. /.  WORLD TRADE  
ORGANIZATION  G/TRIMS/W/37 
23 September 2004  
 
(04-3995) 
Committee on Trade-Related Investment Measures Original:   English 
   
COMMUNICATION FROM THE UNITED STATES 
  
 The following communication, dated 21 September 2004, is being circulated at the request of 
the Delegation of the United States.  
 
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TRANSITIONAL REVIEW MECHANISM PURSUANT TO PARAGRAPH 18 
 OF THE PROTOCOL ON THE ACCESSION OF THE PEOPLE'S 
REPUBLIC OF CHINA ("CHINA") 
 
Additional Questions from the United States to China concerning
 
Trade-Related Investment Measures  
 
 
I. NEW AUTOMOBILE IN DUSTRIAL POLICY 
1. In paragraph 204 of its Working Party Report,  China committed to amend its 1994 Industrial 
Policy for the Automotive Sector upon accession to  make it compatible with WTO rules and 
principles.  On 1 June 2004, China published its  new policy, entitled "Development Policy of the 
Automobile Industry." 
2. In Article 47 of its new policy, China states that a new automobile production plant requires a 
minimum investment of RMB 2 billion, of whic h owned capital should not be less than RMB 800 
million. According to this paragraph, the new plan t should also include an R&D facility, investment 
in which should not be less than RMB 500 million.  Article 47 also requires the establishment of an R&D facility in connection with new automobile engine manufacturing. 
3. In paragraph 7.3 of its Protocol of Acce ssion, China committed:  "China shall, upon 
accession, comply with the TRIMs Agreement, without  recourse to the provisions of Article 5 of the 
TRIMs Agreement. . . . Without prejudice to the rele vant provisions of this Protocol, China shall 
ensure that the distribution of import licences, quotas, tariff-rate quotas, or any other means of approval for importation, the right of importati on or investment by national and sub-national 
authorities, is not conditioned on:  whether compet ing domestic suppliers of such products exist; or 
performance requirements of any kind, such as local content, offsets, the transfer of technology, 
export performance or the conduct of research and development in China ."  (Emphasis added.)  
Similarly, in paragraph 203 of its Working Part y Report, China committed:   "The allocation, 
permission or rights for investment will not be conditional upon performance requirements set by 
national or sub-national authorities or subject to  secondary conditions covering, for example, the 
conduct of research , the provision of offsets or other forms of industrial compensation including 
specified types or volumes of business opportunities, the use of local inputs or the transfer of technology."  (Emphasis added.) G/TRIMS/W/37 
Page 2  
 
Question 1
 
  Please explain whether paragraph 3 of the new policy applies only to Chinese enterprises or also to foreign-invested enterprises.  
Question 2
 
 
 If paragraph 3 of the new policy applies to  foreign-invested enterprises, please explain 
how it complies with China’s commitments in paragraph 7.3 of China’s Protocol of Accession and paragraph 203 of China’s Working Party Report. 
 
4. Annex II of the new policy describes the docum ents that must be filed when seeking 
approvals for new production plants.  One of the liste d documents in paragraph iv of Annex II is the 
technology transfer agreement of the foreign party.   
Question 3
 
 
 Please explain this requirement in light of China’s commitments in paragraph 7.3 of its Protocol of Accession and paragraph 203 of its Working Party Report. 
 
 
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