WORLD TRADE  
ORGANIZATION  G/L/875 
3 December 2008 
 (08-5915) 
Council for Trade in Goods  
  
 
REPORT OF THE COUNCIL FOR TRADE IN GOODS 
ON CHINA'S TRANSITIONAL REVIEW  
 
 
1. The Council for Trade in Goods (CTG), at its  meeting on 18 November 2008, carried out the 
Transitional Review of China pursuant to paragr aph 18 of the Protocol on the Accession of the 
People's Republic of China (WT/L/432).  2. The European Communities, Japan and the United States submitted questions and comments 
in writing to China on the CTG-specific informati on requirements contained in Annex 1A of the 
Protocol and on matters raised before subsid iary bodies.  These questions and comments were 
circulated in documents G/C/W/605, and G/C/ W/606, and G/C/W/603 and Add.1 respectively.  
The Annex 1A  information provided by China to the Council for the review was circulated in 
document G/C/W/608.  3. The CTG took note of the reviews that had been  carried out in the CTG subsidiary bodies.   
Furthermore, the Council reviewed the informati on provided by China concerning specific parts of 
Annex 1.A of the Protocol and the questions raised by certain Members.  The statements made at the 
meeting of 18 November 2008 are reflected in th e minutes of the meeting in document G/C/M/95.  
The relevant paragraphs which reflect the discussion under agenda item VII are annexed. 
 
 
     
 
    
 
    
 
     
 
 G/L/875 
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  Annex 
 
I. TRANSITIONAL REVIEW UNDER PARAGRAPH 18 OF THE PROTOCOL OF 
ACCESSION OF THE PEOPLE'S REPUBLIC OF CHINA  
7.1 The Chairman
 recalled that in accordance with paragra ph 18 of the Protocol of the Accession 
of the People's Republic of China in document WT /L/432, this Council was to report to the General 
Council on the Transitional Review.  As a first step , CTG subsidiary bodies we re required to transmit 
their reports to the Council for Trade in Goods.  As a first step, she would give Members an opportunity to make general comments on those repo rts, and would subsequently propose that the 
Council takes note of the Reviews that had been carri ed out in the CTG subsidiary bodies.  She would 
then move on to the CTG's own report.  The Counc il was required to review the information to be 
provided by China in designated parts of Annex 1.A of the Protocol.  7.2 She added that the following subsidiary bo dies had carried out the Transitional Review:  
Market Access – the report was contained in doc ument G/MA/217:  Agriculture - the report was 
contained in document G/AG/25;  Customs Valua tion - the report was contained in documents 
G/VAL/62;  SPS - the report was contained in doc ument G/SPS/50;  TBT - the report was contained 
in document G/TBT/24;  Import Licensing - the report  was contained in document G/LIC/19;  Rules 
of Origin - the report was contained in document G/RO/66;  Anti-Dumping - the report was contained 
in document G/ADP/17;  Subsidies and Countervailing Measures - the report was contained in document G/SCM/125;  Safeguards - the report was contained in document G/ SG/85;  and TRIMs - 
the report was contained in documents G/L/859.  She asked Members if they had general comments 
on these Reviews.    7.3 The representative of the European Communities
 stated that his delegation was concerned 
about the lack of co-operation from China in this Transitional Review Mechanism and was 
disappointed by the lack of Chinese replies.  Transparency was an essential element of the WTO 
Membership and it applied to all WTO Members.  The scrutiny provided for by the Transitional 
Review Mechanism had been approved by China as part of its Protocol of Accession.  The WTO 
Accession was the starting point, not the end point of the Members' contribution to the WTO system and therefore his delegation hoped that China would give detailed replies to all questions that his 
delegation and other Members had raised in the subsidiary committees.  The EC had re-submitted 
written questions on export restrictions, circulat ed in document G/C/W/605, that had been left 
unanswered in the Market Access Committee.  He focu sed on a few areas of particular concern to his 
delegation, although this was by no means an e xhaustive list of its concerns.  With respect to 
transparency:  he stressed the importance of China fully implementing its commitments in its Protocol 
of Accession to provide for a reasonable period fo r comments to the appropriate authorities before 
measures effecting trade in goods were implemente d.  China's certification system for a range of 
sectors appeared to be trade restrictive.  The EC urged China to develop and implement a certification 
system in such a way so as to avoid unnecessary barri ers to trade.  The EC was concerned about the 
progressive expansion of this system to new products .  The EC continued to have serious concerns 
about the thirteen proposed implementing rules for the proposed re-certification for various 
information technology products for information secu rity requirements.  Pursuant to the notified 
drafts, such products would be subject to the pro cedures and would have to comply with the Chinese 
standards or encryption-references.  Foreign owne d companies established in China were not granted 
the same rights in standard setting technical co mmittees as all other companies in China.  Their 
involvement was restricted to a non-voting service status.  Several other industrial sectors such as steel, ship building, petrochemical, pharmaceuticals, cosmetics, etc. were long-standing issues raised 
on several occasions.  His delegation's concerns also  related to issues such as intellectual property, 
raised in the framework of the Council for Trade- Related Aspects of Intellectual Property Rights, 
pricing and registration procedures, joint-venture limitations, subsidies, local content requirements 
and technical barriers.  G/L/875 
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7.4 The representative of the United States  recalled that this was the seventh TRM for China. The 
US believed that the TRM continued to be a useful  mechanism.  The TRM helped to provide needed 
additional transparency for China's trade regime  so that Members could better understand and assess 
the progress China had made in adopting and complyi ng with WTO disciplines.  In his delegation's  
written submissions before this Committee, it had ra ised questions that had been previously asked 
during transitional reviews conducted by subsidiary bodies, but China had not responded to them.  He 
highlighted a few of his delegation's concerns.  His delegation had raised its concerns regarding 
export restrictions on raw materials in the Market  Access Committee.  China continued to maintain 
export quotas, export quota bidding, minimum ex port prices and export duties on numerous raw 
material inputs that were particularly important to US industry.  WTO rules prohibited export quotas, 
export quota bidding and minimum export prices.  The same was true for most of the export duties that China also used to discourage exports.  Chin a had made a commitment in its WTO Protocol of 
Accessions circumscribing its use of export duties.  It  was long past time for China to get rid of its 
export restrictions on raw materials.  China should  have eliminated them when it acceded to the WTO 
nearly 6 years ago.  His delegation wanted to see a level playing field, where competition was fair.  
However, with China's export restrictions, th e US and other WTO Members were significantly 
disadvantaged.  The export restrictions artificially  raised world raw material prices and lowered 
China's domestic prices.  That gave a substantia l artificial advantage to China's downstream producers 
over US and other foreign downstream producers.  Before the Market Access Committee, his 
delegation had raised these same concerns and asked  questions specifically about two raw materials 
that had recently been subjected to particularly extreme export restrictions – yellow phosphorous and 
refined metal lead.  China did not respond to these questions, so his delega tion resubmitted them to 
the Council for Trade in Goods.  His delegation looked forward to China's responses to these 
questions today.  
7.5 He added that other questions submitted to the CTG were originally submitted in connection 
with the Transitional Review in the Subsidies Co mmittee.  During that Review, his delegation had 
highlighted a number of serious concerns.  In pa rticular, his delegation noted China's continuing 
failure to notify any sub-central government s ubsidy programmes, and information it received 
indicating that China maintained and continued to put in place numerous prohibited subsides, 
especially at the sub-central government level.  Th ese were indeed serious matters, and his delegation 
again urged China to take swift action to r esolve these matters in ac cordance with its WTO 
obligations.  Before this Council,  his delegation had re-submitted questions that dealt with the 
Chinese government's recent efforts to re-centralise control over land admi nistration.  It appeared that 
China had made this change in an attempt to ensure that land use-ri ghts were allocated in accordance 
with state industrial development policies rather th an market principles.  His delegation would like to 
learn more about this area.  At the Review in the Subsidies Committee, China indicated that it had not 
had enough time to prepare its responses to these que stions.  So, his delegation hoped to hear China's 
responses today.  7.6 Finally, he noted significant US concerns a bout matters that fell within the jurisdiction of 
other committees that reported to this Council.  In the area of sanitary and phytosanitary standards, 
China continued to maintain a number of measures that were non-transparent and appeared to lack 
scientific bases, such as BSE-related bans, pathogen standards, residue standards and avian influenza 
bans.  In the investment area, China continued to maintain various restrictions on foreign investment 
and continued to subject new investments and merger s and acquisitions to vague standards, such as 
national economic security.  In the customs valua tion area, China did not seem to uniformly follow 
WTO rules.  The practices of China's Customs Admi nistration still seemed to vary from port to port, 
both in terms of customs clearance procedures and va luation determinations, and in some cases these 
practices gave rise to WTO concerns.  In the area of  technical barriers to trade, China continued to 
pursue the development of unique national standard s, despite the existen ce of well-established 
international standards, apparently with the objective of protecting domestic companies from G/L/875 
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  competing foreign technologies and standards.  All of these matters raised serious concerns for his 
delegation and it looked forw ard to China's responses. 
 7.7 The representative of Switzerland
 also raised an issue that her delegation had previously 
raised in the Committee on Market Access.  She repor ted that, in May 2008, China had raised export 
taxes on yellow phosphorous to 120 per cent and seeme d to have applied since then an effective high-
minimum export price.  Yellow phosphorous was an essential input for many industries, like the textile industry, the construction sector, the electroni c industry and the chemical industry.  This issue 
was of deep concern to Switzerland a nd had been raised in several meetings, even at the highest level.  
Furthermore, her delegation had a more technical, b ilateral meeting on this issue last week for which 
she thanked the Chinese delegation.  Her delegati on's assessment was, however, that the export duty 
on yellow phosphorous was not consistent with Chin a's obligation in its Accession Protocol.  China 
had committed itself therein to not levy export dutie s beyond the level specified in Annex 6 of the 
Protocol for a list of 84 products, including yello w phosphorous.  The maximum level of the export 
tax on yellow phosphorous according to Annex 6 w as 20%.  The export tax was applied on yellow 
phosphorous but not on other industrial produc ts using yellow phosphorous or on downstream 
products.  In this way, the measure severely disad vantaged industries outside of China.  Chinese 
companies producing products using yellow phosphor ous did not have to pay the export tax and 
therefore enjoyed a much lower domestic price.  According to her delegation's information, the 
present export tax would expire on 31 December 2008 at which time China would again be in 
conformity with its WTO obligations.  However,  her delegation had heard that China would not 
decrease its export taxes or only partially reduce them from 120 per cent to 95 per cent.  It also 
seemed that the export tax would stay in place until end December 2009.  Her delegation regretted if 
this was the case.  Switzerland asked the Chinese de legation when it intended to bring itself into WTO 
conformity on this issue, i.e. when would it reduce the export tax on yellow phosphorous to a maximum level of 20 per cent and when would it eliminate the export price. 
 
7.8 The representative of China
 did not wish to re-open the Reviews carried out in the subsidiary 
bodies on the issues identified by th e previous speakers.  Generally speaking, he did not agree with 
the comment by the EC delegate that China lacked  co-operation in this TRM and did not respond to 
the questions raised by Members.  As Member s could see from the minutes of the CTG subsidiary 
bodies, detailed information, explanations and po sitions were provided by the Chinese delegation to 
the questions addressed to it.  He referred to the questions resubmitted in documents G/C/W/603 and 
Add.1 and G/C/W/605 from the US and EC respectivel y.  For example, on the export regulation that 
the US and EC raised before the Committee in Market Access, his colleague had responded very 
clearly that, although the Chinese delegation was willi ng to exchange views on those questions in that 
Committee, it was not appropriate to deal with e xport issues in the Committee on Market Access in  
view of the Committee's TRM mandate.  The Chinese Accession Protocol, in Annex 1A stated:  
"issues concerning export administration were to be taken up by the Council for Trade in Goods".  His 
colleague in the Market Access Comm ittee also told the EC that th e Chinese delegation did not agree 
that any question could be raised in the Transiti onal Review of the relevant committees and councils 
without due regard to their respective mandates.    
7.9 Regarding the question from the US delega te on China's land and administration system, 
raised in the Committee on Subsidies and Count ervailing Measures, the Chinese delegation did 
respond clearly.  It said that it did not see the releva nce of those questions to the mandate of that 
Committee.  In fact, to that response, his delegation ad ded that it doubted the relevance of this issue of 
land and administration to trade in goods, of which this Council was responsible.  In conclusion, the 
Chinese delegation had always engaged seriously and with full co-operation from the relevant 
authorities back in the Capital on the TRM.  He him self travelled to Geneva for this one-day meeting 
from Beijing.  The discussion under the agenda item of  the transitional review should be, and this was 
the wording from the Accession Protocol, "to review the implementation by China of the WTO Agreement and the provisions of this Protocol".  The discussion should not be a discussion on general  G/L/875 
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  issues, such as the land administration system.  There was a mechanism in this organization for 
enhancing the mutual general understanding of the economic and trade regimes and policies of the 
Members.  He concluded that he would take up detailed questions fro m Members in the second part of 
the review.  
7.10 The Chairman
 recalled that China was required to provide information to the CTG in 
accordance with paragraph 18.1 of the Protocol of  Accession. The relevant information requirements 
were listed in Annex 1A therein.  China had s ubmitted this information as circulated in document 
G/C/W/608.  She also drew Members' attention to the following documents to which delegations had 
already referred: questions from the US in docum ents G/C/W/603 and Addendum 1; questions from 
the EC in document G/C/W/605;  and ques tions from Japan in document G/C/W/606. 
 7.11 The representative of China
 informed Members that his delegation's communication, 
submitted as required under Anne x 1A of the Protocol, outlined in detail China's export 
administration regime.  He did not have much more to add to the information provided.  
 
7.12 The representative of Japan  appreciated China's communication but asked that, next year, it 
be submitted well in advance of the Council's meeting.   Her delegation had raised three issues in its 
submission, all related to China's export restrictive measures.  She mentioned a few of the questions in 
the document.  First, Japan expressed its concern regarding China's exporting licensing measures that 
China justified on the basis of GATT Article XX.  Sh e asked China to explain which sub-paragraph of 
Article XX did it justify its export licensing measures on a product-by-product basis.  China also 
mentioned in the past that it implemented st ringent restrictions on domestic production and 
consumption.  In this connection, her delegation w ould like China to explain its justification with 
concrete data.  Japan also expressed its concern re garding China's export taxes on products, such as 
agriculture products and fertilizers.  Her delega tion understood that China imposed export taxes on 
products not listed in Annex 6 of the Accession Prot ocol.  She asked China to explain the purposes 
and necessities of these export taxes, particularly on  products not listed in A nnex 6 of the Protocol.  
China's report said that China would submit to the WTO a new and full notification of quantitative restrictions for the year 2008 which would refl ect details of these export non-tariff measures, 
including quota bonding.  Her delegation looked forward to receiving this notification and asked when that notification would be made.  Japan was also concerned with China's export prohibition on natural 
sand and asked how China justified it with regard to Article11 of the GATT.  If China justified it 
under Article XX(d) of GATT, she asked for a detailed  explanation of China's restrictive measures on 
domestic production and consumption of natural sand.  She also asked for data of the latest trends in 
domestic production and consum ption of natural sand. 
 
7.13 The representative of China
 focused his explanation and responses on the background 
situation in China instead of going into specifi c products.  The Chinese Government was becoming 
more and more aware of the importance and ur gency of environmenta l protection and energy 
conservation while developing its economy.  Th is was a common concern of the international 
community.  It was not difficult to see that the rapi d development of the Chinese economy in the past 
three decades had also brought about heavy pressure  on the environment, and in certain areas the 
situation was fairly serious.  Members might well be aware of the concept of scientific outlook on 
development which was advocated by the Chinese G overnment.  It was natural that the measures 
adopted for such purposes were also reflected on exports.  In the Transitional Reviews of the 
subsidiary Committees that reported to this Counc il, some Members raised questions and concerns 
regarding China’s industrial policies.  As a matte r of fact, the utmost objective of the industrial 
policies was also to achieve environmental protectio n, energy conservation and emission reductions.  
In these areas China was fully aware of its respon sibilities towards the world.  It took note of 
Members' concerns expressed today on the measur es effecting exports, but he clarified that the 
measures were not isolated to specifically or intentiona lly target exports.  Rather they were part of the 
Chinese Government's efforts to address the pressing concern for environmental protection, energy G/L/875 
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  conservation and emission reductions, which these days  were the daily talk of Chinese people.  These 
measures were also accompanied by restrictiv e measures on domestic produc tion and consumption. 
For example, in the Comprehensive Work Sche me on Energy Reservation and Emission Reduction, 
promulgated by the State Council, it was stipulat ed that while implementing the various measures 
affecting the export of energy-intensive and high polluting products, any initiative to establish new 
projects of high energy consumption and high pollu tion must be reviewed in conjunction with the 
local government’s undertaking to meet the targets for energy saving, emission reduction and outdated production capacity elimination.  Obsolete  production capacity in industries of electricity, 
steel, construction inputs, electrolyte aluminium, iron alloy, calcium carbide, coke, coal, tabulate glass 
must be eliminated and local governments must cl ose down those enterprises falling into the above 
categories.  Another example was the Chinese Govern ment's significant, recent increase, on 1 August 
2007 of the resource tax rate on zinc, lead, copper, tungsten, by 400% or 500%.  There were also 
other domestic restriction measures on production and consumption concerning specific products like 
coke, etc. which were elaborated in previous Reviews.  These measures were still in place and he, 
therefore, would not repeat them today. 
 
7.14 It was his delegation's belief that those meas ures affecting exports of certain natural resource 
products had been implemented where strict domest ic production and consump tion restrictions were 
also put in place. They were part of the overa ll programme to achieve sustainable and scientific 
development of the Chinese economy.  They were ta ken, bearing in mind China's obligations in the 
WTO, specifically in Article XI, Annex 6 of the Accession Protocol, a nd paragraph 162 of the 
Working Party Report which basically said that measures having the effect of export restriction in 
exceptional cases may be adopted to the extent that they were consistent with WTO rules.  With 
regard to Japan's question on Chinese measures conc erning agriculture related products, these were in 
response to the shortage of foodstuffs which many Members, particularly developing Members, were 
facing.  China had the largest population in the world, and it was not difficult to understand its 
concerns for maintaining a stable and sufficient dom estic supply of foodstuff at prices affordable to 
the general public.  The measure concerning chemical  fertilizers was also due to shortage of supply 
concerns.  But it was seasonal and would be adjust ed at an appropriate time.  Regarding the 
transparency of export-related measures, the primar y concern in the EC's questions, he did not see the 
problem.  In the past 7 years, China had provide d detailed information regarding export tariff and 
non-tariff measures.  It submitted its annual QR notification to the Committee on Market Access 
which listed, according to 8 digit tariff lines, a ll China's non-tariff measures covering both imports 
and exports, including the quota volume when applicab le.  It also provided annually to this Council 
information required by Annex 1A of the Accession Protocol describing, in detail, China's export 
administration regime. Furthermore, all the info rmation regarding export administration in China 
could be acquired on the internet, at the web-site of the Ministry of Commerce.  In the last two Trade 
Policy Reviews, a large amount of information on China's export administration regime was also 
covered.  Regarding the export prohibition of na tural sand, the export prohibition also aimed at 
protecting the environment and eco-system, as the mining of natural sand caused severe damage to river beds and water quality.  For silica sand, si nce the processing technology of polycrystalline 
silicon was not advanced in China, purity of refined silicon was quite low and most silicon was 
wasted in the processing.  This caused not only poll ution but wasting of natural resources. Currently, 
China was not in favour of domestic natural sand mi ning and silica sand refinery and most of these 
products were imported.  To c onclude, he hoped that Members w ould understand the challenges and 
pressures of a large developing country like China to protect its environment and conserve its natural 
resources to achieve sustainable development.  His delegation took note of Members' specific 
concerns and would keep in touch through bilateral communications.   
 
7.15 The representative of the European Communities
 asked a follow-up question to China on 
export restrictions.  The EC fully understood and sh ared China's environmental concerns.  However, 
the levy of export taxes actually reduced the domestic price for domestic users so it was not clear how  G/L/875 
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  this would help the environment.  Therefore, if the concern was the environment, why did not China 
levy the same taxes on domestic producers that were applied on exports.  7.16 The representative of China
 reiterated that the Chinese government was also implementing 
very strict domestic restrictions on production an d consumption.  One of the examples he gave was 
the increase in the resources tax rate on a number of the mineral products.   
 7.17 The Chairman
 proposed that the Council take note of the information provided by China in its 
submission and in its responses to the questions ra ised by Members.  Regarding the form of the 
Council's report of the Review, she proposed proceedi ng in the same manner as last year.  This would 
mean that a brief factual report would be prepared with references to the documents, and attached to 
the report, the portion of the minutes of this meeti ng which related to the Tr ansitional Review.  This 
report, as well as the reports of the subsidiary bo dies, would then be transmitted to the General 
Council.    
7.18 The Council so agreed
. 
 
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