Senate Report 109-199 - UNITED STATES-BAHRAIN FREE TRADE AGREEMENT IMPLEMENTATION ACT

[Senate Report 109-199]
[From the U.S. Government Publishing Office]

Calendar No. 306
109th Congress Report
SENATE
1st Session 109-199

======================================================================

UNITED STATES-BAHRAIN FREE TRADE AGREEMENT IMPLEMENTATION ACT

_______

December 8, 2005.--Ordered to be printed

Filed under authority of the order of the Senate of November 18, 2005

_______

Mr. Grassley, from the Committee on Finance, submitted the following

R E P O R T

[To accompany S. 2027]

[Including cost estimate of the Congressional Budget Office]

The Committee on Finance, to which was referred the bill
(S. 2027) to implement the United States-Bahrain Free Trade
Agreement, having considered the same, reports favorably
thereon without amendment and recommends that the bill do pass.

CONTENTS

Page
I. Report and Other Materials of the Committee......................2
A. Report of the Committee on Finance.................. 2
B. Summary of Congressional Consideration of the United
States-Bahrain Free Trade Agreement................ 2
1. Background...................................... 2
2. Trade Promotion Authority Procedures in General. 2
3. Notification Prior to Negotiations.............. 3
4. Notification of Intent to Enter Into an
Agreement...................................... 3
5. Development of the Implementing Legislation..... 4
6. Formal Submission of the Agreement and
Implementing Legislation....................... 5
7. Committee and Floor Consideration............... 6
C. Trade Relations with Bahrain........................ 6
1. United States-Bahrain Trade..................... 6
2. Tariffs and Trade Agreements.................... 8
3. U.S. International Trade Commission Study....... 10
D. Overview of the United States-Bahrain Free Trade
Agreement.......................................... 10
1. Overview of the Agreement....................... 10
2. USTR Summary of the Agreement................... 11
E. General Description of the Bill to Implement the
United States-Bahrain Free Trade Agreement......... 31
Title I--Approval of, and General Provisions
Relating to, The Agreement..................... 32
Title II--Customs Provisions....................... 33
Title III--Relief From Imports..................... 36
Title IV--Procurement.............................. 41
F. Vote of the Committee in Reporting the Bill......... 41
II. Budgetary Impact of the Bill....................................42
III. Regulatory Impact of the Bill and Other Matters.................43
IV. Changes in Existing Law Made by the Bill, as Reported...........44

I. REPORT AND OTHER MATERIALS OF THE COMMITTEE

A. Report of the Committee on Finance

B. Summary of Congressional Consideration of the United States-Bahrain
Free Trade Agreement

1. Background

On May 21, 2003, the White House announced that the United
States and the Kingdom of Bahrain would seek to negotiate a
bilateral free trade agreement as one step toward achieving a
Middle East free trade area proposed by President George W.
Bush on May 9, 2003. The United States Trade Representative
consulted with the relevant congressional committees, including
the Senate Committee on Finance, with respect to the initiation
of negotiations with Bahrain. The United States Trade
Representative also attended a meeting of the Congressional
Oversight Group on July 24, 2003, to discuss the initiation of
negotiations with Bahrain. On August 4, 2003, the United States
Trade Representative formally notified Congress of the
President's intention to initiate negotiations with Bahrain and
identified specific objectives for the negotiations, which were
launched on January 26, 2004. On May 27, 2004, the United
States Trade Representative announced that the United States
and the Kingdom of Bahrain had successfully concluded the
negotiations. By letter dated June 15, 2004, President George
W. Bush notified Congress of his intent to enter into the
United States-Bahrain Free Trade Agreement. Notice of the
President's notification was published in the Federal Register
on June 18, 2004. The text of the United States-Bahrain Free
Trade Agreement was made available to the general public on
June 22, 2004. On July 19, 2004, the United States Trade
Representative received reports from 27 trade advisory groups
commenting on the final text of the agreement with Bahrain.
United States Trade Representative Robert B. Zoellick and
Minister of Finance and National Economy Abdulla Hassan Saif of
the Kingdom of Bahrain signed the United States-Bahrain Free
Trade Agreement on September 14, 2004.

2. Trade Promotion Authority procedures in general

Article I, section 8 of the Constitution of the United
States vests Congress with the authority to regulate
international trade. Congress has periodically delegated a
portion of this authority to the President, in order to advance
the economic interests of the United States. This delegation
represents a compact between Congress and the executive, by
which Congress guarantees it will vote on a trade agreement
entered into by the executive without amendment and the
executive guarantees close consultation with Congress during
the negotiation of the trade agreement in order to achieve
objectives identified by Congress. Thorough and timely
consultation by the executive with Congress is the essential
bedrock upon which Congress' delegation of constitutional
authority rests. This longstanding compact, spanning decades,
has resulted in the successful negotiation and implementation
of numerous trade agreements that have contributed
significantly to increased economic growth and prosperity in
the United States.
The most recent incarnation of this compact is found in the
Bipartisan Trade Promotion Authority Act of 2002 (the Act),
which was included in the Trade Act of 2002 (Pub. L. 107-210).
The Act includes prerequisites for congressional consideration
of a trade agreement under expedited procedures (known as Trade
Promotion Authority (TPA) procedures), which are found in
sections 2103 through 2106 of the Act (19 U.S.C.
Sec. Sec. 3803-3806) and section 151 of the Trade Act of 1974
(19 U.S.C. Sec. 2191). Section 2103 of the Act authorizes the
President to enter into reciprocal trade agreements with
foreign countries to reduce or eliminate tariff or nontariff
barriers and other trade-distorting measures. Section 2102 of
the Act outlines the negotiating objectives the President is to
achieve if the President intends to use TPA procedures to
implement a trade agreement. Section 151 of the Trade Act of
1974 sets out expedited procedures for congressional
consideration of a trade agreement without amendment. The
President's authority under section 2103 extends to trade
agreements entered into on or before June 30, 2007.

3. Notification prior to negotiations

Under section 2104(a)(1) of the Act, the President must
provide written notice to Congress at least 90 calendar days
before initiating negotiations. On August 4, 2003, the United
States Trade Representative sent letters to The Honorable Ted
Stevens, President Pro Tempore, United States Senate, and The
Honorable J. Dennis Hastert, Speaker, United States House of
Representatives, to notify Congress of the President's
intention to initiate negotiations with Bahrain. The
negotiations were initiated on January 26, 2004. Section
2104(a)(2) requires the President, before and after submission
of the notice, to consult regarding the negotiations with the
relevant congressional committees and the Congressional
Oversight Group established under section 2107 of the Act. The
Administration engaged in the requisite consultations,
including appearances by the United States Trade Representative
at meetings of the Congressional Oversight Group on July 24,
2003, and May 6, 2004.

4. Notification of intent to enter into an agreement

Under section 2105(a)(1)(A) of the Act, the President is
required, at least 90 days before entering into an agreement,
to notify Congress of his intention to enter into the
agreement. On June 15, 2004, President George W. Bush notified
Congress of his intention to enter into the United States-
Bahrain Free Trade Agreement. The Agreement was signed on
September 14, 2004.

5. Development of the implementing legislation

Section 2105(a)(1)(B) of the Act requires the President,
within 60 days of signing an agreement, to submit to Congress a
description of changes to existing laws that the President
considers would be required to bring the United States into
compliance with such agreement. On October 29, 2004, the United
States Trade Representative transmitted to Congress on behalf
of the President a description of changes to existing laws
required to comply with the Agreement.
Under TPA procedures, Congress and the Administration work
together to produce the legislation to implement a free trade
agreement. Draft legislation is developed in close consultation
between the Administration and the committees with jurisdiction
over the laws that must be enacted or amended to implement the
agreement. The committees may then hold informal meetings to
consider the draft legislation and to make non-binding
recommendations to the Administration, if any. The
Administration then finalizes implementing legislation for
formal submission to Congress and referral to the committees of
jurisdiction. These procedures are meant to ensure close
cooperation between the executive and legislative branches of
government to develop legislation that faithfully implements
the agreement. The final legislation should include only those
provisions that are necessary or appropriate to faithfully
implement the agreement.
The Senate Committee on Finance met in open executive
session on November 9, 2005,to informally consider draft
implementing legislation for the Agreement. One amendment was filed by
Senators Conrad, Baucus, and Bunning, to add to the draft Statement of
Administrative Action a provision on monitoring Bahrain's commitment to
dismantle its primary boycott of Israel. This amendment was dispensed
with by Chairman Grassley, in consultation with Members of the
Committee, through the introduction of a chairman's modification to the
draft Statement of Administrative Action, which added the following
provision:

``The Administration welcomes the commitment made by the
Minister of Finance of Bahrain, in a letter to Ambassador
Portman dated September 5, 2005, regarding the efforts of the
Kingdom of Bahrain to dismantle its primary boycott of Israel.
As part of its annual National Trade Estimates Report, the
Administration intends to monitor and report on the efforts of
the Kingdom of Bahrain to dismantle its primary boycott of
Israel.''

Chairman Grassley also announced that it was his
understanding that the Administration had agreed to include
this provision in the formal Statement of Administrative Action
that would be submitted to Congress to accompany formal
implementing legislation. Absent a quorum, Chairman Grassley
called the meeting into recess and reconvened the meeting later
that day. Upon reconvening, the Committee approved the draft
implementing legislation and draft Statement of Administrative
Action, as modified, by recorded vote, 20 ayes, 0 nays, a
quorum being present. Ayes: Grassley, Hatch, Lott, Snowe, Kyl,
Thomas, Santorum, Frist, Smith, Bunning, Crapo, Baucus,
Rockefeller, Conrad, Jeffords, Bingaman, Kerry, Lincoln, Wyden,
Schumer (proxy).
On November 10, 2005, Bahrain's Minister of Finance, H.E.
Sheikh Ahmed bin Mohammed Al Khalifa, wrote a letter to United
States Trade Representative Rob Portman detailing the
commitment of the Government of Bahrain to continued reform of
its labor laws. By letter dated November 16, 2005, Ambassador
Portman responded to confirm the shared understanding between
the United States and the Kingdom of Bahrain that ``the
commitments set forth in (the) letter of November 10, 2005,
constitute `a matter arising under [the Labor Chapter]'
pursuant to Article 15.6 of the U.S.-Bahrain Free Trade
Agreement.'' Ambassador Portman further stated his intent to
update Congress periodically on the progress that Bahrain
achieves in realizing those commitments.

6. Formal submission of the agreement and implementing legislation

When the President formally submits a trade agreement to
Congress under section 2105 of the Act, the President must
include in the submission the final legal text of the
agreement, together with implementing legislation, a Statement
of Administrative Action (describing regulatory and other
changes that are necessary or appropriate to implement the
agreement), a statement setting forth the reasons of the
President regarding how and to what extent the agreement makes
progress in achieving the applicable policies, purposes,
priorities, and objectives set forth in the Act, and a
statement setting forth the reasons of the President regarding
how the agreement serves the interests of U.S. commerce.
The implementing legislation is introduced in both Houses
of Congress on the day it is submitted by the President and is
referred to committees with jurisdiction over its provisions.
President George W. Bush transmitted the final text of the
United States-Bahrain Free Trade Agreement, along with
implementing legislation, a Statement of Administrative Action,
and other supporting information, as required under section
2105 of the Trade Act of 2002, to Congress on November 16,
2005. The legislation was introduced that same day in both the
House (H.R. 4340) and the Senate (S. 2027). The accompanying
Statement of Administrative Action includes the provision added
by the Committee in its informal consideration of the bill on
November 9, 2005.
To qualify for TPA Procedures, the implementing bill itself
must contain provisions formally approving the agreement and
the Statement of Administrative Action. Further, the
implementing bill must contain only those provisions necessary
or appropriate to implement the Agreement. The implementing
bill reported here--which approves the United States-Bahrain
Free Trade Agreement and the accompanying Statement of
Administrative Action and contains provisions necessary or
appropriate to implement the Agreement into U.S. law--was
referred to the Senate Committee on Finance.

7. Committee and floor consideration

When the requirements of the Act are satisfied,
implementing revenue bills, such as the United States-Bahrain
Free Trade Agreement Implementation Act (Implementation Act),
are subject to the legislative procedures of section 151 of the
Trade Act of 1974. The following schedule for congressional
consideration applies under these procedures:
(i) House committees have up to 45 calendar days in
session in which to report the bill; any committee
which does not do so in that period will be
automatically discharged from further consideration.
(ii) A vote on final passage by the House must occur
on or before the 15th calendar day in session after the
committees report the bill or are discharged from
further consideration.
(iii) Senate committees must act within 15 calendar
days in session of receiving the implementing revenue
bill from the House or within 45 calendar days in
session of Senate introduction of the implementing
bill, whichever is later, or they will be discharged
automatically.
(iv) The full Senate then must vote within 15
calendar days in session on the implementing bill.
Thus, Congress has a maximum of 90 calendar days in session
to complete action on the bill. Once the implementing bill has
been formally submitted by the President and introduced, no
amendments to the bill are in order in either House of
Congress. Floor debate in each House is limited to no more than
20 hours, to be equally divided between those favoring the bill
and those opposing the bill.
The Committee on Finance met in open executive session on
November 18, 2005, to consider favorably reporting S. 2027.
Rule 2(a) of the Rules of Procedure adopted by the Committee on
Finance on January 25, 2005, provides that Members will be
notified of committee meetings at least 48 hours in advance. By
unanimous consent, the Committee waived this provision of Rule
2(a). At the meeting, the Committee favorably reported S. 2027
by recorded vote, 20 ayes, 0 nays, a quorum being present.
Ayes: Grassley, Hatch, Lott, Snowe, Kyl, Thomas, Santorum,
Frist, Smith, Bunning, Crapo, Baucus, Rockefeller, Conrad,
Jeffords, Bingaman, Kerry (proxy), Lincoln, Wyden, Schumer
(proxy).

C. Trade Relations With Bahrain

1. United States-Bahrain trade

Bahrain is a small country, with a gross domestic product
(GDP) that is less than 1 percent of U.S. GDP, and a population
that is about 0.2 percent of U.S. population. Trade between the
United States and Bahrain is currently concentrated in very few
products. Based on 2003 data, U.S. imports of apparel account
for 43 percent of total imports from Bahrain, and U.S. exports
of airplanes and parts account for 49 percent of total exports
to Bahrain. Two products account for 95 percent of U.S. apparel
imports from Bahrain, i.e. women's or girls' woven cotton pants
and men's or boys' woven cotton pants. In 2003, U.S.
merchandise exports to Bahrain were valued at $497 million,
while U.S. imports for consumption from Bahrain were valued at
$378 million. Based on 2002 data, the United States accounts
for 4.5 percent of Bahrain's exports and 11.7 percent of
Bahrain's imports. Based on 2003 data, Bahrain ranked as the
64th largest market for U.S. exports and the 86th largest
source of imports into the United States.
The following tables summarize the top U.S. merchandise
exports to Bahrain and the top U.S. merchandise imports from
Bahrain during the past 6 years.

U.S. EXPORTS TO BAHRAIN, 1999-2004
[In thousands of U.S. dollars]
----------------------------------------------------------------------------------------------------------------
Top 15 product descriptions, by HTS chapter 1999 2000 2001 2002 2003 2004
----------------------------------------------------------------------------------------------------------------
84 Nuclear reactors, boilers, machinery and 81,012 44,598 43,257 54,235 44,448 64,493
mechanical appliances; parts thereof...............
98 Special classification provisions, not elsewhere 65,164 50,145 64,555 92,778 72,398 61,415
specified or otherwise included....................
87 Vehicles, other than railway or tramway rolling 18,492 26,292 31,601 29,077 31,505 31,871
stock, and parts and accessories thereof...........
88 Aircraft, spacecraft, and parts thereof......... 38,252 221,797 79,288 74,539 242,801 27,733
90 Optical, photographic, cinematographic, 7,940 8,974 17,189 8,781 14,453 13,820
measuring, checking, precision, medical or surgical
instruments and apparatus; parts and accessories
thereof............................................
85 Electrical machinery and equipment and parts 12,286 15,757 16,142 10,345 17,837 13,545
thereof; sound recorders and reproducers,
television recorders and reproducers, parts and
accessories........................................
21 Miscellaneous edible preparations............... 2,716 3,057 5,212 3,355 4,078 4,772
94 Furniture; bedding, cushions etc.; lamps and 6,451 4,876 5,702 5,349 9,202 4,484
lighting fittings not elsewhere specified or
otherwise included; illuminated signs, nameplates
and the like; prefabricated buildings..............
89 Ships, boats and floating structures............ 482 1,964 33,168 8,141 3,665 4,434
27 Mineral fuels, mineral oils and products of 3,439 13,276 18,560 5,104 1,957 4,017
their distillation; bituminous substances; mineral
waxes..............................................
73 Articles of iron or steel....................... 1,358 977 4,113 2,891 3,638 3,750
52 Cotton, including yarns and woven fabrics 762 343 6,073 10,133 1,357 3,710
thereof............................................
24 Tobacco and manufactured tobacco substitutes.... 8,187 6,753 5,985 3,868 4,650 3,279
39 Plastics and articles thereof................... 3,866 4,025 3,257 3,088 2,772 2,944
49 Printed books, newspapers, pictures and other 1,660 1,388 1,424 2,228 2,031 2,142
printed products; manuscripts, typescripts and
plans..............................................
Subtotal for top 15 products.................... 252,067 404,222 335,526 313,912 456,790 246,407
Subtotal for all other U.S. exports............. 83,114 35,674 62,185 93,541 40,340 31,294
-----------------------------------------------------------
Total U.S. exports from Bahrain............. 335,181 439,896 397,711 407,453 497,130 277,701
----------------------------------------------------------------------------------------------------------------
Source: U.S. International Trade Commission Dataweb from official statistics of the U.S. Department of Commerce.
Note.--HTS is the Harmonized Tariff Schedule of the United States.

U.S. IMPORTS FROM BAHRAIN, 1999-2004
[In thousands of U.S. dollars]
----------------------------------------------------------------------------------------------------------------
Top 15 product descriptions, by HTS chapter 1999 2000 2001 2002 2003 2004
----------------------------------------------------------------------------------------------------------------
62 Articles of apparel and clothing accessories, 79,489 133,252 164,644 165,693 160,105 155,160
not knitted or crocheted...........................
27 Mineral fuels, mineral oils and products of 6,985 11,218 19,538 0 5,077 72,805
their distillation; bituminous substances; mineral
waxes..............................................
98 Special classification provisions, not elsewhere 15,668 18,951 78,784 85,355 84,581 40,762
specified or otherwise included....................
63 Made-up textile articles not elsewhere specified 0 66 956 589 9,579 40,450
or otherwise included; needlecraft sets; worn
clothing and worn textile articles; rags...........
76 Aluminum and articles thereof................... 80,741 82,766 46,592 63,972 36,859 35,809
29 Organic chemicals............................... 7,797 18,206 20,955 16,632 32,422 26,738
31 Fertilizers..................................... 11,813 30,368 46,166 24,788 28,404 20,688
52 Cotton, including yarns and woven fabrics 2,218 17,488 16,698 21,199 14,116 8,086
thereof............................................
84 Nuclear reactors, boilers, machinery and 43 523 197 41 259 1,012
mechanical appliances; parts thereof...............
99 Special import reporting provisions, not 466 619 822 841 818 817
elsewhere specified or otherwise included..........
61 Articles of apparel and clothing accessories, 17,887 21,924 25,163 12,653 3,569 700
knitted or crocheted...............................
71 Natural or cultured pearls, precious or 132 192 2,636 87 345 569
semiprecious stones, precious metals; precious
metal clad metals, articles thereof; imitation
jewelry; coin......................................
39 Plastics and articles thereof................... 23 80 94 338 715 562
94 Furniture; bedding, cushions etc.; lamps and 0 28 4 0 19 387
lighting fittings not elsewhere specified or
otherwise included; illuminated signs, nameplates
and the like; prefabricated buildings..............
68 Articles of stone, plaster, cement, asbestos, 49 20 65 105 205 187
mica or similar materials..........................
Subtotal for top 15 products.................... 223,310 335,700 423,314 392,292 377,073 404,733
Subtotal for all other U.S. imports............. 3,257 1,909 427 2,798 1,254 850
-----------------------------------------------------------
Total U.S. imports from Bahrain............. 226,567 337,609 423,740 395,090 378,327 405,583
----------------------------------------------------------------------------------------------------------------
Source.--U.S. International Trade Commission Dataweb from official statistics of the U.S. Department of
Commerce.
Note.--HTS is the Harmonized Tariff Schedule of the United States.

2. Tariffs and trade agreements

Bahrain is a member of the World Trade Organization (WTO),
and has bound its tariffs at rates ranging from zero to 125
percent ad valorem. Approximately 17 percent of shipments from
Bahrain entered the United States free of duty in 2003 under
the U.S. Generalized System of Preferences (GSP) program. In
total, about 48 percent of shipments from Bahrain entered the
United States free of duty in 2003 on a normal trade relations
(most-favored-nation) (NTR (MFN)) basis or under GSP or other
U.S. provisions. U.S. exports to Bahrain are generally subject
to a uniform tariff of 5 percent; exceptions include aircraft
(which enter Bahrain free of duty), alcoholic beverages (which
are subject to a 125 percent ad valorem duty), tobacco and
tobacco products (which are subject to a 100 percent ad valorem
duty), and miscellaneous items such as distilled water, and
some medical items, paper products, and aluminum products
(which are each subject to a 20 percent ad valorem duty). In
2000, Bahrain's average bound tariff was about 35.6 percent ad
valorem, while its average applied tariff was about 7.7
percent.
Since the late 1990s, Bahrain has taken steps to liberalize
its trade and investment regime. In 1999, the United States and
Bahrain negotiated a comprehensive bilateral investment treaty
(BIT), i.e. the Treaty Between the Government of the United
States of America and the Government of the State of Bahrain
Concerning the Encouragement and Reciprocal Protection of
Investment. The BIT was based on the standard U.S. prototype
for investment agreements. Because the BIT provides a full
range of investment disciplines, the United States and Bahrain
did not include an investment chapter in the Agreement.
However, the market access, domestic regulation, and
transparency provisions of Chapter 10 of the Agreement (Cross-
Border Trade in Services) govern the treatment of investors and
investments in services sectors. The BIT: (1) applies to all
forms of U.S. investment in Bahrain; (2) requires that covered
U.S. investments receive the better of national treatment or
most-favored-nation treatment provided by Bahrain; (3)
prohibits the imposition of performance requirements on covered
U.S. investments by Bahrain; (4) allows expropriation of U.S.
investments by Bahrain only in accordance with customary
international law; and (5) allows U.S. investors to bring
disputes with the Government of Bahrain to binding
international arbitration, among other provisions. In 2002,
Bahrain concluded a bilateral Trade and Investment Framework
Agreement (TIFA) with the United States. Over the past several
years, Bahrain has pursued economic liberalization and deeper
commercial ties with the United States. The government
liberalized foreign property ownership and tightened anti-
money-laundering laws. Though oil revenues generated 63 percent
of total government revenue in 2002, Bahrain remains committed
to diversifying its economy. Diversification efforts have
focused on financial services, and the government is working to
develop other service industries, including information
technology, healthcare, and education.
In addition to the United States-Bahrain Free Trade
Agreement, the Government of Bahrain has signed bilateral trade
agreements with Egypt, Tunisia, Yemen, Bangladesh, China,
Singapore, France, Greece, the Philippines, Thailand, Malaysia,
Syria, Jordan, Morocco, Turkey, South Korea, India, United
Kingdom, Australia, Russia, and Algeria. In addition, Bahrain
is a member of the Arab free trade area (in force since 1998),
which also includes Egypt, Iraq, Jordan, Kuwait, Lebanon,
Libya, Morocco, Oman, the Palestinian Authority, Qatar, Saudi
Arabia, Sudan, Syria, Tunisia, the United Arab Emirates, and
Yemen. Bahrain is also a member of the Gulf Cooperation Council
(founded in 1981), which in addition to Bahrain includes
Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab
Emirates. The Gulf Cooperation Council launched a customs union
in 2003, with plans to establish a monetary union in 2005, a
common market in 2007, and a single currency by 2010. In
addition, the Gulf Cooperation Council is engaged in ongoing
negotiations with the European Union to conclude a free trade
agreement.
Bilateral trade data alone fail to capture the full
importance of Bahrain as a trading partner of the United
States. In May 2003, President Bush proposed a plan of
graduated steps for Middle Eastern nations to increase trade
and investment with the United States and others in the world
economy, culminating with the establishment of a Middle East
Free Trade Area (MEFTA) by the year 2013. On July 22, 2004, the
report of the 9/11 Commission (Final Report of the National
Commission on Terrorist Attacks Upon the United States) was
released; that report contains, as one of its key
recommendations, that a ``comprehensive U.S. strategy to
counter terrorism should include economic policies that
encourage development, more open societies, and opportunities
for people to improve the lives of their families and to
enhance prospects for their children's future.'' The Agreement
with Bahrain is an important achievement in that effort, and
joins previously concluded bilateral trade agreements between
the United States and Israel, Jordan, and Morocco, as a sound
model for other nations in the Middle East to become full
participants in the rules-based system of global trade. The
Agreement with Bahrain is therefore an important part of a
broader effort to encourage development, more open societies,
and opportunities for people to improve the lives of their
families and to enhance prospects for their children's future,
throughout the Middle East.

3. U.S. International Trade Commission study

In October 2004, the U.S. International Trade Commission
(ITC) released the results of its investigation (Investigation
No. TA-2104-15) into the probable economic effect of a United
States-Bahrain Free Trade Agreement (USITC Pub. 3726). In prior
investigations of free trade agreements, the ITC prepared
estimates of the overall change in U.S. economic welfare
attributable to full implementation of those trade agreements.
With respect to Bahrain, however, the ITC was unable to prepare
such an estimate because the data available to the ITC were not
specific to Bahrain, but instead were aggregated with other
data for the Middle East region. In lieu of such an overall
estimate of the impact on net U.S. welfare attributable to the
United States-Bahrain Free Trade Agreement, the ITC focused on
the apparel sector because approximate data were available and
because U.S. imports subject to the elimination of import
restraints under the Agreement are concentrated in the apparel
sector (i.e. apparel accounts for 91 percent of the duties
collected on U.S. imports from Bahrain). The ITC concluded that
the net welfare gain to the United States attributable to the
elimination of tariffs on all imports from Bahrain falling
under chapters 61 and 62 of the Harmonized Tariff Schedule of
the United States is estimated to be $19.4 million. This
estimate does not, however, account for the elimination of
textile quotas under the WTO Agreement on Textiles and Clothing
effective January 1, 2005, nor does it account for the 10-year
tariff preference level (TPL) provided for under the Agreement.
The ITC found that U.S. imports of apparel from Bahrain are
likely to be substantially higher than they would be in the
absence of the Agreement. However, because higher apparel
imports from Bahrain would be largely offset by lower imports
from the rest of the world, and because imports from Bahrain
are such a small portion of total U.S. imports of apparel, the
ITC concluded that total apparel imports into the United States
are likely to increase by only a small amount. Consequently,
the ITC found that the Agreement is likely to have little or no
adverse effect on the U.S. apparel industry.
With respect to services, the ITC concluded that the
Agreement is not expected to lead to measurable changes in U.S.
exports or imports of services. The ITC further found, however,
that U.S.-based service providers likely will benefit from
improved market access conditions in some service industries
(e.g., providers of insurance and asset management services),
and increased regulatory transparency.

D. Overview of the United States-Bahrain Free Trade Agreement

1. Overview of the Agreement

The United States-Bahrain Free Trade Agreement establishes
a bilateral free trade area that eliminates tariffs on most
merchandise trade between the United States and Bahrain. The
Agreement liberalizes trade in services, and contains
provisions that cover telecommunications, electronic commerce,
intellectual property rights, labor, environment, and
government procurement. The Agreement also contains a mechanism
for settling disputes that arise under the Agreement.
Throughout the Agreement there are important provisions that
promote bilateral consultation and cooperation, procedural and
substantive due process, administrative and judicial review,
transparency, and the rule of law.

2. USTR Summary of the Agreement

The Office of the United States Trade Representative (USTR)
prepared a summary of the United States-Bahrain Free Trade
Agreement which was included among the documents transmitted to
Congress on November 16, 2005. This summary was distributed to
Members of the Committee to aid in their consideration of the
implementing legislation, and is reprinted below:

UNITED STATES-BAHRAIN FREE TRADE AGREEMENT

SUMMARY OF THE AGREEMENT

This summary briefly describes key provisions of the United
States-Bahrain Free Trade Agreement (``FTA'' or ``Agreement'').

Preamble and Chapter One: Establishment of a free trade area and
definitions

The Preamble to the Agreement provides the Parties'
underlying objectives in entering into the Agreement and
provides context to the provisions that follow. Chapter One
sets out provisions establishing a free trade area. The Parties
affirm their existing rights and obligations under the
Marrakesh Agreement Establishing the World Trade Organization
(``WTO'') and other agreements to which both the United States
and Bahrain are party. Chapter One also includes definitions of
certain terms that recur in various chapters of the Agreement.

Chapter Two: National treatment and market access for goods

Chapter Two sets out the Agreement's principal rules
governing trade in goods. It requires each Party to treat goods
from the other Party in a non-discriminatory manner, provides
for the phase-out of tariffs on ``originating goods'' (as
defined in Chapter Four (Rules of Origin)) traded between the
two Parties, and requires the elimination of a wide variety of
non-tariff barriers that restrict or distort trade flows.
Tariff Elimination. Chapter Two provides rules for the
elimination of customs duties on originating goods traded
between the Parties no later than 10 years after the Agreement
enters into force. The Agreement is comprehensive, containing
U.S. and Bahraini elimination commitments on all tariffs. For
example, 100 percent of bilateral trade in consumer and
industrial goods (including textile and apparel goods) will
become duty-free immediately upon the Agreement's entry into
force. In addition, Bahrain will provide immediate duty-free
access for U.S. agricultural exports in 98 percent of
agricultural tariff lines. Certain sensitive agricultural goods
in Bahrain and the United States will have longer periods for
duty elimination (up to 10 years) or will be subject to other
provisions, including, in some cases, the application of
transitional preferential tariff-rate quotas (``TRQs'') by the
United States. Annex 2-B of the Agreement includes detailed
provisions on staging of tariff reductions and application of
TRQs for certain agricultural goods. Chapter Two also provides
that the Parties may agree to speed up tariff phase-outs on a
product-by-product basis after the Agreement takes effect.
Temporary Admission. Chapter Two requires the Parties to
provide duty-free temporary admission for certain goods without
the usual bonding requirement that applies to imports. Such
items include professional equipment, goods for display or
demonstration, and commercial samples.
Import/Export Restrictions, Fees, and Formalities. The
Agreement incorporates the prohibition on import and export
restrictions set out in Article XI of the General Agreement on
Tariffs and Trade (``GATT'') 1994 and specifies that these
include: (1) export and import price requirements (except under
antidumping and countervailing duty orders); (2) import
licensing conditioned on the fulfillment of a performance
requirement; and (3) voluntary export restraints inconsistent
with Article VI of GATT 1994. In addition, a Party must limit
fees and charges imposed on or in connection with importation
or exportation to the approximate cost of services rendered, in
accordance with Article VIII of GATT 1994. Finally, the United
States has also agreed not to apply its merchandise processing
fee on imports of originating goods from Bahrain.
Agricultural Export Subsidies. Chapter Two provides that
the Parties will work together in WTO agriculture negotiations
to eliminate all forms of agricultural export subsidies. The
Chapter further provides that each Party will eliminate export
subsidies on agricultural goods destined for the other country.
According to Article 2.11, neither Party may introduce or
maintain a subsidy on agricultural goods destined for the other
Party unless the exporting Party believes that a third country
is subsidizing its exports to the other Party. In such a case,
the exporting Party may initiate consultations with the
importing Party to develop measures the importing Party may
adopt to counteract such subsidies. If the importing Party
agrees to such measures, the exporting Party must refrain from
applying export subsidies to its exports of the good to the
importing Party.

Chapter Three: Textiles and apparel

Chapter Three sets out provisions addressing trade in
textile and apparel goods, including an ``emergency action''
provision, special rules of origin, and customs cooperation
provisions aimed at preventing circumvention.
Emergency Actions. To deal with emergency conditions
resulting from the elimination or reduction of customs duties,
the Agreement includes an ``emergency action'' provision that
permits the importing country temporarily to re-impose normal
trade relations (most-favored-nation) (``NTR'' (``MFN'')) duty
rates on imports of textile or apparel goods that cause or
threaten serious damage to a domestic industry. Emergency
measures may be applied for a maximum aggregate period of three
years, and a Party may not apply an emergency measure on a good
beyond 10 years after the Party must eliminate duties on that
good under the Agreement.
A Party applying an emergency action must provide the other
Party with mutually agreed compensation in the form of trade
concessions that are substantially equivalent to the increased
duties. If the Parties cannot agree on compensation, the
exporting Party may raise duties up to NTR (MFN) levels on any
goods from the importing Party to achieve trade effects
substantially equivalent to the emergency action.
Rules of Origin and Related Matters. Chapter Three includes
special rules for determining whether a textile or apparel good
is an ``originating good,'' including a de minimis exception
for non-originating yarns or fibers, a rule for treatment of
sets, and consultation provisions. The de minimis rule applies
to goods that ordinarily would not be considered originating
goods because certain of their fibers or yarns do not undergo
an applicable change in tariff classification. Under the rule,
the Parties will consider a good to be originating if such
fibers or yarns constitute seven percent or less of the total
weight of the component of the good that determines the tariff
classification. This special rule does not apply to elastomeric
yarns.
Chapter Three also calls for the United States and Bahrain
to provide tariff preference levels (``TPLs'') for a limited
quantity of specific fabric and apparel goods from non-Party
sources. TPL goods will be accorded preferential tariff
treatment as if they were originating goods. For the specified
fabric, apparel, and made-up goods, TPL status will apply to a
maximum of 65 million square meter equivalents for each of the
first 10 years after the Agreement's entry into force. After 10
years, TPL status will not be available for such goods.
The Annex to Chapter Three includes specific rules of
origin for textile and apparel goods. A textile or apparel good
will generally qualify as an ``originating good'' only if all
processing after fiber formation (i.e., yarn-spinning, fabric
production, cutting, and assembly) takes place in the territory
of one or both of the Parties, or if there is an applicable
change in tariff classification under Annex 3-A.
Customs Cooperation. Chapter Three also includes a customs
cooperation article that sets out detailed commitments designed
to prevent circumvention of the Agreement's rules governing
textiles and apparel. The Parties will cooperate in enforcing
relevant laws, in ensuring the accuracy of claims of origin,
and in preventing circumvention of relevant international
agreements. A Party may conduct site visits under certain
conditions to verify that circumvention is not occurring, and
the other Party must provide information necessary for the
visits. An importing Party may respond to circumvention and
actions that impede it from detecting circumvention, including
by denying preferential tariff treatment under the Agreement to
imports of specific textile or apparel goods or to all imports
of textile or apparel goods from particular enterprises. Either
Party may convene bilateral consultations to resolve technical
or interpretive issues that arise under the Chapter's customs
cooperation article.

Chapter Four: Rules of origin

To benefit from various trade preferences provided under
the Agreement, including reduced duties, a good must qualify as
an ``originating good'' under the rules of origin set out in
Chapters Three (Textiles and Apparel) and Four and Annexes 3-A
and 4-A. These rules ensure that the tariff and other benefits
of the Agreement accrue primarily to firms that produce or
manufacture goods in the two Parties' territories. They are
similar in approach to those included in the United States-
Morocco, United States-Jordan, and United States-Israel free
trade agreements.
Key Concepts. Chapter Four provides general criteria under
which a good that has been imported directly from one Party
into the other Party may qualify as an ``originating good:''
When the good is wholly grown, produced, or
manufactured in one or both of the Parties (e.g., crops
grown or minerals extracted in the United States);
When the good: (1) is not covered by the
rules in Annex 3-A or Annex 4-A; (2) is a ``new or
different article of commerce'' that has been grown,
produced, or manufactured in the territory of one or
both of the Parties; and (3) the sum of (a) the value
of materials produced in the territory of one or both
of the Parties and (b) the ``direct costs of processing
operations'' performed in the territory of one or both
of the Parties is at least 35 percent of the appraised
value of the good at the time it is imported into the
territory of a Party; or
When the good is covered by the rules in
Annex 3-A or Annex 4-A and meets the requirements of
the applicable Annex. (Annex 3-A contains specific
rules of origin for textile and apparel goods. Annex 4-
A contains specific rules of origin on goods such as
citrus juices; dairy products; sugar; sweetened cocoa
powder; plastics; ignition wiring sets; and motor
vehicle parts.)
Chapter Four defines ``new or different article of
commerce'' as ``a good that has been substantially transformed
from a good or material that is not wholly the growth, product,
or manufacture of one or both of the Parties and that has a new
name, character, or use distinct from the good or material from
which it was transformed.'' It defines ``direct costs of
processing operations'' as ``those costs either directly
incurred in, or that can be reasonably allocated to, the
growth, production, or manufacture of the good.'' Such costs
typically include labor costs, depreciation on machinery or
equipment, research and development, inspection costs, and
packaging costs, among others. They typically do not include
profit and general business expenses, such as salaries,
insurance, and advertising.
Chapter Four clarifies that a good will not be considered a
``new or different article of commerce'' merely by virtue of
simple combining or packaging operations or mere dilution with
water or another substance that does not change the
characteristics of the good.
Declarations of Origin. Under the Chapter, importers who
wish to claim preferential tariff treatment for particular
goods must submit, on the request of the importing Party's
customs authorities, a ``declaration'' providing all pertinent
information concerning the production of the good. The
Agreement provides that a Party should request a declaration
only when it has reason to question the accuracy of a claim of
origin or when the Party is conducting a random verification. A
Party may only deny preferential treatment in writing and must
provide legal and factual findings.
Consultations. Chapter Four calls for the Parties to work
together to ensure the effective and uniform application of the
Chapter. The Chapter permits the creation of ad hoc working
groups or a subcommittee of the Joint Committee to discuss
necessary amendments or revisions. In addition, Article 4.13
provides that, at an appropriate time, the United States and
Bahrain ``shall enter into discussions with a view to deciding
the extent to which materials that are products of countries in
the Middle East or North Africa region may be counted for
purposes of satisfying the origin requirement under this
Agreement as a step toward achieving regional integration.''
Finally, in a separate agreement set out in a side letter
regarding Chapter Four, the Parties provide that, for purposes
of determining whether a good is a ``new or different article
of commerce that has been grown, produced, or manufactured''
for purposes of Chapter Four, each country is to be guided by
the rules of origin set forth in section 102.20 of the United
States Customs Regulations (19 CFR 102.20).

Chapter Five: Customs administration

Chapter Five establishes rules designed to facilitate trade
through increased transparency, predictability, and efficiency
in each Party's customs procedures. It also provides for
cooperation between the Parties on customs matters.
General Principles. The United States and Bahrain will
observe certain transparency requirements. The Parties must
promptly publish their customs measures on the Internet and,
where possible, solicit public comments before introducing or
amending their customs regulations. Each Party also must
provide written advance rulings, upon request, to its importers
and to exporters of the other Party regarding whether a good
qualifies as an ``originating good'' under the Agreement, as
well as on other customs matters. The Agreement allows Bahrain
up to two years to comply with the provisions relating to
advance rulings. In addition, each Party must guarantee
importers access to both administrative and judicial review of
customs decisions. The Parties also must release goods from
customs promptly and expeditiously clear express shipments.
Cooperation. Chapter Five also is designed to enhance
customs cooperation. It encourages the Parties to give each
other advance notice of customs developments likely to affect
the Agreement. The Chapter calls for the Parties to cooperate
in securing compliance with each other's customs measures
related to the Agreement and to import and export restrictions.
It includes specific provisions requiring the Parties to share
customs information where a Party has a reasonable suspicion of
unlawful activity in connection with goods traded between the
two countries.

Chapter Six: Sanitary and phytosanitary measures

Chapter Six defines the Parties' obligations to one another
regarding sanitary and phytosanitary (``SPS'') measures. SPS
measures are laws or regulations that protect human, animal, or
plant life or health from certain risks, including plant- and
animal-borne pests and diseases, additives, contaminants,
toxins, or disease-causing organisms in food and beverages.
Under Chapter Six, the Parties affirm their rights and
obligations with respect to each other under the WTO Agreement
on the Application of Sanitary and Phytosanitary Measures. They
also affirm their desire to create a forum through the Joint
Committee on SPS matters. However, neither Party may invoke the
FTA's dispute settlement procedures for a matter arising under
the Chapter. Instead, any SPS dispute between the Parties must
be resolved under the applicable WTO agreement(s) and rules.

Chapter Seven: Technical barriers to trade

Under Chapter Seven, the Parties will build on WTO rules to
promote transparency, accountability, and cooperation between
the Parties on standards issues.
Key Concepts. The term ``technical barriers to trade''
(``TBT'') refers to barriers that may arise in preparing,
adopting, or applying voluntary product standards, mandatory
product standards (``technical regulations''), and procedures
used to determine whether a particular good meets such
standards (``conformity assessment'' procedures).
International Standards. The principles articulated in the
WTO TBT Committee Decision on Principles for the Development of
International Standards, Guides and Recommendations emphasize
the need for openness and consensus in the development of
international standards. Chapter Seven requires the Parties to
apply these principles.
Cooperation. Chapter Seven sets out multiple means for
cooperation between the Parties to reduce barriers and improve
market access. The Chapter specifies that the Office of the
United States Trade Representative and Bahrain's Ministry of
Commerce will serve as TBT Chapter Coordinators responsible for
facilitating this cooperation.
Conformity Assessment. Chapter Seven provides for a
dialogue between the Parties on ways to facilitate the
acceptance of conformity assessment (i.e., testing to determine
whether a product or service meets applicable standards)
results. Chapter Seven further provides that, where a Party
recognizes conformity assessment bodies in its own territory,
it should recognize bodies in the territory of the other Party
on the same terms.
Transparency. Chapter Seven contains various transparency
obligations, including obligations to: (1) permit persons of
the other Party to participate in the development of technical
regulations, standards, and conformity assessment procedures on
a non-discriminatory basis; (2) transmit regulatory proposals
notified under the TBT Agreement directly to the other Party;
(3) describe in writing the objectives of and reasons for
regulatory proposals; and (4) accept and respond in writing to
comments on regulatory proposals. These provisions become
effective no later than five years after the Agreement enters
into force.

Chapter Eight: Safeguards

Chapter Eight establishes a bilateral safeguard mechanism
that will be available to aid domestic industries that sustain
or are threatened with serious injury due to increased imports
resulting from tariff reductions or elimination under the
Agreement. The Chapter does not affect either government's
rights or obligations under the WTO's safeguard provisions
(global safeguards) or under other WTO trade remedy rules.
Chapter Eight authorizes each Party to impose temporary
duties on a good imported from the other Party if, as a result
of the reduction or elimination of a duty under the Agreement,
the good is being imported in such increased quantities and
under such conditions as to constitute a substantial cause of
serious injury, or threat of serious injury, to a domestic
industry producing a ``like'' or ``directly competitive'' good.
Absent agreement by the other Party, a Party may only apply
a safeguard measure to a good during the first 10 years that
the FTA is in force. A safeguard measure may take one of two
forms--a temporary increase in duties to NTR (MFN) levels or a
temporary suspension of duty reductions called for under the
Agreement. A safeguard measure may last for a maximum aggregate
period of three years. If a measure lasts more than one year,
the Party must liberalize it at regular intervals. Chapter
Eight incorporates by reference certain procedural and
substantive investigation requirements of the WTO Agreement on
Safeguards.
If a Party imposes a bilateral safeguard measure, Chapter
Eight requires it to provide the other Party offsetting trade
compensation. If the Parties cannot agree on the amount or
nature of the compensation, the Party entitled to compensation
may suspend ``substantially equivalent'' trade concessions that
it has made to the other Party. A Party may not impose a
safeguard measure under Chapter Eight more than once on any
good. Special safeguard provisions are set out for textile and
apparel goods in Chapter Three (Textiles and Apparel).
Global Safeguards. Chapter Eight maintains each Party's
right to take action under Article XIX of GATT 1994 and the WTO
Agreement on Safeguards against imports from all sources.

Chapter Nine: Government procurement

Chapter Nine provides comprehensive obligations requiring
each Party to apply fair and transparent procurement procedures
and rules and prohibiting each government and its procuring
entities from discriminating in purchasing practices against
goods, services, and suppliers from the other country. The
rules of Chapter Nine are broadly based on WTO procurement
rules. (Bahrain is not a party to the WTO Agreement on
Government Procurement.)
General Principles. Chapter Nine establishes a basic rule
of ``national treatment,'' meaning that each Party's
procurement rules and the entities applying those rules must
treat goods, services, and suppliers of such goods and services
from the other Party in a manner that is ``no less favorable''
than the treatment their domestic counterparts receive. The
Chapter similarly bars discrimination against locally
established suppliers on the basis of foreign affiliation or
ownership. Chapter Nine also provides rules aimed at ensuring a
fair and transparent procurement process.
Coverage and Thresholds. Chapter Nine applies to purchases
and other means of obtaining goods and services valued above
certain monetary thresholds by those government departments,
agencies, and enterprises listed in each Party's schedule.
Specifically, the Chapter applies to procurements by listed
``central'' (i.e., Bahraini or U.S. federal) government
agencies of goods and services valued at $175,000 or more and
construction services valued at $7,611,532 or more.\1\ The
equivalent thresholds for purchases by ``other entities'' are
$250,000 for goods and services and $9,368,478 for construction
services. All thresholds, except the $250,000 threshold, are
subject to adjustment for inflation.
---------------------------------------------------------------------------
\1\ These thresholds are subject to adjustment every two years
according to a ``Threshold Adjustment Formula'' set out in the Annex to
Chapter Nine. In addition, as stated in that Annex, there are specific
required threshold amounts during the first two years of the
Agreement's effectiveness.
---------------------------------------------------------------------------
Transparency. Chapter Nine establishes rules designed to
ensure transparency in procurement procedures. Each Party must
publish its laws, regulations, and other measures governing
procurement, along with any changes to those measures, and
must, upon request, provide an explanation regarding any such
measure to the other Party. Procuring entities must publish
notices of procurement opportunities in advance. The Chapter
also lists minimum information that such notices must include.
Tendering Rules. Chapter Nine provides rules for setting
deadlines on ``tendering'' (bidding on government contracts).
It requires procuring entities to give suppliers all the
information they need to prepare tenders, including the
criteria that procuring entities will use to evaluate tenders.
Entities must also, where appropriate, base their technical
specifications (i.e., detailed descriptions of the goods or
services to be procured) on performance-oriented criteria and
international standards. Chapter Nine provides that procuring
entities may not write technical specifications to favor a
particular supplier, good, or service. It also sets out rules
that procuring entities must follow when they use limited
tendering, i.e., when they limit the set of suppliers that may
bid on a contract.
Award Rules. Chapter Nine requires all tenders for a
contract must be considered, unless submitted by an otherwise
disqualified supplier. The tender must meet the criteria set
out in the tender documentation, and procuring entities must
base their award of contracts on those criteria. Procuring
entities must publish information on awards, including the name
of the supplier, a description of the goods or services
procured, and the value of the contract. Chapter Nine also
calls for each Party to ensure that suppliers may bring
challenges against procurement decisions before independent
reviewers.
Additional Provisions. Chapter Nine is designed to promote
integrity in each Party's procurement practices, including by
requiring the Parties to adopt and maintain procedures that
disqualify suppliers that a Party has determined to have
engaged in fraudulent or illegal action in relation to
procurement. It establishes procedures under which a Party may
change the extent to which the Chapter applies to its
government entities, such as when a Party privatizes an entity
whose purchases are covered under the Chapter. It also provides
that Parties may adopt or maintain measures necessary to
protect: (1) public morals, order, or safety; (2) human,
animal, or plant life or health; or (3) intellectual property.
Parties may also adopt measures relating to procurement of
goods or services of handicapped persons, philanthropic
institutions, or prison labor.

Chapter Ten: Cross-border trade in services

Chapter Ten governs measures affecting cross-border trade
in services between the United States and Bahrain. Chapter
provisions are drawn in part from the services provisions of
the NAFTA and the WTO General Agreement on Trade in Services
(``GATS''), as well as priorities that have emerged since those
agreements.
Key Concepts. Under the Agreement, cross-border trade in
services covers the supply of a service:
from the territory of one Party into the
territory of the other (e.g., electronic delivery of
services from the United States to Bahrain);
in the territory of a Party by a person of
that Party to a person of the other Party (e.g., a
Bahraini company provides services to U.S. visitors in
Bahrain); and
by a national of a Party in the territory of
the other Party (e.g., a U.S. lawyer provides legal
services in Bahrain).
General Principles. Among Chapter Ten's core obligations
are requirements to provide national treatment and MFN
treatment to service suppliers of the other Party. Thus, each
Party must treat service suppliers of the other Party no less
favorably than its own suppliers or those of any other country.
This commitment applies to state and local governments as well
as the federal government. The Chapter's provisions relate to
the rights of existing service suppliers as well as those who
seek to supply services, subject to any reservations by either
Party. The Chapter also includes a provision prohibiting the
Parties from requiring firms to establish a local presence as a
condition for supplying a service on a cross-border basis. In
addition, certain types of market access restrictions to the
supply of services (e.g., rules that limit the number of firms
that may offer a particular service or that restrict or require
specific types of legal structures or joint ventures with local
companies in order to supply a service) are also barred. The
Chapter's market access rules apply both to services supplied
on a cross-border basis and through local investments pursuant
to the Parties' bilateral investment treaty, discussed below.
Sectoral Coverage and Non-Conforming Measures. Chapter Ten
applies across virtually all services sectors. The Chapter
excludes most financial services and air transportation,
although it does apply to specialty air services and aircraft
repair and maintenance. Each Party has listed in Annexes those
measures in particular sectors for which it negotiated
exemptions from the Chapter's core obligations. Any non-
conforming aspects of all current U.S. state and local laws and
regulations are exempted from these core obligations. A Party
may liberalize a measure that it has exempted, but it may not
make such measures more restrictive (though certain market
access commitments are exempted from this obligation).
Transparency and Domestic Regulation. Provisions on
transparency and domestic regulation complement the core rules
of Chapter Ten. The transparency rules apply to the development
and application of regulations governing services. The
Chapter's rules on domestic regulation govern the operation of
approval and licensing systems for service suppliers. Like the
Chapter's market access rules, its provisions on transparency
and domestic regulation cover services supplied both on a
cross-border basis and through local investments under the
Parties' bilateral investment treaty, discussed below.
Exclusions. Chapter Ten excludes any service supplied ``in
the exercise of governmental authority,'' that is, a service
that is provided on a non-commercial and non-competitive basis.
Chapter Ten also does not generally apply to government
subsidies, although the Parties have undertaken a commitment
relating to cross-subsidization of express delivery services.
The Parties have also negotiated an Annex regarding the
regulation of professional services. Under Annex 10-B, the
Parties will endeavor to develop mutually acceptable standards
and criteria for licensing and certification of professional
service suppliers. Such standards and criteria may be developed
with regard, among other things, to: (1) accreditation of
schools or academic programs; (2) qualifying examinations for
licensing; (3) standards of professional conduct and the nature
of disciplinary action for non-conformity with those standards;
(4) requirements for knowledge of such matters as local laws,
regulations, language, geography, or climate; and (5) consumer
protection.
Investment. In 1999, the United States and Bahrain
negotiated a comprehensive bilateral investment treaty
(``BIT''), the Treaty Between the Government of the United
States of America and the Government of the State of Bahrain
Concerning the Encouragement and Reciprocal Protection of
Investment (1999). The BIT was based on the standard U.S.
prototype for investment agreements. The BIT: (1) applies to
all forms of U.S. investment in Bahrain; (2) requires that
covered U.S. investments receive the better of national
treatment or MFN treatment provided by Bahrain; (3) prohibits
the imposition of performance requirements on covered U.S.
investments by Bahrain; (4) allows expropriation of U.S.
investments by Bahrain only in accordance with customary
international law; and (5) allows U.S. investors to bring
disputes with the Bahraini government to binding international
arbitration, among other provisions. Because the BIT provides a
full range of investment disciplines, the United States and
Bahrain did not include an investment chapter in the FTA.
However, as noted above, the market access, domestic
regulation, and transparency provisions of Chapter Ten govern
the treatment of investors and investments in services sectors
pursuant to the BIT.
Side Letters. Finally, in side letters to Chapter Ten that
are part of the Agreement, the Parties clarify that: (1)
Bahrain may prohibit gambling (and the provision of gambling
services) and treat it as a criminal offense, consistent with
WTO rules; and (2) no provision of the Agreement imposes
obligations on the Parties with respect to immigration or--
consistent with Chapter Fifteen--the right to secure employment
in the territory of a Party.

Chapter Eleven: Financial services

Chapter Eleven provides rules governing each Party's
treatment of financial institutions of the other Party and
cross-border trade in financial services.
Key Concepts. The Chapter defines a ``financial
institution'' as any financial intermediary or other
institution authorized to do business and regulated or
supervised as a financial institution under the law of the
Party where it is located. A ``financial service'' is any
service of a financial nature, including, for example,
insurance, banking, securities, asset management, financial
information and data processing services, and financial
advisory services.
General Principles. Chapter Eleven's core obligations
parallel those in Chapter Ten (Cross-Border Trade in Services).
Specifically, Chapter Eleven imposes rules requiring national
treatment and MFN treatment, prohibits certain quantitative
restrictions on market access, and bars restrictions on the
nationality of senior management. These rules apply to measures
affecting financial institutions, including pre-establishment,
and to financial service suppliers that are currently supplying
or seek to supply on a cross-border basis.
Non-Conforming Measures. Similar to Chapter Ten, each Party
has listed in an Annex to Chapter Eleven particular financial
services measures for which it has negotiated exemptions from
the Chapter's core obligations. Any non-conforming aspects of
all current U.S. state and local laws and regulations are
exempted from these obligations. A Party may liberalize a
measure that it has exempted, but it may not make such measures
more restrictive (though certain market access commitments are
exempted from this obligation).
Other Provisions. Chapter Eleven includes provisions on
transparency, as well as rules regarding ``new'' financial
services, self-regulatory organizations (the Agreement allows
Bahrain up to two years to comply with certain such
provisions), and the expedited availability of insurance
products.
Relationship to Other Chapters/Agreements. The existing BIT
provides U.S. investors in financial institutions in Bahrain
with certain benefits not included in the FTA, such as
compensation against expropriation, the right to free
transfers, and a process for investor-state dispute settlement.
Chapter Eleven also incorporates by reference certain
provisions of Chapter Ten, such as those relating to denial of
benefits and transfers and payments as they relate to cross-
border trade.
Side Letters. Finally, side letters to Chapter Eleven that
are part of the Agreement contain additional obligations with
respect to financial services. In particular, the Parties
provide that: (1) in reviewing the regulation of its insurance
sector, Bahrain will not fail to permit U.S. insurance
suppliers to sell their products through independent agents;
(2) a Party may impose registration and other administrative
requirements on insurance companies of the other Party, to the
extent such requirements are consistent with the Agreement; and
(3) the Parties may agree to extend Bahrain's six-month
exemption from the obligations of Chapter Eleven (i.e., its
non-conforming measure) regarding the market for non-life
insurance financial services.

Chapter Twelve: Telecommunications

Chapter Twelve includes disciplines beyond those imposed
under Chapter Ten (Cross-Border Trade in Services) and under
the BIT on regulatory measures affecting telecommunications
trade and investment. Chapter Twelve is designed to ensure that
service suppliers of each Party have non-discriminatory access
to public telecommunications services in the other country. In
addition, the Chapter requires each Party to regulate its
dominant telecommunications suppliers in ways that will ensure
a level playing field for new entrants from the other Party.
Chapter Twelve also seeks to ensure that telecommunications
regulations are set by independent regulators applying
transparent procedures and is designed to encourage adherence
to principles of deregulation and technological neutrality.
Key Concepts. Under Chapter Twelve, a ``public
telecommunications service'' is any telecommunications service
that a Party requires to be offered to the public generally.
The term includes voice and data transmission services. It does
not include the offering of ``value-added services'' (e.g.,
services that enable users to create, store, or process
information over a network).
Competition. Chapter Twelve establishes rules that reflect
the common elements of the Parties' laws promoting competition
in telecommunications services. It also provides flexibility to
account for changes that may occur through new legislation or
regulatory decisions. The Chapter includes commitments by each
Party to:
Ensure that all service suppliers of the
other Party that seek to access or use a public
telecommunications service in the Party's territory can
do so on reasonable and non-discriminatory terms (e.g.,
Bahrain must ensure that its public phone companies do
not provide preferential access to Bahraini banks or
Internet service providers, to the detriment of U.S.
competitors);
Give the other Party's telecommunications
suppliers, in particular, the right to interconnect
their networks with public networks in its territory at
reasonable rates;
Ensure that telecommunications suppliers of
the other Party that seek to build physical networks in
the Party's territory have access to key physical
facilities of dominant carriers, such as buildings,
where they can install equipment, thus facilitating
cost-effective investment;
Ensure that telecommunications suppliers of
the other Party enjoy the right to lease lines to
supplement their own networks or, alternatively,
purchase telecommunications services from dominant
domestic suppliers and resell them in order to build a
customer base; and
Regulation. The Chapter also addresses key regulatory
concerns that may create barriers to trade and investment in
telecommunications services. In particular, the Parties:
Ensure that they will maintain open and
transparent telecommunications regulatory regimes,
including requirements to publish licensing
requirements and criteria and other government measures
relating to public telecommunications services;
Will require their telecommunications
regulators to explain their rule-making decisions and
provide foreign suppliers the right to challenge those
decisions;
May elect to deregulate telecommunications
services when competition exists and certain standards
are met; and
May not prevent telecommunications service
suppliers from choosing the technologies they consider
appropriate for supplying their services, subject to
legitimate public policy requirements.
Side Letters. Finally, side letters to Chapter Twelve that
are part of the Agreement provide that: (1) the manner through
which the Parties expect Bahrain will ensure cost-oriented
interconnection levels for international services; and (2)
Bahrain's commitment to issue any additional commercial mobile
services licenses in a technologically neutral manner.

Chapter Thirteen: Electronic commerce

Chapter Thirteen establishes rules designed to prohibit
discriminatory regulation of electronic trade in digitally
encoded products, such as computer programs, video, images, and
sound recordings. The Chapter contains state-of-the-art
provisions on electronic commerce, similar to those in recent
U.S. free trade agreements with Chile, Singapore, Australia,
and Morocco.
Customs Duties. Chapter Thirteen provides that a Party may
not impose customs duties on digital products of the other
Party that are transmitted electronically. The Chapter does not
preclude a Party from imposing duties on digital products of
the other Party that are fixed on a carrier medium, provided
that the duty is based on the cost or value of that medium
alone, rather than the cost or value of the digital content
stored on that medium.
Non-Discrimination. Chapter Thirteen requires the Parties
to apply the principles of national treatment and MFN treatment
to trade in electronically transmitted digital products. In
particular, a Party may not treat digital products less
favorably because such digital products: (1) have undergone
certain specific activities (e.g., creation, production, first
sale) in the territory of the other Party; or (2) are
associated with certain categories of persons of the other
Party (e.g., authors, performers, producers). Nor may a Party
treat digital products that have such a nexus to the other
Party less favorably than it treats like digital products with
such a nexus to a non-Party. These non-discrimination rules do
not apply to actions taken in accordance with the non-
conforming measures specifically exempted from the rules set
out in Chapter Ten (Cross-Border Trade in Services) or Chapter
Eleven (Financial Services).

Chapter Fourteen: Intellectual property rights

Chapter Fourteen complements and enhances existing
international standards for the protection of intellectual
property and the enforcement of intellectual property rights,
consistent with U.S. law.
General Provisions. Chapter Fourteen calls for the Parties
to ratify or accede to certain agreements on intellectual
property rights, including the International Convention for the
Protection of New Varieties of Plants, the Trademark Law
Treaty, the Brussels Convention Relating to the Distribution of
Programme-Carrying Satellite Signals (the ``Brussels
Convention''), the Protocol Relating to the Madrid Agreement
Concerning the International Registration of Marks, the
Budapest Treaty on the International Recognition of the Deposit
of Microorganisms (the ``Budapest Treaty''), the Patent
Cooperation Treaty, the WIPO Copyright Treaty, and the WIPO
Performances and Phonograms Treaty. The United States is
already a party to these agreements.
Chapter Fourteen also requires broad application of the
principle of national treatment, with only limited exceptions.
The general provisions further clarify the coverage of existing
subject matter and requirements for publication of all laws,
regulations, and procedures relating to the protection and
enforcement of intellectual property rights.
Trademarks and Geographical Indications. Chapter Fourteen
establishes rules concerning the protection of trademarks and
geographical indications. For example, Parties must provide the
owner of a registered trademark the exclusive right to prevent
its use in the course of trade for related goods and services
by any party not having the owner's consent. The Chapter also
sets out rules with respect to the registration of trademarks.
Each Party must provide protection for trademarks, including
protecting preexisting trademarks against infringement by later
geographical indications. Furthermore, the Chapter requires
that the Parties provide efficient and transparent procedures
governing the application for protection of trademarks and
geographical indications. The Chapter also provides for rules
on domain name management that require a dispute resolution
procedure to prevent trademark cyber-piracy.
Copyright and Related Rights. Chapter Fourteen provides for
broad protection of copyright and related rights, affirming and
building on rights set out in several international agreements.
For instance, each Party must provide copyright protection for
the life of the author plus 70 years (for works measured by a
person's life), or 70 years (for corporate works). The Chapter
clarifies that the right to reproduce literary and artistic
works, recordings, and performances encompasses temporary
copies, an important principle in the digital realm. It also
calls for each Party to provide a right of communication to the
public, which will further ensure that right holders have the
exclusive right to make their works available online. The
Chapter specifically requires protection for the rights of
performers and producers of phonograms.
To curb copyright piracy, Chapter Fourteen requires the
governments to use only legitimate computer software, setting
an example for the private sector. The Chapter also includes
provisions on anti-circumvention, under which the Parties
commit to prohibit tampering with technology used to protect
copyrighted works. In addition, Chapter Fourteen sets out
obligations with respect to the liability of Internet service
providers in connection with copyright infringements that take
place over their networks. Finally, recognizing the importance
of satellite broadcasts, Chapter Fourteen ensures that each
Party will protect encrypted program-carrying satellite
signals. It obligates the Parties to extend protection to the
signals themselves, as well as to the content contained in the
signals.
Patents. Chapter Fourteen also includes a variety of
provisions for the protection of patents. The Parties may only
exclude inventions from patentability to protect ordre public
or morality, including to protect human, animal, or plant life
or health or to avoid serious prejudice to the environment. The
Parties also may exclude from patentability animals and
diagnostic, therapeutic, and surgical procedures for the
treatment of humans or animals. The Parties also confirm the
availability of patents for new uses or methods of using a
known product. To guard against arbitrary revocation of
patents, each Party must limit the grounds for revoking a
patent to the grounds that would have justified a refusal to
grant the patent. The Chapter requires the Parties to provide
for patent term adjustments to compensate for unreasonable
delays that occur while granting the patent, as well as for
unreasonable curtailment of the effective patent term as a
result of the marketing approval process for pharmaceutical
products.
Certain Regulated Products. Chapter Fourteen includes
specific measures relating to certain regulated products,
specifically pharmaceuticals and agricultural chemicals. Among
other things, the Parties must protect test information
regarding safety and efficacy submitted in seeking marketing
approval for such products by precluding other firms from
relying on the information.
It provides specific periods for such protection--for
example, five years for new pharmaceuticals and 10 years for
new agricultural chemicals. It also requires the Parties to
adopt measures to prevent the marketing of a pharmaceutical
product during the term of a patent covering that product.
Enforcement Provisions. Chapter Fourteen also creates
obligations with respect to the enforcement of intellectual
property rights. Among these, it requires the Parties, in
determining damages, to take into account the value of the
legitimate goods as well as the infringer's profits. The
Chapter also provides for award of damages based on a fixed
range (i.e., ``statutory damages''), on the election of the
right holder in cases involving infringement of copyright and
related rights and trademark counterfeiting.
Chapter Fourteen provides that the Parties' law enforcement
agencies must have authority to seize suspected pirated and
counterfeit goods, the equipment used to make or transmit them,
and documentary evidence. Each Party must give its courts
authority to order the forfeiture and/or destruction of such
items. Chapter Fourteen also requires each Party to empower its
law enforcement agencies to take enforcement action at the
border against pirated or counterfeit goods without waiting for
a formal complaint. Chapter Fourteen provides that each Party
must apply criminal penalties against counterfeiting and
piracy, including end-user piracy.
Transition Periods. All provisions of the Chapter take
effect when the Agreement enters into force. However, Bahrain
may take up to one year after the Agreement enters into force
effect to ratify or accede to: (1) the Brussels Convention; and
(2) the Budapest Treaty.
Side Letters. Finally, two side letters to Chapter Fourteen
that are part of the Agreement contain additional obligations
on the part of Bahrain with respect to intellectual property
rights. In particular, Bahrain will adopt further measures: (1)
requiring effective written notice to Internet service
providers with respect to materials that are claimed to be
infringing a copyright; and (2) regarding the manufacture of
optical discs, including provisions concerning licensure,
registration, record keeping, and inspections, among others.

Chapter Fifteen: Labor

Chapter Fifteen sets out the Parties' commitments regarding
trade-related labor rights. As with other recent free trade
agreements, this Chapter draws on, but does not replicate, the
North American Agreement on Labor Cooperation (the supplemental
NAFTA labor agreement) and the labor provisions of the U.S.
free trade agreements with Chile, Singapore, and Jordan.
General Principles. Under Chapter Fifteen, the Parties
reaffirm their obligations as members of the International
Labor Organization (``ILO'') and their commitments under the
1998 ILO Declaration on Fundamental Principles and Rights at
Work. Each Party must strive to ensure that its law recognizes
and protects the fundamental labor principles spelled out in
the ILO declaration and listed in the Chapter. Each Party also
must strive to ensure it does not waive or otherwise derogate
from its labor laws to encourage bilateral trade or investment.
The Parties also commit to afford procedural guarantees that
ensure workers and employers have access to fair, equitable,
and transparent procedures for the enforcement of labor laws.
Effective Enforcement. Each Party commits not to fail to
effectively enforce its labor laws on a sustained or recurring
basis in a manner affecting bilateral trade. The Chapter
defines labor laws to include those related to: (1) the right
of association; (2) the right to organize and bargain
collectively; (3) a prohibition on the use of any form of
forced or compulsory labor; (4) labor protections for children
and young people, including a minimum age for the employment of
children and elimination of the worst forms of child labor; and
(5) acceptable conditions of work with respect to minimum
wages, hours, and occupational safety and health. While
committing each Party to effective labor law enforcement, the
Chapter also recognizes each Party's right to establish its own
labor laws, exercise discretion in investigatory, regulatory,
prosecutorial, and compliance matters, and allocate enforcement
resources. The U.S. commitment includes federal statutes and
regulations addressing these areas, but it does not cover state
or local labor laws.
Cooperation. Each Party may convene a national labor
advisory committee, made up of members of its public, including
representatives of labor and business organizations, to advise
it on the implementation of the Chapter. Each Party also will
designate a contact point for communications with the other
Party and the public regarding operation of the Chapter. In
addition, the Joint Committee (see Article 18.2) may establish
a Subcommittee on Labor Affairs comprising the relevant
officials from each Party's labor ministry and other
appropriate agencies to discuss the operation of Chapter
Fifteen. Meetings of the Subcommittee will normally include a
public session.
Finally, the Parties will establish a Labor Cooperation
Mechanism to address labor matters of common interest, such as:
(1) promoting fundamental rights and their effective
application; (2) developing unemployment assistance programs
and other social safety net programs; (3) improving working
conditions; (4) developing processes for regulating foreign
workers; (5) creating alternative forms of labor-management
collaboration; (6) eliminating gender discrimination in the
employment arena; and (7) utilizing labor statistics.
Consultations and Dispute Settlement. If a Party believes
that the other Party is not complying with its obligations,
Chapter Fifteen provides for consultations regarding any matter
arising under the Chapter, including the opportunity to refer a
matter to the Subcommittee on Labor Affairs, if established. If
the matter concerns a Party's compliance with the Chapter's
effective enforcement obligation, the complaining Party may
choose to pursue consultations under Chapter Fifteen or Chapter
Nineteen (Dispute Settlement). If a Party chooses to request
consultations under Chapter Nineteen, consultations under
Chapter Fifteen on the same matter cease. In addition, after 60
days of consultations under Chapter Fifteen, the Parties may
agree to refer the matter concerning compliance with the
effective enforcement obligation directly to the Joint
Committee for resolution under Chapter Nineteen.

Chapter Sixteen: Environment

Chapter Sixteen sets out the Parties' commitments regarding
environmental protection. Chapter Sixteen draws on, but does
not replicate, the North American Agreement on Environmental
Cooperation (the supplemental NAFTA environmental agreement)
and the environmental provisions included in U.S. free trade
agreements with Chile, Singapore, and Jordan.
General Principles. Each Party commits not to fail to
effectively enforce its environmental laws on a sustained or
recurring basis in a manner affecting bilateral trade. The
Parties must ensure that their laws provide for high levels of
environmental protection. Each Party also must strive not to
weaken or reduce its environmental laws to encourage bilateral
trade or investment. The Chapter also includes commitments to
provide certain procedural guarantees that ensure fair,
equitable, and transparent proceedings for the administration
and enforcement of environmental laws. In addition, the Chapter
calls on the Parties to encourage the development of voluntary
measures and market-based mechanisms for achieving and
maintaining high levels of environmental protection. The
Parties also must ensure that opportunities exist for the
public to provide input concerning the implementation of the
Chapter.
Cooperation. Chapter Sixteen includes commitments to
enhance bilateral cooperation in environmental matters. In
particular, the Parties agree to undertake activities pursuant
to a United States-Bahrain Memorandum of Understanding on
Environmental Cooperation. The Parties also commit to continue
to seek means to enhance the mutual benefits of multilateral
environmental agreements (``MEAs'') and trade agreements to
which they are both party, and to consult regularly with
respect to the WTO negotiations regarding MEAs.
In addition, at the request of either Party, a Subcommittee
on Environmental Affairs will be established to discuss the
operation of Chapter Sixteen. The subcommittee will include the
relevant officials from each Party's trade and environmental
agencies. Meetings of the subcommittee will normally include an
open session, and any decisions or reports of the subcommittee
concerning implementation of Chapter Sixteen will normally be
made public.
Effective Enforcement. The U.S. commitment on enforcement
of environmental laws applies to federal environmental statutes
and regulations enforceable by the federal government, but it
does not cover state or local environmental laws. The Chapter
also recognizes the right of each Party to: (1) establish its
own environmental laws; (2) exercise discretion in regulatory,
prosecutorial, and compliance matters; and (3) allocate
enforcement resources.
Consultations and Dispute Settlement. If a Party believes
that the other Party is not complying with its obligations
under the Chapter, it may convene bilateral consultations and
then may refer the matter to the Subcommittee on Environmental
Affairs, if it has been established. If the matter concerns a
Party's compliance with the Chapter's effective enforcement
obligation, the complaining Party may choose to pursue
consultations under Chapter Sixteen or Chapter Nineteen
(Dispute Settlement). If a Party chooses to request
consultations under Chapter Nineteen, consultations under
Chapter Sixteen on the same matter cease. In addition, after 60
days of consultations under Chapter Sixteen, the Parties may
agree to refer the matter concerning compliance with the
effective enforcement obligation directly to the Joint
Committee for resolution under Chapter Nineteen.

Chapter Seventeen: Transparency

Chapter Seventeen sets out requirements designed to foster
openness, transparency, and fairness in the adoption and
application of administrative measures covered by the
Agreement. For example, it requires that, to the extent
possible, each Party must promptly publish all measures
concerning subjects covered by the Agreement and give
interested persons a reasonable opportunity to comment.
Wherever possible, each Party must provide reasonable notice to
the other Party's nationals and enterprises that are directly
affected by an administrative proceeding applying measures to
particular persons, goods, or services of the other Party. A
Party is to afford such persons a reasonable opportunity to
present facts and arguments prior to any final administrative
action when time, the nature of the process, and the public
interest permit. Chapter Seventeen also provides for
independent review and appeal of final administrative actions.
Appeal rights must include a reasonable opportunity to present
arguments and to obtain a decision based on evidence in the
administrative record.
In addition, Chapter Seventeen contains innovative
provisions on combating bribery and corruption. Each country
must adopt or maintain prohibitions on bribery in matters
affecting international trade and investment, including bribery
of foreign officials, and establish criminal penalties for such
offenses. In addition, both countries will adopt or maintain
appropriate measures to protect those who, in good faith,
report acts of bribery and will work jointly to encourage and
support appropriate regional and multilateral initiatives.

Chapter Eighteen: Administration of the Agreement

Chapter Eighteen requires that each Party designate a
contact point to facilitate communication between the Parties
on any matter relating to the Agreement. The Chapter also
creates a Joint Committee to supervise the implementation and
operation of the Agreement and to review the trade relationship
between the Parties. Among others, its tasks will be to: (1)
facilitate the avoidance and settlement of disputes arising
under the Agreement; (2) consider and adopt any amendment or
other modification to the Agreement; and (3) consider ways to
further enhance trade relations between the Parties. The Joint
Committee will convene at least once a year.

Chapter Nineteen: Dispute Settlement

Chapter Nineteen sets out detailed procedures for the
resolution of disputes between the Parties over compliance with
the Agreement. Those procedures emphasize amicable settlements,
relying wherever possible on bilateral cooperation and
consultations. When disputes arise under provisions common to
the Agreement and other agreements (e.g., the WTO Agreement),
the complaining Party may choose the forum for resolving the
matter. The selected forum is the exclusive venue for resolving
that dispute.
Consultations. Either Party may request consultations on
any matter that it believes might affect the operation of the
Agreement. After requesting or receiving a request for
consultations, each Party must solicit the views of the public
on the matter. If the Parties cannot resolve the matter through
consultations within 60 days, a Party may refer the matter to
the Joint Committee, which will attempt to resolve the dispute.
Panel Procedures. If the Joint Committee cannot resolve the
dispute within 60 days after delivery of the request, the
complaining Party may refer the matter to a panel comprising
independent experts that the Parties select. In disputes
related to a Party's enforcement of its labor or environmental
laws, panelists must have expertise or experience relevant to
the subject matter that is under dispute. The Parties will set
rules to protect confidential information, provide for open
hearings and public release of submissions, and allow an
opportunity for the panel to accept submissions from non-
governmental entities in the Parties' territories.
Unless the Parties agree otherwise, a panel is to present
its initial report within 180 days after the chair is selected.
Once the panel presents its initial report containing findings
of fact and a determination on whether a Party has met its
obligations, the Parties will have the opportunity to provide
written comments to the panel. When the panel receives these
comments, it may reconsider its report and make any further
examination that it considers appropriate. Within 45 days after
it presents its initial report, the panel will submit its final
report. The Parties will then seek to agree on how to resolve
the dispute, normally in a way that conforms to the panel's
determinations and recommendations. Subject to protection of
confidential information, the panel's final report will be made
available to the public 15 days after the Parties receive it.
Suspension of Benefits. In disputes involving the
Agreement's ``commercial'' obligations (i.e., obligations other
than enforcement of labor and environmental laws), if the
Parties cannot resolve the dispute after they receive the
panel's final report, the Parties will seek to agree on
acceptable trade compensation. If they cannot agree on
compensation, or if the complaining Party believes the
defending Party has failed to implement an agreed resolution,
the complaining Party may provide notice that it intends to
suspend trade benefits of equivalent effect.
If the defending Party considers that the proposed level of
benefits to be suspended is ``manifestly excessive,'' or
believes that it has modified the disputed measure to make it
conform to the Agreement, it may request the panel to reconvene
and decide the matter. The panel must issue its determination
no later than 90 days after the request is made (or 120 days if
the panel is reviewing both the level of the proposed
suspension and a modification of the measure).
The complaining Party may suspend trade benefits up to the
level that the panel sets or, if the panel has not been asked
to determine the level, up to the amount that the complaining
Party has proposed. The complaining Party cannot suspend
benefits, however, if the defending Party provides notice that
it will pay an annual monetary assessment to the other Party.
The amount of the assessment will be established by agreement
of the Parties or, failing that, will be set at 50 percent of
the level of trade concessions the complaining Party was
authorized to suspend.
Labor and Environment Disputes. Equivalent compliance
procedures apply to disputes over a Party's conformity with the
labor and environmental law enforcement provisions of the
Agreement. If a panel determines that a Party has not met its
enforcement obligations and the Parties cannot agree on how to
resolve the dispute, or if the complaining Party believes that
the defending Party has failed to implement an agreed
resolution, the complaining Party may ask the panel to
determine the amount of an annual monetary assessment to be
imposed on the defending Party. The Panel will establish the
amount of the assessment, subject to a $15 million annual cap,
taking into account relevant trade- and non-trade-related
factors. The assessment will be paid into a fund established by
the Joint Committee for appropriate labor or environmental
initiatives. If the defending Party fails to pay an assessment,
the complaining Party may take other appropriate steps, which
may include suspending tariff benefits, 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.
Compliance Review Mechanism. If, at any time, the defending
Party believes it has made changes in its laws or regulations
sufficient to comply with its obligations under the Agreement,
it may refer the matter to the panel. If the panel agrees, the
dispute ends and the complaining Party must withdraw any
offsetting measures it has put in place, and the defending
country will be relieved of any obligation to pay a monetary
assessment.
The Parties will review the operation of the compliance
procedures for both commercial and labor and environment
disputes either five years after the entry into force of the
Agreement or within six months after benefits have been
suspended or assessments paid in five proceedings initiated
under this Agreement, whichever occurs first.

Chapter Twenty: Exceptions

Chapter Twenty sets out exceptions that apply to the entire
Agreement. Article XX of GATT 1994 and its interpretive notes
are incorporated into and made part of the Agreement and apply
to those Chapters related to treatment of goods. Likewise, for
the purposes of Chapters Ten (Cross Border Trade in Services),
Twelve (Telecommunications), and Thirteen (Electronic
Commerce), GATS Article XIV (including its footnotes) is
incorporated into and made part of the Agreement. For both
goods and services, the Parties understand that these
exceptions include certain environmental measures.
Essential Security. Chapter Twenty allows each Party to
take actions it considers necessary to protect its essential
security interests.
Taxation. An exception for taxation limits the field of tax
measures subject to the Agreement. For example, the exception
generally provides that the Agreement does not affect either
Party's rights or obligations under any tax convention. The
exception sets out certain circumstances under which tax
measures are subject to the Agreement's national treatment
obligation for goods and national treatment and MFN obligations
for services.
Disclosure of Information. The Chapter also provides that a
Party may withhold information from the other Party where such
disclosure would impede domestic law enforcement or otherwise
be contrary to the Party's law protecting personal privacy or
the financial affairs and accounts of individual customers of
financial institutions.

Chapter Twenty-One: Final provisions

Chapter Twenty-One provides that the Parties may amend the
Agreement subject to applicable domestic procedures. It also
provides for consultations if any provision of the WTO
Agreement that the Parties have incorporated into the Agreement
is amended.
Chapter Twenty-One establishes that any other country or
group of countries may become a party to the Agreement on terms
and conditions that are agreed upon between the country or
countries and the Parties and that are approved according to
each country's domestic procedures. The Chapter also permits
non-application of the agreement between a Party and a newly
acceding country or group of countries. It also provides for
the entry into force of the Agreement and for its termination
180 days after a Party provides written notice that it intends
to withdraw.

E. General Description of the Bill To Implement the United States-
Bahrain Free Trade Agreement

Sec. 1. Short title; table of contents

This section provides that the short title of the act
implementing the United States-Bahrain Free Trade Agreement
(the Agreement) is the ``United States-Bahrain Free Trade
Agreement Implementation Act'' (Implementation Act). Section 1
also provides the table of contents for the Implementation Act.

Sec. 2. Purposes

This section provides that the purposes of the
Implementation Act are to approve and implement the Agreement,
to strengthen and develop economic relations between the United
States and Bahrain, to establish free trade between the United
States and Bahrain through the reduction and elimination of
barriers to trade in goods and services, and to lay the
foundation for further cooperation to expand and enhance the
benefits the Agreement.

Sec. 3. Definitions

This section defines the terms ``Agreement,'' ``HTS,'' and
``Textile or apparel good,'' for purposes of the Implementation
Act.

TITLE I--APPROVAL OF, AND GENERAL PROVISIONS RELATING TO, THE AGREEMENT

Sec. 101. Approval and entry into force of the Agreement

This section provides congressional approval for the
Agreement and its accompanying Statement of Administration
Action. Section 101 also provides that, if the President
determines that Bahrain has taken measures necessary to comply
its obligations that take effect at the time the Agreement
enters into force, the President is authorized to exchange
notes with Bahrain to provide for the entry into force of the
Agreement with respect to the United States on or after January
1, 2006.

Sec. 102. Relationship of the Agreement to United States and state law

This section establishes the relationship between the
Agreement and U.S. law. Section 102 clarifies that no provision
of the Agreement will be given effect under domestic law if it
is inconsistent with federal law, including provisions of
federal law enacted or amended by the Implementation Act.
Section 102 provides that only the United States may bring
an action in court if there is an unresolved conflict between a
state law and the Agreement. This section also precludes any
private right of action against the federal government, state
or local governments, or against a private party, based on the
provisions of the Agreement.

Sec. 103. Implementing actions in anticipation of entry into force and
initial regulations

This section provides that, following the enactment of the
Implementation Act, the President may proclaim such actions,
and other appropriate officers of the federal government may
issue such regulations, as may be necessary to ensure that
provisions of the legislation that take effect on the date the
Agreement enters into force are appropriately implemented on
such date. Section 103 provides that, with respect to any
action proclaimed by the President that is not subject to the
consultation and layover provisions contained in section 104,
such action may not take effect before the 15th day after the
date on which the text of the proclamation is published in the
Federal Register. The 15-day restriction is waived, however, to
the extent that it would prevent an action from taking effect
on the date the Agreement enters into force. Section 103 also
provides that, to the maximum extent feasible, initial
regulations necessary or appropriate to carry out the actions
required by the Implementation Act or proposed in the Statement
of Administrative Action shall be issued within 1 year of the
date on which the Agreement enters into force. In accordance
with the accompanying Statement of Administrative Action, any
agency unable to issue a regulation within one year must report
to the Committee, at least 30 days prior to the end of the 1-
year period, the reasons for the delay and the expected date
for issuance of the regulation.

Sec. 104. Consultation and layover provisions for, and effective date
of, proclaimed actions

This section sets forth consultation and layover steps that
must precede the President's implementation of any duty
modification by proclamation. Under the consultation and
layover provisions, the President is required to obtain advice
regarding a proposed action from the appropriate advisory
committees established under section 135 of the Trade Act of
1974 (19 U.S.C. Sec. 2155) and the U.S. International Trade
Commission. The President must also submit to the Senate
Committee on Finance and the House Committee on Ways and Means
a report setting forth the action proposed, the reasons for the
proposed action, and the advice of the appropriate advisory
committees and the U.S. International Trade Commission. Section
104 sets aside a 60-day period following the date of
transmittal of the report for the President to consult with the
Senate Committee on Finance and the House Committee on Ways and
Means on the proposed action.

Sec. 105. Administration of dispute settlement proceedings

This section authorizes the President to establish or
designate within the Department of Commerce an office
responsible for providing administrative assistance to dispute
settlement panels established under Chapter 19 of the
Agreement. Section 105 also authorizes the appropriation of
funds to support this office.

Sec. 106. Effective dates; effect of termination

This section provides that the provisions of the
Implementation Act and the amendments made by it take effect on
the date on which the Agreement enters into force, except for
sections 1 through 3 and Title I, which take effect on the date
of enactment of the Implementation Act. Under section 106, the
provisions of the Implementation Act and the amendments to
other statutes made by it will cease to have effect on the date
on which the Agreement terminates.

TITLE II--CUSTOMS PROVISIONS

Sec. 201. Tariff modifications

Section 201(a) authorizes the President to implement by
proclamation the modification, continuation, or imposition of
duties, or the continuation of duty-free treatment, as the
President determines to be necessary or appropriate to carry
out or apply articles 2.3, 2.5, 2.6, 3.2.8, and 3.2.9, and
Annex 2-B (Tariff Elimination) of the Agreement. In addition,
section 201(a) requires the President to terminate the
designation of Bahrain as a beneficiary developing country for
purposes of the U.S. Generalized System of Preferences on the
date on which the Agreement enters into force.
Section 201(b) authorizes the President, subject to the
consultation and layover provisions of section 104, to proclaim
the continuation, modification, or imposition of additional
tariffs, or the continuation of duty-free treatment, as the
President determines to be necessary or appropriate to maintain
the general level of reciprocal and mutually advantageous
concessions with respect to Bahrain provided for by the
Agreement.
Section 201(c) authorizes the President, with respect to
any good for which the base rate of duty in the Tariff Schedule
of the United States to Annex 2-B (Tariff Elimination) of the
Agreement is a specific or compound rate of duty, to substitute
for the base rate an ad valorem rate that the President
determines to be equivalent to the base rate.

Sec. 202. Rules of origin

Section 202 implements the general rules of origin set
forth in Chapter 4 of the Agreement. These rules define the
circumstances under which a good imported from Bahrain
qualifies as an originating good and is thus eligible for
preferential tariff treatment according to the terms of the
Agreement.
Under section 202(b), for a good entering the United States
to qualify as an originating good, it must be imported directly
from the territory of Bahrain. Further, section 202(b) provides
that the good must be covered by one of three specified
categories. First, a good is an originating good if it is
wholly the growth, product, or manufacture of Bahrain or the
United States, or both.
Second, a good is an originating good if it is a new or
different article of commerce that has been grown, produced, or
manufactured in Bahrain or the United States, or both, i.e. the
good has undergone a ``substantial transformation.''
Additionally, the sum of the value of each material produced in
Bahrain or the United States, or both, and the direct costs of
processing operations performed in Bahrain or the United
States, or both, must be at least 35 percent of the appraised
value of the good at the time the good is entered into the
United States. This ``substantial transformation'' rule of
origin is akin to rules of origin provided for in the United
States-Israel Free Trade Area Implementation Act, the United
States-Jordan Free Trade Area Implementation Act, and the
United States-Morocco Free Trade Agreement Implementation Act.
Third, a good is an originating good if it meets the
product-specific rules set out in Annex 3-A (Rules of Origin
for Textile or Apparel Goods for Chapters 42, 50 Through 63,
70, and 94) or Annex 4-A (Certain Product-Specific Rules of
Origin) of the Agreement and satisfies all other applicable
requirements of section 202. Moreover, each of the non-
originating materials used in the production of the good must
have undergone an applicable change in tariff classification
specified in Annex 3-A or Annex 4-A as a result of production
occurring entirely in the territory Bahrain or the United
States, or both, or the good must otherwise satisfy the
requirements specified in Annex 3-A or Annex 4-A.
Section 202(c) provides a rule of cumulation for an
originating good or material produced in the territory of
Bahrain or the United States, or both, that is incorporated
into a good in the territory of the other country. Section
202(d) provides rules for valuing a material produced in the
territory of Bahrain or the United States, or both. Section
202(e) addresses the treatment of packaging and packing
materials and containers for retail sale and for shipment in
determining whether a good qualifies as an originating good.
Section 202(f) addresses the treatment of indirect materials in
determining whether a good qualifies as an originating good.
Section 202(g) addresses the issue of transit and transshipment
in determining the origin of a good.
Section 202(h) provides certain specific rules of origin
for textile and apparel goods, including a de minimis rule.
Section 202(h)(1)(A) provides that a textile or apparel good
that is not an originating good because certain fibers or yarns
used in the production of the component of the good that
determines the tariff classification of the good do not undergo
an applicable change in tariff classification set out in Annex
3-A of the Agreement shall be considered to be an originating
good if the total weight of all such fibers or yarns in that
component is not more than 7 percent of the total weight of
that component. An exception to section 202(h)(1)(A) is
provided, however, at section 202(h)(1)(B), which states that a
textile or apparel good containing elastomeric yarns in the
component of the good that determines the tariff classification
of the good shall be considered to be an originating good only
if such yarns are wholly formed in the territory of Bahrain or
the United States.
Section 202(i) provides definitions of the following terms
applicable to the rules of origin: (1) ``direct costs of
processing operations,'' (2) ``good,'' (3) ``good wholly the
growth, product, or manufacture of Bahrain or the United
States, or both,'' (4) ``indirect material,'' (5) ``material,''
(6) ``material produced in the territory of Bahrain or the
United States, or both,'' (7) ``new or different article of
commerce,'' (8) ``recovered goods,'' (9) ``remanufactured
good,'' (10) ``simple combining or packaging operations,'' and
(11) ``substantially transformed.''
Section 202(j) authorizes the President to proclaim, as
part of the Harmonized Tariff Schedule of the United States,
the provisions set forth in Annex 3-A (Rules of Origin for
Textile or Apparel Goods for Chapters 42, 50 Through 63, 70,
and 94) and Annex 4-A (Certain Product-Specific Rules of
Origin) of the Agreement, and to modify certain of the
Agreement's rules of origin by proclamation subject to the
consultation and layover provisions of section 104.

Sec. 203. Customs user fees

This section provides for the immediate elimination of the
merchandise processing fee for goods qualifying as originating
goods under the Agreement. Processing of goods qualifying as
originating goods will be financed from the general fund of the
Treasury.

Sec. 204. Enforcement relating to trade in textile and apparel goods

This section authorizes the President to apply anti-
circumvention provisions concerning trade in textile and
apparel goods. Pursuant to article 3.3 of the Agreement, the
Secretary of the Treasury may request that the Government of
Bahrain conduct a verification to determine the compliance of
exporters and producers with applicable customs laws,
regulations, and procedures affecting trade in textile or
apparel goods, and to determine the accuracy of a claim of
origin for a textile or apparel good. Section 204(a) provides
that the President may direct the Secretary of the Treasury to
take ``appropriate action'' while such a verification is being
conducted. Under section 204(b), such appropriate action
includes the suspension of liquidation of the entry of any
textile or apparel good exported or produced by the person
subject to a verification, and the suspension of liquidation of
the entry of a textile or apparel good for which a claim has
been made that is the subject of a verification.
Section 204(c) provides that, if the Secretary of the
Treasury is unable to confirm within 12 months of making a
verification request that a Bahraini exporter or producer is
complying with applicable customs laws, regulations, and
procedures regarding trade in textile or apparel goods, or that
a claim of origin for a textile or apparel good is accurate,
the President may determine what additional ``appropriate
action'' to take. Under section 204(d), such additional
appropriate action includes: the publication of the name and
address of the person subject to the verification; the denial
of preferential tariff treatment under the Agreement to (1) any
textile or apparel good exported or produced by the person
subject to the verification or (2) a textile or apparel good
for which a claim has been made that is the subject of the
verification; and, the denial of entry into the United States
of (1) any textile or apparel good exported or produced by the
person subject to the verification or (2) a textile or apparel
good for which a claim has been made that is the subject of the
verification. Section 204(c) also provides that such additional
appropriate action may remain in effect until such time as the
Secretary of the Treasury receives information sufficient to
make a determination that an exporter or producer in Bahrain is
complying with applicable customs laws, regulations, and
procedures affecting trade in textile or apparel goods, or a
determination that a claim of origin for a textile or apparel
good under the Agreement is accurate. However, section 204(c)
further provides that such additional appropriate action may
remain in effect until such earlier date as the President may
direct.

Sec. 205. Regulations

Section 205 authorizes the Secretary of the Treasury to
prescribe regulations necessary to carry out the rules of
origin and customs user fee provisions in the Implementation
Act, as well as with respect to the President's proclamation
authority under section 202(j).

TITLE III--RELIEF FROM IMPORTS

Sec. 301. Definitions

This section defines the terms ``Bahraini article,''
``Bahraini textile or apparel article,'' and ``Commission,''
for purposes of the general bilateral safeguard provision
contained in Chapter 8 of the Agreement and the textile and
apparel bilateral safeguard provision contained in Chapter 3 of
the Agreement. The term ``Bahraini article'' is defined as an
article that qualifies as an originating good under section
202(b) of the Implementation Act or receives preferential
tariff treatment under paragraphs 8 through 11 of article 3.2
of the Agreement. The term ``Bahraini textile or apparel
article'' is defined as a Bahraini article that is listed in
the Annex to the Agreement on Textiles and Clothing referred to
in section 101(d)(4) of the Uruguay Round Agreements Act (19
U.S.C. Sec. 3511(d)(4)). The term ``Commission'' is defined as
the United States International Trade Commission.

SUBTITLE A. RELIEF FROM IMPORTS BENEFITING FROM THE AGREEMENT

Sec. 311. Commencing of action for relief

This section requires the filing of a petition with the
Commission by an entity, including a trade association, firm,
certified or recognized union, or group of workers, that is
representative of an industry, in order to commence a bilateral
safeguard investigation.
Section 311(b) provides that, upon the filing of a
petition, the Commission shall promptly initiate an
investigation to determine whether, as a result of the
reduction or elimination of a duty provided for under the
Agreement, a Bahraini article is being imported into the United
States in such increased quantities and under such conditions
that imports of the Bahraini article constitute a substantial
cause of serious injury, or threat of serious injury, to the
domestic industry producing an article that is like, or
directly competitive with, the imported article.
Section 311(c) extends certain provisions (both substantive
and procedural) contained in subsections (b), (c), and (i) of
section 202 of the Trade Act of 1974 (19 U.S.C. Sec. 2252(b),
(c), and (i)) that apply to global safeguard investigations, to
any bilateral safeguard initiated under the Agreement. These
provisions include, inter alia, the requirement that the
Commission publish notice of the commencement of an
investigation; the requirement that the Commission hold a
public hearing at which interested parties and consumers have
the right to be present and to present evidence; the factors to
be taken into account by the Commission in making its
determinations; and, authorization for the Commission to
promulgate regulations to provide access to confidential
business information under protective order to authorized
representatives of interested parties in an investigation.
Section 311(d) precludes the initiation of a bilateral
safeguard investigation with respect to any Bahraini article
for which import relief has already been provided under this
bilateral safeguard provision.

Sec. 312. Commission action on petition

This section establishes deadlines for Commission action
following the initiation of a bilateral safeguard
investigation. Section 312(b) applies certain statutory
provisions that address an equally divided vote by the
Commission in a global safeguard investigation under section
202 of the Trade Act of 1974 (19 U.S.C. Sec. 2252) to
Commission determinations and findings under this section. If
the Commission renders an affirmative injury determination, or
a determination that the President may consider to be an
affirmative determination in the event of an equally divided
vote by the Commission, section 312(c) requires that the
Commission also find and recommend to the President the amount
of import relief that is necessary to remedy or prevent the
injury found by the Commission and to facilitate the efforts of
the domestic industry to make a positive adjustment to import
competition. Section 312(d) specifies the information to be
included by the Commission in a report to the President
regarding its determination. Upon submitting the requisite
report to the President, section 312(e) requires the Commission
to promptly make public a summary of such report, except for
any confidential information contained in the report.

Sec. 313. Provision of relief

This section directs the President, not later than 30 days
after receiving the report from the Commission, to provide
relief from imports of the article subject to an affirmative
determination by the Commission, or a determination that the
President considers to be an affirmative determination in the
event of an equally divided vote by the Commission, to the
extent that the President determines necessary to remedy or
prevent the injury 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 provision of the import relief will not provide
greater economic and social benefits than costs.
Section 313(c) specifies the nature of the import relief
that the President may impose, to include: the suspension of
any further reduction in duty provided for under Annex 2-B of
the Agreement; and, an increase in the rate of duty imposed on
such article to a level that does not exceed the lesser of: (1)
the normal trade relations (most-favored-nation) (NTR (MFN))
duty rate imposed on like articles at the time the import
relief is provided, or (2) the NTR (MFN) duty rate imposed on
like articles on the day before the date on which the Agreement
enters into force. Section 313(c) also requires that, if the
period for which import relief is provided exceeds one year,
the President shall provide for the progressive liberalization
of such relief at regular intervals during the period of its
application.
Section 313(d) provides that any import relief that the
President imposes in a bilateral safeguard action may not, in
the aggregate, be in effect for more than 3 years. If the
initial period of import relief is less than 3 years, the
President may extend the effective period of such import relief
to a total of no more than 3 years; however, the Commission
must first report an affirmative determination to the President
that import relief continues to be necessary to remedy or
prevent serious injury and that there is evidence that the
domestic industry is making a positive adjustment to import
competition (or a determination that the President considers to
be an affirmative determination in the event of an equally
divided vote by the Commission). The President may then extend
the effective period of import relief to a total of no more
than 3 years if the President determines that import relief
continues to be necessary to remedy or prevent serious injury
and to facilitate adjustment by the domestic industry to import
competition, and that there is evidence that the domestic
industry is making a positive adjustment to import competition.
Section 313(e) provides that upon termination of import
relief with respect to an article under the bilateral safeguard
provision, the rate of duty to be applied to imports of that
article shall be the rate that would have been in effect, but
for the provision of such relief, on the date on which the
relief terminates.
Section 313(f) precludes the application of import relief
pursuant to the bilateral safeguard provision with respect to
any Bahraini article for which import relief has already been
provided under the bilateral safeguard provision after the date
on which the Agreement enters into force.

Sec. 314. Termination of relief authority

This section provides that the President's authority to
impose import relief under the bilateral safeguard provision
ends after the date that is 10 years after the date on which
the Agreement enters into force; however, import relief may
continue to be provided beyond such date with respect to an
article subject to such import relief pursuant to the bilateral
safeguard provision if the President determines that Bahrain
consents to the application of such relief.

Sec. 315. Compensation authority

This section authorizes the President, under section 123 of
the Trade Act of 1974 (19 U.S.C. Sec. 2133), to grant Bahrain
new concessions as compensation for the imposition of import
relief pursuant to the bilateral safeguard provision, in order
to maintain the general level of reciprocal concessions under
the Agreement.

Sec. 316. Confidential business information

This section applies the same procedures for the treatment
and release of confidential business information by the
Commission in a global safeguard investigation under chapter 1
of title II of the Trade Act of 1974 (19 U.S.C. Sec. 2251 et
seq.) to bilateral safeguard investigations under subtitle A of
Title III of the Implementation Act.

SUBTITLE B. TEXTILE AND APPAREL SAFEGUARD MEASURES

Sec. 321. Commencement of action for relief

This section requires the filing of a request with the
President by an interested party in order to commence action
for relief under the textile and apparel safeguard provision.
Upon the filing of a request, the President shall review the
request to determine, from information presented in the
request, whether to commence consideration of the request.
Section 321(b) provides that, if the President determines that
the request provides the information necessary for the request
to be considered, the President shall cause to be published in
the Federal Register a notice of commencement of consideration
of the request, and notice seeking public comments regarding
the request. The notice shall include a summary of the request
and the dates by which comments and rebuttals must be received.
The Committee notes that our regulatory processes should be
administered in an open and transparent manner that can serve
as a model for our trading partners. For example, in addition
to publishing a summary of a request for safeguard relief, the
Committee notes that the President plans to make available the
full text of the request on the website of the International
Trade Administration of the U.S. Department of Commerce,
subject to the protection of business confidential information,
if any. The Committee encourages this and similar efforts to
enhance government transparency. In particular, the Committee
encourages the President to issue regulations on procedures
for: requesting a textile and apparel safeguard action under
section 321(a) of the Implementation Act; making a
determination under section 322(a) of the Implementation Act;
providing safeguard relief under section 322(b) of the
Implementation Act; and, extending safeguard relief under
section 323(b) of the Implementation Act.

Sec. 322. Determination and provision of relief

This section provides that following the President's
commencement of consideration of a request, the President shall
determine whether, as a result of the reduction or elimination
of a duty under the Agreement, a Bahraini textile or apparel
article is being imported into the United States in such
increased quantities and under such conditions as to cause
serious damage, or actual threat thereof, to a domestic
industry producing an article that is like, or directly
competitive with, the imported article. Section 322(a) provides
that in making such a determination the President shall examine
the effect of increased imports on the domestic industry's
output, productivity, capacity utilization, inventories, market
share, exports, wages, employment, domestic prices, profits,
and investment, none of which is necessarily decisive. Section
322(a) also provides that the President shall not consider
changes in technology or consumer preference as factors
supporting a determination of serious damage or actual threat
thereof.
Section 322(b) authorizes the President, in the event of an
affirmative determination of serious damage or actual threat
thereof, to provide import relief to the extent that the
President determines necessary to remedy or prevent the serious
damage and to facilitate adjustment by the domestic industry to
import competition. Section 322(b) also specifies the nature of
the import relief that the President may impose, to consist of
an increase in the rate of duty imposed on the article to a
level that does not exceed the lesser of: (1) the NTR (MFN)
duty rate imposed on like articles at the time the import
relief is provided, or (2) the NTR (MFN) duty rate imposed on
like articles on the day before the date on which the Agreement
enters into force.

Sec. 323. Period of relief

Section 323(a) provides that any import relief that the
President imposes under the textile and apparel safeguard
provision may not, in the aggregate, be in effect for more than
3 years. If the initial period of import relief is less than 3
years, then under section 323(b) the President may extend the
effective period of such import relief to a total of no more
than 3 years if the President determines that the import relief
continues to be necessary to remedy or prevent serious damage
and to facilitate adjustment by the domestic industry to import
competition, and that there is evidence that the domestic
industry is making a positive adjustment to import competition.

Sec. 324. Articles exempt from relief

This section precludes the President from providing import
relief under the textile and apparel safeguard provision with
respect to any article for which import relief has already been
provided under the textile and apparel safeguard provision
after the date on which the Agreement enters into force.
Section 324 also precludes the President from providing import
relief under the textile and apparel safeguard provision with
respect to any article that is already subject to import relief
pursuant to the global safeguard provision set forth in chapter
1 of title II of the Trade Act of 1974 (19 U.S.C. Sec. 2251 et
seq.).

Sec. 325. Rate after termination of import relief

This section provides that the duty rate applicable to a
textile or apparel article after termination of the import
relief shall be the duty rate that would have been in effect,
but for the provision of such import relief, on the date on
which the relief terminates.

Sec. 326. Termination of relief authority

This section provides that the President's authority to
provide import relief with respect to an article under the
textile and apparel safeguard provision terminates after the
date that is 10 years after the date on which duties on the
article are eliminated pursuant to the Agreement.

Sec. 327. Compensation authority

This section authorizes the President, under section 123 of
the Trade Act of 1974 (19 U.S.C. Sec. 2133), to grant Bahrain
new concessions as compensation for the imposition of import
relief pursuant to the textile and apparel safeguard provision,
in order to maintain the general level of reciprocal
concessions under the Agreement.

Sec. 328. Confidential business information

This section precludes the President from releasing
information received in a textile and apparel safeguard
proceeding that the President considers to be confidential
business information unless the party submitting the
confidential business information had notice, at the time of
submission, that such information would be released by the
President, or such party subsequently consents to the release
of the information. This section also provides that, to the
extent a party submits confidential business information to the
President, the party shall also submit a nonconfidential
version of the information in which the confidential business
information is summarized or, if necessary, deleted.

TITLE IV--PROCUREMENT

Sec. 401. Eligible products

This section amends section 308(4)(A) of the Trade
Agreements Act of 1979 (19 U.S.C. Sec. 2518(4)(A)) to implement
the government procurement provisions of the Agreement.

F. Vote of the Committee in Reporting the Bill

In compliance with section 133 of the Legislative
Reorganization Act of 1946, the Committee states that on
November 18, 2005, S. 2027 was ordered favorably reported,
without amendment, by recorded vote, 20 ayes, 0 nays, a quorum
being present.

II. BUDGETARY IMPACT OF THE BILL

U.S. Congress,
Congressional Budget Office,
Washington, DC, November 29, 2005.
Hon. Charles E. Grassley,
Chairman, Committee on Finance,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 2027, a bill to
implement the United States-Bahrain Free Trade Agreement.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Emily
Schlect.
Sincerely,
Donald B. May
(For Douglas Holtz-Eakin, Director).
Enclosure.

S. 2027--United States-Bahrain Free Trade Agreement Implementation Act

Summary: S. 2027 would approve the free trade agreement
between the government of the United States and the government
of Bahrain that was entered into on September 14, 2004. It
would provide for tariff reductions and other changes in law
related to implementation of the agreement.
The Congressional Budget Office estimates that enacting the
bill would reduce revenues by $20 million in 2006, by $143
million over the 2006-2010 period, and by $341 million over the
2006-2015 period, net of income and payroll tax offsets. CBO
estimates that enacting S. 2027 also would increase direct
spending by $1 million in 2006, $3 million over the 2006-2010
period, and $6 million over the 2006-2015 period.
CBO has determined that S. 2027 contains no
intergovernmental or private-sector mandates as defined in the
Unfunded Mandates Reform Act (UMRA) and would not directly
affect the budgets of state, local, or tribal governments.
Estimated cost to the Federal Government: The estimated
budgetary impact of S. 2027 over the 2006-2015 period is shown
in the following table. The cost for spending under this
legislation falls within budget function 750 (administration of
justice).

----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-------------------------------------------------------------------------------
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
----------------------------------------------------------------------------------------------------------------
Changes in Revenue

Changes in Revenue.............. -20 -28 -30 -32 -34 -35 -37 -39 -42 -45
Changes in Direct Spending

Estimated Budget Authority...... 1 1 1 1 1 1 1 1 1 0
Estimated Outlays............... 1 1 1 1 1 1 1 1 1 0
----------------------------------------------------------------------------------------------------------------
Note: Negative changes in revenues and positive changes in direct spending to increases in budget deficits.

Basis of estimate

Revenues
Under the United States-Bahrain agreement, tariffs on U.S.
imports from Bahrain 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 on the date the agreement enters into
force, to gradual elimination over 10 years. According to the
U.S. International Trade Commission, the United States
collected $29 million in customs duties in 2004 on $406 million
of imports from Bahrain. Those imports consist largely of
various types of apparel articles, oils, aluminum, and
chemicals. Based on these data, CBO estimates that phasing out
tariff rates at outlined in the U.S.-Bahrain agreement would
reduce revenues by $20 million in 2006, by $143 million over
the 2006-2010 period, and by $341 million over the 2006-2015
period, net of income and payroll tax offsets.
This estimate includes the effects of increased imports
from Bahrain 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 Bahrain 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 Bahrain would
displace imports from other countries.

Direct spending

This legislation would exempt certain goods imported from
Bahrain from the merchandise processing fees collected by the
Department of Homeland Security. Such fees are recorded as
offsetting receipts (a credit against direct spending). Based
on the value of goods imported from those countries in 2004,
CBO estimates that implementing this provision would reduce fee
collections by under $1 million in fiscal year 2006 and in each
year through 2014, for a total of $6 million over the 2006-2014
period. There would be no effects in later years because the
authority to collect merchandise processing fees expires at the
end of 2014.
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.
Previous CBO estimate: On November 22, 2005, CBO
transmitted a cost estimate of H.R. 4340, an identically titled
bill ordered reported by the House Committee on Ways and Means
on November 18, 2005. The two bills are identical, as are CBO's
estimates.
Estimate prepared by: Federal Revenues: Emily Schlect.
Federal Spending: Mark Grabowicz. Impact on State, Local, and
Tribal Governments: Melissa Merrell. Impact on the Private
Sector: Craig Cammarata.
Estimate approved by: G. Thomas Woodward, Assistant
Director for Tax Analysis. Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.

III. REGULATORY IMPACT OF THE BILL AND OTHER MATTERS

Pursuant to the requirements of paragraph 11(b) of Rule
XXVI of the Standing Rules of the Senate, the Committee states
that the bill will not significantly regulate any individuals
or businesses, will not affect the personal privacy of
individuals, and will result in no significant additional
paperwork.
The following information is provided in accordance with
section 423 of the Unfunded Mandates Reform Act of 1995 (UMRA)
(Pub. L. No. 104-04). The Committee has reviewed the provisions
of S. 2027 as approved by the Committee on November 18, 2005.
In accordance with the requirement of Pub. L. No. 104-04, the
Committee has determined that the bill contains no
intergovernmental mandates, as defined in the UMRA, and would
not affect the budgets of State, local, or tribal governments.

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

In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, 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 italics, existing law in which no change
is proposed is shown in roman):

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, title II of the
United States-Jordan Free Trade Area Implementation
Act, title III of the United States-Chile Free Trade
Agreement Implementation Act, title II of the United
State-Singapore Free Trade Agreement Implementation
Act, title II of the United States-Australia Free Trade
Agreement Implementation Act, title III of the United
States-Morocco Free Trade Agreement Implementation Act,
[and] title III of the Dominican Republic-Central
America-United States Free Trade Agreement
Implementation Act, and title III of the United States-
Bahrain 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 308 OF THE TRADE AGREEMENTS ACT OF 1979

SEC. 308. DEFINITIONS.

As used in this title--
(1) * * *

* * * * * * *

(43) Eligible products.--
(A) In general.--The term ``eligible
product'' means, with respect to any foreign
country or instrumentality that is--
(i) * * *
(ii) a party to the North American
Free Trade Agreement, a product or
service of that country or
instrumentality which is covered under
the North American Free Trade Agreement
for procurement by the United States.
(iii) a party to a free trade
agreement that entered into force with
respect to the United States after
December 31, 2003, and before January
2, 2005, a product or service of that
country or instrumentality which is
covered under the free trade agreement
for procurement by the United States;
[or]
(iv) a party to the Dominican
Republic-Central America-United States
Free Trade Agreement, a product or
service of that country or
instrumentality which is covered under
that Agreement for procurement by the
United States[.]; or
(v) a party to a free trade agreement
that entered into force with respect to
the United States after December 31,
2005, and before July 2, 2006, a
product or service of that country or
instrumentality which is covered under
the free trade agreement for
procurement by the United States.

* * * * * * *

----------

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.]
(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 Customers User Fee Account.

* * * * * * *

[(15) No fee may be charged under subsection (a) (9)
or (10) with respect to goods and that qualify as
originating goods under secton 203 of the Dominican
Republic-Central America-United States 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.]
(15) No fee may be charged under subsection (a) (9)
or (10) with respect to goods and that quality as
originating goods under section 203 of the Dominican
Republic-Central America-United States 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.
(16) No fee may be charged under subsection (a) (9)
or (10) with respect to goods and that quality as
originating goods under section 203 of the United
States-Bahrain 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.