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China Has Mixed Record on WTO Compliance - USTR

China Has Mixed Record on WTO Compliance, U.S. Trade Agency Says
Some Chinese government policies, interventions viewed as source of friction
By Andrzej Zwaniecki
USINFO Staff Writer

Washington - China's record in implementing its World Trade Organization (WTO) commitments is "decidedly" mixed despite "significant" progress in many areas, U.S. Trade Representative Susan Schwab says.

Schwab expressed concern about "worrisome" signs that China's market liberalization efforts have slowed in 2006 as Beijing's industrial policies and interventions inconsistent with WTO rules have created new barriers to trade and preserved existing ones.

Schwab's comments were included in a December 11 news release announcing her office's annual report to Congress on China's compliance with its WTO obligations.

The report said China's transitional period as a new WTO member now is "essentially over."
"With five years of WTO membership experience under its belt, we believe it is fair to expect China to be implementing the letter and spirit of its WTO obligations in full," Schwab said.

The report called China's efforts to bring its trading system into basic compliance with WTO standards and related reforms "significant and often impressive."

According to the news release, U.S. exports to China have grown by 190 percent and China has become the U.S.'s fourth largest export market since China's accession to the WTO in 2001.

The report said, however, the country continues to pursue "problematic" industrial policies that rely on trade-distorting measures such as local content requirements, import and export restrictions, discriminatory regulations and prohibited subsidies. Furthermore, U.S. industries have complained that excessive Chinese government intervention in the marketplace is the most significant source of their problems in doing business in China.

An unnamed U.S. trade association official quoted in the report said the "continued and expanding use of government intervention and industrial policies … have the potential to create even sharper frictions in bilateral economic relations than [Chinese violations of] intellectual property rights (IPR)."

In 2006, under pressure from the Bush administration, China made commitments to strengthen protection and enforcement of IPR, and to improve market access in several areas including medical devices, telecommunications services and express courier services.

Beijing, however, has resisted calls for its better use of criminal remedies against rampant intellectual property piracy and counterfeiting, and for the elimination of prohibited subsidies, the report said. It also has kept a number of questionable regulations, such as ones requiring a minimum percentage of locally manufactured components be used in the production of motor vehicles. In addition, the Chinese government has introduced new "worrisome" measures such as new requirements for state control of "critical" equipment manufacturers and restrictions on foreign providers of financial information services.

Even in areas where the greatest progress has been made, such as services, Chinese regulatory policies and practices prevent U.S. providers from achieving their full market potential in China, according to the report.

The administration will continue to seek improvements in these and other areas through bilateral fora such as the Joint Commission on Commerce and Trade and the newly created Strategic Economic Dialogue, the report said.

Schwab warned that the Bush administration will be ready to use WTO dispute settlement procedures and U.S. trade remedy laws if those efforts do not produce the desired results.

"Whether through dialogue, negotiation or dispute settlement, China must be held to its commitments to reform," she said in an editorial printed in the December 11 issue of Financial Times.

The full texts of the news release and report (PDF, 109 pages) can be viewed on the USTR Web site.
For more information on U.S. policy, see The United States and China.

ENDS

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