9:55 AM Jun 1, 1993
CHINA GATT RE-ENTRY STILL SEEMS LONG WAY OFFGeneva 28 May (TWN) -- The Working Party on China's application for resumption of its status as a contracting party ended a week-long session of consultations (mostly informal), with a Chairman's summing up of the issues so far addressed to be covered in such a protocol and the agreed or differing views. Though no date has been set for the next meeting the working party is expected to resume in September. Participants said that while its Chairman, Amb. William Rossier of Switzerland, is attempting to take the process forward, the United States does not want and would not allow the working party to move forward to drafting a protocol and prefers prior bilateral negotiations and agreement with China. The position of the EC does not also appear to be clear. However, in both these major entities, a number of major corporations are pushing for a favourable decision, since they think it would give them a more secure access to the booming Chinese market. Several other contracting parties have said they were engaged in tariff negotiations with China. At the end of the informal consultations this week, the Chairman reportedly provided a summing up on the different issues addressing in relation to the exercise. These issues related among others to China's trade relations with Hong Kong, Macao and Taiwan; provisions about observance of GATT rules and obligations by local and regional authorities of China; any differential treatment of minority autonomous regions of China and other areas of poverty; the scope of any existing legislation cause; the status of China as a developing contracting party; questions of transparency in Chinese trade regulations and their administration; periodic reviews of any special commitments by China; Chinese adherence to MTN agreements and codes; autonomy of Chinese enterprises and their right to engage in foreign trade; Chinese exchange rate policies; and the question of a special safeguards clause. On this last, in the discussions so far not only the leading trading entities like US, EC and Japan, but even many developing countries supporting China, have expressed some concerns and doubts about price formation and pricing of goods in China and need for them to have special safeguards (enabling the importing country to apply restrictions on imports from China if warranted) measures until the Chinese economy is completely transformed into a real market economy. The Chairman's summing up of the discussions said that the point had been made that a special safeguards clause would be an essential element of the protocol. China (for its part), the summing up added, had stated that any provision on safeguards in the protocol would have to be such as not to crate an imbalance between the rights of China and those of other contracting parties. It was agreed that an indication should be given of the principal elements that members wished to have included in a safeguards provision. On the issue of Chinese trade relations with the three customs territories of Hong Kong and Macao (which are due to come under Chinese sovereignty by 1997) and Taiwan, it was noted that this would be governed by Art XXIV:1 of the General Agreement and hence no need to make any special provisions in the protocol. As for observance of GATT by local or regional authorities, China said that, under the constitution, the central government had the power to annul or modify measures of subnational authorities not consistent with the GATT. The provisions of Art XXIV:12 (under which contracting parties would only be committed to take such reasonable measures available to them to ensure observance of GATT by local and regional authorities) would not apply. There was hence no need for any special provisions in the protocol and the Chinese assurances should merely be noted. The Chinese advised the working party of the constitutional obligation on the central government to assist minority autonomous regions and other areas of economic poverty, but that there was no specific instruments specified for this purpose. China considered the central government could carry out its obligations in a GATT consistent manner. Nevertheless, information has been sought from China on the current regime: specific measures to facilitate frontier traffic and their consistency with Art XXIV:3 (a) which allows such frontier (free or preferential trade) traffic; preferential trade arrangements with neighbouring countries and regions; and measures to promote economic development in minority autonomous regions and other areas of economic poverty. The question of existing legislation (that will be grandfathered and saved by the protocol) was not discussed, but the working party took note of China's intention to submit an illustrative list of legislation that would be covered by the existing legislation clause of a protocol. China has sought in its protocol of resumption of status a reference to its current status as a developing country along the lines of reference in Mexico's protocol of accession. The working party noted that the rights of developing cps under the GATT flowed from the substantive provisions of the General Agreement, and not in statements in protocols of accession on the status of cps as contracting parties. There was broad agreement in the working party that the commitments on transparency in the US-China Memorandum of Understanding (MOU) of October 1992 should be multilateralized through incorporation of similar commitments in the protocol. China was called upon to make a similar commitment to multilateralize the commitments in the MOU on standards and inspection. On the first, the secretariat is to prepare a table comparing the transparency provisions in the MOU and those in the preliminary consolidated list of issues (for the protocol) identified by the working party in March 1993 and on this basis the working party is to revert to the issue later. On standards and inspection, China indicated its willingness to multilateralize the commitments but did not consider it necessary to reflect them in the protocol. However, with other cps expressing concern about lack of clarity on nature, coverage and operation of Chinese standards and inspection system, China has been asked to prepare a submission on the subject, explaining the laws, regulations, institutional setting and procedural steps on mandatory and non-mandatory inspection of imports and exports and its relationship with the process of customs clearance. There was strong support in the working party to seek a protocol commitment from China to progressively liberalize restrictions on right of enterprises and individuals to engage in foreign trade and, ultimately, to move to elimination of all such restrictions, and to clarify and publish all criteria used by the government in according the right to engage in trade. China said it was prepared to make a commitment in the protocol to increase the number of enterprises having the right to engage in foreign trade, but that it could not commit itself to the ultimate elimination of all restrictions on the right to engage in foreign trade. On exchange rate policies, China has said that it could commit itself to (a) establishing a system of uniform quotations and transaction rates for foreign exchange in swap centres by end of 1993, (b) establish a single rate for foreign exchange within five years and (c) thereafter move towards full convertibility of the Chinese currency Renminbi. However, further commitments are being sought from China (a) to liberalize the conditions of access to the foreign exchange swap centres, (b) progressively eliminate restrictions on foreign exchange, and (c) abolish administrative guidance on use of foreign exchange. Some of these however would impinge on China's rights under the International Monetary Fund of which it is a party. The Chairman of the working party is to contact the IMF on the legal status of China's current exchange system in terms of Art. VIII and XIV of the IMF Articles of Agreement. The IMF representative has indicated that the Fund would be willing to provide on request information on the legal status of China's current exchange system. On agricultural development, China made clear it was seeking no special derogation in its protocol on agriculture and any quantitative restrictions that would remain (China referred to current restrictions on wool and rubber) on resumption of China's status as a cp would be justified by relevant GATT provisions. A time-table for phasing out any remaining restrictions, China suggested, could be negotiated in the context of bilateral tariff negotiations. China has been asked to indicate which particular GATT provisions it would resort to for justifying the remaining import restrictions.