./.WORLD TRADE
ORGANIZATIONG/C/W/476
28 November 2003
(03-6323)
Council for Trade in Goods Original:  English
TRANSITIONAL REVIEW MECHANISM IN CONNECTION WITH PARAGRAPH 18 OF
THE PROTOCOL ON THE ACCESSION OF THE PEOPLE'S REPUBLIC OF CHINA
Communication from the European Communities
The following communication, dated 26 November 2003, has been received from the
delegation of the European Communities.
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The EC attaches a great importance to the TRM exercise, and considers that it is of utmost
importance to ensure a proper and meaningful functioning of this mechanism over the years to come.
Taking into account the experience of last year and to make the 2003 exercise more
meaningful, the EC had decided this year to:
(i) as last year, transmit the questions well in advance of each meeting (typically 6 weeks)
(ii) focus on a limited number of priorities and
(iii) raise only issues discussed already a number of times in the WTO committees or in bilateral
meetings and therefore well-known to the Chinese side.
The objective of the EC was to have in eac h subsidiary body under the Council for Trade in
Goods a meaningful discussion and detailed replies from the Chinese side to this limited number of
questions.
The assessment made by the EC about this year’s TRM exercise in the subsidiary bodies
under the Council for Trade in Goods is mixed: while the Chinese side provided useful clarifications
on several matters of concerns, the EC impression is that it did not obtain satisfactory replies from the
Chinese side to a number of questions raised notably in the Import Licensing, Market Access, TBT
and SPS Committees.
The EC will come back to these issues in the relevant committees and bilaterally with China
in the coming months.
In this meeting, the EC would like to concentrate on two extremely important concerns, on
which the answers provided by the Chinese side raise a number of questions:
(i) the trading rights issue (right to import and export for foreign invested companies): the
Chinese statement on this issue at the Import Licensing Committee does not clarify whether
the shortcomings in the current Chinese legislation highlighted by the EC in both the Import
Licensing and the Market Access committees will be corrected and whether, in line with
China’s commitments, all majority-owned foreign joint-ventures will be able to obtain theG/C/W/476
Page 2
trading rights from 11 December 2003, without any condition and for all goods related to their
activity.
This notably supposes the abolition of the distinction currently made by the Chinese side but
not foreseen under China’s Protocol of accession, between so-called “trading JVs” and
“manufacturing” JVs, the elimination of conditions on prior experience and capitalrequirement and the unclear requirement for existing JVs to request in some cases a “change
of [their] scope of business”.
(ii) the establishment of a dual distribution network for domestically produced and imported
automobiles:While the question from the EC on this issue was unfortunately left unanswered by the
Chinese side at the Market Access Committee of 20 October 2003, the Chinese side officially
confirmed its intention to set up separate distribution network a few days later in a bilateralmeeting. The EC was told that the objective of China was to establish such system in the
coming months.
As was done then and on a number of occasions in the past (notably during last year TRM in
this Council), the EC would like to strongly reiterate its deep concerns with regards to this
planned measure and to its WTO compatibility.The EC would be grateful if China could explain whether it intends to reconsider this measure
and, if not, what is the state of play of the legislative process for its adoption and when China
intends to notify it for comments. In this resp ect, given the potentially very disruptive impact
such a measure would have on the activity of foreign automotive firms in China, the EC
would like to urge China to make available the text of the planned measure as soon aspossible.
Finally, as a follow-up to the question asked last year, the EC would like to raise the question
of China’s accession to the Government Procurement Agreement (GPA).
In the Working Party for WTO accession China stated that would initiate negotiations for
membership in the GPA as soon as possible.
Now that two years have elapsed since China’s accession to the WTO, the EC would be
grateful if China could indicate when it intends to start negotiation in order to join the GPA.
The EC would also like to stress that, until its accession to the GPA, China should, in line
with its commitments ensure that all government entities  conduct their procurement in a transparent
manner and that all foreign suppliers are provided with equal opportunity to participate in that
procurement pursuant to the MFN principle.
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