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Cablegate: Ustr General Consul Reif Visits Shanghai

VZCZCXRO6022
RR RUEHCN RUEHGH
DE RUEHGH #0483/01 3490331
ZNR UUUUU ZZH
R 150331Z DEC 09
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 8419
INFO RUEHBJ/AMEMBASSY BEIJING 3194
RUEHSH/AMCONSUL SHENYANG 2292
RUEHCN/AMCONSUL CHENGDU 2301
RUEHGZ/AMCONSUL GUANGZHOU 0758
RUEHHK/AMCONSUL HONG KONG 2470
RUEHIN/AIT TAIPEI 2091
RUEHKO/AMEMBASSY TOKYO 0828
RUEHUL/AMEMBASSY SEOUL 0617
RUEHGV/USMISSION GENEVA 0101
RUEHBS/USEU BRUSSELS 0034
RUEHCP/AMEMBASSY COPENHAGEN 0001
RHMFIUU/DEPT OF JUSTICE WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 9083

UNCLAS SECTION 01 OF 02 SHANGHAI 000483

SENSITIVE
SIPDIS

STATE FOR EAP/CM
STATE ALSO PASS USTR FOR CHINA OFFICE
STATE ALSO PASS DOJ FOR INTERNATIONAL ANTITRUST- CHEMTOB

E.O. 12958: N/A
TAGS: ETRD WTRO SENV PGOV CH ECON
SUBJECT: USTR GENERAL CONSUL REIF VISITS SHANGHAI

REF: STATE 124680

(U) This document is sensitive but unclassified. Please protect
accordingly.

1. (SBU) Summary: During meetings December with USTR General
Counsel Timothy Reif, scholars from the Shanghai Municipal
Government's WTO Center expressed worries about how to harmonize
possible commitments to limit greenhouse gas emissions with
existing trade policy regimes. AmCham Shanghai members who met
with Reif were generally upbeat about the business climate
despite chronic problems related to intellectual property
protection and regulatory transparency. Shanghai Commerce
Commission officials emphasized Shanghai's success in meeting
Central Government standards for transparency but acknowledged
Shanghai remains more conservative with respect to government
openness than some other jurisdictions in China. End Summary.

=========================================
WTO Center: Overreach and Climate Change
=========================================

2. (SBU) On December 7, USTR General Counsel Reif, accompanied
by AUSTR Tim Stratford and Claire Reade, Chief Counsel for China
Trade Enforcement, met Shanghai WTO Affairs Consultation Center
President Wang Xinkui to discuss concerns over WTO Appellate
Body overreach and the growing nexus between measures to address
climate change and trade policy. General Counsel Reif began by
asking WTO Center analysts for their thoughts on whether the WTO
Appellate Body had overreached in certain cases. The WTO
Center's Professor Gong Baihua agreed that there had been
instances of overreach, corresponding to an increased reliance
by WTO members on the dispute settlement mechanism. He was
quick to point out, however, that overreach happened in both
directions, and that it was often the losers of a case who
claimed that the Appellate Body had overreached. WTO Center
President Wang suggested that the Appellate Body should be
"restrained" to prevent overreach in the future, but conceded
that the body, in spite of its faults, would continue to serve a
useful purpose "as long as it prevents trade wars."

3. (SBU) The discussion then shifted to a conversation over the
expanding linkage between climate change measures and trade
policy. Wang noted that, on the eve of the Copenhagen Climate
Change Conference, China had pledged to reduce its carbon
emissions to 40-45% of their 2005 levels per unit of GDP by
2020. Wang questioned whether mandates coming out of the
Copenhagen Climate Change Conference will be dealt with under
existing WTO agreements. General Counsel Reif stated that he
was confident existing WTO rules will give us answers as to how
to harmonize Copenhagen outcomes with WTO members' trade policy
regimes, including whether the results of Copenhagen will be
consistent with GATT Article III. Reif noted, however, that this
conclusion depends on the terms of the actual agreement.

============================================= =========
AmCham Shanghai: Indigenous Innovation and Procurement
============================================= =========

4. (SBU) During a luncheon roundtable at the American Chamber of
Commerce in Shanghai, several members raised concerns over
China's "catalogue of indigenous innovation products for
government procurement", which they claim discriminates against
international companies, favoring "indigenous" products instead.
The USTR delegation noted that Washington is carefully
monitoring this issue, had coordinated an interagency response
in Washington, and had drafted a demarche to be delivered in
Beijing on December 10 (REFTEL). The USTR delegation appealed to
Shanghai AmCham members to continue to supply the USG with
specific and actionable information to support their complaints.

5. (SBU) The AmCham members also cited continuing concerns over
transparency, China's implementation of the Anti-Monopoly Law,
and weak IPR protection. In addition, insurance industry
representatives raised national treatment and market access
concerns. Medical device manufacturers also expressed concerns
over Chinese government procurement policy. Despite their

SHANGHAI 00000483 002 OF 002


downbeat assessment of these non-tariff barriers, AmCham
Shanghai members were upbeat when asked about the overall
business climate; several members cited unexpected and
unprecedented growth over the last quarter.

============================================= ==============
=======
Commerce Commission: Government Transparency in Shanghai
Improving
============================================= ==============
=======

6. (SBU) In a separate December 7 meeting, Shanghai Municipal
Commerce Commission Secretary General Gu Jiahe stressed the
Municipal Government's efforts to expand transparency. Shanghai
has already implemented all of the "open government" regulations
issued by the Central Government and is adhering to commitments
made by China during the 2008 U.S.-China Strategic Economic
Dialogue. While Gu claimed that most municipal laws and
regulations are already available on-line, he admitted that the
process for commenting on draft regulations is only partially
available to the public "due to their complexity." Reif
congratulated Gu on Shanghai's efforts and urged the Municipal
Government to continue its work to expand transparency at the
local level. He added that allowing for public consultation in
drafting of regulations helps increase confidence in the
regulatory environment and improves the investment climate.

7. (SBU) Gu enumerated many of the Municipal Government's
accomplishments in improving access to information and stressed
that all government offices have their own web sites, which
provide the names of senior officials and relevant regulations
and laws. Gu was especially proud of Shanghai's system for
attracting foreign investment. He said that procedures for
entering into joint ventures (JVs) or establishing wholly
foreign-owned enterprises (WFOEs) are posted on-line and that
investors receive a clear timeline from the municipal
authorities to help them monitor the process of their
applications. If a JV or WFOE application is refused, the
applicant will be given the reason for the refusal.

8. (SBU) Reif asked about the current controversy surrounding a
journalist's request for the publication of Shanghai's budget,
which the Municipal Government refused, citing laws on state
secrets. (Note: Guangdong Province, by way of contrast,
responded to the same request by immediately posting their
budget online. End note.) Gu demurred, reiterating that
Shanghai had fully complied with the Central Government's open
government initiative but conceded that, in this instance, other
jurisdictions within China are more forward-leaning than
Shanghai. Reif asked how the Municipal Government handles cases
in which the open-government initiative guidance conflicts with
state secret laws. Gu only acknowledged the existence of
guidance but did not elaborate.

9. (U) This cable was cleared by USTR.
CAMP

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