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Cablegate: Austr Stratford Raises Concerns About China's

VZCZCXRO5412
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #3052/01 2200947
ZNR UUUUU ZZH
P 070947Z AUG 08
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 9042
INFO RUCPDOC/USDOC WASHDC
RUEHOO/CHINA POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 03 BEIJING 003052

SIPDIS
SENSITIVE

FOR EAP/CM JHABJAN/PPARK
FOR EEB JBYERLY/TROBL/VLIMAYEDAVIS
USDOC FOR ITA/MAC/IKASOFF/NMELCHER/RKARNAK/TDYCUS
STATE PASS USTR
USTR FOR TSTRATFORD/TWINELAND/AMAIN
TRANSPORTATION FOR SMCDERMOTT/JSZABAT/BALLEN/NPORTER
TREASURY FOR MANAGING DIRECTOR DWRIGHT

E.O. 12958: N/A
TAGS: ECON EFIN CH
SUBJECT: AUSTR STRATFORD RAISES CONCERNS ABOUT CHINA'S
DRAFT POSTAL LAW

THIS CABLE IS SENSITIVE BUT UNCLASSIFIED. NOT FOR
INTERNET DISTRIBUTION.

1. (SBU) Summary: On July 14, Assistant USTR (AUSTR)
for Asia Tim Stratford told State Postal Bureau (SPB)
Deputy Administrator Wang Yuci that a provision in
China's latest draft postal law is of great concern to
the United States as it would seem to exclude foreign
firms, but not domestic firms, from the domestic
document delivery business. He cautioned that USTR
lawyers were reviewing the draft law to determine
whether it is inconsistent with China's WTO
commitments. Although Wang claimed that the draft
law, now in its 10th revision, was WTO-consistent, he
accepted AUSTR Stratford's offer to have USTR
technical experts meet with SPB experts to discuss WTO
compliance. AUSTR Stratford also discussed the Second
U.S.-China Symposium on Postal Reform and Express
Delivery Services (EDS). After the meeting, Commerce
Deputy Assistant Secretary for Asia Ira Kasoff joined
AUSTR Stratford to continue discussion of these issues
over dinner with Wang and other SPB officials. End
Summary.

10th Draft of Postal Law Raises WTO Concerns
--------------------------------------------

2. (SBU) On July 14, Assistant USTR for Asia Tim
Stratford raised United States concerns over the draft
postal law to State Postal Bureau (SPB) Deputy
Administrator Wang Yuci. He informed Wang that a
provision in the so-called 10th draft postal law is of
great concern to the United States as it would seem to
exclude foreign firms from the domestic document
delivery business. AUSTR Stratford stressed that this
provision would put United States companies at a
tremendous competitive disadvantage to Chinese
competitors.

3. (SBU) AUSTR Stratford noted that the U.S.
Government was not aware of any countries that have
such restrictions on foreign companies in place. He
also said that such a limitation was not the best
policy for growing the express delivery service (EDS)
business in China and serving Chinese customers.
AUSTR Stratford reminded Wang that the U.S. companies
in this sector have made major investments in China
and noted the UPS hub in East China and the
forthcoming FedEx hub in southern China.

4. (SBU) In addition to the above-mentioned economic
reasons, AUSTR Stratford said SPB should reconsider
the problematic provision in the 10th draft because of
China's WTO commitments. He also noted that in
previous JCCT's, former Vice Premier Wu Yi said that
the Chinese Government would not take actions that
would have a negative impact on foreign-invested
enterprises.

5. (SBU) AUSTR Stratford cautioned that the 10th draft
raised WTO concerns and that USTR lawyers were
reviewing the draft law to determine whether it is
inconsistent with China's WTO commitments. In
particular, the lawyers are assessing whether there is
a GATS violation on the treatment of foreign operators
versus domestic operators. He noted that this is a
question of national treatment and that the U.S.
Government wants a clear understanding of the draft
law's potential impact on foreign operators before it
is passed from the State Council Legislative Affairs
Office (SCLAO) to the National People's Congress (NPC)
for review. AUSTR Stratford asked to see SPB's WTO
compliance analysis given that USTR is in the midst of
conducting its own analysis. He cautioned that SPB -
as a government agency - would want to be careful
about recommending a draft law for review if it had
WTO problems.

Postal Law Reform Proposed for JCCT Agenda

BEIJING 00003052 002 OF 003


------------------------------------------

6. (SBU) AUSTR Stratford also told Wang that postal
law reform would be on the United States' list of
proposed issues for the 19th JCCT scheduled for
September 16 in the United States. He also said
senior USTR and Commerce officials would be raising
U.S. concerns about the 10th draft in a meeting with
MOFCOM Vice Minister Ma Xiaohong on July 17.

SPB Says Draft Postal Law is WTO Compliant
------------------------------------------

7. (SBU) SPB) Deputy Administrator Wang thanked AUSTR
Stratford for introducing the U.S. viewpoint and said
SPB understood the U.S. concerns. He claimed that
China conducted a careful study of its WTO commitments
and that the 10th draft postal law was WTO compliant.
He also said that honoring WTO commitments was a very
important principle and then gave the floor to SPB
Director General (DG) for Policy and Legal Affairs Da
Wa.

8. (SBU) Da said the United States and China have
discussed this issue over 12 times and opined that the
core of the issue was how to understand China's WTO
commitment. He reviewed China's assessment of its WTO
commitments and remarked that when China joined the
WTO, China did not commit to open base or ordinary
postal services. He also said China only committed to
open express mail delivery services with the exception
of what was reserved for China's postal monopoly. He
defined the postal monopoly as including the delivery
of letter mail and said that according to the existing
postal law, all delivery of letter mail, express mail,
private mail, public mail and ordinary mail is under
the public monopoly. Da said there were no
limitations on weight and charges of letter mail.

SPB Says WTO Commitment Only Covers Packages
--------------------------------------------

9. (SBU) Da claimed that when China entered WTO, it
only committed to opening the market for express
delivery of packages, which did not include mail. He
cited China's horizontal commitments and said China
only allowed entrusted companies to operate incoming
and outgoing letter mail delivery services. By way of
entrustments, foreign enterprises continue to operate
those letter mail delivery services, except in the
area of private and government mail. He claimed that
China has strictly followed its WTO commitments and
commented that when the issue of national treatment is
discussed, it is only in the committed areas.

WTO Compliance Concerns Remain
------------------------------

10. (SBU) In response, AUSTR Stratford said WTO
experts from other countries might have a different
interpretation than SPB. He reminded Wang that NDRC
promulgated a rule on auto parts relating to factories
that use them and noted that the United States and
European Union believed the rule discriminated against
imported auto parts. AUSTR Stratford said China had a
different analysis and that the WTO found mistakes in
China's analysis, which resulted in WTO problems.

11. (SBU) AUSTR Stratford stressed that he was not
saying that the United States believes the 10th draft
is a WTO violation, as there are many complicated
issues that have to be considered. He recommended
that WTO experts from both the United States and China
sit down and think through the complicated WTO issues
involved before - and not after - the draft postal law
is adopted. Although Wang claimed that the 10th draft
was WTO-compliant, he accepted AUSTR Stratford's offer
to have USTR technical experts meet with SPB experts
to discuss WTO compliance. However, when AUSTR

BEIJING 00003052 003 OF 003


Stratford asked for clarification as to whether it was
more appropriate to have technical discussions with
SPB or SCLAO, Da commented that the draft postal law
has been out of SPB's hands since 2002.

Second Postal Reform and Express Delivery Symposium
--------------------------------------------- ------

12. (SBU) AUSTR Stratford also discussed the Second
U.S.-China Symposium on Postal Reform and Express
Delivery Services (EDS) and proposed that the dates be
switched to September 18 and 19. After the meeting,
Commerce Deputy Assistant Secretary for Asia Ira
Kasoff joined AUSTR Stratford for a dinner with Wang,
SPB Director General for Policy and Legal Affairs Da
Wa and other SPB officials. During dinner, Wang said
SPB accepted the revised dates of September 18 and 19
and confirmed that SPB accepted the U.S. Government
suggestion to meet with U.S. Department of Justice
officials to discuss anti-trust issues while in
Washington, DC for the symposium.

RANDT

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