• The WTO transparency obligations have had a positive effect on local governance by providing cover to reformers and raising public and official awareness of administrative, judicial, and legislative reform efforts.
• The Chinese government has adopted a series of industry development policies that reorganize domestic industries and frequently discriminate in favor of domestic products, sometimes in contravention of China's WTO commitments.
• Only rhetorical progress has been made toward reducing the extremely high level of intellectual property rights infringement in China in the past year and the situation continues to severely injure U.S. intellectual property industries.

Commercial Rule of Law Beyond the WTO

The systemic changes required to implement China's WTO commitments also affect other areas of rule of law development in China, especially the capacity building of the Chinese judiciary and bureaucracy that many of China's WTO accession commitments have mandated. In the judiciary, the Supreme People's Court (SPC) has begun seeking comments on its draft interpretations through its online services. In addition, some intermediate courts are now experimenting with publication of all their decisions.⁸⁰² The significance and reasons for this change extend beyond the requirements of WTO accession, but the need to provide reasoned decisions for trade-related actions plays a role in this reform.⁸⁰³
Provincial and local government bodies and provincial people's congresses continue to make notable progress in transparency.
Some have been publishing draft legislation, for both trade-related laws and other types of legislation. For example, the Sichuan Provincial People's Congress has published draft laws since the early 1990s.⁸⁰⁴ The Guangdong Provincial People's Congress has interpreted the 2000 Law on Legislation to require that the Congress seek opinions on legislation from relevant stakeholders.⁸⁰⁵ The Guangdong People's Congress and the Sichuan People's Congress publish all legislation on their Web sites before formal approval.⁸⁰⁶
An increasing number of local legislatures have made open calls to the general public for input on legislation. Some have developed official procedures for considering suggestions. These regulations have been developed to implement certain provisions of the 2000 Law on Legislation.⁸⁰⁷ Shenzhen began soliciting legislative proposals through its Web sites in 2004.⁸⁰⁸ The Guangdong Provincial People's Congress solicits comments on legislation through newspapers, its Web site, direct invitations to particular constituencies, and open hearings.⁸⁰⁹ Some local people's congresses have attempted to use hearings to obtain public views on legislation. But people's congresses also seem to be having problems putting into practice previously adopted rules outlining how they will conduct a hearing. The few legislative hearings held so far demonstrate that Chinese legislators still need to address issues such as witness selection and public and official attendance.⁸¹⁰
Provinces and municipalities are developing innovative measures to distinguish themselves as forward-leaning in governmental transparency and business efficiency. In Chongqing, officials established the Chongqing Industrial Business Administration Office to be a "one-stop" office for licensing.⁸¹¹ The Internet also provides a regular means of interaction between the government and its citizens on a wide variety of issues. In Wuhan, the government has created a bulletin board for airing grievances, and Beijing's government solicits input on public works online.⁸¹² Shanghai's legislature has sought to expand its experience with hearings beyond the legislature itself with a proposal to enact a local regulation that would set up a hearing mechanism for the local government.⁸¹³
Although not directly required by China's WTO commitments, local governments have cited WTO transparency commitments as a factor affecting changes in the civil service system. According to interviews with Commission staff, the Guangdong Provincial Personnel Department responded to WTO accession by recruiting for civil servants from a wider pool of applicants, without regard to their social status. The entire process of hiring, promotion, and firing has become more transparent, using a standard examination for hiring decisions and protecting the right of the public to file complaints against prospective high-level appointees.⁸¹⁴
Recent changes like these that bring greater transparency in government administration owe much to the general requirements and increases in capacity that WTO accession has required. While many problems have arisen in China's implementation of its specific commitments, that implementation has benefited many U.S. companies doing business in China and provided U.S. trade officials with much more comprehensive tools for addressing problems that arise in the bilateral relationship.
China has not made progress over the last year on WTO commitments related to transparency. According to USTR, transparency is the most important of all of the WTO obligations.⁸¹⁵ Because transparency affects a wide range of industries, the Chinese government's failure to implement the commitments causes harm in a number of sectors and trade areas. As soft commitments, the transparency obligations are some of the most difficult to comply with, because they involve the cooperation of government departments and agencies at all levels. A government organization seeking to comply with the transparency commitments must also reckon with the interests of the Communist Party, which may not always correspond. Despite these difficulties, some observers are optimistic that the Chinese government will eventually meet its commitments on transparency, and the general level of U.S. industry concern has decreased.⁸¹⁶
In its accession agreement, China also agreed to participate in an annual review for the first eight years of its WTO membership with a final review in the tenth year.⁸¹⁷ This Transitional Review Mechanism (TRM) has now completed two cycles through the Committees and Councils of the WTO, ending with a consolidating session in the WTO General Council. In the first year, the results of the TRM disappointed many observers, who expected it to have great potential to assist WTO implementation in China.⁸¹⁸ The Chinese government refused to provide written answers to questions and requests that the United States and other WTO members had made in advance. Because decision-making in WTO Committees and Councils operates by consensus, the Chinese delegation also blocked the adoption of any official report on the TRM. Monitoring progress with China's implementation in its second year of membership, the U.S. government declared that the 2003 TRM process was less contentious and more productive.⁸¹⁹ The 2003 TRM, however, had all the same negative features of the earlier TRM process, with no written responses from the Chinese delegation or final report of any kind. The Chinese delegation appears to have succeeded in lowering expectations for the outcome of the TRM. As a result, the TRM process does not work to the benefit of China, the United States, or other WTO members, and suggests that Chinese central government authorities responsible for trade matters are not dedicated to implementing WTO transparency commitments.
Industry Development Policies
China's government has pursued a variety of policies since WTO accession to improve the capacity for innovation in Chinese industry. These policies and the measures used to implement them often exploit broad WTO rules and soft commitments requiring systemic changes to China's bureaucracy to favor Chinese industry.⁸²⁰ Following its long tradition of economic planning, China's leaders intervened in these industries to generate global competitiveness, often targeting Chinese producers lagging significantly behind global competitors.⁸²¹ Four particularly noteworthy cases from the past year detailed below have been the subject of bilateral discussions between the U.S. and Chinese governments with varying degrees of success. Some of these cases were resolved using specific complaints tied to individual WTO obligations, but in other cases, little progress has been made in combating discriminatory Chinese policies exploiting vague WTO rules despite threats of specific action from China's trading partners.
Chinese government efforts to use industry policies to protect or develop Chinese industries at the expense of foreign firms may grow more acute as obvious barriers to trade are eliminated and more subtle barriers succeed. This shift to more defensible or less transparent tactics in industrial policies may take several years, as the Chinese still must replace specifically WTO-inconsistent development policies built on technology transfer and import substitution. U.S. policymakers will have to be vigilant to prevent discrimination against U.S. products and service providers and to ensure that China's WTO obligations are helping China create a robust commercial legal system.
Value added tax rebate on integrated circuits
Efforts by the United States convinced the Chinese government to abandon its value added tax (VAT) rebate policy for domestically-produced integrated circuits in July 2004. The policy had the potential to devastate the U.S. industry by forcing it to relocate both semiconductor fabrication and research and development to China to achieve lower production costs and gain access to the rapidly expanding Chinese market. On March 18, 2004, the United States formally sought consultations with China under Articles 1 and 4 of the WTO Dispute Settlement Understanding (DSU) regarding the Chinese government's practice of providing a partial VAT rebate to semiconductor manufacturers designing and fabricating integrated circuits (ICs) in China.⁸²² This challenge was the first invocation of the WTO dispute settlement mechanism against China since the latter's accession to the WTO in December 2001.
China established its VAT rebate policy before acceding to the WTO through the State Council's promulgation of a Notice on June 24, 2000.⁸²³ This Notice provided that firms manufacturing ICs in China should receive a rebate of 11 percent of China's normal VAT rate of 17 percent, reducing the effective VAT rate to 6 percent.⁸²⁴ The policy only granted rebates to firms manufacturing ICs in China. Chinese tax authorities continued to assess the full VAT of 17 percent for sales of imported ICs. The United States asserted that the policy violated Article III of the General Agreement on Tariffs and Trade (GATT 1994), which prohibits the imposition of "internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products." ⁸²⁵
Consultations at the WTO between the Chinese and U.S. governments began in April 2004. Although the 60-day period during which a complaining WTO member cannot seek the formation of a panel expired before the end of May, the United States refrained from requesting a panel at the June meeting of the WTO Dispute Settlement Body and continued consultations with the Chinese government on the policy. On July 8, 2004, the Chinese government agreed not to certify any additional enterprises for preferential treatment and to phase out the policy for existing beneficiaries by April 1, 2005.⁸²⁶
Wireless local area network (WLAN) architecture and privacy infrastructure (WAPI)
U.S. government action, culminating in the April 21, 2004 meeting of the U.S.-China Joint Commission on Commerce and Trade (JCCT), also prevented a commercially onerous set of standards from injuring the U.S. wireless networking industry. In this case, the General Administration of Quality Supervision, Inspection and Quarantine of the People's Republic of China (AQSIQ) sought to implement standards that not only deviated from a corresponding set of international standards but also had the potential to force the transfer of technology from U.S. computer manufacturers to their Chinese competitors as a requirement of importation.⁸²⁷ In July 2003, AQSIQ and the Standards Administration of China (SAC) met and determined that after December 1, 2003, wireless networking equipment imported, manufactured, or sold in China would have to comply with two Chinese standards for wireless local area networks (WLAN).⁸²⁸ These standards differ from an adopted international series of WLAN standards designated 802.11 by the International Standards Organization.⁸²⁹ Specifically, the encryption algorithms for the Chinese standards, known as WLAN Architecture Privacy Infrastructure (WAPI), could not function with 802.11-compliant hardware or software. Through the WTO Agreement on Technical Barriers to Trade (TBT Agreement), China committed to use international standards as the basis for domestic standards except when ineffective or inappropriate and to refrain from adopting more trade-restrictive standards than necessary.⁸³⁰ Yet, under China's proposed standard, hardware products that operate according to internationally accepted standards would not function on a network using the Chinese standards. Moreover, the implementation by SAC and the State Encryption Management Commission (SEMC), a sub-unit of AQSIQ, would have required foreign computer manufacturers to provide their products to 24 Chinese computer firms for preparation to enter the market.⁸³¹ Those Chinese firms would have loaded the WAPI algorithms on the foreign firms' hardware and controlled the conformity assessment process for the foreign firms' equipment.
Although AQSIQ later adjusted the date the policy would take effect from December 1, 2003 to June 1, 2004, the lack of transparency and the unpublished algorithm for the standard made this policy particularly problematic for foreign computer manufacturers. The U.S. government responded to the promulgation of this policy by both requesting a delay in implementation and seeking its revocation.⁸³² At the April 2004 meeting of the JCCT, Vice Premier Wu Yi agreed that the Chinese government would suspend the implementation of the new standards indefinitely; work to revise the standard and its implementation, taking into account the comments provided by a variety of parties; and participate in the processes of international standards making bodies dealing with wireless encryption.⁸³³
Export controls on coke
In 2004, another potential WTO dispute settlement case arose in the context of the Chinese government's export quota on coke, a key input in steel production. Although China is the world's largest coke producer, it exports only a small percentage of its overall out-put.⁸³⁴ This type of export restriction, which a WTO member may only impose to remedy a critical shortage, to implement a legitimate standard used in international trade, or to implement a legitimate environmental objective, became a problem in 2004 because China's increased demand for raw materials has contributed to steadily rising commodity prices globally.⁸³⁵ As a result, the Chinese export quota has begun to affect U.S. steel producers.
The European Union apparently reached an agreement with China in May 2004 guaranteeing the same level of quota in 2004 as it received in 2003, but such an arrangement may not guarantee enough Chinese coke to satisfy U.S. demand in 2004.⁸³⁶ The U.S. trade agencies continue to negotiate with their Chinese counterparts to reach an acceptable resolution of this problem.
Automobile Industry Development Policy
China's new Automobile Industry Development Policy poses serious market access problems for the U.S. automobile industry through new controls on in-country investment and a variety of obstacles to and discrimination against imports. In 2003, China's National Development and Reform Commission (NDRC) issued a draft of the Automobile Industry Development Policy.⁸³⁷ In May 2004, the NDRC issued the final version of the policy. Foreign industry complaints about the draft policy centered on the requirements that foreign-invested enterprises participating in the particular manufacturing covered by the policy, including automobile and motorcycle assembly and auto parts manufacture, faced high minimum capital requirements and a prohibition on majority owner-ship.⁸³⁸ While NDRC addressed some of these restrictions in the final version, it still presents concerns for small and medium-sized
U.S. auto parts manufacturers.
Much of the policy addresses changes designed to create Chinese automobile brands through consolidation and higher barriers to market entry. This brand-creation part of the policy will also have inevitable effects on foreign investment in the automobile and motorcycle sectors, as it limits the number of joint venture partners available for U.S. firms. While not prohibiting automobile imports, the policy places significant functional limitations on sales and distribution channels for importers by requiring them to establish complete distribution networks for their products.⁸³⁹ Finally, the subsidization of China's automobile industry, mostly through loans from China's state-run banking system, changes the competitive landscape by bolstering Chinese automobile firms at the expense of their foreign competitors.
Intellectual Property Rights: Laws and Enforcement
The Chinese government has not made progress toward effective enforcement of intellectual property rights (IPR). After the cancellation of the World Intellectual Property Organization (WIPO) summit in 2003 due to the Severe Acute Respiratory Syndrome outbreak, China ceased making even rhetorical progress toward the goal of improving IPR protection in China. After the summit's cancellation, all indications that China would make concrete progress by, for example, joining the WIPO Copyright and Performances and Phonograms Treaties (collectively, WIPO Internet Treaties), evaporated. Instead, extremely high rates of piracy and counterfeiting continued in 2003 and U.S. right-holders noted the resurgence of exports of counterfeit goods from China.⁸⁴⁰ In November 2003, the U.S. Ambassador to China convened the second annual IPR Round-table in Beijing and the U.S. Embassy in Beijing unveiled its online IPR Toolkit to provide advice on protecting intellectual property in China.⁸⁴¹ In spite of these constructive overtures by the United States, the Chinese government failed to take actions showing a serious intent to reduce counterfeiting and piracy, instead disputing the seriousness of the problem.842
Beginning at the end of 2003, and continuing through the meeting of the JCCT in April 2004, the Chinese government began to make the type of personnel assignments and broad commitments that have resulted in improved IPR protection in other countries.⁸⁴³ In November 2003, the Chinese government designated Vice Premier Wu Yi the leader of the State Council's "Leading Group on IPR Protection." ⁸⁴⁴ At the JCCT meeting in April 2004, Vice Premier Wu committed China to improving both the IPR legal regime and government enforcement of IPR.⁸⁴⁵ If implemented, these commitments may reduce the rate of piracy and counterfeiting in the Chinese market and help conform China's IPR protection regime to the commitments in the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs).⁸⁴⁶ Close vigilance by U.S. trade officials is necessary to ensure that China meets these commitments.
Unfortunately, the central government has not demonstrated a capacity or desire to implement these commitments. Implementing the commitment to increase the range of IPR violations subject to the criminal law, for example, requires only that the SPC lower the criminal enforcement threshold, but the Court has not yet taken that simple step.⁸⁴⁷ And because most infringement occurs far from the center of government in Beijing, IPR violators avoid sanction through a combination of bureaucratic barriers, local protectionism, and corruption.⁸⁴⁸ Moreover, several highly publicized IPR-related events have attracted the attention of foreign observers and caused
U.S. businesses to question whether they can risk bringing their intellectual property into the China market.⁸⁴⁹
The developing capacity of Chinese courts with respect to private IPR cases is a positive sign and worthy of greater U.S. attention. In a number of cases, foreign right-holders have successfully sued Chinese infringers in intermediate people's courts.⁸⁵⁰ While difficult to quantify, the increasing speed and reliability of intermediate people's courts in handling IPR infringement cases reflect the results of government policies seeking to improve judicial competence on IPR law, as well as generally rising standards in the Chinese judiciary.⁸⁵¹
Agricultural Market Access
China has become one of the largest foreign markets for U.S. agricultural products, but market access issues limit this important component of U.S.-China trade relations. China's administration of its tariff rate quota (TRQ) system raised market access concerns almost from the moment China entered the WTO.⁸⁵² The Chinese government has sought to address these concerns with quota administration, although with mixed success. The quota administration authorities adopted a series of regulations in 2003 that should have resolved these concerns, but renewed complaints in 2004 have called into question whether the relevant Chinese authorities are implementing the regulations.⁸⁵³
There has also been a lack of progress in resolving problems with AQSIQ's administration of the quarantine process for plant and animal products. Problems identified by U.S. industry have lingered on without satisfactory reason despite negotiations between AQSIQ and the U.S. Department of Agriculture's Animal and Plant Health Inspection Service (APHIS).⁸⁵⁴ The Commission has heard testimony that China's failure to use science-based standards in its sanitary and phytosanitary inspection process impedes imports of U.S. agricultural products.⁸⁵⁵ Specifically, U.S. beef and poultry cannot enter China's market if any pathogens are present and arbitrarily enforced Chinese quarantine procedures adversely affect trade in U.S. soybeans, grains, and oilseeds. The American Chamber of Commerce in China asserted that AQSIQ does not apply the same stringent standards to China's domestic agricultural products.⁸⁵⁶ Although problems with individual products are resolved periodically, the glacial pace of approvals feeds the impression that AQSIQ uses quarantine as a barrier to trade.
Services: Distribution Services and Trading Rights
Two of China's most important WTO accession commitments were pledges to end restrictions on distribution services and trading rights.⁸⁵⁷ While other barriers to market access still exist, the end of these specific limitations will dramatically change the way U.S. and other foreign companies do business in China. China's commitments required eliminating the restrictions on majority foreign-owned companies to obtain trading rights and engage in certain segments of distribution services by December 11, 2003, two years after accession.⁸⁵⁸ The Ministry of Commerce (MOFCOM) did not complete its draft of the Foreign Trade Law, which covers trading rights, or the Regulations on Foreign Investment in the Commercial Sector, which covers most distribution services, until the spring of 2004. When the Chinese government published the measures, however, it caught up with overdue commitments and, on paper, granted trading and distribution rights to wholly foreign-owned companies ahead of schedule.⁸⁵⁹ The coming year will tell whether the implementation of these measures will have the effect of eliminating these significant barriers to trade, producing a positive impact for U.S. companies doing business in China.

U.S. Government and Other WTO Member Technical Assistance to China

China has received technical assistance from the United States aimed at assuring compliance with WTO commitments and requirements. The principal vehicle for this type of assistance is a U.S. Commerce Department program that began in September 2000. Continuing programs focus on WTO commitments where China's implementation has lagged, including IPR enforcement. In addition to traditional technical assistance programs run by the Commerce Department's International Trade Administration (ITA), innovative programs such as the U.S.-China Legal Exchange and annual Standards Workshops have broadened the program to reach different audiences. U.S. programs have been overshadowed by other WTO members who have committed far greater funds and personnel to their systematic technical assistance programs to China than the United States. The EU, Japan, and Canada significantly outspend the United States, which spends about the same as Australia.⁸⁶⁰ The impact of this funding gap is not academic: on many trade issues on which the United States disagrees with its trading partners, such as the recognition of geographical indications (GIs) and the treatment of genetically modified organisms (GMOs), the larger presence of other WTO members as primary resources for training, source materials, ideas, and policy approaches will likely prejudice U.S. companies that confront these issues in China.

Notes to Section V(e)—Commercial Rule of Law and the Impact of the WTO

802 The Beijing High People’s Court Web site (<http://bjgy.chinacourt.org/cpws/>) publishes all IP-related decisions and many other decisions from Beijing’s two intermediate people’s courts and from the Beijing High People’s Court itself.
803 "Establishing a WTO-compatible Judicial Review System: An Empirical Study on the Role of the Chinese Judiciary in Implementing the Law of the WTO," (draft manuscript on file with the Commission) Section II.1.
804 Commission Staff Interview.
805 Ibid.
806 Commission Staff Interviews.
807 Ibid.
808 "Internet Helps Public Affairs Decision-making," Xinhua, reprinted in China Daily Online, 28 January 04, <www.chinadaily.com.cn>.
809 Commission Staff Interview.
810 The Guangdong People’s Congress has detailed regulations. Several cities within the province, such as Guangzhou, Shenzhen, and Shantou, have their own regulations on public hearings. The Sichuan Standing Committee Legal Affairs Commission has established regulations to set up procedures for hearings that explain how to select participants, how to select attendees, how records from hearings are to be published, and how to report the results of the hearing so that the Standing Committee may consider the hearing contents in its deliberations. The Standing Committee then invites citizens to attend its meetings, on a first-come, first-served basis. In spite of all the regulations, the Guandong People’s Congress and the Sichuan People’s Congress have actually held only one hearing each. Some of the cities have held more. Guangzhou has held three, and Shenzhen has held four or five. Commission Staff Interviews.
811 Chongqing Industrial Business Administrative Management Office Web site [Chongqing gongshang xingzheng jingli ju wangzhan], <www.cqgs.cn/index.asp>.
812 "Internet Helps Public Affairs Decision-making," Xinhua.
813 Xiao Liang, "System for People to Oversee City Hall," China Daily, reprinted in China Daily Online, 23 February 04, <www.chinadaily.com.cn>.
814 Commission Staff Interviews.
815 U.S.-China Trade: Preparations for the Joint Commission on Commerce and Trade, Hearing of the Subcommittee on Commerce, Trade and Consumer Protection of the House Committee on Energy and Commerce, 31 March 04, Testimony of Charles Freeman, Deputy Assistant USTR for China.
816 China and the WTO: Compliance and Monitoring, U.S.-China Security and Economic Review Commission, 5 February 04, Testimony of Terence Stewart, Managing Partner, Stewart and Stewart Law Offices. Also, the U.S.-China Business Council reported in its assessment of China’s second year in the WTO that transparency was one of the bright areas in a year in which there seemed to have been a loss of momentum among the Chinese leadership. China and the WTO: Compliance and Monitoring, U.S.-China Security and Economic Review Commission, 5 February 2004, Testimony of Robert A. Kapp, President, U.S.-China Business Council. But see Trade Policy Staff Committee Hearing, 10 September 03, Testimony of Robert A. Kapp, President, U.S.-China Business Council (noting the loss of momentum and decrying the continued transparency problems). Interestingly, when GAO sought to determine the areas of implementation that U.S. businesses were most interested in, they found that the importance placed on implementation of transparency commitments fell in an 18-month period from the third most important concern to the ninth most important concern out of twenty-six concerns with implementation. Compare General Accounting Office, World Trade Organization: Selected U.S. Company Views about China’s Membership, GAO–02–1056, 23 September 02, 9 with General Accounting Office, World Trade Organization: U.S. Companies’ Views on China’s Implementation of Its Commitments, GAO–04–508, 24 March 04, 10.
817 Protocol, WT/L/432, Part I.18, 11.
818 Trade Policy Staff Committee Hearing, Testimony of Robert A. Kapp, 5.
819 U.S.-China Trade, Testimony of Charles Freeman; Office of the United States Trade Representative, 2003 Report to Congress onChina’s WTO Compliance, 10.
820 Soft commitments, as the term is used in this report, are general, systemic requirements for which the Chinese government must develop a capacity throughout the bureaucracy. Soft commitments present the greatest challenge to both the Chinese government (as it seeks to implement them) and the U.S. government’s trade bureaucracy (as it seeks to use these commitments to guarantee market access for U.S. firms). The Chinese government frequently finds, however, that it lacks the capacity to implement the soft WTO commitments both effectively and promptly.
821 In 2003 and 2004, the Chinese government continued to issue and enforce rules governing investment and participation in specific industries that limited market access for foreign firms by placing restrictions or conditions on personnel or financing decisions. Industries affected include automobile financing, construction, and construction design. In each of these industries, high prudential requirements, large minimum investments, and the requirement that significant foreign management staff be resident in China limit market access, especially for small and medium size firms.
822 China-Value-Added Tax on Integrated Circuits-Request for Consultations by the United States, WT/DS309/1, 23 March 04.
823 State Council Notice Concerning the Issuance of Certain Policies Encouraging the Development of the Software and Integrated Circuit Industries [Guowuyuan guanyu yinfa guli ruanjian chanye he jicheng dianlu chanye fazhan ruogan zhengce de tongzhi], issued 24 June 00.
824 Ibid., art. 41. The policy was adjusted to provide a 14 percent rebate to firms that designed and manufactured ICs in China while the 11 percent rebate was maintained for firms that designed ICs in China but, due to lack of capacity, manufactured outside China. Notice of the Ministry of Finance and the State Administration of Taxation Regarding Furthering Tax Policies to Encourage the Development of the Software Industry and Integrated Circuit Industry [Caizhengbu guojia shuiwu zongju guanyu jinyibu guli ruanjian chanye he jicheng dianlu chanye fazhan shuishou zhengce de tongzhi], issued 10 October 02; Notice of the Ministry of Finance and the State Administration of Taxation Regarding Tax Policies for Imports of Integrated Circuit Products Domestically Designed and Fabricated Abroad [Caizhengbu guojia shuiwu zongju guanyu bufen guonei sheji guowai liupian jiagongde jicheng dianlu chanpin jinkou shuishou zhengce de tongzhi], issued 25 October 02.
825 General Agreement on Tariffs and Trade (1994) [hereinafter GATT], art. III.2. Many GATT and WTO panel decisions have analyzed the meaning of "like products." See, e.g., WTO Appellate Body Reports in Korea—Taxes on Alcoholic Beverages, WT/DS75/AB/R and WT/DS84/AB/ R, 18 January 99, § 118; Canada—Certain Measures Involving Periodicals, WT/DS31/AB/R, 30 June 97, 21–25; and Japan—Taxes on Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, and WT/DS11/AB/R, 4 October 96, 18–24.
826 China-Value-Added Tax on Integrated Circuits—Joint Communication from China and the United States, WT/DS309/7, 16 July 04. In the agreement by which WTO dispute settlement was avoided, China also agreed to eliminate the policy granting a partial rebate to firms designing ICs in China but manufacturing abroad before October 1, 2004.
827 Technology transfer requirements as a condition of importation are proscribed by commitments China made in its WTO accession documents. Working Party Report on the Accession of the People’s Republic of China, WT/MIN(01)/3 ["Working Party Report"], §§ 49, 203; Protocol on the Accession of the People’s Republic of China, WT/L/432 ["Protocol"], Part I.7.3, 5.
828 The two standard were issued by the Standards Administration of China, a part of the State Council, after review by the Ministry of Information Industries, on May 12, 2003. Notice No. 2003–110 Concerning the Implementation of Mandatory Wireless Local Area Network National Standards [Guanyu wuxian juyuwang qiangzhixing biaozhun shishi de gonggao], issued 26 November 04.
829 A series of 802.11 standards govern different parts of the hardware and software puzzle with earlier versions designated by the addition of early letters of the alphabet and later versions designated by later letters of the alphabet. The IEEE has addressed the different parts of the puzzle and submitted its standards to ISO for adoption. For a complete technical discussion of the 802.11 standard and its development, see the IEEE 802.11 Working Group Web site at <http://grouper.ieee.org/groups/802/11>.
830 WTO Agreement on Technical Barriers to Trade ["TBTAgreement"], arts. 2.2, 2.4.
831 Those 24 companies were announced in three tranches during December 2003. Wang Yichao and Zhang Fan, "The WAPI Battle: Who Caused Us to Fall into a Double Loss Situation?" [Hai yuan WAPI zhi zheng: shei shi women xianru shuang shu zhi ju], Finance [Caijing], 5 April 04, <www.caijing.com.cn>.
832 AQSIQ granted an extension to the effective date that permitted companies to continue to ship some hardware to China after December 1, 2003 until June 1, 2004. AQSIQ and the State Certification and Accredidation Administration (CNCA) Notice 2003–113. This was later mooted by the indefinite suspension of the policy.
833 Office of the United States Trade Representative, The U.S.-China JCCT: Outcomes on Major U.S. Trade Concerns, 21 April 04, 1, available at <www.ustr.gov>. Following JCCT, AQSIQ, the Certification and Accreditation Administration of the PRC (CNCA), and SAC issued a notice indefinitely postponing implementation of the standards. Announcement No. 2004–44 [Gonggao], issued 29 April 04.
834 In 2003, China produced 190 million tons of coke andexported only 14.75 million tons of that production. China’scoke exports in 2003 included 4.4 million tons to the countries inthe EU and 910,000 tons to the United States. "Sino-EuropeanCoke Export Crisis" [Zhong ou jiaotan chukou pei’efengbo], Finance [Caijing], 29 May 04, <www.caijing.com.cn>.
835 GATT, Arts. XI.1, XI.2, XX.
836 In the first 5 months of 2004, exports of Chinese coke to the United States increased 14.9 percent over the same period in 2003, according to Chinese customs statistics. "China’s Coke Export Statistics for the First Five Months of 2004" [2004 nian 5 fen woguo jiaotan chukouliang tongji], Customs Consolidated News and Information Network [Haiguan zonghe xinxi zixun gang], 21 June 04, <www.china-customs.com>.
837 NDRC as a government entity under the State Council is the new name of the slightly reorganized State Development and Planning Commission, the entity responsible for formulating the plan in the socialist part of the economy.
838 Automobile Industry Development Policy [Qiche chanyefazhan zhengce], issued 21 May 04, arts. 47, 48.
839 Automobile Industrial Development Policy, art. 34. See also Article 59, which proscribes imports for waste metal reclamation purposes.
840 International Intellectual Property Alliance, 2004 Special 301 Report: China, 15 February 04, 31.
841 IPR Toolkit, <www.usembassy-china.org.cn/ipr/>.
842 Proceedings of Ambassador Randt’s Second AnnualIPR Roundtable, contributions of Chinese government officials, 18November 03.
843 Improvement in economies such as Hong Kong have occurred when the government has provided significant resources to an organized enforcement effort and pursued criminal enforcement against the organized infringers reaping significant profits from the infringement. Office of the United States Trade Representative, Special 301 Report, 3 May 04, 35–44. Compare International Intellectual Property Alliance, 2004 Special 301 Report: Hong Kong, 15 February 99, < www.iipa.com/rbc/1999/rbc— hong—kong—301—99.html> with International Intellectual Property Alliance, 2004 Special 301 Report: Hong Kong, 15 February 04, 401–2.
844 Yu Zhong, "China Attaches More Importance toProtecting Intellectual Property Rights" [Zhongguo yuelaiyuezhongshi baohu zhishi chanquan], China IPR News and Developments[CNIPR xinxi dongtai], 14 May 04, <www.cnipr.com>.
845 The commitments included reducing the overall level of infringement; changing the law so that more IPR offenses are subject to criminal enforcement; improving enforcement in the country and at the border; and joining the WIPO Internet Treaties "as soon as possible." The United States will monitor progress toward these commitments through a new U.S.-China Intellectual Property Rights Working Group under the JCCT. Office of the United States Trade Representative, The U.S.-China JCCT: Outcomes on Major U.S. Trade Concerns, 21 April 04, 2.
846 WTO, Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), arts. 41–61.
847 The U.S. government has advocated adjusting the criminal threshold for transfer of counterfeiting and piracy cases to criminal enforcement for several years. Office of the United States Trade Representative, Special 301 Report, 3 May 04, 11–12; Office of the United States Trade Representative, Special 301 Report, 1 May 03, 11; Office of the United States Trade Representative, Special 301 Report, 30 April 02, 17.
848 Office of the United States Trade Representative, 2003 Report to Congress on China’s WTO Compliance, 11 December 03, 50.
849 Twelve Chinese generic pharmaceutical manufacturers brought an action before SIPO alleging that sildenafil citrate, the active ingredient in Viagra, lacked novelty. SIPO instead invalidated Pfizer’s Chinese patent on a technicality, asserting that the patent examiner had erred in relying on Pfizer’s data demonstrating that sildenafil citrate treated or prevented erectile dysfunction in animals. The decision calls into question the overall Chinese commitment not to bend the rules to protect Chinese producers. While the rampant production and sale of counterfeit Viagra has damaged legitimate sales tremendously and tough restrictions on Pfizer’s marketing authorization have limited the size of the legitimate market, the systemic concerns raised by this decision eclipse the relatively small financial impact it is likely to have. "Viagra" Patent is Declared Invalid ["Wan’aike" zhuanli bei xuangao wuxiao], China’s State Intellectual Property Office Web site, 10 July 04, <www.sipo.gov.cn >.
850 Some judgments in civil cases involving U.S. rightholders are available (in Chinese only) at <www.chinaiprlaw.com/spxx/spxx.htm>.
851 The SPC has assigned numerous intermediate courts to hear patent cases. The authorizations include Supreme People’s Court Authorization Regarding Assigning Shangdong Province Weifang Municipal Intermediate People’s Court to Accept Patent Cases [Zuigao renmin fayuan guanyu tongyi zhiding Shandong sheng weifang shi zhongji renmin fayuan shenli bufen zhuanlijiufen anjian de pifa], issued 2 February 04; Supreme People’s Court Authorization Regarding Assigning Zhejiang Province Ningbo Municipal Intermediate People’s Court to Accept Patent Cases [Zuigao renmin fayuan guanyu tongyi zhiding zhejiang sheng ningbo shi zhongji renmin fayuan shenli bufen zhuanli jiufen anjian de pifa], issued 15 April 03; Supreme People’s Court Authorization Regarding Assigning Jiangxi Province Jingde County and County Intermediate People’s Court to Accept Patent Cases [Zuigao renmin fayuan guanyu tongyi zhiding zhejiangsheng ningbo shi zhongji renmin fayuan shenli bufen zhuanli jiufen anjian de pifa], issued 31 December 2002.
852 "U.S. Warns China on Farm TRQs, Pleased with Progress on Soybeans," China Trade Extra, 20 December 2001, <www.ChinaTradeExtra.com>.
853 "Agricuture TRQs Still a Problem in China Despite USTR Report," Inside U.S.-China Trade, 14 April 04, 8.
854 China and U.S. Agriculture: Sanitary and Phytosanitary Standards, A Continuing Barrier to Trade?, Commission Staff-Led Roundtable, 26 March 04, Testimony of Dr. Peter Fernandez, Associate Administrator of the U.S. Department of Agriculture’s Animal and Plant Health Inspection Service, 31.
855 Ibid., 23–24.
856 2003 White Paper: American Business in China, The American Chamber of Commerce People’s Republic of China and The American Chamber of Commerce in Shanghai, August 03, 108– 109.
857 Protocol, Part I.5, 4.
858 Working Party Report, para. 83(c).
859 Working Party Report, para 83(d). The PRC Foreign Trade Law provides that all enterprises, foreign, foreign-invested, and domestic have trading rights in China. PRC Foreign Trade Law, enacted 6 April 04, art. 14. The Regulations on the Management of Foreign Investment in the Commercial Sector permit foreign-invested and wholly foreign-owned companies to provide distribution services. The Regulations on the Management of Foreign Investment in the Commercial Sector [Waishang tuozi shangye lingyu guanli banfa], issued 16 April 04. Regulations for direct selling are expected later this year.
860 Even before some recent initiatives announced by the EU and Japan, just the reported figures available as part of the Doha round’s trade capacity building efforts indicate that Japan contributed over 9 million U.S. dollars, Canada provided over 3 million U.S. dollars, and Australia over 1 million U.S. dollars. The most telling comparison with the United States, however, was the EU’s contribution of nearly 15 million U.S. dollars. Note also that the EU’s contribution does not include additional amounts contributed by its Member States, including Germany, which maintains a full-time staff of trainers in Beijing. Congressional Research Service, Memorandum on WTO-Related Foreign Assistance and Technical Training in China, 23 March 04.