Transcript CHINA and the WTO - International Trade Relations

China and the WTO
International Trade Relations
Spring 2003
Prof. Malawer
Dan Funk
Gary Malloy
Ed Ostensoe
Devi Prasad
Agenda
 China’s WTO accession and current global trade data
 China’s WTO membership
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Implications of China’s adoption of international trade
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China’s WTO accomplishments thus far and some complaints
 TRIPS overview – IPR in China and the impact on trade
 Trade dispute settlement mechanisms
 China’s WTO concerns, problem areas and adoption issues
 China and TRIPS – legal modifications and practical obstacles
 United States trade policy proposal on China and IPR
China and the WTO
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China’s WTO accession was a 15-year process
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Applied for admission to GATT in July 1986
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Entered WTO December 11, 2001 following Doha Ministerial
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143rd member nation
Organizational support and oversight
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TPSC: Trade Policy Staff Committee Subcommittee on China’s
WTO Compliance
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MOFTEC: Ministry of Foreign Trade and Economic Cooperation
China’s main domestic WTO activities since accession (2002)
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Restructuring of trade-related ministries and agencies
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Education and training on the requirements and benefits of
WTO membership: SIPO and CIPTC
China’s Accession Agreement
 Confers obligations of 20+ multilateral WTO
agreements
 Especially MFN, national treatment, TRIMS, and TRIPS
 Opens China’s markets to WTO members
 Includes safeguard mechanisms for WTO members
 Legal restraint of Chinese imports
 Textiles safeguard
 Special methodology for measuring dumping
 Transitional Review Mechanism
 Annual WTO compliance review through 2009
China’s IPR Infrastructure
 SIPO
 State Intellectual Property Office
 CIPTC
 China Intellectual Property Training Center
 HK SAR IPD
 Hong Kong’s Special Administrative Regions
Intellectual Property Department
 APEC IPEG
 Asia-Pacific Economic Cooperation Intellectual
Property Rights Expert Group
China Trade
$350,000
$300,000
Chinese Imports
$ Millions (USD)
Chinese Exports
$250,000
$200,000
$150,000
$100,000
$50,000
$1995
1996
1997
1998
1999
2000
2001
2002
Source: US Department of Commerce - ITA Mark et Access Compliance (2003)
China Trade
Top 5 Chinese Import Sources, 2002
Top 5 Chinese Export Markets, 2002
22%
25%
Hong Kong
Japan
5%
18%
15%
15%
18%
US
EU
37%
13%
EU
Taiw an
Korea
US
Korea
Other
Japan
13%
9%
Other
10%
Source: US Department of Commerce – ITA Market Access Compliance (2003)
US / China Trade Balance
$140,000.00
Exports to China
$120,000.00
$ Millions (USD)
Imports from China
$100,000.00
$80,000.00
$60,000.00
$40,000.00
$20,000.00
$1985
1986 1987
1988
1989
1990
1991 1992
1993
1994
1995 1996
1997
1998
1999
2000 2001
2002
Source: US Census Bureau (January 2003)
Transformation - 1970s to 2000
Internal and Institutional
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Isolation to integration i.e, Ordinary trade regime to Dual System
regime i.e., liberal trade regime
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Duty free import of investment, inputs by Foreign Invested Enterprises
Import tariffs, TBs & NTBs, trade by SOE
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Entry into IMF and IBRD in 1980s
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Revival of contractual party status with GATT in 1986 i.e, 36 years gap
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WTO membership – A felt need in 1990s for external impetus to
overcome obstacle to further reforms to sustain growth
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Membership Welfare Impact – China to grow by 2.2% & World by 0.2% p.a
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($28 bn and $ 56 bn respectively)
$10bn trade in 1970s rose to $280bn in 2000
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Moved up from 30th to 6th position as trading nation
Trade/GDP increased four fold to 40 percent – next only to that of US
Meaning of WTO Accession
A Multilateral Trading System
 For Some Developing Countries
 A Destructive Force
- smashes old edifice of their closed economy
 For Others
 A Constructive Force – builds their institutional capabilities and overhauls
economic management system
 For For China –
 The Most Efficient system that taps potential of each trading partners through
open market (i.e., Not a bazaar but bidirectional relationship)
 A need & opportunity to officials, businessmen, general public to reconfigure
their mindset to new circumstances (a dent on their power base)
 For the US –
 For ALL –
 A responsible behavior from major players who account for 75 % of global trade
through multilateral trading agreements
Impact Transmission through
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Factor productivity growth
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Expansion of Labor intensive industries
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Contraction of Protected & Land intensive industries
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Competition to inefficient SOEs
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Reduced in budgetary revenue ?
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Increased unemployment and regional disparities
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Increased Market access to Chinese exports in US, OECD and other developed
countries
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Increased market access to US & European Exports
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for agro, capital and technology intensive industries
Enhanced policy transparency, better governance, greater business predictability
leading to consistency in applicabilition of rules
Some of China's Accomplishments
& The US gains
Reduced tariff from 55 % in 1982 to 12% in 2003
Permitted more than one shipment per licence (a major US concern)
Promised to bring down to <10% by Jan 2005
Repealed more than 90 Laws
Progressed in its commitments
Reviewd >2500 trade laws
Trained 1000 Judges abroad
Amended legislative framework for
Trademark, Copy right, Patents
Initiated anti-piracy and anti-counterfeiting campaign in 2002
But weak on enforcement and remedies that have deterrent effect.
Police are not interested in pursuit of violations
An illustrative list of impact on US – A pointer for more?!
US high-tech IT export sector alone gained $500 mn due to tariff reduction by China
in 2002
US exports of wood products surged by 65% in value due to tariff reduction
Beef & poulty exports increased by 28% in value; almonds exports up to $50 mn
Complaints
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Weak IPR regime - violation of which has implication of $1.9 bn/yr
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Incomplete & inconsistent information on Subsidies & CVD
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Continuing Quotas and licence fee on some raw materials
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Weak VAT administration on domestic products
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Indirect restrictions under TRIMS
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Mixed compliance in Agriculture sector due to TBs
Some Good news
 2002 anti piracy campaign involving
400,000 government agents yielded seizure
of 16 mn illegal publications and 39 mn
pirated discs
 Japan and other WTO members are cooperating at TRIPS Council to ensure
Chinese compliance
 China to host 2003 WIPO Conference
TRIPS – Origins & Functions
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TRIPS came into effect January 1, 1995 (Uruguay Round)
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TRIPS requires compliance with WIPO conventions
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Developed countries: 1-year phase-in period
Developing & Transition countries: 5-year phase-in period
Least developed countries: 11-year phase-in period
Paris Convention (industrial property)
Berne Convention (copyright)
Rome Convention (performances)
IPIC (protection of integrated circuits)
TRIPS Council
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Monitoring
Consultation
Technical Cooperation
Reviews and Negotiations on Specific Subjects
Review of TRIPS agreement
Resistance to TRIPS
 Costs to establish and enforce IPRs
 Technology transfer
 Patent eligibility and compulsory licensing
 Biotechnology
 Confidential test data
 Geographical indications
How Are “TRIPS” Disputes
Handled?
 Bilateral Discussions, for example U.S. /
China, EU / China, Japan / China
 Arbitration – CIETAC, China International
Economic and Trade Arbitration
Commission, (Based on the number of
cases CIETAC is the busiest arbitration
institution in the world) www.kpmg.com.cn
Advantages Of Arbitration
 More time and cost effective than court
proceedings
 Right to chose the arbitrators from an
international pool of arbitrators
 CIETAC grants a binding decision & awards can
be enforced in China and abroad
www.kpmg.com.cn
Who Are The Disputes With?
 Chinese Individuals
 Chinese Companies
 Chinese Government
“The number of cases involving the first two categories
far exceeds those of the third.”
(Export America, June 2001,
Dispute Avoidance And Dispute Resolution In China)
Disputes With Chinese Companies Or
Individuals
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Primary Ways To Resolve A
Commercial Dispute In China
Negotiation (least expensive)
Arbitration (CIETAC) (CMAC)
Litigation (complex and time
consuming)
DSB
(Export America, June 2001, Dispute Avoidance And
Dispute Resolution In China)
Dispute Resolution (WTO)
Current Cases Involving China
 AS RESPONDENT – NONE (www.wto.org)
 AS COMPLAINANT – TWO CASES VS. U.S.,
REGARDING “DEFINITIVE SAFEGUARD
MEASURES ON IMPORTS OF CERTAIN STEEL
PRODUCTS” MARCH 2002
(www.wto.org)
“Many cases will not be based on a violation of fair trade
practices and therefore are not subject to the WTO
dispute settlement mechanism.” (www.kpmg.com.cn)
International Arbitration Cases
1995 1996 1997 1998 1999 2000 2001 2002
AAA
180
CIETAC 902
HKIAC 184
ICC
427
226 320
778 723
197 218
433 452
387
645
240
466
453
609
257
529
510 649
543 731*
298 307
541 566*
672
684*
320
593*
AAA
American Arbitration Association
CIETAC China International Commercial Dispute Resolution
HKIAC
Hong Kong International Arbitration Center
ICC
International Chamber of Commerce
*Statistics include domestic as well as international arbitrations
www.hkiac.org/en_statistics.html
MOFTEC: China’s WTO Intermediary
MOFTEC: Ministry of Foreign Trade and
Economic Cooperation
Review of 2500 Domestic Trade Laws in 2002
• 830 reportedly “repealed”
• 325 reportedly “amended”
Mission: Continued Education & Implementation
WTO requirements (Central/Provincial Officials)
WTO-Mandated Tariff Reductions
1. Information Technology/Computers
2. Chemicals
3. Autos/Parts
4. Wood/Paper Products
5. Agriculture Goods
(Beef/Dairy/Citrus, etc.)
Other Central WTO Concerns
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MFN and National Treatment of Goods/Services
Transparency and Rules of Origin
Independent Review of Administrative Decisions
Technical Barriers to Trade, Import Licensing,
Antidumping, Subsidies/Countervailing Duties
• NTB removal initiated in many Chinese sectors:
Chemicals to Scientific Equipment
• Legal foundation to access China’s: Financial
Services/Banking/Insurance, Telecom, Product
Distribution, Construction, Engineering, etc.
WTO Imposition Problem Areas
1. Limited Transparency in adoption and operation
of new laws & regulations.
2. Inconsistent Implementation at local and
provincial levels of government.
3. Local Government Resistance and arbitrary
imposition of existing laws/WTO requirements.
4. Little opportunity for public commentary &
input in drafting of laws & regulations.
5. Endemic uncertainty and lack of uniformity in
law imposition and enforcement mechanisms.
Selected US-China WTO Trade Issues
(Agriculture and TRIPS/IPR)
Agriculture
Bio-Technology: Uncertain Rules and Regulation Imposition
Tariff Rate Quota (TRQ) on selected Bulk products: Cotton/Wheat/Corn
Sanitary/Phyto-sanitary “zero tolerance” requirements on Meat &
Poultry imports, not applied to domestically produced food stuffs.
Trade delaying inspection and monthly import limitation requirements.
Continued Subsidization of domestic production for export (corn).
WTO Mandated Changes in China’s
Intellectual Property Laws (TRIPS)
 Patents – China’s new patent law
came into effect on July 1, 2001
 Trademarks – China’s new trademark
law went into effect December 1,
2001
 Copyrights – China’s new copyright
law went into effect October 27, 2001
China’s TRIPS Agreement Failings
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Ineffective Enforcement Mechanisms, Remedies, Penalties
Lack of Coordination in Chinese Ministries and Agencies
Local Protectionism and Corruption
Low Police Enforcement Interest
High Legal Threshold for Criminal Prosecution and Conviction
Lack of Technically Skilled Judges and Expert Witnesses
Limited Judicial/Legal Experience
Weak Punishment Mechanisms for Civil and Criminal Penalties
USTR Testimony to Congress (2002)
IPR related trade association testimony to Congress:
“Effective enforcement against (IPR) infringement in China is
universally recognized as the chief concern of (IPR)
rights holders, as piracy rates in China are high.”
For example: US Copyright holders report that inadequate
enforcement “has resulted in piracy levels in China for
most sectors at around or in excess of 90 %” with losses
due to piracy estimated to be a staggering $1.9 Billion
annually….
Recommended US Policy and Actions
Demand stronger enforcement of China’s IPR laws
Enhanced Judicial Educational Exchange
Continued Bi-lateral Discussions with Chinese Ministries
both US based and in concert with other WTO members.
Increase trade barriers to China
Form coalition with other IPR-affected WTO members to
exert trade pressure on China
Timeframe: 3 years (tie this to TRM milestones)
Questions?
Sources
China Online: http://www.chinaonline.com/refer/biographies/secure/BB-REV-GaoLulin3.asp
China Intellectual Property Center http://www.ciptc.org.cn/en/zxjsen.htm
WTO Website: http://www.wto.org
WIPO Website: http://www.wipo.org
TRIPS: Controversies and Potential Reform: Keith E. Maskus, Lead Economist, The World Bank
Development of China Trade 1995 – 2002: http://mac.doc.gov/China/docs/chinatrade.pdf
USTR: 2002 Report to Congress on China’s WTO Compliance
USTR World Regions: China, HK, Mongolia, Taiwan: http://www.ustr.gov/regions/china