U.S.-China Trade

In recent years, market access barriers and inadequate protection of intellectual property rights have discouraged U.S. firms from doing business in the rapidly growing economy of the People's Republic of China. To help overcome these barriers, in 1992 the United States and China signed two Memoranda of Understanding in which each country made commitments to improve market access and intellectual property rights protection. This report examines China's implementation of the two Memoranda. GAO discusses (1) China's compliance with the provisions of the market access Memorandum and related progress needed for China to meet the eligibility requirements to join the General Agreement on Tariffs and Trade and (2) China's implementation of the Memorandum on the protection of intellectual property rights. GAO also provides information on the legal procedures involved in addressing U.S. concerns about foreign market access and intellectual property rights protection under Section 301 of the 1974 U.S. Trade Act.

GAO found that: (1) China has substantially complied with most of the market access MOU provisions; (2) China has made progress in verifying its trade laws and practices and reducing nontariff barriers, but it has not ensured that its sanitary and phytosanitary standards and testing requirements are not used as import barriers; (3) U.S. companies continue to experience problems in market access because of the declining control over provincial and local officials, China's vested interest in state-owned industries, the lack of convertible Chinese currency, and price regulation; (4) Chinese negotiators and GATT members need to resolve a number of issues before China can join GATT or its successor, the World Trade Organization; (5) China has amended and issued IPR laws as required, but it has not significantly improved its compliance with the MOU enforcement provisions; and (6) because of its enforcement failure, the Office of the U.S. Trade Representative has designated China a priority foreign country under U.S. trade law, initiated a special investigation into China's IPR practices, and published a proposed list of Chinese products that would be subject to 100-percent tariffs if China does not improve its IPR enforcement.