Is China complying with its
The USTR says it is not.
On 11 December 2003, two years after China
joined the World Trade Organisation (WTO), the United States Trade
Representative (USTR) published its second report to the United
States Congress on China's compliance with its WTO obligations.
While favourably acknowledging the growth
in US-China trade, the report concludes that there are "a
number of systemic concerns that remain, making further
improvements in that relationship problematic". The United
States government will use "all available means" to
resolve its concerns, preferably "through bilateral
consultations in a timely and effective manner", but, if
these are not successful, "through other means, including
dispute resolution at the WTO".
On the positive side, the
USTR commends China for the steps it took during 2003 to implement
WTO commitments, including measures to improve the tariff-rate
quota (TRQ) system for bulk agricultural commodities (largely, the
USTR notes, in response to "high-level engagement" by
the United States government), the relaxation of some barriers to
soybean trade that allowed United States exporters to achieve
record sales, the reduction of capitalisation requirements in
financial services sectors, the opening up of motor vehicle
financing, and the removal of obstacles to China’s membership in
the WTO’s Committee of Participants in the Expansion of Trade in
Information Technology Products.
The main complaint of the USTR is
that China failed to implement its WTO commitments in some key
sectors of economic importance to the
United States. The USTR charges that institutionalisation of
market mechanisms remains incomplete, with Chinese government
officials intervening frequently in the market. It also accuses
China of diverting attention from this implementation failure by
manipulating trade flows to produce a temporary increase in
affected imports from the United States.
Main complaints by sector
* China’s actual and
threatened use of what the USTR considers to be
"unreasonable" rules on biotechnology, most notably in
the case of soybeans, and "questionable" sanitary and
phytosanitary (SPS) measures have, says the USTR, continued to frustrate efforts of U.S.
agricultural traders to develop a consistent market for their
exports to China.
* China appears also, it suggests, to be
using subsidies to promote some agricultural exports.
* China’s administration
of TRQs for bulk agricultural commodities has also "caused serious
concern". Since China’s WTO accession, the setting of
sub-quotas, the use of what the USTR calls "Catch-22 import licensing procedures", the
allocation of TRQs in commercially unviable quantities and the
alleged lack of transparency in TRQ allocation and
management have combined to limit what should be an expanding market for U.S. exporters,
particularly in the case of cotton. China has, though, taken steps
to eliminate separate allocations for general trade and processing
trade, eliminate certain unnecessary licensing requirements, and
create a new mechanism for identifying allocation recipients, so
the United States decided not to initiate WTO dispute resolution
on this issue in 2003.
Intellectual Property Rights
* Intellectual propery rights (IPR) are
protected by legislation, but because enforcement is ineffecitve
there is not yet a "meaningful system of IPR
* IPR problems cover the widespread
production, distribution and end-use of counterfeit and pirated
products, brands and technologies. Violations include the
"rampant piracy" of film, music, publishing and software
products, infringement of pharmaceutical, chemical, information
technology and other patents, and counterfeiting of consumer
goods, electrical equipment, automotive parts and
* IPR infringements, points
out the USTR, do not merely have an economic impact, they may also
have health and safety implications for China’s population and
for international consumers.
* Problems in the services
sectors are largely those of a lack of transparency and, says the
USTR, of China’s use of capitalisation and other requirements
that exceed international norms. Following discussions with the
United States, China did begin to take steps to reduce
capitalisation requirements in the insurance sector.
* The United States remain
"at odds" over issues such as China’s implementation
of its commitments on branching by insurance companies.
Value-Added Tax Policies
* China uses value-added tax (VAT) policies
to encourage domestic production in a number of
industrial and agricultural sectors.
* In the case of
semiconductors, the USTR alleges that China’s policy of
providing VAT rebates to domestic semiconductor producers
disadvantages United States exports and "raises serious WTO
* In the case of fertiliser, China exempts
from the VAT fertiliser that is primarily produced domestically
and that competes directly with the principal United States
* While some Chinese
ministries and agencies have taken steps to improve opportunities
for public comment on draft laws and regulations, and to provide
appropriate WTO enquiry points, China’s overall effort, says the
USTR, is "plagued by uncertainty and a lack of
uniformity". The USTR charges that some of China’s
ministries and agencies seek selective comment on proposed
regulations and implementing rules from domestic Chinese
interests, while excluding participation from foreign
businesses active in the China market.
Trading Rights and Distribution Services
* The USTR acccuses China of having fallen
behind in its implementation of its commitment to ensure the
unrestricted rights of all Chinese and foreign businesses to
engage in importing and exporting by 11 December 2004.