WORLD TRADE  
ORGANIZATION  G/C/W/568 
17 November 2006 
 
 (06-5565) 
Council for Trade in Goods Original:   English 
  
TRANSITIONAL REVIEW MECHANISM PURSUANT TO PARAGRAPH 18  
OF THE PROTOCOL ON THE ACCESSION OF THE  
PEOPLE'S REPUBLIC OF CHINA ("CHINA")  
 
Questions From the EUROPEAN COMMUNITIES to CHINA
  
in anticipation of the Council for Trade in Goods  
 
  The following communication, dated 15 November 2006, is being circulated at the request of 
the delegation of the European Communities.  
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 The EC welcomes progress made by China in the implementation of many of its 
commitments under its Accession Protocol. It we lcomes the positive trend in informing foreign 
parties and the industry ahead of introducing  legislation. It also notes with satisfaction the setting up 
of bilateral dialogues on various topics that allow for increased sharing of views and experience early 
in the process of reform and legislative drafting, and should help avoid the creation of obstacles to trade.  At the same time, the EC attaches a great im portance to the transiti onal review mechanism, 
and considers that it is of utmost importance to en sure a proper and meaningful functioning of this 
mechanism. The EC has raised a number of questi ons during the reviews in the committees that report 
to the Council for Trade in Goods. The EC wishes he re to concentrate on those questions of utmost 
concern and for which no detailed responses were gi ven, notwithstanding the fact that for all 
questions raised in the committees it would very much welcome answers from China. 
 
Transparency
 
  The EC welcomes the improvement that China has made in the transparency of its trade 
regime. In March 2006, the State Council instructed  central, provincial and local government entities 
to start sending copies of their trade related measu res for publication in the China Foreign Trade and 
Economic Cooperation Gazette issued by the Minist ry of Commerce. Could China give details on 
how this process is being implemented?  
  The EC wishes to stress the importance of fully implementing China's commitment in its 
Protocol of accession to provide for a reasonable period for comment to the appropriate authorities 
before measures affecting trade in goods are implem ented. Early consultation of parties potentially 
affected by trade related measures helps preventing po tential trade irritants. Can China provide details 
on time allowed for commenting trade related measures before they are implemented? 
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  Chinese exports restrictions 
 
 
 The EC refers to its 2005 communication in wh ich it had recalled China's commitments:   
 
• to eliminate, upon accession, export restrictions unless they could be justified under WTO 
rules (§ 165 of the Working Party Report);  and  
 
• to notify any possible export restrictions to the WTO.  
  Justification requested for the existing export r estrictions by the EC since the TRM exercise 
of 2002 has not been provided by  the Chinese authorities nor was it transmitted to the WTO. China 
did no respond in the Market Access Committee on this issue. 
 
 The EC thus remains very concerned about the WTO compliance of a number of the export 
restrictions maintained by China.  China is th erefore urged to comply with its accession related 
commitments and to bring its export regime of ra w materials into conformity with WTO rules.  
 
 The EC attaches particular importance to and refers to earlier bilateral exchanges on coke, 
rare earths and non-ferrous metals. It urges China:     
• to notify in line with Part I-Section 8 (b) of the Protocol of accession the quantities associated 
with the export restrictions imposed on the products listed in the Chinese document of 17 
October 2003 (and on any other product that ma y not be included in this list);  and  
 
• to transmit to the WTO the justification for theses export restrictions; or  
 
• when no such justification exists, correctly notify to the WTO when and how it intends to 
bring its coke export regime in line with WT O rules and also to transmit all necessary 
information when this will be case for rare earths. 
  The EC asks China to communica te a timeframe for the aboliti on of the export licence system 
on coke. 
  The EC urges China to present a comprehensive table on the export taxes and VAT reimbursement schemes and other export restricti ons, in particular on non- ferrous metals and on 
chemical industry raw materials such as fluorsp ar and phosphorous. Attempts to obtain such 
information have met with failure and showed so me deficiency current implementing provisions to 
fulfil WTO transparency requirements.   As far as the introduction of new export restri ctions is concerned, the EC urges China to 
comply with the obligation of consulting countries ha ving a substantial interest in trade of products 
concerned.  
  The EC is also concerned that a number of e xport restrictions maintained by China may affect 
the supply of raw hides and skins for European tanners.   In this context, the EC would like to urge China:    
 
• to clarify and notify the products subject to export restrictions and taxes;   
 
• to transmit to the WTO the justification for theses export restrictions. 
  G/C/W/568 
 Page 3 
 
 
  China Compulsory Certification (CCC) Regulation  
 
 The EC would also like stress to the Chin ese authorities its concern about the growing 
difficulties encountered by European exporters owi ng to the China Compulsory Certification (CCC) 
regulation. Several sectors are affected by provisions  that appear to be trade restrictive, impose a 
heavy cost on importers and are not proportionate to the objectives stated by the Chinese legislation. 
The EC urges China to develop and implement a certification system in a way avoid unnecessary barriers to trade.  
Automobiles
 
  The EC refers to its serious concerns rega rding the new Automobile Industry Development 
Policy (hereafter “NAP”) already voiced in last year ’s transitional review, especially with a view to 
the wide scope of state intervention and the uncerta inty about the implementing regulations that will 
supplement the new policy. Based on past experience  on how the NAP was developed, the EC wishes 
to stress the transparency obligations under WTO ru les with regard to the outstanding implementation 
regulations of the NAP. Publishing drafts of th ese implementing regulations  well in advance would 
allow other WTO Members to comment on them and avoid potential trade irritants.   The EC would like to draw China’s sp ecial attention to the following issues 
 
(i) Joint venture ownership limitation 
 
 The NAP imposes restrictions on foreign investor s, which have contributed substantially to 
the rapid development of China’s automotive sect or. Foreign joint venture partners are still 
not allowed majority ownership in automobile production. Moreover, participation of foreign 
joint venture partners in automobile manuf acturing projects is limited to two for the 
production of passenger cars and two for commer cial vehicles (“2+2”). Due to the global 
nature of the automotive industry and the bran d strategies of local companies locked in 
50/50% ventures with foreign vehicle makers su ch restrictions are counterproductive to the 
NAP’s objective of promoting international competitiveness. 
  In this context the EC urges China:   
 
• to allow foreign majority investment;  and  
• to eliminate the “2+2” regulation.  
 (ii) Type Approval/ Homologation Standards
 
 Vehicles/components produced in China are type-approved according to the China 
Compulsory Certification (CCC) regulation. Since the CCC rules are not internationally 
recognized these vehicles are marketable on the domestic market only. Moreover, vehicles 
importers have to carry considerable – and so metimes prohibitive – costs as vehicles already 
type approved according to EU Directives that conform to the internationally recognized 
homologation standards of the 1958 UN/ECE Agreement have to be approved again 
according to the CCC rules. The CCC regulation thus effectively constitutes a non-tariff 
market access barrier. 
  Against this background the EC reco mmends China’s accession to the 1958 UN/ECE 
agreement as soon as possible.  
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Page 4  
 
   Adhesion to the Agreement would allow China both to recognize and to deliver homologation 
results obtained in accordance with the testing methods it prescribes.  That would facilitate 
the sales of China-made cars in other countri es. In addition, China would be able to 
proactively participate in preparing interna tionally recognized homologation standards as they 
continue to evolve. 
 
(iii) Revision of the Automotive Industry Development Policy
 
 The EC takes note of China's reply in the TR IMS Committee that is h as currently no plans to 
revise or amend the Automobile industry Develo pment Policy. It urges China to fully consult 
members in case such revision would be envisaged.  
 
Steel Industry Development Policy  
 
 The EC takes note of China's reply in the TRIMS Committee that, regarding article 18 of the Steel Industry Development Policy, the Chinese government had not enacted any implementation 
measures. Could China indicate what are the plan s for enacting implementation measures and which 
ministries are responsible for preparing such implementation measures?  
 
Government Procurement
 
 
 In paragraph 341 of the Report of the Working Party on the Accession of China to the WTO, 
China committed “to initiate negotiation for member ship in the Government Procurement Agreement 
by tabling an Appendix 1 offer as soon as possible”.  
 
 China indicated in the Trade Policy Review of  April 2006 that it plans to initiate negotiations 
to join the GPA and submit its GPA offer by not la ter than December 2007. The EC would be grateful 
if China could provide information regarding its current preparation for the GPA accession 
negotiations. 
 
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