C.

U.S. and Private Sector Monitoring and Bilateral Approaches to Address Issues

 

 

 

1.

Bilateral mechanisms for addressing issues

 

In addition to US efforts through the WTO to encourage China's WTO compliance, the US maintains an active bilateral relationship with China involving both formal high-level meetings as well as informal discussions.  The United States and China maintain three formal vehicles for bilateral discussion: (1) the Joint Commission on Commerce and Trade, (2) the Joint Economic Commission, and (3) the Trade Dialogue.  Charles Freemen, Deputy Assistant U.S. Trade Representative, has described the framework of US-China bilateral discussions on trade and economic matters as follows:

The Administration maintains three formal dialogues with Chinese ministries.  The Commerce Department chairs meetings of the Joint Commission on Commerce and Trade; the Treasury conducts meetings of the Joint Economic Commission with the Chinese Ministry of Finance; and USTR chairs an interagency Trade Dialogue with counterparts from the Ministry of Commerce and relevant other Chinese agencies.  Like many of the informal contacts, these formal occasions are opportunities not merely to discuss bilateral and multilateral trade and economic matters, but are themselves action-forcing events at which significant progress can be achieved.  They also act as an early warning system on trade problems – providing an opportunity to resolve issues before they become broader bilateral irritants.

 

In addition to these formal processes, the Administration meets frequently on both the Cabinet and sub-cabinet level with senior Chinese officials, and uses such meetings to press the importance of economic issues with Chinese counterparts.  In the case of USTR, Ambassador Zoellick meets or speaks via telephone with PRC Minister of Commerce Lu Fuyuan on a regular basis, has been to China twice since December 11, 2001, and plans to travel to China again for bilateral discussions next month.  Ambassador Josette Sheeran Shiner recently confirmed as Deputy USTR, plans to continue an active dialogue with her counterparts, and other USTR officials meet regularly with Chinese officials on bilateral trade concerns, whether in Washington, Beijing, or at the WTO.  These exchanges are critical opportunities to advance bilateral and multilateral trade and economic matters, and have proven effective in making progress on key U.S. concerns.[1]

 

 

Joint Commission on Commerce and Trade

As noted above, the US-China trade dialogue that is chaired by the Department of Commerce is the Joint Commission on Commerce and Trade (JCCT).  The Department of Commerce describes the purpose and activities of the JCCT as follows:

· The US-China Joint Commission on Commerce and Trade (JCCT) was established in 1983 as a forum for high-level dialogue on bilateral trade issues and a vehicle for promoting commercial relations.

· The JCCT works to resolve problems affecting US companies and serves as an umbrella for trade events and World Trade Organization (WTO) technical assistance programs.

· The JCCT is co-chaired by US Secretary of Commerce and China's Minister of Commerce and enjoys strong interagency support on both sides.

· The Commission consists of three working groups covering trade and investment issues, business development and industrial cooperation, and commercial law, as well as a side dialogue on export controls.

· Cabinet-level plenary sessions typically are held annually, while sub-cabinet sessions and subgroup meetings are more frequent and ongoing.

· The Department of Commerce (DOC) consults closely with US industry prior to each session to ensure that companies' most pressing concerns are addressed.[2]

 

 

As noted above, the JCCT has three working groups covering trade and investment issues, business development and industrial cooperation, and commercial law.  In addition, the US and China maintain a side dialogue on export controls.  These groups are involved in the following bilateral activities:

· The Trade and Investment Working Group (T&IWG):   The T&IWG is co-chaired by the DOC Assistant Secretary for Market Access and Compliance and China's Ministry of Commerce (MOFCOM) Director General for the Americas.  The T&IWG covers issues related to market access, trade finance, and investment and business facilitation.  T&IWG also provides an important venue where outstanding commercial dispute cases are reviewed and addressed. 

 

The last T&IWG meeting convened at the directorial level in Washington, DC on August 11, 2003.  The US side raised a number of issues including establishing further cooperation on standards development and stronger intellectual property rights protection.  The US side also proposed strengthening and reinvigorating the T&IWG mechanism by designating a coordinator on each side, regularizing meetings, and maintaining a direct line of communication between working group meetings.[3]

 

· The Business Development and Industrial Cooperation Working Group (BDICWG):   The BDICWG is co-chaired by DOC Assistant Secretary for Trade Development and MOFCOM Director General of the Department of Science and Technology.  The BDICWG promotes greater commercial cooperation on an industry sector basis.  Industry sub-groups in environmental technologies, medical and pharmaceuticals, information industries, aviation and airport infrastructure, electric power technologies, and motor vehicle and allied products provide an ongoing policy forum for sector-focused discussion of market access and regulatory issues, and commercial cooperation.  US Government agencies such as the EPA, FDA, and the FAA are important partners in supporting sub-group activities.

 

The BDICWG last convened in Washington in April 2003 to discuss industry sector-specific issues, review industry subgroup progress, and agree upon new priorities and principles for bilateral cooperation. The co-chairs agreed that all subgroups should undertake stronger cooperation on standards as a part of their overall efforts.[4]

 

· Commercial Law Working Group (CLWG):   The CLWG is co-chaired by the Department of Commerce General Counsel and MOFCOM Director General for Treaty and Law.  The CLWG works to improve commercial relations between the United States and China through discussion of legal issues of mutual interest.  The CLWG has proven a useful forum for seeking reform of China's commercial law system in areas of concern to US companies.  Through the CLWG there have been successful discussions on measures to enhance the recognition and enforcement of arbitral awards in China and the inequitable application of China's border trade policy to goods that compete with US products.

 

The CLWG last convened in April 2002 in Beijing, where the US raised several concerns including lack of transparency in Chinese regulatory practices, problems with the method of promulgation and content of measures regulating foreign law firms issued by China's Ministry of Justice, and the process of granting marketing approval for generic drugs.

 

The CLWG also sponsors the US-China Legal Exchange, a series of joint legal seminars that foster mutual understanding of the legal regimes governing trade and investment in both countries.  The seminars offer US audiences the opportunity to learn about the legal reforms taking place in China and provide Chinese participants the chance to learn about US practices.  Under this program, the United States and China send delegations of legal experts to speak on topics of current interest.  Both private sector and government attorneys have been featured at the seminars, which are open to government officials and academicians as well as the local business and legal communities.  In December 2002, Vice Minister of Foreign Trade Long Yongtu led a delegation of Chinese legal experts to the United States to talk about the legal changes necessary for China to implement its WTO accession commitments.  General Counsel Kassinger reciprocated, leading the most recent Legal Exchange delegation to China in November 2003 to discuss both recent developments in corporate governance practices in the United States as well as to discuss a variety of trade remedy measures used to safeguard fair trade between the United States and its trading partners, including China.[5]

 

· Export Controls Dialogue:   The Bureau of Industry and Security (BIS) meets with officials from MOFCOM's Department of Science and Technology under the Export Controls Side Dialogue of the JCCT.  BIS has generally used the regularized exchange of the JCCT forum to encourage more cooperation from MOFCOM on end-use checks for US strategic goods licensed to China.

 

The Bureau of Industry and Security co-hosted the Sino-U.S. Export Control Outreach Seminar in Shanghai, China with China's Ministry of Commerce on September 17-18, 2003.  The conference highlighted basic elements of US and Chinese export controls, regulations, and enforcement and was attended by 275 business and Chinese Government participants.  Presenters at the conference consisted of both US and Chinese export control government representatives.  Speakers from both governments were able to share their experience and knowledge of export controls with industry attendees.[6]

 

Joint Economic Committee

The China-US Joint Economic Committee was established in 1979 and generally has met on an annual basis.  The most recent meeting of the China-US Joint Economic Committee, the 15th Session, occurred in the United States in September 2002.  The meeting discussed issues related to macroeconomic developments, financial sector issues (including transparency and financial service liberalization pursuant China’s WTO commitments), cooperation on terrorist finance, anti-money laundering and other issues, and international financial institutions.  US participants at the 15th JEC meeting included representatives from the Treasury, Federal Reserve, Office of the U.S. Trade Representative, Council of Economic Advisors, Securities Exchange Commission, Department of State, and Department of Commerce.  Chinese participants included representatives from the Ministry of Finance, People’s Bank of China, Ministry of Foreign Affairs, Ministry of Public Security, State Development Planning Commission, Ministry of Justice, China Securities Regulatory Commission, China Insurance Regulatory Commission and the Legislative Affairs Office of the State Council.[7]

The Trade Dialogue

In October 2002, the United States and China established a new structure for bilateral trade discussions termed the US-China Trade Dialogue.  As described by the USTR:

The U.S.-China Trade Dialogue is a new bilateral forum designed to bring U.S. and Chinese officials from throughout their governments to discuss bilateral trade issues, resolve potential disputes and foster cooperation on issues within the ongoing Doha global trade negotiations.[8]

 

 

The United States and China decided to launch the Trade Dialogue in order to give senior trade officials a chance to meet and discuss trade issues on a regular basis.  Press reports indicated that, under the new initiative, the US and China intended to convene on a quarterly basis.[9]  To date, there have been two Trade Dialogues.  The first occurred in February 2003 when USTR Zoellick traveled to Beijing and the second occurred in November 2003 in Beijing with the US delegation led by Deputy USTR Shiner.

Given China's shortfalls in meeting WTO commitments, bilateral relations, including the Trade Dialogue, have taken on increased importance as a vehicle for addressing China WTO compliance problems.  The Deputy USTR Allgeier described the value of bilateral channels as follows:

When confronted with compliance problems, the Administration uses all available and appropriate means to obtain China’s full WTO compliance, including intervention at the highest levels of government.  The Administration has worked closely with the affected U.S. industries on compliance concerns, and has utilized bilateral channels through multiple agencies, at all levels, to press these concerns.  *  *  *

 

In furtherance of these efforts, Ambassador Zoellick has met with his Chinese counterparts on numerous occasions.  Most recently, in February of this year, he was in China and raised key WTO implementation and other concerns with Wen Jiabao, who is now China’s Premier, and with the Trade Minister.  This past February, USTR also launched a new trade dialogue with China, led on the U.S. side by then-Deputy U.S. Trade Representative Huntsman. Meanwhile, U.S. Embassy personnel in Beijing, including Ambassador Randt, continue to maintain close contacts with Chinese trade officials at all levels, and Deputy U.S. Trade Representative Deily has developed a good working relationship with her Chinese counterpart at the WTO in Geneva.

 

These varied efforts are not merely designed to resolve current bilateral trade problems, but also to pre-empt future problems through an early-warning system.  In general, the level of discourse has been quite high, and China’s responsiveness has been satisfactory.  As with any relationship as complex as that of the United States and China, however, resolving problems takes time and energy.  At USTR, we are spending the maximum amount of time and energy on this task.[10]

 

 

In its 2003 China compliance report, USTR highlights the following US-China bilateral efforts in 2003.

· As the slowdown in China’s WTO implementation efforts became evident in 2003, the Administration stepped up its efforts to engage senior Chinese leaders. Over the course 2003, President Bush emphasized the importance of China’s WTO obligations in meetings with his counterpart, Hu Jintao, and with China’s Premier, Wen Jiabao.

 

· USTR Zoellick made two separate visits to China for talks on WTO implementation matters with Premier Wen and with Vice Premier Wu Yi.

 

· USTR Zoellick raised U.S. concerns throughout the year with his Ministry of Commerce (MOFCOM) counterpart, including most recently at the October 2003 APEC meetings in Thailand.

 

· The Secretaries of Commerce and Treasury made their own trips to China carrying the message that China’s WTO implementation was a matter of the highest priority.

 

· Sub-cabinet officials from various U.S. economic and trade agencies also met with their Chinese counterparts in China, Washington and Geneva to work through areas of concern, including WTO implementation issues, on numerous other occasions.

 

· In 2003, the Administration established the "Trade Dialogue", a sub-cabinet dialogue on WTO compliance and other trade matters that brings together U.S. economic and trade agencies and various Chinese ministries and agencies with a role in China’s WTO implementation.  Trade Dialogue meetings were convened twice in 2003 (February and November).  The Trade Dialogue meetings were used to communicate specific trade concerns and served as an early warning mechanism for emerging trade disputes.[11]

 

 

 

 

2.

Monitoring programs

 

 

 

 

(a)

Government

 

Monitoring of trade agreements generally

Since the 1980s, the United States has entered into more than 400 trade-related agreements.  It is important to the success of these agreements in achieving their goals of liberalized trade and opening market access for U.S. companies that the agreements be effectively monitored and enforced.  Meaningful monitoring and enforcement are also essential to maintaining public support and confidence in the benefits of trade agreements.  Generally, within the federal structure, the Office of the US Trade Representative bears the primary responsibility for monitoring and enforcing trade agreements, but at least 16 other US Government agencies also are active, to varied degrees, in monitoring and enforcement activities, as the diagram below shows.

 

 

The President

____

National Economic Council

 

|

US Trade Representative

 

Department of Commerce

 

Department of Agriculture

 

Department of State

|

Department of Treasury

 

Department of Labor

|

Other agencies

|

Department of Justice

 

Department of Interior

 

Department of Energy

 

International Trade Commission

 

Office of Management & Budget

 

Council of Economic Advisers

|

Department of Defense

 

Department of Transportation

 

Department of Health & Human Services

 

Environmental Protection Agency

 

Agency for International Development

 

Source:     US General Accounting Office, International Trade: Strategy Needed to Better Monitor and Enforce Trade Agreements (GAO/NSIAD-00-76, March 2000) at 9 (figure 3).

 

After USTR, the US agencies with most involvement in monitoring trade agreements are the Departments of Commerce, Agriculture, and State, which conduct their own monitoring and enforcement efforts while also coordinating with USTR.  The Departments of Commerce and Agriculture "have certain statutory monitoring responsibilities for trade agreements," and the Department of State "has an important role in monitoring and enforcing trade agreements because of its foreign policy expertise."[12]  A brief summary of the functions of these primary monitoring agencies is presented below.

USTR:

·   primarily responsible for developing and coordinating U.S. international trade, commodity, and direct investment policy.

·   leads or directs negotiations with other countries on such matters.

·   primary agency responsible for monitoring and enforcing U.S. trade agreements.

·   statutorily required to annually identify foreign policies and practices that constitute significant trade barriers and particularly considers whether any identified policies or practices are covered by trade agreements.

·   refers to appropriate agency any unfair trade practice inconsistent with provisions of any trade agreement that has significant adverse impact on U.S. commerce.

·   authorized to initiate actions to enforce U.S. rights under bilateral and multilateral trade agreements.

·   chairs interagency group that oversees the multiple interagency committees that coordinate trade policy.

 

Commerce:

·   general responsibility for major nonagricultural trade functions of the U.S. government, including monitoring and taking certain steps to secure compliance with trade agreements and ensuring that U.S. companies have access to foreign markets.

·   statutorily responsible, along with USITC, for administering U.S. unfair trade laws (antidumping and subsidies).

·   shares statutory responsibility with USTR for monitoring violations of WTO rules concerning member countries’ subsidy practices.

·   trade activities carried out primarily by International Trade Administration.

 

Agriculture:

·   provides technical assistance to USTR on matters pertaining to agricultural trade, including international negotiations on agricultural trade agreements.

·   statutorily responsible for implementing and monitoring the agricultural provisions of WTO agreements and NAFTA.

·   required to report to USTR and Congress re non-compliance with WTO provisions that adversely affects U.S. agricultural trade.

·   Foreign Agricultural Service handles Agriculture’s trade activities and works with USTR and State on international agricultural trade issues.

 

State:

·   advises USTR on the foreign policy implications of any trade-related actions and participates in trade negotiations that have direct and significant impact on foreign policy.

·   State’s Bureau of Economic and Business Affairs has overall responsibility for formulating and implementing policy regarding foreign economic matters.

·   State's economic officers (through in-country contacts with U.S. businesses and foreign officials) provide instrumental assistance in monitoring and enforcing trade agreements.

 

Other agencies:

·   at least 13 other federal agencies are also involved in the monitoring and enforcement of trade agreements; they generally provide technical/policy input derived from their specialized areas of expertise.  For example:

q         Treasury is responsible for developing policies on international monetary affairs, trade and investment, international debt strategy, and U.S. participation in international financial institutions, and advises USTR on the financial services htmects of trade agreements.

q         Labor advises USTR on any labor and workers’ rights issues associated with trade agreements.

q         Health and Human Services’ Food and Drug Administration helps Agriculture's FAS address other countries’ health and food safety measures affecting U.S. exports.

q         U.S. International Trade Commission plays unique role due to broad investigative powers in monitoring trade data and trade agreements.

Inter-agency mechanisms:

·   National Economic Council

q         cabinet-level organization established in 1993.

q         comprised of: the President; Vice President; Secretaries of State, Treasury, Agriculture, Commerce, Labor, Housing and Urban Development, Transportation, and Energy; Administrator of Environmental Protection Agency; Chair of Council of Economic Advisors; Director of Office of Management and Budget; U.S. Trade Representative; Assistants to President for Economic Policy, Domestic Policy, and Science and Technology Policy; National Security Advisor; and other executive departments/agencies as the President may designate.

q         coordinates domestic and international economic policy formulation.

q         reviews significant trade policy issues; ensures overall trade policy coordination.

 

·   Trade Policy Committee (TPC)

q         chaired by USTR; includes State, Agriculture, Commerce, Treasury, and Labor.

q         two subordinate bodies - (1) Trade Policy Review Group (management-level) and (2) Trade Policy Staff Committee (senior staff-level).

q         subordinate committees comprised of TPC agencies, plus other agencies.

q         TPSC operates primarily through network of subcommittees/task forces composed of staff from various agencies and chaired by USTR staff.

q         TPSC subcommittees deal with both regional and industry-specific issues, and specialized task forces deal with specific trade issues.

Source:        US General Accounting Office, International Trade: Strategy Needed to Better Monitor and Enforce Trade Agreements (GAO/NSIAD-00-76; March 2000).

 

 

In addition, a number the US agencies involved in trade issues, primarily USTR, Commerce, Treasury, State, and the International Trade Commission, are required by statute to prepare a variety of trade-related reports that assist their monitoring and enforcement efforts.[13]

Monitoring of China's WTO commitments

In 2001, as China entered the WTO, the US government viewed the implementation of China's WTO commitments and obligations as critical to the success of China's incorporation into the global trade regime.  Even more so than in the case of a typical trade agreement, the US focused on the need to vigilantly monitor and enforce China's WTO commitments.  In the statute authorizing extension of normal trade relations treatment to China,[14] Congress made the following findings:

The United States Government must continue to be vigilant in monitoring and enforcing the compliance by our trading partners with trade agreements in order for United States businesses, workers, and farmers to continue to benefit from the opportunities created by market-opening trade agreements.

 

The People’s Republic of China, as part of its accession to the World Trade Organization, has committed to eliminating significant trade barriers in the agricultural, services, and manufacturing sectors that, if realized, would provide considerable opportunities for United States farmers, businesses, and workers.

 

For these opportunities to be fully realized, the United States Government must effectively monitor and enforce its rights under the agreements on the accession of the People’s Republic of China to the WTO.[15]

 

 

Congress therefore authorized appropriations for additional resources to support monitoring of China's compliance with its WTO commitments.  In particular, Congress authorized monitoring activities by the US Trade Representative and the Departments of Commerce and Agriculture.  With respect to the Department of Commerce, Congress authorized appropriations for "monitoring compliance by the People’s Republic of China with its commitments under the WTO." [16]  For USTR, Congress authorized appropriations for additional staffing in "offices relating to the WTO and to different sectors of the economy, including agriculture, industry, services, and intellectual property rights protection, to monitor and enforce the trade agreement obligations of the People’s Republic of China in those sectors.[17]  With respect to the Department of Agriculture, Congress authorized appropriations "for additional staff to increase legal and technical expertise in areas covered by trade agreements and United States trade law, including food safety and biotechnology, for purposes of monitoring compliance by the People’s Republic of China with its trade agreement obligations."[18]  Congress also authorized appropriations to the Departments of Commerce and State for an overseas compliance program of "monitoring in the People’s Republic of China that country’s compliance with its international trade obligations."[19]

In addition, Congress also created two commissions whose purpose is, in part, to monitor the progress of China's compliance with its WTO obligations. 

 

 

 

United States-China Economic and Security Review Commission

(USCC)

http://www.uscc.gov

 

·        created by Congress in the Floyd D. Spence National Defense Authorization Act for 2001 § 1238, Pub. L. No. 106-398, 114 STAT. 1654A-334 (2000) (codified at 22 U.S.C. § 7002 (2001).

·        legislative mandate to monitor, investigate, and report to Congress on the national security implications of the bilateral trade and economic relationship between the United States and the People's Republic of China.

·        consists of 12 members, of which 3 members each are appointed by

--     Speaker of the House of Representatives

--     President pro tempore of the Senate (as recommended by the majority leader of the Senate

--     President pro tempore of the Senate (as recommended by the minority leader of the Senate

--     minority leader of the House of Representatives

 

 

 

 

Congressional-Executive Commission on China (CECC)

http://www.cecc.gov

·        created by Congress in the China Relations Act of 2000, Pub. Law No. 106-286 (October 10, 2000) (codified at 22 U.S.C. § 6911 et seq.).

·        legislative mandate to monitor China's compliance with international human rights standards, to encourage the development of the rule of law in the PRC, to establish and maintain a list of victims of human rights abuses in China, and to submit an annual report to the President and the Congress.

·        consists of:

--     nine Senators appointed by the Senate Minority Leader in consultation with Senate Minority Leader

--     nine members of the House of Representatives appointed by the Speaker of the House in consultation with the House Minority Leader

--     five senior Administration officials appointed by the President

 

Given the great number of China's WTO commitments, as well as the complexity and breadth of the accession agreement, the task of monitoring and enforcing China's compliance with its WTO obligations is a challenging endeavor.  In response to the increased responsibilities placed on them by China’s accession to the WTO, the US Trade Representative, and the Departments of Commerce, Agriculture and State have focused efforts on improving their ability to monitor China's WTO compliance.

Soon after China's accession, the Department of Commerce described the steps it had taken to initiate its monitoring program.

Commerce's China Team holds semiweekly strategy sessions to review cases and implementation plans.  A new China-specific website (www.export.gov/china) provides US business with detailed information on China's WTO obligations, compliance and market opportunities.  China Team representatives meet regularly with the commercial staff from the Chinese Embassy in Washington, D.C. and Commercial Service officers meet regularly with Ministry of Foreign Trade and Economic Cooperation in Beijing, to review specific market access and compliance problems. A group dedicated especially to monitoring developments relevant to potential unfair trade problems with China also has been established as an offshoot of Commerce’s ongoing work in import monitoring and the enforcement of U.S. rights under the WTO with respect to multilateral subsidy disciplines. Among other things, this group will monitor China’s provision of financial assistance and state aids to industrial enterprises to ensure that they conform to WTO commitments.

 

* * *

Commerce’s enforcement efforts are part of a coordinated U.S. Government approach to monitoring and enforcing China’s WTO compliance.  In Washington, D.C., the U.S. Department of Commerce, the Office of the U.S. Trade Representative and the Departments of State, Treasury, Agriculture and Labor, play an active role in WTO implementation and monitoring efforts.

 

In Beijing, Commercial Service officers, along with State Economic officers, Foreign Agricultural Service officers and Customs Attaches, participate in a WTO Implementation Coordination Committee which meets regularly to assess progress and monitor problems, with input from US consulates in Shanghai, Guangzhou, Shenyang and Chengdu.[20]

 

 

Also, in furtherance of its monitoring efforts, the Department of Commerce has set up a number of websites including China Gateway (http://www.mac.doc.gov/china/WTOAccessionPackage
NEW.html) maintained by the Office of China Economic Area and China Monitoring (http://ia.ita.doc.gov/trcs/imports/china/china.html) maintained by the Import Administration's Trade Remedy Compliance Staff.

In a recent study, the US General Accounting Office examined how the key federal agencies had organized in order to address China compliance issues.  The GAO reported that USTR, Commerce, Agriculture and State had "reorganized or established teams to better coordinate the activities among the various agency units involved in China WTO compliance," and had added staff in the United States and China to conduct their monitoring efforts.[21]  In addition to intra-agency activities, "USTR established a staff-level interagency working group focused on China WTO compliance to identify, analyze, and resolve problems."[22]  The GAO report summarized these monitoring efforts.

USTR

·         In June 2002, USTR created an Office of North Asian Affairs by merging the Offices of China and Japan; this office has primary responsibility for coordinating efforts on China WTO trade issues.

·         USTR's General Counsel and other sector/function-specific offices support the North Asian Affairs Office on China trade issues.

·         USTR’s Monitoring and Enforcement Unit of the General Counsel's Office has primary responsibility for representing the US if a China-related dispute settlement case is brought before the WTO.

Commerce

·         In May 2001, Commerce created an intra-agency China Compliance Team to facilitate compliance monitoring efforts.

·         The China Compliance Team is comprised of 6 units and meets twice weekly:

q         Market Access and Compliance (MAC) (chair)

q         Import Administration

q         Trade Development

q         U.S. and Foreign Commercial Service (FCS)

q         Trade Information Center

q         Office of General Counsel

·         2 offices within MAC directly coordinate compliance efforts: Office of China Economic Area and Trade Compliance Center.

USDA

·         In December 2001, USDA recognized its need to gather cross-agency expertise to aid in effectively monitoring China’s WTO compliance regarding agriculture.

·         USDA created 2 intra-agency task forces (a USDA-wide task force and a working-level task force) within USDA’s Foreign Agricultural Service (FAS).

·         6 USDA agencies participate in the USDA-wide China Task Force, which was created in February 2002 and meets quarterly.

·         The FAS-wide China Task Force (established March 2002) meets monthly to develop strategies for resolving China compliance issues.

·         2 divisions within FAS coordinate compliance efforts: the Asia and the Americas Division and the Multilateral Trade Negotiations Division.

State

·         State officers at U.S. Beijing embassy took the lead in coordinating compliance monitoring efforts in China.

·         U.S. embassy established a WTO Implementation Coordination Committee.

q         Committee meets monthly, is chaired by the embassy’s economic minister, and coordinates WTO monitoring, compliance, technical assistance, and outreach efforts.

q         Committee is comprised of State officers from relevant sections, and officers from Commerce, USDA, and Customs.

q         Committee gathers, summarizes, and communicates information from China to U.S. government agencies in Washington, D.C.

·         State's Office of Chinese and Mongolian Affairs is main communications link between US agencies in Washington, DC and U.S. embassy and consulates general in China.

q         The office coordinates instructions and other diplomatic dispatches regarding China WTO compliance issues.

q         It also coordinates with State’s Bureau of Economic and Business Affairs to obtain sector-specific and other technical expertise on China trade issues.

Inter-Agency Monitoring Group:

TPSC Subcommittee on China WTO Compliance

·         The Trade Policy Committee (TPC) is the formal interagency structure led by USTR.

·         The TPC has 2 subordinate bodies: Trade Policy Review Group (management-level committee) and Trade Policy Staff Committee (senior staff-level committee subordinate to TPRC).

·         In 2001, USTR established a new TPSC subcommittee to focus exclusively on China’s compliance with its WTO commitments.

·         The new subcommittee -- TPSC Subcommittee on China WTO Compliance -- is chaired by USTR and replaced an existing China subcommittee.

·         Almost 40 officials, representing 14 departments and executive offices, participate in the China compliance subcommittee.

·         In December 2001, the China WTO Compliance Subcommittee adopted an action plan with 8 components:

q         comprehensive monitoring activities on a coordinated interagency basis, with input from private sector groups;

q         regular dialogue with other WTO members;

q         outreach to the private sector about the business environment it should expect in China;

q         outreach to Chinese officials about their WTO commitments and compliance and its benefits;

q         technical assistance and capacity building activities for China;

q         active participation in the WTO Transitional Review Mechanism process;

q         facilitation of congressional oversight, by providing an annual report to Congress; and

q         efforts to seek enforcement of U.S. rights through bilateral and multilateral means, including recourse to WTO dispute settlement procedures, as appropriate.

·         During its first year (2002) the China WTO Compliance Subcommittee was very active and met 11 times, at which officials evaluated and prioritized monitoring activities undertaken, reviewed steps taken by China to implement its commitments, and decided on appropriate responses.  However, GAO states that, according to agency officials, much of their monitoring work takes place informally outside of formal meetings.

·         The TPSC Subcommittee on China WTO Compliance held public hearings in both 2002 and 2003.

·         GAO notes that it took some time for the TPSC subcommittee to "get up to full speed."  This was due to several factors, such as the time needed by the various participants to work out roles and responsibilities, delineate monitoring tasks and set initial priorities.  Also, it was sometimes difficult to obtain timely and accurate translations of Chinese laws and regulations for review.

Source:   US General Accounting Office, World Trade Organization: First-Year U.S. Efforts to Monitor China's Compliance, GAO-03-461 (March 2003) at 6-8, 11-13.

 

In the US-China Relations Act of 2000, Congress enacted a requirement that USTR submit an annual report to Congress on China's compliance with its "commitments made in connection with its accession to the World Trade Organization, including both multilateral commitments and any bilateral commitments made to the United States."[23]  In its preparation of the compliance report, USTR is required to seek public participation through a public hearing.[24]  To date, USTR has issued its 1st (Dec. 2002) and 2nd (Dec. 2003) annual reports to Congress on China’s WTO Compliance.[25]  In both 2002 and 2003, USTR conducted public hearings prior to submitting its annual report to Congress.[26]

The US General Accounting Office has conducted a number of studies related to the monitoring of China's WTO commitments and trade agreements generally.  These studies include the following:

·        World Trade Organization: Ensuring China's Compliance Requires a Sustained and Multifaceted Approach (GAO-04-172T) (October 30, 2003).

·        World Trade Organization: First-Year U.S. Efforts to Monitor China's Compliance (GAO-03-461) (March 2003).

·        World Trade Organization: Analysis of China's Commitments to Other Members (GAO-03-4) (October 2002).

·        World Trade Organization: Selected U.S. Company Views about China's Membership (GAO-02-1056) (September 2002).

·        World Trade Organization: Observations on China's Rule of Law Reforms (GAO-02-812T) (June 6, 2002).

·        World Trade Organization: Status of China's Trade Commitments to the United States and Other Members (GAO/NSIAD-00-142) (May 2000).

·        International Trade: Strategy Needed to Better Monitor and Enforce Trade Agreements (GAO/NSIAD-00-76) (March 2000).

 

The GAO has also established an electronic database of China's WTO commitments.  Because an understanding of China's WTO accession obligations is essential to assessing whether China is abiding by its commitment, and because of the length and complexity of China's accession agreement, the GAO created the electronic database to aid its analysis and to assist Congress, the Administration, and other interested parties in "analyzing, monitoring, and enforcing China's WTO commitments."[27]  The GAO's electronic data base is available at http://www.gao.gov/special.pubs/gaochnawtodb.zip.

Recently, in the 2004 appropriations legislation for Commerce and related agencies, Congress criticized federal agency efforts to date in monitoring and enforcing China's WTO commitments.  In particular, the Conference report adopted language in a House report that found that the International Trade Administration and US Trade Representative had failed to meet their mission to support U.S. businesses.  The conference report stated:

The conferees understand the difficulties in attempting to balance the positive and the negative effects of a free trade agenda.  The conferees are steadfast in their support of America's trade policy to create growth and raise living standards around the globe, and in return to increase the benefits to U.S. workers, farmers, consumers, and businesses.  Yet, the U.S. Government must uphold its responsibility to enforce trade laws, particularly with China. If trading partners do not abide by the rules that are set in the global trading system, then U.S. firms are not competing on a level playing field.[28]

 

 

Consequently, Congress appropriated additional funds for USTR and Commerce for monitoring, enforcement, and other China-related activities.  In particular, Congress provided $3 million for Commerce to establish an Office of China Compliance[29] and directed USTR to "increase the number of positions dedicated to enforcing the commitments made by the PRC Government upon accession to the WTO."[30]  Congress also directed USTR "to provide a report detailing steps taken by the PRC Government toward meeting its WTO obligations."[31]

Congress also directed USTR to prepare a report about steps taken to coordinate federal agency monitoring and enforcement efforts respecting trade agreements generally:

The conferees understand that a number of Federal agencies are involved in monitoring and enforcing our trade agreements.  The conferees agree that robust monitoring and enforcement efforts are critical and that such efforts must be well coordinated within the Executive Branch.  Accordingly, the conferees direct the USTR, working with the Department of Commerce and other Federal agencies, to take steps to assure that monitoring and enforcement efforts are coordinated among the Federal agencies to maximize their effectiveness and are based on a strategy that focuses on priority areas of potential trade violations.  USTR is directed to report back to the Committees on Appropriations on these steps within 120 days of the enactment of this Act.[32]