China Falls Short on WTO Compliance, Says Report
The ''fact'' that Beijing continues to manage trade, it says, is a ''root problem.''
WASHINGTON, DC - 12/14/05 - China has done a poor job in embracing World Trade Organization principles and continues to fall well short on transparency in key economic sectors and tackling the thorny issue of IP piracy and copyright violations, according to a new trade report published by the Office of the US Trade Representative.
The report to Congress, published annually, underscored US concern over state intervention in certain sectors of China's economy four years since the country joined the WTO in December 2001, and raises the specter of possible future legal action in the world trade body.
The report by the USTR comes as the 149 nations of the WTO begin a crucial ministerial meeting in Hong Kong to try to agree a framework for lifting underdeveloped nations out of poverty and liberalizing trade.
"While China has made important progress in implementing specific commitments and in adhering to the ongoing obligations of a WTO member, there are still serious problems in some important areas, especially in the enforcement of intellectual property rights [IPR]," the US report said.
"Counterfeiting and piracy in China," it continued, "remain at epidemic levels and cause serious economic harm to US businesses in virtually every sector of the economy."
"There are different sorts of problem with each type of IPR issue," Assistant US Trade Representative Timothy Stratford told reporters in Hong Kong.
He said China was home to the world's second largest PC market but was only the 25th biggest market for software, clearly raising questions over piracy.
Also of concern was the wide application of policy tools that promote and protect certain industries, contradicting China's WTO obligations and contributing to the perception that it does not fully play by the rules.
Many of the problems appeared to stem from China's incomplete transition from a centrally planned economy to one based on market trading principles, the report said.
Stratford said that US companies often found that when WTO-mandated changes were implemented they were structured in such a way as to restrict competition or profits.
Earlier this year, China's State Council laid down a set of strict rules that would allow companies to sell directly to the consumer as of December 1, but these fell far short of American expectations.
"They had restrictions on direct sales that are different from what you tend to find in other countries so the expectations of certainly our companies ... really were not met..." said Stratford.
The USTR report said that although China had taken steps to repeal or revise more than 1,000 laws and regulations as part of efforts to meet its obligations to the WTO, the fact that it continued to manage trade was a root problem.
This further stokes growing concerns that China is an unfair and protectionist trader rather than an open and non-discriminatory economy that has become a major driver of global economic growth.
Foreign companies and governments are becoming increasingly frustrated with the continuing problems of piracy and counterfeiting in China, which leads to billions of dollars in losses each year, it said.
As a result stricter US action could be on the cards in the near term amid a growing perception among US businesses and government officials that China should do more.
"People are starting to think what other ways of action," said Stratford, adding that taking cases to WTO arbitration would be one approach, adding that "such action could come as soon as next year although the US would continue to talk to China in hopes of making progress."
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