Summary of U.S. - China Bilateral WTO
Agreement
February 2, 2000
AGRICULTURE
The Agreement would eliminate barriers and
increase access for U.S. exports across a broad range of commodities.
Commitments include:
Significant cuts in tariffs that will be
completed by January 2004. Overall average for agricultural products will be
17.5 percent and for U.S. priority products 14.5 percent (down from 31.5
percent).
Establishment of a tariff-rate quota system
for imports of bulk commodities, e.g., wheat, corn, cotton, barley, and rice,
that provides a share of the TRQ for private traders. Specific rules on how the
TRQ will operate and increased transparency in the process will help ensure that
imports occur. Significant and growing quota quantities subject to tariffs that
average between 1-3 percent.
Immediate elimination of the tariff-rate
quota system for barley, peanut oil, sunflower-seed oil, cottonseed oil, and a
phase-out for soybean oil.
The right to import and distribute products
without going through a state-trading enterprise or middleman.
Elimination of export subsidies on
agricultural products.
China has also agreed to the elimination of SPS
barriers that are not based on scientific evidence.
INDUSTRIAL PRODUCTS
China would lower tariffs and 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 on
U.S. products.
TARIFFS
Tariffs cut from an average of 24.6 percent
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) and eliminate 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 80-100% level to 25% by mid-2006, with the largest cuts in the
first years after accession.
Auto parts tariffs will be cut to an average
of 10% by mid-2006.
In the wood and paper sectors, tariffs will
drop from present levels of 12-18% on wood and 15-25% on paper down to levels
generally between 5% and 7.5%.
China will also be implementing the vast
majority of the chemical harmonization 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 agreed to eliminate these restrictions with phase-ins
limited to five years.
Quotas: China will eliminate existing
quotas upon accession for the top U.S. priorities (e.g. optic fiber cable). It
will phase out remaining quotas, generally by 2002, but no later than
2005.
Quotas will grow from current trade levels
at a 15% annual rate in order to ensure that market access increases
progressively.
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
auto industrial policy), and this will grow by 15% annually until
elimination.
RIGHT TO IMPORT AND
DISTRIBUTE
Trading rights and distribution are among the top
concerns for U.S. manufacturers and agricultural exporters. At present, China
severely restricts trading rights (the right to import and export) and the
ability to own and operate distribution networks. Under the Agreement, trading
rights and distribution services will be progressively phased in over three
years. China will also open up sectors related to distribution services, such
as repair and maintenance, warehousing, trucking and air courier
services.
SERVICES
China has made commitments to phase out most
restrictions in a broad range of services sectors, including distribution,
banking, insurance, telecommunications, professional services such as
accountancy and legal consulting, business and computer related services, motion
pictures and video and sound recording services. China will also participate in
the Basic Telecommunications and Financial Services Agreements.
GRANDFATHERING
China will grandfather the existing level of
market access already in effect at the time of China's accession for U.S.
services companies currently operating in China. This will protect existing
American businesses operating under contractual or shareholder agreements or a
license from new restrictions as China phases in their commitments.
DISTRIBUTION AND RELATED
SERVICES
China generally prohibits foreign firms from
distributing products other than those they make in China, or from controlling
their own distribution networks. Under the Agreement, China has agreed to
liberalize wholesaling and retailing services for most products, including
imported goods, throughout China in three years. In addition, China has agreed
to open up the logistical chain of related services such as maintenance and
repair, storage and warehousing , packaging, advertising, trucking and air
express services, marketing, and customer support in three to four
years.
TELECOMMUNICATIONS
China now prohibits foreign investment in
telecommunications services. For the first time, China has agreed to permit
direct investment in telecommunications businesses. China will also participate
in the Basic Telecommunications Agreement. Specific commitments
include:
Regulatory Principles -- China has agreed to
implement the pro-competitive regulatory principles embodied in the Basic
Telecommunications Agreement (including interconnection rights and independent
regulatory authority) and will allow foreign suppliers to use any technology
they choose to provide telecommunications services.
China will gradually phase out all
geographic restrictions for paging and value-added services in two years, mobile
voice and data services in five years, and domestic and international services
in six years.
China will permit 50 percent foreign equity
share for value-added and paging services two years after accession, 49 percent
foreign equity share for mobile voice and data services five years after
accession, and for domestic and international services six years after
accession.
INSURANCE
Currently, only two U.S. insurers have access to
China's market. Under the agreement:
China agreed to award licenses solely on the
basis of prudential criteria, with no economic-needs test or quantitative limits
on the number of licenses issued.
China will progressively eliminate all
geographic limitations within 3 years. Internal branching will be permitted
consistent with the elimination of these restrictions.
China will expand the scope of activities
for foreign insurers to include group, health and pension lines of insurance,
phased in over 5 years. Foreign property and casualty firms will be able to
insure large-scale commercial risks nationwide immediately upon
accession.
China agreed to allow 50 percent ownership
for life insurance. Life insurers may also choose their own joint venture
partners. For non-life, China will allow branching or 51 percent ownership on
accession and wholly owned subsidiaries in 2 years. Reinsurance is completely
open upon accession (100 percent, no restrictions).
BANKING
Currently foreign banks are not permitted to do
local currency business with Chinese clients (a few can engage in local currency
business with their foreign clients). China imposes severe geographic
restrictions 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 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
(national treatment) as Chinese banks within designated geographic
areas.
Both geographic and customer restrictions
will be removed in five years.
Non-bank financial companies can offer auto
financing upon accession.
SECURITIES
China will permit minority foreign-owned joint
ventures to engage in fund management on the same terms as Chinese firms. By
three years after accession, foreign ownership of these joint ventures will be
allowed to rise to 49 percent. As the scope of business expands for Chinese
firms, foreign joint venture securities companies will enjoy the same expansion
in scope of business. In addition, 33 percent foreign-owned joint ventures
will be allowed to underwrite domestic equity issues and underwrite and trade in
international equity and all corporate and government debt issues.
PROFESSIONAL SERVICES
China has made strong commitments regarding
professional services, including the areas of law, accounting, management
consulting, tax consulting, architecture, engineering, urban planning, medical
and dental services, and computer and related services. China's commitments
will lead to greater market access opportunities and increased certainty for
American companies doing business in China.
MOTION PICTURES, VIDEOS, SOUND
RECORDINGS
China will allow the 20 films to be imported on a
revenue-sharing basis in each of the 3 years after accession. U.S. firms can
form joint ventures to distribute videos, software entertainment, and sound
recordings and to own and operate cinemas.
PROTOCOL PROVISIONS
Commitments in China's WTO Protocol and Working
Party Report establish rights and obligations enforceable through WTO dispute
settlement procedures. We have agreed on key provisions relating to antidumping
and subsidies, protection against import surges, technology transfer
requirements, and offsets, as well as practices of state-owned and
state-invested enterprises. These rules are of special importance to U.S.
workers and business.
China has agreed to implement the TRIMs Agreement
upon accession, eliminate and cease enforcing trade and foreign exchange
balancing requirements, as well as local content requirements, refuse to enforce
contracts imposing these requirements, and only impose or enforce laws or other
provisions relating to the transfer of technology or other know-how, if they are
in accordance with the WTO agreements on protection of intellectual property
rights and trade-related investment measures.
These provisions will also help protect American
firms against forced technology transfers. China has agreed that, upon
accession, it will not condition investment approvals, import licenses, or any
other import approval process on performance requirements of any kind,
including: 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 dumping and subsidies. The U.S. and China have agreed that
we will be able to maintain our current antidumping methodology (treating China
as a non-market economy) in future anti-dumping cases. This provision will
remain in force for 15 years after China's accession to the WTO. Moreover, when
we apply our countervailing duty law to China we will be able to take the
special characteristics of China's economy into account when we identify and
measure any subsidy benefit that may exist.
PRODUCT-SPECIFIC
SAFEGUARD
The agreed provisions for the protocol package
also ensure that American domestic firms and workers will have strong protection
against rapid 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 cause market disruption to a U.S. industry. This mechanism, which
is in addition to other WTO Safeguards provisions, differs from traditional
safeguard measures. It permits United States to address imports solely from
China, rather than from the whole world, that are a significant cause of
material injury through measures such as import restrictions. Moreover, the
United States will be able to apply restraints unilaterally based on legal
standards that differ from those in the WTO Safeguards Agreement. This could
permit action in more cases. The Product-Specific Safeguard 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 government's involvement in the economy. China has agreed that
it will ensure that state-owned and state-invested enterprises will make
purchases and sales based solely on commercial considerations, such as price,
quality, availability and marketability, and that it will provide U.S. firms
with the opportunity to compete for sales and purchases on non-discriminatory
terms and conditions.
China has also agreed that it will not influence
these commercial decisions (either directly or indirectly) except in a WTO
consistent manner. With respect to applying WTO rules to state-owned and
state-invested 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-invested enterprises do not constitute "government
procurement" and thus are subject to WTO rules.
We have clarified the status of state-owned
and state-invested enterprises 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 remain in the effect until December 31, 2008, which
is four years after the WTO agreement on Textile and Clothing
expires.
