OPENING STATEMENT BY COMMISSIONER PATRICK A. MULLOY

U.S.-China Security Review Commission
Hearing on WTO Compliance and Sectoral Issues

January 18, 2002
124 Dirksen Senate Office Building

I am pleased to have been asked by Chairman D’Amato and my fellow Commissioners to co-chair today’s hearing.

Congress established the U.S.-China Security Review Commission in October 2000 for the purpose of monitoring and investigating, among other things, the national security implications and impact of the bilateral trade and economic relationship between the U.S. and the People’s Republic of China. We are charged with providing an annual report to Congress with our findings and recommendations, if any, for legislative or executive action. Our first report to the Congress is due this June.

The Commission has held ten hearings to examine the various issues designated in our legislative mandate. Today’s hearing will be the third to examine matters related to China’s accession to the World Trade Organization (WTO). Since the Commission’s last hearing on this topic in August, China has formally entered the WTO and is now in the process of undertaking the enormous economic reforms necessary to comply with its WTO obligations. In prior hearings, we heard an array of opinions about how China’s WTO accession will impact the U.S. economy and U.S.-China relations. Supporters of China’s accession have argued that it will open up China both economically and politically, in ways beneficial to U.S. interests. One of the key premises of this argument is that China has both the will and capacity to comply with its varied WTO commitments.

In numerous meetings with Chinese officials, members of this Commission have been assured of China’s intention to fully comply with its WTO obligations. Nonetheless, this will be a monumental task for China. China lacks a mature and transparent legal system and the judicial and administrative infrastructure that is essential to meeting its WTO obligations. In addition, China must still enact hundreds of new laws to come into compliance. Enactment of appropriate statutes and development of the requisite legal and administrative institutions will be an important indicator of China’s commitment, but the key indicator will be China’s actual implementation of its new policies. Further, even if the central government is committed to the WTO, it is uncertain whether it has the resources to enforce compliance by reluctant local officials who have a vested interest in the status quo.

During the morning session of today’s hearing, which I will chair, we will examine China’s ability to meet its near-term and long-term WTO commitments and whether and how the U.S. may be able to play a constructive role in assisting China in this effort. We will first hear from a distinguished panel of representatives from the U.S. Government agencies on the front lines of monitoring China’s compliance efforts – Assistant United States Trade Representative Jeffrey Bader; Assistant Secretary of Commerce William Lash; Acting Assistant Secretary of State Shaun Donnelly; and Patricia Sheikh, the Deputy Administrator for International Trade Policy at the Department of Agriculture.

A second panel will present important perspectives on this issue from outside the government. We will hear from Professor Donald Clarke of the University of Washington Law School; Jeff Fiedler, a consultant to the Food and Allied Service Trades Department of the AFL-CIO; Professor Margaret Pearson of the University of Maryland, who served on the Council of Foreign Relations’ task force on China’s WTO accession; and Terence Stewart, a very distinguished attorney whose law firm – Stewart & Stewart – is preparing a study for the Commission that will set benchmarks for future efforts to monitor and assess China’s WTO compliance.

During the afternoon session, which Chairman D’Amato will chair, the Commission will continue its survey of how key industry sectors in the U.S. view China’s WTO accession, with testimony from representatives of the financial services, entertainment and communications industries. In addition to market access issues, this afternoon’s session will examine the unique challenges facing U.S. entertainment and communications firms as a result of China’s nascent intellectual property rights regime and its attempts to restrict the free flow of information.

I look forward to an interesting and productive hearing.