This reflects an acceleration of tariff cuts in the first years after accession as compared with China's previous offer set out below.

• Quotas on autos will be phased out by 2005 with an initial level of $6.0 billion, which exceeds the actual level of trade prior to implementation of the 1994 Auto Industrial Policy. Quotas will grow 15% annually until eliminated.

• Currently in China, the right to engage in trade (importing and exporting) is strictly limited; only companies that receive specific authorization or who import goods to be used in production have such rights. This limits the ability of U.S. companies to do business in China, and has limited U.S. exports. China has agreed that companies in China and U.S. companies will be able distribute most products, including autos and auto parts, into any part of China three years after accession. This commitment is phased in over the three-year period.
• China also generally prohibits companies from distributing imported products or providing related distribution services such as repair and maintenance services. China will permit foreign enterprises to engage in the full range of distribution services over a three-year phase-in period for almost all products, including autos and auto parts. (See separate papers on distribution services and related services.)

• Currently, only certain Chinese banks are authorized to conduct auto financing and only for certain vehicle models. Upon accession, non-bank financial institutions will be permitted to provide auto financing without any market access or national treatment limitations.

• China has committed to strong provisions to address import surges. This safeguard takes the form of a special mechanism that addresses rapidly increasing imports from China that cause or threaten to cause market disruption on a product-specific basis for 12 years after accession.

• China has agreed to include a provision in its protocol that explicitly permits continued use of non-market economy methodology. The provision in China's protocol will remain in effect for 15 years from China's accession.

• China has agreed to certain subsidy rules, including rules applicable to state-owned enterprises. Specifically, where government benefits are provided to an industry sector and state-owned enterprises are the predominant recipients or receive a disproportionate share of those benefits, the United States could take action under our unfair trade laws.
• In addition, the agreement establishes that the United States can determine whether government benefits, such as equity infusions or soft loans, have been provided to an industry using market-based criteria rather than Chinese government benchmarks.

• China has agreed to eliminate local content requirements immediately after it accedes to the World Trade Organization and not to enforce provisions in existing contracts that impose this requirement.
• These commitments combined with the other market-opening steps that China will take, such as cutting tariffs, eliminating quotas and permitting our companies to distribute products in China, will result in better access for our exports and eliminate false incentives or requirements to use domestic goods.

• China has agreed that it will not condition import or investment approvals on technology transfer or on conducting research and development in China.
• China will also have to provide better intellectual property protection for technology that is transferred and eliminate requirements mandating that the Chinese partner in a joint venture gains ownership of trade secrets after a certain number of years.

• China has agreed that importation and investment will not be conditioned on providing offsets. Other Commitments.
• To alleviate the uncertainty associated with China's inconsistent application, refund, and waivers of its 17% VAT tax, China has agreed to apply all taxes and tariffs uniformly to both domestic and foreign businesses.
• China has agreed not to apply or enforce export-performance requirements and similar requirements as a condition on importation or investment approval.

BANKING AND SECURITIES

China currently limits foreign banks to foreign currency business in selected cities. While China is conducting an experiment in permitting foreign banks to conduct local currency business, the experiment is limited to two cities and business is limited to foreign customers. Foreign securities firms now may only trade "B shares," which are the limited number of stocks designated for foreign investors, via shared commissions and may underwrite international offerings of equity and debt.

• China has agreed to condition issuance of licenses only on prudential grounds. China will allow internal branching and to provide national treatment for all newly permitted activities. Foreign investors in banks, depending on the type of institution being established, may be required to exceed certain asset thresholds.

• China will expand the scope and geographic opportunities for foreign banks to conduct local currency business.

• Currently, only certain Chinese banks are authorized to conduct auto financing and only for certain vehicle models. Upon accession, non-bank financial institutions will be permitted to provide auto-financing without any market access or national treatment limitations.

• Deal directly in "B shares" (without Chinese intermediary) upon accession.
• Eligible for "special" membership in all exchanges upon accession.
• Manage assets through a joint venture with foreign minority equity share (one-third equity share cap upon accession, 49 percent by three years after accession).
• Establish securities operation as a joint venture with a minority (up to or equal to 33.33%) equity share for foreign investors to underwrite A, B, and H shares and corporate and government debt and trade all these securities except A shares by 3 years after accession (including new products).
• (Cross border) Trading in B shares (without Chinese intermediary) upon accession.

• (Both cross border and via commercial presence) Provision of financial information, data processing and advisory services (such as portfolio research and corporate restructuring) upon accession.

CHEMICALS

• China will reduce average chemical tariffs by more than 50% by January 1, 2005. Specifically, the average rate of 14.74% will be reduced to a final average rate of 6.9%.
• These reductions include reductions on all priority U.S. chemical exports and involve full implementation of more than two-thirds of the 1,100-plus products in the Chemical Tariff Harmonization Agreement (CTHMA) of the Uruguay Round. China will also significantly reduce tariffs on the remaining items.

• Quotas will be eliminated on virtually all chemicals upon accession. The remaining quotas on polyethylene terephthalate slices or chips and a few non-priority fertilizer products will be eliminated in 2002.

• Currently, U.S. companies' ability to do business in China is strictly limited because the right to engage in trade (importing and exporting) is restricted to a small number of companies that receive specific authorization or who import goods to be used in production. This limits U.S. exports. China has agreed that any entity will be able to import most products, including chemicals except fertilizers, into any part of China. This commitment is phased in over the three-year period with all entities being permitted to import and export at the end of the period. The right to import chemical fertilizer products is still under negotiation.
• China -- which generally prohibits companies from distributing imported products or providing related distribution services -- will permit foreign enterprises to engage in the full range of distribution services. These rights will be phased in over a three-year period for almost all products, including chemicals. (See separate papers on distribution services and related services.)

• China has agreed not to apply or enforce export performance, local content, and similar requirements as a condition on importation or investment approval.
• To alleviate the uncertainty associated with China's inconsistent application, refund, and waivers of its 17% VAT tax, China has agreed to apply all taxes and tariffs uniformly to both domestic and foreign businesses.

CIVIL AIRCRAFT

• For all items in Annex 1 of the Agreement on Trade In Civil Aircraft, tariffs will be bound and reduced from the current average rate of 14.7% to a final average rate of 8% starting upon China's accession and with most reductions completed by January 1, 2002. China actually applies lower or no tariffs for most products in this sector.

• Quotas and licenses will be eliminated upon accession for all items in the Agreement on Trade In Civil Aircraft.

• Currently, U.S. companies' ability to do business in China is strictly limited because the right to engage in trade (importing and exporting) is restricted to a small number of companies that receive specific authorization or who import goods to be used in production. This limits U.S. exports. China has agreed that any entity will be able to import most products, including civil aircraft, into any part of China. This commitment is phased-in over the three-year period with all entities being permitted to import and export at the end of the period.
• China -- which generally prohibits companies from distributing imported products or providing related distribution services -- will permit foreign enterprises to engage in the full range of distribution services. These rights will be phased in over a three-year period for almost all products, including civil aircraft. (See separate papers on distribution services and related services.)

• China has agreed to certain subsidy rules, including rules applicable to state-owned enterprises. Specifically, where government benefits are provided to an industry sector and state-owned enterprises are the predominant recipients or receive a disproportionate share of those benefits, the United States could take action under our unfair trade laws.
• In addition, the agreement establishes that the United States can determine whether government benefits, such as equity infusions or soft loans, have been provided to an industry using market-based criteria rather than Chinese government benchmarks.

• China has agreed to eliminate local content requirements immediately after it accedes to the World Trade Organization and not to enforce provisions in existing contracts that impose this requirement.
• These commitments combined with the other market-opening steps that China will take, such as cutting tariffs, eliminating quotas and permitting our companies to distribute products in China, will result in better access for our exports and eliminate false incentives or requirements to use domestic goods.

• China has agreed that it will not condition import or investment approvals on technology transfer or on conducting research and development in China.
• China will also have to provide better intellectual property protection for technology that is transferred and eliminate requirements mandating that the Chinese partner in a joint venture gains ownership of trade secrets after a certain number of years.

• China has agreed that importation and investment will not be conditioned on providing offsets.

• China has agreed not to apply or enforce export performance and similar requirements as a condition for importation or investment.

COMPUTER AND RELATED SERVICES

• Foreign service suppliers who are certified engineers or who hold a bachelor's degree and have had three years experience in computer services will be able to provide services in China.
• For consultancy services related to hardware installation, data processing and tabulation services, and time-sharing services, foreign-service suppliers will be able to operate in China without limitations upon accession. These services can also be provided through cross-border delivery.
• For software implementation services, systems and software consulting services, systems analysis services, systems design services, programming services, systems maintenance services, data processing services, input preparation services, foreign service suppliers will be able to operate in China upon accession through joint ventures. These services can also be provided through cross-border delivery.

CONSTRUCTION EQUIPMENT

• For construction equipment, China will reduce its current average tariff rate of 13.6% by over 50 percent to 6.4%. Reductions will commence upon accession and will be fully implemented by January 1, 2004.

• Tendering requirements for non-government purchases will be eliminated within two years of accession.

• Currently, U.S. companies' ability to do business in China is strictly limited because the right to engage in trade (importing and exporting) is restricted to a small number of companies that receive specific authorization or who import goods to be used in production. This limits U.S. exports. China has agreed that any entity will be able to import most products, including construction equipment, into any part of China. This commitment is phased in over the three-year period with all entities being permitted to import and export at the end of the period.
• China -- which generally prohibits companies from distributing imported products or providing related distribution services -- will permit foreign enterprises to engage in the full range of distribution services. These rights will be phased in over a three-year period for almost all products, including construction equipment. (See separate papers on distribution services and related services.)

• China has agreed not to apply or enforce export performance, local content, and similar requirements as a condition on importation or investment approval.
• To alleviate the uncertainty associated with China's inconsistent application, refund, and waivers of its 17% VAT tax, China has agreed to apply all taxes and tariffs uniformly to both domestic and foreign businesses.

COSMETICS

• China will reduce its tariffs from current levels as high as 45% to 10% or 15% by 2004 or 2005. Tariffs on priority exports will reach 6.5% by 2008.

• Currently, U.S. companies' ability to do business in China is strictly limited because the right to engage in trade (importing and exporting) is restricted to a small number of companies that receive specific authorization or who import goods to be used in production. This limits U.S. exports. China has agreed that any entity will be able to import most products, including cosmetics, into any part of China. This commitment is phased in over the three-year period with all entities being permitted to import and export at the end of the period.
• China -- which generally prohibits companies from distributing imported products or providing related distribution services -- will permit foreign enterprises to engage in the full range of distribution services. These rights will be phased in over a three-year period for almost all products, including cosmetics. (See separate papers on distribution services and related services.)

• China has agreed not to apply or enforce export performance, local content, and similar requirements as a condition for importation or investment.
• To alleviate the uncertainty associated with China's inconsistent application, refund, and waivers of its 17% VAT tax, China has agreed to apply all taxes and tariffs uniformly to both domestic and foreign businesses.

• Standards/statutory inspection and labeling will be addressed in the multilateral negotiations on China's Protocol and Working Party Report.

DISTRIBUTION SERVICES

• China now generally prohibits companies from distributing imported products or providing related distribution services such as repair and maintenance services.
• China agreed to liberalize its distribution system, one of the primary commitments sought by U.S. manufacturers and agricultural exporters. (China now generally prohibits companies from distributing imported products or providing related distribution services such as repair and maintenance services.)
• China's distribution commitment is comprehensive, covering commission agents services, wholesaling, retailing, franchising, sales away from a fixed location, as well as related subordinated activities, such as inventory management or repair and maintenance services.(See "Services Related to Distribution" for a complete definition.)
• China also made specific commitments related to distribution, such as rental and leasing services, air courier services, freight forwarding, and packing services. These commitments are found elsewhere in China's schedule under the relevant services categories. (For more information, see resource paper on Services Related to Distribution.)
• Current restrictions for all products are phased-out within three years from the date of accession, unless specifically noted below. This tracks with China's commitment to phase in trading rights within three years.

• Within one year of accession, foreign service suppliers will be permitted to establish joint ventures.(This means companies can establish as either an equity joint venture of no more than 50 percent, or as a contractual joint venture, in which the terms of the agreement are decided upon by the parties to the agreement, in accordance with Chinese law.)
• Within two years from the date of accession, foreign majority equity share is allowed and all geographic and quantitative restrictions are eliminated.
• Within three years from the date of accession, foreign service suppliers may establish wholly owned subsidiaries.

• Upon accession, foreign service suppliers will be permitted to establish as a joint venture in Zhengzhou and Wuhan.
• Within one year of accession, foreign service suppliers will be permitted to establish no more than two joint ventures in the five Special Economic Zones (Shenzhen, Zhuhai, Shantou, Xiamen, and Hainan) and four cities (Tianjin, Guangzhou, Dalian and Qingdao). Four joint ventures are permitted in Beijing and Shanghai. Two among the four joint ventures established in Beijing may set up branches in Beijing.
• Within two years from the date of accession, foreign majority equity share is allowed in these joint ventures, and geographic restrictions will be further liberalized to include all provincial capitals and Chongqing and Ningbo.
• Within three years from the date of accession, there will be no restrictions on equity, geographic areas, or on the number of service suppliers.

• Franchising, sales away from a fixed location (both wholesale and retail) and related subordinated activities are permitted without restrictions in three years.

• For retail department stores over 20,000 square meters and chain stores with more than 30 stores, China will only permit minority equity participation in joint ventures.
• Excluded from China's commitments are wholesaling for salt, and wholesaling and retailing for tobacco.
• China specified different end-points for liberalization for the product categories identified below. China is still obligated to provide market access and national treatment without restrictions, but there are no interim "benchmark" commitments as provided for other products.

SERVICES RELATED TO DISTRIBUTION

• Foreign service suppliers will be able to provide repair and maintenance services for household consumer goods, motorcycle, auto, and office machinery, including computers. (For repair services affiliated with a manufacturer, see resource paper on Distribution Services.)
• Foreign service suppliers may establish as joint ventures upon accession, hold a majority equity share in one year, and be free of restrictions within three years.

• China's commitment covers rental and leasing services for machinery and equipment without operators, and personal and household goods, except for videotapes.
• Foreign service suppliers must hold global assets of $5 million in order to operate in China.
• Foreign service suppliers may establish as joint ventures upon accession, hold a majority equity share in one year, and be free of restrictions within three years.

• Foreign service suppliers may establish in China as a joint venture upon accession, hold a majority equity share within two years, and set up as a wholly owned subsidiary within four years.
• In order to provide cross-border services, however, foreign service suppliers must go through authorized advertising agents in China.

• Foreign service suppliers which have been engaged in inspection services in their home countries for more than three years and hold $500,000 in registered capital are permitted to establish joint ventures upon accession, hold majority equity share within two years, and be free of restrictions within four years.
• "Statutory inspection" services are excluded from freight inspection services commitments.

• Foreign service suppliers may establish as joint ventures upon accession, hold a majority equity share within one year, and be free of restrictions within three years.

• China's commitments covers land-based international courier services and all services related to an international shipment handled by an express carrier.
• Foreign service suppliers are permitted to establish as a joint venture upon accession, hold a majority equity share within one year, and be free of restrictions within four years.

• Foreign service suppliers are permitted to establish as joint ventures upon accession, hold a majority equity share within one year, and will be free of restrictions within three years.

• Road transport: Foreign service suppliers will be able to establish as joint ventures upon accession, hold a majority equity share within one year, and be free of restrictions within three years.
• Rail transport: Foreign service suppliers will be able to establish as joint ventures upon accession, hold a majority equity share within three years, and be free of all restrictions within six years.

• In order to establish in China, foreign service suppliers should have at least three consecutive years experience. The minimum registered capital of a joint venture shall be no less than $1 million and the length of operation shall not exceed 20 years.
• Foreign service suppliers are permitted to establish a joint venture upon accession, and hold a majority equity share within one year.
• After one year of operation in China, a joint venture may set up a branch if it adds $120,000 to the original registered capital for each branch established.
• All restrictions are eliminated within four years.

ENVIRONMENTAL SERVICES

• China's environmental services commitments cover sewage services, solid waste disposal services, cleaning services for exhaust gases, noise abatement services, nature and landscape protection services, and other environmental protection services. However, environmental monitoring and pollution source inspection are excluded.
• Foreign service suppliers may provide environmental consultation services through cross-border delivery, without having to establish in China. All other foreign service suppliers may operate in China through a joint venture.

FURNITURE

• China will reduce its current average tariff rate of 22% to 0% on all furniture items covered by the Uruguay Round sectoral initiative. Reductions will commence upon accession and will be fully implemented by January 1, 2005.

• Currently, U.S. companies' ability to do business in China is strictly limited because the right to engage in trade (importing and exporting) is restricted to a small number of companies that receive specific authorization or who import goods to be used in production. This limits U.S. exports. China has agreed that any entity will be able to import most products, including furniture, into any part of China. This commitment is phased in over the three-year period with all entities being permitted to import and export at the end of the period.
• China -- which generally prohibits companies from distributing imported products or providing related distribution services -- will permit foreign enterprises to engage in the full range of distribution services. These rights will be phased in over a three-year period for almost all products, including furniture. (See separate papers on distribution services and related services.)

• China has agreed not to apply or enforce export-performance requirements, local-content requirements, and similar requirements as a condition on importation or investment approval.
• To alleviate the uncertainty associated with China's inconsistent application, refund, and waivers of its 17% VAT tax, China has agreed to apply all taxes and tariffs uniformly to both domestic and foreign businesses.

INFORMATION TECHNOLOGY PRODUCTS

• China will sign on to the Information Technology Agreement (ITA) on accession, thereby committing to eliminate tariffs on all products covered by the ITA. Tariff reductions from the current applied average of 13% will commence upon accession. Tariffs on two-thirds of the ITA products will be eliminated by January 1, 2003, and tariffs on all the remaining products will be eliminated by January 1, 2005.

• Quotas will be eliminated upon accession.

• Currently, U.S. companies' ability to do business in China is strictly limited because the right to engage in trade (importing and exporting) is restricted to a small number of companies that receive specific authorization or who import goods to be used in production. This limits U.S. exports. China has agreed that any entity will be able to import most products, including ITA products, into any part of China. This commitment is phased in over the three-year period with all entities being permitted to import and export at the end of the period.
• China -- which generally prohibits companies from distributing imported products or providing related distribution services -- will permit foreign enterprises to engage in the full range of distribution services. These rights will be phased in over a three-year period for almost all products, including ITA products. (See separate papers on distribution services and related services.)

• China has agreed not to apply or enforce export performance, local content, and similar requirements as a condition on importation or investment approval. (See separate paper on these protocol issues).
• To alleviate the uncertainty associated with China's inconsistent application, refund, and waivers of its 17% VAT tax, China has agreed to apply all taxes and tariffs uniformly to both domestic and foreign businesses.

INSURANCE

China currently allows selected foreign companies to operate in China on a limited basis in two cities. Two U.S. firms have licenses to operate, and two additional licenses for U.S. firms are pending approval by China's regulatory authorities.

• China has agreed to grant licenses on a prudential basis, without numerical restrictions or discretionary "economic needs" tests. Companies can obtain a license if they have more than 30 years of experience in a WTO member country; a representative office established in China for two consecutive years; and global assets of more than $5 billion.

• Upon accession, foreign service suppliers can provide master policy and/or large scale commercial risk insurance (i.e., an insurance company headquartered in city X can provide nationwide coverage for a corporation headquartered in city Y or with multiple operations throughout China); insurance for enterprises located abroad, property insurance, related liability insurance and credit insurance for foreign invested companies.
• Within four years from the date of accession, foreign service suppliers can provide the full range of non-life insurance services to both Chinese and foreign clients.

• Upon accession, foreign service suppliers can provide individual policies to both foreign and Chinese clients.
• Within four years from the date of accession, foreign service suppliers can provide health insurance to foreign and Chinese clients.
• Within five years, foreign service suppliers can provide group policies, pension, and annuities to both foreign and Chinese clients.

• China will permit upon accession the cross-border provision of reinsurance, as well as investment as a branch, joint-venture or wholly-owned subsidiary, without geographic or quantitative limitations.

• Excluded.

• Cross-border provision of these services permitted upon accession.

• Upon accession, branch and joint-ventures at 51 percent equity share permitted. Wholly-owned subsidiary permitted within two years from date of accession.

• Upon accession, joint ventures permitted with partner of choice at 50 percent equity share.

• Shanghai and Guangzhou opened upon accession. Within two years from the date of accession, foreign service suppliers can establish in Beijing, Chengdu, Dalian, Chongqing, Shenzhen, Fuzhou, Suzhou, Xiamen, Ningbo, Shenyang, Wuhan, and Tianjin. All geographic restrictions will be phased out within three years of accession.
• Internal branching is permitted consistent with the phase-out of geographic restrictions.

• Reinsurance, master policy insurance and large-scale commercial risk insurance can be provided nationwide upon accession.

ELIMINATING NON-TARIFF MEASURES AND CONDITIONS ON INVESTMENTS

China's commitments to eliminate non-tariff measures and certain conditions on U.S. exports and investment all enter into effect immediately upon China's accession to the WTO.

At that time, China will:

• Implement the WTO Agreement on Trade-Related Investment Measures (TRIMs);
• Eliminate and cease to enforce trade and foreign-exchange balancing requirements -- which link a company's level of imports to its level of exports;
• Eliminate local content requirements; and
• Eliminate export performance requirements.

China will not enforce the provisions of contracts imposing these requirements. Contracts, particularly those establishing joint ventures or wholly foreign-owned companies, frequently contain such requirements as a condition for government approval.

China has also agreed that, subject to the other provisions of its WTO accession package, the government (at the central, provincial, and local levels) will not condition: - import licenses, - quotas, - tariff-rate quotas, or - any other means of approval for importation, the right of importation, or - investment on whether Chinese companies can supply the products -- or on performance requirements of any kind.

Thus China will cannot condition their approval of an investment on whether a company:

• Provides offsets,
• transfers technology
• uses locally produced goods, or
• conducts research and development in China.

LOCAL CONTENT AND TECHNOLOGY TRANSFER

• China has agreed to eliminate local content requirements immediately after it accedes to the World Trade Organization and not to enforce provisions in existing contracts that impose this requirement.
• These commitments combined with the other market-opening steps that China will take, such as cutting tariffs, eliminating quotas and permitting our companies to distribute products in China, will result in better access for our exports and eliminate false incentives or requirements to use domestic goods.

• China will eliminate technology transfer requirements and offsets as a condition for investment approval or importation.
• The terms and conditions of any transfer of technology will be agreed between the parties to a contract and not imposed by the government.
• Exports from the United States will no longer face this barrier and companies that want to invest in China can negotiate these terms without the Government interfering.
• China will also have to provide better intellectual property protection for technology that is transferred and eliminate requirements mandating that the Chinese partner in a joint venture gains ownership of trade secrets after a certain number of years.

• Elimination of local content requirements and technology transfer as a prerequisite for an investment approval are only two of the practices that China will eliminate as a result of WTO accession. China will also eliminate export performance requirements and foreign exchange and trade balancing requirements. If these provisions are in contracts, the government will not enforce them.
• Similarly, importation and investment will not be conditioned on conducting research and development in China.

MEDICAL EQUIPMENT

• China will reduce its tariffs on medical equipment from its current average tariff of 9.9% to 4.7%. Reductions will begin on accession and will be completed by January 1, 2003.
• If WTO Members agree to and adopt the medical equipment sectoral initiative that originated in APEC, China will join this initiative and eliminate its tariffs on these products.

• Quotas will be eliminated upon accession.

• Tendering requirements for non-government purchases will be eliminated within four years of accession.

• Currently, U.S. companies' ability to do business in China is strictly limited because the right to engage in trade (importing and exporting) is restricted to a small number of companies that receive specific authorization or who import goods to be used in production. This limits U.S. exports. China has agreed that any entity will be able to import most products, including medical equipment, into any part of China. This commitment is phased in over the three-year period with all entities being permitted to import and export at the end of the period.
• China -- which generally prohibits companies from distributing imported products or providing related distribution services -- will permit foreign enterprises to engage in the full range of distribution services. These rights will be phased in over a three-year period for almost all products, including medical equipment. (See separate papers on distribution services and related services.)

• China has agreed not to apply or enforce export performance, local content, and similar requirements as a condition on importation or investment approval. (See separate paper on this protocol issue.)
• To alleviate the uncertainty associated with China's inconsistent application, refund, and waivers of its 17% VAT tax, China has agreed to apply all taxes and tariffs uniformly to both domestic and foreign businesses.

PAPER

• China will reduce its tariffs on paper and paper products from its current average tariff of 14.2% to 5.5%. Reductions will commence upon accession and will be fully implemented by January 1, 2005. Tariffs on U.S. priority paper products will reach 2% or 5% by year 2004.
• If WTO Members agree to and adopt the paper sectoral initiative that originated in APEC, China will join this initiative and eliminate its tariffs on these products.

• Currently, U.S. companies' ability to do business in China is strictly limited because the right to engage in trade (importing and exporting) is restricted to a small number of companies that receive specific authorization or who import goods to be used in production. This limits U.S. exports. China has agreed that any entity will be able to import most products, including paper products, into any part of China. This commitment is phased in over the three-year period with all entities being permitted to import and export at the end of the period.
• China -- which generally prohibits companies from distributing imported products or providing related distribution services -- will permit foreign enterprises to engage in the full range of distribution services. These rights will be phased in over a three-year period for almost all products, including paper. (See separate papers on distribution services and related services.)

• China has agreed to provide treatment to the United States on par with China's preferential programs. For example, if China grants a lower tariff rate to Malaysia than is applied in China's tariff schedule due to a WTO-consistent preferential program, that rate must also be provided to the United States for paper products.
• To alleviate the uncertainty associated with China's inconsistent application, refund, and waivers of its 17% VAT tax, China has agreed to apply all taxes and tariffs uniformly to both domestic and foreign businesses.
• China has agreed not to apply or enforce export performance, local content, and similar requirements as a condition on importation or investment approval. (See separate paper on these protocol issues.)

PHARMACEUTICALS

• China will reduce its average tariff on pharmaceuticals by about 60%, from its current average tariff of 9.6% to 4.2%. Reductions will commence upon accession and will be completed by January 1, 2003.
• China will bind all its tariffs.

• Currently, U.S. companies' ability to do business in China is strictly limited because the right to engage in trade (importing and exporting) is restricted to a small number of companies that receive specific authorization or who import goods to be used in production. This limits U.S. exports. China has agreed that any entity will be able to import most products, including pharmaceuticals, into any part of China. This commitment is phased in over the three-year period with all entities being permitted to import and export at the end of the period.
• China -- which generally prohibits companies from distributing imported products or providing related distribution services -- will permit foreign enterprises to engage in the full range of distribution services. These rights will be phased in over a three-year period for almost all products, including cotton. (See separate papers on distribution services and related services.)

• China has agreed to implement the Trade-Related Intellectual Property Agreement of the Uruguay Round upon accession to the WTO.

PRODUCT-SPECIFIC SAFEGUARD

China has agreed to a 12-year product-specific safeguard, which allows the United States to address rapidly increasing Chinese imports in a targeted fashion, if they are disrupting the U.S. market. This provision does not apply to U.S. exports to China.

• Provides a means to address Chinese exports that cause or threaten to cause "market disruption."

• This provision will remain in force for 12 years after China accedes to the WTO.

PROFESSIONAL SERVICES

• China has agreed to market access and national treatment for accounting, auditing, and bookkeeping services. Foreign accounting firms will be permitted to affiliate with Chinese firms and enter into contractual agreements with their affiliated firms in other WTO member countries.
• These firms must be represented by Certified Public Accountants (CPA) licensed by Chinese authorities; however, existing accounting firms are exempted from this requirement.
• CPA licenses will be issued on a national treatment basis. Applicants will be informed of results in writing no later than thirty days after submission of their application.

• When China accedes to the WTO, foreign firms can establish as a profit-making representative office, or as a joint venture with a majority equity share.
• Five years after accession, foreign firms can establish as a wholly owned subsidiary.

• Foreign law firms will be able to provide legal services in the form of a profit-making representative office. All geographic and quantitative restrictions will be phased out within one year of China's accession, which means that foreign firms can open more than one office anywhere in China.
• Foreign firms will be able to give advice on international conventions and practices, and the law of other WTO members in which the lawyer is licensed to practice. While the foreign firm cannot employ Chinese nationals as lawyers for the practice of Chinese law, it can enter into long-term "entrustment" contracts providing for close working relationships with firms practicing Chinese law.
• The chief representative of a foreign law firm must be a partner or equivalent in a law firm from a WTO-member country. All representatives must be a member of the bar in a WTO member country, possess three years experience outside of China, and reside in China no less than six months each year.

• Foreign firms will be able to establish through majority owned joint ventures, or provide services cross-border in cooperation with Chinese professional organizations.

SCIENTIFIC EQUIPMENT

• China will reduce its tariffs on scientific equipment from its current average tariff of 12.3% to 6.5%. Reductions will commence upon accession and will be completed by January 1, 2003.
• If WTO Members agree to and adopt the scientific equipment sectoral initiative that originated in APEC, China will join this initiative and eliminate its tariffs on these products.

• Tendering requirements for non-government purchases will be eliminated within four years of accession.

• Currently, U.S. companies' ability to do business in China is strictly limited because the right to engage in trade (importing and exporting) is restricted to a small number of companies that receive specific authorization or who import goods to be used in production. This limits U.S. exports. China has agreed that any entity will be able to import most products, including scientific equipment, into any part of China. This commitment is phased in over the three-year period with all entities being permitted to import and export at the end of the period.
• China -- which generally prohibits companies from distributing imported products or providing related distribution services -- will permit foreign enterprises to engage in the full range of distribution services. These rights will be phased in over a three-year period for almost all products, including scientific equipment. (See separate papers on distribution services and related services.)

• China has agreed not to apply or enforce export performance, local content, and similar requirements as a condition on importation or investment approval.
• China has agreed to implement the Trade-Related Intellectual Property Agreement of the Uruguay Round upon accession to the WTO.
• China has agreed to join any of the ATL sectoral initiatives, including the environmental equipment initiative, adopted by the WTO members.
• To alleviate the uncertainty associated with China's inconsistent application, refund, and waivers of its 17% VAT tax, China has agreed to apply all taxes and tariffs uniformly to both domestic and foreign businesses.

GRANDFATHERING PROVISION FOR TRADE IN SERVICES

• China committed that foreign-invested companies would after China's accession continue to enjoy at least the market access they had at the time of accession.
• China's commitment is broad; it applies both to contractual and shareholder agreements approved at the local or provincial level as well as those centrally-approved by Beijing authorities.
• The specific commitment is contained in China's services schedule:

SODA ASH

• China will reduce its tariff from 12% to 5.5% in equal annual stages beginning on accession -- reaching 5.5% by January 1, 2003.

• Currently, U.S. companies' ability to do business in China is strictly limited because the right to engage in trade (importing and exporting) is restricted to a small number of companies that receive specific authorization or who import goods to be used in production. This limits U.S. exports. China has agreed that any entity will be able to import most products, including soda ash into any part of China. This commitment is phased in over the three-year period with all entities being permitted to import and export at the end of the period.
• China -- which generally prohibits companies from distributing imported products or providing related distribution services -- will permit foreign enterprises to engage in the full range of distribution services. These rights will be phased in over a three-year period for almost all products, including soda ash. (See separate papers on distribution services and related services.)

• China has committed to strong provisions to address import surges. This safeguard takes the form of a special mechanism that addresses rapidly increasing imports from China that cause or threaten to cause market disruption on a product-specific basis for 12 years after accession.

• China has agreed to include a provision in its protocol that explicitly permits continued use of non-market economy methodology. The provision in China's protocol will remain in effect for 15 years from China's accession.

• China has agreed to certain subsidy rules, including rules applicable to state-owned enterprises. Specifically, where government benefits are provided to an industry sector and state-owned enterprises are the predominant recipients or receive a disproportionate share of those benefits, the United States could take action under our unfair trade laws.
• In addition, the agreement establishes that the United States can determine whether government benefits, such as equity infusions or soft loans, have been provided to an industry using market-based criteria rather than Chinese government benchmarks.

• China has agreed not to apply or enforce export performance, local content, and similar requirements as a condition on importation or investment approval.
• To alleviate the uncertainty associated with China's inconsistent application, refund, and waivers of its 17% VAT tax, China has agreed to apply all taxes and tariffs uniformly to both domestic and foreign businesses.

STATE-OWNED AND STATE-INVESTED ENTERPRISES

• China has confirmed the application of WTO rules to state-owned enterprises and extended those disciplines to state-invested enterprises, e.g., companies in which the government has an equity interest. Under these commitments, China's state-owned and state-invested enterprises are required to buy and sell based on commercial considerations, such as quality and price.
• China must also provide U.S. companies opportunities to sell products to state-owned and state-invested enterprises.
• Purchases and sales of goods and services by state-owned enterprises, for commercial resale, or for use in the production of goods for commercial sale, are not considered to be government procurement and are subject to WTO rules.
• China has agreed to certain subsidy rules, including rules applicable to state-owned enterprises. Specifically, where government benefits are provided to an industry sector and state-owned enterprises are the predominant recipients or receive a disproportionate share of those benefits, the United States could take action under our unfair trade laws.
• In addition, the agreement establishes that the United States can determine whether government benefits, such as equity infusions or soft loans, have been provided to an industry using market-based criteria rather than Chinese government benchmarks.

STEEL

• China will reduce its tariffs on steel and steel products from its current average tariff of 10.3% to 6.1%. Reductions will commence upon accession and will be completed by January 1, 2003.

• Currently, U.S. companies' ability to do business in China is strictly limited because the right to engage in trade (importing and exporting) is restricted to a small number of companies that receive specific authorization or who import goods to be used in production. This limits U.S. exports. China has agreed that any entity will be able to import most products, including steel, into any part of China. This commitment is phased in over the three-year period with all entities being permitted to import and export at the end of the period.
• China -- which generally prohibits companies from distributing imported products or providing related distribution services -- will permit foreign enterprises to engage in the full range of distribution services. These rights will be phased in over a three-year period for almost all products, including steel. (See separate papers on distribution services and related services.)

• China has committed to a strong product-specific safeguard that allows the United States to address import surges. Specifically, the safeguard allows the United States to restrain increasing imports from China that cause or threaten to cause market disruption for 12 years after accession. After that, current U.S. safeguard provisions -- Section 201 -- remain available to address increasing imports.

• The Agreement explicitly permits the United States to continue to use its current non-market economy methodology for 15 years after China's accession to the WTO.

• China has agreed to certain subsidy rules, including rules applicable to state-owned enterprises. Specifically, where government benefits are provided to an industry sector and state-owned enterprises are the predominant recipients or receive a disproportionate share of those benefits, the United States could take action under our unfair trade laws.
• In addition, the agreement establishes that the United States can determine whether government benefits, such as equity infusions or soft loans, have been provided to an industry using market-based criteria rather than Chinese government benchmarks.

TELECOMMUNICATIONS

Foreign service suppliers are currently prohibited from providing telecom services in China. After China's accession, foreign suppliers will be permitted to provide a broad range of services as described below:

• Foreign service suppliers will be able to provide the following services: electronic mail, voice mail, on-line information and data base retrieval, electronic data interchange, enhanced/value-added facsimile services (including store and forward, store and retrieve), code and protocol conversion, on-line information and data processing (including transaction processing), and paging services.
• Foreign service suppliers may hold 30 percent foreign equity share upon accession, 49 percent after one year, 50 percent after two years.
• Foreign service suppliers may provide services to Beijing, Shanghai, and Guangzhou upon accession, to Chengdu, Chongqing, Dalian, Fuzhou, Hangzhou, Nanjing, Ningbo, Qingdao, Shenyang, Shenzen, Xiamen, Xian, Taiyuan and Wuhan after one year, and nationwide after two years.

• Foreign service suppliers will be able to provide all analogue/digital cellular services and personal communications services.
• Foreign services suppliers may hold a 25 percent foreign equity share one year after accession, 35 percent after three years, and 49 percent after five years.
• Foreign service suppliers may provide services in Beijing, Shanghai, and Guangzhou one year after accession, to Chengdu, Chongqing, Dalian, Fuzhou, Hangzhou, Nanjing, Ningbo, Qingdao, Shenyang, Shenzen, Xiamen, Xian, Taiyuan and Wuhan after three years, and nationwide after five years.

• Foreign service suppliers will be able to provide domestic and international voice, packet-switched data transmission services, circuit-switched data transmission services, and facsimile services. International closed user groups voice and data services are also included.
• Foreign service suppliers may hold a 25 percent foreign equity share three years after accession, 35 percent after five years, and 49 percent after six years.
• Foreign service suppliers may provide services in Beijing, Shanghai, and Guangzhou after three years, Chengdu, Chongqing, Dalian, Fuzhou, Hangzhou, Nanjing, Ningbo, Qingdao, Shenyang, Shenzen, Xiamen, Xian, Taiyuan and Wuhan after five years, and nationwide after six years.

• Internet and satellite services are included, but not explicitly scheduled, following the scheduling convention of most WTO members, including the United States.
• Internet services are subsumed under value-added services.
• For satellite services, China has attached to its services schedule and signed the "Notes for Scheduling Basic Telecom Services" (S/GBT/W/REV.1). This means unless explicitly excluded in China's sectoral column, any basic service may be provided through any means of technology (e.g., cable, wireless, satellites).

• All international telecommunications services suppliers shall be licensed by China's telecommunications authorities, which will act as an independent regulatory authority. The decisions and procedures used by regulators shall be impartial with respect to all market participants.

• China has agreed to undertake all the obligations contained in the WTO Reference Paper on pro-competitive regulatory principles. China also made commitments in accordance with the Notes for Scheduling Basic Telecom Services (S/GBT/W/REV.1) and Market Access Limitations on Spectrum Availability (S/GBT/W/3).
• China agrees that further liberalization of telecommunications, including with respect to the level of equity participation permitted, will be discussed in the services negotiations during the trade round initiated in Seattle.
• Periodic, bilateral consultations will be held at the expert level on interconnection and fees, at the request of either the United States or China.

TEXTILES AND APPAREL

• China will reduce its tariffs on textiles and apparel products from its current average tariff of 25.4% to 11.7% -- essentially implementing the textile harmonization formula. Reductions will commence upon accession and will be completed by January 1, 2005.
• Tariff rates agreed to in the 1997 U.S-China Bilateral Textile Agreement will be implemented and bound in the WTO by 2001. Further tariff reductions will be implemented by 2005.

• Currently in China, the right to engage in trade (importing and exporting) is strictly limited; only companies that receive specific authorization or who import goods to be used in production have such rights. This limits the ability of U.S. companies to do business in China, and has limited U.S. exports. China has agreed that companies in China and U.S. companies will be able to import most products, including textile and apparel products, into any part of China three years after accession. This commitment is phased in over the three-year period.
• China also generally prohibits companies from distributing imported products or providing related distribution services such as repair and maintenance services. China will permit foreign enterprises to engage in the full range of distribution services over a three-year phase-in period for almost all products, including textile and apparel products. (See separate papers on distribution services and related services.)

• Most Chinese quotas on priority U.S. exports will be eliminated upon accession, except that quotas on thirty yarn, synthetic filament tow, and fiber products will be eliminated after one year.
• The United States will apply the WTO Agreement on Textiles and Clothing to China with a phase-out of our quotas under that Agreement.

• China has committed to two strong provisions to address concerns regarding import surges of textile and apparel products:

• China has agreed to certain subsidy rules, including rules applicable to state-owned enterprises. Specifically, where government benefits are provided to an industry sector and state-owned enterprises are the predominant recipients or receive a disproportionate share of those benefits, the United States could take action under our unfair trade laws.
• In addition, the agreement establishes that the United States can determine whether government benefits, such as equity infusions or soft loans, have been provided to an industry using market-based criteria rather than Chinese government benchmarks.

• To alleviate the uncertainty associated with China's inconsistent application, refund, and waivers of its 17% VAT tax, China has agreed to apply all taxes and tariffs uniformly to both domestic and foreign businesses.
• Additional subsidies issues will be addressed multilaterally in China's Protocol and Working Party Report.

TEXTILES: SPECIAL SAFEGUARD

• China has agreed to incorporate the textile-specific safeguard provided for in the U.S.-China Bilateral Textile Agreement. Accordingly:

• Restraints on imports become effective on receipt of a request for consultations.
• Restraints may remain in place for up to a year unless we go through procedures to reapply the safeguard.
• China has no right to retaliate against a restraint.

• The terms and procedures of the textile safeguard are enforceable through dispute settlement in the WTO.

TOYS

• China will eliminate its tariffs -- currently as high as 35% -- on products in the Uruguay Round sectoral initiative of toys. This sector includes video games, billiard tables, and bowling equipment as wells as traditional toys. Reductions will commence upon accession and will be fully implemented by January 1, 2005.

• Currently in China, the right to engage in trade (importing and exporting) is strictly limited; only companies that receive specific authorization or who import goods to be used in production have such rights. This limits the ability of U.S. companies to do business in China, and has limited U.S. exports. China has agreed that companies in China and U.S. companies will be able to import most products, including toys, into any part of China three years after accession. This commitment is phased in over the three-year period.
• China also generally prohibits companies from distributing imported products or providing related distribution services such as repair and maintenance services. China will permit foreign enterprises to engage in the full range of distribution services over a three-year phase-in period for almost all products, including toys. (See separate papers on distribution services and related services.)

• To alleviate the uncertainty associated with China's inconsistent application, refund, and waivers of its 17% VAT tax, China has agreed to apply all taxes and tariffs uniformly to both domestic and foreign businesses.