The Transitional Review Mechanism

What is required by Article 18 of the Protocol

Prior to acceding to the WTO, China made significant modifications to its trading system. Upon accession, China assumed commitments to liberalize its trading regime, including making further significant reductions in its tariffs and certain non-tariff barriers. However, China's accession to the WTO in December 2001 was not the culmination of the transformation of its trading system. Recognizing that China still needed to accomplish huge changes over a period of years before China would be in full compliance with all of its WTO obligations, other Members wanted to establish an annual monitoring mechanism that would oversee the progress of China's compliance with its WTO commitments and that would focus a light on China's implementation process. The United States, for example, explicitly made an annual review of China's compliance with its WTO obligations an element of its national trade policy. In the bill that extended nondiscriminatory treatment (normal trade relations treatment) to the People's Republic of China, Congress expressly provided:

It shall be the objective of the United States to obtain as part of the Protocol of Accession of the People's Republic of China to the WTO, an annual review within the WTO of the compliance by the People's Republic of China with its terms of accession to the WTO.[1]

This provision is codified at 22 U.S.C. § 6931. Given China's importance to the world trading system, the concerns of the United States and other Members were not surprising.

Thus, in the Protocol on Accession, China agreed to an annual review of its progress in implementing its WTO obligations. As set out in the Protocol. this annual process, referred to as the Transitional Review Mechanism ("TRM"), would occur for eight consecutive years starting in 2002 with one final review of China's compliance and implementation in the tenth year following accession.[2] The TRM process is unique to China.

Article 18 of the Protocol on Accession establishes the Transitional Review Mechanism and sets out the requirements and procedures for conducting the TRM. Article 18 provides that sixteen WTO subsidiary bodies, each of which has a mandate in reviewing China's WTO commitments, shall, within one year of China's accession, and on an annual basis thereafter (for eight years), review China's implementation of its WTO commitments. The sixteen subsidiary bodies with a role in the TRM are:

· Council for Trade in Goods

· Council for TRIPs

· Council for Trade in Services

· Committee on BOP Restrictions

· Committee on Market Access

· Committee on Agriculture

· Committee on Sanitary and Phytosanitary Measures

· Committee on Technical Barriers to Trade

· Committee on Subsidies and Countervailing Measures

· Committee on Anti-Dumping Measures

· Committee on Customs Valuation

· Committee on Rules of Origin

· Committee on Import Licensing

· Committee on TRIMs

· Committee on Safeguards

· Committee on Trade in Financial Services

China is required (pursuant to Protocol Annex 1A) to provide certain specific information to these bodies in advance of their review, and China may raise before these bodies issues relating to commitment reservations by other Members. Each body is directed to report the results of its review to the relevant WTO council, and that council in turn shall make a report to the General Council.[3]

Article 18.2 directs that the General Council shall, within one year of China's accession, and on an annual basis thereafter (for eight years), review China's implementation of its WTO commitments in accordance with the framework set out in Protocol Annex 1B.[4] The General Council may make recommendations to China and other Members pursuant to its review.[5]

The text of Article 18 is presented in the following box:

18. Transitional Review Mechanism

1. Those subsidiary bodies¹ of the WTO which have a mandate covering China's commitments under the WTO Agreement or this Protocol shall, within one year after accession and in accordance with paragraph 4 below, review, as appropriate to their mandate, the implementation by China of the WTO Agreement and of the related provisions of this Protocol. China shall provide relevant information, including information specified in Annex 1A, to each subsidiary body in advance of the review. China can also raise issues relating to any reservations under Section 17 or to any other specific commitments made by other Members in this Protocol, in those subsidiary bodies which have a relevant mandate. Each subsidiary body shall report the results of such review promptly to the relevant Council established by paragraph 5 of Article IV of the WTO Agreement, if applicable, which shall in turn report promptly to the General Council.

2. The General Council shall, within one year after accession, and in accordance with paragraph 4 below, review the implementation by China of the WTO Agreement and the provisions of this Protocol. The General Council shall conduct such review in accordance with the framework set out in Annex 1B and in the light of the results of any reviews held pursuant to paragraph 1. China also can raise issues relating to any reservations under Section 17 or to any other specific commitments made by other Members in this Protocol. The General Council may make recommendations to China and to other Members in these respects.

3. Consideration of issues pursuant to this Section shall be without prejudice to the rights and obligations of any Member, including China, under the WTO Agreement or any Plurilateral Trade Agreement, and shall not preclude or be a precondition to recourse to consultation or other provisions of the WTO Agreement or this Protocol.

4. The review provided for in paragraphs 1 and 2 will take place after accession in each year for eight years. Thereafter there will be a final review in year 10 or at an earlier date decided by the General Council.

¹Council for Trade in Goods, Council for Trade-Related htmects of Intellectual Property Rights, Council for Trade in Services, Committees on Balance-of-Payments Restrictions, Market Access (covering also ITA), Agriculture, Sanitary and Phytosanitary Measures, Technical Barriers to Trade, Subsidies and Countervailing Measures, Anti-Dumping Measures, Customs Valuation, Rules of Origin, Import Licensing, Trade-Related Investment Measures, Safeguards, Trade in Financial Services.

Annexes 1A and 1B to the Protocol detail the types of information that China must provide to the relevant subsidiary bodies in the context of the TRM and the issues that the General Council shall address in the TRM.

Annex 1A organizes the information that China is directed to provide by subject area and, within each area, more specifically identifies that information that China should provide to particular subsidiary bodies. The following identifies the subject areas and summarizes the type of information that China is required to provide within those areas pursuant to Protocol Annex 1A.[6]

Ø ECONOMIC DATA, including information regarding:

· recent import/export statistics

· current account data on services

· capital account data regarding foreign direct investment

· tariff revenues, non-tariff taxes, and other border charges levied exclusively on imports

· the value of export duties/taxes

· trade volume subject to tariff exemptions

· commissions/mark-ups/other fees charged on imports subject to state/designated trading

· share of import/export trade held by state-owned enterprises (SOEs)

· annual and 5-year economic development programs, or any industrial/sectoral policies of central and sub-central government entities

· annual VAT receipts

Ø ECONOMIC POLICIES, including information regarding:

· non-discrimination (e.g., repeal of WTO-inconsistent laws and regulations; provision of full GATT national treatment)

· foreign exchange and payments (e.g., exchange measures required by IMF)

· investment regime

· pricing policies (e.g., price controls; pricing mechanisms of state trading enterprises (STEs))

Ø FRAMEWORK FOR MAKING AND ENFORCING POLICIES, including information regarding:

· structure and powers of the government

· authority of sub-central governments

· uniform administration

· revision/enactment of domestic laws and regulations related to WTO commitments

Ø POLICIES AFFECTING TRADE IN GOODS, including information regarding:

· tariff rate quotas

· non-tariff measures (including quantitative import restrictions)

· import licensing

· customs valuation

· export restrictions

· safeguards

· technical barriers to trade (e.g., standards and harmonization of standards; conformity assessment bodies and procedures)

· trade-related investment measures (e.g., status of trade and foreign exchange balancing requirements, local content and export performance offsets and technology transfer requirements; measures concerning motor vehicle production and investment)

· state trading entities (e.g., extension of trading rights; access to raw materials in textiles; increased access to trade in fertilizer and oil)

· government procurement (e.g., laws and regulations; transparency)

Ø POLICIES AFFECTING TRADE IN SERVICES, including information regarding:

· updated laws, regulations, etc. affecting trade in services

· licensing procedures and conditions between domestic and foreign service suppliers

· updated lists of authorities responsible for administration of trade in services

· independence of the regulatory authorities

· status of licensing applications in sectors where specific commitments were made

Ø TRADE-RELATED INTELLECTUAL PROPERTY REGIME, including information regarding:

· Copyright, Trademark and Patent Law amendments

· compliance with and full application of TRIPS Agreement

· IPR enforcement efforts

Ø SPECIFIC QUESTIONS IN THE CONTEXT OF THE TRANSITIONAL REVIEW MECHANISM (received from either the General Council or any of the subsidiary bodies)

Annex 1B identifies the issues that the General Council should address in the context of the TRM. These are: (1) the review of the TRM reports submitted by each of the responsible subsidiary bodies; (2) the state of development of China's trade with other Members and trading partners; and (3) any recent developments and cross-sectoral trade issues respecting China's trade regime.[7]

The following boxes provide the specific requirements of Annex 1A and Annex 1B.

ANNEX 1A

INFORMATION TO BE PROVIDED BY CHINA

IN THE CONTEXT OF THE TRANSITIONAL REVIEW MECHANISM

China is requested to provide information on the following in accordance with Article 18.1 of the Protocol of Accession. The requested information should be provided annually, except in those cases where China and the Members agree that it is no longer required for the review.

I. ECONOMIC DATA

(a) most recently available import and export statistics by value and volume, by supplier country at the HS 8-digit level

(b) current account data on services, by source and destination in line with the statistical requirements of the IMF

(c) capital account data for inward- and outward-realized foreign direct investment by source and destination in line with the statistical requirements of the IMF

(d) the value of tariff revenues, non-tariff taxes, and other border charges levied exclusively on imports by product or at the highest level of detail possible, but at least by HS heading (4‑digit) at the beginning of the review mechanism

(e) the value of export duties/taxes by product

(f) the volume of trade subject to tariff exemptions by product or at the highest level of detail possible, but at least by HS heading (4-digit) at the beginning of the review mechanism

(g) the value of commissions, mark ups and other fees charged on imports subject to state trading or designated trading imposed through government regulation or guidance, if any

(h) the shares of imports and exports accounted for by the trading activities of state-owned enterprises

(i) annual economic development programmes, China's five-year programmes and any industrial or sectoral programmes or policies (including programmes relating to investment, export, import, productions, pricing or other targets, if any) promulgated by central and sub-central government entities

(j) annual receipts under the Value-Added Tax (VAT), with separate information for imports and domestic products as well as information on VAT rebates

II. ECONOMIC POLICIES

1. Non-Discrimination (to be notified to the Council for Trade in Goods)

(a) the repeal and cessation of all WTO inconsistent laws, regulations and other measures on national treatment

(b) the repeal or modification to provide full GATT national treatment in respect of laws, regulations and other measures applying to internal sale, offering for sale, purchase, transportation, distribution or use of: after sales service, pharmaceutical products, cigarettes, spirits, chemicals and boiler and pressure vessels (for pharmaceutical products, chemicals and spirits there is a reservation of the right to use a transitional period of one year from the date of accession in order to amend or repeal relevant legislation)

2. Foreign Exchange and Payments (to be notified to the Committee on Balance-of-Payments Restrictions)

(a) exchange measures as required under Article VIII, Section 5 of the IMF's Articles of Agreement and such other information on China's exchange measures as was deemed necessary in the context of the transitional review mechanism

3. Investment Regime (to be notified to the Committee on Trade-Related Investment Measures)

(a) completed revisions to investment guidelines in conformity with the WTO Agreement

4. Pricing Policies (to be notified to the Committee on Subsidies and Countervailing Measures)

(a) application of existing or any other price controls and the reason for their use

(b) pricing mechanisms of China's state trading enterprises for exported products

III. FRAMEWORK FOR MAKING AND ENFORCING POLICIES

1. Structure and Powers of the Government/Authority of Sub-Central Governments/Uniform Administration (to be notified to the General Council)

(a) revision or enactment of domestic laws, regulations and other measures related to China's commitments under the WTO Agreement and Protocol, including those of local governments at the sub-national level, that have been promulgated since accession or the previous meeting of the relevant body under the Transitional Review Mechanism

(b) establishment and operation (upon accession) of the mechanism pursuant to Section 2(A), paragraph 4 of the Protocol under which individuals and enterprises can bring cases of non-uniform application of the trade regime to the attention of national authorities

IV. POLICIES AFFECTING TRADE IN GOODS

1. Tariff Rate Quotas (to be notified to the Committee on Market Access)

(a) administration of TRQs on a transparent, predictable, uniform, fair and non-discriminatory basis using clearly specified timeframes, administrative procedures and requirements and evidence of a consistent national allocation (and reallocation) policy including:

(i) provision of volume/value of the quota or TRQ made available;

(ii) reallocated quota or TRQ applied for;

(iii) the volume/value of requests for allocation or reallocation denied;

(iv) fill rates for the quota or TRQ;

(v) for TRQs, the amount of any goods entered at the over quota rate; and

(vi) time taken to grant a quota or TRQ allocation.

2. Non-Tariff Measures including Quantitative Import Restrictions (to be notified to the Committee on Market Access)

(a) the introduction, re-introduction or application of any non-tariff measures other than those listed in Annex 3 of the Protocol and elimination of non-tariff measures

(b) implementation of the schedule for phased elimination of the measures contained in Annex 3

(c) quota allocation and reallocation in conformity with WTO requirements, including the Agreement on Licensing Procedures following criteria set out in the Report of the Working Party on the Accession of China ("Report ")

(d) distribution licences, quotas, tariff rate quotas or any other means of approval for importation are not subject to conditions set out in Section 7, paragraph 3 of the Protocol

3. Import Licensing (to be notified to the Committee on Import Licensing)

(a) implementation of the provisions of the Agreement on Import Licensing Procedures and the WTO Agreement applying the measures set out in Section 8 of the Protocol including provision of the time taken to grant an import licence

4. Customs Valuation (to be notified to the Committee on Customs Valuation)

(a) the use of valuation methods, other than the stated transaction value

5. Export Restrictions (to be notified to the Council for Trade in Goods)

(a) any restrictions on exports through non-automatic licensing or other means justified by specific product under the WTO Agreement or the Protocol

6. Safeguards (to be notified to the Committee on Safeguards)

(a) implementation of China's Regulation on Safeguards

7. Technical Barriers to Trade (to be notified to the Committee on Technical Barriers to Trade)

(a) notification of acceptance of the Code of Good Practice not later than four months after China's accession

(b) periodic review of existing standards of government standardizing bodies and harmonization of the same with relevant international standards where appropriate

(c) revision of current voluntary national, local and sectoral standards so as to harmonize them with international standards

(d) use of the terms "technical regulations" and "standards" according to their meaning under the TBT Agreement in China's notifications under the TBT Agreement, including under Article 15.2 thereof and publications referenced therein, and in modifications of existing measures

(e) review of technical regulations every five years to ensure international standards are used in accordance with Article 2.4 of the Agreement and provision for adoption of international standards as the basis for technical regulation as part of its notification under Article 15.2 of the Agreement

(f) progress report on increase of the use of international standards as the basis for technical regulations by ten per cent in five years

(g) provision of procedures to implement Article 2.7 of the Agreement

(h) provision of a list of relevant local governmental and non-governmental bodies that are authorized to adopt technical regulations or conformity assessment procedures as part of China's notification under Article 15.2 of the Agreement

(i) ongoing updates on the conformity assessment bodies that are recognized by China

(j) enactment and implementation of a new law and relevant regulations regarding assessment and control of chemicals for the protection of the environment in which complete national treatment and full consistency with international practices would be ensured within one year after China's accession following conditions set out in 3(t) of the TBT Working Party Report

(k) information on whether, one year after accession, all conformity assessment bodies and agencies are authorized to undertake conformity assessment for both imported and domestic products and are following the conditions outlined in Section 13, subparagraph 4(a) of the Protocol

(l) assignment of the respective responsibilities of China's conformity assessment bodies solely on the basis of the scope of work and type of product without any consideration of the origin of a product no later than eighteen months after accession

(m) notification of the respective responsibilities assigned to China's conformity assessment bodies to the TBT committee 12 months after accession

8. Trade-Related Investment Measures (to be notified to the Committee on Trade-Related Investment Measures)

(a) elimination and cessation of enforcement of trade and foreign exchange balancing requirements, local content and export performance offsets and technology transfer requirements made effective through laws, regulations or other measures

(b) amendments to ensure lifting of all measures applicable to motor vehicle producers restricting the categories, types or models of vehicles permitted for production (to be completely removed two years after accession)

(c) increased limits within which investments in motor vehicle manufacturing could be approved at the provincial government at the levels outlined in the Report

9. State Trading Entities (to be notified to the Council for Trade in Goods)

(a) progressive abolishment of state trading in respect of silk measures, increasing and extending trading rights, granting the right to trade to all individuals no later than 1 January 2005

(b) access to supplies of raw materials in the textiles sector at conditions no less favourable than for domestic users, and not adversely affected access to supplies of raw materials as enjoyed under existing arrangements

(c) progressive increases in access by non state trading entities to trade in fertilizer and oil and the filling of quantities available for import by non state trading entities

10. Government Procurement (to be notified to the Council for Trade in Goods)

(a) laws, regulations and procedures

(b) procurement in a transparent manner and application of the MFN principle

V. POLICIES AFFECTING TRADE IN SERVICES (to be notified to the Council for Trade in Services)

(a) regularly updated lists of all laws, regulations, administrative guidelines and other measures affecting trade in each service sector or sub-sector indicating, in each case, the service sector(s) or sub-sector(s) they apply to, the date of publication and the date of entry into force

(b) China's licensing procedures and conditions, if any, between domestic and foreign service suppliers, measures implementing the free choice of partner and list of transport agreements covered by MFN exceptions

(c) regularly updated lists of the authorities, at all levels of government (including organizations with delegated authority) which are responsible for the adoption, implementation and reception of appeals for laws, regulations, administrative guidelines and other measures affecting trade in services

(d) independence of the regulatory authorities from the service suppliers

(e) foreign and domestic suppliers in sectors where specific commitments have been undertaken indicating the state of play of licensing applications on sector and sub-sector levels (accepted, pending, rejected)

VI. TRADE-RELATED INTELLECTUAL PROPERTY REGIME (to be notified to the Council for Trade-Related htmects of Intellectual Property Rights)

(a) amendments to Copyright, Trademark and Patent Law, as well as relevant implementing rules covering different areas of the TRIPS Agreement bringing all such measures into full compliance with and full application of the TRIPS Agreement and the protection of undisclosed information

(b) enhanced IPR enforcement efforts through the application of more effective administrative sanctions as described in the Report

VII. SPECIFIC QUESTIONS IN THE CONTEXT OF THE TRANSITIONAL REVIEW MECHANISM (to be notified to the General Council or relevant subsidiary body)

(a) response to specific questions in the context of the transitional review mechanism received from the General Council or a subsidiary body

ANNEX 1b

ISSUES TO BE ADDRESSED BY THE GENERAL COUNCIL IN ACCORDANCE

WITH SECTION 18.2 OF CHINA'S PROTOCOL OF ACCESSION

– Review of the reports and the issues referred to in Section 18.1 of China's Protocol of Accession.

– Development of China's trade with WTO Members and other trading partners, including the volume, direction and composition of trade.

– Recent developments and cross‑sectoral issues regarding China's trade regime.

The Rules of Procedure of the WTO General Council shall apply unless specified otherwise. China shall submit any information and the documentation relating to the review no later than 30 days prior to the date of the review.

Experience in the first review

(a)

Timing of review issues

There is no time frame for the conduct of the TRM included in the Protocol of Accession. A few months after China's accession, controversy surfaced over the TRM timing issue as Members sought to get the TRM process started by raising substantive compliance issues and TRM procedural issues at early committee meetings in 2002.

At the request of the United States, "implementation of WTO commitments by the People's Republic of China" was placed on the agenda at the regular meeting of the Council for Services on March 17, 2002. Specifically, the United States raised issues regarding insurance and express delivery services, and stated that it would seek opportunities to raise other issues in other WTO bodies as necessary. The United States also pointed out that WTO Members should raise their concerns regarding China's implementation throughout the course of the year, and any such concerns should subsequently be reflected in the annual transitional review at the end of the year. In response, China said the issues raised were too complex for an immediate response, and indicated that it believed the proper forum for raising such issues was in the transitional review mechanism. In China's view, "there was only one annual review within the provisions of Section 18 of the Protocol" and "none of the statements made at this meeting should be included in the annual review within the framework of the TRM."[8]

Subsequently, at the regular meetings of many committees in the spring and early summer of 2002, preparation in relation to the transitional review mechanism was raised as part of the agenda. The discussions held at these meetings focused on whether new guidelines and procedures needed to be established to advance the TRM process. Members, such as the United States, urged agreement on the three timing issues that the Protocol does not spell out, namely, (1) how far in advance must China submit the relevant information set out in Annex 1A, (2) how far in advance must Members submit their specific questions for China, and (3) how far in advance must China submit its responses to Members' questions.

To ensure adequate time for preparation for a constructive review, the United States proposed a 90-60-30 day formulation in which China's notification would be submitted 90 days in advance of the meeting at which the review would take place, questions would be posed to China 60 days in advance of that meeting, and China would respond to these questions 30 days in advance of the meeting.[9] China rejected the proposal. At the Committee on Market Access, for example, China stated that its obligation was stipulated in Paragraph 18 and that it was unacceptable to go beyond that and increase the obligations of China in terms of specific time-frames or procedures.[10]

Based on proposals at many committee meetings, committee chairs engaged in informal consultations with China and other Members to resolve their difference of views on TRM procedural matters. By mid-year 2002, it was generally agreed that the first TRM review would be held at the last regular subsidiary body meetings of 2002. However, no consensus was achieved regarding the timing for submission of required information China, questions from Members, and responses by China. Nevertheless, as a voluntary gesture, Members began submitting written questions for the TRM review as early as August 2002. The first TRM review occurred at the Council on TRIPS on September 17, 2002. The following table shows the timing of events during the first TRM in 2002.

Timing of TRM-Related Events -- 2002

2002	Event
March	· The US puts "Implementation of commitments by the People's Republic of China" on the agenda of the regular meeting of the Council for Trade in Services.
April	· "Preparation in connection with paragraph 18 of the Protocol on the Accession of the People's Republic of China" put on the agenda of the regular meeting of the Committee on Safeguards. · EC raises timing issues in relation to the transitional review at the regular meeting of the Committee on Antidumping Practices.
May	· "Preparation in connection with paragraph 18 of the Protocol on the Accession of the People's Republic of China" put on the agenda of the regular meetings of the Committee on Customs Valuation, Subsidies and Countervailing Measures, Import Licensing, and TRIMS.
June	· "Preparation in connection with paragraph 18 of the Protocol on the Accession of the People's Republic of China" put on the agenda of the regular meetings of the Committee on Agriculture, Market Access, SPS Measures, Financial Services, and Council for Trade in Services.
August	· Members begin to submit written questions to China in the context of the first TRM.
September	· TRM Review held by:
September	qCouncil for TRIPS qCommittee on Market Access	q Committee on Import Licensing q Committee on Agriculture
October	· TRM Review held by:
October	qCouncil for Trade in Services qCommittee on TRIMS qCommittee on Safeguards qCommittee on Anti-Dumping Practices	q Committee on Technical Barriers to Trade q Committee on Trade in Financial Services q Committee on Subsidies and Countervailing Measures
November	· TRM Review held by:
November	qCommittee on Customs Valuation qCommittee on SPS Measures qCommittee on Rules of Origin	q Committee on Balance-of-Payments q Council for Trade in Goods
December	· TRM Review by the General Council.

(b)

Data supplied by China at beginning of review

Pursuant to Annex 1A of Paragraph 18 of the Protocol of Accession, China is required to submit certain information to the relevant WTO subsidiary bodies in advance of the transitional review. As reviewed in Section B.1. above, the information required covers a wide range of subject areas pertaining to trade, and includes economic data, economic policy, and information on legislative efforts to ensure compliance with specific commitments.

During the first transitional review, China submitted all the information required under Annex 1A except for information on foreign exchange and payments which was supposed to be notified to the Balance-of-Payments Committee.[11] A detailed list of China’s submissions is included in Appendix 1.

Article 18 and Annex 1A do not specify the format that China should follow in preparing information submissions. China therefore made the initial determination as to how substantial and detailed the information would be that it submitted. Except for economic data (such as trade statistics, capital account data, current account data, tariff revenue, etc.) and a few areas which could be quantified (such as market access changes in service sectors), most of the information required consisted of a literal introduction of relevant trade regimes and policies, or a description of the status of implementation efforts by China on specific commitments.

Examples of information submissions by China are presented below. The first deals with the pricing mechanism of China's state trading enterprises for export products:

II. Economic Policies

4. Pricing Policies

(b) Pricing mechanism of China’s state trading enterprises for export products

The Pricing Law of the People’s Republic of China stipulates that state pricing and government guidance pricing only apply to products and services as published, regardless of the ownership of the enterprises. Prices of products and services that are not subject to state pricing and government guidance pricing shall be determined by the market, and eventually by the enterprises themselves. Pricing mechanism of state trading enterprises for exports is also determined by the enterprises with reference to the price of international market. It is generally set by adding cost of distribution (including cost of storage and transportation, interest rate and inspection fees etc.) to the cost of domestic purchase.[12]

A second example details the efforts that China made to increase the use of international standards as the basis for its technical regulations:

IV. Policies Affecting Trade in Goods

7. Technical Barriers to Trade

(f) progress report on increase of the use of international standards as the basis for technical regulations by ten per cent in five years

China committed to increase 10% of its technical regulations taking international standards as the basis. In order to meet this commitment, China is now developing a nationwide programme and annual implementation plan. A nationwide meeting was convened specially for promoting the alignment with international standards and advanced foreign standards. The meeting was attended by more than 30 vice-minister level officials and addressed by the State Councilor Madame WU Yi. To encourage the adoption of international standards, AQSIQ, jointly with other 6 ministries and commissions, published Opinions on Promoting Alignment with International Standards to actively encourage the adoption of international standards. Harmonization of standards has become an important technical foundation for the development of national economy and safeguard for enhancing the overall level of product quality and the competitiveness in domestic and world market, for expanding foreign trade and for maintaining the sustainable, healthy and quick development of the Chinese economy.

The Chinese Government has taken standardization as one of the main strategies for scientific and technological development so as to ensure that international standards are scientifically and promptly adopted. The specific requirements for use of international standards as the basis for technical regulations are: (1) To timely revise the mandatory standards based on relevant international standards once the international standards have been revised, and adopt the newest edition of the international standards; (2) If new mandatory standards or revision of the established ones are necessary, international standards should be used as the basis for both preparation and revision if appropriate; (3) On average there will be an annual 2% increase use of international standards as the basis for technical regulations in five years so that the commitment of 10% increase in 5 years will be definitely met.[13]

In areas where no actions had been taken, in its submission, China simply reconfirmed its determination to fulfil the particular commitment. The following is an example of this kind of response.

IV. Policies Affecting Trade in Goods

8. Trade-Related Investment Measures

b. Amendments to ensure lifting of all measures applicable to motor vehicle producers restricting the categories, types or models of vehicles permitted for production (to be completely removed two years after accession)

The Chinese government shall completely lift the said measure in line with the commitment made with respect to the timeframe, so as to ensure that motor vehicle producers have right to choose categories, types or models of vehicles they will produce.[14]

At the TRM reviews conducted by a committee to which China submitted information under Annex 1A, China highlighted its efforts in preparing the submission, noted that it had paid special attention to the written questions from certain Members, and expressed its belief that the information it provided appropriately addressed the concerns raised by these Members.

In response to China's submissions, Members generally expressed their appreciation and commented that the information represented a good start to an overall understanding of the compliance efforts made by China. Typically, Members raised few questions regarding the details in China's information submission. This was due to the fact that, in most cases, Members received China's submission only a few days before the TRM review, and, hence, did not have sufficient time for an in-depth examination and analysis prior to the review. Members such as the US and the EC, however, reserved their right to put forward further questions or requests for clarification to China.

Section 18.2 of the Protocol of Accession stipulates that China shall provide information specified in Annex 1A to relevant committees "in advance of the review." However, that provision does not define "in advance of the review." Annex 1B, titled "Issues to be addressed by the General Council in Accordance with Section 18.2 of China's Protocol of Accession," appears to set a timeframe for China's submission by providing that "China shall submit any information and the documentation relating to the review no later than 30 days prior to the date of the review." But, this provision would appear to apply only to China's submission to the General Council, not to its submissions to the subsidiary bodies. In this regard, however, it should be noted that China failed to observe the 30 day timeframe, as its submission to the General Council dated November 19, 2003 was only 21 days prior to the General Council's review on December 10, 2003.

As for the information that China submitted to the other committees or councils, the information was received by the committees or councils, on average, 3 days in advance of the TRM review. At the Council for Trade in Goods, the United States made the following comments:

The representative of the United States said that the information provided was precisely the type of information warranted under the TRM. It would have been helpful to have had information further in advance of the meeting. The US did not have all its experts present to review the Annex 1A submission from China which it had just received and it was difficult to respond to the points made in China's statement at this meeting, not having had the information in advance.[15]

On one occasion, at the Market Access Committee's review, Members raised specific concerns with respect to the information required under Annex 1A. There, Australia noted with interest the information provided in sections (i), (iii) and (iv) concerning China's administration of tariff rate quotas, i.e., the volume of TRQs made available, the volume of requests for allocations denied, and the fill rates of tariff rate quotas by July 31, 2002. Australia observed:

[W]ith the exception of wool, all agricultural product tariff quotas were oversubscribed and in most cases the volume of requests for allocation denied were several times the volume of tariff rate quota available. By comparison, and notwithstanding that they cover the period to 31 July, the fill rates for some products were shown to be extremely low. His delegation {i.e. the Australian} asked China for a general comment on why it considered the fill rates were generally so low given the heavy oversubscription of many of the tariff rate quotas.[16]

China responded with the following explanation:

It was the first year of China's accession and many applicants wanted to get more quotas and the quantity asked by the applicants was much more than the quantity China had committed to under its WTO commitments. So that was why there was a discrepancy, and the low fill rate for certain products was because of the situation of demand and supply in the market. So China could not control the fill rate, it could only guarantee the full allocation of the quotas.[17]

(c)

Willingness of China to respond to questions in writing

Annex 1A of the Protocol of Accession is titled "Information to be Provided by China in the Context of the Transitional Review Mechanism." Under Section VII of Annex 1A, China is required to provide a "response to specific questions in the context of the transitional review mechanism received from the General Council or a subsidiary body." In the first TRM, there was an intense debate over whether China should respond in written form to questions from other WTO Members in advance of the review. Members such as the United States, the EC and Japan considered written responses as essential to a meaningful review and effective monitoring and argued that China should provide timely and written responses. In response, China took the position that written answers were not required, and that to provide them would be going beyond the mandate of paragraph 18 of the Protocol of Accession, which does not specifically spell out the form that China's responses should take. Generally, China's approach was to address Members' concerns and questions orally at the committee meetings.

The debate over written responses began at the Market Access Committee meeting on September 23, 2002. At that review, Members expressed disappointment over China's inadequate oral responses to their questions and requested prompt written answers. China argued in response that there was no legal obligation to provide answers in written form and the information it had submitted appropriately addressed the concerns raised by Members. China pointed out that although at that meeting "Members had to finalize China's transitional review mechanism on market access, ... other channels for the exchange of information were open."[18] In a gesture of goodwill, China proposed to convene an informal meeting to address outstanding issues outside of the TRM process. In the end, however, China's proposal was withdrawn as Members insisted on pursuing formal opportunities to continue the discussion as part of the formal record of the TRM process.

A similar debate occurred in other committee reviews as Members continued to urge China to submit written responses in a timely manner in order to achieve a useful review. In addition, Members pushed for procedures to allow an extended process of questions and answers. Members complained that they did not have sufficient time to digest the information and oral responses provided by China at the committee meetings. Such Members did not consider the review completed until there were opportunities to pose further questions in the context of the TRM. At the Antidumping Practices Committee, China reiterated its position in a comprehensive manner with respect to the procedural issues dispute, and again restated its position at the Services Council, which is summarized as follows:

· Paragraph 18 of the Protocol of China's Accession serves as the only legal basis governing the TRM exercise, and no one in the room could justify a request for written responses from that paragraph. It is not the mandate of this Committee to interpret the paragraph.

· The information provided prior to the meeting, at the meeting and the explanations provided, are sufficient for a meaningful review. The statement made by the head of the Chinese delegation will be submitted to the Secretariat and Members can get copies for transparency purposes.

· Members who have any follow-up questions might approach experts present at the review, and China would hold informal bilateral discussions with them. Informal bilateral contacts have nothing to do with the TRM, and China is not intending to substitute this for the multilateral exercise, but to supplement the multilateral exercise.

· The questions could not be exhausted by one TRM. A TRM is an 8-10 year programme, and China does not expect to graduate from an 8-10 year program in one year, so there will be many more opportunities, multilateral and bilateral.[19]

At the meetings of the Council for Trade in Goods held on November 22, 2002, and of the General Council on December 10, 2002, the EC, joined by Japan and the United States, called for more orderly procedures, such as a fixed timetable for the transmission of questions and replies, to be put in place to make the TRM more productive and efficient in the years ahead. The EC argued that the TRM should follow the common rules and practices in the WTO to ensure that questions and replies were exchanged in writing in advance of a committee's meeting.[20] In response, China reiterated that the TRM had been successful in providing a useful and effective channel for information exchange and mutual understanding between China and other Members, but that China would not agree to any request for a practice beyond the provisions in the Protocol, such as a request for written replies to Members' questions.[21]