RESTRICTEDWORLD TRADE
ORGANIZATIONG/MA/M/33
19 November 2002
(02-6419)
Committee on Market Access
MINUTES OF THE MEETING HELD ON 23 SEPTEMBER 2002
Chairman: Joshua Phoho Setipa (Lesotho)
Agenda of the meeting             Page
1. Periodic Report of the Committee to the Council for Trade in Goods including
factual information on waivers expiring on 31 October 2002...............................................2
2. Submission of HS96 documentation........................................................................................2
3. Submission of HS2002 Documentation ...................................................................................2
4. Modalities and operation of the Integrated Data Base..........................................................4
(a) Status of submission of the requir ed documentation (G/M A/IDB/2/Rev.15).............................4
(b) Report by the Secretariat................................................................................................... ..........5
5. Consolidated Tariff Schedules Database  - Report by the Secretariat.................................5
6. Implementation-Related Issues and Co ncerns:  Meaning to be given to the
phrase "substantial interest" in paragraph 2 (D) of Article XIII of GATT 1994
(paragraph 1.2 of WT/MIN(01)17)..........................................................................................5
7. Outstanding Implementation Issues  raised by Members: Tiret 99 of
Job(01)/152/Rev.1 – Measures designed to secure a Redistribution of Negotiating
Rights in Favour of Small and Medium-sized Exporting Members in Trade
Negotiations ................................................................................................................... ............6
8. Transitional review under paragraph 18  of the Protocol of Accession of the
People's Republic of China ..................................................................................................... .6
9. Ecuador – New Panama Canal Transit Tolls (G/MA/W/37) ..............................................2410. Draft Report (2002) of the Committee to the Council for Trade in Goods
(G/MA/SPEC/22) ................................................................................................................. ...27
11. Other Business.............................................................................................................. ...........27
(a) Date of the next meeting.................................................................................................... .......27
The above agenda as reproduced in document WTO/AIR/1893 dated 13 September 2002 was
adopted with the inclusion of one item under "other business".  An annotated agenda was circulated in
an informal document (Job No.(02)/123) dated 20 September 2002.  Discussion on items 6 and 7 of
the agenda as reproduced above was suspended.G/MA/M/33
Page 2
1. Periodic Report of the Committee to the Co uncil for Trade in Goods including factual
information on waivers expiring on 31 October 2002
1.1 The Chairman drew attention to document G/ MA/SPEC/21 which contained the draft periodic
report of this Committee.  He indicated that this report, which would be finalized in the light of the
discussion that would take place at this meeting,  would be submitted to the Council for Trade in
Goods for examination at its meeting of 1-2 October 2002.  As was customary, the report contained in
its Annexes I and II  tables summarizing factual information on the waivers under process submitted
by the Members concerned.  In this context, he requested the Committee to take note of the requests
that had been presented by these Members concerning their respective waivers and of the reasons for
doing so.   All the waivers expired on 31 October 2002.
1.2  From Annex I of the documen t G/MA/SPEC/21,  he noted that  to date seven Members had
forwarded requests for waivers in connection with the introduction of HS96 changes to their
schedules of concessions. Factual information provided by these Members concerning their request
and  the accompanying draft decisions had also been circulated.
1.3 The representative of Malaysia enquired as to the status of Malaysia's waiver.
1.4 A representative of the Secretariat responded that Malaysia's waiver was for one year and
would expire on 30 April 2003.1.5 Details concerning Members which had requested an extension of their respective waivers for
the transposition of their schedules in the Ha rmonized System following the introduction of the
Harmonized System, and the renegotiation of their sc hedule were contained in Annex II of document
G/MA/SPEC/21.  These extensions concerned Sri Lanka and Zambia respectively.  The requests and
the draft decisions related to these extensions had been circulated.
1.6 The Committee took note of the statements and agreed
 to forward the requests and draft
decisions to the Council for Trade in Goods for action.
2. Submission of HS96 documentation
2.1 The Chairman drew the Committee's attention to document G/MA/TAR/2/Rev.29 which
reflected the present situation concerning the submission of required documentation.  From the
document, it could be noted that the submissions of ten Members, whether they had requested anextension of waivers or not, remained pending due to ongoing consultations and/or negotiations.
2.2 He reported on the informal consultations that had been taking place on the subject of the
HS96 transposition exercise.   Since the last formal meeting on 12 June 2002, an informal meeting of
the Committee was held on 26 July 2002 to review the status of HS96 submissions.   An informal listentitled Revision 13 detailing the situation of HS96 submissions was faxed to all Members when this
informal meeting was convened.   He stated that this process was useful in achieving progress and
proposed that another meeting of this kind be held in the near future. A Revision 14 of the informal
list detailing the situation of HS96 submissions co uld be issued along with the fax convening this
meeting.
2.3 The Committee agreed to the Chairman's proposal.
3. Submission of HS2002 Documentation
3.1 The Chairman drew attention to document entitled "Status of HS2002 submissions-
Revision 2" circulated as G/MA/TAR/4/Rev. 2. It reflected the status of submissions of HS2002
documentation, as of 17 September 2002.   At the Committee's informal meeting on 26 July 2002,  heG/MA/M/33
Page 3
had indicated that the fact that a large number of HS2002 submissions had been notified at the same
time had presented the Secretariat with difficulties regarding the preparation and issuance of the
verification sheets within the time-limits set out in the procedures for the incorporation of HS2002
changes into schedules of concessions (WT/L/407).  The situation had been rendered more difficult
due to the absence of the person responsible for the preparation of the HS2002 verification sheets.However, this was a special situation which was temporary.  In this regard, he requested the
Committee to show some understanding and patience, and note that these were exceptional
circumstances.
3.2 On this subject,  he recalled that a number of Members had been granted waivers through the
form of a "collective decision" in order to introduce HS2002 changes domestically and to
subsequently undertake the exercise of introducing these changes to their respective schedule ofconcessions. The draft waiver decision was adopted by the General Council on 13 May 2002 of this
year (WT/L/469).  The waiver, for all Members, with the exception of two Members, began on
1 January 2002 and would expire on 31 December 2002. Given the situation, as described previously,
it would be difficult for these Members to complete  the transposition exercise within the time-limit of
the waiver and consideration might need to be given to an extension of the waiver.   This situationwas also applicable to Romania which was granted a waiver through a decision adopted by the
General Council on 8 July 2002 (WT/L/477).  He proposed that he hold consultations regarding this
matter.
3.3 The representative of Japan stated that his delegation had three points to raise.  First, Japan
had  submitted on 20 September 2002 its entire HS2002 documentation and he hoped that it would be
circulated to Members as soon as possible,  and that document G/MA/TAR/4/Rev.2 would be
accordingly updated.  Second, although the Chairman had requested Members to show some
understanding in this difficult situation, Japan had concerns about the delay in the HS2002 exercise,
especially about the significant delays in the production of electronic verification sheets because ofresource constraints on the part of the Secretariat.  There were some time-lines in the  General
Council decision contained in WT/L/407.  For example, the Secretariat was supposed to "prepare a
verification sheet which will  be circulated or made available to all Members at the latest four weeks
after the circulation" of the HS2002 documentation of a Member.  However, so far there had been
delays of about five months as could be noted fro m the document.  In this regard,  his delegation
wished to request the Secretariat to take the current situation more seriously and to take necessary
measures including reinforcing Secretariat staff members dealing with electronic verification so as toaccelerate this exercise. Third, he wished to explain Japan's particular situation briefly.  To enable the
entry into force of Japan's draft schedule incorporating the HS2002 changes, his delegation, after
obtaining a certification by the Director-General, needed to submit the certified draft schedule to the
Diet for approval. Japan therefore needed a longer  time-period than other Members to implement the
HS2002 changes. The annual regular session of the Diet normally started in late January 2003.Before that time his delegation wished to complete the multilateral process on its draft schedule.  To
address Japan's concern in a practical way,  he wished to propose a sort of priority treatment in this
exercise.  Japan's proposal was that a Member having concerns about the delay in this exercise could
request priority treatment from the Secretariat. If such a request was made, the Secretariat may accord
appropriate treatment including changing the order of  the waiting list for electronic verification taking
into account the needs of such a Member making a request and other factors related to this exercise.
His delegation hoped that Members would pay favour able consideration to this practical proposal.
3.4 The Chairman noted that, as he had indicated before, the difficulties faced by the Division
were temporary and unavoidable. The Secretariat was working hard to try to complete the work.
3.5 The representative of China informed the Committee that the technical work on the HS2002
documentation was almost complete and her delegation would be submitting the documentation
shortly.G/MA/M/33
Page 4
3.6 The representative of the United States stated that her delegation had provided a revised
HS2002 schedule for circulation to Members. It also intended to submit a rectification regarding the
implementation of the second pharmaceutical update which would weed out a number of outstanding
issues raised in the electronic verification process.  She encouraged Members to submit their
schedules.
3.7 The representative of Philippines sought clarification as to whether Japan had submitted its
entire schedule or only the tariff items affected by the HS02 changes. She had understood the
procedures to require the submission of only those tariff items affected by the HS02 changes.  On a
second point,  document G/MA/TAR/4/Rev.2 li sted Members which had made HS2002 submissions
and for whom verification sheets had already been circulated. In previous meetings there had been
requests for these countries to submit improved sc hedules incorporating comments contained in the
Secretariat verification sheet.  She had understood that only once this was done would Members
having reservations on those submissions begin filing their reservations. In short, she wished to know
what the procedure was once Members had submit ted revised HS2002 documentation incorporating
comments made by the Secretariat.
3.8 In response to the question by the Philippines, the representative of Japan clarified that
Japan's HS2002 submission contained only those tariff lines affected by HS02 changes. He had used
the word "entire" because Japan had initially submitted HS2002 documentation on
10 September 2002, but the documentation was considered incomplete by the Secretariat because of
the lack of concordance tables.  The present submission contained the concordance tables which iswhy he had referred to it  as "entire".
3.9 In response to the Philippines, a representative from the Secretariat stated that there had been
a first multilateral review in which certain questions were raised on the first five HS2002 submissions.
Some revised HS2002 submissions had now been received.  The intention would be to prepare newverification sheets on these revised submissions. However, at this stage priority was being given to the
HS2002 submissions on which no verification sheets had as yet been prepared.  As to the question on
queries, from the discussions,  she had understood that queries on HS2002 submissions could be put
forward at any stage by any delegation.  However, it had been considered more useful if such queries
came after the consultative process between the Secretariat and the delegation concerned had
concluded as sometimes the queries covered issues which were also addressed in the Secretariat
verification sheet.
3.10 The representative of Norway informed the Committee that her delegation was still consulting
with the Secretariat and was in the process of preparing the necessary documentation which it hoped
to submit as soon as possible.
3.11 In response to a question raised by Australia, the Chairman  stated that he hoped to hold the
next multilateral review as soon as some verification sheets were available.
3.12 The Committee took note of the statements and agreed  to the Chairman's proposal to hold
consultations on the HS2002 waiver.
4. Modalities and operation of the Integrated Data Base
(a) Status of submission of the requir ed documentation (G/MA/IDB/2/Rev.15)
4.1 The Chairman stated that document G/MA/I DB/2/Rev.15 presented the situation of PC IDB
submissions as of 17 September 2002.  Since the document had been finalized the Secretariat had
advised him that the following new submissions had been received: Costa Rica (imports 2001);
Estonia (imports 2001); and Slovenia (imports 2001).  He reminded Members that the deadline forG/MA/M/33
Page 5
furnishing the 2002 tariff information was 30 March 2002, and 2001 trade information was
31 October 2002.
4.2 The representative of Australia stated that his delegation had submitted applied tariff data of
2002 and it aimed to submit the tariff concordances with respect to national correlation to the IDB
very shortly.  Australia's IDB submission did not include bound tariff data.  However, his delegation
had advised the Secretariat that this information was now available in Australia's consolidated tariff
schedule submission. It had suggested to the Secretariat that this data be imported from that
submission. His delegation had also informed the Secretariat that it should be able to obtain requisite
import data for Australia each year under the agreement that the Australian Bureau of Statistics had
with the UN and the WTO for the supply of trade data.
4.3 The Committee took  note of the statements.
(b) Report by the Secretariat
4.4 The Secretariat introduced its report which is reproduced in Annex 1.
4.5 The Committee took note of the report.
5. Consolidated Tariff Schedules Database  - Report by the Secretariat
5.1 The Secretariat introduced its report which is reproduced in Annex 2.
5.2 The Committee took note of the report.
6. Implementation-Related Issues and Concer ns:  Meaning to be given to the phrase
"substantial interest" in paragraph 2 (D) of Article XIII of GATT 1994 (paragraph 1.2 of
WT/MIN(01)17)
6.1 The Chairman recalled that at the last formal meeting of the Committee on 12 June 2002, the
Committee had agreed that the Secretariat should prepare more empirical examples as proposed in
St Lucia's paper circulated as document G/MA/W/30.  At its informal meeting of 26 July 2002, the
Committee held a discussion on this subject on the basis of additional empirical examples prepared by
the Secretariat which were circulated in document Job(02)/94.  At the end of the discussion, it was
agreed that consultations should be held to see how to advance the process.  He drew attention to the
fact that  in accordance with paragraph 1.2 of document WT/MIN(01)/17 the Committee had to makerecommendations to the General Council  "as expeditio usly as possible but in any event not later than
the end of 2002."
6.2 His sense from the discussions held so far on the subject was that everyone had sympathy for
the situation of small and medium-sized economies and the difficulties they faced.  However, on howto proceed on this question there appeared to be divergent views.  Some delegations were of the view
that there was no need to continue discussing this subject in the Committee as it would be addressed
in the context of the negotiations on agricultural products.  For others, it was more of a systemic issue
which should continue to be addressed in this Committee. His conclusion from the discussions was
that the Committee could continue do some more work on this issue. In this connection, he proposedthat the Committee suspend discussion on this item and that it meet informally in the near future to
have a frank and thorough discussion of this item  The recommendations to be made to the General
Council would be determined from the discussi ons at the informal meeting and any subsequent
meeting on this subject and would need to be considered formally by the Committee at its resumed
formal meeting.G/MA/M/33
Page 6
6.3 The Committee agreed to the Chairman's proposals and suspended  discussions on this agenda
item.
7. Outstanding Implementation Issues raised by  Members: Tiret 99 of Job(01)/152/Rev.1 –
Measures designed to secure a Redistribution of Negotiating Rights in Favour of Smalland Medium-sized Exporting Members in Trade Negotiations
7.1 The Chairman recalled that discussions were held on this implementation issue at the
Committee's informal meeting of 26 July 2002. A background paper by the Secretariat entitled
"Negotiating Rights under Article XXVIII of GATT 1994" was circulated as Job (02)/93.   Following
the discussion, it was agreed that St Lucia would submit a paper to help advance the process.
However, it had come to his attention that it might be difficult for St Lucia do this in the very near
future.  Additionally, the Committee needed to make a report to the TNC on this matter before the end
of the year.
7.2 From the discussions he had held with delegations it appeared that there needed to be a better
understanding of this issue and its implications, and a greater clarity of its scope.  He proposed that
while awaiting St Lucia's submission, those delegati ons interested in this subject put forward some
thoughts on the matter in writing in order to advance discussions.  To this end he proposed that the
Committee suspend consideration of this issue in order to pursue discussions, and to reconvene in the
future in order to consider its report to the TNC.
7.3 The Committee agreed to the Chairman's proposal and suspended  discussions on this agenda
item.
8. Transitional review under paragraph 18  of the Protocol of Accession of the People's
Republic of China  
8.1 The representative of China thanked the Chairman for giving him this opportunity to address
the Committee on the implementation of China’s commitments on market access under the framework
of paragraph 18 of China’s Protocol of Accession. He hoped that this introduction would help
Members better understand China's efforts and achievements in this regard.
8.2 However, before his introduction, there were two points that he wished to add. The first
concerned the information that China had provided for this transitional review. China had submitted
to the Committee the information requested in Annex 1A of China's Accession Protocol, quantitativerestriction notification and 18 rules and regulations relating to China’s commitments in market access
for goods and import licensing, namely implementation rules on administration of automatic import
licensing of machinery and electronic products; measures on administration of import of machinery
and electronic products; implementation rules on the administration of import quotas of machinery
and electronic products; implementation rules on the administration of import of specific machineryand electronic products; interim measures on the administration of import quotas of natural rubber;
implementation rules on the administration of import tariff rate quota of wool and wool tops of 2002;
the quantity, conditions of application and allocation methods of import tariff rate quota of important
agricultural products of 2002; interim measures on the administration of import tariff rate quota for
agricultural products; implementation rules on the administration of automatic import licensing ofimportant industrial products; measures on the administration of import licenses for goods; circular of
the state development planning commission of the People’s Republic of China no.3, 2002; measures
on the administration of automatic import licensing of goods; the allocation methods for import
quantity of automobile tires under import quota and application procedures in the year 2002; the
allocation methods for import quantity of processed oil under import quota and application proceduresin the year 2002; the allocation methods for import quantity of fertilizer under tariff rate quota and
application procedures in the year 2002; decree on the adjustment of the import quotas (non-state
trading) for processed oil, automobile tires and crude oil of 2002; the allocation methods for importG/MA/M/33
Page 7
quantity of processed oil under import quota and application procedures in the year 2003; the
allocation methods for import quantity of automobile tires under import quota and application
procedures in the year 2003.
8.3 Secondly, the Chinese delegation at this meeting was large, comprising of experts from the
State Development Planning Commission, the Stat e Economic and Trade Commission, Ministry of
Agriculture and Ministry of Foreign Trade and Economic Cooperation who stood ready to respond to
Members’ questions and exchange views with them in  this meeting. This fully demonstrated China’s
sincerity in honouring the commitments made and th e importance China attached to this transitional
review process.
8.4 The past 15 years had seen China’s lengthy and painstaking experience of negotiations for the
accession to the WTO and the integration of one of the biggest developing countries in the process of
profound social and economic reforms into the multilateral trading system. The accession had
presented itself as a huge challenge not only to China but also to the WTO. During the accession
negotiations, China had made extensive and far-reaching commitments under the intrinsic demands of
China's economic reform and opening-up policy, as well as the requirements posed by the WTO rulesand other Members. It was fair to say that the implementation of these commitments entailed
enormous difficulties.  He wished to make clear however, that China was a responsible country and
had made its utmost efforts to open its market with a view to fully implementing its commitments.
8.5 His introduction would focus on 4 aspects.  The first was the streamlining of legislative and
administrative documents and practices in order to make them in line with the WTO rules.  After
accession, a massive action to enact, amend and annul laws, regulations, rules and administrative
measures, totalling 2,300 pieces, was launched to bring the trade related policies and measures at all
levels in China into conformity with WTO rules. As of April 2002, the Ministry of Foreign Trade and
Economic Cooperation, for example, had annulled 381 administrative measures and 178 rules at theMinistry level. Apart from that, to ensure comp liance with the commitments made in the accession
process and for reasons of transparency, opportunities for comments were provided for in the laws,
regulations and administrative measures before their implementation. The WTO Notification and
Enquiry Centre had also been established as a focal point to provide accurate and reliable information
on China's trade policy to WTO Members, enterprises and individuals both in China and abroad.
8.6 Secondly, regarding the tariff rate, on 1 January 2002, China had dramatically lowered the
simple average of import duties from 15.3% to 12%, covering 5,332 tariff headings, which accounted
for 73% of all the headings. Among them, the tariff rate for industrial products had dropped from
14.7% to 11.3%, while that of agricultural products (excluding fishery products) had dropped from
18.8% to 15.8%. Furthermore, China had also reduced the number of the products subject to
provisional duties from 523 to 209. With all these efforts, China had fulfilled its commitment on tariffreduction made in the accession process.
8.7 Thirdly, on tariff rate quota, relevant government agencies in China had promulgated a series
of rules and administrative measures governing the tariff rate quota (TRQ) regime for industrial and
agricultural products including grain, cotton, vegeta ble oil, sugar, wool and wool tops and chemical
fertilizer with a view to administering the TRQs in a transparent, predictable, uniform and
non-discriminatory manner. These rules and administrative measures contained specific provisions on
valid terms, administrative procedures and requirements, allocation (and reallocation) of TRQs etc.
China had also provided relevant information to the WTO on provisions of volume and (or) value of
the quota or tariff rate quota made available, reallocated quota or TRQ applied for, the volume and/orvalue of requests for the allocation or reallocation denied, fill rates for the quota or the TRQ etc. The
new TRQ system implemented by the Chinese government had provided more extensive, stable and
predictable market access opportunities for WTO members.G/MA/M/33
Page 8
8.8 Lastly, he drew Members’ attention to the ef forts China had made with regard to non-tariff
measures (NTMs) including quantitative restrictions. NTMs had been greatly reduced since China’s
WTO accession. From the beginning of 2002, a number of products including grain, vegetable oil,
sugar, wool, cotton, chemical fertilizer, tobacco and its products, acetate tow, polyester fillet, acrylic
fibre, polyester fibber, color television sets and TV kinescope, radios, tape recorders and their mainparts, audio and video tape duplication equipment,  refrigerators and their compressor, recording
equipment and its key parts, air conditioners and their compressor, open-end spinning machines, wine,
color sensitive material were no longer subject to either quota or import licensing. As for automobile
tires, motor vehicles and their key parts, import quotas and licensing administration of part of their HS
headings had been eliminated. China had also eliminated NTMs on machinery and electric products
under 159 tariff headings according to the commitm ent in Annex 3 of the Accession Protocol. To
speed up the process of trade liberalization, China had removed 3 products (84743100, 85291090,90311000) from NTM administration three years ahead of the time designated in Annex 3. In 2002,
the number of products subject to import licensing administration had been reduced from 35 in the
previous year to 12, and the products in 8 digit tariff headings subject to import licensing
administration was reduced from 502 to 170.
8.9 The allocation and reallocation of the quotas had been administered in line with the
provisions of the Agreement on Import Licensing Procedures and the Working Party Report (WPR)
on the Accession of China. Examples, among others, were natural rubber, machinery and electronic
products, processed oil and automobile tires. The import quota quantity of natural rubber in 2002 was
set at 567,000 tons, which was in strict conformity w ith the growth rate stipulated in Annex 3, and this
quota quantity had been allocated in full. The annual 15% growth rate of quotas for machinery and
electronic products listed in Annex 3 had been carried out faithfully. And the import quota quantity
for processed oil and automobile tires, based on China's committed level, had also been fully
allocated. Now relevant administrative bodies were processing the unused quotas returned as well as
the applications for reallocation.
8.10 The implementation of China’s commitments made in the WTO accession process was an
integral part of China’s opening up and economic reform policy. China had been faithfully fulfilling
its commitments which well reflected China’s relati onship with other Members, on a friendly and
mutually benefiting basis. China, as a developing country, was facing enormous difficulties and
capability constraints in implementing the WTO Agreement and honouring its commitments. It was
therefore China's sincere hope that WTO Members would adopt a long term approach and pragmaticattitude toward China’s implementation process.
8.11 To conclude, China believed that this review was an opportunity for effective information
exchange and clarification between China and othe r Members. It was hoped that this review would
facilitate China’s implementation process in a proactive manner with helpful comments from otherMembers.
8.12 The representative of the European Co mmunities thanked China for the information
circulated in document G/MA/W/39 and for the responses provided. However, not all her delegation's
points had been addressed,  and her delegation was keen on obtaining replies.  She was extremelypleased to see the number of delegates from China attending this meeting which demonstrated the
importance that China attached to this exercise.  She was also pleased to hear the statement by China
that it was a responsible country keen on fully implementing its commitments. Those commitments
had enabled China to accede to the WTO. She was also very impressed by the effort made by China
during the year. Translating all the provisions and legislations was not an easy task.  What remainedwere problems which required solutions more than responses.  Although there were some positive
instances such as the one concerning the management of tariff quotas on fertilisers, her delegation had
some specific concerns, and she wished to begin with tariff commitments.  It had been very difficult
for her delegation to carry out a systematic check of such commitments because it did not have an
electronic copy of China's tariffs.  This had meant undertaking a manual check which was not easy.G/MA/M/33
Page 9
Generally, she was satisfied with what she saw.  She had not seen big problems, although  her
delegation had thought that on 1 January 2002, the phased-in tariff rate committed to for 2002 should
have been applied but that had not been the case.  She wished to know why this delay had come
about.
8.13 Next, she wished to address the issue of quotas, more particularly in the area of cars.
Admittedly, this might be an issue only because her delegation had very scant information from
China, and she was ready to stand corrected if the Chinese authorities could provide data. The
allocation for quotas for 2002 had been delayed, and her delegation did not understand why.
Moreover, her delegation failed to understand why the Chinese authority seemed to include CKD
(completely knocked-down kits)   for vehicles and SKD (semi knocked-down kits) for vehicles as part
of the quota.  This was an issue that needed to be addressed.  Her delegation had a problemconcerning the issuing of licensees for those who wanted to distribute both local cars and foreign cars
together.  Moreover, her delegation  had problems concerning certification and classification. There
were certain parts of cars that got systematically classified in the high value section of the
classification.
8.14 On quotas in general, there were a series of elements that did not tally with what were in the
minutes of the WPR especially the timing for the issuance of licensees.  The timing did not seem to
correspond to what was agreed in paragraph 129 of the WPR. Sometimes extensions of licenses were
not mentioned in the regulation. The allocation of these licenses did not occur at a central focal point,
but there seemed to be a two-tier system where there was the central authority and a local one. Thiswas inexplicable given the commitments entered into by China, but it was also extremely perplexing
in terms of transparency.  Once again this might be  the result of a lack of information, however, these
issues had been raised in reports by people working in China.  The provisions which were
implementing the accession commitments undertaken by China contained elements which concerned
the proportion of quota applied to new applicants.  In this regard, there seemed to be certaindiscrimination when provisions provided for priority to be given to "applicants with strong
productions, sales and service abilities."  Additionally, an applicant who did not exploit his quota to
the full should have a "proportionate reduction" but the regulation issued by China used the word
"deduction".  The mechanism that her delegation had thought had been agreed to during the accession
negotiations was not present.  She had other more specific queries concerning parts and machinery,
but at this stage, she preferred to focus on the main difficulties.  Her delegation had not discerned in
the regulations issued by China a clear will to abolish domestic content requirements. There were newarrangements but they did not seem to live up to China's commitments.  There was also the problem
of separate distribution channels which had nothing to do with quotas but on which a separate
discussion was required. Her delegation would be extremely grateful to the Chinese authorities for a
clear explanation on all these aspects.
8.15 Another area of concern for her delegation was export restriction. As regarded export
restrictions, she noted that Sections C. 1 and 2 of the WPR basically dealt with these issues i.e. export
charges, taxes, export licensing etc.  Her delegation was extremely satisfied to see China signing up to
a long list of commitments concerning export restrictions in the accession negotiations. China had
listed in Annex 6 some 84 products which were subject to export duty.  However, the problem wasthat certain other products which were not part of the list were subject to a restriction. In this
connection, she wished to refer to refractory bauxite under HS heading 2606.  China which was a net
exporter and supplier of brown fused alumina was somehow applying export restrictions to refractory
bauxite.  This problem was becoming urgent and he r delegation would be extremely grateful if the
Chinese authorities could provide clarifications as well as solve the problem.  The treatment ofanother raw material, copper, had raised concerns in the EC.  The VAT regime launched in China in
2000 provided for a VAT free import concession.  If one were to make a rough calculation, this
concession actually covered the cost of processing. The fact that the concession was applied to
increasing annual quotas for copper concentrates demonstrated that the regime being used was
possibly running foul of China's commitments. Here, the Chinese authorities in addition to clarifyingG/MA/M/33
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the matter should see if such a system was in accordance with their obligations in terms of the
application of internal taxes to imports.
8.16 Tariff problems also existed and they seemed to stem from the fact that the Chinese
authorities had opted to use specific duties rather than ad valorem  rates.  That was not a problem in
itself. However, it became a problem when the bound ad valorem rates in China's schedule were
breached and this had been the case for some products, including for Chapter 37.  She would not go
into details. However, the reports received from industry for some sectors were extremely worrying.
8.17 On the questions received from the Chinese authorities, one concerned the allocation of a
quota increase that was decided in the accession negotiations. There was a slight delay in this
allocation of the 5% which was the increased amount. A regulation had already been drafted to takecare of this increase and in this respect, both the increase for 2001 and 2002 together would be taken
care of. This regulation was in its final stages but it was just the increase that needed to be settled. Her
delegation was intended to provide the reply in writing.
8.18 What China was doing was impressive, and solutions would be found for these problems, if
they were truly problems. For the time being, she was still missing information but from the reports
received, it appeared that these problems existed and in particular the problem of quotas for cars was
especially of concern to her delegation.  Her delegation was willing to cooperate and was ready to
provide information or details. At the same time, her delegation hoped to have China's replies by a
date which would enable her delegation to study the replies and to complete the TRM by the end ofthe year.  She would propose a date towards the end of October 2002.  This would provide enough
time to the Chinese delegation to provide information and to respond to questions of substance that
had been raised.  Throughout the exercise there had been a sense that there were gaps in information.
However, she understood that there were problems of translation for the Chinese authorities.
8.19 Another representative from the European Communities stated that he wished to draw
Members' attention, particularly China's attention, to the situation resulting from the application of the
MFN clause to exports from French overseas territories.  The clarification of the conditions for the
granting of MFN to overseas territories was indispensable.  These were the overseas territories of the
French Republic with whom the Community had close association relations.  The French delegation
would be introducing this specific point which it would be addressing to the Chinese authorities in
order to clarify the situation as to the overseas territories.  However, this concern was shared by all ofthe Community and wished to stress solidarity in this respect.
8.20 The representative of France thanked the representative of the European Communities for the
solidarity expressed regarding the overseas territories on behalf of whom he was speaking now.  The
overseas territories were not part of the EC but they did have very close ties with the Community.Although it was not an exhaustive list, he was referring to the following territories: New Caledonia,
Wallis and Futuna, French Polynesia in the Pacific, the French Southern and Antartic lands, Mayotte
in the Indian Ocean, St Pierre and Miquelon which were next to Canada.  As France was a founding
Member of the WTO, these territories were subject to  the rights and obligations in the WTO.  China's
accession to the WTO should have meant the automatic granting of most-favoured-nation treatment tothe overseas territories of the French Republic.  Yet this had not been the case so far, in particular, for
exports from New Caledonia to China.  It emerged from bilateral contacts with the Government of the
People's Republic of China that China would be prepared to accord the benefit of the MFN clause to
these territories and exports from these territories as of 1 January 2003.  So, he requested China to
confirm that it would indeed be according, at the latest, as of 1 January 2003 most-favoured-nation
treatment to products from the overseas territories of the French Republic, and in particular from New
Caledonia.
8.21 The representative of China stated that with regard to allocation of the car quota, he recalled
that China had already allocated the quotas of car and the key parts of automobile according to itsG/MA/M/33
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commitment in the accession protocol and WPR.  On the components of car and key parts of the
automobile, the value for the quota of automobile and the key parts included CKD vehicles and SKD
vehicles because China had negotiated this. The value of the quotas was based on the import statistics
from the year 1995 to 1997 which incorporated automobile parts and CKD vehicles and SKD
vehicles.  From January to August 2002, China had imported a lot of automobiles.  The total numberaccording to China's customs statistics was worth US$4.8 billion which was 32% higher than that in
the previous year.  China had already fulfilled its obligation regarding the allocation of the quotas on
automobile and key parts and according to China's statistics the total value of China's quota for
automobile and key parts was US$7.9 billion this year and the real import would reach this limit.  The
Communities had made a reference to the so-called two tier system for the application for the quota
allocation.  No two tier system existed. The agency at the provincial level had the function of assisting
the central administration to collect information and to verify the information presented by theapplicants.  Because China was so huge, in order to guarantee the efficiency and accuracy for the
allocation of the automobile quota and other quotas, this was an effective way to guarantee allocation
of quotas in a timely manner by the central government. On the use of the term "deduction" of quota,
in relevant regulations, he recalled that in the accession negotiations this issue was discussed at length
in order to guarantee the full utilisation of quota.  Many Members had suggested that China's laws andregulations should have a penalty clause if a quota holder could not fulfil his import.  So pursuant to
the request of WTO Members, China had included such a clause in the relevant regulations.  With
regard to local content requirements,  he could confirm that after accession China had eliminated this
requirement because it was inconsistent with the TRIMS Agreement. On export restrictions, the EC
representative had referred to Annex 6.  To his k nowledge Annex 6 only dealt with export tariffs, not
export licensing.  In the WPR, specifically paragraphs 157 to 165, the representative of China had
clarified China's position on export restrictions.  In line with Article XX and XXI of GATT 1994, it
was legitimate for China to maintain export restrictions for certain products, so it was China's legal
right.  For the two specific items, China would check to see if they existed in the list of export
licencing products which, in fact, had been provided to the WTO.  China could confirm that if theseproducts were not on the list then they were not subject to this export licencing restriction.  But if they
were on the list they were subject to this restriction.  The representative of the Communities had also
mentioned VAT issues.  China applied VAT on a non discriminatory basis.  Both imported products
and domestically produced products were subject to the same VAT so there was no problem of
national treatment.  On the tariff issue, with regard  to the relationship between the specific tariff and
ad valorem  tariff, China shared the view of the EC that the use of these two kinds of tariff was not a
problem.  The problem was if the specific tariff was higher than the bound ad valorem  rate. His
delegation would discuss with relevant Members this issue of specific duties outside the TRM
framework at a more technical level. China regretted that the Communities had delayed
implementation of the growth rate of the quota, and urged the Communities to take action to
implement the commitments they had undertaken in China's Accession Protocol.  On the issue raised
by France, and the Communities on the MFN status for overseas territories of France, China had noproblem granting MFN treatment to any WTO Member.  With regard to the situation of overseas
territories, this was a new issue.  China  had spent some time following accession to consult with
other Members and the WTO Secretariat on how to deal with this issue.  Now, he could confirm that
China would grant most-favoured-nation treatment to products from the overseas territories of the
French Republic, including New Caledonia as of 1 January 2003.  With regard to the last commentmade by the Communities concerning written replies, according to China's understanding of the
TRM, China had no obligation to provide responses in written form.   In fact, before this TRM, China
had received a lot of questions from certain Members.  These questions had helped China in its
preparation of relevant information for the WTO.  His delegation believed that the information
submitted by China addressed appropriately the concerns raised by these Members.  Should additionalquestions be raised beyond what China had covered in its submitted information, he would provide
the necessary answers during the course of this review.
8.22 The representative of the European Communities thanked the Chinese delegation for its
willingness to  respond to her questions.   As regarded the issue of the quota, it was obvious thatG/MA/M/33
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China had allocated quotas but they had been allocated with a lot of delay.  China had promised that
for the year 2003, China would publish the quota allocation by mid-October 2002.  Moreover, there
was a complete lack of transparency in this exercise for quotas.  She would have liked to have greater
details concerning quota requirements remaining in effect after China's accession, applied tariffs,
trade data etc (bullet points on page 2 of G/MA/W/33).  It was important to get this exercise rightfrom the start.  As regarded CKD and SKDs, China was right to classify them with parts, but not with
finished vehicles, and this was precisely the point.  Her delegation did not understand how this
classification came about.   As regarded local content, China had indicated that whatever was required
had already been done.  However, she was not convinced. There were two sets of concerns to which
she had already referred in her introduction.  There were concerns which were associated with the
absence of the right type of information and which might disappear once such information was
provided.  Then, there were concerns which were not only a matter of providing good replies orresponses, but also a matter of solving the problem.  In this respect, for all the issues that she had
raised, she unfortunately had not found satisfactory replies in the paper submitted by China.  In that
paper China was quoting what she would describe as the success stories of implementation. Now,
there were other problems which had been brought to China's attention and she hoped that by the end
of October 2002  her delegation  would have a reply to these problems if not a solution.  She waspleased to hear that China would see whether the list of 84 products included the products that she had
mentioned.  As regarded the issues pertaining to national treatment, she was sceptical of China's
reasoning.  In any case, she was grateful for the willingness with which the Chinese delegation had
responded to her request for clarification.
8.23 The representative of France thanked the Chinese delegation for the very precise and clear
reply concerning his delegation's question.
8.24 The representative of Japan thanked the representative of China for his introductory statement
which was useful and requested China to circulate the statement. In accordance with Section 18 of the
Protocol on the Accession of the People's Republic of China, which set out the process for the TRM,
Japan wished to make the following comments on the issues of China's market access.  Japan
welcomed China's efforts to meet its commitments under the WTO Agreement and its Protocol of
Accession to the WTO.  Japan understood that China had been obliged to change a number of
trade-related laws and regulations to implement its obligations since becoming a WTO Member at the
end 2001.  Such efforts undoubtedly required a significant amount of time and human resources.
Japan generally welcomed China's efforts so far to implement a wide range of commitments under theWTO.  Japan held the view that the TRM would contribute to China's implementation of WTO rules
and its Accession Protocol, if operated in a meaningful and productive manner.  Japan had submitted
its comments one month before this meeting and in the comments Japan had requested China to
respond in written form in advance of the meetin g.  Japan intended to make this TRM meeting as
meaningful as possible by clarifying facts and China's views on some market access-related issuesbeforehand.  However, it was regrettable that China's response had not yet been provided, so Japan
once again requested a prompt written response from China.  He wished to provide a brief outline of
some of the most important issues for Japan which had also formed part of the questions submitted to
China a month ago.
8.25 On tariffs:  (1) concerning certain photographic and cinematographic goods, while China had
made tariff commitments regarding 35 photographic product line items in HS37 on an ad valorem
basis, those items were currently subject to specific import duties (levied on a yuan/square meter
basis), which resulted in a tariff burden that was excessive of the bound rate.  Japan had requested that
those excessive duties be lowered to the level of the bound rate in an expeditious manner;.  (2) onbeer, while China had committed to an ad valorem tariff rate on beer in HS 22, it was currently
levying a specific duty.  Japan held the view that China should observe the bound rate in line with
China's Schedule of Concessions and Commitments on Goods.G/MA/M/33
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8.26 On quantitative restrictions on imports, and on (1) import quotas on motor vehicles, the
Communities had already referred to this issue but Ja pan wished to also discuss this issue because it
was important.  China had announced that $7.9 billion was allocated for the 2002 quota, but the value
of automobiles, engines and auto bodies imported from April to July 2002 was $1.3 billion, according
to China's Customs Statistics.  In response to the EC,  China had referred to $4.8 billion.  There was adifference in the numbers and his delegation wished to have a more detailed breakdown of this figure.
Japan had  received information from several source s in the Chinese automobile market that Chinese
consumers were showing increasing interest in imported automobiles. Japan was concerned about
whether allocation of import quotas for automobiles and key parts was implemented appropriately.
Japan wished to review whether or not China was in confirmity with the provisions of the WTO
Agreement and its Protocol on the Accession, after re ceiving replies to the following questions.  First,
Japan requested China to provide the following information with respect to Article 1, paragraph 4 andArticle 3, paragraph 5(a) of the Agreement on Import Licensing Procedures: (1) the eligibility of the
applicant, and in particular, the relationship to trading rights; (2) information (both on the basis of the
application and the actual allocation) on the value of import quotas for complete vehicles, CKD, and
parts, broken down, by country of origin, engine displacement, and company; (3) according to
paragraph 4 of "Implementation Rules on the Quota Administration on Imports of Machinery andElectrical Products", the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) was
responsible for examining and supervising the status of allocation of import licences.  Japan wished to
have relevant information on the current status of the import quota allocation distributed by the
following entities: all provinces, autonomous regions, municipalities directly under the central
government and those with independent budgetary status, coastal open cities, and external economictrading management departments of special economic zones and State Council-related
machinery/electrical product import/export administrative offices; (4) according to paragraph 129 of
the WPR, August was the application period, and allocation would be made no later than 60 days after
closure of the application quota. Japan requested  confirmation that the quotas for 2003 would be
allocated by 30 October 2002.  Second, on the reallocation of unused quotas, Japan requested thatunused quotas for this year be returned and reallocated as specified in the WPR. Third, regarding
concern over priority consideration to new entrants in quota allocation, Japan requested that China
give priority consideration to new entrants in allocating quotas, as it had committed to.  So, Japan
wished to have information on the actual record of the allocation to new entrants as evidence. Fourth,
regarding rules concerning the quota system for motor vehicles,  Japan requested China to specify the
following points in its "Implementation Rules on the Quota Administration on Imports of Machinery
and Electrical Products",  in order to embody the scheme provided for in the WPR.  The following
five elements needed to be included in the regulati on:  (1) priority consideration to be given to new
entrants, enterprises with foreign ownership equal to or less than 50 percent, and enterprises with
foreign ownership greater than 50 per cent in alloca ting quota;  (2) an import licence to be issued in
most cases within three working days, and in exceptional cases, within a maximum of ten working
days, after a request for the licence; (3) an import license to be extended once, upon request, for up tothree months, if the request was made before 15 December of the current quota year; (4) the
procedures for requests for extension mentioned in (3) above; and (5) methodology of quota reduction
for holders failing to return unused quota, and the date of reduction.  Fifth, on the extension of period
for quota allocation, paragraph 129 of the WPR provided that import licenses would be extended
once, upon request for, up to three months, if the request was made before 15 December.  Japanrequested China to ensure that for this year, the effective period for all quotas and related import
licences be extended by three months, since the allocation of the quota had been delayed for three
months.  Finally, sixth, on import prohibition policy  of used goods, Japan requested China to modify
its import prohibition measures on used industrial electric products to conform to the WTO
Agreement.
8.27 On trading rights, Japan had a strong interest in the smooth implementation of the phased
liberalization of trading rights to which China had committed in its Protocol of Accession.  Japan
requested China to announce the schedule for liberalization and related procedures well in advance.
He added that all the issues that had been mentioned related to questions that Japan had submitted toG/MA/M/33
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China one month ago.  Since no replies had been received,  his delegation had  had to make clear its
position on these issues.  His delegation had not received written responses to the questions submitted
to China, and Japan considered it necessary to conduct the review based on an examination of China's
responses in written form.  Therefore, Japan requested China to address these issues one by one in
today's meeting and give responses to Japan's comments. Furthermore, Japan wished to haveadditional opportunities to further clarify facts and exchange views based on today's oral responses
and written replies to the questions to be supplied later.  Japan therefore, requested that the TRM
process be continued after today's meeting.
8.28 Finally, he wished to refer to the information provided by China in accordance with
Annex 1A of the Accession Protocol.  Since, Japan had only received it at the end of last week, his
delegation had not yet examined it adequately.  However, it was regrettable that the description of theimplementation of quota allocation in 2(c) did not include adequate concrete information.  Japan
wished to revert to this point after examining it in more detail.
8.29 The representative of China stated that on the question from the Communities on the delay of
implementation of the quota allocation, China acknowledged that the allocation of quota for the year
2002 was delayed when compared with China’s commitment in its Protocol because 2002 was the
first year of China's accession.  China had had a heavy burden to draft and promulgate the regulations
supervising the allocation of these quotas.  There was also the obligation to provide a period of time
for the public to comment on these relevant regulations. There had been a dilemma in that Members
were asking China to promulgate those regulations in a timely manner, but the private sector wasrequesting sufficient time to examine and comment on these regulations.  At the beginning of this
year, China had received a lot of comments from different WTO Members and different enterprises
both in China and abroad.  His authorities had incorporated into the regulations many of the
constructive and useful suggestions. For the implementation of the quota allocation, as this was the
first year, a period of time was required to allow applicants to get used to this new regime. As Chinahad already committed to abolishing the so called two tier system, the authorised agency needed a
period of time to get familiar with its new functions, to collect the information and verify the
information provided by the applicants.  As a result of this, the allocation of quotas was delayed.
However, he could confirm that China would allocate the quotas of next year within the time-frame
that China had committed to in its schedule.
8.30 With regard to the questions raised by Japan, he reiterated China’s position that written
replies from China went beyond the mandate of this review mechanism. He had no problems
providing oral responses.  He could agree to Japan’s request that China's opening statement be
circulated. On tariff issues, Japan had referred to the application of specific duties on photographic
and cinematographic goods.  The basic point was that  if the specific duty was equivalent to the bound
ad valorem  duty, there was no violation of China’s commitments as contained in its schedule of
concessions.  If Japan had specific questions concerning the price based on which a specific duty was
calculated on photographic products or beer, China had no problem having a technical discussion. In
fact, China’s experts were prepared to do that.  He urged Japan to take a constructive and positive
approach to deal with these specific issues.  With regard to quantitative restrictions on automobiles, he
had quoted recent statistics obtained from China’s Customs. If Japan was interested, more specificdata could be obtained from China’s Customs because all this information was published. He could
also confirm that allocation of quotas would be fina lized within sixty days. In China’s circular of the
allocation of quotas, China had already stipulated that this year's quota for electronic machinery could
be extended to the first three months of the next year, but China had no intention to extend the return
of unused quota. During the process of allocation, China had already reserved a proportion of thequotas for new entrants, in order to fulfil its obligat ions in the WPR.  With regard to the suggestion
made by Japan that China incorporate the language in paragraph 130 of the WPR, China had already
incorporated these principles in the Implementation Rules of Administration of Import and Export
Machinery and Electronic Products. For example, Articles 5 and 6 contained elements of paragraph
130 of the WPR.  However, it was not necessary to copy the language of the WPR into China'sG/MA/M/33
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domestic regulations.  China’s obligation was to maintain the consistency of its domestic laws with
the WPR and the Accession Protocol.  If there were any inconsistencies, they could be pointed out.
For the used goods issue, it was legitimate for China to have restrictions and prohibition for several
used goods in order to protect human beings.  In recent years, China had imported some used vehicles
from Japan and there had been many accidents in China.  So it was legitimate for China to take actionto avoid these accidents from occurring again.  On the last question on trading rights, since its
accession China had begun to liberalize trading rights in accordance with its commitment in the
Protocol.  During the three-year transitional period, China would continue its efforts to liberalize
trading rights and after these three years, China would grant trading rights to all enterprises in China.
8.31 The representative of the United States thanked China for its submission received the
previous week.  It represented a good start as an overview and her delegation welcomed efforts that
China had made to be responsive at this meeting and realised that this was indeed a huge task.  Her
delegation had forwarded China's document to Wash ington for review and her delegation would also
submit to China as soon as possible a few additional questions or requests for clarification. Once
again, her delegation would find it useful to have the responses in writing.  Her delegation had heard
China’s views on this matter, but continued to believe that it was a challenge for those Memberswhich had to try to assess the situation to do that without written responses.  It was a challenge for the
Committee to try to develop a report and it was an enormous problem for Members to try to figure out
how to ensure that answers to questions had been obtained. Many of the questions were very detailed
and went beyond the general responses that China had provided at this meeting.  It would be difficult
for her delegation to understand how to proceed.  Her delegation had thought that it was operating onthe basis of receiving written submissions and written information in advance, and written responses
to its questions.  She did not know how one could receive information in advance if it was not in
writing, so that was a matter that her delegation continued to be concerned about.  Her delegation’s
questions focused on the type of information that it thought was most relevant to China's
implementation of the WTO Agreement and China's Protocol that was required in this TRM, whichwas an essential part of China's accession package.  China's agreement to provide information under
this review was a part of that commitment, and again she requested that some mechanism be found to
ensure that detailed responses which would allow an assessment be provided. Her delegation
welcomed the additional information that was provided by China the previous week. However, it was
so late that her authorities had not really had time to digest it.  So her delegation was hoping to have
that additional time, and to have some other means to try to submit additional questions to China.  Her
delegation noted from several responses that China had given that it would be willing to follow upwith certain questions bilaterally, and while her delegation always welcomed the opportunity to
discuss these important issues bilaterally, it was her delegation’s strong view that both the questions
and answers submitted in the context of this re view should be made available multilaterally and
should be reflected in the permanent record of this discussion.  Other Members might have an interest
in knowing China's responses to the questions posed by the US delegation and her delegationcertainly had an interest in knowing China's responses to some of the questions raised by others, and
indeed the follow-up answers that China might be providing.
8.32 In its submission of 30 August 2002, her delegation had raised 22 questions.  Most of these
questions related to what her delegation saw as some inconsistencies between the commitments it hadunderstood that China had made and detailed provisions of the regulations.  In the area of fertilizers,
her delegation shared concerns expressed by a number of Members on the delays in allocation that
had occurred and wanted to try to ensure that there was no repeat of the challenge that was faced this
year by US traders.  It was very costly in a number of instances to US traders and while her delegation
understood that in the first year there were some difficulties, her delegation had some concerns aboutdates that were actually built into the regulations as being inconsistent.  She suggested that perhaps
China might be able to reflect upon those areas where her delegation saw differences in the dates of
the commitments and differences in the regulations and give her delegation a response on how it
planned to remedy this situation.  Her delegation also saw an instance where China had based
allocation of TRQs on end-user demand and consumer requirements, and her delegation would beG/MA/M/33
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interested to see how this reconciled with what her delegation believed to be China's commitments.
There were issues relating to rights to trade and how quota holders without trading rights identified
potential importers and were able to function in the system.  Approximately half of her delegation’s
questions were in the area of fertilizers and her delegation would welcome China's more detailed
responses to those questions in the discussions at this meeting.  Her delegation had also a number ofquestions with regard to industrial quotas.  She appreciated that some information had been provided
on the area of automobile quotas, however, her delegation shared some of the same concerns as Japan
and the EC with regard to administration of quotas in the automobile area.  While her delegation
noted that some of this information was provided, it felt that there was more relevant information that
her delegation would like to have from China.  In another area, her delegation noted that China
committed to publish all measures affecting trade in  goods, services, TRIPS, the control of foreign
exchange, and to provide a reasonable period for comment to those measures that were implemented.Her delegation wished to have some more information on China's plans for ensuring that, in the
future, all of China's Ministries would publish and provide a reasonable period of time for comment
on trade-related measures prior to their implementation.  China had agreed to a very detailed
procedure for quota allocation, and this was of keen interest to the US and yet it did not seem to be
present in the regulations, in particular that  relating to Implementing Measures for Quota
Management of Machinery and Electrical Product Imports.  Her delegation sought confirmation that
China planned to fully reflect these provisions in its regulations and to ensure that the quota was
allocated in accordance with those provisions.  Also with regard to the Regulations on Implementing
Measures for Quota Management of Machinery and Electrical Product Imports, there was a provision
which guaranteed the need of scientific research, education, culture, sanitation and other social causes,and while the US respected China's interest in pursuing educational and other social objectives, her
delegation believed that Article 9.1 went well beyond the criteria for quota allocation that China had
agreed to in its WPR.  Her delegation wished to have clarification on this point as well.  China had
committed that any entity that would possess the right to trade in the quota year should apply for a
quota allocation and license to import such products, but her delegation saw that there were additionalrestrictions that might apply to this quota allocat ion that were not provided for, for example the
question of management right, and without an adequate definition her delegation wished to have
further clarification on that particular point.  Her delegation was also concerned with the issue of
multiple application requirements because it believed that China had specifically committed not to
impose such application requirements. Her delegation had highlighted that such a situation appeared
again in the Implementing Measures for Quota Management of Machinery and Electrical Products
and her delegation wished to have clarification on how this might be rectified.  Article 13 of the sameimplementing measures prevented a quota holder from making changes to trade means, use of
products, name of products, price, equipment conditions, etc. after an import licence had been issued.
Her delegation did not understand how these provisions were in conformity with China's
commitments.  Her delegation understood that these would not be separately reflected and that as long
as a quota holder stayed within the relevant quota category, all the rest was subject to commercialterms of trade, so clarification there would be helpful.  Her delegation, in fact, wished to have China’s
responses to points raised in the area of quota allocation.
8.33 With respect to the several other areas, such as value-added taxes applied to certain fertilizer
products, her delegation believed that there was a partial rebate for domestic producers of urea, and ithad created a discriminatory situation.  Some clarification on this issue would be useful.  With regard
to consumption tax applied to imported goods, her delegation had not seen an amendment of the
provisional regulations on consumption tax and believed that China was still using a different tax base
to compute the consumption tax for imported products and domestic products. If this was not the case,
her delegation wished to have information on that, because otherwise there might be a GATT ArticleIII problem.  It would be useful for China to focus on this issue and remedy it.  In the area of ITA,
China had committed that upon its accession it would participate in the ITA and eliminate tariffs on
all information technology products.  China had not yet become a participant in the Committee, nor
had it implemented its commitments in accordance with the ITA, because it appeared to be requiring
importers to obtain end-use certificates from the Ministry of Information Industries on 15 ITAG/MA/M/33
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products in order to receive ITA reduced or duty-free treatment.  The experience of all ITA
participants was that ITA coverage was determined on the basis of classification only, not through the
use of end-use certificates, so her delegation sought information on China's intentions in that regard.
Finally, with regard to the questions already raised, she noted with interest that China was about to
submit its IDB information and the updated information was welcome.  This information was veryimportant for the negotiations.  She had some additional questions: 1) how would China ensure that
any entity that had the right to import any produc t might serve as the importer for non-state trading
TRQ products, and that the importation and delivery of the product to the quota holder could be
completed without any involvement of the state trading enterprise?  A further question was how
would China ensure that all entities who used or distributed fertilizer might apply for a TRQ?
Whether an entity wished to apply for a TRQ reserved for importation through state trading
enterprises or non-state trading enterprises, the requirements should be the same.  For example,foreign enterprises should be able to apply for and receive TRQs reserved for importation through
either state trading enterprises or non-state trading enterprises.   She welcomed very much the
opportunity to hear China's responses to these detailed questions.  They were very important in
determining how China was proceeding to impl ement its commitments. There was enormous work
underway in China and her delegation appreciated that this was a very difficult task, but also felt that
in order to make this review a valid process, he r delegation had to have thorough answers to these
questions in order to be able to assess and to help where it could.
8.34 The representative of China  stated that he had already indicated his delegation's position with
regard to requests for written replies from China.  For the other specific issues raised by the US
beginning with  the delay of allocation of fertilizer quotas, he had already explained the reasons for
the delay and had informed the Committee that the new circular had already been promulgated, so
next year's allocation would take place without delay.  About the discrepancy between China's
commitment and the date for the allocation of the quota, China took note of this issue and would need
to check on it.  As far as he was aware,  there was this discrepancy because his authorities had wantedto  ensure consistency between the allocation of fertilizer quotas and the regulations on import and
export of goods.   For the allocation of these fertilizer quota according to end-users' interest,  there
was no discrepancy between the interest of end-users and the overall balance of national economic
development. It was the language of this regulation.  For the public comment regarding machinery
and electrical products, as he had mentioned earlier,  China had been in a dilemma after accession. On
the one hand China had needed to promulgate this regulation as soon as possible in order to
implement it on time, on the other hand a period of time needed to be reserved for public comment.For fertilizer, for agricultural TRQ regulations, China had already reserved a period of time for public
comment but machinery and electrical products, in order to implement the regulations on time, on
20 December 2001 China had promulgated the implementation rules on the administration of import
quotas of machinery and electronic products.  Howe ver, before the promulgation, hearings were held
in the different agencies of China.  In the future , China guaranteed that for any regulation concerning
trade policies it would provide a period of time for public comment.  With regard to the criteria
regarding scientific research, education, culture, sanitation and other social good causes contained in
the Implementing Measures for Quota Management of Machinery and Electrical Product Imports, no
preferential treatment was provided to this kind of a request under this criteria. The next question was
about paragraph 130 of the WPR.  In fact, para graphs 128 and 130 of the WPR should be linked.
China had stipulated the criteria for the allocation for electronic and machinery products based on
those two paragraphs.  So if a question was raised on the basis of paragraph 130, it was worth keeping
in mind paragraph 128.  The criteria regarding the administration of electronic and machinery
products was to guarantee the maximum utilisation of the quotas.  With regard to the local authorized
agency for the allocation of electronic and machiner y products, he repeated that a two-tier system did
not exist in China. The authorised agencies had only the function of collecting information and
assisting the central Government to verify the information provided by applicants.  China was so huge
that if all applicants went to Beijing, to MOFTEC, to obtain quota allocations, it would be difficult for
the central Government to verify the situation.  It  would result in a delay in the allocation and up to
three or four months would be required to allocate those quotas.  That was why authorised agenciesG/MA/M/33
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were asked to assist the central Government in verifying the situation and to collect the basic
information.  This was a measure adopted by the Chinese Government to guarantee the timely
allocation of the quotas and the implementation of it s commitments according to the Protocol and the
WPR.  The US had also mentioned that Article 13 of the implementation rules on the administration
of import quotas of machinery and electronic products prevented quota holders from changing thecontents of this import licence after its issuance.  In fact, quota holders could apply to make changes,
and this was not a burdensome procedure for the quota holders.  Quota holders were requested to
follow this procedure so that customs could supervise these imports, obtain the right information and
the statistics.  On the issue of the fertilizer VAT is sue, actually his authorities had discussed this issue
bilaterally with the United States.  His authorities were not convinced by the argument raised by the
US that the different fertilizers (MAP, DAP) were competing in the same market.  China had
domestic production of the two fertilizers, so the same policy was applied to the product, no matterwhether it was imported or made in China. So, there was no violation of GATT Article III.  For the
consumption tax, his delegation was told by the Ministry of Finance that China provided the same
treatment to domestic products and imported products with respect to consumption tax. The formula
applied to calculate the consumption tax was equivalent to both domestic products and imported
products.  So once again there was no violation of GATT Article III  On the ITA, China regretted thatit could not participate in the ITA Agreement.  Since China's accession to the WTO, it had already
implemented its commitment under the ITA. However, some Members had blocked China becoming
a participant to the ITA. It was a strange situation in that if China could not enjoy the rights of this
Agreement why was it being asked to implement the obligations.  Nonetheless, China had already
reduced tariffs under the ITA.  On the question raised by the US on the end-use certificates for 15 ITAproducts, this was a measure to assist the customs to verify that those products were subject to the
scope of the ITA.  It was only a technical procedure to ensure proper implementation of the ITA, so
China did not believe it to be inconsistent with China's commitment under the ITA.  Regarding the
IDB, China would submit its schedule in electroni c version this week, so it could help Members
analyse China's tariff schedule.  On non-state trading enterprises, during China's accessionnegotiations, China had discussed the state trading issue,  trading rights issue and the distribution
issue with  Members.  It was agreed that for three years after China's accession, China would maintain
the system of approval for trading rights, i.e. importing rights and exporting rights.  Within five years
China would have a different kind of restriction on domestic distribution in its services schedule.  If
enterprises had import rights but no distribution rights, they could import products but could not
distribute their products in China.
8.35 The representative of Canada thanked China for its efforts in meeting the challenges relating
to this first year of China's membership in the WT O, and in terms of the regulatory transition period
and adjustments that needed to take place.  He welcomed the intervention and initial statement made
by China in which China had renewed its commitmen t to fully implement its commitments as part of
the Accession Protocol.  Canada had submitted two very specific questions in document G/MA/W/36,one on tariff and value-added tax preference for frontier traffic and the second one on the variable
duty rate for newsprint.  Canada also had an interest in the questions raised by other Members and the
communications they had submitted prior to the review mechanism.  Canada had examined the
information provided by China in document G/MA/W /39, but had not had a chance to review all the
information provided with respect to the TRM exercise that would take place in the Import LicensingCommittee.  However, the intervention made by the Chinese delegation, and the information
submitted today had not provided responses to Canada's two questions. So his delegation would be
grateful if China could provide the responses to those questions in the context of this review.  If it was
not possible to provide answers at this meeting, he requested China to indicate in which form and
under which time-frame it would be able to provide answers to Canada's questions.  His delegationnoted that in certain instances China had made reference to the possibility of discussing certain
questions raised in the context of the TRM bilaterally.  As Canada had an interest in several of the
questions raised by other delegations, his delegation would try to build on what the US had said
previously, that questions raised multilaterally could be addressed in a multilateral context. This TRMG/MA/M/33
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was a very useful exercise, not only for China but for all WTO Members, and Canada looked forward
to continuing this dialogue with China.
8.36 The representative of China stated that on Canada's second question on variable duties on
newsprint, he could confirm that from 1 January 2003, China would apply the ad valorem  tariff to
these tariff lines.  China recognized that this was a commitment made by China in its market access
schedule that China would replace the variable duty upon accession.  This was different from the case
raised by Japan on the photographic products, because on those products China had not made a
specific commitment. With regard to frontier traf fic, border trade, according to China's understanding
this issue should be dealt with at the Council for Trade in Goods, but his delegation had no problem in
providing the information  here.  Canada had raised the following question: "What did China consider
to constitute the frontier area? What are its geographical limitations?"  Currently more than130 frontier counties in ten frontier provinces and autonomous regions were subject to this frontier
area.  On the second question, the goods used daily by the residents living in the frontier area were
subject to  tariff and VAT preferences.  As to the rules of origin in place to identify goods being
imported as originating from the frontier area of adjacent countries, China imported goods from the
15 neighbouring countries under frontier traffic or border trade.  The fourth question raised by Canadawas whether China encouraged goods to leave the frontier areas.  China did not encourage imported
goods under border trade to leave frontier areas.  The last question on frontier traffic concerned the
definition of a "small" company in the context of this policy. Companies dealing in border trade or
frontier traffic were called "border trade companies" and so the term "small" companies was not used
in China.
8.37 The representative of Argentina, in response to China's questions raised in G/MA/W/38,
stated that   regarding the undertakings entered into by Argentina under Annex 7 of China's Protocol
of Accession, specifically with regard to safeguard measures which were in force at the time of the
Protocol, as foreseen in Ministerial Resolution 862/1999, the measure expired on 31 July 2002.  Asregarded the application of specific duties to goods  coming from China, as specified in Annex 7 of the
Protocol of Accession, the time-frame which was agreed upon is under the national decree through the
Ministry of the Economy 825.  In view of this information, Argentina had met the commitments
entered into under Annex 7 of the Protocol of Accession of the Republic of China to the WTO.
8.38 The representative of Hungary, in response to China's questions raised in G/MA/W/38,
informed the Committee that all the information requested by China was available in different
notifications made by Hungary to different WTO fora, namely the TMB, the CRN and the Committee
on Import Licensing. She was willing nevertheless to provide some brief information on the operation
and administration of the system of quantitative restrictions maintained by Hungary.  A government
decree constituted the legal basis for the application of quantitative restrictions.  The Ministry of
Economic Affairs and Transport was responsible for enforcing the decree and issued the relevantdecrees for the administration of the quotas twice a year.  The three groups of products subject to the
quotas affecting imports from China were footwear made from leather and leather substitutes,
clothing, other clothing and accessories.  All products  subject to restrictions were listed by customs
tariff headings in the decree of the Ministry of Economic Affairs and Transport.  The quota was
announced in two equal instalments in each half-year.  The coverage of the quota had not changedeither in 2001 or 2002.  The values or quantities of the quotas in 2001 and 2002 were in full
conformity with the quota increase provisions set out in Annex 7 to the Protocol on the Accession of
China to the WTO.  The removal of the restrictions maintained by Hungary according to Annex 7 of
China's Accession Protocol was scheduled for 2005.  For more detailed information, she referred to
Hungary's notification made to the Committee on Import Licensing (G/L IC/N/1/HUN/4 and 5).
8.39 The representative of Mexico, in response to China's questions raised in G/MA/W/38, stated
that there was no provision in Annex 7 of the Chinese Accession Protocol which related to
quantitative restrictions applied by Mexico.G/MA/M/33
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8.40 The representative of China stated that Article 17 of China's Accession Protocol covered
"quantitative restrictions" and "other measures", and the measures maintained by Mexico were "other
measures".  Those measures had an impact on market access, so it was necessary to discuss these
issues in this context.  His delegation was looking forward to a response from Mexico.
8.41 The representative of Poland, in response to China's questions raised in G/MA/W/38, thanked
China for submitting the questions concerning measures provided for in Annex 7 of its Accession
Protocol.  These questions had been forwarded to Warsaw, and as soon as his delegation received a
response, it would submit it to the Chinese delegation and to other WTO Members.
8.42 The representative of the Slovak Republic, in response to China's questions raised in
G/MA/W/38, stated that the licensing system of the Slovak Republic was regulating the
administration of quantitative restrictions.  The licensing system was governed by the decree of the
Ministry of Economy No. 15 from 1998 on the conditions of the issuance of the licences for export
and import of goods and services.  The authority responsible for the issuance of licences was the
Ministry of Economy.  The licensing system of the Slovak Republic was notified last week to the
WTO Committee on Import Licensing and all relevant documents were available in the MarketAccess Division.  With respect to the safeguard measures applied from 1 February 1999 in the form of
quantitative restrictions for the import of footwear (HS 6401 to 6405), she stressed that this measure
was introduced due to the enormous increase of imports of footwear.  The quantitative quota was
liberalized by 25 per cent in 2002 in comparison to 2001 and currently stood at 3 million pairs.  Her
authorities had reviewed the application of these measures and decided to withdraw this measureapplied to China's imports of footwear as from 1 January 2003.  The quantitative restrictions to China
would apply only until the end of this year.
8.43 The representative of Turkey, in response to China's questions raised in G/MA/W/38, stated
that he had not received any detailed responses from his authorities.  Furthermore, he shared the view
expressed by Hungary as regarded information already supplied to the different bodies of the WTO
which could be useful in this process.  However, as soon as he received more detailed information, he
would submit it.
8.44 The representative of China encouraged all relevant Members to implement their
commitments under Article 17 of China's Accession Protocol, and stated that it was important in order
to keep the TRM process balanced.  Additionally, he requested that the responses be reflected in theminutes of this meeting.
8.45 The representative of Chinese Taipei thanked China for its efforts so far on this TRM.  While,
attaching great importance to this review process in terms of overall benefits to the WTO, his
delegation  recognized the difficulties China might have in meeting all the obligations. His delegationwould be submitting a number of written questions very shortly.  The main areas of concern were in
the implementation of tariff concessions, tariff quota administration, quota allocation and import
licensing procedures.  His delegation had questions similar to those already raised by previous
speakers but at this stage he would only mention th e main areas of concern.  However, he wished to
point out that the fact that many speakers had raised the same issues showed that these were importantareas of concern.   On the tariff side, his delegation had the same concerns as Japan concerning beer
and photographic film products.  In its schedule of concessions, China had committed to remove the
variable duty on these products including newsprint.  However, it was his delegation's understanding
that such a variable duty was still imposed on newsprint.  He wished to know whether his
understanding was correct.  If the variable duty still existed then he wished to know when it could beremoved. According to China's schedule of concessions, China had committed to apply a 6.8 tariff
rate to paper-made products.  However, China still imposed variable duties on two of those
paper-made products.  Again, his delegation wished to confirm whether its understanding was correct
and if so when this duty could be removed.  On tariff quota administration, his delegation had the
same concerns as those raised by the US which was that in the enactment of the ImplementingG/MA/M/33
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Measures for Quota Management of Machinery and Electronic Products Imports, the public was not
given the opportunity to give comments.  His delegation requested China to provide the public with
such an opportunity as it had agreed to do in it s Protocol of Accession.  On quota allocation, his
delegation had the same problem with fertilizers but his delegation had heard the explanation from
China.  However, on quotas for processed oil, his delegation understood that China had agreed thatquota on processed oil by non-state enterprises wo uld be 4 million metric pounds at the time of
accession.  His delegation understood that this quota was mainly given to fuel oil, and some to diesel
but nothing to gasoline and other fuels.  On ITA end-users' certification, his delegation shared the
concerns of the US.  On import licensing, the Japanese delegation had mentioned that used electronic
goods were prohibited.  His delegation wished to know when such a prohibition could be lifted.  As
indicated earlier, his delegation would submit the questions in written form shortly.
8.46 The representative of Australia thanked China for submitting the information provided on
tariff rate quotas and non-tariff measures as list ed in Annex 1A to its Accession Protocol.  His
delegation noted with interest the information provided in sections 1, 3 and 4 of Annex 1A on tariff
quota rate volumes made available in 2002, on the volume of requests for allocation denied and on the
import volume and fill rates of tariff rate quotas by 31 July.  This showed that with the exception ofwool, all agricultural product tariff quotas were oversubscribed and in most cases the volume of
requests for allocation denied with several times the volume of tariff rate quota available.  By
comparison, and notwithstanding that they cover the period to 31 July, the fill rates for some products
were shown to be extremely low.  His delegation asked China for a general comment on why it
considered the fill rates were generally so low given the heavy oversubscription of many of the tariffrate quotas.
8.47 The representative of China stated that with regard to the questions raised by Chinese Taipei,
according to his understanding the TRM on Market Access would end today and China only
committed itself  to have this kind of review once per year.  So after this meeting, his delegationwould reject any kind of questions in written form in  this TRM context.  With regard to the questions
raised by Australia as to why the fill rate was so lo w and why the quantity denied so large.  It was the
first year of China's accession and many applicants wanted to get more quotas and the quantity asked
by the applicants was much more than the quantity China had committed to under its WTO
commitments.  So that was why there was a discrepancy, and the low fill rate for certain products was
because of the situation of demand and supply in the market. So China could not control the fill rate, it
could only guarantee the full allocation of the quotas.
8.48 The representative of Chinese Taipei stated that on a question on procedure, how did the
Chairman intend to handle the questions his delegation had raised orally and which had not been
responded to?
8.49 The Chairman responded that he would address this matter when he concluded discussions on
this agenda item.
8.50 The representative of Japan stated that the responses by China to his delegation's questions
covered a number of issues and it was not easy for him at this stage to react to those responses.
However, he wished to make some comments and put forth additional questions. About tariffs on
films, there was a reference to the difference between the tariffs on newsprint and photographic films,
but according to Japan's understanding China had made a commitment of an ad valorem  tariff rate
under the WTO, so in order to satisfy that commitm ent Japan believed that China should change the
specific rate to an ad valorem  tariff.  In that connection, although China was of the view that it was a
technical question, Japan did not think so.  It was a fundamental question concerning how to apply
tariff rates and Japan requested the quick reform of the tariff regime by China.  In that respect, his
delegation wished to know what the time-frame woul d be for China to change the tariff regime.  The
next issue related to the figure of 4.8 billion dollars quoted by China corresponding to automobile
imports under the import quota.  Japan had two concerns about the number.  According to Japan'sG/MA/M/33
Page 22
understanding, because this year's quota allocation was delayed the actual use of quota for this year
started from April. So why did China provide a number that included the imports from January to
March?  Another concern was about the scope of the products included in the statistics.  For
automobiles only two key parts could be included in the import quota and his delegation did not know
whether China had included more than two key parts.  So Japan wished to have further clarificationon the number of 4.8 billion US dollars.  In that respect, his delegation had concerns about the actual
import level compared with the committed figure of the import quota, and would appreciate China
providing the data of how much actual quota was already distributed this year.  China's response
about the reallocation of this year was not clear.  According to Japan's figures, the actual import for
this year was quite low so Japan presumed that there could be possibilities of reallocation of import
quotas and he believed that reallocation was going to  start from September.  His delegation did not at
this moment have information about whether reallocation had started yet.  His delegation wished toclarify this situation and wished to know when reallocation was going to start for this year.  About
new entrants, Japan had understood China's response to refer to a certain amount of reserves for new
entrants.  His delegation appreciated China providing the actual volume and value of reservation for
this year for new entrants.  In fact, because the quota allocation had already been made, he wished to
know how much actual quota was reserved for new entrants for this year.  About Japan's request toinclude certain elements of the WPR into the actual Chinese regulations, his delegation had not said
that the same language should appear in the Chinese regulations, but he believed that those were
important points. At this moment, the actual rule was not so clear in China's regulations. About the
import restriction on used cars, China had referred to the reasons for the protection of human lives and
he understood that this was a very important issue.  However, his delegation did not understand whyall used electronic products listed in the relevant list should be prohibited.  There were a wide range of
different types of used products, for example there could be used products that were used only for one
year, and Japan did not understand how China was going to justify restricting all used electric
products on the list.  Finally, Japan shared the concerns expressed by the US on the  end-user
certificate requirements for 15 IT products.
8.51 The representative of China stated that for specific tariffs on photographic products, he
wished to make China's position clear.  China had no obligation to change specific duties for
photographic products.  If Japan wished to discuss the possible discrepancy of the level between the
specific tariffs and the ad valorem  tariffs, China could accommodate this request.  For the question
regarding import statistics on automobiles, the number he had mentioned of 4.8 billion US dollars was
the total value of imports from January to August.  However, most imports took place from April toAugust following the allocation of the automobile quota.  The next question was about the allocation
of quotas for automobiles.  China had already allocated these quotas and the information had been
provided to the WTO, but if Japan requested information going beyond the TRM and the WTO
Agreement then his delegation had no obligation to provide it.  With regard to reallocation, until now
China had not received any return of these quota s, so China had no specific idea about how to
reallocate it.  Maybe Japan was correct that quota holders were so eager to import that the quotas were
fully used. China had already committed itself and promulgated regulations in order that the validity
of the quota would be extended for the first three months of the next year, so that quota holders would
still have time to sign contracts and import.  For the new entrants' allocation, his delegation had
reserved ten per cent of the total quota for allocation for new entrants.  On the used product issueraised by Japan, China did not have the technical measures to judge if these used cars were one year
or ten years old. So, in order to protect human life, China introduced this restriction on these products.
For the ITA, he had no further information to provide.
8.52 He added that China had no obligation to provide written responses to the questions raised by
Members because this had not been stipulated in Ar ticle 18 of China's Protocol of Accession.  China
had taken a cooperative approach in this TRM.  His delegation had wanted to use this opportunity to
exchange views with Members, to share informati on with Members and to listen to comments and
suggestions made in the context of this mechanism to help China  improve its implementation.  China
also understood the practical difficulties that Members were facing because of time constraints.G/MA/M/33
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Maybe Members believed that the meeting did not provide sufficient time.  China believed that this
was a legitimate concern, and his delegation wished to accommodate such a concern.  However, the
transitional review mechanism was a transitional review mechanism.  Today Members had to finalize
China's transitional review mechanism on market access, but other channels for the exchange
information were open. Chinese experts on electronic machinery administration, on fertilizerallocation, on agriculture and TRQ administration and import licensing administration were present.
In order to take advantage of their presence and to show flexibility and good will, his delegation was
proposing to convene an informal meeting outside of  the transitional review mechanism process, and
subsequent to the market access, import licensing and agriculture transitional review. Through this
informal meeting Chinese experts could provide more information to the questions raised by any
interested Members.  He hoped that suggestion could be accepted by the Members.  He stressed that
this informal meeting had no legal linkage with the ongoing transitional review, and it would be heldfor reasons of transparency and information exchange.
8.53 In response to a question raised by the Chairman, the representative of China stated that his
delegation would invite interested parties to participate in this meeting, and his delegation would chair
this exercise of information exchange.
8.54 The representative of the United States thanked China for the offer to provide some additional
responses informally.  She had to say, however, that for the US there was great interest in this process.
There was great congressional interest and great interest on the part of the US business community.
The informality of the proposal would not allow the US to have included in the report of theChairman the additional responses which her delegation felt were important.  She appreciated that
China was trying to make an effort but her delegation still needed to have a formal record of the
discussions including China's responses.  Her authorities strongly believed that more should be
available in writing, so she was not able to go al ong with that proposal as a formal solution to the
problem.
8.55 The representative of Japan appreciated the proposal by China about informal opportunities
for further discussions and clarification, but supported the delegation of US about the need for further
formal opportunities to continue discussions.
8.56 The representative of China stated that if the Members could not go along with the proposal
he had made then he withdrew it.8.57 The Chairman proposed that on the basis of the discussions held at this meeting, he would put
together a report for the Council for Trade in Goods.  This would be a factual report, clearly
indicating and referring to the documents that had been circulated as part of this agenda item and also
clearly referring to the part of this meeting's minut es that would cover the discussions and also cover
the questions and answers that were raised in this meeting.
8.58 The representative of Japan  stated that it would be difficult for Japan to consider the TRM
over.   His delegation had understood that Members needed additional opportunities to continue this
transitional review mechanism. Would those future discussions also be included in the report? Hisdelegation felt that additional discussions should be included in the report.
8.59 The representative of China stated that according to China's understanding of Article 18 there
was no procedure for the adoption of the report.  The only stipulation was for one review per year.
So, he believed that the Committee should conclude this agenda item today.  If there was anotherreview, it was for next year.  His delegation would not participate in any review again this year.
8.60 The representative of the United States stated that her delegation shared the views of Japan.
At this point, she believed that her authorities would conclude that the Committee had not completedG/MA/M/33
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this transitional review process.  Therefore, she was not in a position to indicate that the process was
over from the US perspective.
8.61 The Chairman stated that this was a very difficult issue procedurally for the Chair, but he
realized that delegations had strong views and different interpretations on the procedure for this
process.  He proposed that the Committee turn to informal mode and hold consultations.
8.62 The Committee so agreed and broke into informal mode.
8.63 Following resumption of the formal meeting, the Chairman thanked all delegations for the
active discussion held at the meeting and for their patience and tolerance.  He intended to prepare a
factual report of the proceedings.  The report would refer to the minutes of this meeting which wouldreflect all points, issues and interventions of delegations.  It would also clearly refer to and highlight
the documents that were prepared for discussions of this agenda item.  This report he would submit  to
the Council for Trade in Goods for consideration at its next meeting.
8.64 The representative of Japan wished to have some clarification about the nature of the minutes
and the report.  She had understood the Chairman as stating that the minutes of this meeting would
reflect the discussions, statements and sentiments raised by delegations under this agenda item. Was
her understanding correct that the report itself would not reflect the more detailed parts of the
substantive discussions or the sentiments raised by the delegations such as the point that there may
have been some differences of interpretation of the TRM exercise, and that instead, the report would
be a very simple description of the factual exchanges?
8.65 The Chairman responded that, in his own assessment, if the Committee were to try and make
the report as comprehensive as possible, it ran the risk of trying to interpret what Members had said.
This meant that the Committee would have to come back to clear that report which would be a neverending process because consensus would not be possible on what was said by some delegations at this
meeting.  That was the reality.  On the other hand, the minutes would reflect in a factual manner what
had transpired at this meeting. The report would outline that the agenda item was considered but for
more substantive coverage of the proceedings the minutes would need to be referred to.
8.66 The Committee took note of the statement.
9. Ecuador – New Panama Canal Transit Tolls (G/MA/W/37)
9.1 The representative of Ecuador stated that the Panama Canal was of major importance for
world trade in linking the Atlantic and Pacific Ocean. This importance went beyond simply the
interest of a small country such as Ecuador.  Therefore, his government had thought it useful to bring
this matter to the attention of the Committee.  His delegation was concerned that the new toll structurewas not in line with paragraphs 3 and 4 of Article V of GATT 1994which stated that the tolls
collected should be commensurate with the servic e rendered in order to facilitate free trade that
Panama had to provide as a  WTO Member.  His delegation was concerned that the Canal Authority
had drastically changed the transit toll structure that had been in force for more than eight decades by
invoking a market oriented policy when there were no other inter-oceanic links as an alternative thatcould compete with the Canal.  From the Canal authority website, one could see that in the first  9
months of 2000, 581 million balboas were earned with 213 million as the net profit which was
equivalent to 36.35%.  Ecuador was also struck  by some statements made by the Panamanian
authority which qualified the Canal as a natural resource from which financing should be obtained for
alternative planning. In light of the foregoing, his delegation had submitted some questions to thedelegation of Panama which had been circulated in G/MA/W/37.  His delegation had one additional
question which was "What was the profit that Panama expected to obtain as a result of the new rise in
tolls for crossing the Canal?".G/MA/M/33
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9.2  The representative of Panama stated that the Panama Canal provided inter-oceanic transport
service for vessels of all nations of the world. The Panama Canal was administered by the Panama
Canal Authority (PCA) which was an autonomous legal entity under Panamanian law established
under Panama's constitution and which as a private entity administered, operated, conserved,
maintained and modernised the Panama Canal and its related activities. The PCA had its own fundsand administered those funds. It charged for services rendered, for inter-oceanic transport of vessels
as well as other related services on the basis of prices established taking into consideration both the
market and the cost to provide these services.  These prices were applied to national and foreigners
alike without any discrimination.
9.3 On acceding to the Marrakesh Agreement, and on the specific commitments of Panama on
services, the Republic of Panama had established its horizontal commitments which applied to allservices. That was to say that there would be no binding on market access in the geographical areas
covered by the Panama Canal Treaties. In other words, there was no specific obligation for the
services provided through the Panama Canal.  The Republic of Panama had other means of inter-
oceanic transport for goods such as the Panamanian railway and road transport using the existing
infrastructure. The government of the Republic of Panama guaranteed freedom of transit andtranshipment of goods in full compliance with Article V of the GATT 1994 for all transport provided
by the PCA by railway, road or port.   As established in the interpretative notes to paragraphs 3, 4 and
5 of Article 33 of the Havana Charter which corresponded to Article V of GATT 1994, the word
"charges" as used in the English text of these paragraphs should not be understood to include
transportation charges (cf. Havana Reports, page 72, paragraph 13). In any case, these charges werecovered by  paragraphs 2 and 4 of Article III which required full compliance with the principle of
national treatment which in turn was fully met by all means of transport offered for the transit of
goods across the Republic of Panama.
9.4 In response to the first question raised by Ecuador, the Panama canal was an industrial
complex with more than 88 years of operation and it required a rigorous maintenance and investment
programme and in order to continue to provide efficient and safe service for international trade in the
medium and long term, it required financial planing whose price structure was a fundamental element
in order to ensure the necessary funds for constant modernisation and improvement. The Panama
Canal Authority  provided detailed explanations  regarding the change to its toll structure to
government representatives of Ecuador and other interested countries which participated in the
consultations and public hearing process which were conducted between 7 June-19 July 2003.Furthermore, this information was published in the Panama Canal Register on the 7 June 2002 as well
as in the local press and on the Canal website.   The Constitution of the Republic of Panama clearly
stated that "The tolls and rates set by the Authority shall take into consideration the conditions of safe,
uninterrupted, efficient, competitive and profitable Canal service".  This meant that the tolls charged
in the Canal had to provide an adequate level of profitability and sufficient resources in order toensure the viability and competitivity of the Canal in the medium and long term.  For the information
of Committee Members, Panama had attached the documentation which was available on the Canal
web site and which was distributed to those who had attended the public hearing.
9.5 In response to questions 2 and 3 from Ecuador,  the toll system was designed long before the
Canal was inaugurated and its main purpose was to recover the operating and investment costs. The
system was designed in such a way that the total cost could be distributed proportionally among the
vessels transiting through the Canal. In its 88 years of operation, the Panama Canal had increased its
tolls eight times by a cumulative total of 114.2 per cent.  The original toll charged for vessels in 1914
was $1.20 per net ton,  the present rate was $2.57 per net ton. The recent changes introduced to thetoll system maintained the same system to measure the vessels. However,  they established a
differentiated scale based on vessel size, whereby a higher rate was payable on the first 10,000 tons, a
slightly lower rate on the next 10,000 tons and a still lower rate on all tons thereafter.  This change
was based on the fact that in terms of costs the Canal operations required a large amount of fixed
assets for operation, which were virtually equal for all vessels whatever their size. The scaling ofG/MA/M/33
Page 26
prices guaranteed a better distribution of transit tolls to cover fixed costs. This type of differentiation
corresponded to the current operating conditions and the services provided by the company that was
administering the Panama Canal. The size of vessels used in international trade was determined by the
shippers according to their own interests and was dependent upon factors which were totally out of
control of the Panama Canal. Other international canals such as the Suez Canal had historically useddifferentiated transit tolls structures based on vessel type and size.  The document which would be
distributed contained a table giving this information.
9.6 On questions 4 and 5, historically the Canal tolls were calculated to cover most of the fixed
costs relating to the transit of vessels. Part of the services provided for vessels transiting the Canal
were not covered by tolls, but rather by charges specifically designed for each service, the use of
which depended on the requirement of each particular vessel. These included measurement service,transit reservation system, pilotage, channel fee, tr ansiting vessel inspection service,  security charge
for transiting vessels, chemical inspection  services, sanitary inspection service,  moorage and
anchorage, shifting berth and wharfage,  salvage service, embarkation and disembarkation at locks,
shuttle advisor service, public relations service, provisions for employees aboard vessels, on-line
vessel information service, small vessels and launch service.
9.7 Under the new structure, the use of towing locomotives was classified as a related service for
which specific rates were charged according to their individual use by each vessel.  This scheme
would enable the costs of locomotives to be established according to their level of use.  Like tugboats
and line handler service, locomotive services had evolved in keeping with vessel configuration andsize and their costs had increased significantly over the years.  The first towing locomotives
purchased  in 1914 cost $13,000 each; the fleet was replaced in 1965 at a cost of $115,000 per unit
and was being replaced again (100 locomotives) at a cost of $2.1 million per unit, which coupled with
the replacement of the entire lock tow track and energy supply system, brought total investment to
over $350 million.  This system of vessel positioning was also the greatest consumer of electric powerin the whole Canal system. The document to be circulated provided some example of charges for the
use of locomotives.
9.8 For question 6, Panama considered that the maritime transport service rates charged by the
PCA were fair and consistent with WTO rules and other international treaties governing Panama
Canal operations.  The GATT provisions were not incompatible with the price increases recently
established by the Panama Canal, insofar as the new structure was applicable to all vessels whichtransited the Canal irrespective of flag, route, type of cargo, value of cargo, country of origin or
destination.
9.9 As to the last question by Ecuador which was raised at this meeting, he would refer the
question back to his authorities.
9.10 The representative of Ecuador thanked Panama for the replies which were useful in
continuing  an analysis of these issues.9.11 The representative of the United States thanked Panama for the thorough responses.  There
had been some concerns raised in the US on this subject, and her delegation looked forward to seeing
the responses in written form so that her authorities could consider them more carefully.
9.12 The Committee took note of the statements.G/MA/M/33
Page 27
10. Draft Report (2002) of the Committee to the Council for Trade in Goods
(G/MA/SPEC/22)
10.1 The Committee agreed that the updated report which took into account the discussions at this
meeting would be circulated to all Members for their comments.  If no comments were forthcoming,
the report would be considered as adopted.
11. Other Business
(a) Date of the next meeting
11.1 The Committee noted that the next meeting of the Committee was scheduled to take place on
26 March 2003, subject to confirmation.G/MA/M/33
Page 28
Annex 1
Integrated Data Base -  Report by the Secretariat
IDB dissemination:
The Secretariat has continued to load information onto the IDB Internet site on a monthly basis.
As of 16 September 2002, there were 348 country periods on the site, of which 339 were in the
approved area.  Eighty-three Members and four acceding countries or territories are represented.
A revision of the June 2002 version (Release 8)  of the CD-ROM was sent to delegations on 23
July 2002. This revised CD-ROM contains a correction of an error that was discovered after the June
2002 version had been distributed. It contains information for 269 country periods. As usual, two
copies of the CD-ROM have been provided to each delegation. Any delegation requiring extra copies
is requested to contact the Secretariat.
Implementation of the IDB/CTS dissem ination policy (Document G/MA/115)
The 4 intergovernmental organizations designated as authorized users under paragraph 2(d) of
document G/MA/115 have been given full access to the IDB and CTS after accepting the conditions
of use and publication of the information in the two databases. They are the IMF, ITC, UNCTAD andthe World Bank. In addition, the OECD has just made a formal request for full access to the IDB and
CTS in accordance with paragraph 5 of the abovementioned document. This request will be circulated
to Members of the Committee for consideration at its next meeting.
Three out of the four acceding countries designated as authorized users of the IDB/CTS (see
paragraph 4(b) of G/MA/115) have also been given full access to the IDB/CTS after having accepted
the conditions of use and publication of the information in the two databases.
Publication of IDB and CTS data
Since the June 2002 meeting IDB and CTS data have been used for WTO documents as follows:
• Following a request by the European Communities, document G/C/W/406 was produced
assembling tariff indicators on HS Chapters 51-63 for selected Members.  It is based on IDB forMFN applied duties and on CTS for final bound duties.
Two documents were produced for the Negotiating Group on Market Access.
• The first one, Data Availability and Software Tools for Tariff Negotiations, TN/MA/S/2, gives an
overview of available trade and tariff data, including IDB and other comparable databases
maintained by other international organisations.  It also contains an overview of various software
tools within and outside the Secretariat suitable for trade and tariff analyses.
• The second one, WTO Members' Tariff Profiles, TN/MA/S/4, presents tariff profiles based on
IDB - applied duties and CTS final bound duties for all WTO Members, data availability
permitting.  Following a request from Members, an EXCEL version of the detailed tables will bemade available on the IDB Members' web site by the end of the month.  A revised version, taking
into account comments raised by Members, will be issued for the next meeting of the Negotiating
Group in November.G/MA/M/33
Page 29
Technical Assistance
Since the last meeting of the CMA, two national IDB workshops have taken place, one in the
Dominican Republic, undertaken in conjunction with a TPR mission and one in India.  In addition ,
one IDB staff made presentations at the two Africa n Trade policy courses in Casablanca and Nairobi.
The following activities are still to be undertaken up to the end of 2002:
Regional workshops for:
• French speaking African Members (December);
• Caribbean Member countries (November)
• participation in a United Nations Statistical Division workshop on improving African trade
statistics (December).
National IDB activities:
• Bangladesh;
• Burundi;
• Lithuania (October)
For the two outstanding regional workshops, a co mponent on Market Access issues will be added
following requests from several Members made in the context of their TA requests for the year 2003.
For the year 2003 the TA plan is currently under internal review. The IDB/CTS component
incorporates requests from delegations. In 2003 the emphasis of TA activities will shift from the
traditional IDB data submission training towards the use of IDB and CTS data and Market Access
issues in cooperation with the Market Access Division. A range of joint Statistics/Market Access
Division regional workshops are planned.
Software development
The second release of the IDB Internet Analysis Facility (IAF) prototype software
(http://iaf.wto.org/) will be made available this week. The new software release includes 3 additional
reports (tariff and trade profiles, principal products and principal suppliers) and downloading facilitiesfor 2 reports (tariff line detail and tariff and trade profiles).   The application has also been revamped
to improve response time.  The IAF log records show that 50 Member governments have thus far
made use of the facility, some of them quite extensively. The dissemination database has also been
updated to include more recent information.
A consultant has evaluated possibilities for permitting the IAF to operate from a "snapshot" of the
database distributed on DVDs, to address the needs of users that have unreliable telecommunication
facilities.  This approach appears to be feasible. Additional resources will therefore be sought for this
project. The Secretariat estimates that the project will require around 6 months of programming time.
The group of WTO divisional representatives met to review and identify additional requirements
for the IAF. The IAF was also presented to delegations on 10 July, resulting in additional suggestions.
From these suggestions, the Secretariat has drawn up a blueprint for future development, including
post-project development. Another presentation of the software and development plans will be held
for delegations tentatively on 8 October. The exact date and venue will be communicated shortly.
While the demonstration will be in English, questions and answers can be provided in all three WTO
languages.G/MA/M/33
Page 30
Annex 2
Consolidated Tariff Schedules Database – Report by the Secretariat
CTS on line
Following the adoption of the combined IDB/CT S dissemination policy by the Committee on the
12 June, (see G/MA/115) the CTS files were made available to Members through the IDB Internet site
on the 9 July. The CTS files of all WTO Members, including Poland, are now in the IDB File
Transfer Facility.
Still outstanding are:
• Comments from Venezuela:  Venezuela is reviewing the data in order to complete the approval
process;
• Iceland:  The correlation between the tariff commitments' legal nomenclature and their
transposition into the national tariff nomenclature for 2000 has to be finalized by Iceland. Thecorrelation table links the tariff commitments' legal nomenclature and their transposition into the
national tariff nomenclature for 2000 and is a key element for linking the CTS file with the IDB.
Work in Progress
Updates
The Secretariat has updated the data contained in the CTS by incorporating information on
Members' commitments from documents issued after the processing of the CTS files.  This phase
involved the revision of 36 files and was completed in July 2002.
Incorporating additional comments
The Secretariat also received ad ditional comments from Bulgaria, the Czech Republic, Costa Rica
and Singapore on their CTS files.  In addition ya number of Members have made comments to the
Secretariat following the publication of the Member s' tariff profiles document. These comments are
being incorporated into the respective database files.
Standardization of the database files
Before the CTS database can be linked to the IDB at the tariff line level, all CTS files have to be
standardized.  The Secretariat started work on the CTS standardization in August 2002.
Linking the IDB and the CTS
The files of three Members, Switzerland, Norway and Canada have already been linked to the
IDB at the tariff line level.  A standard IDB/CTS concordance table and a table containing the
unbound tariff lines have been created and tested for this purpose. Standardized and updated CTS fileswill be progressively linked to the latest tariff and trade submissions in  the IDB.  The CTS/IDB link
will be updated to 2000 and 2001 if correlation tables can be established or have been provided by the
Members concerned.  The Secretariat will contact Members if additional information is required.
CTS CD-ROM
The Secretariat has initiated the arrangements to reproduce a CD-ROM containing the approved
CTS files in Access and text formats.  Th e CD-ROM should be ready around mid-October.
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