What is the WTO?
The World Trade Organization (WTO)
is the only global international organization dealing with the rules of trade
among nations. Created on January 1, 1995, it is the successor to the General
Agreement on Tariffs and Trade (GATT), which was operative from 1948 to 1994.
The main functions of the WTO are:
- Provision of the common institutional
framework for the conduct of trade relations among the member countries in
matters related to the WTO agreements and associated legal instruments;
- Facilitation of the implementation,
administration and operation, and further of the objectives of WTO agreements;
- Provision of the forum for negotiations
among it's members concerning their multilateral trade relations in matters
dealt with WTO agreements;
- Administration of the Rules
and Procedures Governing the Settlement of the Disputes;
- Administration of the Trade
Policy Review Mechanism;
WTO Accession
Procedures
For the actual accession process
of the WTO, Article XII of the WTO Agreement sets out the guidelines for the
WTO accession, and Article IX of the WTO Agreement and the Understanding on
its application lay down the decision-making procedures involved. The following
is a brief description about the WTO accession process:
According to the information provided
in the WTO web page, the process of WTO accession commences when an applicant
submits a formal request to the Director General of the WTO expressing its desire
to accede to the WTO under Article XII. The General Council would then consider
the application and establish a Working Party to examine the application for
accession to the WTO under Article XII and to submit to the General Council
recommendation, which may include a draft Protocol of Accession. The Working
Party is open to all WTO contracting parties. A Chairperson would be selected
for the Working Party after consultation with WTO contracting parties and the
applicant.
After the working party is established,
the applicant government need to present a Memorandum describing aspects of
its trade and legal regime including information on the currently applicable
tariff schedule and copies of relevant laws and regulations. After the submission
of the Memorandum, a clarification process about information in the Memorandum
through questions and replies follows. The first meeting of the working party
would then be scheduled after the applicant presents its replies. In the meetings
of Working Party, members of the Working Party study the conformity of the regime
of applicant with various requirements of the WTO Agreements.
In parallel, the applicant and interested
WTO members commence bilateral market access negotiations on goods and services.
The results of these bilateral negotiations are complied into the Schedules
of Concessions and Commitments, which is part of the final "Accession Package".
The "Accession Package" also consists of a Report of the working party
summarizing the discussions in the working party meetings and a Protocol of
Accession containing the terms of accession agreed by the applicant and members
of working party.
When the "Accession Package"
which consists of Report of Working Party, Protocol of Accession and the Schedule
of Concessions and Commitments on Goods and Services are finalized, the Accession
Package will be forwarded to the WTO General Council or the Ministerial Conference
for approval. After the General Council approved to adopt the package (i.e.
a two-thirds majority of WTO members vote in favor), the Protocol of Accession
enters into force. After the applicant indicated its acceptance of the "Accession
Package" by signing the Protocol of Accession, the applicant becomes a
full member of the WTO in thirty days.
How the accession
procedures differ from those of other international organizations?
The accession process of the WTO
is quite different form the process of other international organization. The
distinctive characteristics of the WTO accession are that the accession requirement
on an applicant depends on the terms agreed between the applicant and other
WTO members. Therefore, to accede to the WTO, an applicant must require all
WTO members' agreement and solve all related outstanding issues in the course
of the bilateral and multilateral negotiation between the applicant and WTO
members.
These bilateral and multilateral
negotiations determine the terms and conditions for WTO accessions. The terms
and conditions would cover commitments to observe WTO rules and disciplines,
and the transition period granted for the applicant to align its policy with
WTO disciplines. Basically, the discipline of the WTO is to provide full competitive
opportunity of trade among the members. Under the discipline, there are two
major principles of WTO: the most-favored-nation treatment and the national
treatment. The former implies non-discriminatory treatment among members (i.e.
if two members exchange trade-related benefits between themselves, the benefit
must be extended to other members), while the latter represents non-discriminatory
treatment between an exporting member and an importing member (i.e. imported
products must receive treatment no less favorable to the domestic product) for
a discussion.
A Brief History
About China's Accession
Key events in China's WTO
bid
The followings
are some selective key events related to China's 15-year bid to join the World
Trade Organization (WTO).
May 1948
- Nationalist China was one of the 23 founding members of the General Agreement
on Tariffs and Trade (GATT).
Mar. 1950
- China pulled out of GATT; one year after the People's Republic of China was
established.
Jul. 1986
- China applied to join GATT, seven years after China adopted the policy of
reform and open up.
1987 - First
meeting of Working Party held in Geneva.
Jun. 1989
- Tiananmen Square Incident; negotiation of joining GATT ceased.
Dec. 1989
- Resumption of WTO negotiations.
1994 - China
accelerated its drive to join GATT, but failed.
1 Jan. 1995
- WTO replaced GATT; China failed to become a founding member.
May 1995
- The main WTO members like the US and Japan resumed the bilateral negotiation
with China.
Nov. 1995
- China unveiled its biggest trade liberalization package in 16 years aimed
at winning US backing to enter the WTO. China planned to slash import tariffs
by 30% and allowed joint venture companies to be set up.
Mar. 1996
-China's informal multi-lateral negotiation started.
Mar. 1997
- EU expressed its support for China's accession.
Oct. 1997
- China slashed import duties to 17% from 23%, but maintained so-called "peak
tariffs" on other goods such as automobiles.
Feb. 1998
- China promised a detailed offer of tariff cuts, but the United States and
other nations insisted China open its doors wider to foreign products and services.
4 Mar. 1999
- US Trade Representative Charlene Barshefsky held talks with Chinese officials,
and left saying "significant gaps" remained on farm trade and services.
6 Apr. 1999
- China and the United States reached a breakthrough on agricultural issues
that removed major obstacles to China's bid.
8 Apr. 1999
- President Bill Clinton and Zhu signed a joint statement in Washington welcoming
substantial progress and committing them to completion of a WTO deal by the
end of the year. The two sides closed the gap on about 90% of WTO issues, including
agriculture and telecommunications, but negotiators still had worked to complete
a number of other market access issues on banking, securities and textiles.
7 May 1999
- NATO bombed Chinese Embassy in Belgrade; China held on WTO negotiations temporarily.
11 Sept.
1999 - Chinese President Jiang Zemin and US President Clinton agreed on sidelines
of Asia-Pacific Economic Cooperation (APEC) forum in New Zealand to resume WTO
negotiations.
15 Nov.
1999 - China and the United States signed a bilateral WTO agreement in Beijing,
paving China's way into the World Trade Organization.
27 Nov.
1999 - China and Canada signed bilateral agreement on China's entry into World
Trade Organization. The agreement signified another step forward to the admission
of China to the WTO.
21 Dec.
1999 - China and the European Union (EU) held the Second China-EU Summit in
Beijing. The First China-EU Summit was held in London in 1998.
Jan. 2000
- China and the European Union (EU) held bilateral talks in Brussels for China's
accession into World Trade Organization (WTO).
Feb. 2000
- China and India signed a bilateral WTO agreement.
Feb. 2000
- China and the European Union (EU) held WTO talks in Beijing.
Mar. 2000
- China, EU held another round of talks in Beijing. EU trade Commissioner Pascal
Lamy headed the EU delegation and trade minister Shi Guangsheng headed the Chinese
side.
11 May 2000
- China and EU finally reached a bilateral agreement on China's accession into
WTO after four rounds of talks. The last round was held in Beijing and lasted
for five days.
May 2000
- China and Australia signed a bilateral WTO agreement.
26 Sept.
2000 - China and Switzerland signed a bilateral WTO agreement.
13 Sept.
2001 - China and Mexico signed a bilateral WTO agreement. The bilateral agreement
was signed by Sha Zukang, ambassador of the Permanent Mission of China to the
United Nations Office in Geneva, and Uardo Perez Motta, Mexican ambassador to
the WTO.
Historical Development of China's
WTO Accession (1986~ September 2001)
China was one of the 23 original signatories of the General Agreement on Tariffs
and Trade (GATT) in 1948. After China's revolution in 1949, the government in
Taiwan announced that China would leave the GATT system. Although the government
in Beijing never recognized this withdrawal decision, nearly 40 years later
in 1986, China notified the GATT to resume its status as a GATT contracting
party. A working party to examine China's status was established in March 1987
and met for the first time in October 1987.
Based on the news report from a news database, Lexis-and-Nexis, with searching
keywords "WTO or GATT" and "China". We can roughly divide
the historical development into 5 stages between 1986 - September 2001.
Phase 1: Encouraging Initial
Stage (1986 ~ May 1989)
During this episode, China's WTO accession process was progressing smooth. Contracting
parties showed their support on China's accession. And China did not make much
concession for quick accession.
China applied to resume its contracting
party status in the GATT (General Agreement on Tariff and Trade) on July 11,
1986. In November of the same year, the GATT had decided to start the process
of negotiations on China's request. China responded to this GATT decision by
presenting a memorandum on its foreign trade to the GATT. A working group was
formed in March 1987 to settle problems concerning resumption of China's membership.
Seven meetings were concluded from 1986 to May 1989.
Responses from GATT contracting
parties were also positive during this period. The GATT contracting parties,
including Japan, European Community (EC), Australia, New Zealand and Canada,
showed their support on China's accession. As the progress of resuming membership
seemed satisfactory, China did not try to make a major change in policy to meet
the GATT requirement.
Phase 2: Years of Silence (June
1989 ~ February 1992)
Phase 2 is completely different from phase 1. In this episode, most contracting
parties became non-supportive towards China's accession. The negotiation progress
took a pause. During this episode, China began to align its policy with GATT
requirement.
The suppression of China's democratic
movement in June 1989 marked a big setback in China's accession process. Some
GATT contracting parties, especially the US, began to criticize China's state
control over its economy and demand deeper economic reforms for China to rejoin
the GATT.
In 1991, Sino-US relation even worsened
due to their dispute over Intellectual Property Right (IPR), Most-Favored-Nation
(MFN), and human right and military technology transfer to the third-world countries.
The deteriorated relation became an obstacle for China to renew its MFN treatment
from US.
Facing the worsening relationship
with the US, China turned to negotiate with smaller countries. In 1991, small
countries such as Belgium, Brazil and Argentine began to reiterate their support
for China. Other more important contracting parties such as Germany, Australia
and Britain subsequently followed. Their support moderated the tense political
atmosphere and pave ways for China to gain the support of other countries.
During this episode (1989 ~ 1992),
China began to align its policy with GATT principles. China announced its intention
to amend Sino-foreign investment law in December 1989 and publicize trade policies
in December 1991. Moreover, China set up a research institute to study international
trade rules and help the country rejoin the GATT. Compare with the period in
phase 1, China offered more concessions for the accession.
Phase 3: Dashing for WTO Founding
Member Status (Feb 1992 ~ Dec 1994)
In this episode, negotiations resumed and China was keen to accede to the WTO
before 1995 in order to gain founding member status. The main obstacle for China's
accession came from Sino-US dispute and trade balance dispute.
After a break of 17 months, talks
resumed in February 1992 between China and the GATT. From February 1992 to December
1994, intense negotiations were carried out, both US and other member countries
demanded concessions from China in many areas. In 1992 to 1993, member countries'
concern focused on tariff reduction. From 1994, more concerns were given to
other non-tariff trading areas such as intellectual property right and market
access of service sectors.
Attempting to become a WTO founding
member, China had made many concessions response to the contracting parties'
concerns e.g. concessions on human right issue, covering sensitive areas such
as automobile industry. With China's extension of copyright protection from
US to other GATT contracting parties, most of the contracting parties including
the EU, Japan and Australia threw support for the earliest admission of China
into the GATT by the first half of 1994. However, the US refused granting early
membership to China. It is because the US wanted to acquire the possible greatest
concession from China in order to increase the US benefit from China's WTO accession.
Consequently, the US became the sole obstacle in China's way into the GATT.
In order to gain the support from
the US, China offered further concessions. In 1992, China had given a list of
products that no longer needed import licensing and had named 50 import categories
whose tariffs were to be reduced. In 1993, the demand from the US was increasing
with negotiations' focus turned to non-tariff trade barriers and other trade-related
issues. In order to protect the US economy, the US demanded China to accept
a special safeguard system against China. However, little progress was made
over China and the US. In the second half of 1993, trade dispute over China's
textile import quotas and exchange rate manipulation had led to sore Sino-US
relation.
In 1994, Sino-US relation became
worse. During the first half of 1994, the US concern over China's human right
situation had hindered both the granting of MFN and China's accession progress
into GATT. In the second half of 1994, disputes over developing country status,
IPR protection and trade deficit blocked China's way into the GATT. Although
China had made some concession in market access, the US denied China's developing
country status and insisted greater Chinese market access. For the IPR protection,
the US was discontent with China's lack of comprehensive law, lenient punishment
and poor law enforcement. Although China had made many law amendments and civilized
privacy, the US did not soften its stance. Under this difficult situation, China
failed to become the founding member of the WTO.
Phase 4: China Changed Negotiation
Attitude (1995 ~ Mar 1996)
Following the failure to become a founding member of the WTO, China's accession
progress slowed down. China suspended formal negotiation for the first time.
It insisted developing country status and claimed unwillingness in sacrificing
economic stability for WTO membership.
Although China showed its firm position
over the accession issue in January 1995, US did not soften its stance. This
tough attitude was mainly due to the US copyright dispute and its huge trade
deficit with China. By the end of January 1995, there was a trade war between
the 2 countries after the collapse of the Sino-US talks on copyright.
This suspension of formal Sino-US
bilateral negotiations continued after January 1995. Frictions came from the
dispute over developing country status, opposing pressures from the US commercial
and agricultural sector over China's accession, and political conflicts over
Taiwan. On developing country status, US argued that China should be regarded
as developed country due to its vast economic size and fast economic growth.
However, China was not willing to sacrifice economic stability for WTO membership.
At the same time, China had dispute with the US over a visit of Taiwan president;
Sino-US relation was at its low point. In addition, the US continued to express
its concern over trade deficit. As a result, formal bilateral negotiations were
difficult to resume.
The EU held a softer stance than
the US on China's accession issue. Although the EU insisted that China had to
meet several requirements including reducing tariff, opening service market,
liberalizing foreign trade monopoly etc., the EU urged other WTO members to
resume talks and break political logjam over China's accession issue. Moreover,
the EU recognized China's developing country status and introduced a "transitional
approach" for China to take up developed members' responsibility gradually.
However, these actions were not strong enough to push for greater overall negotiation
progress.
Phase 5: Stage Towards Success
(Mar 1996 ~ 1999)
After 1995, existing WTO member countries became more enthusiastic to China's
accession. The main obstacles for China's WTO accession in this episode came
mainly from contracting parties' concern over bilateral trade balance, IPR dispute
and China's offer on its service and agricultural sectors.
1996
On 22 March 1996, the first formal meeting of WTO China working group was held
in Geneva. After the resumption of formal negotiation, larger contracting parties
such as EU, Canada and Japan called for quick China's accession. Although the
EU introduced the 'transition period' approach for China to gradually fulfill
obligation required for WTO membership, China still needs to meet developed
member countries' obligation in certain areas immediately after gaining membership.
Consequently, there were questions of which areas should the 'transition period'
approach applied to and how long these transition periods should be. These questions
became the new Sino-EU negotiation focus. During negotiation in 1996, the EU
continued to ask for better offer from China in terms of market access, subsidy
and tariff. Market access of automobile sector would probably be the most significant
hurdle of 1996 negotiation progress because European automobile industry experts'
demanded for a drastic cut in Chinese auto-tariff and greater transparency of
China's long-term policies on auto industry.
In first half of 1996, the Sino-US
relation was again troubled by intellectual property right dispute. By May 1996,
the US announced 3 million dollars worth of preliminary sanctions against Chinese
exports in retaliation for China's failure to protect the US intellectual property
right. Consequently, the Sino-US negotiation did not have much progress.
Even the completion of Sino-US deal
on intellectual property right in June, the Sino-US negotiation progress was
still slow. Agriculture was another difficult negotiation area. In addition,
the ballooning Sino-US trade deficit had let the US to insist on expanding market
access from China. Pressure from the US congress and other lobbying groups also
dampened China's accession.
1997
In this year, China had made a series of offers to WTO members and had carried
out many negotiations with member countries. The new offers covered not only
tariff reduction, but also regulations on distribution and production for foreign
companies in China. On tariff reduction, the new offered reduced China's average
tariff rate from 23% to 17% by October 1997. On distribution and production
regulations China promised to open wholesale and retail sector to foreign investment
and granting rights to all enterprises in China to import or export after a
short transition period.
On the other hand, China gained
negotiation progress with several countries. It concluded talks with New Zealand,
South Korea successfully in August 1997. Talks with Japan also attained great
progress. In September 1997, Japan completed a framework agreement on trade
in goods with China. However, market access for services sector remained a sticky
issue between Japan and China.
During 1997, pressure from the US
congress persisted. Congress proposed several stringent sanctions on China.
The sanction proposed include banning prison labor products from the US markets;
banning US travel for Chinese officials who engage in religious persecution
and who forced women to have abortions for population control; adding the US
human rights monitors in Beijing; banning the US trade with companies controlled
by the Chinese military and denying below market rate international loans to
China. This tough stance of the US congress might also contribute to the slow
Sino-US negotiation progress.
1998
Negotiation progress in 1998 was similar to that of 1997. Demand from member
countries for China's liberalization on agricultural and services sector continued
to be strong. In addition of 1997 Asian Financial Crisis, export ability of
many Asian countries had deteriorated. China thus can increase its share in
western countries' import drastically. The increase deficit gave these western
countries a reason to raise demand of market access on China.
In response to WTO members' demand,
China offered a package in April 1998. The package included tariff reduction
to 10.8% by 2005 and elimination of import restrictions on 385 kinds of commodities
over next 10 years. Also, China provided concessions over telecommunications
and services sectors, including banks and insurance markets.
1999
In the first quarter of 1999, China's attention was on bilateral negotiation
with the US. In March, China offered tariff cut in several agricultural products
such as beef and wheat. Yet, troubled by an accusation of Chinese stealing nuclear
secrets from the US and the problem of rising trade deficit, the US did not
soften its stance towards China's accession. In addition, there were opposing
voices from different commercial entities such as steel industry, information
technology in the US. These opposing voices urged for an opening of China's
services market and for anti-dumping activities from China. Congress' opposition
also hindered the US administration from reaching any agreement with China.
In May, China's accession encountered
another political obstacle - NATO bombing event of China's embassy. China had
suspended negotiation with the US. This suspension of bilateral negotiation
with US was aimed at reducing domestic discontent attitude towards the NATO
bombing event. Once this discontent got alleviated, China resumed negotiation
with the US. Finally, the Sino-US protocol was reached in November 1999. In
the same month, another bilateral agreement was signed by China and Canada.
2000
In January, China and the European Union (EU) held bilateral talks in Brussels
for China's accession into World Trade Organization (WTO). Although the talks
ended without agreement, some officials described that the talks were held in
a "constructive and positive atmosphere". The talks covered outstanding
issues including market access, tariffs, investment and industrial goods. However,
some important issues still remain to be resolved e.g. market access for telecom
and insurance companies.
China and India signed a bilateral
agreement on China's entry into the World Trade Organization (WTO) on February
22. The agreement will help increase the trade volume between two countries,
and will also be helpful to accelerate China's entry into the WTO.
In May, the EU-China bilateral agreement
is concluded. On the lifting of foreign insurer restrictions, China has promised
to allow foreign operators to sell the same products as their Chinese competitors,
including health, pension and group insurance in the life sector. On the location
of foreign insurers, Beijing will remove current restrictions that only allow
overseas companies to operate in the cities of Shanghai and Guangzhou. Other
concessions in the insurance sector include allowing foreign insurance brokers
to operate in China within five years of WTO accession. In addition, Beijing
will allow foreign partners in Chinese life insurance joint ventures to exercise
"effective management control" by allowing them to choose their Chinese
partners and securing a legal guarantee of freedom from any regulatory interference
in private contracts on a 50-50 equity basis. In the same month, Australia and
China signed an agreement to liberalize access to the Chinese market when China
joins the WTO. The agreement covers 1,000 product categories across agricultural
and manufacturing exports as well as key service sectors.
In September 2000, China and Switzerland
reached a bilateral agreement. The bilateral negotiation with Mexico became
the last remaining obstacle of China's entry to WTO.
2001
On 13 September 2001, China and Mexico concluded bilateral negotiations on China's
accession to the World Trade Organization. The agreement allows Mexico to extend
its current countervailing duties on 1,300 Chinese products for six years. These
products include textiles, garments, footwear and toys. Mexico will also be
able to maintain the import duties after the six-year period if it discovers
dumping.
Although China and Mexico signed
an accord removing a hurdle to China's accession to the World Trade Organization,
some barriers still existed. The issue to be settled is a United States and
European Union dispute over access to the Chinese insurance market. Mexico had
insisted it must maintain measures against similar goods from China for up to
15 years after China became a member of WTO.
Besides, some technical issues remains.
For instance, checking and reviewing the legal documents on China's accession,
including a multilateral agreement and the China working team's report. However,
The US disaster has made it impossible for negotiators.
If the ongoing 18th meeting of the WTO China working group finalizes legal documents
on the country's accession, China should be formally approved as a member at
the November Doha meeting and become a formal member early next year.
Highlights of
the US-China Bilateral Agreement on WTO
For the entering into WTO, China
has make some concession on its trading policies. China signed Sino-US bilateral
agreement on 15 November 1999 and EU-China bilateral agreement on 19 May 2000.
Based on concessions made by China in these two agreements, some sectors in
China will be most affected. The followings are the sectors that will be most
affected by its WTO membership.
Agriculture
The agreement provides increased access for U.S. exports across a broad range
of commodities and elimination of barriers. Commitments include:
- Significant cuts in tariffs
that will be completed by January 2004. Overall average for agricultural products
will be 17% and for U.S. priority products 14.5%.
- Establishment of a tariff-rate
quota (TRQ) system for imports of bulk commodities, e.g., wheat, corn, cotton,
barley, and rice, that provides a share of the TRQ for private traders.
- The right to import and distribute
products without going through state-trading enterprise or middleman.
Industrial Products
China's commitments will 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 that restrict imports of U.S. products.
Tariff
- Tariffs cut to an average of
9.4% overall and 7.1% on U.S. priority products.
- China will participate in the
Information Technology Agreement (ITA) eliminating 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 100% or 80% level to 25% by 2006. Auto parts
tariffs will be cut to an average of 10% by 2006.
Elimination of Quotas and Licenses
China has agreed to eliminate quotas and other quantitative restrictions within
five years.
- Quotas: China will eliminate
existing quotas upon accession for the top U.S. priorities. It will phase-out
remaining quotas not later than 2005.
- Quotas will grow from current
trade level at a 15% annual rate in order to ensure that market access increases
progressively.
- Auto quotas will be phased out
by 2005.
Right to Import and Distribute
Under the Agreement, China will provide trading rights and distribution rights
to U.S. manufacturing firms. Americans will be able to distribute imported products
as well as those made in China. Distribution rights will also be provided for
China's most restricted distribution sectors such as wholesale, transportation,
maintenance and repair. Trading rights will be progressively phased in over
three years.
Telecommunications
China commits to open its telecommunications sector, both to the scope of services
and to direct investment in telecommunications businesses.
- Regulatory Principles: China
has agreed to technology-neutral scheduling, which means foreign suppliers
can use any technology they choose to provide telecommunications services.
- Scope of services: China will
phase out all geographic restrictions for paging and value-added services
in 2 years, mobile/cellular in 5 years and domestic wire line services in
6 years. China's key telecommunications services corridor in Beijing, Shanghai,
and Guangzhou will open immediately on accession in all telecommunications
services.
- Investment: China will allow
49% foreign investment in all services, and will allow 50% foreign ownership
for value added paging services in two years, for mobile services, 49 percent
in 5 years; and for international and domestic services, 49% in 6 years.
Insurance
China now restricts foreign companies to operating in Shanghai and Guangzhou.
Under the agreement:
- Geographic Limitations: China
will permit foreign property and casualty firms to insure large-scale risks
nationwide immediately upon accession, and will eliminate all geographic limitations
in 3 years.
- Scope: China will expand the
scope of activities for foreign insurers to include group, health and pension
lines of insurance, which represent about 85% of total premiums, phased in
over 5 years.
- Prudential Criteria: 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.
- Investment: China agreed to
allow 50% ownership for life insurance. Life insurers can choose their own
joint venture partners. For non-life, china will allow branching or 51% ownership
on accession and form wholly owned subsidiaries in 2 years.
Banking
Currently foreign banks are not permitted to do local currency business with
Chinese clients.
- 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 as Chinese banks within designated geographic areas.
- Both geographic and customer
restrictions will be removed in five years.
Travel and Tourism
Hotels: China will allow unrestricted access to the Chinese market for hotel
operators with the ability to set up 100% foreign owned hotels in 3 years, with
majority ownership allowed upon accession.
Travel Services: Foreign travel
operators can provide the full range of travel agency services. For travel agency
services, China will allow access to government resorts as well as Beijing,
Shanghai, Guangzhou and Xian.
Textiles
China's protocol package will include a provision drawn from the 1997 bilateral
textiles agreement, which permits U.S. companies and workers to respond to increased
imports of textile. This textile safeguard will be in effect until December
31, 2008, which is after the WTO Agreement on Textiles and Clothing, expires.
Highlights
of the EU-China Bilateral Agreement on WTO
Telecommunications
- The timetable for market opening
in mobile telephony has been accelerated by 2 years. Foreign investment will
be allowed at 25% on accession, 35% after 1 year and 49% after 3 years.
- China will open up its leasing
market in 3 years, allowing foreign firms to rent capacity from Chinese operators
and resell it domestically and internationally.
Insurance
- Effective management control
has been negotiated for foreign participants in life insurance joint ventures,
through choice of partner, and a legal guarantee of freedom from any regulatory
interference in private contracts on a 50-50 equity basis.
- China will immediately give
7 new licenses to European insurers, in both the life and non-life sectors.
And 2 EU firms will be permitted to establish in 2 new cities.
Monopoly state import/export
restrictions
- China's state monopoly on importing
crude and processed oil, and NPK fertilizer, will be gradually opened to private
traders.
- The state monopoly on exporting
silk will be completely removed by 2005.
Tariffs
- China has reduced import tariffs
on over 150 leading European exports - such as machinery, textiles, clothing,
foot wear and leather goods. Agreed levels are generally around 8-10%.
Motor vehicles
- European carmakers are well
established in China, and will have greater flexibility to choose which types
of vehicles they build. Approval thresholds of provincial authorities will
be raised from $30m to $150m.
- China has agreed to eliminate
the joint-venture restriction for engine production.
Distribution
- China has agreed to lift the
specific joint venture restriction on large department stores and for all
chain stores.
Agriculture
- Market access will improve for
key EU products, such as rape-seed oil, dairy products, pasta, wine and olives.
Horizontal measures
- China will cease to apply a
number of measures that distort trade and have macroeconomic effects, including
export performance and local content requirements, and industrial export subsidies.
- China's government procurement
system will be transparent, and will not discriminate between foreign bidders.
- China will abolish preferences
to domestic producers in the fields of pharmaceuticals, chemicals, after-sales
services, cigarettes and spirits.
Other
- Improved market access in the
fields of banking, legal services, accountancy, architecture, tourism, construction,
dredging and market research.
The followings are some selective
commitments of China to its market access after gaining membership in the World
Trade Organization.
| 2001 |
China's accession
to WTO.Tariffs cut in many industries by up to 50%. |
| 2003 |
* Tendering Requirements:
China will eliminate
its tendering requirements for non-government purchases of construction
equipment within 2 years of accession.
China will eliminate
its tendering requirements for non-government purchases of agricultural
equipment within 4 years of accession.
|
| 2004 |
Trading Rights
& Distribution:
Any entity will be able to import products including agricultural equipment,
chemicals & civil aircraft, into any part of China. China will also
permit foreign enterprises to engage in the full range of distribution
services. These commitments are phased-in over the three-year period after
accession.
Banking:
Foreign banks will be able to conduct local currency business with Chinese
enterprises starting 2 years after accession and with Chinese individuals
from 5 years after accession.Branches held to 4 more cities each year,
then nationwide by 2006.
|
| 2005 |
| 2006 |
*Remark: According to
China's Bidding Law (BL), if a project falls within the following categories,
then all aspects of the project, including survey, design, construction, supervision
works and supply of major equipment and materials, must be procured through
competitive bidding.
These mandatory-bidding
projects include:
- projects that relate
to the public interest and safety, such as major infrastructure and public
utility projects; or
- projects that are
entirely or partially invested or financed by State funding; or
- projects that use
loans or financial assistance from international organizations or foreign
governments.
However, based on current
practices from Chinese officials, only Sino-foreign joint venture projects that
are majority-owned by state-owned enterprises would be subject to mandatory-bidding
requirement. In addition, currently many local constructions regulations require
project owners to obtain a "tender permit" from the local authorities
before calling for tenders.
Impacts of WTO
Entry on China
Advantages of Joining
WTO
Preferential Treatment
Based on a developing country status, China will benefit from the preferential
treatment in free trade, especially in tariff reduction, allowing higher subsidies
on agricultural products.
Acceleration of Agricultural
Reform
The entry will help China
accelerate its agriculture reform, thus enhancing the production of agricultural
products and raising the competitiveness in the international market.
Reduction of Unfair Treatment
on China
As a member state, China can make use of multilateral dispute solution mechanism,
to reduce frontal frictions and conflicts with other states, thereby effectively
safeguarding China's legitimate rights and interests.
Besides, China is also qualified
to participate in multilateral trade negotiations to fight protectionism in
trade of farm products. Other WTO members will dramatically reduce the amount
of unfair treatment imposed on China's agricultural sector, including non-tariff
restrictions against China's exported farm products, thus facilitating their
accession into the world market and expanding their market shares.
Promotion of Export Trade
As global demand for grain keeps increasing, its price has risen steadily in
the world market. The trend gives China a good chance to promote its grain production
and exports.
After entering the WTO, China will enjoy the most favored nation status as a
member country. This will not only enable China to enjoy the advantages offered
by other countries and regions opening their markets, and cause the main trading
countries to gradually abolish their discriminatory practices, thereby promoting
China's export trade.
Improvement of Foreign Investment
Environment
After joining the WTO, China has to fulfill the specified obligations made by
WTO, and gradually open its domestic markets, this will help further improve
the foreign investment environment and facilitate the inflow of foreign capital,
technology and management expertise.
Entry into the WTO also helps China
establish its own transnational companies, set up enterprises in other counties
and enhance the international competitiveness of the Chinese economy.
Adjustment of Domestic Industrial
Structure
It is conducive to accelerating the readjustment and optimization of the domestic
industrial structure. Joining the WTO will create a favorable international
environment for the transfer of oversupplied products to other WTO members.
China can make use of foreign capital and technology to transform its traditional
industries, accelerate the development of high-tech industries and services
trades, and raise the overall levels of China's industrial development.
Economic Restructuring
WTO accession helps continue deepening China's economic restructuring and move
towards its aim to establish a socialist market economic structure. At the same
time, it will boost the reform of State-owned enterprises (SOEs) and the establishment
of a modern enterprise system; the accession will also push forward the in-depth
structural reform of foreign trade, banking, insurance, securities and commercial
aspects, so as to meet the need of the gradual opening of these areas.
Enhancing International Status of China
Joining the WTO to participate in the formulation of bilateral trading rules
can give full expression to and reflection of the opinions and demands of China
and the numerous other developing countries, give further play to China's role
in international economic affairs, and enhance China's international status.
Disadvantages /
Challenges of Joining WTO
Burden on China's Foreign Exchange Reserve
China will have to open its domestic market and remove all non-tariff restrictions
on imported farm products. As the government's protective policies on domestic
farm products begin to be phased out, foreign farm products at lower prices
become a great challenge to Chinese counterparts. The flood of foreign farm
products into China will put heavy pressure on the country's foreign exchange
reserve.
Intense Competition for China's Enterprises
Further opening the market will cause some domestic products, enterprises and
industries to face more intense competition. Along with the expansion in market
access, the reduction of tariffs and the abolition of non-tariff measures, more
foreign products, services and investments will possibly enter Chinese markets;
domestic enterprises will face fiercer competition.
Laws and Regulations Adjustment
China's foreign economic and trade management will, to a certain extent, be
subject to the restriction of WTO rules. China's current foreign-related economic
laws, regulations and policies still do not completely conform with the stipulations
of WTO regulations, there still exist many areas of conceptual and institutional
inadaptability. Therefore, further law and regulations amendment is needed.
Why it Took China
So Long to Get Acceded?
1. Human Right
Why it took China so long to get
acceded? One of the reasons is the unsatisfactory of human rights conditions
in China. China consumed much time on human rights dialogues both with the EU
and the US. A tight control on basic freedoms began in late 1998, escalated
throughout 1999, and has continued into the new year. However, evidences showed
that there is crackdown of political parties and internet control in China.
As a WTO member, China has to restructure
its economy so as to fit WTO standards. Other than further open up its market
economically, China also have to improve its human right situation, reform its
legal system so as to protect contracts and combat corruption and the rule of
law should extend to the political and security areas.
2. Intellectual Property Right (IPR) Protection
With protection of intellectual
property rights (IPR) becomes important in an era of globalization and rapid
technological advances. The World Trade Organization (WTO) has assigned the
IPR protection as one of the criteria for membership.
According to Section 182 of the
Trade Act of 1974 (also known as "Special 301"), China's laws failed
to provide adequate protection of patents, copyrights, and trade secrets.
A complete set of laws and regulations
are needed in order to meet the world standard of IPR protection. As a result,
the dissatisfaction of intellectual property rights protection made China took
a long time to WTO.
The followings are the development
of IPR protection system in China:
| 1982 |
Chinese Trademark Law was promulgated,
which is a milestone of the construction of modern IPR protection system
in China. |
| 1984 |
Chinese Patent Law was promulgated. |
| 1986 |
The General Principles of Civil
Law was promulgated, in which IPR is ascertained as the civil rights of
the natural and legal persons in the basic civil law. |
| 1990 |
Chinese Copyright Law was promulgated. |
| 1991 |
The Regulations for the Protection
of Computer Software was promulgated. |
| 1992 |
The Provisions on the Implementation
of the International Copyright Treaty was promulgated which makes clear
the rights of the foreign copyright holders.The amendments to patent law
expanded the protection scope of the patent to products of chemicals. |
| 1993 |
The amendments to trademark
laws, and in which extends the protection scope to service trademark. |
| 1995 |
The Regulations on IPR Border
Protection was issued. |
| 1997 |
The Regulations on Protection
of Plant Varieties was promulgated. |
3.
Disagreement over Market Access
China's delayed accession to the
WTO was claimed to be partially due to the unfair demand of the U.S. and the
European Union for further concessions. China already has wide access to the
US market for years, so accession will not increase the penetration of Chinese
products in the US market. In the WTO negotiation, China made unilateral concessions.
The US simply maintains the market access policies to China by granting it Permanent
Normal Trade Relations (PNTR).
China has to negotiate the market
accession across almost every economic sector, including its markets for agriculture,
services, technology, telecommunications, and manufactured goods. Besides, China's
exclusive rights to import and distribute goods are also included in negotiation
talks.
As part of Sino-US bilateral negotiation,
the US and China's representatives has to negotiate three separate mechanisms.
The most important mechanism involves the antidumping laws. This law is used
to protect US industry and workers against low- priced, injurious imports form
China. Specified to Chinese imports, a 'non-market economy' methodology is used
to calculate the amount of dumping that is taking place. The Sino-US bilateral
agreement allowed US to use this methodology for 15 years after China's accession
into WTO.
Another significant concession made
by China is the creation of a special safeguard mechanism. It is used to protect
US industry and workers against import surges from China. This mechanism is
known as the 'product-specific safeguard' because the safeguard measures solely
apply to Chinese products. It will be available to the US and other WTO members
for 12 years after China's accession.
The third mechanism is a safeguard
applies to textile products. This will apply to the US and other WTO members
for approximately 7 years after China's accession, or until the end of 2008.
4. Trade Balance Dispute with the
US
The trade deficit problem carries
great importance because US products enjoyed only limited access to Chinese
market. Therefore, the US would demand greater market openness from China.
Since 1985, U.S. imports from China
have grown 25% per year, while exports to China have grown at less than half
this rate. The result is a rapidly growing trade deficit for
