Bridges Weekly Trade News Digest • Volume 10 • Number 36 • 1st November 2006
WTO Scrutinises China’s Trade Policies
For the fifth time, WTO Members scrutinised China’s industrial subsidies and intellectual property rights protection last week under the annual transitional review mechanism established in the country’s accession agreement. China claimed it had faithfully fulfilled its commitments, but admitted that difficulties in the collection of data made it impossible to answer some of the questions raised.
Local- and regional-level subsidies challenged
At the meeting of the Committee on Subsidies and Countervailing Measures (SCM) on 26 October, the US and the EU charged that China had only included subsidies granted by the central government in the 88-page notification it forwarded to the WTO last April, leaving out substantial support measures provided by local and regional authorities.
Despite the lacking data, China cautioned WTO Members against exaggerating the extent of local- or regional-level support to domestic industries. It argued that local authorities had only limited jurisdiction, as well as few resources to provide extensive subsidies. China also rejected allegations about WTO-inconsistent subsidies to industries such as textiles and clothing, autos, semiconductors, and the banking and financial sectors. In response to US complaints regarding state-owned banks and the low interest rates charged by the Exim Bank, China stated that state-owned banks had long been transformed into market-based commercial banks, and that the export credit policy of the Exim Bank was WTO-consistent.
More forceful implementation needed in IPRsChina’s compliance with its intellectual property protection commitments was examined in the 25-26 October meeting of the Council for Trade-related Aspects of Intellectual Property Rights (TRIPS). Many Members praised China for its efforts in this area, but expressed concerns over its inadequate enforcement of IPRs and the prevailing high level of piracy.
Prior to the meeting, the EU, Japan and the US had submitted written questions mostly focused on the enforcement of IPR protection. They were particularly concerned that IPR infringements were not pursued adequately under criminal law.
China said it had strengthened law enforcement with more effective penalties and set up service centres to receive complaints regarding intellectual property infringements. China also circulated three documents to Members: a report on Intellectual Property Protection in 2005; information on China’s Action Plan Protection for this year (issued earlier in the year) and a book called ‘Protect Your Intellectual Property Rights in China’. The Chinese representative maintained that five years after the country joined the WTO, its intellectual property rights system was fully consistent with the TRIPS Agreement and that China had "fully implemented its accession commitments".
Nevertheless, China left unanswered some requests for data, which it said were not available.
Transformation of the Transitional Review Mechanism
The WTO created the Transitional Review Mechanism in order to monitor China’s compliance with its accession commitments on an annual basis. The final review is to take place in 2010, or eight years after China’s accession.
In previous years, the EU, the US and other Members had pressed China to comply with its WTO obligations, as well as requested further liberalisation even beyond existing WTO commitments. The 2006 transitional review pointed to a shift in focus from monitoring implementation of accession commitments to examining the compatibility of China’s new policies with WTO rules.
China’s consent to the establishment of the review mechanism was widely viewed as a major concession. Since last August, seven WTO committees have examined China’s implementation of commitments with regard to anti-dumping, import licensing, sanitary and phytosanitary measures, safeguards, market access, IPRs and subsidies. In 2005, seventeen different WTO bodies undertook reviews within their mandates.
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