WORLD TRADE
ORGANIZATIONG/SG/66
17 November 2003
(03-6149)
Committee on Safeguards
CHAIRMAN'S REPORT TO THE COUNCIL FOR TRADE IN GOODS
ON TRANSITIONAL REVIEW OF CHINA
1. The Committee on Safeguards undertook the second transitional review of China's
implementation of the Agreement on Safeguards pursuant to Paragraph 18 of the Protocol on theAccession of the People's Republic of China (WT/L/432) at its meeting on 20 October 2003.
2. Annex 1A to the Protocol requires China to submit information regarding the implementation
of its Regulation on Safeguards.  The information provided by China for the 2003 transitional review
is contained in document G/SG/W/195.
3. Japan submitted questions in the context of the transitional review relating to safeguard action
taken by China against imports of certain steel pr oducts.  Japan's questions can be found in document
G/SG/Q2/CHN/2.
4. The statements made at the meeting of 20 October 2003, at which the transitional review was
Item H of the agenda, are reflected in the minutes of the meeting, which will be circulated as
document G/SG/M/24.  The relevant paragraphs which reflect the statements made and the discussionat the meeting are annexed.G/SG/66
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ANNEX [EXTRACT FROM DOCUMENT G/SG/M/24]
H. TRANSITIONAL REVIEW UNDER  PARAGRAPH 18 OF THE PROTOCOL OF
ACCESSION OF THE PEOPLE' S REPUBLIC OF CHINA TO THE WORLD TRADE
ORGANIZATION.
1. The Chairman noted that Paragraph 18 of China' s Protocol of Accession provided that all
subsidiary bodies, including the Safeguards Committee, "which have a mandate covering China's
commitments under the WTO Agreement or [the] Protocol shall, within one year after accession,
review, as appropriate to their mandate, the implementation by China of the WTO Agreement and of
the related provisions of [the] Protocol."  China was to provide relevant information in advance of the
review, including information specified in Annex 1A  to the Protocol.  China could also raise issues
relating to any reservations under Section 17 or to any other specific commitments made by other
Members in the Protocol, in subsidiary bodies which have a relevant mandate.
2. The Chairman stated that the Committee must repor t the results of the review promptly to the
Council for Trade in Goods.  Review was to take place after accession in each year for eight years,
with a final review in year 10 or at an earlier date decided by the General Council.  He added that
there were no procedures set out for the conduct of the transitional review in the Protocol, except that
China was to provide relevant information in adva nce of the review.  In accordance with section IV.6
of Annex 1A to the Protocol, China was required to notify the Committee of its implementation of its
Regulation on Safeguards.  The Chairman informed the Committee that China had sent a fax on
17 October 2003 concerning the implementation of its safeguards legislation.  He stated that China's
fax was forwarded to Members on the same day.  He also noted that Japan had submitted a number of
questions to China in the context of the transitional review mechanism, as set forth in document
G/SG/Q2/CHN/2.
3. The representative of China stated that, concerning the implementation of the Agreement, no
new investigation had been initiated by China since the last transitional review.  Thus, China had only
initiated one safeguard investigation since becoming a WTO Member.  That investigation concerned
imports of certain steel products, and was initiated by the Ministry of Foreign Trade and Economic
Cooperation ("MOFTEC") on 20 May 2002, upon petition by domestic steel industries.  The
representative of China stated that the progress of that investigation had been addressed during the
2002 transitional review.  Subsequently, the inve stigating authority of China continued the
investigation according to law and issued a notice on 19 November 2002, announcing the decision to
apply safeguard measures for a duration of three years, including the implementation period of the
provisional safeguard measure, on five imported steel products such as non-alloy hot-rolled sheets and
coils etc.  China had notified the findings of the investigation, and the application of safeguard
measures, to the Committee.
4. In response to Japan's questions, the representative of China asserted that first, on the legality
of the safeguard measures on certain steel products, China’s safeguard investigation on certainimported steel products had been carried out in full compliance with the WTO Agreement on
Safeguards and in strict conformity to China's safeguards laws.  Regarding the provisional and
definitive safeguard measures on certain imported steel products, China had notified the Committee
on Safeguards of the findings with regard to serious injury and the threat thereof caused by increased
imports, as well as the authority’s decisions to apply such measures, thus having fulfilled itsnotification obligations under the Agreement on Safeguards.  China’s investigating authorities also
made adequate information disclosures regarding find ings of the investigation, and notified disclosed
information to Members having a substantial interest, including Japan.  Moreover, pursuant to the
rules set out in Articles 12.3 and 12.4 of the Agreement on Safeguards, China had held consultations
with those Members having substantial interest, including Japan, furnished the relevant information,and exchanged views on the measures.  China’s safeguard measures on certain imported steelG/SG/66
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products had been, and would continue to be, applied according to the timetables stipulated in China's
Official Bulletin on definitive measures.
5. Second, on the result of the investigation of injury, the Chinese delegate stated that Article 16
of China's safeguards regulations provided that in a case where a preliminary determination
established the existence of an increase in the quantity of an imported product and injury and a causallink between the two, MO FTEC and the State Economic and Trade Commission ("SETC") should
continue with their investigations and, on the basis of the findings of such investigations, make a final
determination which should be published by MOFT EC.  Accordingly, a final determination was
published by MOFTEC on 19 November 2002.
6. The representative of China also reiterated China’s position with regard to the transitional
product-specific safeguard mechanism contained in  paragraph 16 of China’s Accession Protocol.
China considered that the mechanism was discriminatory in nature, and contrary to the basicprinciples of the WTO.  Experience over the years had revealed the fact that injury suffered by
domestic industries was attributable in most cases to imports from several exporting Members, rather
than a single one.  Thus, invoking the product-specific safeguard mechanism - which targeted solely
imports originating in China - was not only discrimi natory, but also failed to counteract the injury
suffered by domestic industries.  In that spirit, it was China’s belief that trade remedies within aframework of the WTO should always be the resort of priority in the case of domestic injuries.  China
sincerely hoped that all Members would abide by th e fundamental principles of the WTO and exercise
maximum caution in considering the application of the transitional product-specific safeguard
mechanism.
7. The representative of Japan made some preliminary remarks on China's statement.  First, on
the legality of the measures by the PRC, he noted that this issue had been discussed in last year’s
transitional review mechanism, and during bilateral consultations held under Article 12 of the
Safeguards Agreement.  However, Japan was still of the view that China's measures were not in
conformity with the Safeguards Agreement, and would seek more detailed explanations from China
about the legality of those measures.  In connection with China’s response to Japan's second question,he sought clarification regarding the status of China's safeguard measure in respect of products which
were subject to the provisional measure, but which were subsequently found not to have caused
serious injury to domestic producers.  He stated that there was no basis for maintaining measures on
those products, and asked when measures  on those products would be repealed.
8. The representative of China stated that China was more than pleased to continue its
cooperation under the process of providing more information to Japan concerning the legality of its
safeguard measures.  Regarding the additional clarification sought by Japan, he stated that the relevantinformation could be found in the Official Notice published by the Ministry of Foreign Trade and
Economic Cooperation, now the Ministry of Commerce.
9. The representative of Japan expressed the hope that he could find the necessary information
in the document referred to by China.
10. The representative of the United States asserted that, as China’s second year of WTO
membership came to a close, the United States appreciated the transitional review mechanism, as it
provided a venue to conduct a thorough and meanin gful review both to highlight China’s successes
and to identify areas where more work needed to be done.  As China was already applying its
safeguards law, it was important that its practices conformed to its WTO commitments.  As could be
seen by the questions that the United States and other Members had raised, both in the TRM andunder the other agenda items for the Committee meeting, there were some serious concerns about
China’s safeguard practices and its progress at meeting some of its commitments.  The United States
appreciated China’s prompt written responses to the questions it had submitted, and the United StatesG/SG/66
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viewed this as an important indication of China’s efforts to play a constructive role in this Committee.
Once it had reviewed those responses in detail, the United States expected to follow up with
additional questions in the Committee so it could better understand China’s rules and practices.  The
United States recognized and applauded China’s effort to promulgate implementing rules.  The
United States noted that additional rules were notified to the WTO both in February and April 2003,and thanked China for the responses to the questions that it had submitted with respect to those
notifications.  Nonetheless, the United States was concerned about the delay in China notifying these
and other rules to the WTO in light of China having undertaken a safeguard investigation before all
the necessary rules had been issued and notified.  According to the United States, such a delay could
have caused confusion and uncertainty for the parties affected by the safeguard proceedings.
11. The US representative recalled that last year the United States had raised some concerns
about a lack of transparency in China’s decision-making process for the safeguard measure, and suchlack of transparency appeared to have carried forward into some aspects of China’s implementation of
the measure.  For example, some US exporters complained that China’s process for allocating quotas
under the measures was unclear, making it very difficult for them to gain a fair share, if any share at
all, of the available quotas.  The United States also had concerns about such issues as, first, the criteria
China had used in determining which WTO Members would be accorded the status of a developingcountry or region for purposes of Article 9.1 of the Agreement, and in particular whether those criteria
were clear and transparent.  Second, the United States had concerns about China’s treatment of non-
WTO Members under Article 9.1.  That provision required non-application of safeguard measures to
developing country WTO Members where the import share criteria were met, but it did not provide
for exclusion of countries which were not WTO Members.  Third, the United States was concernedabout how confidential data submitted during th e course of a safeguard investigation would be
protected, especially when outside experts were employed.  Fourth, there was a concern as to access
to non-confidential information from safeguard investigations by interested parties and by the general
public, in terms of the procedural requirements for and limitations on such access.  Fifth, there was a
concern as to the refunding of safeguard duties collected pursuant to provisional measures whendefinitive measures were not imposed on the relevant products.  Sixth, the United States was
concerned about the terms and conditions covering China's extension of safeguard measures.
12. The US representative explained that, whereas the United States did not take issue with
China’s use of safeguard remedies, it did have concerns about certain aspects where there had been a
lack of transparency that had accompanied China’s implementation to that point.  As noted, the
United States expected to follow up with additional questions in the Committee to better understand
China’s rules and practices on these and other issues.  The United States looked forward to continuedcooperation with China, and appreciated the opportu nity to participate in the transitional review.
13. The representative of the European Commun ities stated that the European Communities
shared most of the views expressed by Japan and the United States, and had several concerns about
China's steel safeguard measures.  He noted that the European Communities had expressed those
concerns on several occasions in the past, including in the context of Article 12.3 consultations, andtherefore did not consider it necessary to repeat them all at that meeting.  The European Communities
still believed that there were a number of inconsistencies in China's measures, and would ideally like
China's measures to be repealed as soon as possible.  However, at the meeting the European
Communities wanted to focus on the possibility that China might review its measures before their
three-year expiry.  The European Communities accepted that the mid-term review provision of theAgreement only provided for a mandatory mid-term re view if the measure lasted for more than three
years, which was not the case for the Chinese measures on steel.  However, according to Article 7.1 of
the Agreement, a Member should apply safeguard measures only for such a period of time as may be
necessary to prevent or remedy serious injury.  There was, therefore, at least a possibility that China
could carry out a review before the expiry of these measures.  The European Communities believedthat the circumstances in the Chinese market had changed very substantially and very rapidly over theG/SG/66
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last one and a half years since the Chinese measures were first introduced, and these changed
circumstances could give China cause to carry out a review to see whether its measures were still
necessary.  The European Communities asked whether China was ready to consider that option.
Alternatively, since China had explicitly stated th at their measures were taken in response to the US
and EC measures, the European Communities asked whether China would at least be ready toconsider a review in the event that the US and EC steel safeguard measures were revoked in the
coming months.
14. The representative of China stated that China had always faithfully and sincerely
implemented the commitments and obligations that it undertook upon its accession to the WTO, and
this has been reflected not only in the legislation dr afted by China, but also in the practices that China
has so far been engaged in.  Concerning any delay in the submission of China's legislative
notifications, that was attributable to government restructuring which China has been engaged instarting from March or April 2003.  China considered that it was only appropriate for it to make the
necessary modifications and changes to the original legislations because of the restructuring of the
Chinese government departments.
15. With regard to the specific issues raised by th e United States, such as the standards or criteria
that China had used for defining developing countries, at least for the purpose of China’s safeguardinvestigations, and other issues such as the treatment of non-WTO Members, these were already
covered by China's written replies to written quest ions.  The EC questions concerning the review of
China's safeguard measures would be referred to capital for further consideration.
16. The Chairman noted that China's Protocol of Accession contained no guidelines for reporting
to the Council for Trade in Goods on the Committee's transitional review of China's implementation
of the Agreement.  He proposed that the Committee follow the same reporting procedure as last year,
whereby the Chairman, acting on his own responsibili ty, would prepare a brief, factual report, with
references to the documents concerned, and attaching the portion of the minutes of the meeting which
relate to the transition review.
17. The Committee agreed that the Chairman should prepare the same type of report in respect of
the 2003 transitional review.
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