Source: The White House Office of Public Liason
NOVEMBER 17, 1999
BRIEFING ON THE CLINTON ADMINISTRATION AGENDA FOR THE
WORLD TRADE ORGANIZATION MATERIAL
SUMMARY OF U.S. - CHINA BILATERAL WTO AGREEMENT
I. AGREEMENT HIGHLIGHTS
The U.S.-China WTO agreement covers all agricultural products, all ind
ustrial goods, and all service areas.
Industrial Tariffs
China's industrial tariffs will fall from an overall average of 24.6%
in 1997 to an overall average of 9.4% by 2005.
On U.S. priority industrial products, tariffs will fall to 7.1% with t
he majority of tariff cuts fully implemented by 2003. Tariffs will fal
l on a range of products including: wood, paper, chemicals, capital an
d medical equipment.
In information technology, tariffs on products such as computers, semi
conductors, and all internet-related equipment, will fall from an aver
age of 13.3% to 0% by 2005.
Agriculture
On U.S. priority agriculture products, tariffs will be reduced from an
overall average of 31.5% to 14.5% by January 2004, at the latest.
Priority Products Tariffs
Pre-Agreement Tariffs
Post-Agreement
Beef 45 12%
Grapes 40% 13%
Wine 65% 20%
Cheese 50% 12%
Poultry 20% 10%
Pork 20% 12%
OVERALL AVERAGE 31.5% 14.5%
China will expand access for of bulk agriculture commodities, on produ
cts including corn, cotton, wheat, rice, barely, soybean oil.
China will eliminate export subsidies -- this is especially critical f
or U.S. cotton and rice producers.
China will for the first time ever permit private trade (trade between
private parties) in agriculture.
Services
On industrial goods, China will for the first time permit the right to
import and export without middle-men -- so-called trading rights -- a
s well as full rights of distribution including wholesale and retail a
nd aftersale service, repair, maintenance, and transport.
The telecommunications, insurance, banking, securities, audio visual,
and professional service sectors, to name a few, will all have expande
d market access under the agreement.
II. RESOLUTION OF KEY UNRESOLVED ISSUES
Import Surge Mechanism. China has agreed to a special safeguard mechan
ism that will remain in place for 12 years following accession and tha
t can be used to address rapid increases in imports from China that ca
use or threaten market disruption.
Anti-Dumping. The agreement ensures that the United States can continu
e to apply our current non-market economy methodology in antidumping c
ases involving imports from China for 15 years. China can, of course,
request review under U.S. law of specific sectors or the economy as a
whole to determine if it is market oriented and no longer subject to t
he special methodology.
Motion Pictures. A previously unresolved issue had been the degree to
which China restricted imports of films. Prior to the agreement, China
permitted a maximum of 10 foreign films. Under the agreement, China w
ill quadruple imports to 40 films after accession, growing to 50 films
in three Years, of which 20 will be on a revenue-sharing basis, in ea
ch of the three Years.
Internet Access. Because of the enormous projected growth in internet
access in China over the coming decade, a key priority of the U.S. was
to ensure that China's telecom service commitment clearly included al
l aspects of internet service. The agreement ensures that Internet ser
vices will be liberalized at the same rate as other key telecommunicat
ions services.
Satellites. China has clarified that it will permit provision of telec
ommunications services via satellite.
Auto Financing. China has now made commitments for non-bank foreign fi
nancial institutions to be able to provide auto financing upon China's
accession. This in combination with commitments regarding importation
, distribution, sale, financing, and maintenance and repair of automob
iles will help open up this key sector for U.S. industry.
Accelerated Auto Tariff Reduction. As part of the efforts to find "win
-win" solutions to sensitive areas, China agreed to accelerated tariff
reduction in exchange for a slightly longer phase-in period. This pro
vides earlier market access with auto tariffs still being reduced from
the current 100-80 percent to 25 percent by July 1, 2006.
Telecommunications. While the United States agreed to China's request
to limit foreign equity participation in value-added and paging servic
es to 50 percent, China agreed to both accelerate significantly the pe
rcentage of equity participation in the first two years and eliminate
geographic restrictions on an accelerated basis. China had indicated i
t would allow 35% foreign ownership for value-added and paging service
s two years after accession and 51% four years after accession. China
will now allow 49% foreign ownership in the first year of accession an
d 50% foreign ownership in the second year.
Life Insurance. While the United States agreed to China's request to l
imit foreign equity participation in life insurance to 50%, China agre
ed to significantly accelerate the elimination of geographic restricti
ons the percentage of equity participation in the first few years.
SUMMARY OF U.S. - CHINA BILATERAL WTO AGREEMENT
AGRICULTURE
The Agreement provides increased access for U.S. exports across a broa
d range of commodities and elimination of barriers. Commitments includ
e:
Significant cuts in tariffs that will be completed by January 2004. Ov
erall average for agricultural products will be 17 percent and for U.S
. priority products 14.5 percent.
Establishment of a tariff-rate quota system for imports of bulk commod
ities, e.g., wheat, corn, cotton, barley, and rice, that provides a sh
are of the TRQ for private traders. Specific rules on how the TRQ will
operate and increased transparency in the process will help ensure th
at imports occur. Significant and growing quota quantities subject to
tariffs that average between 1-3 percent.
The right to import and distribute products without going through stat
e-trading enterprise or middle-man.
China has also agreed to the elimination of SPS barriers that are not
based on scientific evidence and no export subsidies on agricultural p
roducts.
INDUSTRIAL PRODUCTS
China's commitments will eliminate broad systemic barriers to U.S. exp
orts, such as limits on who can import goods and distribute them in Ch
ina as well as barriers such as quotas and licenses that restrict impo
rts of U.S. products.
TARIFFS
Tariffs cut to an average of 9.4 percent overall and 7.1 percent on U.
S. priority products.
China will participate in the Information Technology Agreement (ITA) e
liminating all tariffs on products such as computers, telecommunicatio
ns equipment, semiconductors, computer equipment and other high techno
logy products.
In the auto sector, China will cut tariffs from the current 100% or 80
% level to 25% by 2006, with the largest cuts in the first years after
accession.
Auto parts tariffs will be cut to an average of 10% by 2006.
Significant cuts will also be made in the wood and paper sectors, goin
g from present levels of 12-18% on wood and 15-25% on paper down to le
vels generally between 5 and 7.5%.
China will also be implementing the vast majority of the chemical harm
onization initiative. Under that initiative, tariffs will be at 0, 5.5
and 6.5 percent for products in each category.
ELIMINATION OF QUOTAS AND LICENSES
WTO rules bar quotas and other quantitative restrictions. China has ag
reed to eliminate these restrictions with phase-ins limited to five ye
ars.
Quotas: China will eliminate existing quotas upon accession for the to
p U.S. priorities (e.g. optic fiber cable). It will phase-out remainin
g quotas, generally by 2002, but no later than 2005.
Quotas will grow from current trade level at a 15% annual rate in orde
r to ensure that market access increases progressively, and reduces th
e effect of quantitative restrictions.
Auto quotas will be phased out by 2005. In the interim, the base level
quota will be $6 billion (the level prior to China's industrial auto
policy) and this will grow by 15% annually until elimination.
RIGHT TO IMPORT AND DISTRIBUTE
Trading rights and distribution are the major priority of the manufact
uring sector. At present, China severely restricts trading rights (the
right to import and export) and distribution (wholesaling, retailing,
maintenance and repair, transportation, etc.). Under the Agreement, C
hina will provide, for the first time, trading rights and distribution
rights to U.S. firms. Trading rights will be progressively phased in
over three years. Distribution rights will be provided even for China'
s most restricted distribution sectors such as wholesale, transportati
on, maintenance and repair. China will provide for trading rights and
distribution.
SERVICES
China has made commitments in all major service categories with reason
able transitions to eliminate most foreign equity restrictions (especi
ally in sectors where the U.S. has a strong commercial interest), agre
eing to accede to the Basic Telecommunications and Financial Services
Agreements, and "grandfathering" of current market access for U.S. ser
vice providers.
GRANDFATHERING
China will grandfather all existing current market access and activiti
es in all services sectors. This will protect existing American distri
bution services, financial services, professional and other service pr
oviders in China, including those operating under contractual or share
holder agreements or a license, from restrictions as Chinese commitmen
ts phase in.
DISTRIBUTION
In China today, foreign firms have no right to distribute products oth
er than those they make in China, or to own or manage distribution net
works, wholesaling outlets or warehouses. China also now frequently is
sues businesses licenses which limit the ability of American firms to
conduct marketing, after-sales service, maintenance and repair and cus
tomer support. As the section on industrial goods noted, this is a sev
ere barrier to goods exports as well as to service exports.
China's commitments address all these issues. They reflect a comprehen
sive commitment on distribution - including wholesaling, sales away fr
om a fixed location, retailing, maintenance and repair, and transporta
tion. Thus, Americans will be able to distribute imported products as
well as those made in China, offering significant opportunity to expan
d U.S. exports of goods. As noted above, China will phase out all rest
rictions on distribution services for most products within three years
.
SERVICES AUXILIARY TO DISTRIBUTION
Chinese commitments in services auxiliary to distribution include rent
al and leasing, air courier, freight forwarding, storage and warehousi
ng, advertising, technical testing and analysis, and packaging service
s. All restrictions will be phased-out in 3 to 4 years, at which time
U.S. service suppliers will be able to establish 100% wholly-owned sub
sidiaries.
TELECOMMUNICATIONS
China now severely restricts sales of telecommunications services and
bars foreign investment. China's commitments mark its first agreement
to open its telecommunications sector, both to the scope of services a
nd to direct investment in telecommunications businesses. Through thes
e commitments, China will become a member of the Basic Telecommunicati
ons Agreement.
Specific commitments include:
Regulatory Principles: China has agreed to implement the pro-competiti
ve regulatory principles embodied in the Basic Telecommunications Agre
ement (including cost-based pricing, interconnection rights and indepe
ndent regulatory authority), and agreed to technology-neutral scheduli
ng, which means foreign suppliers can use any technology they choose t
o provide telecommunications services.
Scope of services: China will phase out all geographic restrictions fo
r paging and value-added services in 2 years, mobile/cellular in 5 yea
rs and domestic wireline services in 6 years. China's key telecommunic
ations services corridor in Beijing, Shanghai, and Guangzhou, which re
presents approximately 75% of all domestic traffic, will open immediat
ely on accession in all telecommunications services.
Investment: Under present circumstances, China allows no foreign inves
tment in telecommunications services. With this agreement, China will
allow 49% foreign investment in all services, and will allow 50% forei
gn ownership for value added paging services in two years, for mobile
services, 49 percent in 5 years; and for inernational and domestic ser
vices, 49% in 6 years.
INSURANCE
For insurance, China now restricts foreign companies to operating in S
hanghai and Guangzhou. Under the agreement:
Geographic Limitations: China will permit foreign property and casualt
y firms to insure large-scale risks nationwide immediately upon access
ion, 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 represe
nt about 85% of total premiums, phased in over 5 years.
Prudential Criteria: China agrees to award licenses solely on the basi
s of prudential criteria, with no economic needs test or quantitative
limits on the number of licenses issued.
Investment: China agreed to allow 50 percent ownership for life insura
nce. life insurers may now choose their own joint venture partners. fo
r non-life, china will allow branching or 51% ownership on accession a
nd form wholly owned subsidiaries in 2 years. reinsurance is completel
y open upon accession (100 percent, no restrictions).
BANKING
Currently foreign banks are not permitted to do local currency busines
s with Chinese clients (a few can engage in local currency business wi
th their foreign clients). China imposes severe geographic restriction
s on the establishment of foreign banks.
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 Chi
nese enterprises starting 2 years after accession.
Foreign banks will be able to conduct local currency business with Chi
nese individuals from 5 years after accession.
Foreign banks will have the same rights (national treatment) as Chines
e banks within designated geographic areas.
Both geographic and customer restrictions will be removed in five year
s
Non-bank financial companies can offer auto financing upon accession
SECURITIES
China will permit minority foreign owned joint ventures to engage in f
und management on the same terms as Chinese firms. As the scope of bus
iness expands for Chinese firms, foreign joint venture securities comp
anies will enjoy the same expansion in scope of business. Minority joi
nt ventures will be allowed to underwrite domestic securities issues a
nd underwrite and trade in foreign currency denominated securities (de
bt and equity).
PROFESSIONAL SERVICES
In the professional services, China currently tightly restricts operat
ion of foreign law firms and accounting firms. In the Agreement, China
has provided a broad range of commitments, including on legal, accoun
tancy, taxation, management consultancy, architecture, engineering, ur
ban planning, medical and dental, and computer and related services. C
hina will permit foreign majority control except for practicing Chines
e law (an exception common to many WTO members.) For accountancy, Chin
a has agreed to eliminate a mandatory localization requirement and wil
l now allow unrestricted access to its market to professionals license
d and follow transparent procedures.
AUDIOVISUAL
China's commitments cover the right to distribute video and sound reco
rdings and cinema ownership and operation. For video and sound recordi
ngs, China will allow 49% foreign participation in joint ventures enga
ged in the distribution of these products. China has also agreed to im
port 40 films after accession growing to 50 films in three years, of w
hich 20 films will be revenue sharing in each of the three 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 o
f travel agency services. For travel agency services, China will allow
access to government resorts as well as Beijing, Shanghai, Guangzhou
and Xian.
PROTOCOL PROVISIONS
Commitments in China's WTO Protocol and Working Party Report establish
rights and obligations enforceable through WTO dispute settlement pro
cedures. We have agreed on key provisions relating to antidumping and
subsidies, protection against import surges, technology transfer requi
rements and offsets as well as practices of state-owned and state-inve
sted enterprises. These rules are of special importance to U.S. worker
s and business.
China had agreed to implement the TRIMs Agreement upon accession, elim
inate and cease enforcing trade and foreign exchange balancing require
ments, eliminate and cease enforcing local content requirements, refus
e to enforce contracts imposing these requirements; and only impose or
enforce laws or other provisions relating to the transfer of technolo
gy or other know-how, if they are in accordance with the WTO agreement
s on protection of intellectual property rights and trade-related inve
stment measures.
These provisions will also help protect American firms against forced
technology transfers, as China has also agreed that, upon accession, i
t will not condition investment approvals, import licenses, or any oth
er import approval process on performance requirements of any kind, in
cluding: local content requirements, offsets, transfer of technology,
or requirements to conduct research and development in China.
ANTIDUMPING AND SUBSIDIES METHODOLOGY
The agreed protocol provisions ensure that American firms and workers
will have strong protection against unfair trade practices including d
umping and subsidies. The U.S. and China have agreed that we will be a
ble to maintain our current antidumping methodology (treating China as
a non-market economy) in future anti-dumping cases. this provision wi
ll remain in force for 15 years after china's accession to the WTO. Mo
reover, when we apply our countervailing duty law to China we will be
able to take the special characteristics of China's economy into accou
nt when we identify and measure any subsidy benefit that may exist.
PRODUCT SPECIFIC SAFEGUARD
The agreed provisions for the protocol package also ensure that Americ
an domestic firms AND WORKERS will have strong protection against rapi
d increases of imports.
To do this, the Product-Specific Safeguard provision sets up a special
mechanism to address increased imports that cause or threaten to caus
e market disruption to a U.S. industry. China is a major exporting cou
ntry that enjoys open access to U.S. markets. This mechanism, which is
in addition to other WTO Safeguards provisions, differs from traditio
nal safeguards measures. It permits United States to address imports s
olely from China , rather than from the whole world, that are a signif
icant cause of material injury through measures such as import restric
tions. Moreover, the United States will be able to apply restraints un
ilaterally based on legal standards that differ from those in the WTO
Safeguards Agreement and could permit action in more cases. This provi
sion will remain in force for 12 years after China accedes to the WTO.
STATE-OWNED AND STATE-INVESTED ENTERPRISES
The Protocol addresses important issues related to the Chinese governm
ent's involvement in the economy. China has agreed that it will ensure
that state-owned and state-invested enterprises will make purchases a
nd sales based solely on commercial considerations, such as price, qua
lity, availability and marketability, provide U.S. firms with the oppo
rtunity to compete for sales and purchases on non-discriminatory terms
and conditions.
China has also agreed that it will not influence these commercial deci
sions (either directly or indirectly) except in a WTO consistent manne
r. With respect to applying WTO rules to state-owned and state-investe
d enterprises, we have clarified in several ways that these firms are
subject to WTO disciplines.
-Purchases of goods or services by these state-owned and state-investe
d enterprises do not constitute "government procurement" and thus are
subject to WTO rules.
-We have clarified the status of state-owned and state-invested enterp
rises under the WTO Agreement on Subsidies and Countervailing Measures
. This will help ensure that we can effectively apply our trade law to
these enterprises when it is appropriate to do so.
TEXTILES
China's protocol package will include a provision drawn from our 1997
bilateral textiles agreement, which permits U.S. companies and workers
to respond to increased imports of textile and apparel products. This
textile safeguard will be in effect until December 31, 2008 which is
after the WTO Agreement on Textiles and Clothing expires.
--
天下英雄出我辈，一入江湖岁月催。
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