China Trade

China has the largest economy worldwide that is not covered by the World Trade Organization (WTO). WTO seeks to promote open and fair international trade through increased transparency (public openess), rules, and commitments to reduce barriers on foreign goods and services, and provide a binding system for resolving disputes. China would like to join WTO and is now in the negotiation phase. Joining WTO will require China to make major changes to its economy. Although Congress does not vote on China's WTO membership, the U.S. Trade Representative is required to consult with Congress before a WTO vote it taken. The administration plans to ask Congress to enact legislation to resolve a potential conflict between the conditional most-favored-nation status afforded China under U.S. law and the unconditional most-favored-nation status provided by the WTO Agreements. If China becomes a member and Congress has not enacted this legislation, the administration intends to invoke a WTO provision that would permit the United States not to apply the WTO Agreements to China. An important consequence of this action would be that China and the United States would not be obligated to provide each other with all the WTO trade commitments that they would give to other WTO member states. In such a situation, U.S. businesses may not be able to benefit fully from the commitments that China will make to open its markets to other WTO members.

GAO noted that: (1) China has the largest economy worldwide that is not covered by the WTO; (2) the WTO seeks to promote open and fair international trade through increased transparency, rules, and commitments to reduce barriers on foreign goods and services, and provide a binding system for resolving disputes; (3) China would like to join the WTO and is currently in the negotiation phase, which is the second of the four-stage process for becoming a member; (4) joining the WTO will require China to make substantial changes to its economy; (5) although Congress does not vote on China's WTO membership, the United States Trade Representative is required to consult with Congress before a WTO vote is taken; (6) the Administration plans to ask Congress to enact legislation to resolve a potential conflict between the conditional MFN afforded China under U.S. legislation and the unconditional MFN provided by the WTO agreements; (7) if China becomes a member and Congress has not enacted this legislation, the Administration intends to invoke a WTO provision that would permit the United States not to apply the WTO Agreements to China; (8) an important consequence of taking this exception is that China and the United States would not be obligated to provide each other all the WTO trade commitments that they would give to other WTO member states; and (9) in such a situation, U.S. business may not be able to benefit fully from the commitments China will make to open its markets to other WTO members.