WORLD TRADE  
ORGANIZATION  G/MA/W/78 
18 September 2006 
 (06-4448) 
Committee on Market Access Original:   English 
  
 
CHINA'S TRANSITIONAL REVIEW MECHANISM  
 
Communication from the United States
 
  
 The following communication, dated 15 September 2006, is being circulated at the request of 
the Delegation of the United States.  
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Trading Rights  
 
1. In its Protocol of Accessi on, China committed to eliminate its system of examination and 
approval of trading rights, i.e., the right to impor t goods (into China) and the right to export goods 
(from China), and make full trading rights automa tically available for all Chinese enterprises, 
Chinese-foreign joint ventures, wholly foreign-ow ned enterprises and foreign individuals, including 
sole proprietorships, within three years of its accession, or by December 11, 2004, the same deadline 
for China to eliminate most restrictions in the area of distribution services.  The only exceptions 
applied to products listed in Anne xes 2A and 2B, such as grains, cotton and tobacco, for which China 
reserved the right to engage in state trading.  In April 2004, the National People’s Congress issued the 
revised Foreign Trade Law .  Except with regard to products reserved for state trading, this law – 
consistent with China’s WTO obligations – provided  for trading rights to be automatically available 
through a registration process for all domestic a nd foreign entities and individuals, effective 
1 July 2004.   Despite the revised Foreign Trade Law , other Chinese measures reserve the right to 
import publications, including books , newspapers and magazines, a udiovisual products and electronic 
publications, to certain state-owned en terprises.  These measures include the Administrative 
Regulations on Publishing , issued by the State Council in December 2001, the Catalogue for the 
Guidance of Foreign Investment Industries , issued by the National Development and Reform 
Commission (“NDRC”) and the Ministry of Co mmerce (“MOFCOM”) in November 2004, the 
Decisions of the State Council Regarding Entrance of Non-Public Capitals into Cultural Industries , 
issued by the State Council in April 2005, the Several Opinions on Canvassing Foreign Investment 
into the Cultural Sector , issued by the Ministry of Culture, the State Administration of Radio Film 
and Television, the General Administration of  Press and Publications (“GAPP”), NDRC, and 
MOFCOM in July 2005, and the Procedures for the Examination and Approval of Establishment of 
Publication Importation Entities , issued by GAPP in December 200 5.  Other relevant measures 
include the Administrative Regulations on Audio and Video Products , issued by the State Council in 
December 2001, and the Administrative Regulations on Electronic Publications , issued by GAPP in 
December 1997. 
 (a) When China responded to questions on this issue from the United States at the 
November 2005 meeting of the Council for Trade in Goods, it explained − with regard to the 
importation of books, newspaper and magazines − that the Chinese government had the right 
to restrict the importation or exportation of pro ducts to protect public morals, public interest 
and national security.  China cited Article XX of GATT 1994.  Please explain the relevance G/MA/W/78 
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  of GATT Article XX to China’s Protocol of Accession.  In addition, please explain why 
China’s import restriction is “necessary”  within the meaning of Article XX. 
 
(b) Does China contend that it has the right to r estrict the importation of audiovisual products and 
electronic publications on the same basis as it restricts the importation of books, newspapers 
and magazines?  Please explain.    
Export Restrictions  
 
2. The United States remains concerned about Ch ina’s export restrictions on coke, a key steel 
input.  China is the world’s largest producer of c oke, with total production exceeding 208 million MT 
in 2005, a 14 percent increase over 2004.  For 2006, China announced an export quota of 14.3 million MT, similar to the level to which Ch ina eventually raised the quota in 2004 and 2005.  
Despite the fact that WTO rules establish a genera l prohibition against export restrictions, with only 
limited exceptions, China has not yet formally announ ced when it will eliminate its coke export quota 
system.  Previously, an official from the NDRC ha d stated publicly that China would eliminate the 
coke export quota system in 2006.  Does China have  any plans to eliminate its coke export quota 
system?  Please explain. 
 
3. In connection with China’s Trade Polic y Review, held on 19 and 21 April 2006, the 
United States submitted written questions addressi ng export quotas, such as the export quota on 
fluorspar, that are allocated through bidding.  Accord ing to the Secretariat’s report, exports subject to 
quota bidding are, inter alia , “those involving large amounts of exhaustible natural resources; those 
having a dominant share in the international market , and their overall export amounts are ‘unlikely to 
be affected by price fluctuations’; those whose supply exceeds demand and thus tend to be sold at a 
low price, which may result in anti-dumping actions in  other countries; . . . .”   The United States then 
asked the following questions: 
 a.  Please identify the products that fell under each of the three enumerated categories in 
2005. 
 
b.  Please explain how each of the three enumerated categories is consistent with China’s 
WTO obligations. 
 
 To date, China has not responded to these ques tions.  The United States anticipates that China 
will submit its Trade Policy Review responses pr ior to this Committee’s 4 October 2006 meeting, 
when China’s Transitional Review Mechanism is on the agenda.  The United States may then ask 
follow-up questions in connection with China’s upcomi ng transitional review.  In the event that China 
is unable to submit its Trade Policy Review r esponses prior to this Committee’s 4 October 2006 
meeting, the United States would ask that Chin a provide its responses during the portion of that 
meeting devoted to the Transitional Review Mechanism. 
 4. Has China begun to take any steps to elimin ate the export quotas that it maintains on fluorspar 
or other raw materials?  Does China have any plans to do so?  If not, why not?  Tariff-Rate Quotas on Fertilizers 
 
5. Does China have any plans to adjust the ta riff-rate quota quantities for fertilizers?  Please 
explain.   G/MA/W/78 
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  Value-Added Tax Applied to Diammonium Phosphate  
 
6. The United States continues to have concerns  regarding the Circular about VAT Exemption 
Policy for Certain Farming Materials (No. 113/2001), jointly issued by the Ministry of Finance and the State Administration of Taxation on July 20, 2001, which exempts all phosphate fertilizers except 
diammonium phosphate (DAP) from China's value-adde d tax.  DAP, which is produced in the United 
States, competes with similar phosphate fertiliz ers produced in China, such as monoammonium 
phosphate (MAP).  This measure discourages use of DAP, for which China committed to permit 
access under the TRQ commitments set forth in th e Goods Schedule accompanying its Protocol of 
Accession, in favor of products that are not imported.   
 
(a) Previously, the United States has requested th at China provide data showing China’s annual 
consumption of DAP and MAP, including the amounts sourced domestically versus imported 
amounts.  To date, China has not provided a ny of this data.  Please provide this data. 
 
(b) Does China have any plans for revising Circular 113/2001 to eliminate the discriminatory 
treatment of DAP?  If not, why not? 
 
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