $500,000 a year.

Basis of estimate

Revenues
Under the United States-Singapore agreement, all tariffs on
U.S. imports from Singapore 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 to partial elimination over 10
years. According to the U.S. International Trade Commission,
the U.S. collected $88 million in customs duties in 2002 on
about $14.1 billion of imports from Singapore. Of the imports,
only $1.3 billion faced non-zero tariff rates. These dutiable
imports from Singapore consist mostly of certain electrical
machinery, knitted or crocheted apparel, mineral fuels and
oils, surgical and precision instruments, and certain nuclear
reactor components. Based on these data, CBO estimates that
phasing out tariff rates as outlined in the U.S.-Singapore
agreement would reduce revenues by $55 million in 2004, by $410
million over the 2004-2008 period, and by about $1 billion over
the 2004-2013 period, net of income and payroll tax offsets.
This estimate includes the effects of increased imports
from Singapore 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 Singapore 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 Singapore would
displace imports from other countries.
Based on current law, H.R. 2739 would not provide for the
assessment of civil monetary penalties on employers for
violations of the labor attestation process with respect to
certain workers from Singapore. However, if H.R. 2738, a bill
to implement the United States-Chile FTA, were to be enacted
prior to this bill, H.R. 2739 would allow the Secretary of
Labor to assess such penalties. CBO expects that any additional
revenues collected as a result would amount to less than
$500,000 in any year.
Direct spending
Title IV of H.R. 2739 would permit certain traders and
investors from Singapore, and their spouses and children, to
enter the United States as nonimmigrants. The Bureau of
Citizenship and Immigration Services (BCIS) would charge fees
of about $100 to provide nonimmigrant visas, so CBO estimates
that the agency could collect several million dollars annually
in offsetting receipts (a credit against direct spending). The
agency is authorized to spend such fees without further
appropriation, so the net impact on BCIS spending would not be
significant.
However, if H.R. 2738 (a bill to implement the United
States-Chile FTA) were to be enacted prior to this bill, title
IV would establish a new nonimmigrant category for certain
professional workers from Singapore. The legislation would
limit the number of annual entries under this category to
5,400, plus spouses and children. The BCIS would charge fees of
about $100 to provide nonimmigrant visas, so CBO estimates that
the agency would collect less than $3 million annually in
offsetting receipts. Again, the agency is authorized to spend
such fees without further appropriation, so the net impact on
BCIS spending would not be significant.
Under current law, the Department of State also collects
$100 application fee for nonimmigrant visas. These collections
are spent on border security and consular functions. CBO
estimates that the net budgetary impact would be less than
$500,000 a year.
Spending subject to appropriation
Title I of H.R. 2739 would authorize the appropriation the
necessary funds for the Department of Commerce to pay the
United States' share of the costs of the dispute settlement
procedures established by the agreement. Based on information
from the agency, CBO estimates that implementing this provision
would cost $100,000 in 2004, and $250,000 in each of the
following years, subject to the availability of appropriated
funds.
Title III would require the International Trade Commission
(ITC) to investigate claims of injury to domestic industries as
a result of the FTA. The ITC would have 120 days to determine
whether a domestic industry has been injured, and if so, would
recommend the necessary amount of import relief. The ITC would
also submit a report on its determination to the President.
According to the ITC, similar FTAs have resulted in only a
handful of cases each year, at an average cost of about
$200,000 per investigation. Based on this information, CBO
estimates the bill would have no significant effect on spending
subject to appropriation.
Summary of effect on revenues and direct spending: The
overall effects of H.R. 2739 on revenues and direct spending
are shown in the following table.

--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
--------------------------------------------------------------------------------------------------
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in receipts.................................. 0 -55 -80 -86 -92 -98 -104 -110 -117 -124 -132
Changes in outlays................................... * * * * * * * * * * *
--------------------------------------------------------------------------------------------------------------------------------------------------------
*=Less than $500,000.

*Source: The Congressional Budget Office.

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.
Federal Spending: Dispute Settlements--Melissa Zimmerman;
Immigration--Mark Grabowixz, Christi Hawley-Sadoti, and Sunita
D'Monte. Impact on State, Local, and Tribal Governments:
Melissa Merrell. Impact on the Private Sector: Paige Piper/
Bach.
Estimate approved by: G. Thomas Woodward, Assistant
Director for Tax Analysis and, Peter H. Fontaine, Deputy
Assistant Director for Budget Analysis.

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

A. Committee Oversight Findings and Recommendations

With respect to clause 3(c)(1) of rule XIII of the Rules of
the House of Representatives (relating to oversight findings),
the Committee, based on public hearing testimony and
information from the Administration, concluded that it is
appropriate and timely to consider the bill as reported.

B. Statement of General Performance Goals and Objectives

With respect to clause 3(c)(4) of rule XIII of the Rules of
the House of Representatives, the Committee advises that the
bill contains no measure that authorizes funding, so no
statement of general performance goals and objectives for which
any measure authorizes funding is required.

C. Constitutional Authority Statement

With respect to clause 3(d)(1) of rule XIII of the Rules of
the House of Representatives, relating to Constitutional
Authority, the Committee states that the Committee's action in
reporting the bill is derived from Article 1 of the
Constitution, Section 8 (``The Congress shall have power to lay
and collect taxes, duties, imposts and excises, to pay the
debts and to provide for * * * the general Welfare of the
United States.'')

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

In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, 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):

SECTION 13031 OF THE CONSOLIDATED OMNIBUS BUDGET RECONCILIATION ACT OF
1985

SEC. 13031. FEES FOR CERTAIN CUSTOMS SERVICES.

(a) * * *
(b) Limitations on Fees.--(1) * * *

* * * * * * *

(13) No fee may be charged under subsection (a) (9)
or (10) with respect to goods that qualify as
originating goods under section 202 of the United
States-Singapore Free Trade Agreement Implementation
Act. Any service for which an exemption from such fee
is provided by reason of this paragraph may not be
funded with money contained in the Customs User Fee
Account.

* * * * * * *

----------

SECTION 592 OF THE TARIFF ACT OF 1930

SEC. 592. PENALTIES FOR FRAUD, GROSS NEGLIGENCE, AND NEGLIGENCE.

(a) * * *

* * * * * * *

(7) Prior disclosure regarding claims under the
united states-singapore free trade agreement.--
(A) An importer shall not be subject to
penalties under subsection (a) for making an
incorrect claim that a good qualifies as an
originating good under section 202 of the
United States-Singapore Free Trade Agreement
Implementation Act if the importer, in
accordance with regulations issued by the
Secretary of the Treasury, voluntarily and
promptly makes a corrected declaration and pays
any duties owing.
(B) In the regulations referred to in
subparagraph (A), the Secretary of the Treasury
is authorized to prescribe time periods for
making a corrected declaration and paying
duties owing under subparagraph (A), if such
periods are not shorter than 1 year following
the date on which the importer makes the
incorrect claim that a good qualifies as an
originating good.

* * * * * * *

----------

SECTION 202 OF THE 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, [and] title II of
the United States-Jordan Free Trade Area Implementation
Act, and title III of the United States-Singapore 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.

* * * * * * *

SECTION 214 OF THE IMMIGRATION AND NATIONALITY ACT

admission of nonimmigrants

Sec. 214. (a) * * *
(g)(1) * * *

* * * * * * *

[The purported changes made to paragraph (8) of section 214(g) by this
bill are shown below. Section 402(a)(2)(B) of H.R. 2738 inserts at the
end of subsection (g) a new paragraph (8), which is presumed to take
effect prior to the execution of these amendments.]

[(8)(A) The agreement referred to in section
101(a)(15)(H)(i)(b1) is the United States-Chile Free Trade
Agreement.]
(8)(A) The agreements referred to in section
101(a)(15)(H)(i)(b1) are--
(i) the United States-Chile Free Trade Agreement; and
(ii) the United States-Singapore Free Trade
Agreement.
(B)(i) * * *
[(ii) The annual numerical limitations described in clause
(i) shall not exceed 1,400 for nationals of Chile for any
fiscal year. For purposes of this clause, the term ``national''
has the meaning given such term in article 14.9 of the United
States-Chile Free Trade Agreement.]
(ii) The annual numerical limitations described in clause (i)
shall not exceed--
(I) 1,400 for nationals of Chile (as defined in
article 14.9 of the United States-Chile Free Trade
Agreement) for any fiscal year; and
(II) 5,400 for nationals of Singapore (as defined in
Annex 1A of the United States-Singapore Free Trade
Agreement) for any fiscal year.

* * * * * * *

VII. EXECUTIVE CORRESPONDENCE

Executive Office of the President,
The United States Trade Representative,
Washington, DC, July 18, 2003.
Hon. William M. Thomas,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: I appreciate your leadership in moving
through the Ways and Means Committee legislation to implement
the United States-Singapore and United States-Chile free trade
agreements.
Because we have received inquiries about how the tariff
suspension provisions of the agreements would operate, I
thought it would be useful to provide the relevant text for the
enforcement of dispute settlement panel reports. The following
provisions are set out in articles 20.5-7 of the U.S.-Singapore
Free Trade Agreement (FTA) and articles 22.14-16 of the U.S.-
Chile FTA.

Commercial disputes

If, in its final report, the panel determines that a Party
has not conformed with its obligations under this Agreement or
that a Party's measure is causing nullification or impairment *
* *, the resolution, whenever possible, shall be to eliminate
the non-conformity or the nullification or impairment. * * * If
* * * the Parties are unable to reach agreement on a
resolution, * * * the Party complained against shall enter into
negotiations with the other Party with a view to developing
mutually acceptable compensation.
If the Parties * * * are unable to agree on compensation
within 30 days after the period for developing such
compensation has begun; or * * * have agreed on compensation or
on a resolution * * * and the complaining Party considers that
the other Party has failed to observe the terms of such
agreement, the complaining Party may at any time thereafter
provide written notice * * * that it intends to suspend the
application to the other Party of benefits of equivalent
effect. * * *
If the Party complained against considers that * * * the
level of benefits [that the other Party has] proposed to be
suspended is manifestly excessive; or * * * [that the defending
party] has eliminated the non-conformity or the nullification
or impairment that the panel has found, it may * * * request
that the panel be reconvened to consider the matter. * * * If
the panel determines that the level of benefits proposed to be
suspended is manifestly excessive, it shall determine the level
of benefits it considers to be of equivalent effect.
The complaining Party may suspend benefits up to the level
the panel has determined * * * or, if the panel has not
determined the level, the level the Party has proposed to
suspend * * * unless the panel has determined that the Party
complained against has eliminated the non-conformity or the
nullification or impairment.
The complaining Party may not suspend benefits if, within
30 days after it provides written notice of intent to suspend
benefits or * * * the Party complained against provides written
notice * * * that it will pay an annual monetary assessment.
The Parties shall consult * * * with a view to reaching
agreement on the amount of the assessment. If the Parties are
unable to reach an agreement within 30 days after consultations
begin, the amount of the assessment shall be set at a level, in
U.S. dollars, equal to 50 percent of the level of the benefits
the panel has determined * * * to be of equivalent effect or,
if the panel has not determined the level, 50 percent of the
level that the complaining Party has proposed to suspend.* * *
If the Party complained against fails to pay a monetary
assessment, the complaining Party may suspend the application
to the Party complained against of benefits [under the
Agreement].

Labor and environment disputes

If, in its final report, a panel determines that a party
has not conformed with its [labor or environment] obligations *
* * and the Parties * * * are unable to reach agreement on a
resolution * * *; or have agreed on a resolution * * * and the
complaining Party considers that the other Party has failed to
observe the terms of the agreement, the complaining Party may
at any time thereafter request that the panel be reconvened to
impose an annual monetary assessment on the other Party. * * *
The panel shall determine the amount of the monetary
assessment in U.S. dollars. * * * In determining the amount of
the assessment, the panel shall take into account [various
factors set forth in the agreement.]
The amount of the assessment shall not exceed 15 million
U.S. dollars annually. * * * Assessments shall be * * *
expended * * * for appropriate labor or environmental
initiatives, including efforts to improve or enhance labor or
environmental law enforcement, as the case may be, in the
territory of the Party complained against, consistent with its
law.
If the Party complained against fails to pay a monetary
assessment, [or, under the U.S.-Singapore FTA, does not make
funds available through an escrow account] the complaining
Party may take other appropriate steps to collect the
assessment or otherwise secure compliance. These steps may
include suspending tariff benefits under the Agreement as
necessary to collect the assessment, while bearing in mind the
Agreement's objective of eliminating barriers to bilateral
trade and while seeking to avoid unduly affecting parties or
interests not party to the dispute.
Again, thank you for your efforts in securing passage of
this important legislation.
Sincerely,
Robert B. Zoellick.

VIII. VIEWS

DISSENTING VIEWS

If these two trade agreements were truly going to benefit
U.S. workers, as the Administration claims, then we would have
no reservations and would gladly support both agreements today.
However, the lack of strong labor enforcement language, the
addition of new permanent work visa program, and the use of
these agreements as a template for future trade agreements is
sufficient reason to oppose both agreements and the
implementing legislation.
Our nation's unemployment rate reached 6.4 percent in
June--the highest rate in more than nine years, causing a loss
of more than one million jobs in the last three months alone.
The Bush Administration's solution to pursue trade agreements
that depart from the standard set by the US-Jordan Free Trade
Agreement and return to the failed North American Free Trade
Agreement (NAFTA) model. As of September 2000, the U.S. lost
over half a million jobs due to NAFTA. Over three-quarters of
the jobs lost due to NAFTA have been in the manufacturing
sector. These are good paying U.S. jobs that have been shipped
overseas. But rather than take the successes of the US-Jordan
FTA which was heralded by the Clinton Administration, labor and
environment organizations, as the new model for trade
agreements, the Bush Administration is taking us down the path
of further job losses.
Neither trade agreements includes the International Labor
Organization's (ILO) five core labor standards. While both
countries claim to uphold the ILO's core labor standards, there
is nothing in the agreements that require either country to do
so. If these countries are truly committed to the five core
labor standards then there is no reason to exclude binding
agreement language that would have committed these countries to
adhering to them. It is time to make labor standards as serious
and issue in trade agreements as the commercial provisions--
especially when the involved parties claim to uphold ILO's
policies anyway.
Furthermore, these agreements fail to provide the same
enforcement mechanisms for labor and environmental violations
as the agreements provide for commercial violations. Once
again, the Administration chooses to relegate labor and
environment to a substandard class. Under the Chile and
Singapore agreements, once a determination that a labor
violation has been made the first course of action is a fine,
which is capped at $15 million annually. This is a mere slap on
the wrist for a country that could be found in serious
violation of the labor provisions. The negotiated course of
enforcement pales in comparison to the sanctions that are
available for commercial violations.
In addition to the failures of the labor provisions in both
trade agreements, both agreements set up a new immigration visa
program. This sets a dangerous precedent by including U.S.
immigration law in trade agreements. Nor was this provision
authorized in the Fast Track negotiating language that narrowly
passed the House of Representatives. House Judiciary members of
both the majority and minority have expressed serious
reservations about including U.S. immigration law in trade
agreements, and usurping Congress's constitutional authority.
The current H1-B visa program is a 3-year temporary work visa,
which may be renewed one time. The new visa program negotiated
in these trade agreements will allow an indefinite renewal of
5,800 nationals from Singapore and Chile. This means that we
are earmarking ten percent of the current H1-B visa program to
nationals from these small countries in these small agreements.
Another serious concern we have is the fact that the
implementing language contradicts the trade agreement language
with respect to the new visa program. It is doublespeak. The
implementing language attempts to address the concern of
allowing new immigrant workers only upon certifying that U.S.
workers won't be displaced; the negotiated trade agreements
prohibit such certification as a condition of entry. As the
U.S. experienced with NAFTA, it is the trade agreement, and not
the domestic statute that takes precedent under global trade
rules.
Finally, these two agreements should not be used as a model
for future trade agreements. A vote in support of the
agreements signals to the Administration that the model used
for Chile and Singapore is acceptable, when it is far from
acceptable. We oppose both agreements, the implementing
legislation and urge the Administration to avoid using the
flawed Chile and Singapore model for future trade agreements.

Pete Stark.
Stephanie Tubbs Jones.
Jerry Kleczka.
Mike R. McNulty.
John Lewis.

ADDITIONAL VIEWS OF DEMOCRATIC MEMBERS

The U.S.-Singapore Free Trade Agreement
The U.S.-Singapore Free Trade Agreement (FTA) includes
strong and comprehensive commitments by Singagore to open its
goods, agricultural and services markets to U.S. producers. The
agreement includes commitments that will increase regulatory
transparency and act to the benefit of U.S. workers, investors,
intellectual property holders, businesses and consumers.
At the same time, the economic impact of the Singapore
agreement is likely to be minuscule. The U.S. International
Trade Commission estimates that the Singapore FTA will account
for just one one hundredth of one percent of U.S. GNP.
While some of the provisions in the FTA could serve as a
template for other agreements, a number of provisions clearly
cannot. In some instances, this is because the provision, while
workable in the Singapore context, is not appropriate for FTAs
with other coiuntries, where very different circumstances
prevail. In other cases, it is because the policy being pursued
by the Administration is just plain wrong.
In fact, one of the concerns raised in the consideration of
both the Chile and Singapore FTAs has been that the
Administration is beginning to use some of their provisions as
models for other FTAs, for example the CAFTA, where the
conditions make it inappropriate to do so.
We cannot change in the implementing bill major provisions
in the basic agreements specifically negotiated between the
parties. Unfortunately, the provisions relating to core labor
and environmental standards, and investment issues raise
serious concerns.
For example, there are separate dispute settlement rules
that place arbitrary caps on the enforceability of those
provisions. This is a mistaken approach, the difficulties of
which would only be magnified if used as a precedent for future
FTAs involving very different circumstances.
That is doubly true of any attempt to use as a model for
other FTAs the ``enforce your own law'' standard used in Chile
and Singapore. The laws of Chile and Singapore essentially
reflect core internationally recognized labor rights and these
countries have a history of enforcing their laws. How they are
applied does vary in the two countries, reflecting the
different characteristics of the two nations. At the same time,
there is little practical concern that these countries will
back track.
Singapore is very diferent from many other FTA negotiating
partners, including certainly most Central American countries
and many others that would be a part of an FTAA. Use of the
``enforce your own law'' standard is invalid as a precedent--
indeed, it contradicts the purpose of promoting enforceable
core labor standards--when a country's laws clearly do not
reflect international standards and when there is a history,
not only of non-enforcement, but of a hostile environment
towards the rights of workers to organize and bargain
collectively. Using this standard in different circumstances
will lead to totally different results.
The Office of the U.S. Trade Representative (USTR) has
undertaken this misapplication of the ``enforce your own law''
standard by using it in the core labor proposal tabled in CAFTA
and Free Trade Area of the Americas (FTAA). USTR justifies this
action by arguing that the Trade Act of 2002 does not allow it
to go further. That interpretation is erroneous. Under Trade
Promotion Authority USTR can negotiate a provision to adopt and
enforce the five core ILO labor standards (ban on child labor,
forced labor, discrimination, and the right to associate and
bargain collectively).
Expanded trade is important to this country and the world.
Benefits will accrue to a broad range of persons in our nation
and in other nations if these trade agreements include
enforceable commitments on basic labor standards. With such a
provision, workers in developing countries, including in
Central America, will have the opportunity to become real
partners in economic progress and help develop the expanded
middle class so vital to those nations, and to the United
States.
With regard to other provisions that the Administration has
stated it intends to use as a model, we are seriously concerned
about any such use and we will be watching carefully their
implementation. These provisions include: (1) certain
intellectual property provisions that lock in the current state
of U.S. law, thereby making it much more difficult for Congress
to change those rules in the future; (2) the investor-state
provisions and the issue of whether the USTR has adequately
ensured that foreign investors will not have greater rights
than provided under U.S. law; and (3) the provisions on capital
controls and the question of whether USTR's and Treasury's
effort to eliminate a country's flexibility to impose on an
emergency basis temporary capital controls, is sound policy and
should be pursued in future FTAs. In addition, we are
interested to know whether more can be done by Singapore to
stop the trans-shipment of illegally harvested timber.
Finally, one area where we would like to see improvements
in future FTAs is in the rules of origin. To a large extent,
the provisions on rules of origin in the implementing
legislation are dictated by the underlying agreements.
The Committee report states that the Agreement contains
``strong, simple, and transparent rules of origin.'' The rules
of origin used for the Agreement are different than those for
theNAFTA and for other previous FTAs. It is extremely difficult
for Congress to gauge whether the rules of origin strike the correct
balance between the dual goals of preventing trans-shipment/ensuring
economic activity in the FTA partners and ease of compliance and
administration. While we trust that the USTR negotiators are seeking
the correct balance, the Committee should request the ITC to conduct a
study into the operation of various types of rules or origin and their
impact on trade.

The U.S.-Singapore implementing legislation

The Committee Democrats pressed for the Committee to hold
the July 10, 2003, traditional ``mock'' mark-up. the informal
legislative drafting process ensures active congressional
involvement in shaping the legislation necessary to implement
changes to U.S. law that are required by trade agreements.
In the past, the informal legislative drafting process in
the House--prior to the Administration's introduction of the
formal, and nonamendable, legislation--has culminated in the
Ways and Means Committee holding an informal markup (sometimes
called a ``mock markup'') of the draft legislation. This
process was used in the case of implementing legislation for
the North American Free Trade Agreement (NAFTA), the Uruguay
Round agreements and prior agreements dating back more than 20
years.
The mock markup reflects a broadly agreed-upon and well-
established practice. Further, it enables the Members of the
Committee and the public to understand more fully and clearly
the content of the legislation, raise questions about it, and
offer ``mock amendments'' when necessary. Ensuring that the
legislative process for the implementing legislation is as open
as possible is consistent with the great importance the United
States has attached to improving the transparency of
international trade agreements and foreign government laws and
regulatory practices.
The implementing legislation includes only addresses those
portions of the FTA where implementation requires changes to
U.S. law. With respect to these provisions, it is important to
note the improvements that we have been successful in making to
several controversial areas.
First, the Integrated Sourcing Initiative (ISI) was
initially described by USTR as a special program to benefit two
Indonesian islands near Singapore. In fact, the ISI was much
wider than USTR had initially described it. Any country could
benefit from the ISI, and it would have allowed Singapore to
import certain components directly from any country in the
world, incorporate them into other products, and count the
components as ``Singapore content.'' Further, the ISI called
for considering an expansion of the list of products that could
benefit from this unusual treatment, and the initial draft of
the implementing legislation would have allowed expansion
through an Executive proclamation.
Democrats on the Ways & Means Committee began raising
questions and concerns about the ISI with USTR. The result has
been a number of changes:
Expansion of the ISI Requires Congressional
Approval. Under the ISI's primary feature, certain goods listed
in an annex to the FTA can be trans-shipped through Singapore
and receive the benefits of the FTA. The ``trans-shipment''
feature of the ISI is not significant in practice, however, as
all of the goods currently on the ISI Annex already enter the
U.S. duty-free regardless of where they originate. However,
Ways and Means Democrats were concerned that the ISI Annex
could be expanded by Executive proclamation in the future to
include other goods which could be more sensitive. Accordingly,
Ways and Means Democrats and other offices succeeded in
modifying the implementing legislation to require congressional
approval for expanding the ISI.
Local Content Feature Restricted. Ways and Means
Democrats raised a number of questions about the fact that the
``local content'' feature of the ISI would allow components
from any other country to be counted as Singapore content in
``downstream goods,'' helping those goods benefit from duty-
free treatment under the FTA. As a result, a key sentence in
the agreement was deleted. The initial draft of the legislation
implementing the agreement contained an ambiguity and the
implementation language was modified. While it was our
expectation that as a result, the local content feature was
being eliminated entirely, the Statement of Administrative
Action contained language that indicated that the local content
feature had been restricted so that ISI components would first
have to be trans-shipped between the U.S. and Singapore before
they could count as local content for another good which would
itself have to be shipped between the two countries.
In sum, as a practical matter, it would appear that use of
the local content feature would be severely restricted.
Nonetheless, we are taking steps to ensure adequate monitoring,
including through agreement with the Chairman to request
detailed monitoring by the U.S. International Trade Commission
for the first two years of the agreement to follow trade in
products that could be affected by the ISI and to detect
surges, if any, in use of the ISI local content provision. If
such a surge is detected, the ITC would conduct a special
investigation. In any event, the Commission would prepare a
report to the Committee on the results of its monitoring.
A second set of troublesome issues in both the U.S.-Chile
and U.S.-Singapore FTAs related to H1-B immigration visas.
Although not under the jurisdiction of this Committee, we
worked actively with our colleagues in both parties on the
Judiciary Committee to make meaningful changes to these
provisions. The most significant changes include: (1) inclusion
of the Singapore and Chile visas within the overall H1-B cap;
(2) a requirement that employers pay the H1-B fee (currently
$1000) for the initial visa, and for every third renewal of the
visa (these fees are used to fund training programs for workers
in the United States); (3) a requirement that employers submit
labor attestations not only for the initial visa, but also for
every third renewal; (4) clarification in the Statement of
Administrative Action that visas issued under the Chile and
Singapore programs are temporary, and that laws governing
temporary visas, including requirements that the visa holder
show that the stay is temporary, continue to apply; and (5) a
clarification in the Statement of Administrative Action on the
scope of occupations covered.
Additionally, as first drafted, bills did not require
Administration to consult with trade advisory committees, ITC,
or Congress when exercising discretionary authority granted by
the legislation. The bill has been amended to require
consultation with each of these entities, helping provide
greater role for Congress and a more balanced and well-founded
trade policy.
This process has worked for improving the problematic
provisions in the implementing legislation.
Finally, we are concerned that the legislative
implementation of the rules of origin may create unnecessary
confusion. The rules of origin in the Chile and Singapore FTAs
differ in a number of ways, some substantive, but most non-
substantive. In a number of instances, the implementing
legislation mirrored the language in the agreements, despite
the fact that there were no substantive differences intended.
We are concerned that the differences in legislative language
between two contemporaneously considered bills could create
confusion for Customs and traders. Generally, Congress does not
use different language when it means the same thing.
Accordingly, we encourage Customs to issue harmonized
implementing regulations for the Singapore and Chile FTAs to
the maximum extent possible.

U.S. Trade policy for economic growth and jobs

Even as we support the Singapore and Chile free trade
agreements, it is vital that American trade policy restore a
focus on opening markets that achieve big gains for Americans.
In particular, numerous barriers to exports of American goods
and services, and other unfair trade practices have been
allowed to stand for too long. These barriers include
international piracy of American copyrights and other
intellectual property, discrimination by China against key
American high-tech exports, and Japan's discrimination against
myriad of manufactured and agricultural goods. A more concerted
effort needs to be undertaken to reduce these barriers that
cost American jobs and exports.
Additionally, there is a great deal at stake in
negotiations currently ongoing under the auspices of the World
Trade Organization--the so-called Doha round. These
negotiations should be conducted carefully to achieve potential
significant benefits to American manufacturing, agriculture and
services, and to prove benefits to both the United States and
other developed countries, as well as developing countries.
Ways and Means Democrats are monitoring these negotiations
carefully and urge a greater focus by the Administration on
ensuring real and meaningful progress at the upcoming
Ministerial meeting in September in Mexico.

Charles B. Rangel.
Jim McDermott.
Max Sandlin.
Robert T. Matsui.
Earl Pomeroy.
Richard E. Neal.
Ben Cardin.
Sander Levin.
Xavier Becerra.