The Jackson-Vanik Amendment and
Candidate Countries for WTO Accession:
Issues for Congress
William H. Cooper
Specialist in International Trade and Finance
June 15, 2012
Congressional Research Service
7-5700
www.crs.gov
RS22398
CRS Report for Congress
Pr
epared for Members and Committees of Congress
The Jackson-Vanik Amendment and Candidate Countries for WTO Accession
Summary
Unconditional most-favored-nation (MFN) status, or in U.S. statutory parlance, normal trade
relations (NTR) status, is a fundamental principle of the World Trade Organization (WTO). Under
this principle, WTO members are required unconditionally to treat imports of goods and services
from any WTO member no less favorably than they treat the imports of like goods and services
from any other WTO member country. Under Title IV of the Trade Act of 1974, as amended, most
communist or nonmarket-economy countries were denied MFN status unless they fulfilled
freedom-of-emigration conditions as contained in Section 402, the so-called Jackson-Vanik
amendment, or were granted a presidential waiver of the conditions, subject to congressional
disapproval. The statute still applies to many of these countries, even though most have replaced
their communist governments. The majority of these countries have joined the WTO or are
candidates for accession. Several countries are close to completing the accession process, and
Congress could soon face the issue of what to do about their NTR status to ensure that the United
States benefits from those accession agreements. During the 112th Congress, Members face the
issue of whether to extend PNTR to Russia. On June 12, 2012, Senator Max Baucus introduced a
bill (S. 3285) with bipartisan co-sponsorship to authorize PNTR for Russia.
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The Jackson-Vanik Amendment and Candidate Countries for WTO Accession
Contents
MFN/NTR and the GATT/WTO...................................................................................................... 1
Jackson-Vanik Amendment and Communist and Former Communist Country
GATT/WTO Members.................................................................................................................. 2
The Case of China ........................................................................................................................... 3
Prospective WTO Accessions .......................................................................................................... 4
Contacts
Author Contact Information............................................................................................................. 5
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The Jackson-Vanik Amendment and Candidate Countries for WTO Accession
ussia, Kazakhstan, Moldova (which is already a member of the World Trade
Organization), and a number of other former communist states are still subject to the
R provisions of Title IV of the Trade Act of 1974, as amended, including Section 402 (the
Jackson-Vanik amendment). The 112th Congress faces the question of whether to enact legislation
to repeal the application of Title IV to Russia, and Moldova, and could face the issue regarding
one or more of the other countries, thereby authorizing permanent normal trade relations (PNTR)
status to fulfill the unconditional most-favored-nation (MFN) obligation under the WTO, or to
exercise other options.1
MFN/NTR and the GATT/WTO
Most-favored-nation (MFN) treatment is a fundamental principle of the General Agreement on
Tariffs and Trade (GATT 1994), which governs trade in goods; of the General Agreement on
Trade in Services (GATS); and of the agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPs). In essence, the principle requires that each WTO member treat the
product of another member no less favorably than it treats a like product from any other member.
If a member country lowers a tariff or nontariff barrier in its trade with another member, that
“concession” must apply to its trade with all other member countries.2
The United States grants all but a few countries, namely Cuba and North Korea, normal trade
relations (NTR), or MFN, status.3 In practice, duties on the imports from a country that has not
been granted NTR status are set at much higher levels—rates that are several times higher than
those from countries that receive such treatment. Thus, imports from a non-NTR country can be
at a significant price disadvantage compared with imports from NTR-status countries.
The WTO agreements also require that MFN treatment be applied “unconditionally.” However,
when a WTO member determines that it cannot, for political or other reasons, accede to this or
any other GATT/WTO principle toward a newly acceding member, it can “opt-out” of its
obligations toward that member by invoking the non-application provision (Article XIII of the
WTO or Article XXXV of the GATT). In so doing, the WTO member is declaring that the WTO
obligations and mechanisms (e.g., the dispute settlement mechanism) are not applicable in its
trade with the new member in question.
Invoking the non-application clause is a double-edged sword. Although it relieves the member
invoking the provision of applying MFN or any other obligations toward the new member, it also
1 For more information on PNTR for Russia, see CRS Report RS21123, Permanent Normal Trade Relations (PNTR)
Status for Russia and U.S.-Russian Economic Ties, by William H. Cooper.
2 Some exceptions are permitted. For example, the GATT 1994 and the GATS allow members to form free-trade areas
and customs unions that extend preferential treatment to trade among the members of the free-trade area and customs
union but not to countries outside the arrangement. They also permit developed countries to extend unilateral
preferential treatment to developing countries under generalized system of preference (GSP) or similar programs.
These exceptions are allowed under specified conditions. A member country may also seek a special waiver in its
application of MFN to another member, subject to the approval of at least three-fourths of the WTO membership. The
GATS and TRIPs also provide for some MFN exceptions.
3 The terms normal trade relations (NTR) status and most-favored-nation (MFN) status are used interchangeably. MFN
was replaced by NTR in U.S. law in 1998 to dispel the notion that MFN conveyed a preferential benefit. However, the
term MFN is still widely used in the WTO and international trade agreements.
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The Jackson-Vanik Amendment and Candidate Countries for WTO Accession
denies the benefits and protections that the WTO would provide to the former in its trade with the
latter.
Jackson-Vanik Amendment and Communist and
Former Communist Country GATT/WTO Members
In 1951, the United States suspended MFN status to all communist countries (except Yugoslavia)
under Section 5 of the Trade Agreements Extension Act. That provision was superseded by Title
IV of the Trade Act of 1974.
Section 401 of Title IV requires the President to continue to deny nondiscriminatory status to any
country that was not receiving such treatment at the time of the law’s enactment on January 3,
1975. In effect, this meant all communist countries, except Poland and Yugoslavia. Section 402 of
Title IV, the so-called Jackson-Vanik amendment, denies the countries eligibility for NTR status
as long as the country denies its citizens the right of freedom of emigration. These restrictions can
be removed if the President determines that the country is in full compliance with the freedom-of-
emigration conditions set out under the Jackson-Vanik amendment. The Jackson-Vanik
amendment also permits the President to waive full compliance with the freedom-of-emigration
requirements if he determines that such a waiver would promote the objectives of the amendment,
that is, encourage freedom of emigration.4 While Title IV addresses only freedom of emigration,
Congress has used the law to press the subject countries on a number of economic and political
issues. Removal of a country from Jackson-Vanik restrictions requires Congress to pass
legislation.
Czechoslovakia was an original signatory to the GATT in 1947. In 1951, the United States
suspended MFN treatment because it had become communist. Because Czechoslovakia was an
original signatory to the GATT and not a newly acceding member, the non-application provision
did not apply. Instead, the United States sought and obtained from the other GATT signatories
approval for the suspension of MFN treatment.5
The United States invoked the non-application provision when Romania and Hungary became
GATT signatories in 1971 and 1973, respectively. These restrictions no longer applied after the
United States, through legislation, extended unconditional MFN, or permanent normal trade
relations (PNTR), status to Czechoslovakia (later the Czech Republic and Slovakia), Hungary,
and Romania after the fall of the communist governments in those countries.
The United States granted PNTR to Albania, Bulgaria, and Cambodia before these countries
acceded to the WTO, making it unnecessary to invoke the non-application provision. This was
also the case for the former Soviet republics of Estonia, Latvia, and Lithuania.
4 For more information on the Jackson-Vanik amendment, see CRS Report 98-545, The Jackson-Vanik Amendment: A
Survey, by Vladimir N. Pregelj. (Out of print; available on request from the author.)
5 Pregelj, Vladimir N. Normalization of U.S. Commercial Relations with East Europe. In U.S. Joint Economic
Committee. East European Economic Assessment. A Compendium of Papers. July 10, 1981, p. 671. Cuba was also an
original signatory to the GATT. When the United States suspended MFN as part of a total trade embargo on Cuba in
1962, it did not seek such approval, but Cuba has never challenged the suspension of MFN. Pregelj, Vladimir N. CRS
Report 75-192. United States-Cuban Trade Relations: Their Present Legal Status and Action Required For Their
Normalization. August 27, 1975. (Out of print; available on request from the author.)
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Mongolia joined the WTO on January 29, 1997, more than two years before the United States
granted it PNTR. During that time, the United States invoked the non-application provision. It
also invoked the provision with Armenia when it joined the WTO on February 5, 2003, and
received PNTR on January 7, 2005, and with Kyrgyzstan when it joined the WTO on December
20, 1998, before receiving PNTR on June 29, 2000. Each bill authorizing PNTR for Mongolia,
Armenia, Kyrgyzstan, and Georgia contained a “finding” that extending PNTR would enable the
United States to avail itself of all rights within the WTO regarding that country. The United States
invoked Article XIII also in its trade relations with Vietnam on November 7, 2006, before PNTR
for Vietnam went into effect, but had granted Ukraine PNTR status in 2006 prior to that country’s
accession to the WTO. Currently, the United States has invoked the non-application provision
regarding Moldova (a WTO member), but legislation (S. 309/H.R. 1463) has been introduced in
the 112th Congress to authorize PNTR for Moldova The United States has announced its intention
to do so regarding Russia at the time Russia was invited to join the WTO on December 16, 2011.
Senator Max Baucus introduced legislation (S. 3285) to authorize PNTR for Russia.
The Case of China
As with the other communist countries, China was subject to the provisions of the Jackson-Vanik
amendment. The United States denied China MFN status until October 1979, when it was granted
conditional MFN under the statute’s presidential waiver authority. China acceded to the WTO on
December 11, 2001. Congress passed legislation (P.L. 106-286) removing the Jackson-Vanik
requirement from U.S. trade with China and authorizing the President to grant PNTR to China,
which he did on January 1, 2002. However, in the legislation, Congress linked the granting of
PNTR to U.S. acceptance of conditions for accession to the WTO. It states that prior to making a
determination on granting PNTR, “the President shall transmit to Congress a report certifying that
the terms and conditions for the accession” of China to the WTO “are at least equivalent to those
agreed to” in the bilateral agreement the United States and China reached as part of the accession
process.6
China’s bilateral agreement with the United States, which is contained in the final accession
agreement, contains provisions for special safeguard procedures (codified in U.S. law as Sections
421-423 of the Trade Act of 1974) to be used when imports cause or threaten to cause market
disruption in the United States. It also provides for a separate safeguard procedure in the case of
surges in imports of textiles and wearing apparel from China, as well as special antidumping and
countervailing duty procedures. All of these provisions have time limits. The legislation
authorizing PNTR for China also provided for the establishment of a congressional-executive
commission to monitor human rights protection in China to replace Congress’s focus on this issue
that occurred during the annual NTR renewal debate.7
6 As part of the WTO accession process, candidate countries must complete bilateral negotiations with any WTO
member that wishes to do so. The agreement obligates the acceding country to change laws or practices to meet the
needs of the specific WTO member. All of the bilateral agreements plus the agreement with a WTO Working Party are
combined into a protocol of accession laying down the conditions for the country to enter the WTO.
7 For more information, see CRS Report RL33536, China-U.S. Trade Issues, by Wayne M. Morrison.
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The Jackson-Vanik Amendment and Candidate Countries for WTO Accession
Prospective WTO Accessions
Countries that are still subject to the restrictions have also applied for membership to the WTO
and are at various stages of the accession process: Azerbaijan, Belarus, Kazakhstan, Tajikistan,
and Uzbekistan. On December 16, 2011, Russia was invited to join the WTO. It will officially
join 30 days after its parliament ratifies the accession package, which it is expected to do
sometime in July 2012.8 Congress usually has no legislative role in the accession of countries to
the WTO. However, the legislative requirement for repeal of Title IV provides a role, albeit
indirectly, in the cases of the above-mentioned affected countries by giving Congress leverage on
the negotiation of conditions for WTO accession.
Congress has several options. It could repeal the restrictions before the country(ies) actually
enter(s) the WTO, completely separating the issues of Title IV repeal and WTO accession. This is
the course that Congress has followed in most cases to date and would allow the United States to
fulfill the unconditional MFN requirement prior to the country acceding to the WTO. Many of the
countries in question, Russia in particular, view the Jackson-Vanik requirements and the rest of
the Title IV restrictions as Cold War relics that have no applicability to their current emigration
policies and, more generally, to the types of governments they now have. They assert that their
countries should be treated as normal trade partners and, therefore, that the restrictions should be
removed unconditionally. On the other hand, some Members of Congress have raised concerns
regarding trade, economic, and other policies and practices of one or more of the countries and
may view the PNTR as leverage in addressing these issues.
A second option would be for Congress to link the granting of PNTR with the country’s accession
to the WTO. For example, Congress could follow the model established with PNTR for China by
requiring the President to certify that the conditions under which the country is entering the WTO
are at least equivalent to the conditions that the United States agreed to under its bilateral
accession agreement with the country. It can be argued that in this way, Congress helped define,
at least indirectly, the conditions under which China entered the WTO. However, the candidate
countries would probably bridle at such treatment, asserting that they would be asked to
overcome hurdles that are not applied to most of the other acceding countries, especially
countries not subject to Jackson-Vanik.
A third option would be for Congress to not repeal Title IV at all, as is the case currently with
Moldova. This option would send a strong message to the partner country of congressional
concerns or discontent with its policies or practices without preventing the country’s entrance into
the WTO. At the same time, the United States would have to invoke the non-applicability
provision (Article XIII) in its trade relations with that country. The United States would not
benefit from the concessions that the partner country made in order to accede to the WTO. The
United States would not be bound by WTO rules in its trade relations with the country, nor would
that country be so bound in its trade with the United States. For example, the WTO dispute
settlement body mechanism would not be available to the two countries in their bilateral trade
relationship.
8 For more information on Russia’s accession to the WTO, see CRS Report R42085, Russia’s Accession to the WTO
and Its Implications for the United States, by William H. Cooper.
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In determining which option to exercise, Congress faces the balance of costs and benefits of each.
In addition, how Congress treats each of the countries relative to the others could have
implications for U.S. relations with them. For example, Russia might consider it a serious affront
if conditions for its obtaining PNTR are less favorable than were given to Ukraine.
Author Contact Information
William H. Cooper
Specialist in International Trade and Finance
wcooper@crs.loc.gov, 7-7749
Congressional Research Service
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