WORLD TRADE  
ORGANIZATION  G/L/764 
21 November 2005 
 (05-5506) 
  
  
 
 
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 10 November 2005, 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/530, G/C/W/532, G/C/W/537 and G/C/W/538 respectively.  The Annex 1A  information provided by China to the Council for the review was circulated in 
document G/C/W/539.  
3. The review proceeded in two stages.  First,  the CTG took note of the reviews that had been 
carried out in the CTG subsidiary bodies.  Second,  the Council reviewed the information provided by 
China concerning specific parts of Annex 1A of the Protocol and the questions raised by certain Members.  The statements made at the meeting of 10 November 2005 are reflected in the minutes of 
the meeting in document G/C/M/82.  The relevant  paragraphs which reflect the discussion under 
agenda item III are annexed. 
 G/L/764 
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 ANNEX 
 
III. TRANSITIONAL REVIEW UNDER PARAGRAPH 18 OF THE PROTOCOL OF 
ACCESSION OF THE PEOPLE'S REPUBLIC OF CHINA 
 
3.1 In accordance with paragraph 18 of the Protoc ol of the Accession of the People's Republic of 
China ("the Protocol") in document WT/L/432, the Chairman
 explained that the CTG would report to 
the General Council on the Transitional Review Mech anism (TRM).  He sugg ested that the Council 
proceed in two stages.  First, the CTG subsidiary b odies were required to transmit their reports to the 
Council for Trade in Goods.  This they had done and,  as a first step in the review process, he gave 
Members an opportunity to make general comment s on those reports, and then proposed that the 
Council take note of the Reviews that had been ca rried out in these bodies.  Then the Council would 
turn to its own report.  The Chairman recalled that  the following subsidiary bodies had carried out the 
Review:  Committee on Market Access (documen t G/MA/164 and G/MA/W/74 which contained 
information China supplied after completion of th e Review);  Committee on Agriculture (G/AG/21);  
Committee on Customs Valuation (G/VAL/59);  Co mmittee on Sanitary and Phytosanitary Measures 
(G/SPS/38);  Committee on Technical Barriers to Trade (G/TBT/17);  Committee on Import 
Licensing (G/LIC/14);  Committee on Rules of Or igin (G/RO/61);  Committee on Anti-Dumping 
(G/ADP/14);  Committee on Subsidies and Countervailing Measures (G/SCM/118);  Committee on Safeguards (G/SG/80);  and Committee on Trade-Related Investment Measures (G/L/751).  3.2 The representative of the United States
 recalled that the WTO was nearing the end of the 
fourth annual transitional review of China's efforts to implement the commitments in its Protocol of 
Accession to the WTO.  His delegation believed th at the TRM remained an important and useful 
mechanism, serving the interests of China and of other WTO Members.  It provided Members with the opportunity to seek clarifications on China's policies and practices.  China, in turn, had the 
opportunity to clarify its approaches and actions, in  order to prevent misunderstandings that could 
lead to trade frictions.  Perhaps the most importa nt aspect of the TRM was that it also provided a 
forum for Members to convey to China their views,  expectations and con cerns regarding China's 
efforts to comply with its WTO obligations.  China then had the opportunity to explain its views and to inform Members about how it had addressed their expectations and concerns.   The TRM was an 
important and useful exercise in transparency, one  of the fundamental principles underlying the WTO 
Agreement.  His delegation believed that many of  the TRM exercises in th e subsidiary Committees 
generated productive exchanges and it was evident th at China put a lot of time and effort into 
reviewing and considering Members' questions and preparing responses.  However, there were areas 
in which China could improve.  It would be helpfu l if China could bring experts from capital to the 
reviews;  in some cases, their absence prevented productive exchanges during or around the reviews. 
 
3.3 His delegation highlighted concerns that it ha d raised during the reviews in the subsidiary 
Committees.  Several areas of concern were rai sed in the SPS and Agriculture Committees, and his 
delegation focused on two BSE-related issues.  It s strongest concern involved China's BSE-related 
ban on US beef.  It was nearly two years since China imposed its ban on US beef, and China had still not offered any explanation of its actions or the ne cessary regulatory steps for lifting the ban.  Dozens 
of countries lifted their bans on US beef.  Each of them had, at a minimum, provided the US with a 
detailed explanation of the regulatory steps necessary to  decide on the US request to lift the ban.   His 
delegation strongly urged China to take immediate steps to ensure that its regulatory authorities 
moved quickly to address this problem.  His delegation also expressed concern about the de facto  ban 
that China maintained on low-risk, non-ruminant origin products from the US.  China's ban was 
ostensibly based on concerns about BSE, but th ese products should never have been banned under 
existing OIE (World Organization for Animal Health ) guidelines.  His delegation continued to urge 
China to take immediate steps to lift this ban.    G/L/764 
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 3.4 Another area of concern related to China's c ontinued fire blight-relate d ban on the importation 
of US apples, pears and plums.  His delegation had asked China to move quickly to modify its ban to 
allow the importation of mature fruit which were free of symptoms, consistent with the decision of the 
Appellate Body in Japan – Measure Affecting the Importation of Apples (WT/DS245/AB/R) .  As in 
prior reviews, his delegation also focused on China' s Quarantine Import Permit (QIP) system.  China's 
regulatory authorities seemed to frequently use this sy stem to intervene in the market in order to 
control the pace and quantity of tr ade in agricultural commodities.  This was one of the most 
important issues affecting the United States and Ch ina's other agricultural trading partners.  His 
delegation also expressed continued concern about Ch ina's VAT policies and practices as they related 
to corn.  This was an area where US exporters had complained about ad hoc  treatment and other 
irregularities that favoured domestic producers.  As a result, his delegation sought, and continued to 
seek, needed clarifications from China.   
 3.5 Before the Market Access Comm ittee, his delegation raised three important issues.  The first 
concerned one of the initial measures implementing Ch ina's new automobile industrial policy.  Here, 
the United States, like other Members, expressed str ong concern over regulations issued earlier this 
year addressing tariffs on imported auto parts.  Th ese regulations would likely break China's tariff 
bindings by applying the higher tariff rate for complete vehicles to many imported parts.  The 
regulations also called into question China's commitm ent to eliminate local content requirements.  So 
far, these regulations had created significant uncerta inty for US and other foreign suppliers, and his 
delegation looked forward to China remedy ing this situation as soon as possible. 
 
3.6 The representative of the European Communities
 also attached great importance to the 
functioning of the TRM.  Transparency was an essential element of WTO Membership, and while the 
TRM was specific to the China Protocol of Accession to the WTO, it was not terribly different from the trade policy reviews to which every Member wa s subject.  China had reaped enormous benefits 
from its access to the liberal and transparent trad e environment provided by the WTO.  China was 
now a major trading partner, and had a key stage in  the proper functioning of this institution.  His 
delegation looked to China to show  leadership in setting the example of providing detailed answers to 
legitimate concerns of all Members.  This could only  contribute to mutual trust and dispel concerns 
about, for example, the enactment of industrial po licies that appeared to feature elements not 
compatible with WTO commitments.  His delegation was grateful for the replies received in the 
various subsidiary bodies and the efforts China had made to resolve some of the concerns.  
Nevertheless it hoped for more detaile d replies than in the past to the questions that his delegation and 
other Members had raised in the subsidiary bodies.   His delegation had provided advance questions 
for the CTG-specific review also.  Some questions overlapped with the US and these were in three 
domains.  The first concerned Chinese export restric tions, in particular coke.  The second concerned 
the measures for the import of automobile component s fulfilling the characteristics of a whole vehicle, 
which the US had also raised.  The third was his delegation's concern over lack of subsidies 
notifications.   He added that a fourth area of c oncern was the timing of the opening of negotiations 
with China to join the Government Procurement Agreement.    3.7 The representative of China
 stated that his delegation had made tremendous efforts to respond 
to questions and concerns raised by Members.  It believed that it had clarified and explained its 
positions on all of these issues, and that it had legitimat e reasons and concerns with regard to all of the 
issues raised which had been dealt with in a WTO-consistent manner.  The review process was 
certainly helpful for Members to understand better the positions and the background in China with 
regard to the issues raised.  That said, his delegati on also had some concerns with the review process 
itself.  In its view, some of the questions had b een raised repeatedly and China's positions had been 
explained many times over the years, as reflected in the minutes of all the subsidiary Committee 
meetings in which the TRM took place.  Members should refrain from giving such extra burdens to 
developing Members like China, particularly in light of the heavy tasks leading to the Hong Kong Ministerial.  Another concern was the late presen tation of questions to China which made them 
difficult to deal with.  His delegation would work professionally and pragmatically to respond to the G/L/764 
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 questions raised but did not want its efforts distur bed by the late presentation of questions.  Finally, 
his delegation thanked Members for their interest in  China's trade policies and regime;  China had the 
same interest in other Members.  His delegation looked forward to further exchanges with Members 
on issues of mutual trade interest, and to more stab ilising trade relations which were healthy not only 
for China but for other Members.  
3.8 The Chairman
 proposed that the Council take note of the statements made and of the reports 
from the subsidiary bodies on their respective TRM ex ercises.  Afterwards, he proposed that the 
Council move to the CTG-specific TRM.  3.9 The Council so agreed
. 
 
3.10 With respect to the CT G-specific Review, the Chairman  stated that China was required to 
provide information to the CTG in accordance with paragraph 18.1 of the Protocol of Accession.  The 
relevant information requirement s were listed in Annex 1A.  China had submitted the required 
information in document G/C/W/539.  He also drew  attention to questions from Japan in document 
G/C/W/532, questions from the United States in document G/C/W/530 and 537, and questions from 
the European Communities in document G/C/W/538.    3.11 The representative of Japan
 agreed with the US and the EC on the value of the TRM process 
and also commended China for its great efforts to respond to the questions that made this process 
most productive.  Japan was also pleased to see that there was some good productive and informative 
clarifications for progress.  At the same time, there were still issues that concerned his delegation.  On 
the specific issues raised in his delegation's submi ssion, he made some brief points.  His delegation 
had raised the system of complete automobile feat ures several times, and it carefully listened to the 
past explanations by China.  However, it remained c oncerned in light of the consistency with the spirit 
of China's commitment in paragraph 93 of the Report of the Working Group on the Accession of 
China, and with Article II of the GATT.   His delegation would appreciate additional efforts by China 
to address the concern which was also shared by ot her Members as well.  With regard to fluorite and 
coke, Japan questioned the justification under Article XX(g) of GATT.  This Article stipulated that 
regulation on domestic production and consumption should accompany trade restrictions introduced 
for conservation of exhaustible na tural resources.  All natural resources except for renewables were 
exhaustible in principle.  However, his delegati on did not believe that this was the way in which 
Article XX(g) should be interpreted.  Japan requ ested solid reasons why the measures noted were 
GATT-consistent.  Japan acknowledged that the pro duction of coke had environmental impacts that 
China was trying to address very seriously.  The envi ronmental problem was also a serious problem in 
Japan in the past and his delegation understood the importance of solving these problem.  However, 
the policy measures chosen should be most straig htforward to avoid pollution.  His delegation 
believed that environmental regula tions and their effective enforcement were primary means;  trade-
restrictive policies should be avoided.  With regard  to government procurement, his delegation shared 
the views of the US and Japan and looked forw ard to good news from the Chinese delegation. 
 3.12 The representative of China
, before responding to the detailed questions, noted that some of 
these questions had already been dealt with in the s ubsidiary bodies.  In this respect, he reiterated 
China's position with regard to the relationship of the mandate of the subsidiary bodies vis-à-vis the 
mandate of the CTG.  His delegation provided the following clarifications regarding the questions 
raised by Members.  Regarding importation and distribution of books, newspaper and magazines, 
pursuant to Articles 14 and 16(a) of the revised Foreign Trade Law, the Chinese government had the 
right to restrict the importation or exportation of pr oducts to protect public moral, public interest and 
national security.  This was not contradictory to  Article XX of GATT 1994.  In accordance with the 
Foreign Trade Law , the Administrative Regulations on Publishing  and the Catalogue for the 
Guidance of Foreign Investment Industries stipulated that any Chinese enterprise, foreign invested 
enterprise or wholly-foreign owned enterprise could engage in exportation of newspapers, books and  G/L/764 
 Page 5 
 
 magazines, while for the purpose of protection of public moral, importation of foreign publications 
should be done only by certain enterprises.  
3.13 Regarding distribution of imported publica tions, China’s service schedule read, “For these 
products, foreign service suppliers  will be permitted to engage  in the distribution of books, 
newspapers, magazines, pharmaceutical products, p esticides and mulching films within three years 
after China's accession, and to engage in the distri bution of chemical fertilizers, processed oil and 
crude oil within five years after China's accessi on.”.  In accordance with the commitments in the 
Accession Protocol, China had already opened its ma rket to foreign invested and wholly foreign 
owned enterprises to engage in wholesale and distribution of Chinese books, newspapers and 
magazines in China.  
3.14 Regarding trade in coke, it should be noted that the raw material for making coke, coal, was 
an exhaustible resource and coal mines had already been excessively exploited.  At present, reserved 
coal mines in China, which could be used in coke  production, were estimated to guarantee sustainable 
use for coke production for, at most, only 100  years. Taking into account the losses from the mining 
and production processes, the coal reserves could act ually last for only 40 years.  Under these 
circumstances, China car ried out a series of measures to control the domestic production and 
consumption of coke.  First, on 1 Septem ber 1999 and 1 Jan 2000, the SETC published the first batch 
of Catalogue of Prohibition of Repetitive Project  Investment in Industrial and Commercial Area,  the 
Second Batch of Catalogue of Outdated Production Capacity, Techniques and Products.  Second, on 
27 May 2004, nine ministries jointly published the Circular on Streamlining Administration on Coke 
Industry, which stipulated that small coke factories mu st be shut down and qualified manufacturers 
have to pay a high pollution fee;  that all the c oke projects after 2000 must be reviewed and those 
failing to meet the published standards were terminated;  and more effective enforcement against illegal sales of export quota licenses for coke.  Third, on 16 December, 2004, the National 
Development and Reform Commi ssion published Announcement No. 76 of 2004, which set the 
standard for market access in th e coke industry. The standard applied to both domestic and foreign 
enterprises. It showed the Chinese Government’s dete rmination to streamline and restore market order 
in the coke industry.  
 3.15 At present, as a result of those effective measures, domestic order in the coke market was 
restored.  The export price of coke was only 130 US $/ton, which equalled the coke import price of the 
United States.  Therefore, it was not proper to say that, “a significant portion of the export price 
remained attributable to the practice of selling e xport quota certificates“ or that, “the export price 
remained artificially high ”. Moreover, as the present coke pri ce in the international market was 
already lower than the production cost of many coke producing countries, maintaining the quota 
system on coke could guarantee the international mark et price remaining at a rational level, estimated 
to be 200-220 US$/ton.  However, he pointed out  that one Member, on one hand, implemented an 
anti-dumping tax on China’s coke export, while on the other, urged China to abolish its export control 
on coke. He asked if the Member could provide th e rationale for such self-contradictory behaviour? 
 3.16 Regarding the Agreement on Government Pr ocurement, the Chinese government was taking 
positive steps to initiate negotiations. Recently, a jo int study group at the Ministry level had been 
established under the leadership of the Ministry of Finance. His delegation expected the study group to turn out concrete outcomes in the near future .  Regarding transparency, the Chinese Government 
had been faithfully implementing its accession commi tment. At present, Ministries and agencies were 
supposed to submit copies of their newly pub lished laws and regulati on to MOFCOM, which was 
trying to include all the trade related laws and regulations in the Foreign Trade and Economic 
Relation Gazette published by MOFCOM. However, it should be noted that although the MOFCOM 
Gazette may include all the trade-related laws, regulations and administrative measures, other 
ministries or agencies could still publish their own ga zettes to make their policies known to the public.  
This had proven to be an effective method for publ ic opinion solicitation.  As for the public opinion 
solicitation process, most of the drafted trade relate d laws and regulations we re to be published on the G/L/764 
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 websites of respective competent government bodies , which provided an easy  access for interested 
parties to make their voices heard.  Besides, pub lic hearings, symposiums and discussion groups were 
also held to involve interested parties.  
 
3.17 Regarding the rationale for export controls on fluorspar, his delegation had been clear during 
the previous TRM and it seemed unnecessary to re peat the points which remained unchanged.  
Regarding border trade, China did not maintain any country-specific preferential treatment at present.  
Regarding iron ore, the Chinese Government had not been informed by the industry association of the 
promulgation of any standard yet.  Regarding the tax base for the consumption tax applied to imported 
goods, his delegation believed that there was a misunder standing due to translation of the regulation;  
the formulas to calculate the tax base were the same though the Chinese wording may seem different. 
His delegation would welcome a bilateral tec hnical communication after today’s meeting.  
 
3.18 The representative of the United States
 thanked China for the detailed responses.  To follow-
up on a couple of points, he noted that with rega rd to the importation of  books, newspapers and 
magazines, his delegation had a difference in view.  China's commitment to allow the importation of 
books, newspapers and magazines was clear from its  accession agreement.  China was allowed to 
reserve for state trading certain products listed in Annex 2, and books, ne wspapers and magazines 
were not among the products listed in Annex 2.  His delegation understood China's stated concerns 
about protecting public morals.  Whatever mechanism China wanted to use to do that, it still needed to 
figure out a system that would allow foreign ente rprises and individuals to import books, newspapers 
and magazines at the same time.  With regard to the distribution of books, ne wspapers and magazines, 
his delegation was happy to hear that China consider ed this sector to be fully open.  His delegation 
raised one measure in its questions, the admi nistrative measures on subscription of imported 
publications which seemed to, in part, restrict distribution to state trading enterprises.   
 3.19 With regard to the coke export quota system, his delegation appreciated the detailed comments from China on that issue.  Whatever system China implemen ted, it must not discriminate in 
its efforts to protect the exhaustible natural resour ces.  The current quota system was discriminatory 
against exports of coke.  He appreciated the Ch inese delegate's comments about the consumption tax 
issue and looked forward to discussing bilaterally the translation issue.  Lastly, there was one question 
regarding border trading for which his delega tion would welcome information from China.  
Specifically, what were the currently applicable value added tax rates for logs and for sawn wood? 
 
3.20 The representative of China
 briefly responded to these points.  On newspapers and magazines, 
his delegation maintained that China's commitme nt with regard to these products, both in the 
distribution and the import and export side, was fa ithfully implemented and did not affect China's 
right to take necessary measures for the protection of  public morals and other legitimate concerns.  
That being said, his delegation's position was quite clear .  On the issue of coke, he did not have much 
to add since the positions of China had been ex plained clearly.  Lastly, on border trade and 
specifically regarding a preferential arrangement with Russia, his delegation explained clearly that China did not presently have any country-specific preferential arrangements.  3.21 The Chairman
 thanked the delegation of China for th e answers that it had provided and also 
those delegations that had raised questions and ma de comments.  He proposed that the Council agree 
to proceed with the preparation of a brief factual report on the TRM with references to the relevant 
documents and with the portion of the minutes of th is meeting relating to the TRM attached.  The 
CTG report, together with the reports of the subs idiary bodies, would then be transmitted to the 
General Council.  
3.22 It was so agreed
. 
_________