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USIS Washington File

16 March 2000

Text: Summary of U.S.-China Bilateral WTO Agreement

(China must still negotiate with other WTO members) (2190) 
The China Trade Relations Working Group at the White House has
released a summary of the U.S.-China Bilateral World Trade
Organization (WTO) Agreement that was signed, after thirteen years of
negotiation, in Beijing November 15, 1999.
While the agreement represented a crucial step in China's WTO
accession process, China must still conclude bilateral negotiations
with a number of other WTO members and finish its own domestic
procedures for accession. Multilateral negotiations on China's
accession protocol must also be completed before the country becomes a
member of the WTO.
Following is the text of the summary as published by The White House
China Trade Relations Working Group:
(begin text)
THE WHITE HOUSE
China Trade Relations Working Group
SUMMARY OF U.S.-CHINA BILATERAL WTO AGREEMENT
February 2, 2000
AGRICULTURE
The Agreement would eliminate barriers and increase access for U.S.
exports across a broad range of commodities. Commitments include:
Significant cuts in tariffs that will be completed by January 2004.
Overall average for agricultural products will be 17.5 percent and for
U.S. priority products 14 percent (down from 31 percent).
Establishment of a tariff-rate quota system for imports of bulk
commodities, e.g., wheat, corn, cotton, barley, and rice, that
provides a share of the TRQ for private traders. Specific rules on how
the TRQ will operate and increased transparency in the process will
help ensure that imports occur. Significant and growing quota
quantities subject to tariffs that average between 1-3 percent.
Immediate elimination of the tariff-rate quota system for barley,
peanut oil, sunflower-seed oil, cottonseed oil, and a phase-out for
soybean oil. The right to import and distribute products without going
through a state-trading enterprise or middleman. Elimination of export
subsidies on agricultural products.
China has also agreed to the elimination of SPS barriers that are not
based on scientific evidence.
INDUSTRIAL PRODUCTS
China would lower tariffs and eliminate broad systemic barriers to
U.S. exports, such as limits on who can import goods and distribute
them in China, as well as barriers such as quotas and licenses on U.S.
products.
TARIFFS
Tariffs cut from an average of 24.6 percent to an average of 9.4
percent overall and 7.1 percent on U.S. priority products. China will
participate in the Information Technology Agreement (ITA) and
eliminate all tariffs on products such as computers,
telecommunications equipment, semiconductors, computer equipment, and
other high-technology products. In the auto sector, China will cut
tariffs from the current 80-100% level to 25% by mid-2006, with the
largest cuts in the first years after accession. Auto parts tariffs
will be cut to an average of 10% by mid-2006. In the wood and paper
sectors, tariffs will drop from present levels of 12?18% on wood and
15-25% on paper down to levels generally between 5% and 7.5%. China
will also be implementing the vast majority of the chemical
harmonization initiative. Under that initiative, tariffs will be at 0,
5.5 and 6.5 percent for products in each category.
ELIMINATION OF QUOTAS AND LICENSES
WTO rules bar quotas and other quantitative restrictions. China has
agreed to eliminate these restrictions with phase-ins limited to five
years.
Quotas: China will eliminate existing quotas upon accession for the
top U.S. priorities (e.g. optic fiber cable). It will phase out
remaining quotas, generally by 2002, but no later than 2005. Quotas
will grow from current trade levels at a 15% annual rate in order to
ensure that market access increases progressively. Auto quotas will be
phased out by 2005. In the interim, the base-level quota will be $6
billion (the level prior to China's auto industrial policy), and this
will grow by 15% annually until elimination.
RIGHT TO IMPORT AND DISTRIBUTE
Trading rights and distribution are among the top concerns for U.S.
manufacturers and agricultural exporters. At present, China severely
restricts trading rights (the right to import and export) and the
ability to own and operate distribution networks. Under the Agreement,
trading rights and distribution services will be progressively phased
in over three years. China will also open up sectors related to
distribution services, such as repair and maintenance, warehousing,
trucking and air courier services.
SERVICES
China has made commitments to phase out most restrictions in a broad
range of services sectors, including distribution, banking, insurance,
telecommunications, professional services such as accountancy and
legal consulting, business and computer related services, motion
pictures and video and sound recording services. China will also
participate in the Basic Telecommunications and Financial Services
Agreements.
GRANDFATHERING
China will grandfather the existing level of market access already in
effect at the time of China's accession for U.S. services companies
currently operating in China. This will protect existing American
businesses operating under contractual or shareholder agreements or a
license from new restrictions as China phases in their commitments.
DISTRIBUTION AND RELATED SERVICES
China generally prohibits foreign firms from distributing products
other than those they make in China, or from controlling their own
distribution networks. Under the Agreement, China has agreed to
liberalize wholesaling and retailing services for most products,
including imported goods, throughout China in three years. In
addition, China has agreed to open up the logistical chain of related
services such as maintenance and repair, storage and warehousing ,
packaging, advertising, trucking and air express services, marketing,
and customer support in three to four years.
TELECOMMUNICATIONS China now prohibits foreign investment in
telecommunications services. For the first time, China has agreed to
permit direct investment in telecommunications businesses. China will
also participate in the Basic Telecommunications Agreement. Specific
commitments include:
Regulatory Principles ?- China has agreed to implement the
procompetitive regulatory principles embodied in the Basic
Telecommunications Agreement (including interconnection rights and
independent regulatory authority) and will allow foreign suppliers to
use any technology they choose to provide telecommunications services.
China will gradually phase out all geographic restrictions for paging
and value-added services in two years, mobile voice and data services
in five years, and domestic and international services in six years.
China will permit 50 percent foreign equity share for value-added and
paging services two years after accession, 49 percent foreign equity
share for mobile voice and data services five years after accession,
and for domestic and international services six years after accession.
INSURANCE
Currently, only two U.S. insurers have access to China's market. Under
the agreement:
China agreed to award licenses solely on the basis of prudential
criteria, with no economic-needs test or quantitative limits on the
number of licenses issued. China will progressively eliminate all
geographic limitations within 3 years. Internal branching will be
permitted consistent with the elimination of these restrictions. China
will expand the scope of activities for foreign insurers to include
group, health and pension lines of insurance, phased in over 5 years.
Foreign property and casualty firms will be able to insure large-scale
commercial risks nationwide immediately upon accession. China agreed
to allow 50 percent ownership for life insurance. Life insurers may
also choose their own joint venture partners. For non-life, China will
allow branching or 51 percent ownership on accession and wholly owned
subsidiaries in 2 years. Reinsurance is completely open upon accession
(100 percent, no restrictions).
BANKING
Currently foreign banks are not permitted to do local currency
business with Chinese clients (a few can engage in local currency
business with their foreign clients). China imposes severe geographic
restrictions on the establishment of foreign banks.
China has committed to full market access in five years for U.S.
banks. Foreign banks will be able to conduct local currency business
with Chinese enterprises starting 2 years after accession. Foreign
banks will be able to conduct local currency business with Chinese
individuals from 5 years after accession. Foreign banks will have the
same rights (national treatment) as Chinese banks within designated
geographic areas. Both geographic and customer restrictions will be
removed in five years. Non-bank financial companies can offer auto
financing upon accession.
SECURITIES
China will permit minority foreign-owned joint ventures to engage in
fund management on the same terms as Chinese firms. By three years
after accession, foreign ownership of these joint ventures will be
allowed to rise to 49 percent. As the scope of business expands for
Chinese firms, foreign joint venture securities companies will enjoy
the same expansion in scope of business. In addition, 33 percent
foreign-owned joint ventures will be allowed to underwrite domestic
equity issues and underwrite and trade in international equity and all
corporate and government debt issues.
PROFESSIONAL SERVICES
China has made strong commitments regarding professional services,
including the areas of law, accounting, management consulting, tax
consulting, architecture, engineering, urban planning, medical and
dental services, and computer and related services. China's
commitments will lead to greater market access opportunities and
increased certainty for American companies doing business in China.
MOTION PICTURES, VIDEOS, SOUND RECORDINGS
China will allow the 20 films to be imported on a revenue-sharing
basis in each of the 3 years after accession. U.S. firms can form
joint ventures to distribute videos, software entertainment, and sound
recordings and to own and operate cinemas.
PROTOCOL PROVISIONS
Commitments in China's WTO Protocol and Working Party Report establish
rights and obligations enforceable through WTO dispute settlement
procedures. We have agreed on key provisions relating to antidumping
and subsidies, protection against import surges, technology transfer
requirements, and offsets, as well as practices of state-owned and
state-invested enterprises. These rules are of special importance to
U.S. workers and business.
China has agreed to implement the TRIMs Agreement upon accession,
eliminate and cease enforcing trade and foreign exchange balancing
requirements, as well as local content requirements, refuse to enforce
contracts imposing these requirements, and only impose or enforce laws
or other provisions relating to the transfer of technology or other
know-how, if they are in accordance with the WTO agreements on
protection of intellectual property rights and trade-related
investment measures.
These provisions will also help protect American firms against forced
technology transfers. China has agreed that, upon accession, it will
not condition investment approvals, import licenses, or any other
import approval process on performance requirements of any kind,
including: local content requirements, offsets, transfer of
technology, or requirements to conduct research and development in
China.
ANTIDUMPING AND SUBSIDIES METHODOLOGY
The agreed protocol provisions ensure that American firms and workers
will have strong protection against unfair trade practices including
dumping and subsidies. The U.S. and China have agreed that we will be
able to maintain our current antidumping methodology (treating China
as a non-market economy) in future anti-dumping cases. This provision
will remain in force for 15 years after China's accession to the WTO.
Moreover, when we apply our countervailing duty law to China we will
be able to take the special characteristics of China's economy into
account when we identify and measure any subsidy benefit that may
exist.
PRODUCT-SPECIFIC SAFEGUARD
The agreed provisions for the protocol package also ensure that
American domestic firms and workers will have strong protection
against rapid increases of imports.
To do this, the Product-Specific Safeguard provision sets up a special
mechanism to address increased imports that cause or threaten to cause
market disruption to a U.S. industry. This mechanism, which is in
addition to other WTO Safeguards provisions, differs from traditional
safeguard measures. It permits United States to address imports solely
from China, rather than from the whole world, that are a significant
cause of material injury through measures such as import restrictions.
Moreover, the United States will be able to apply restraints
unilaterally based on legal standards that differ from those in the
WTO Safeguards Agreement. This could permit action in more cases. The
Product-Specific Safeguard will remain in force for 12 years after
China accedes to the WTO.
STATE-OWNED AND STATE-INVESTED ENTERPRISES
The Protocol addresses important issues related to the Chinese
government's involvement in the economy. China has agreed that it will
ensure that state-owned and state-invested enterprises will make
purchases and sales based solely on commercial considerations, such as
price, quality, availability and marketability, and that it will
provide U.S. firms with the opportunity to compete for sales and
purchases on non-discriminatory terms and conditions.
China has also agreed that it will not influence these commercial
decisions (either directly or indirectly) except in a WTO consistent
manner. With respect to applying WTO rules to state-owned and
state-invested enterprises, we have clarified in several ways that
these firms are subject to WTO disciplines:
Purchases of goods or services by these state-owned and state-invested
enterprises do not constitute "government procurement" and thus are
subject to WTO rules. We have clarified the status of state-owned and
state-invested enterprises under the WTO Agreement on Subsidies and
Countervailing Measures. This will help ensure that we can effectively
apply our trade law to these enterprises when it is appropriate to do
so.
TEXTILES
China's protocol package will include a provision drawn from our 1997
bilateral textiles agreement, which permits U.S. companies and workers
to respond to increased imports of textile and apparel products. This
textile safeguard will remain in the effect until December 31, 2008,
which is four years after the WTO agreement on Textile and Clothing
expires.
(end text)
(Distributed by the Office of International Information Programs, U.S.
Department of State. Web site: usinfo.state.gov)



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