"Whether it's improved market access, distribution rights for US exporters, new access for companies from banks to insurance companies to telecommunications companies, or even China's new commitment to abide by the WTO settlement process, this agreement will increase opportunities for American manufacturers and their workers."
Jerry Jasinowski, President,
National Association of Manufacturers

The US chemical industry is the nation's largest exporter, [accounting] for more than $1 of every $10 in US exports...[This bilateral agreement] will expand opportunities for the US chemical industries and the more than 1 million American men and women who work in [them].
The Chemical Manufacturers Association

China represents a huge potential market for US telecommunications equipment suppliers.... [China bought] telecommunications infrastructure amounting to more than $21 billion in 1998. This figure is up from $1.2 billion in 1990.
Telecommunications Industry Association

[The WTO agreement's] market-opening measures...offer our industry a genuine opportunity to compete for China's $63 billion forest products market.
American Forest & Paper Association

The US-China agreement on China's WTO accession lays out a substantial set of commitments that China will have to meet as a WTO member. The commitments in this bilateral will appear in China's final Protocol of Accession, unless they are supplanted by better terms arising out of future bilateral and multilateral WTO negotiations.

The following tables, organized by sector, detail the agreement's terms as they appeared in the summary released by the White House Office of Public Liaison on November 17, 1999 (with the exception of the information on the audiovisual sector, which was updated more recently). The tables also highlight the areas of the US economy that will be most affected by the agreement. These include:

• Agriculture China has agreed to eliminate export subsidies, permit agricultural trade outside of government-controlled channels, slash tariffs, and eliminate sanitary and phytosanitary barriers not based on scientific evidence. A tariff-rate quota system for bulk commodities will provide a share for private traders. Agricultural firms will have the right to import into China and distribute products directly.

• Industry China has agreed to phase out quotas, and phase out or cut tariffs dramatically on a broad range of industrial goods. China will also allow non-bank auto financing and participate in the Information Technology Agreement (ITA), which calls for elimination of tariffs on IT products.

• Services China has made commitments in all major service categories to eliminate most foreign-equity and geographic restrictions. The PRC will accede to the WTO's Basic Telecommunications and Financial Services agreements, and will "grandfather" current market-access benefits. China's service sector accounts for one-third of its GDP. US service companies will be well positioned to compete.

• Trading and distribution rights China has agreed to define "distribution" broadly to include wholesaling, retailing, maintenance, repair, and transportation. US firms will be able to trade, distribute, and sell goods themselves, as well as engage in auxiliary services such as leasing, air-courier, warehousing, advertising, and packaging. This is a critical factor in US business success in international markets, but China currently denies these rights to US companies in China.

Effects of WTO accession

After China completes its accession process, and once the US Congress grants China permanent Normal Trade Relations status, the United States could see benefits in the areas of

• Employment Current US trade with China directly supports more than 200,000 manufacturing and service-sector jobs in the United States; add Hong Kong and the number reaches 400,000. US trade with China helps generate employment in the United States in transportation, distribution, retail, and financial services, among other sectors. Small US companies in particular are likely to find new opportunities in China after accession.

• Rule of law The WTO is a rules-based international trading system. The WTO's dispute-settlement mechanism provides a credible and effective tool to enforce US economic rights, backed up by the threat of WTO-authorized sanctions for non-compliance.

• Integration into the global economy Integrating China further into the global trading system will strengthen the economic and political forces already changing Chinese society. US trade and investment will benefit from a more open and stable China.

US-China WTO Agreement: Agriculture

Market Access Issue/Product Current Conditions Post-Accession Conditions Impact on the United States
Sanitary and Phytosanitary Measures (SPS) China regularly imposes unscientific sanitary and phytosanitary barriers on US agricultural exports. •Elimination of unscientific SPS barriers.

China agreed in April 1999 to lift unjustified SPS bans on citrus, fruit, meat, and wheat.

Greater access to PRC markets for US wheat, citrus, fruit, and meat.
Subsidies China subsidizes its agricultural sector. Many of China's agricultural exports are sold in the global market at prices significantly below those in the domestic market. •Elimination of export subsidies on agricultural products. Elimination of export subsidies is particularly beneficial to US corn, cotton, and rice producers because they compete with similar Chinese products in international markets.
Tariffs Average tariffs on US priority products: 31.5% •China will reduce tariffs immediately upon accession.

•Average tariffs will fall to 14.5% for US priority products, and 17% for all other products, by January 2004.

•All agricultural tariffs cuts will be bound (cannot be increased) and will be fully phased in by 2004.

PRC tariffs will fall below those of most American trade partners, with greatest reductions in the areas of top priority to US producers.
Trading Rights Only state enterprises or entities designated by the PRC government can engage in import and export activities. •Introduction of private trade (trade between private parties) in agriculture.

•Establishment of new rights to import and distribute products without going through a state-trading enterprise or middleman.

An increase in US export opportunities.

Bulk Commodities

 Restrictive quotas and their non-transparent application limit market access for US bulk commodities. Out-of-quota tariff rates are as high as 121.6%. •Expanded access for bulk agriculture commodities, including barley, corn, cotton, rice, soybean oil, and wheat.

•Establishment of a tariff-rate quota system (TRQ) that provides a share of the TRQ for private traders. Significant and rising quota quantities will be subject to tariffs that average between 1-3%.

Greater access to PRC markets.

Specific operating rules for the TRQ system and the greater transparency of this process will help secure imports.
Corn: 250,000 metric tons (mt) •Increase to 4.5 million mt (mmt) upon entry rising to 7.2 mmt.

•10% (40% by 2004) of quota and any unused state portion reserved for China's private sector.

Cotton: 200,000 mt •Increase to 743,000 mt upon entry rising to 894,000 mt by 2004.
Rice: 250,000 mt •Increase to 2.6 mmt upon entry rising to 3.3 mmt by 2005; TRQ to be eliminated by 2006.

•50% of quota reserved for China's private sector.

Soybean Oil: 1.5 mmt •Increase to 1.7 mmt upon entry rising to 3.3 mmt by 2005; TRQ to be eliminated by 2006.

•50%, rising to 90%, of quota reserved for China's private sector.

Wheat: Less than 2 mmt •Increase to 7.3 mmt, upon entry rising to 9.3 mmt.

•10% of quota and any unused state portion reserved for China's private sector.

Dairy Current Tariffs

Cheese: 50%

Ice Cream: 45%

2004 Tariffs

12%

19%

 Greater access to PRC markets for US cheese and ice cream exporters.
Fruits Current Tariffs

Almonds: 30%

Apples: 30%

Citrus: 40%

Grapes: 40%

2004 Tariffs

10%

10%

12%

13%

•China will end its ban on US grapefruit, orange, and other citrus fruit imports.

Greater access to PRC markets for US fruit exporters.

The citrus industry estimates that trade will reach $1.2 billion in the first year after one ban ends, a $700 million increase over current imports through informal channels.
Meats

 

 

 Current Tariffs

Beef: 45%

Pork: 20%

Poultry: 20%

 2004 Tariffs

12%

12%

10%

•China will accept US Department of Agriculture certification for meat safety.

Greater access to PRC markets, particularly for variety meats.
Soybeans (Tariff not available) •3% tariff bound on accession. Greater access to PRC markets for US soybean exporters.
Wine Current Tariff

65%

 2004 Tariff:

20%

 Greater access to PRC markets for US wine exporters.
Sources: The White House Office of Public Liaison, US Trade Representative, US State Department, Charles Schwab & Co.


US-China WTO Agreement: Industry

Market Access Issue/Product Current Conditions Post-Accession Conditions Impact on the United States
Industrial Products Tariffs: 1997 average 24.6%

Quotas: currently apply to a wide range of goods

•Average tariff: 9.4% by 2005.

•Average tariff for priority products: 7.1%, with majority of cuts by 2003.

•Existing quotas will be eliminated upon accession for the top US priority goods (e.g. fiber-optic cable). Most remaining quotas will be phased out by 2003, but no later than 2005.

•From current trade level, quotas will grow 15% annually, ensuring that market access increases progressively.

Elimination of broad systemic barriers to US exports, such as limits on import and distribution rights, and licenses, will open up trade opportunities across the board.
Autos

Auto Financing

Auto Parts

Tariff range: 80-100%

Quotas

Not permitted

•Tariff: 25% by July 1, 2006, with the largest cuts in the first years after accession. •Quotas will be phased out by 2005. Base-level quota of $6 billion (the level prior to China’s industrial auto policy) will grow by 15% annually until eliminated. •Non-bank foreign financial institutions will be able to provide auto financing upon accession.

•Average tariff: 10% by 2006.

New opportunities for US auto exporters.

Foreign manufacturers in China will also benefit from the right to distribute products, and conduct marketing and after-sales services (see services table).

 

Chemicals

 

Tariffs: up to 35% •Tariffs: 0, 5.5%, and 6.5% for products in each chemical harmonization initiative category. An increase in US chemical exports to China.
Electronics Average tariff: 13.3% •Tariff: 0 by 2005. •China will participate in the Information Technology Agreement (ITA), and eliminate tariffs on semiconductors, computers, and all Internet-related equipment by 2005. New opportunities for the rapidly growing US information technology sector.

Elimination of cumbersome distribution and retailing regulations will provide new opportunities for US exporters and foreign manufacturers in China (see services table).

Wood & Paper Tariffs:

wood: 12-18%

paper: 15-25%

•Tariff range: 5-7.5% (both wood and paper). New opportunities to export wood and wood products to China’s $63 billion forest-products market.
Source: The White House Office of Public Liaison


US-China WTO Agreement: Services

Market Access Issue/Product Current Conditions Post-Accession Conditions Impact on the United States
General Restrictive investment laws, lack of transparency in administrative procedures, and arbitrary application of regulations and laws severely limit US service exports and investment in China, especially in the audiovisual, distribution, financial services, professional services, telecommunications, and travel and tourism sectors. China has made commitments in all major service categories with reasonable transition periods, and will:

•Eliminate most foreign-equity restrictions, especially in sectors where the United States has a strong commercial interest.

•Accede to the WTO Basic Telecommunications and Financial Services agreements.

•"Grandfather" current market-access activities in all services sectors.

Sales in China and opportunities for foreign investment will rise.

Small and medium-sized US companies will be able to enter the PRC market for the first time.

US companies already in China may streamline and integrate their operations within China and globally.

Grandfathering will protect American distribution, financial, and professional and other service providers in China (including those operating under contractual or shareholder agreements or a license) from restrictions as Chinese commitments are phased in.

Telecommunications Closed to foreign investment. •Regulatory Principles: China has agreed to implement pro-competitive regulatory principles embodied in the WTO Basic Telecommunications Agreement (including cost-based pricing, interconnection rights, and the establishment of an independent regulatory authority). China has agreed to technology-neutral scheduling.

•Scope of Service: China will phase out all geographic restrictions for paging and value-added services within 2 years of accession; mobile/cellular within 5 years; and domestic wireline services within 6 years. China's key telecom services corridor in Beijing, Shanghai, and Guangzhou, which carries about 75% of all domestic traffic, will open immediately on accession in all telecommunications services.

•Investment: China will allow 49% foreign ownership in mobile services within 5 years of accession; 49% in international and domestic land and sea (not mobile) services within 6 years; 49% in most other services upon accession; and 50% in value-added services within 2 years.

China's commitments mark the first time it has agreed to open its telecommunications sector, both to direct investment in telecommunications businesses and to a broad range of services.

Relaxation of restrictions on investment and distribution will increase demand for foreign telecommunications goods and services in China. China is already US telecom exporters' seventh-largest foreign market–fourth-largest if Hong Kong is included.

Foreign suppliers will be able to use any technology they choose to provide telecom services.

Insurance Foreign companies may operate only in Guangzhou and Shanghai.

Restrictive licensing practices have limited the number of foreign insurers in China's market to less than 20, and restricted each company to a narrow range of operations.

Foreign companies must join with government-approved Chinese partners, and are unable to sell group or pension policies.

•Geographic scope: China will permit foreign property and casualty firms to insure large-scale risks nationwide immediately upon accession, and will eliminate all geographic limitations in 3 years.

•Product Scope: China will expand the scope of activities for foreign insurers to include group, health, and pension lines of insurance, which represent about 85% of total premiums, phased in over 5 years.

•Prudential Criteria: China has agreed to reward licenses solely on the basis of prudential criteria, with no economic needs test or quantitative limits on the number of licenses issued.

Investment: •Life Insurance: China will allow 50% foreign ownership in life insurance joint ventures. Life insurers will be able to choose their own joint-venture partners.

•Non-life: Upon accession, China will allow the establishment of branches, or 51% ownership in joint ventures, and will permit the formation of wholly foreign-owned subsidiaries in 2 years.

•Reinsurance: Reinsurance will be completely open to foreign providers upon accession (100%, no restrictions).

Current license holders will be able to expand their scopes of business, and newcomers will be able enter the market with a broader range of product offerings. New opportunities will emerge for US insurance companies to provide life, non-life, and reinsurance products and services in China.
Banking Local-currency business with Chinese clients is prohibited.

China has severe geographic restrictions on where foreign banks may operate.

US financial institutions require approval–granted on a discretionary, case-by-case basis–for new representative offices and branches.

•US banks will:

•Gain full market access within 5 years of accession.

•Be able to conduct local-currency transactions with Chinese enterprises 2 years after accession.

•Be able to conduct local-currency business with Chinese individuals from 5 years after accession.

•Foreign banks will have the same rights (national treatment) as Chinese banks within designated geographic areas.

•Geographic and customer restrictions will be removed 5 years after accession.

US banks will gain new opportunities and substantially greater access to the PRC market.
Securities Closed to foreign investment.

Underwriting by foreign banks of domestic securities and foreign-currency denominated securities is prohibited.

•Foreign financial institutions will be allowed a 33% stake in fund management enterprises upon accession. The stake will rise to 49% after 3 years.

•Foreign underwriters will also be allowed to invest up to 33% in joint ventures.

•Joint ventures in which US firms have minority stakes will be allowed to underwrite domestic securities issues as well as underwrite and trade in foreign-currency denominated securities (debt and equity); and will be allowed to engage in fund management on the same terms as Chinese firms.

US firms will gain unprecedented access to China's capital markets.
Trading and Distribution Rights Foreign firms have no right to distribute products other than those they make in China, or to own or manage distribution networks, wholesaling outlets, or warehouses.

China severely restricts trading rights (the right to import and export) and distribution (wholesaling, retailing, maintenance and repair, transportation, etc.).

Business licenses frequently limit the ability of US firms to conduct marketing, after-sales service, maintenance and repair, and customer support.

•Commitments in this area address all current restrictions and reflect a comprehensive commitment on distribution--including wholesaling, sales away from a fixed location, retailing, maintenance and repair, and transportation.

•Trading rights will be phased in within 3 years of accession.

•China will phase out all restrictions on distribution services for most products within 3 years of accession.

US firms will be able to trade, distribute, and sell goods themselves, allowing for better control and greater market access.

Companies will be able to streamline their operations in China and eventually integrate their China operations into their global networks.

Small and medium-sized US companies will be able to enter the PRC market for the first time.

Services Auxiliary to Distribution

 

Foreign firms have no right to distribute products other than those they make in China, or to own or manage distribution networks, wholesaling outlets, or warehouses.

 

China severely restricts trading rights (the right to import and export) and distribution (wholesaling, retailing, maintenance and repair, transportation, etc.).

Business licenses frequently limit the ability of US firms to conduct marketing activities, or offer after-sales service, maintenance and repair, and customer support.

•China will permit foreign firms to provide services auxiliary to distribution include rental and leasing, air courier, freight forwarding, storage and warehousing, advertising, technical testing and analysis, and packaging.

•All restrictions will be phased out in 3-4 years, at which time US service suppliers will be able to establish 100% foreign-owned subsidiaries.

Greater control over after-sales services;

emergence of opportunities for foreign investment in freight-forwarding and logistics, and other auxiliary activities.

Professional Services China tightly restricts operation of foreign law and accounting firms.

Accounting representative offices in China may only offer consulting services. China also requires localization of foreign partners in accounting firms.

•China has provided a broad range of commitments, including on legal, accountancy, taxation, management consulting, architecture, engineering, urban planning, medical and dental, and computer-related services.

•China will permit foreign majority control of professional services ventures except in the practice of Chinese law.

•In the area of accountancy, China has agreed to eliminate the mandatory localization requirement, to permit licensed professionals unrestricted access to its market, and to follow transparent procedures.

Foreign providers of professional services will gain new freedom to provide services in China.
Audiovisual Distribution of books, magazines, movies, sound recordings, and videos is highly restricted. •China will permit the distribution of video and sound recordings, as well as cinema ownership and operation.

•China will allow 49% foreign participation in joint ventures engaged in the distribution of video and sound recordings.

•China will allow 20 films annually, on a revenue-sharing basis, upon accession.

The Chinese commitment to import 50 foreign movies over three years amounts to a 300% increase in foreign film exports to China.

Expanded equity-investment rights will also boost sales. In 1997, US film industry revenues in China totaled only $18 million, in contrast to $12 billion worldwide.

Travel and Tourism Activities of foreign firms are highly restricted. •China will allow unrestricted access to the Chinese market for hotel operators–majority ownership will be permitted on accession, and 100% foreign ownership will be phased in within 3 years. Allows US firms the opportunity to participate in China's growing travel and tourism market.
Source: The White House Office of Public Liaison