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China almost near the entry post at the WTO

by Chakravarthi Raghavan

Geneva, 4 July 2001 - As the Working Party on China’s accession to the WTO ended its 16th meeting Wednesday, China seemed near its goal of completing 15 years of negotiations, with the Chairman of the Working Party, Amb. Pierre-Louis Girard speaking in terms of the “major breakthrough” and confidently envisaging the wrapping up of the process in the near future.

The Working Party is to hold another session on 16 July, and if things go according to plan, will have a draft protocol of accession and schedules of China’s commitments to be approved by the Working Party, with its report, and forwarded to capitals to enable the WTO members to accept it at the Doha Ministerial meeting. After China completes its own internal process of ratification, and signs the protocol, it would formally become a member 30 days later.

At a press conference after the Working Party, Girard and the Chinese vice-minister Long Yongtu struck a confident note, with Long agreeing with Mr.  Girard’s assessment of a breakthrough. At the Working Party itself, Long in his statement said substantial negotiations had been completed and that this would become a turning point in the long process of China’s WTO accession.

Among the issues ‘settled’ at this meeting, in effect translating into the protocol language, was the accord between China and the US over agriculture, under which China has agreed to a de minimis ceiling, in terms of product and non-product specific domestic support, of 8.5% of the total value of agricultural output.

The ceiling for industrial countries is 5% and for developing countries it is 10% and China had long been contending that it should be treated as a developing country, while the US has been insisting otherwise.

Developing countries under the Agriculture Agreement (AoA) have been enabled to provide two kinds of support, without fear of challenge at the WTO. The first is under Art. 6.2 of the AoA, where developing countries are exempt from any domestic support commitment and without any ceiling limitations, investment subsidies generally available to agriculture in developing countries, and input subsidies generally available to low-income or resource-poor producers.

A second provision is that in Art. 6.4 of the AoA, under which developing countries can provide de minimis product-specific and non-product-specific support of up to 10% of their agricultural output.

The exact language used in relation to the Chinese protocol commitment in this would need to be studied when available. But several developing country negotiators had expressed their concern that the Chinese commitment struck bilaterally with the US, for a 8.5% de minimis level of support applied both to the Art. 6.2 and 6.4 domestic support subsidies, would have some adverse implications and impact on the position of the developing countries in the agricultural negotiations under way under Article 20 of the AoA.

India had raised this issue at the informal meeting, and there had been some intense negotiations to evolve a compromise language that the Chinese commitments would not set any precedent or affect the existing rights of the developing countries. The concerns raised by India at the informal meeting, were echoed at the formal session Wednesday by Malaysia and Pakistan, according to participants.

For the record, and to provide some satisfaction, the introductory statement in (current) para nine of the draft Working Party report, is to state that “all commitments undertaken by China in her accession process were solely those of China and would prejudice neither existing rights and obligations of Members under the WTO Agreements nor on-going and future WTO negotiations and any other process of accession.. While noting the pragmatic approach taken in China’s case in a few areas, Members also recognized the importance of differential and more favourable treatment for developing countries embodied in the WTO Agreements.”

Privately, several developing country negotiators said that while this was useful, the developing countries, and particularly the larger economies, would face pressures from the US and some of the Cairns Group to agree to commitments in any new agricultural talks on the same level as China. And China too would be sorely tempted to attempt to get its competitors to accept a similar level of commitment to its own.

This is in the nature of the trading system, which behind all its rhetoric about free trade and development, is a neo-mercantalist organization where each country pursues the narrow commercial interests of its corporations and exporters on the one side, and try to protect and shield its domestic producers on the other.

>From China’s own point of view, Mr. Long pointed out and with some irritation and sharpness at the press conference, that the Chinese commitment on de minimis ceiling applied only to ‘trade distorting’ support (the socalled amber box support) and not to the ‘green box’ support, which China was now providing about 1-2 percent as trade-distorting support (and thus had enough ceiling to help its farmers), and that it intended to provide a major part of its future support under ‘green box’ measures.

At one point, Mr. Long, generally very patient in his meetings with the media, and though ebullient at the press conference on other matters, said somewhat sharply that China, after 15 years of negotiations, perhaps better understood the provisions of the WTO Agreements and their implications than some of the critics.

The irritation of Long, in his responses on this seemed to relate to the questions that implied that Long and Beijing had in effect forsaken the interests of its impoverished peasantry in order to get into the WTO - a viewpoint that according to some Chinese observers is echoed inside the party’s internal debates.

But while this is a matter of judgement that the Chinese policy makers have to make, the concerns of other developing countries appear to be not over this judgement on the domestic benefits and costs, but on any adverse impact it may have on the future negotiations.

The draft report in the introductory statements says:

“8. The representative of China stated that although important achievements have been made in its economic development, China was still a developing country and therefore should have the right to enjoy all the special and preferential treatment accorded to developing country Members pursuant to the WTO Agreement.”

“.9. Some members of the Working Party indicated that because of the significant size, rapid growth and transitional nature of the Chinese economy, a pragmatic approach should be taken in determining China’s need for recourse to transitional periods and other special provisions in the WTO agreements available to developing country WTO members. Each agreement and China’s situation should be carefully considered and specifically addressed. In this regard it was stressed that this pragmatic approach would be tailored to fit the specific cases of China’s accession in a few areas, which were reflected in the relevant provisions set forth in China’s draft Protocol and the Working Party Report. Noting the preceding statements, Members reiterated that all commitments taken by China in her accession process were solely those of China and would prejudice neither existing rights and obligations of Members under the WTO Agreements nor ongoing and future WTO negotiations and any other process of accession. While noting the pragmatic approach taken in China’s case in a few areas, Members also recognized the importance of differential and more favourable treatment for developing countries embodied in the WTO Agreements.”

A part of the draft report on the section on China’s Agricultural Policies said that China (in relation to its linkage of import policies for agriculture, including Tariff-rate Quota allocations, to domestic production policy and sub- national supply and utilization situation) had confirmed that China would base import policies for agriculture on commercial considerations only.

On the concerns of some about the ‘administrative guidance’ China would provide at national and sub-national levels that may have the effect of influencing the quantity and composition of agricultural imports, China confirmed that consistent with its commitment to uniform administration, by the date of accession, China would not maintain, resort or revert to guidance plans or administrative guidance at national or sub-national levels that regulate the quantity, quality or treatment of imports, or constitute import substitution practices or other non- tariff measures including those maintained through state-trading enterprises at the national or sub-national level.

On the concern of some members that the large stocks in China of grain and cotton procured at relatively high prices by state-trading enterprises or other state-affiliated, state-run or state controlled entities could be exported at prices lower than comparable prices charged for like products to buyers in the domestic market, and which could be challenged as an export subsidy inconsistent with WTO obligations, China confirmed that all entities in China will operate in accordance with its WTO obligations, including those on export subsidies. China was also further committed that national and sub-national authorities would not provide fund transfers or other benefits to any entity in China that would be contrary to its WTO obligations, including to offset losses accrued through exports.

China also confirmed that by the date of its accession, China would not maintain or introduce any export subsidies on agricultural products.

On the issue of support under Art. 6.4 and 6.2 of the AoA, China confirmed that while China can provide support through government measures of the types described in Art. 6.2, the amount of such support would be included in China’s calculation of Aggregate Measure of Support.

[Under Art. 6.2, developing countries are allowed not to include such support in the AMS calculations.]

China also noted that its total AMS commitment level was set in its schedule, and that China would have recourse to a de minimis exemption for product specific-support equivalent to 8.5% of total value of production of a basic agricultural product during the relevant year, and that similarly China would have recourse to a de minimis exemption for non-product-specific support of 8.5% of total agricultural production.

These percentages are to constitute de minimis exemptions.

Girard said in his summing up statement at the Working Party that the areas where effectively work of producing multilaterally agreed texts had been completed were:

·        antidumping and countervailing measures - where there was now agreement on a multilaterally agreed text for the draft Working Party report, complementing that already finalised in the draft protocol;

·        on industrial policy, including subsidies, where there was now an agreed complete text on industrial policy, resolving what had proved to be a difficult area for some delegations;

·        judicial review, uniform administration and transparency. Texts in this area also have been finalised, following consultations in which the issues of uniform administration and transparency were revisited. “There is now complete texts on these areas for the Draft Working Party Report.”

·        Product-specific safeguards/textiles: In this area, members of the Working Party and China have agreed on the final version of a text. The agreed language gives additional clarification on the procedures to be followed by WTO members in cases where they may invoke the transitional safeguard established in the protocol.

·        Quantitative import restrictions, including prohibitions and quotas: The text for this section has been finalised.

·        Sanitary and Phytosanitary measures: In this area, an issue not previously the subject of plurilateral discussions, members of the Working Party and China have been able to report completion of texts.

·        TRIPS: plurilateral discussions have allowed the finalization of the section of the Working Party on this.

·        Technical Barriers to Trade: texts have been finalised in this area.

·        Trading Rights: there are mutually agreed texts for the Working Party report, complementing the texts and clarifying the related agreed text of the draft protocol.

Transitional review mechanism: A completed draft protocol, with accompanying annexes have been reached.

Tariff-Rate quotas: the text has been consolidated and work on the head-notes has substantially progressed and will be completed shortly.

Services: the texts have “basically” been agreed, only one specific issue remains to be resolved.

[This would appear to relate to the insurance sector and the American firm AIG which now has a 100% ownership operation in Shanghai and apparently cleared and agreed to be in China.]

In his statement at the Working Party, Long spoke of seeing “light at the end of the tunnel, coming closer and closer”, and China having demonstrated in 15 years of negotiations its unswerving commitment to implementing basic national policy of reform and opening up. The protracted negotiations were not only for accession of China, but to facilitate China’s reform and opening up. China’s accession would also be in the interests of WTO members as well as the multilateral trading system.

While China insisted on its right to be treated as a developing country and accede to the WTO on that basis, it has also taken a pragmatic view towards the various treatments for developing countries, and had made specific commitments in different areas in the light of its national situation. Commitments had been taken in some areas consistent with its own development level, and the request to reduce average tariff levels to those of developed countries had been rejected. Its tariff levels were comparable to average tariff levels of developing countries, as also market access commitments in services.

On TRIPS (where China has in effect agreed to the US demands for TRIPS-plus), Long said in this area, China had the capability to implement obligations and did not deem it necessary to seek preferential treatment available to developing countries, nor on access to the transition periods. However, when some developing countries were seeking extended transition periods, China supported their request since this was reasonable.

After accession, Long said, China was determined to play a positive and constructive role in the WTO. It supported the launch of a new round “to establish an open and fair world trading system and an equitable world economic order.” But China insisted that in the new round, the interests of all countries, and developing countries in particular, should be fully taken into account and all members should join hands to handle complicated contradictions and meet all challenges in a pragmatic, balancing and creative spirit.

In some responses to questions, particularly on the anti-dumping investigations against China, Mr. Long hoped that after the accession the importing countries would view their actions in line with the rights and obligations of China, but added that China too as an exporter had to undertake some responsibility in ensuring the transparency of its price formation internally in terms of the market. – SUNS4930

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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