WORLD TRADE  
ORGANIZATION  G/L/792 
27 October 2006 
 (06-5196) 
Committee on Trade-Related Investment Measures  
 
  
TRANSITIONAL REVIEW MECHANISM PURSUANT TO PARAGRAPH 18 OF THE 
PROTOCOL OF ACCESSION OF THE PEOPLE'S REPUBLIC OF CHINA TO THE 
WORLD TRADE ORGANIZATION 
 
Report of the Chairman
 
  
1. Pursuant to Paragraph 18 of the Protocol of  Accession of the People's Republic of China, the 
Committee on Trade-Related Investment Measures ca rried out the fifth annual review under China's 
Transitional Review Mechanism (TRM) at its meeting on 25 October 2006.   
 
2. Written questions regarding China's TRM were  submitted in advance of the review by the 
United States and the European Communities.  These submissions were circulated as documents 
G/TRIMS/W/47, and G/TRIMS/W50, respectively.    3. In a communication dated 20 October 2006, Ch ina submitted information on Annex 1A of its 
Protocol of Accession in connection with its TRM.   This submission was distributed in document 
G/TRIMS/W/51 dated 23 October 2006.  4. Annex 1 to this report re produces the relevant sections of the Minutes of the TRIMs 
Committee's meeting held on 25 October 2006 in wh ich Members' substantive discussions regarding 
China's TRM are reflected.   
 
_______________ 
 
  
 
    
 
    
 
     
 
 G/L/792 
Page 2  
 
  Annex 1
 
  
Relevant Sections of the Minutes 
 
of the meeting held on 25 October 2006  
 
(G/TRIMS/M/25 ) 
 
 
 
B. T RANSITIONAL REVIEW MECHANISM PURSUANT TO PARAGRAPH  18 OF THE PROTOCOL OF 
ACCESSION OF THE PEOPLE 'S REPUBLIC OF CHINA TO THE WORLD TRADE ORGANIZATION  
4. The Chairman  recalled that under Paragraph 18 of China's Protocol of Accession the TRIMs 
Committee was required to review annually, over a pe riod of eight years after China's accession, the 
implementation by China of the TRIMs Agreement a nd the related provisions of the Protocol and to 
report to the Council for Trade in Goods (CTG) on the results of its review.  The fourth annual review 
had taken place on 10 October 2005 a nd the relevant report had been submitted to the CTG as 
document G/L/751.   
5. With respect to this year's review, he said that in order to discharge its reporting obligations in 
a timely manner the TRIMs Comm ittee needed to undertake the review and submit its report in 
advance of the next meeting of the Council for Tr ade in Goods which was scheduled for 7 November 
2006.  Pursuant to paragraph 18 of China's Protoc ol of Accession, the Council for Trade in Goods 
would in turn report to the General Council by the end of the year.  He then said that the Committee had received communications from the United Stat es and the European Communities, containing 
questions regarding China's Transitional Review Mechanism (TRM).  These submissions had been 
circulated in documents G/TRIMS/W/47 and 50, resp ectively.  In addition, the Committee had also 
received a communication from China, dated 20 Oct ober 2006, concerning information provided 
under Annex 1A of its Protocol of Accession.  This  had been circulated in document G/TRIMS/W/51.  
6. He proposed that, in keeping with previous pr actice, the Committee conduct the review in the 
following manner:  he would first give the floor to  those delegations that had submitted questions to 
China, and to any other delegation that wished to comment on this item.   He would then invite the 
delegation of China to answer the questions and pr ovide any other information they might wish to 
share with the Committee.    
7. The Committee so agreed
. 
8. The representative of the United States  said that after this fifth annual Transitional Review 
Mechanism for China more than one-half of the requ ired reviews would have been completed.  The 
United States continued to believe that the TRM w as a useful mechanism.  It helped to provide 
needed additional transparency for China’s trade regime.  It also provided Members with a 
multilateral forum for conveying their concerns with  China’s WTO compliance efforts.  In the latter 
sense, the TRM was a useful supplement to ongoing bilateral discussions with China. 
9. For the present exercise, the United States ha d submitted questions addressing (1) China’s 
auto policy, (2) China’s steel policy, (3) China’ s new regulations on Mergers and Acquisitions, and 
(4) the State Council Opinions on the Revitalizat ion of the Industrial Machinery Manufacturing 
Industries. 
10. The Auto Policy questions focussed on two cond itions for making investments in China that 
raised WTO concerns.  One of these was a research  and development requirement, and the other was a  G/L/792 
 Page 3 
 
 
  technology transfer requirement.  The Steel Polic y questions also raised WTO concerns about 
conditions for investment.  In the Steel Policy so me conditions only applied to foreign firms, not 
domestic firms, and at least one condition for invest ment involved technology transfer.  In its written 
questions, the United States had asked China to ex plain how these various conditions for investment 
were consistent with China's commitments in paragraph 7.3 of its Protocol of Accession and 
paragraph 203 of China’s Working Party Report.  Those cited provisions proscribed conditioning 
investment approvals on the conduct of research in China or on technology transfer, among other 
things. 
11. The remaining questions that the US had submitted addressed a troubling trend in China.  
Instead of relying more on the market to dict ate outcomes, China increasingly was resorting to 
industrial policies that restrict foreign investment  while promoting domestic companies.  One example 
of this could be seen in what was contemplated by the State Council Opinions on the Revitalization of 
the Industrial Machinery Manufacturing Industries, i ssued in June 2006.  Those Opinions called for 
new controls on foreign investment for 16 types of equipment manufacturing, such as the manufacturing of semiconductor equipment, aircraft engines, pollution control equipment and textiles 
machinery.  The State Council Opinions combined these new controls on foreign investment with a 
number of initiatives designed to promote and de velop domestic companies and to expand their 
market share in China. 
12. China’s new regulations on Mergers and Acquisitio ns, issued in August 2006, fitted right into 
these policies.  They gave China’s Ministry of Commerce broad discretion to approve or reject 
mergers and acquisitions.  The United States viewed China’s increasing use of policies that restrict 
foreign investment while promoting domestic co mpanies as a step backwa rds and urged China to 
resume its progress toward the full institutionalizatio n of market mechanisms.  His delegation looked 
forward to China’s responses to its written questions. 
13. The representative of the European Communities
 said that his delegation welcomed the 
opportunity to participate in the fifth TRM exercise for China.  Since the EC's  concerns had been set 
out in detail and in writing in document G/TRIMS/W/ 50, he intended just to highlight the EC's key 
concerns and questions, rather than dwell at lengt h on the document.  As a preliminary remark, he 
said that it was regrettable that the EC was obliged to raise again in its submission a good number of 
issues that had been raised in the TRIMs Committee in  the past and to repeat questions that had not 
yet been answered in a fully satisfactory fashion.   While the EC thanked the Chinese authorities for 
their own written contribution to this exercise – document G/TRIMS/W/51, which had been circulated 
only the day before the meeting – it noted that the contribution very largely only reiterated 
information provided during the TRM in 2005 and that  it did not provide answers, or even preliminary 
comments, to the questions posed by the EC earlier that month.  The EC hoped very much that China 
would be able to provide additional information and respond in a more substantive fashion in the 
course of the present meeting. 
14. The EC therefore wished to reiterate its requ est to China for further clarification on the 
following four areas:  (i) Clauses contained in contr actual arrangements that are incompatible with 
China's obligations under its Accession Protocol and the Regulation for the Implementation of the 
Law of the People's Republic of China on Sino-Foreign Equity Joint Ventures;  (ii) New Automobile Policy;  (iii) Steel Industry Development Policy;  and (iv) JV Ownership Limitations and Local 
Content Requirements in the Petrochemical, Chemical, Energy and Environment sectors. 
15. Regarding the first area on which the EC request ed further clarification, he said that in 
previous TRM exercises, China had emphasized and in sisted on the sanctity of private contracts, 
stating for example during the 2005 TRM that a Chinese court or any other administrative body was not able to alter or invalidate existing contracts, or  any articles thereof, without the consensus of the 
parties involved.  At the same time, under Paragr aph 7.3 of the Protocol of Accession, China had G/L/792 
Page 4  
 
  undertaken the commitment not to enforce provisi ons of contracts imposi ng "trade and foreign 
exchange balancing requirements, local content a nd export or performance requirements".  The EC 
invited China to clarify how it was ensuring the implementation of this commitment. 
16. During the last TRM, China had also stated th at amendments had been made to the Law on 
Sino-Foreign Equity Joint Ventures of the People's Republic of China with a view to removing all 
articles that were in contradiction with the TRIMs Agreement.  The EC noted, however, that 
Articles 41 and 43 of the Regulations for the Implem entation of this Law still imposed requirements 
on technology transfer agreements  concluded by Joint Ventures. 
17. The EC therefore invited China to explain how these requirements related to the relevant 
provision of the Accession Protocol and whether it c onsidered that they result in equal treatment for 
imported goods as compared to domestic products. 
18. On the New Automobile Policy, he said that dur ing the last TRM China had stated that the 
shareholding requirement restricting the participatio n of foreign investors was based on the fact that 
China's automotive industry was at a preliminary stage of development and that it did not contradict any WTO principle or any of China's accession co mmitments.  Such considerations seemed less 
pertinent given the significant development of the industry in China over the last years and its bright 
prospects.  In particular, heavy regulation and arbi trary restrictions on investment were hard to 
reconcile with a booming automobile industry and wi ll clearly impede its successful consolidation. 
19. In this regard, the EC urged China to allow fo reign majority investment and to eliminate the 
"2+2" regulation.  In addition, th e EC asked China to provide inform ation on the latest developments 
on the "Automotive Industry Development Policy" with regard to export promotion and revised 
investment conditions for foreign manufacturers, including those from the EU. 
20. Regarding the Steel Industry Development Policy, he said that in light of the lack of 
information provided during the last TRM, the EC reiterated its request that China provide Members 
of the Committee with information regarding th e Steel Industry Development Policy.  In its 
submission for this item at the present meeting (G/T RIMS/W/50), the EC had set out its concerns and 
requests for clarification on the provisions of Articles 17, 18, and 23 of the Steel Industry 
Development Policy.  The EC invited China to respo nd to the questions raised in this communication. 
21. On JV Ownership Limitations and Local C ontent Requirements in the Petrochemical, 
Chemical, Energy and Environment sectors, he said that the Chinese Authorities maintained foreign 
investment ceilings in these sectors – in some ca ses limiting foreign partners to below 50 per cent – 
which impeded further growth and investment.  Mo reover, local content requirements applied for the 
construction of new plants.  In particular, these local content requirements could be as high as 60 per 
cent for new projects in the renewable energy sectors.   Such requirements might also be extended to 
other sectors such as chemicals.  These measures app eared to be clearly inconsistent with both the 
TRIMs Agreement and the specific commitments of China under Paragraph 7.3 of its Protocol of 
Accession.  Accordingly, the EC invited China to provide the clarifications requested in its written 
communication. 
22. In conclusion, he said that the EC looked fo rward to the further responses and additional 
information that China could provide at the present meeting on these and all the other points raised in 
its communication in G/TRIMS/W/50. 
23. The representative of China
 said that his delegation was pleased to have the opportunity to 
exchange views where delegations had raised ques tions, comments and concerns under this TRM item 
of the agenda.    G/L/792 
 Page 5 
 
 
  24. He wished first of all to draw attention to  paragraphs 13 and 14 of the Committee's draft 
annual report in G/TRIMS/W/49 – and particularly to  paragraph 14 concerning the TRM report.  He 
thought that the year mentioned in that paragr aph should be 2006 rather than 2005 but sought 
clarification as to whether the present review referre d to the TRM one year ago or today.  He thought 
a simpler way to refer to the TRM review was to put the two paragraphs together and just mention 
that this review had taken place on whatever day and refer to what documents had been received.  One 
paragraph would be cleaner and w ould be without any misunderstanding about specifically the time of 
the transitional review. 
25. With regard to the questions and documents submitted by the US and the EC under the TRM 
agenda item, he first wished to make some ge neral comments and then would invite the Chinese 
representative from Capital to address some of those specific issues or questions. 
26. First, his impression was that Members obviou sly had expectations beyond the mandate of 
this TRM item or beyond this Committee.  He ha d carefully read the documents submitted by the EC 
and the US in which, for instance, they had raised  some issues concerning equity, investment limits, 
or the "2+2" issue.  He had tried to find how th ese elements related to the TRIMs Agreement and to 
China's specific accession co mmitment but failed to do so.  He understood, of course, that in the on-
going Doha negotiations Members had also put some si milar requests to China.  For instance, in the 
negotiations in Services that China had been asked to raise its equi ty limit or investment ratio for 
foreigners in certain sectors.  Although that w as understandable, he hoped that the delegations who 
submitted questions in the TRIMs Committee could fi nd that their questions and comments related to 
either the TRIMs Agreement itself or to Chin a's specific accession commitment.  China had no 
obligation to respond to those issues that were be yond the mandate of this Committee under this item, 
or beyond the mandate and scope of the TRIMs Agreement. 
27. Another point he wished to make concerned th e procedural issue.  For instance, in his 
statement at the present meeting, the EC delegate had said that in the past China had failed to provide 
to them answers in a fully satisfactory fash ion and that was the reason why the European 
Communities had been repeatedly asking the same qu estions.  He would be grateful if the EC 
delegation could provide China with a definition of what was a "fully satisfactory fashion answer" to 
help it prepare an answer that hopefully would fully satisfy the EC.  As far as he understood it, the 
purpose of this [TRM] exercise was to carry out  the mandate under Paragraph 18 of China's 
Accession commitment for a transitional review.  Para graph 18 did not say that China had to provide 
an answer in a fully satisfactory fashion to a certain Member.  If Paragraph 18 had this kind of 
requirement he was sure his delegati on would be more than willing to try to fully satisfy the request of 
Members.  Otherwise, he hoped that Members could refrain from making these kinds of requests that were beyond the mandate because it would be impossi ble and very difficult for China to provide the 
kind of satisfaction wanted by some Members. 
28. Concerning China's communication in G/TRIMS/W/51, which the EC said had been 
circulated only yesterday, he understood that China had provided this document to Members some 
days ago.  If one looked at the legal requirement for this matter, China was to provide relevant 
information to the relevant bodies under the TRM and Paragraph 18.  There was no requirement as to 
how far in advance China had to provide this ki nd of information.  Therefore, as long as the 
information was provided in advance of the presen t session – for instance even five minutes before 
the meeting – that was legitimate.  He hoped that  the European Communities therefore understood 
better the nature, the characteristics, the require ments, and the mandate of Paragraph 18 on the 
transition review and would refrain  from making requests that went beyond the mandate of the TRM. 
29.
 He wished once again to thank the delegations of the EC and the US for their questions and 
said that his colleague from Capital would address some of those specific questions. G/L/792 
Page 6  
 
  30. The representative of China
 said that under the agenda item of the transitional review of the 
TRIMs Committee this year, he was willing to clarif y the following issues in relation to the questions 
and comments that China had received before the meeting.  
31. Firstly, regarding the new Automobile Industry Development Policy,  China noted that there 
were concerns regarding Article 47 of the Policy which involved the establishment of R&D facility. 
China would like to make the following clarifications. First of all, as China had explained in previous 
meetings, the industry development policies promul gated by the Chinese government aim at providing 
macro development guidance for the industries. They  were not compulsory themselves. According to 
his knowledge, so far, the Chinese government had not enacted any follow-up rules on administration 
of the investment in the auto manufacturing sector to implement the policy.  
32. Secondly, Article 47 of the Policy referred to the automobile manufacturing project, instead 
of the foreign investment or investor that may be  involved in the project. In view of the fact that  
foreign investment in auto manufacturing sector can  not go beyond 50 per cent, China did not see that 
this was a mandatory requirement on the foreign invest or, or that the right of investment of foreign 
investors was conditioned upon the conduct of R&D.  Therefore China believed that it was not 
necessarily inconsistent with either the TRIM S Agreement or China’s accession commitment.  
33. As to the "technology transfer" issue, he said that it was surprising that this was brought up 
again at the present meeting.  He believed that China had already made clear and complete clarification on this issue in previous meetings.  He wished simply to rep eat China's positions which 
could be found in the minutes of previous mee tings.  The document regarding the source of 
technology as required to be provided during the regi stration of an automobile manufacturing project 
aimed at examining the authenticity of the source of technology and of the content of project, not at 
technology transfer. This requirement was applie d across the board both to domestic and foreign 
enterprises. Furthermore, requirement of such a document was also important to the protection of intellectual property rights with the legitimate right of the technology transferee, if applicable, and the 
right of the holder safeguarded.  
34. Regarding the "2+2" issue which was also a re petition, China believed that it was legitimate 
for the Chinese government to provide guidance on development of the industry based on its 
independent judgment of the maturity of the industr y. This was not in any way related to WTO rules 
or China's accession commitment. 
35. Regarding the amendment to the new Automobile Industry Development Policy,  China would 
highly appreciate if the Member that brought that question could identify its source of information, for 
the Chinese government currently had no plan to revise or amend the Automobile Industry 
Development Policy.  
36. With regard to the Steel Industry Development Policy , China did not see that the question 
regarding the requirement of 40 per cent self-owned ca pital in the investment for a project was related 
to the mandate of this Committee, or rules of this Organization, or China’s accession commitment. 
Questions regarding foreign stake limitation, as well  as criteria for foreign investors in this sector, 
were not related either.  These were , rather, issues to be discussed if there would be a multilateral 
investment agreement.  
37. On questions regarding outdated equipment, th ey referred to those with high level of energy 
and resource consumption, poor product qualit y and heavy pollution which cannot reflect the 
development trend of the steel industry. The ca talogues of outdated production capacity, techniques 
and products were de termined with reference to such criteria as energy consumption level, resource 
consumption level, quality of the products  and environment pollution level, etc.   G/L/792 
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  38. On questions regarding Article 18 of the Polic y, the Chinese government had not enacted any 
implementing measures. 
39. On questions regarding ownershi p of independent technology by investment party as said in 
the Policy, China believed this was a qualification criterion on the investor, which was different in 
nature from a compulsory technology transfer requi rement. China saw no inc onsistency with China’s 
accession commitment as contained in Article 7.3 of  the Accession Protocol and Paragraph 203 of the 
Working Party Report.  
40. On the issue of differentiation in treatment be tween domestic and foreign enterprises, he first 
wished to quote a few lines from paragraph 22 of the document provided by the EC, which read "As 
for foreign non-steel investors, the same Article states that 'overseas non-steel enterprises wishing to 
invest in the steel sector must demonstrate a high le vel of public trust'." Article 23 appeared thus to 
discriminate between domestic and foreign compan ies in that higher production volume thresholds 
were being set for foreign investors as compared  to domestic common steel enterprises." Here, he 
wished to refer to the original text of the Steel Industry Development Policy.  Just two lines above the 
EC quotation of "overseas non-steel enterprises wishing to  invest in the steel sector must demonstrate 
a high level of public trust", it clearly stipulated th at "domestic non-steel enterprises wishing to invest 
in the steel sector must demonstrate a high level of  fund and public trust". The requirement in this 
regard on domestic enterprises was the same as foreign ones.  
41. Regarding the recently promulgated State Council Opinions on the Revitalization of the 
Industrial Machinery Manufacturing Industries , he wished to point out that there was no restriction on 
foreign investment stipulated. It only stipulated that for those enterprises which concerned national 
security and national welfare, the State should ha ve a controlling ownership. This was a common 
practice in many countries. The Opinion applied to  the manufacturing industry, and there was no plan 
to extend it to other sectors. China saw no inconsiste ncy of this document with its obligations under 
the TRIMS Agreement, other WTO rules and its accession commitment. 
42. Regarding the question on enforcement of the contracts which contain conflicting terms with 
provisions in the TRIMs Agreement, China had revised the Law of the People's Republic of China on 
Chinese-Foreign Equity Joint Venture ; Law on Chinese-Foreign Contractual Joint Venture ; and  Law 
on Wholly Foreign Owned Enterprises  and their respective implementing regulations. The revision 
included the elimination and cessation of enforcemen t of requirements on trade and foreign exchange 
balancing, local content, export performance, compul sory technology transfer, and etc. The Chinese 
government will respect freedom of contract.  If the ar ticles of association or contract of enterprises 
with foreign investment approved before amendment of the relevant laws c ontained terms on foreign 
exchange balance, local contents, and export perfo rmance, the investors may decide by themselves 
whether to change the terms. If there was an agreem ent to change, they may file the application to 
relevant authorities to change their articles of asso ciation or contract of enterprises accordingly. And 
the application will be processed timely and in a manner consistent with the TRIMs Agreement. A 
related question in this regard was on "local c ontent requirement" in the energy and chemical 
industry. In view of the legislation revision mentioned above, China was not aware of any local content requirement in these sectors. 
43. Regarding the revision of the Industrial Catalogue for Foreign Investment , the Chinese 
government was currently doing studies with cons iderations including the economic and social 
development need, the future trend in absorbing and utilizing FDI, and the consistency with WTO 
rules. 
44. Regarding the  Regulations for the Implementation of  the Law of the People's Republic of 
China on Sino-Foreign Equity Joint Venture,  Article 41 of the Regulation aimed at making sure that 
the technology was "appropriate and advanced", while  "display conspicuous social economic results G/L/792 
Page 8  
 
  domestically or to be competitive on the internati onal market" was the result of the "appropriate and 
advanced" technology. The purpose of this provision was to stress the importance of technology being 
"advanced and appropriate", not to enforce a performance requirement.  
45. Regarding the new Merger and Ac quisition regulation, it should be pointed out that before the 
regulation was promulgated, the Chinese government held public consultations by way of meetings 
with academic scholars and industry experts, as well  as with quite a number of companies, law firms 
and consulting firms, both foreig n and domestic. On other questions concerning the regulation, 
frankly speaking China did not see that it was related to the TRIMS Agreement, or the mandate of this 
review mechanism. China was entitled to improve furt her its FDI regime and in this respect it saw no 
inconsistency with WTO rules and the accession commitment.  
46. The Chairman
 said that, as concerned the compet ence of the Committee as well as the 
adequacy of the questions asked under the mandate of  this Committee, it was not his role to decide 
about the competence of the Committee.  This w as something that depended on the will of the 
Members.  He wished to recall that this exercise in  this Committee was an exer cise in transparency.  It 
was based on cooperation and was to allow all Members to understa nd better the Chinese legislation 
on a whole series of matters connected to investment .  It was not a point of challenging the Chinese 
legislation, whether it was compatible or incompatib le.  He believed that all Members were interested 
in seeing that the discussions in the Committee be  as complete, as precise, and as cooperative as 
possible.  There were other fora in the Organiza tion where one could challenge the compatibility of 
the legislation of Members with the WTO rules.   In the TRIMs Committee Members should have a 
complete and precise discussion on all these matters and it seemed to him that, at the present meeting, 
Members had heard the precise questions raised by  the United States and the European Communities 
and the replies by the Chinese delegation.  He thanked both the United States and the European 
Communities for their questions, and also thanked Ch ina for having participated  in this exercise and 
for their comments.   
47. The representative of the United States  agreed with the Chairman's comments on the 
importance of transparency in this type of exerci se and said they were very eloquent and appropriate 
for the present meeting.  He urged the Chinese delega tion to take those comments into consideration.  
He said he was puzzled at China's resistance to answer questions that  had been provided in a recently 
held bilateral dialogue with China where ma ny of these questions had been answered. 
48. The representative of the European Communities  thanked China for its responses and the 
information it had provided.  He considered that  China's statement contained some quite important 
material, and said that it would be very helpful to r eceive the statement in writing, if possible, rather 
than having to wait for the Minutes of the meeting to be circulated.  On a more broader point, he said 
that the purpose in the TRM was one of tran sparency against the mandate of reviewing 
implementation by China of its commitments.  That process of review depended, for practical purposes, on a question-and-answer process and on an opportunity for Members to bring their 
concerns to the table, and for China to give its r esponse.  The EC continued to believe that for the 
TRM to be as useful as it should be a certain amount of preparation was also called for.  It was clear 
that the preparation of the Chinese statement at the present meeting had been quite substantial and 
quite significant for which the EC wished to than k China.  Of course, if the document had been 
received a little earlier the EC could have prepared  some follow-up questions  as well and could have 
struck out some of the questions to which China had already given a response.   However, he was 
reluctant to engage in a discussion on the considerat ion as regards the mandate of the relevance to the 
TRIMs Agreement.  Also, it seemed to him that China had not responded, or had responded differently, to some particular questions, for example those put by the United States on requirements concerning technology transfer.  Essentially, the Eu ropean Communities wished to thank China for at 
least providing some material and some substance in  their response.  He reiterated the EC's request 
that China share their response w ith the Committee by providing it in writing.  The EC would, of  G/L/792 
 Page 9 
 
 
  course, study the response and if there were any furt her points for which they needed clarification, his 
delegation would probably c ontact China bilaterally.  
49. The representative of Malaysia  said that his delegation did not have any question concerning 
China's TRM.  However, if he had understood well what the Chairm an had said about looking at 
transparency with relation to investment, Malays ia was not sure that the TRIMs Committee had a 
mandate to discuss investment per se .  This was a Committee on TRIMs, and it was basically an issue 
of trade-related investment measures and those issues related to TRIMs were just part of the Chinese 
accession.  His delegation just wanted to be sure  that what was being done corresponded to the 
mandate of the Committee and to wh at the TRM exercise was all about. 
50. The Chairman  said that he sensed that Malaysia's last question might be directed at himself 
more than at China.  He did not, of course, e xpect the TRIMs Committee to take up the entire WTO 
negotiations on investment;  the TRIMs Committee was not the place to do that and there might be other times and other places where this would be done .  His remark had only been directed at making 
all Members understand that the interest of this Co mmittee, and the interest of all the Members, was 
to have a broad discussion so that it was clearly understood what Members were doing in order to 
avoid problems that might end up in other forums of the Organization.  His wish was therefore to have 
the broadest discussion possible in the TRIMs Committ ee and, of course, within the mandate of the 
Committee.   
51. The representative of China
 said that he understood the Chairman's wish to have a broader 
complete discussion and, as he had also mentioned, of course within the mandate of this Committee and its Agreement.  He wished first to take the opportunity to thank Malaysia for its remarks because 
he believed that the questions raised were not only  pertinent to the Chairman but to every Member;  
how this Committee handled its discussion and work de liberations.  For instance, there were a lot of 
investment measures, but not all of them were relate d to trade.  So the mandate of this Committee or 
the TRIMs Agreement only applied to those investment  measures related to trade in goods.  Of course 
China was willing to help to promote transparency fo r this Committee within this mandate, but if the 
transparency requirement of a Member went beyond  this mandate, it would be difficult for China to 
apply and to try to help them to do that.  If Chin a did that it would be illegal because it was against the 
mandate or went beyond the mandate.  So, on Chin a's part, it had to refrain from doing things that 
went beyond the mandate of the TRIMs Committee. 
52. China would again like to take the opportunity to  thank the EC delegate for his comments.  
Although China had no obligation to  provide a written response or answer to the questions or 
comments from Members, he said that China could give positive considerati on to this particular 
request by the EC, and could discuss it with the EC de legate to help him in his work and in the work 
of the EC delegation as a whole.  The EC had mentioned the issue of technology transfer.  China said that the point he wanted to draw participants' atte ntion to was that Members had to make a distinction 
between the performance requirements of technology transfer and the requirement of demonstrating 
necessary investor competence.  For instance, if China's regula tion requested an investor to 
demonstrate necessary competence in terms of a possessed modern tec hnology, that did not mean that 
China was requiring them to transfer that technol ogy.  For example, if the Chinese delegate asked 
someone to demonstrate his driving skills, that di d not mean that that person was being asked to 
transfer his driving skills to the Chinese delegate.  He asked Members to ma ke a distinction between 
the two.   
53. With regard to the US questions, there had b een several points that mentioned that China 
seemed to have failed to address specific issues  such as the Merger and Acquisition regulation, 
industrial machinery, and the US had requested that China provide information on the legal effect of 
Opinions and describe this kind of legal effect.  The questions that China wished to put to the Unites 
States were the following:  Could the US please he lp China to establish the relation of its question G/L/792 
Page 10  
 
  with TRIMs.  How did it relate to TRIMs Article 1.  How did it relate to a specific commitment of 
China and of TRIMs.  If the US was able to pr ovide China with legal ev idence that there was a 
relation between Article 1 of the TRIMs Agreement and the US questions, China would be more than 
willing to help the United States with this kind of information.   
54. The representative of Korea
 said that his delegation understood China's logic and legal point 
of view, as well as China's reluctance to provide a wr itten response.  As the Chairman had mentioned, 
Korea felt that it was a good exercise to try to u nderstand each other in a cooperative way and not to 
put pressure on anyone.  This was a trade policy re view, and his delegation thought it was better to 
have a dialogue among Members, to raise questions and to exchange information.  Korea could also 
understand China's intention and the policy implications  which it wished to rai se.  If one was to raise 
the question of the competence of the TRIMs Comm ittee it would be very difficult to continue the 
discussion, so Korea hoped that Members were not going to engage in that kind of discussion.  Of course, Members could raise the question, but if one  was aiming at doing things in a cooperative way, 
all trade in goods was related to a ll the policies.  So, in that sense , Korea could understand why such a 
question had been raised.  China had provided inform ation and Members had to continue this kind of 
mechanism in a cooperative way.   
55. The representative of the United States
 said that some of the questions put by his delegation 
did directly raise concerns about China's commi tments either under the TRIMs Agreement or under 
its Protocol of Accession.  He referred here to th e US questions about the Auto Policy and about the 
Steel Policy.  Not all of the United States' questions  dealt with specific concerns about whether or not 
China may or may not be adhering to particular commitments.  He reiterated that this was a 
transparency exercise and in some  areas the United States was just trying to learn more to get 
clarification from China as to what its policies we re.  It was difficult to know whether particular 
provisions of the TRIMs Agreement may be implicated or not.  With regard to the State Council opinions and the Merger and Acquisition regulations, the United States was just trying to gain more 
information at this point consistent with the Chai rman's statement about the fundamental principle of 
transparency. 
56. The Chairman
 said that with respect to the Committ ee's reporting obligation to the Council 
for Trade in Goods, he understood that Members would wish the Committee to follow the same 
procedure that had been adopted in previous years,  i.e., the Chairman would submit a brief, factual 
report, which would include references to the submissi ons made in connection with this year's review 
and would contain in the Annex the relevant parts of  the Minutes of this meeting.  He had taken the 
liberty of asking the Secretariat to prepare a draf t outline of his report for Members' consideration. 
This had been circulated as document G/TRIMS/W/48.    If Members agreed to this outline, and once 
the relevant sections of the Minutes had been attached to it, he would forward the report to the Council for Trade in Goods.  
57. The Committee took note
 of the statements made under this item and agreed  on the proposed 
procedure to discharge its reporting obligations concerning China's TRM. 
 
 
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