USTR Report: Never Judge a Book By Its Cover

Wednesday, December 13, 2006 0:11
Comments Off on USTR Report: Never Judge a Book By Its Cover

Following up on yesterday’s post (Happy Anniversary!), I have been reading through the USTR report that was released on the same day.

While I generally believe the cliche you should never judge a book by its cover, I am beginning to realize that I can judge the tone of just about anything by reading the executive summary…

In the case of the USTR report, the 8 pages of summary are really a warning shot being fired across the bow of China. No less than 8 times the summary either states further actions will be taken (meaning report to WTO) or that actions are already being pursued.

Before I jump to far ahead though.. the summary does start off by giving some credit to China’s efforts over the last five years and highlights a couple things:

  • China has repealed, revised, or enacted more than 1000 laws, regulations, and other measures to bring its trading system into line with WTO agreements
  • Each year, China has made tariff reductions, eliminated, non-tariff barriers, expanded market access, and improved transparency.

It even ends the second paragraph by stating “”That the United States – including U.S. Workers, businesses, farmers, service providers, and consumers – has benefited significantly from these steps and continues to do so as U.S.-China trade grows.

Tone is good so far… until the third paragraph where “Despite significant progress in many areas (see above), China’s record in implementing WTO commitments is decidedly mixed.

I guess the benefits that were mentioned in the sentence before really have not been all that great after all??

the next section of text is devoted mainly to the role of the Chinese government, and there are a few things that jump out:

  1. The authors state, in reference to government intervention, that some of the difficulties would be expected, but that over time (after WTO accession), there was an expectation that government intervention would see “significantly reduced levels”
  2. one reason for recent, perceived, reduced momentum according to the report is that there is “a lack of consensus within China’s government and competing Chinese priorities”

so, at this point, China is looking pretty good overall. the Chinese government and economy is making steps to meet the WTO requirements, there has been “significant benefit” to U.S. stakeholders, and there wasn’t a major speed bump mentioned… just a few things that need adjustment, (i.e. getting the million members of the Chinese government to all move in unison)

On Page 3, the praise stops full stop, and 4 warning shots are fired to show that the U.S. will exercise its dispute rights if dialogue fails (2 cases are sited – Jan 2006 antidumping and Nov 2006 IPR). The page wraps up by introducing that the report will highlight several “key” concerns, and for the next 5 pages those concerns are introduced:

  1. IPR – Where to begin? DVD piracy, software, royalty payments, and in the eyes of the U.S. government, there has been little progress on this front
  2. Industrial Policies – A concern that domestic industries are being protected is the primary focused (used auto parts and 3G as the example), that the new M&A rules are too vague and are meant to further hinder foreign investment, and that there are “plans to steer government purchases to domestic manufacturers to promote innovation in Chinese enterprises”
  3. Trading Rights and Distribution Services – the main focus interestingly enough is that the government has not opened the market to foreign publications (books, mags, DVD, audio, etc), and that this itself is creating part of the problem with regard to infringement.
  4. Agriculture – The real sticking points here are guaranteeing policies that lead to spoilage and the ban on U.S. Beef.
  5. Services – The primary concerns of this section surrounded the pace at which banking, insurance, motor vehicle financing, telecommunications, construction and engineering, legal and other services were progressing
  6. Transparency – While initially seeing this as a header, I was looking out the window wondering where the Yan An expressway went, and even though the report states that China has “made important strides to improve transparency” and that “China’s transparency commitments in many ways requires a profound historical shift”… there were still two issues that stood out
    1. China has yet to adopt a single publication to publish trade-related measures
    2. China has yet to regularize the use of notice-and-comment procedures for new or revised trade-related measures prior to implementation.

With that, the executive summary closed with its 8th warning that “When bilateral dialogue is not successful, the Administration will not hesitate to employ the full range of enforcement tools available as a result of China’s Accession to the WTO”.

So far, it has been interesting. There are a number of items that seem to conflict (i.e. U.S. has seen significant benefit…. China is not living up to its end) and hopefully the following 95 pages will bring to light the issues in their entirety

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