Bridges Weekly Trade News Digest • Volume 8 • Number 43 • 15th December 2004

China Marks Three Years In WTO

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China marked the third anniversary of its membership in the WTO on 11 December by announcing a series of liberalisation measures. The US and the EC, for their part, reviewed China’s efforts to adhere to its WTO commitments more favourably than they have in past years. Meanwhile, foreign businesses operating in the country hailed it as a "responsible" Member of the WTO.

China announces liberalisation measures

In keeping with its WTO obligations, China removed import restrictions on steel, natural rubber, wool, acrylic fibres, and plywood. Prior to 11 December, the Chinese government permitted only a limited a number of companies to engage in restricted trade in these commodities. That same day, China also liberalised its insurance sector well ahead of its end-2006 deadline to do so, allowing foreign insurers to set themselves up anywhere in the country to sell group, health, and pensions insurance. Insurance brokers are now also allowed to own majority shares in joint ventures that they establish.

USTR finds Chinese WTO compliance "impressive" though incomplete

China’s progress as a WTO Member came up for examination both in the WTO General Council, which met on 13 December (see related story, same issue), and in the US Congress, which received an annual report on Chinese trade policy from the Office of the United States Trade Representative (USTR).

As required by the terms of its WTO accession, China submitted to the General Council a review (WT/GC/84) of its balance of payments, foreign direct investment flows, trade policies, institutions, and revenues from trade-related taxes and tariffs. At the meeting itself, the Chinese delegation drew attention to the country’s extraordinary import growth — imports have increased by over 40 percent annually in both 2003 and 2004 — pointing out that China is now the world’s third-largest importer of products from least-developed countries (LDCs). China also noted that many foreign banks and other services companies were operating in the country. Zambia welcomed the Chinese efforts to comply with WTO law. The US agreed that China had largely been living up to its commitments, but said that doing business in China was still unpredictable due to the "systematic opacity" of its regulatory regimes; it also complained that China fails to strictly enforce intellectual property rights (IPR) protections. The EC expressed doubt that China was upholding all of its commitments on services and automobile tariffs.

The USTR report to the US Congress found China’s efforts to comply with its WTO obligations "impressive," but went on to note that they were "far from complete," particularly with regard to IPR protections and services.

A recent survey of 1,000 foreign-owned businesses by a Shanghai-based think tank showed that 93 percent of those interviewed were satisfied with China’s performance since it joined the WTO in 2001, describing it as a "responsible" Member of the organisation.

China to tax textile exports

In related developments, the Chinese Ministry of Commerce announced over the weekend that it will levy duties on certain textile exports to curb excessive growth when quotas restricting trade in textiles and clothing expire at the end of 2004 (see BRIDGES Monthly Review, October 2004). The move comes amid fears that the removal of quotas will result in a flood of Chinese exports that will devastate textile producers in other countries, wiping out millions of jobs. The European Union and other countries have asked China to exercise moderation in its textiles trade.

In its three years in the WTO, China has doubled its trade volume, which surpassed USD 1 trillion in value in the first eleven months of 2004, making it the fourth biggest trader in the world behind the US, the EU, and Japan. The world’s new economic giant is increasingly perceived as an influential player in WTO negotiations; it is a member of the G-20 grouping of developing countries and has become a mainstay of ‘mini-ministerial’ and other key negotiating meetings.

ICTSD reporting; "China lifts import restrictions on steel and other commodities," AGENCE FRANCE PRESSE, 11 December 2004; "China makes good on WTO insurance vows, some early," REUTERS, 11 December 2004; "China keeping WTO commitments" CANADIAN BROADCASTING CORPORATION, 11 December 2004; "Foreign businesses affirm China’s WTO membership," XINHUANET, 11 December 2004; "China WTO Compliance Effort ‘Impressive,’ But Lags in IPR, Other Areas, USTR Reports," WTO REPORTER, 15 December 2004; "China to Charge Duties on Textile Exports to Curb Trade," DOW JONES, 12 December 2004.