17 September 2001
WTO successfully concludes negotiations on China's entry
The World Trade Organization today (17 September) successfully concluded negotiations on China's terms of membership of the WTO, paving the way for the text of the agreement to be adopted formally at the WTO Ministerial Conference in Doha, Qatar, in November.
“International economic cooperation has brought about this defining moment in the history of the multilateral trading system,” said Mike Moore, WTO Director-General, at the conclusion of the meeting of the Working Party on China's Accession. “With China's membership, the WTO will take a major step towards becoming a truly world organization. The near-universal acceptance of its rules-based system will serve a pivotal rôle in underpinning global economic cooperation.”
Under the chairmanship of Ambassador Pierre-Louis Girard of Switzerland, the Working Party concluded almost 15 years of negotiations with China and agreed to forward some 900 pages of legal text for formal acceptance by the 142 Member Governments of the WTO. Thirty days after China notifies its acceptance of the agreement, China legally becomes a member of the WTO.
As a result of the negotiations, China has agreed to undertake a series of important commitments to open and liberalize its regime in order to better integrate in the world economy and offer a more predictable environment for trade and foreign investment in accordance with WTO rules.
Among some of the commitments undertaken by China are the following:
China will provide non-discriminatory treatment to all WTO Members. All foreign individuals and enterprises, including those not invested or registered in China, will be accorded treatment no less favourable than that accorded to enterprises in China with respect to the right to trade.
China will eliminate dual pricing practices as well as differences in treatment accorded to goods produced for sale in China in comparison to those produced for export.
price controls will not be used for purposes of affording protection to domestic industries or services providers.
the WTO Agreement will be implemented by China in an effective and uniform manner by revising its existing domestic laws and enacting new legislation fully in compliance with the WTO Agreement.
Within three years of accession all enterprises will have the right to import and export all goods and trade them throughout the customs territory with limited exceptions.
China will not maintain or introduce any export subsidies on agricultural products.
While China will reserve the right of exclusive state trading for products such as cereals, tobacco, fuels and minerals and maintain some restrictions on transportation and distribution of goods inside the country, many of the restrictions that foreign companies have at present in China will be eliminated or considerably eased after a 3-year phase-out period. In other areas, like the protection of intellectual property rights, China will implement the TRIPS (Trade-related Aspects of Intellectual Property Rights) Agreement in full from the date of accession.
During a 12-year period starting from the date of accession there will be a special Transitional Safeguard Mechanism in cases where imports of products of Chinese origin cause or threaten to cause market disruption to the domestic producers of other WTO members.
On the other hand, prohibitions, quantitative restrictions or other measures maintained against imports from China in a manner inconsistent with the WTO Agreement would be phased out or otherwise dealt with in accordance with mutually agreed terms and timetables specified in an annex to the Protocol of Accession.
The conclusion of the negotiations for market access on goods represents a commitment undertaken by China to gradually eliminate trade barriers and expand market access to goods from foreign countries. China has bound all tariffs for imported goods. After implementing all the commitments made, China's average bound tariff level will decrease to 15% for agricultural products. The range is from 0 to 65%, with the higher rates applied to cereals. For industrial goods the average bound tariff level will go down to 8.9% with a range from 0 to 47%, with the highest rates applied to photographic film and automobiles and related products. Some tariffs will be eliminated and others reduced mostly by 2004 but in no case later than 2010.
Upon accession China will become a party to the Agreement on Textiles and Clothing and will be subject to its rights and obligations. As for all WTO members, quotas on textiles will end at 31 December 2004, but there will be a safeguard mechanism in place until the end of 2008 permitting WTO Member Governments to take action to curb imports in case of market disruptions caused by Chinese exports of textile products.
China agreed to limit its subsidies for agricultural production to 8.5% of the value of farm output (per Article 6.4 of the Agriculture Agreement). China also agreed to apply the same limit to subsidies covered by Article 6.2 of the Agriculture Agreement.
Upon China's accession, foreign service suppliers will be permitted to establish joint venture enterprises, without quantitative restrictions, and provide services in several cities. Foreign investment in the joint venture shall be no more than 25%. Within one year of accession, the areas will be expanded to include services in other cities and foreign investment shall be no more than 35%. Within three years of accession, foreign investment shall be no more than 49%. Within five years of accession, there will be no geographic restrictions.
Upon accession, foreign financial institutions will be permitted to provide services in China without client restrictions for foreign currency business. For local currency business, within two years of accession, foreign financial institutions will be permitted to provide services to Chinese enterprises. Within five years of accession, foreign financial institutions will be permitted to provide services to all Chinese clients.
Foreign non-life insurers will be permitted to establish as a branch or as a joint venture with 51% foreign ownership. Within two years of China's accession, foreign non-life insurers will be permitted to establish as a wholly-owned subsidiary. Upon accession, foreign life insurers will be permitted 50% foreign ownership in a joint venture with the partner of their choice. For large scale commercial risks, reinsurance and international marine, aviation and transport insurance and reinsurance, upon accession, joint ventures with foreign equity of no more than 50% will be permitted; within three years of China's accession, foreign equity share shall be increased to 51%; within five years of China's accession, wholly foreign-owned subsidiaries will be permitted.
Notes to Editors: back to top
1. History of China's accession to the WTO
China was one of the 23 original signatories of the General Agreement on Tariffs and Trade (GATT) in 1948. After China's revolution in 1949, the government in Taiwan announced that China would leave the GATT system. Although the government in Beijing never recognized this withdrawal decision, nearly 40 years later, in 1986, China notified the GATT of its wish to resume its status as a GATT contracting party.
China is one of 30 governments currently seeking accession to the World Trade Organization. Like many of the countries now applying for WTO membership, China is in the process of implementing economic reforms and transforming its economy into one which is more market-based. China's accession process to the WTO has been guided by a Working Party whose membership consists of all interested WTO member governments. Initially, the Working Party on China's status was established under GATT in 1987 and concerned only China's trade regime for goods. In 1995, it was converted to a WTO Working Party and its scope was broadened to include trade in services, new rules on non-tariff measures and rules relating to intellectual property rights.
A substantial part of China's accession process involved bilateral negotiations between China and WTO members. These were usually conducted privately, either at the WTO in Geneva or in capitals. Other meetings concern either informal or formal sessions of the Working Party. While several areas of China's trade policies, i.e. schedules of market-access commitments in goods and specific commitments on services, have been the focus of bilateral and plurilateral negotiations, it was the responsibility of the Working Party to maintain an overview of how the negotiations were progressing and to ensure that all aspects of China's trade policies were addressed.
Ambassador Pierre-Louis Girard, a senior Swiss trade official, served as the Chairman of the Working Party. The Chairman, member governments and China were aided in their work by the WTO Secretariat which provided administrative and legal assistance as necessary.
The Working Party had two tasks: to compile a report based on its deliberations; and to complete a Protocol of Accession. It is not unusual that WTO accession working parties attach a number of annexes to the protocol. The annexes are an integral part of the protocol, are legally binding and address specific issues related to the applicant's trade regime. As with all other accessions, the annexes, which have been a focus of the negotiations, are meant to provide WTO members with guarantees that the reforms or other transitional measures promised by the applicant will actually be implemented. In other words, they serve as a kind of a negotiated timetable for bringing the applicant's trade regime into full conformity with the WTO's rules and obligations.
Accession processes vary in length and can take several years to complete, much depends on the readiness of the applicant country to meet not only the rules and obligations of the WTO's market-economy principles, and its policies of pro-competition and non-discrimination, but also the market-access conditions for goods and services which the applicant country grants to other WTO Members. Because the Working Party makes decisions by consensus, all WTO members and the country seeking membership must be in agreement that their individual concerns have been met and that all outstanding issues have been resolved in the course of their deliberations.
2. The Chinese Taipei GATT/WTO relationship
In early 1965 Taiwan requested and was granted observer status at sessions of the General Agreement on Tariffs and Trade (GATT 1947). In 1971, this status was removed, following a decision by the UN General Assembly that recognized the People's Republic as the only legitimate government of China.
At its September 1992 meeting, the GATT's Council of Representatives decided to establish a separate working party to examine the request for accession of the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (“Chinese Taipei”). The Chairman said he had carried out extensive consultations on the subject of establishing a working party. He noted that all contracting parties had acknowledged the view of the People's Republic of China (PRC) that Chinese Taipei, as a separate customs territory, should not accede to the GATT before the PRC itself.
3. Hong Kong and China and the WTO
Hong Kong, then a British Crown Colony became contracting party of GATT on 23 April 1986. On 1 July 1997 the People's Republic of China, resumed the exercise of sovereignty over Hong Kong. From that date, Hong Kong became a Special Administrative Region of China. As such it would, inter alia, retain the status of a separate customs territory, and would continue to decide its economic and trade policies on its own and could, also on its own, using the name “Hong Kong, China”, maintain and develop relations, and conclude and implement agreements, with States, regions and relevant international organizations in the economic, trade and other fields. Subsequently, Hong Kong, as a contracting party of GATT, was a full participant in the Uruguay Round and assumed all of the corresponding rights and obligations through formally accepting the Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, which was drawn up at Marrakesh on 15 April 1994. By virtue of Article XI of the Marrakesh Agreement Establishing the World Trade Organization, Hong Kong became an original Member of the WTO. In accordance with the arrangements described above, Hong Kong will continue to be a WTO Member using the name of “Hong Kong, China”.
4. Macau and China and the WTO
The People's Republic of China resumed the exercise of sovereignty over Macau, a former Portuguese colony, on 20 December 1999. On that day, Macau became a Special Administrative Region of China and as such, inter alia, continues to maintain its social and economic system and retained its economic and trade policies, on its own, using the name of “Macau, China”, maintain and develop relations, and conclude and implement agreements with all States, regions and relevant international organizations in the economic, trade and other fields. The People's Republic of China said at the time that the Macau Special Administrative Region would continue to participate in relevant international organizations and international trade agreements such as the General Agreement on Tariffs and Trade.
Macau became a contracting party of the General Agreement on 11 January 1991 and was a founding member of WTO, which was established on 1 January 1995. On 20 December 1999 Macau continued to be a member of the WTO using the name of “Macau, China”.
5. China in World Trade
In 2000 China was the 7th leading exporter and 8th largest importer of merchandise trade - exports: 249.2 billion dollars (3.9% share), imports: 225.1 billion dollars (3.4% share). For commercial services China was the 12th leading exporter and the 10th largest importer - exports: 29.7 billion dollars (2.1% share), imports: 34.8 billion dollars (2.5% share).