World Trade Organization

The United States and China concluded a bilateral trade agreement in November 1999 on issues related to China's joining the World Trade Organization (WTO). The Administration has asked Congress to pass legislation that would allow the President to grant China permanent normal trade relations status. This report updates GAO's past work on the status of China's membership negotiations, including parts of GAO's earlier analysis that were recently declassified by the U.S. Trade Representative. GAO discusses (1) the results of the November 1999 bilateral Agreement on Market Access between China and the United States and (2) the status of China's ongoing multilateral negotiations in WTO.

GAO noted that: (1) in a November 1999 bilateral agreement with China, U.S. and Chinese negotiators reached agreement on commitments in four areas of market access issues that would: (a) reduce China's tariffs; (b) remove its nontariff barriers such as quotas; (c) reduce its limits on trade in services; and (d) remove its barriers on trade in agricultural products; (2) the results of these ongoing bilateral negotiations, together with those China has completed with other members, would improve upon the commitments China made to the United States in these four areas to some degree; (3) negotiations with WTO's working party have covered issues in seven broad areas of interest to working party members regarding how China will adhere to the obligations and responsibilities created by the WTO agreements; (4) according to GAO's analysis, China has already reached general agreement or has only minor differences to resolve with members of the working party on commitments in four of these areas; (5) the commitments in these areas would: (a) expand foreigners' trading rights, increase transparency in administering its trade regime, and reform other aspects of China's trade framework; (b) better protect intellectual property rights; (c) place disciplines on how China applies health and safety standards and regulatory measures to imported products; and (d) determine what compliance and monitoring mechanisms will be applied to China beyond those to which other WTO members are subject; (6) China agreed to certain compliance and monitoring mechanisms in its November 1999 bilateral agreement with the United States, and U.S. Trade Representative officials are confident that these commitments will be incorporated in China's accession protocol and working party report without substantive change; (7) working party and Chinese negotiators still have differences to resolve in the other three areas of negotiation: (a) China's trade-distorting industrial policies, primarily its use of subsidies to firms; (b) China's ability to use trade-related restrictions to protect its foreign currency reserves; and (c) other issues, most notably China's closed government procurement market; (8) in the November 1999 bilateral agreement, China also made a number of commitments regarding its state-owned and state-invested enterprises that relate to concerns over subsidies and procurement; and (9) U.S. Trade Representative officials are confident that these draft commitments will be incorporated into China's accession protocol and working party report without substantive change.