09 May 2000
Text: Barshefsky Testimony May 9 on WTO, Permanent NTR for China
(PNTR would benefit U.S. trade, China's reformers) (8200)
Permanent Normal Trade Relations (PNTR) with China would benefit U.S.
trade interests and bolster the position of China's reformers,
according to U.S. Trade Representative Charlene Barshefsky.
At a May 9 hearing before the Senate Banking Committee, Barshefsky
said that in the last 30 years "trade policy has strengthened China's
stake in prosperity and stability throughout Asia."
"Together with our Pacific alliances and military commitments; in
tandem with our advocacy of human rights; and in the best tradition of
postwar American leadership; it has helped us build a relationship
with the world's largest nation which strengthens guarantees of peace
and security for us and for the world. And WTO (World Trade
Organization) accession, together with Permanent Normal Trade
Relations, will be the most significant step in this process in many
years," the U.S. Trade Representative said.
China's commitments to international rules of trade "will give China's
people more access to information, and weaken the ability of
hard-liners in government to isolate China's public from outside
influences and ideas," Barshefsky said.
The PNTR agreement with China, if approved by the U.S. Congress, will
"open China's markets to American exports of industrial goods,
services and agriculture to a degree unprecedented in the modern era,"
Barshefsky said. It will also strengthen U.S. guarantees of fair trade
and give the United States greater ability to enforce China's trade
commitments, she said.
"By contrast," she noted, "we agree only to maintain the market access
policies we already apply to China, and have for over twenty years, by
making China's current Normal Trade Relations status permanent."
Support for approval of the PNTR agreement is strong, Barshefsky said.
In addition to the Clinton Administration, every living former
Secretary of State, 47 State and Territorial Governors, all former
U.S. Trade Representatives and Secretaries of Commerce, Agriculture,
and the Treasury, and former Presidents of both parties support the
agreement, she said.
Following is the text of Barshefsky's remarks, as prepared for
delivery:
(begin text)
CHINA'S WTO ACCESSION
AND PERMANENT NORMAL TRADE RELATIONS
Testimony of Ambassador Charlene Barshefsky
U.S. Trade Representative
Senate Banking Committee
Washington, D.C.
May 9, 2000
Mr. Chairman, Senator Sarbanes, Members of the Committee:
The House's vote on extension of Permanent Normal Trade Relations to
China, as China enters the World Trade Organization, will be one of
the most important trade and foreign policy decisions the United
States has made in many years. I thank you for this opportunity to
join with Secretary Summers in testifying on its significance for the
United States.
INTRODUCTION: ONE-WAY CONCESSIONS
In a sense, this decision presents us with a simple choice.
Last November, after years of negotiation, we reached a bilateral
agreement with China on WTO accession which secures broad-ranging,
comprehensive, one-way trade concessions on China's part. These
concessions:
-- Open China's markets to American exports of industrial goods,
services and agriculture to a degree unprecedented in the modern era,
through specific and detailed commitments on tariffs, quotas, trading
rights, distribution, sanitary and phytosanitary measures, the full
range of services industries and other issues.
-- Strengthen our guarantees of fair trade, with specific provisions
to address dumping into the U.S. market, import surges, technology
transfer as a condition of investment and other practices intended to
draw jobs and research to China, textile trade and other issues.
-- Give us far greater ability to enforce China's trade commitments.
-- And facilitate the WTO accession of Taiwan, which has made an
equally valuable set of market access commitments.
By contrast, we agree only to maintain the market access policies we
already apply to China, and have for over twenty years, by making
China's current Normal Trade Relations status permanent.
This is the only policy issue before Congress. Regardless of our
decision, China will enter the WTO. Regardless of our decision, it
will continue to sell in the American market. The only question
Congress will decide is whether we accept the benefits of China's
accession and the agreement we negotiated; or whether on the contrary,
by turning away from permanent NTR, we enable our competitors in Asia,
Latin America, Canada and Europe to take advantage of these benefits
while American entrepreneurs, farmers and factory workers are left
behind.
I. CHINA'S WTO ACCESSION IN HISTORIC CONTEXT
From the perspective of trade policy, therefore, this is a relatively
simple decision. But China's WTO accession also has deeper
implications.
China is the world's most populous country; over the past decade, it
was the world's fastest-growing major economy. Our relationship thus
affects all of America's foreign policy and security goals in Asia
today, and its future course will be one of the major issues for
Americans throughout the next decades. And the WTO accession, together
with permanent NTR, will have a substantial impact on the future of
China and our relationship with China.
When we look at our relationship with China today, we see a number of
serious differences. In these cases, we have and will continue to
assert our values and interests with candor and firmness -- as we have
recently done at the UN Human Rights Commission in Geneva. At the same
time, however, we also see a responsibility to develop a stable,
mutually beneficial relationship in which we and China act upon areas
of shared benefit and mutual interest. China's WTO accession, together
with permanent NTR, is an example of just such shared interest and
benefit.
-- By opening the Chinese economy to U.S. goods, services and
agricultural products, the WTO accession and PNTR will create
significant new opportunities for American businesses, farmers and
working people; and it will help to reform and improve a deeply
imbalanced existing trade relationship.
-- By helping to open and liberalize China's economy, WTO accession
will create new economic freedoms for Chinese citizens and promote the
rule of law in many fields now dominated by state power and control. A
number of leading Chinese and Hong Kong advocates of democracy thus
endorse WTO membership not only for its economic value, but as a
foundation for broader future reforms.
-- And by integrating China more firmly into the Pacific and world
economies, WTO accession will give China a greater stake in regional
stability and prosperity. Together with our military presence in the
Asia-Pacific and our alliances with Japan, South Korea and other
Pacific democracies, it will thus be a factor in favor of long-term
regional peace.
AMERICA AND THE TRADING SYSTEM
Let me now turn to a detailed review of our bilateral agreement on WTO
accession, beginning with the historic context in which we should view
this event.
The World Trade Organization has its roots in the General Agreement on
Trade and Tariffs, or GATT. Its creation in 1948 reflected the
personal experience of President Truman and his European counterparts
in Depression and war. They had seen the Smoot-Hawley Act in America
and similar protectionist policies overseas deepen the Depression and
contribute to the political upheavals of the 1930s. Fifteen years
later, they believed that by reopening world markets they could
promote growth and raise living standards; and that, in tandem with a
strong and confident security policy, as open markets gave nations
greater stakes in stability and prosperity beyond their borders, a
fragile peace would strengthen.
The work they began has now continued for over fifty years, and the
faith they placed in open markets and the rule of law has been
abundantly vindicated. Through eight Rounds of negotiations, and as
113 new members joined the 23 founders of the GATT, we abandoned the
closed markets of the Depression era and helped to foster a fifty-year
economic boom. America, as the world's largest importer and exporter,
benefits perhaps most of all: the efficiency of our industries and the
high living standards of our families reflect both the gains we
receive from open markets abroad, and the benefits of our own
open-market policies at home.
But the development of the trading system has had equally important
effects worldwide. As it has developed over the past fifty years, the
world economy has grown six-fold; per capita income nearly tripled;
and hundreds of millions of families escaped from poverty. And perhaps
the best testimony to this success is that many of the new applicants
to join the WTO are nations which are abandoning the postwar
experiment in communist central planning.
CHINA FROM REVOLUTION TO REFORM
This brings me to China.
With the Communist revolution, China set out upon a very different
road. After 1949, it shut doors it had once opened to the world. Among
its new leaders' first steps were to expel foreign businesses from
China and bar direct economic contact between Chinese citizens and the
outside world. Inside China were similar policies: destruction of
private internal trading networks linking Chinese cities and villages,
abolition of private property and land ownership, and of course
suppression of the right to object to these policies.
In essence, one cannot separate postwar China's deepening isolation
from the outside world from its steadily increasing internal
repression and diminishing space for individual life and freedom.
Likewise, China's economic isolation had severe consequences for
regional peace and stability: Asia's largest nation had little stake
in prosperity and stability -- in fact, saw advantage in warfare and
revolution -- beyond its borders. Every Pacific nation felt the
consequences not only in economics and trade but in peace and
security.
China's domestic reforms since 1978 have helped to undo this
isolation, integrating China into the Pacific regional economy as they
opened opportunities for Chinese at home. The results have been
profoundly positive: as China's people regained the right to farm
their own land, open businesses and choose their own places of
employment, they have found new opportunities both to raise their
living standards and determine their own futures. At the same time,
China has moved gradually from a revolutionary role in the region to a
willingness to play a positive and stabilizing role on issues as
various as the maintenance of peace on the Korean peninsula and the
Asian financial crisis.
And as China has opened its economy to the world, it has become a more
integrated, responsible member of the Pacific community. To choose a
specific example, in 1997, South Korea and the ASEAN states were the
market for $22.3 billion worth of Chinese semiconductors, video CD
players, rice, apparel and other goods. Setting Hong Kong aside, that
is one dollar in six of China's exports to the world. These countries
were also the source of $6 billion in foreign direct investment in
China, meaning (again with Hong Kong excepted) a seventh of the FDI
China received that year.
This has implications not only for China's economy, but to our own
vital interest in a peaceful and stable region -- because 1997 was, of
course, the year of the financial crisis. A generation ago, China
might have seen the event as a revolutionary opportunity. In 1997 its
reaction was entirely different: the crisis was a threat to the export
markets that support Chinese factories and farm income, and to the
Asian investment that creates jobs and growth.
The constructive and stabilizing policies China adopted, through
currency stability and contribution to IMF-led recovery programs, thus
reflected basic self-interest. But in historic context, they enabled
us to deal with the crisis primarily as an economic and humanitarian
disaster, rather than a security crisis. And they are thus evidence of
a change in China's view of its own regional interests and role whose
importance for our national security cannot be overstated.
THE ROLE OF U.S. TRADE POLICY
A bipartisan U.S. trade policy over the past thirty years has
contributed to these positive trends.
Broadly speaking, our goals have been to support Chinese domestic
economic reform, integrate China into the Pacific regional economy,
through a variety of means including commercially meaningful
agreements that open opportunities for Americans. This has extended
from the lifting of the trade embargo in 1972, to our Bilateral
Commercial Agreement in 1980, more specific agreements in the 1980s;
and then a series of recent and highly focused agreements including:
-- Intellectual Property -- In the early 1990's, China's failure to
protect intellectual property rights was one of the most problematic
aspects in our trading relationship. Piracy of films, software, CDs,
and other intellectual property-based products cost our industry
hundreds of millions of dollars and led to trade confrontations with
China, including invocation of sanctions on two occasions. The United
States ultimately negotiated agreements in 1995, and then won further
commitments in 1996 that led China to close over 70 pirate production
facilities; cease the export of pirated products and significantly
improve enforcement -- the principal focus of the agreements.
-- Textiles -- Likewise, textile transshipment and market access
barriers have historically been a problem in our textile trade
relationship with China. While problems remain, two separate
agreements, in 1994 and 1997, combined with sustained enforcement
efforts by the U.S. Customs Service and the Administration, as well as
imposition of triple charge penalties, have helped to mitigate these
problems. The 1997 agreement, in fact, committed China for the first
time to significantly reduce its textile import restrictions.
-- Agriculture -- Most recently, our Agreement on Agricultural
Cooperation in April of 1999 lifted long-standing bans on exports of
American citrus, meats and Pacific Northwest wheat, imposed due to
China's unscientific sanitary and phytosanitary measures. As in the
cases of intellectual property and textiles, we continue to hold
frequent consultations with the Chinese authorities charged with
implementing the agreement, and have seen very significant results in
the first shipments of Pacific Northwest wheat, California and Florida
citrus, and U.S. meats to China.
Taken as a whole, this work has helped to open the Chinese economy;
created a series of new opportunities for Americans; and given the
Chinese public a much broader array of contacts with the outside world
than at any time since the late 1940s. But the work is only partly
done.
China's trade barriers remain very high; a number of policies dating
from the 1950s are still unchanged; and China's integration with the
world economy remains insecure. Likewise, China's neighbors remain
blocked from an economy which -- like Japan's -- could be an engine of
growth. One index of this is our substantial trade deficit with China.
Another is that since we extended Normal Trade Relations (formerly MFN
status) to China in 1980, our exports to China have grown by only $10
billion, a figure significantly less than our total growth to most
other major trading partners in Europe, North America and East Asia.
II. CHINA'S WTO ACCESSION, PNTR, AND U.S. TRADE INTERESTS
The WTO accession agreement therefore builds upon thirty years of
work, to reach a detailed, specific and enforceable series of
commitments covering the range of American trade priorities in China.
As China has looked to WTO accession to create jobs and foster
sustainable growth through economic reform, we have won commercially
meaningful and enforceable commitments that help Americans on the farm
and on the job export to China by addressing the many layers of trade
barriers and policies which limit access; strengthen guarantees of
fair trade; and give us additional tools for enforcement and
compliance.
Thus, in all respects, this bilateral agreement meets the high
standards President Clinton set years ago. Let me now offer an
overview of the agreement, and then turn to its specific features.
OVERVIEW
First, our bilateral agreement is comprehensive. It will reduce
Chinese trade barriers across the range of goods, services and
agricultural products; eliminate or sharply reduce restrictions on
freedom to import and distribute goods within China; address
industrial policies intended to draw jobs and technology to China; and
strengthen our guarantees of fair trade practices. All these reflect
the ideas, advice and guidance we have received over years of
negotiations from Members of the Committee and Congress as a whole.
Second, it is fully enforceable. China's commitments in all areas are
specific and include timetables and final dates for full
implementation. These commitments are enforceable through our trade
laws, WTO dispute settlement and other special mechanisms including
periodic multilateral review of China's implementation and compliance.
These will, of course, require vigilance and constant commitment to
enforcement by the United States as well as by China's other trading
partners in the WTO. We are committed to vigorous monitoring and
enforcement, and are already preparing for this through a number of
different means: for example, the President's budget this year
requests a tripling of the Commerce Department's budget for China
trade enforcement, and an additional full-time China officer at USTR.
And third, its results will be rapid. On accession to the WTO, China
will begin opening its market from day one in virtually every sector.
The phase-in of further concessions will be limited to five years in
almost all cases, and in many cases one to three years.
I will now turn to a review of the details in each major sector.
SERVICES
In services, China will open markets across the spectrum of
distribution services, financial services, telecommunications
including the Internet, professional, business and computer services,
motion pictures, environmental services, and other industries. In some
fields, such as audiovisual services, China will be one of only a very
few WTO members with specific and binding commitments. China will also
participate in both of the WTO's newest services agreements -- the
Agreement on Basic Telecommunications and the Agreement on Financial
Services.
Specific commitments in the services industries include the following
Grandfathering -- China will protect the existing activities and
market access of all service providers operating in China at the time
of accession. This includes financial services.
Financial Services Agreement -- In joining the WTO, China agrees to
participate in the Financial Services Agreement. This, covering nearly
$60 trillion in banking, insurance and securities transactions each
year, is history's largest single trade agreement ever. Though it went
into force just a short time ago, it has already helped American
banks, securities firms and insurance companies expand operations and
find new market opportunities, through ownership of and investment in
foreign banking institutions, brokerage and insurance sectors, as well
as through cross-border trade. This has the potential to significantly
increase U.S. financial services exports -- which have already grown
by $4 billion since 1992, to total $13.7 billion in 1998. We do not
have final export figures by services industry as yet for 1999, but
overall private services exports grew by approximately 5%.
China now stands ready to make such financial services commitments
itself. In China we currently face one of the world's most restricted
markets, as evident in our very small total of $49 million in
financial service exports to China in 1998. The WTO accession will
make broad and deep changes in this situation:
Insurance -- Today, only two U.S. insurers operate in China's market.
(Two others are expected to begin operations soon.) China reserves the
right to deny licenses on almost entirely arbitrary grounds, to
restrict operations to particular cities and to terminate existing
rights when it chooses to do so.
With WTO accession, China agrees to award licenses solely on the basis
of prudential criteria, with no economic-needs test or quantitative
limits on the number of licenses issued; progressively eliminate
geographic limitations within three years, and permit internal
branching as these restrictions lift. Further commitments will enable
foreign insurers to offer group, health and pension lines of insurance
within five years; for non-life insurance, branch and joint-ventures
at 51 percent equity share are permitted on accession, and
wholly-owned subsidiary within two years. And for life insurance,
joint ventures are permitted with the partner of choice at 50 percent
equity share upon accession.
-- Banking -- The status quo in banking is equally restrictive.
Foreign banks cannot now conduct local currency business with Chinese
clients, and only a few can engage in local currency business even
with foreign businesses or individuals. With WTO accession, as in the
case of insurance, China also imposes severe geographic restrictions
on the establishment of foreign banks.
With this agreement, China commits to full market access in five years
for American financial institutions established in China. China will
allow internal branching and provide national treatment for all newly
permitted activities. Geographic restrictions will be lifted on a set
schedule, and abolished within five years. Foreign banks will be
guaranteed the right to conduct business in foreign currency with all
clients, and in local currency, with foreign clients on accession.
They will be able to conduct business in local currency with Chinese
enterprises starting two years after accession, and with Chinese
individuals after five years. Financial leasing will be allowed for
foreign-owned banks when allowed for domestic banks. Upon accession,
non-bank financial institutions will be permitted to provide
auto-financing without any market access or national treatment
limitations.
-- Securities -- In securities, China will permit minority foreign
owned joint ventures to engage in fund management on the same terms as
Chinese firms. Minority joint ventures will be allowed to underwrite
domestic equity issues and underwrite and trade other securities (debt
and equity). As the scope of business expands for Chinese firms,
foreign joint venture securities companies will enjoy the same
expansion in scope of business. And China will hold regular
consultations with the U.S. Treasury Department under the auspices of
our Joint Economic Commission with China. The purpose of this is to
exchange information and assist the development of China's financial
and capital market.
China's commitments in our bilateral agreement also, of course, extend
to the full range of services industries.
Distribution -- China now generally prohibits 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 within three years. This
will remove all restrictions on wholesaling, retailing, maintenance
and repair, marketing, customer service and transportation, along with
restrictions on auxiliary services including trucking and air express
delivery, air courier, rental and leasing, storage and warehousing,
advertising and others. This is of immense importance in its own
right, and as noted below, will help our exporters of industrial goods
and farm products to do business more easily in China.
Telecommunications -- China now prohibits foreign investment in
telecommunications. With WTO accession, it will join the Basic
Telecommunications Agreement, implementing regulatory principles
including interconnection rights and regulatory rules. It will end
geographic restrictions for paging and value-added services such as
the Internet within two years, mobile and cellular within five years,
and domestic wireline and closed user groups in six. It will also end
its ban on foreign direct investment in telecommunications services,
allowing 49% foreign investment in all services and 50% foreign
ownership for value-added and paging services in two years.
Audiovisual -- China does not now allow foreign participation in
distribution of sound recordings. Under the agreement, China will
allow 49% foreign equity for the distribution of video and sound
recordings, majority ownership in three years for construction and
ownership and operation of cinemas. China has also agreed to allow the
importation of 20 films per year on a revenue-sharing basis.
Travel and Tourism -- U.S. travel agencies will now be able to provide
a full range of services for Americans in China, such as access to
government resorts and major tourist centers.
Other -- Also covered is a broad range of other services. In the
professions, China has made a full range of commitments for
architecture, engineering, accounting, and legal services. Likewise,
new opportunities will open in computer and business services, with
China making commitments on hardware installation, data processing and
tabulation services, and time-sharing services 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. Other fields include management consulting, environmental
services, franchising, express delivery and many more. In each, China
has made specific, enforceable commitments that open markets and offer
competitive American industries important new opportunities.
INDUSTRY
In industrial goods, China will cut tariffs from an average of 24.6%
in 1997 to 9.4% by 2005 and bind them at these new, lower levels. It
will eliminate quotas and other numerical restrictions. And it will
allow American firms to import and distribute their products freely in
China. This is essential, as American companies, farmers and workers
need the ability to import, export and distribute goods in China to
compete effectively -- rights currently denied but which will be
permitted under the agreement, allowing our businesses to export to
China from here at home, and to have their own distribution networks
in China, rather than being forced to set up factories there to sell
products through Chinese partners. Some highlights include:
Trading Rights -- China will grant American companies, over a
three-year phase-in period, rights to import and export most products
without Chinese middlemen. Currently, 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 not only the ability of U.S.
companies to do business in China, but in particular has limited U.S.
exports.
Fertilizer -- As an addendum to our November 1999 bilateral agreement,
we have reached an agreement with China that will effectively provide
market access for U.S. fertilizer. The agreement sets up a TRQ system
for importation of fertilizer products of priority interest to the
United States that is similar to the system we negotiated for
agricultural products.
Distribution -- As in the case of trading rights, the right to
distribute products is critical to our ability to export successfully
to China. After accession, China will allow American firms to market,
wholesale, retail, repair and transport their products -- whether
produced in China or imported. At present, China generally prohibits
companies from distributing imported products or providing related
distribution services such as repair and maintenance services. China
will permit enterprises to engage in the full range of distribution
services over a three-year phase-in period for almost all products.
Tariffs -- China will make substantial tariff cuts on accession with
further cuts phased in, two thirds of which will be completed in three
years and almost all of which will be completed within five years. On
U.S. priority industrial items, tariffs will drop on average to 7.1%
-- a figure comparable to those of most major U.S. trading partners.
As in agriculture, China will bind tariffs at these low levels. Some
specific examples include:
Information Technology Agreement -- China will participate in the
Information Technology Agreement (ITA), eliminating all tariffs on
such information technology products as semiconductors,
telecommunications equipment, computer and computer equipment and
other items by 2003 in most cases and 2005 in a few others.
Autos -- China will reduce tariffs on autos from rates of 80%-100%
today to 25% in 2006, and on auto parts to an average of 10% from an
average of over 23%.
Wood and Paper Products -- China will reduce high tariffs on wood and
paper to levels generally about 5% and 7.5% respectively. As noted
below, China will also implement any sectoral APEC Accelerated Tariff
Liberalization initiative adopted by the WTO in this sector.
Chemicals -- China will commit to the vast bulk of chemical
harmonizations, reducing tariffs from present rates between 10%-35% to
an average rate of 6.9%. These reductions include reductions on all
priority U.S. chemical exports.
Furniture -- China will reduce its current average tariff rate of 22%
to 0% on all furniture items covered by the Uruguay Round sectoral
initiative, by 2005.
Accelerated Tariff Liberalization -- China has agreed to implement the
Accelerated Tariff Liberalization initiative of APEC now under
consideration in the WTO, when consensus is achieved. This would
eliminate tariffs on forest products, environmental goods and
services, energy and energy equipment, fish, toys, gems and jewelry,
medical equipment and scientific instruments, and also includes
chemical harmonization.
Non-Tariff Barriers -- China will eliminate quotas and other
quantitative restrictions upon accession for top U.S. priorities,
including certain fertilizers and fiber-optic cable.
AGRICULTURE
In agriculture, China will make substantial reductions in tariffs both
on accession to the WTO and over time. It will adopt tariff-rate
quotas that provide significant market access for bulk commodities of
special importance to American farmers. It will agree to apply
science-based sanitary and phytosanitary standards including in
grains, meats and fruits. And it will eliminate export subsidies.
Notable achievements here include:
Tariffs -- China's agricultural tariffs will fall from 31% to 14% for
our priority items. All cuts occur over a maximum of four years, and
will be bound at the applied levels. To cite a few examples:
Current Level Under the Agreement
Beef 45% 12%
Pork 20% 12%
Poultry 20% 10%
Citrus 40% 12%
Grapes 40% 13%
Apples 30% 10%
Cheese 50% 12%
Crayfish 30% 15%
Lobster 30% 15%
Wine 65% 20%
Beer 70% 0%
TRQs -- China will liberalize its purchase of key bulk agricultural
commodities like wheat, corn, rice, cotton and soybean oil, through
tariff-rate quotas -- that is, application of very low tariffs (1% for
bulk commodities) on a set volume of commodities. We include in this
portion of the agreement provisions to maximize the likelihood that
these TRQs are filled. In particular, a portion of each TRQ is
reserved for importation through private traders, and TRQs which have
not been filled by a set date will be redistributed to other end-users
with an interest in importing on a first-come, first-served basis.
Some salient examples include:
1998 Total Imports Initial TRQ 2004 TRQ Private Share
Cotton 200,000 mt 743,000 mt 894,000 mt 67%
Wheat 2,000,000 mt 7,300,000 mt 9,636,000 mt 10%
Corn 250,000 mt 4,500,000 mt 7,200,000 mt 25%,
grows to 40%
Rice
total 250,000 mt 2,660,000 mt 5,320,000 mt ----
short/med grain 1,330,000 mt 2,660,000 mt 50%
long grain 1,330,000 mt 2,660,000 mt 10%
Export Subsidies -- China will eliminate agricultural export
subsidies. This is an important achievement in its own right, and a
step toward our goal of totally eliminating export subsidies
worldwide.
Domestic Support -- China has committed to cap and reduce
trade-distorting domestic subsidies. China also committed to provide
greater transparency to make its domestic support measures more
predictable.
Sanitary & Phytosanitary Standards -- China will agree to apply
sanitary and phytosanitary standards based on science. Among other
things, this will give us additional means of enforcing the Agreement
on Agricultural Cooperation and its commitment to lift longstanding
bans on American meats, citrus fruit and Pacific Northwest wheat.
PROTOCOL ISSUES
Finally, our bilateral agreement deals, appropriately, with the
special and unusual characteristics of the Chinese economy. These
include the high degree of state participation in the Chinese economy;
a series of industrial policy measures intended to draw jobs and
technology from the U.S. and other trading partners to China, such as
local content, offset and export performance requirements as well as
forced technology transfer; and special measures to address import
surges from China and unfair export practices like dumping.
Altogether, no agreement on WTO accession has ever contained stronger
measures to strengthen guarantees of fair trade and to address
practices that distort trade and investment. China's major commitments
in this regard include:
Import Surge Protection -- China has agreed to a twelve-year
product-specific safeguard provision, which ensures that the U.S. can
take effective action in case of increased imports from China which
cause market disruption in the United States. This provision applies
to all industries, permits us to act based on lower showing of injury,
and act specifically against imports from China.
Non-Market Economy Dumping Methodology -- China's WTO entry will
guarantee our right to continue using our current "non-market economy"
methodology in anti-dumping cases for fifteen years after China's
accession to the WTO.
Subsidies -- Likewise, when we apply our countervailing duty law to
China, we will be able to take the special characteristics of China's
economy into account. 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. The agreement also establishes that the U.S. 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.
Investment Reforms -- China will reform a large number of policies
intended to draw jobs and technology away from China's trading
partners. It will, for example, implement the WTO's Agreement on
Trade-Related Investment Measures agreement on accession; eliminate
mandated offsets, local content and export performance requirements
and refuse to enforce contracts containing these requirements; and not
condition investment licenses on performance requirements of any kind.
All of this will make it significantly easier for Americans to export
to China from home, rather than seeing companies forced to set up in
China in order to sell products there.
Technology Transfer -- China will abolish requirements for technology
transfer for U.S. companies to export or invest in China. This will
better protect our competitiveness and the results of U.S. research
and development.
State-Owned and State-Invested Companies -- China commits that
state-owned companies and state-invested enterprises will make
purchases and sales solely on commercial terms, specify that purchases
by these companies for commercial and non-governmental purposes are
not government procurements and thus are not subject to any special or
different rules that could undercut basic WTO commitments, and provide
U.S. firms the opportunity to compete for sales and purchases on
non-discriminatory terms and conditions.
Textiles -- Under our agreement, quotas will remain in effect for
Chinese textiles as for those of other WTO members until 2005.
Moreover, until January of 2009, we will have a special safeguard
enabling us to address market-disrupting import surges from China in
the textile sector. This is in addition to the broader
product-specific safeguard noted above.
COMPLIANCE AND ENFORCEMENT
Of course, trade commitments require full implementation and
enforcement to be meaningful in practice. Our previous successes in
improving intellectual property rights and enforcing textile
commitments demonstrate how crucial constant oversight, monitoring,
and strict enforcement are in the case of China, and our trading
partners in general. And with China's WTO membership, we will gain a
number of advantages in enforcement we do not now enjoy.
First is the WTO dispute mechanism itself. In no previous agreement
has China agreed to subject its decisions to impartial review,
judgment and ultimately imposition of sanctions if necessary.
Second, of course, is our continued right to use the full range of
American trade laws, including Section 301, Special 301, and our
countervailing duty and anti-dumping laws.
Third, we gain substantial new leverage by creating the
product-specific safeguard, as well as guaranteeing our right to use
non-market economy antidumping methodologies. These features of the
accession will significantly strengthen our ability to ensure fair
trading practices.
Fourth, and very significant, we strengthen our enforcement
capabilities through the multilateral nature of the WTO. The
accession, to begin with, will create a multilateral review mechanism
to monitor all of China's implementation closely. And as these
commitments come into effect, China will be subject to enforcement by
all 136 WTO members, significantly diminishing China's ability to play
its trading partners off against one another. In all previous disputes
over Chinese compliance with agreements, notably those over
intellectual property, the United States had to act alone. With China
in the WTO, we will be able to work with 135 other members, many of
whom will be concerned about the same issues we raise and all of whom
will have the legal right to enforce China's commitments.
Fifth, the specificity of China's commitments in this bilateral
agreement will help us ensure that China complies. Experience shows
that agreements with China are implemented and enforced most
satisfactorily when obligations are concrete, specific, and open to
monitoring. Our bilateral agreement therefore includes highly specific
commitments in all areas, clear time-tables for implementation, and
firm end-dates for full compliance. These allow us carefully to
monitor China's compliance and present clear evidence of failure to
comply.
Finally, however, enforcement (as in any agreement) depends on U.S.
commitment. We will relentlessly monitor and enforce China's
compliance with its Protocol of Accession and all of the WTO
agreements. We are already preparing for an increased monitoring and
enforcement effort through President Clinton's request for $22 million
in new enforcement and compliance resources for USTR, the Commerce
Department, USDA, and the State Department. The President has
requested resources for the largest monitoring and enforcement effort
for any agreement ever, covering China's obligations in the WTO and
strong enforcement of our trade laws.
The additional resources sought for the Office of the U.S. Trade
Representative in the FY 2001 budget would create new positions in
four areas of expertise -- legal, economic, geographic, and sectoral
-- to be devoted to negotiating, monitoring, and enforcing trade
agreements; and would almost double the number of USTR staff dedicated
to China trade compliance. President Clinton's initiative also would
triple resources at the Department of Commerce dedicated to China --
including administration of our antidumping and countervailing duty
laws.
The Administration will be monitoring China's compliance on three
fronts: (1) on-the-ground in China, where State, Commerce and
Agriculture officers will seek to resolve U.S. business complaints and
prevent compliance problems before they arise; (2) here in Washington,
where special interagency teams of government experts will be created
to examine China's implementation of each of the 20 WTO agreements as
well as WTO commitments unique to China; and (3) at the WTO in Geneva,
where the United States will join 135 other WTO members in the
multilateral review mechanism designed especially for China.
USTR will create a special interagency structure that coordinates
these initiatives to ensure that China fully complies with the
commitments it has made. This will bring together our government's
experts on both China and the subject matter of each of the 20 WTO
agreements, to regularly and vigorously monitor China's compliance
with all of the WTO agreements. These interagency teams will monitor
everything from China's implementation of its tariff-rate quota
commitments to the grant of insurance licenses and trading rights.
Where they find non-compliance, we will use all the tools available to
us -- under our trade laws, the WTO dispute settlement mechanism, the
various WTO committees, and the special WTO transitional review
mechanism -- to ensure implementation. In addition, we will create two
new interagency committees to oversee two unique features of this
historic agreement: one dedicated to U.S. participation in the
multilateral review mechanism, and one to implement the
product-specific safeguard mechanism to address import surges.
These interagency groups will base their work on information gathered
from the American Embassy in Beijing, the Foreign Agricultural Service
and Foreign Commercial Service; advice received from the business
community, the agricultural community, trade associations, organized
labor, and other non-governmental organizations; and information
received from the public, including information received in response
to requests for comment, via agency Web sites, and the Department of
Commerce's domestic district office network.
The Administration will continue to work with Congress and American
workers, farmers, and businesses to ensure effective monitoring and
quick responses to non-compliance. At the same time, we will seek to
prevent or reduce problems by working with the Chinese, including
through technical assistance where appropriate, to ensure they fully
understand their new obligations. WTO rules will require real and
meaningful changes in China's application of trade rules and policies,
and consultation and training will help head off problems before they
arise.
PERMANENT NORMAL TRADE RELATIONS
By contrast to this comprehensive set of Chinese commitments, the U.S.
commitment is merely to continue our present policies. Thus, the
United States:
-- Makes no changes in our current market access policies.
-- Preserves our right to withdraw market access for China in the
event of a national security emergency.
-- Requires no changes in our laws controlling the export of sensitive
technology.
-- Amends none of our trade laws.
Our sole obligation is to grant China permanent NTR. This is, in terms
of our policy toward China, no real change. NTR is simply the tariff
status we have given China since our Bilateral Commercial Agreement
and normalization of diplomatic relations in 1979; which Congress has
reviewed every year since, and found to be in our fundamental national
interest. Under the legislation President Clinton sent to Congress on
March 8th, permanent NTR would only be available to China when the
President certifies that China has entered the WTO on the basis of the
commitments we reached in our bilateral agreement.
Thus permanent NTR represents little real change in practice. But the
legislative grant of permanent NTR is critical, as without permanent
NTR we risk losing the full benefits of the agreement we negotiated,
including broad market access, special import protections, and rights
to enforce China's commitments through WTO dispute settlement. All WTO
members, including ourselves, pledge to give one another permanent NTR
to enjoy the benefits available in one another's markets. To refuse to
grant permanent NTR, therefore, would enable our trade competitors
throughout the world to reap these benefits; but American farmers and
businesses would be left behind.
TAIWAN'S WTO ACCESSION
Finally, China's entry will facilitate Taiwan's entry into the WTO.
This will have substantial trade benefits, as Taiwan is already a
larger export market for us than China. And the opening of both
economies, while we have no guarantees, may ultimately play some part
in easing the tensions in the Strait. It should thus be no surprise
that Taiwan's new leadership supports both China's WTO membership and
normalized trade between China and the United States.
III. WTO ACCESSION, PNTR, AND BROADER U.S. INTERESTS
Let me now turn from the specific trade policy changes China's WTO
accession and PNTR will make, to their implications for issues
separate from trade, but central to the broader US-China relationship.
U.S. trade policy, ever since the Second World War, has been one
element in a larger response, conceived under Franklin Roosevelt and
developed into concrete policies and institutions under President
Truman, to the lessons of the Depression and the Second World War.
These included collective security, reflected by the United Nations,
NATO, the Rio Treaty and our alliances with the Pacific democracies;
commitment to human rights, embodied by the Universal Declaration on
Human Rights and then a series of more recent Conventions; and the
fostering of open markets and economic stability, with the creation of
the IMF and World Bank on the one hand, and the GATT on the other.
Each element in this set of policies and institutions, over the years,
has had its own intrinsic benefit, but also helped to support and
strengthen the others. And this will also be true with China's WTO
accession and permanent NTR.
HUMAN RIGHTS AND THE RULE OF LAW
With respect to reform within China, WTO accession represents a
potentially profound and historic shift, building upon but going much
further than China's domestic reforms to date.
China's domestic reforms have reversed the most damaging policies of
the Cultural Revolution and Great Leap Forward. WTO accession will
accelerate and deepen this process, altering policies which date to
the earliest years of the communist era. As it enters the WTO, China
will:
-- Permit foreigners and all Chinese businesses to import most goods
into China;
-- Reduce, and in some cases remove entirely, state control over
internal distribution of goods and the provision of services;
-- Enable foreign businesses to participate in information industries
such as telecommunications including the Internet; and
-- Subject its decisions in all areas covered by the WTO to
enforcement, including through formal dispute settlement when
necessary.
These commitments are a remarkable victory for economic reformers in
China. They will give China's people more access to information, and
weaken the ability of hard-liners in government to isolate China's
public from outside influences and ideas. More deeply, they reflect a
judgment that prosperity, security and international respect will not
come from the static nationalism, state power and state control over
the economy China adopted after the war, but that China's own
interests are best served by the advancing economic freedom,
engagement with the world, and ultimately development of the rule of
law inherent in the initiative President Truman began in 1948 with the
founding of the GATT.
The WTO accession, therefore, has potential beyond economics and
trade: as a means to advance the rule of law in China, and a precedent
for willingness to accept international standards of behavior in other
fields. That is why many Hong Kong and Chinese activists for democracy
and human rights -- Martin Lee, the leader of Hong Kong's Democratic
Party who visited Washington this week to restate his support for
PNTR; Bao Tong, the reformer jailed for seven years after Tiananmen
Square, whose appeal to the UN Human Rights Commission last month drew
worldwide sympathy -- support PNTR and see WTO accession as China's
most important step toward reform in twenty years. And it is why our
support for WTO accession rests on a broader long-term commitment to
human rights and freedoms, as well as new opportunities and
strengthened guarantees of fairness for Americans.
WTO ACCESSION AND AMERICAN NATIONAL SECURITY
Perhaps still more important, the PNTR decision is a test of our
ability to develop the type of stable, mutually beneficial
relationship with China that will be critical to peace and stability
in the Pacific region in the years to come.
Our relationship with China remains marked by substantial
disagreements. When we disagree with China, to quote Theodore
Roosevelt, speaking about the Open Door Policy to China in the first
years of the 20th century:
"We must insist firmly on our rights; and China must beware of
persisting in a course of conduct to which we cannot honorably submit.
But we in our turn must recognize our duties exactly as we insist upon
our rights."
In this spirit, we recognize how important a stable and peaceful
relationship with China is -- for the Chinese, for the world, and for
America -- and how fundamental is our responsibility to act upon areas
of shared interest and benefit. We saw this responsibility clearly in
the Asian financial crisis. We see it in the environmental problems of
the Asia-Pacific; and for nearly three decades, we have seen it in
trade.
Neither this WTO accession agreement, nor any trade agreement will
ever solve all our differences. However, the WTO accession, together
with PNTR, will address a number of them; and moreover, it will do so
through a set of one-way concessions by China. I believe that if we
turn down a comprehensive set of one-way concessions, we make a very
dark statement about the future possibility of a stable, mutually
beneficial relationship with the world's largest country.
Such a statement would threaten our work on all the specific issues in
our China policy agenda today -- from non-proliferation and arms
control, to reducing tensions in Korea and South Asia. It would
complicate for the foreseeable future our existing Pacific alliances,
as all of our Asian friends and allies would view rejection of PNTR as
an unnecessary rejection of stable and constructive relations with
their largest neighbor; and a turn away from the open, confident
vision we have held for the Pacific over the years.
Over the long term, and perhaps most important, China -- seeing no
economic reason for our decision -- would become more likely to read
hostile intent into our every move; and this in turn would raise the
prospect that our present disagreements and tensions will escalate
into a broader confrontation of great consequence for every Pacific
nation and for ourselves.
CONCLUSION
That is the ultimate and most significant point at stake in Congress'
decision next month. To reject PNTR would be to severely damage
American trade interests; to set back the cause of reform in China;
and to risk, without cause, a fundamental deterioration in our
relationship with the world's largest country.
But if we have the wisdom and confidence to make the right choice, the
WTO accession and PNTR offer us a remarkable opportunity.
Over three decades, trade policy has strengthened China's stake in
prosperity and stability throughout Asia. Together with our Pacific
alliances and military commitments; in tandem with our advocacy of
human rights; and in the best tradition of postwar American
leadership; it has helped us build a relationship with the world's
largest nation which strengthens guarantees of peace and security for
us and for the world. And WTO accession, together with Permanent
Normal Trade Relations, will be the most significant step in this
process in many years.
That is the opportunity before us. These are the stakes in this
debate. And that is why this Administration -- together with every
living former Secretary of State; 47 State and Territorial Governors;
all former U.S. Trade Representatives and Secretaries of Commerce,
Agriculture, and the Treasury; and former Presidents of both parties
-- is committed to permanent NTR on the basis of this historic
agreement.
Thank you very much.
(end text)
(Distributed by the Office of International Information Programs, U.S.
Department of State. Web site: http://usinfo.state.gov)
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