RESTRICTED  WORLD TRADE  
ORGANIZATION  G/TRIMS/M/22 
21 October 2005 
 (05-4860) 
Committee on Trade-Related Investment Measures  
  
 
 
MINUTES OF THE MEETING HELD ON 10 OCTOBER 2005 
 
Note by the Secretariat
 
 
 
1. The Committee on Trade-Related Investment Measures met on 10 October 2005. The meeting 
was opened under the Chairmanship of Mr. Sivarame n Palayathan (Mauritius), and continued under 
the Chairmanship of Mr. Suren Badral (Mongo lia) (see item A below).  The Committee adopted  the 
agenda contained in WTO/AIR/2675. 
A. ELECTION OF OFFICERS  
2. According to its rules of pr ocedure,  the Committee elected  by acclamation Mr. Suren Badral 
(Mongolia) as its Chairman for the period 2005-2006.       
B. NOTIFICATIONS UNDER ARTICLE 6.2 OF THE TRIM S AGREEMENT  
3. The Chairman  reported that since the last meeting of the Committee, notifications under 
Article 6.2 had been received from Albania and Ango la.  He noted that an updated compilation of all 
notifications which had been submitted under Article 6.2 was contained in document 
G/TRIMS/N/2/Rev.14, dated 22 September 2005.   He added that there were still a number of 
Members who had not yet complied with this notifi cation requirement and urged them to submit their 
notifications as soon as possible.  
4. The Committee agreed  to revert to this item at a future meeting. 
C. PROPOSALS ON SPECIAL AND DIFFERENTIAL TREATMENT PROVISIONS REFERRED TO THE 
COMMITTEE ON TRADE -RELATED INVESTMENT MEASURES BY THE CHAIRMAN OF THE 
GENERAL COUNCIL , RELATING TO ARTICLE 4 AND ARTICLE 5.3 OF THE TRIM S AGREEMENT  
5. The Chairman  recalled that two Special and Differential (S&D) treatment proposals had been 
referred to the TRIMs Committee by the General Council in 2003.  These proposals related to   
Article 4 and Article 5.3 of the TRIMs Agreement.   They had been submitted by the African Group 
originally in document TN/CTD/W/3/Rev.2.   Purs uant to its Decision of 1 August 2004 (WT/L/579, 
paragraph 1(d)), the General Council had instruct ed the WTO bodies to which S&D proposals had 
been referred to, the so-called Category II proposals,  to expeditiously complete the consideration of 
these proposals and report to the General Council with  clear recommendations for a decision, no later 
than July 2005.  Accordingly, he noted, the TR IMs Committee had held a number of formal and open-
ended informal meetings to discuss the S&D propo sals, as well as several rounds of consultations 
with interested Members on this issue.  At an  informal meeting on 9 May 2005, the Committee had 
considered a revised version of the proposals su bmitted by Kenya on behalf of the African Group, 
which sought to address more specifically the concerns of the proponents.   G/TRIMS/M/22 
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 6. As stated in the report submitted to the Ge neral Council by the outgoing Chairman of the 
TRIMs Committee in July 2005 (G/L/742), the Committee had not been able to arrive at a consensus 
that would have allowed it to make clear reco mmendations on the proposals under consideration.  
Certain important issues had remained unresolved, including in particular the country-coverage and 
the time-horizon for the application of the said prop osals.  However, his predecessor had sensed that 
there might be some room for progress and had ther efore recommended that this matter be kept under 
consideration.  
7. In view of the importance of the S&D issues in  the framework of the Doha Work Programme, 
and unless the General Council decided otherwise,  he believed that the TRIMs Committee should 
pursue its consideration of the S&D proposals.  He  appealed to Members' creativity and cooperation 
to work together in order to find a satisfactory solutio n to this issue. He then asked  Members, and in 
particular the proponents, whether there had been a ny new developments since the last meeting of the 
Committee regarding the new version of the African Group's proposals.       
8. The representative of Kenya
 said that her delegation had no new ideas nor information from 
the proponents to submit to the Committee.  She a dded that the African Group's proposals remained 
the same. 
9. The Chairman  noted that there was no new information to be given to the Committee at this 
stage and that the situation remain ed as it was in July.  It seemed to him that Members had not been 
able to bridge their differences of view on this ma tter.  He therefore asked them to redouble their 
efforts to find some flexibility so as to find an accep table solution to the S&D issues.  He added that 
he stood ready to hold consultations if Members beli eved this would help in moving forward on this 
matter.     
10. The Committee took note of the statements made.  
D. TRANSITION REVIEW MECHANISM PURSUANT TO PARAGRAPH  18 OF THE PROTOCOL OF 
ACCESSION OF THE PEOPLE 'S REPUBLIC OF CHINA TO THE WORLD TRADE ORGANIZATION  
11. The Chairman  recalled that under Paragraph 18 of Chin a'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 third annual review 
had taken place in October 2004 and the relevant report had been  submitted to the CTG as document 
G/L/708.   
12. With regard to this year's review, he said th at in order to discharge its reporting obligations 
the TRIMs Committee would need to  undertake the review and submit its report in advance of the 
next meeting of the Council for Trade in Goods, wh ich was planned for 10 November 2005.  Pursuant 
to paragraph 18 of China's Protocol 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 European Communities a nd the United States, containing questions in 
connection with China's Transitional Review Mechan ism.  These submissions had been circulated in 
documents G/TRIMS/W/41 and 42, respectively.  In addition, the Committee had received a 
communication from China, dated 6 October 2005, c oncerning information provided under Annex 1A 
of its Protocol of Accession.  This had been circulated in document G/TRIMS/W/45.  
13. He proposed that, in accordance with past practice, the Committee conduct the review as 
follows: he would first give the floor to those dele gations that had submitted questions to China, and 
to any other delegation that wished to comment on th is item.  He would then offer the floor to the 
delegation of China to answer the questions and pr ovide any further information they might wish to  G/TRIMS/M/22 
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 share with the Committee.   With respect to th e Committee's reporting obligation to the Council for 
Trade in Goods, he understood that Members wo uld 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 make reference to the submissi ons made in connection with this year's review 
and would contain in an 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/44.  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.  
14. The Committee agreed
 on the proposed procedure to discharge its reporting obligations. 
15. The representative of the European Communities  thanked the delegation of China for its 
submission, which had been circulated on 7 October.  He said that it was unfortunate that most of the 
questions in his delegation's present communication had already been raised in the past, and so far had 
not yet been answered in a fully satisfactory manner in the EC's view.  For example, with regard to 
the contractual arrangement clauses, which the EC  believed were incompatible with the TRIMs 
Agreement, the EC had raised this issue at last year's review and was still awaiting confirmation from 
China that it would ensure that any contracts whic h might contain commitments incompatible with the 
TRIMs Agreement would not be enforced, incl uding before domestic la w courts or other 
administrative tribunals.  The EC was still seeking this assurance from China. 
16. The issue of the Industrial Guideline Catalogue for Foreign Investments had also been raised 
by his delegation at the last Transitional Review  Mechanism (TRM).  On that occasion, China had 
alluded to prospective amendments to the catalogue .  The EC would like to seek confirmation from 
China on whether the amendments that were referred to last year had been made.  The EC would also 
appreciate having more details regarding what the am endments entailed, especially with regard to the 
status of the catalogue of investment.  His delegatio n would also wish to have information on where 
these amendments had been published and where they could be found. 
17. On the new automobile policy and related out standing issues, the EC continued to have 
concerns regarding the publica tion of drafts of these implemen ting regulations. The EC would 
appreciate receiving the drafts well in advance so as to allow it and other Members to conduct a 
proper examination of them in the WTO.  More pr ecisely, the EC had concerns over the so-called 
Administrative Measures for the Imports of Automo bile Components Fulfilling the Characteristics of 
a Whole Vehicle.  His delegation would urge Chin a to review its new legislation in the WTO, 
allowing for an open and constructive in-depth discu ssion on this matter.  The EC would be seeking to 
have this discussion with its Chinese partners.  He added that the same concerns arose when looking 
at the joint venture ownership limitation foreseen in th e new automobile policy.  In that context, his 
delegation wanted to draw China's attention to the fact that a review of the joint venture ownership 
regulation might help to facilitate solving the problem related to the localisation of parts production.   
18. His delegation also shared the United States' concerns over China's recently implemented 
steel policy, known as the Steel Industry Developm ent Policy.  More specifically, the EC had 
concerns regarding two basic provisions of this ne w policy.  One was Article 23, which in the EC's 
view appeared to discriminate between domestic a nd foreign companies.  In that regard, the EC 
sought further clarification from China on the crite ria that it intended to use for applying this 
provision.  The second set of provisions concerned Article 17 and Article 18 of the same piece of 
legislation, which basically foresaw a ban on outdat ed techniques and equipments.  The EC wished to 
receive more information from China on the defin ition of "outdated equipm ents" and "advanced and 
practical equipment".   His delegation was willing to have a fruitful exchange with China on this issue 
and receive information to take back home in view  of the next review in the Council for Trade in 
Goods.  G/TRIMS/M/22 
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 19. The representative of the United States
 said that he had not much to add to the 
communication that his delegation had submitted on this issue.  The United States basically had three separate areas where it required further clarification:  the foreign investment catalogue; the automobile 
industrial policy; and the steel policy.  His delega tion would appreciate any further information that 
the Chinese delegation could shed on these matters.  
20. The representative of Chinese Taipei
 said that, according to paragraph 203 of China's 
Working Party Report, prior to acceding to the WT O China had revised its Laws on Chinese-foreign 
Equity Joint Ventures, on Foreign Capital Ente rprises, and on Chinese-foreign Contractual Joint 
Ventures to bring them into compliance with th e TRIMS Agreement by eliminating the foreign-
exchange balancing and trade-balancing requireme nts, local content requirements, and export 
performance requirements.  While from the legal pers pective there was general conformity with WTO 
rules, Chinese Taipei's companies that had invested in China said that they were facing some 
problems.  Therefore, his delegation would like to ask two questions to China.  First, given that 
differing interpretation of Chinese law and regula tion had led to a situation where there was 
inconsistent enforcement by the central and local gov ernments, he asked if any measures or concrete 
actions had been taken to ensure consistency a nd transparency. Secondly, he asked if China was 
considering the drafting of a law such as an administ rative procedural law that would provide for fair 
and open procedures to be followed in administrativ e action in order to protect the interests of 
business.  If so,  his delegation would appreciate if  China could provide further details on the main 
provision of this law. 
21. The representative of China  said that prior to this meeting his delegation had submitted to the 
TRIMS Committee the information required by Annex 1A of its Protocol of Accession 
(G/TRIMS/W/45). At present, he would like to provi de responses to the issues of concern raised by 
Members.   
22. Firstly, he stated that the Chinese Government  faithfully honoured its commitments made in 
the Protocol on the Accession of China to the World Trade Organization (WTO) and the Working 
Party Report.  China had made two amendments in 2000 and 2001 respectively, to the Law on Sino-
Foreign Equity Joint Ventures of the People’ s Republic of China, the Law on Sino-Foreign 
Cooperative Joint Ventures of the People’s Repub lic of China, the Law on Foreign-Invested 
Enterprises of the People’s Republic of China and their implementing rules or measures as well as 
related regulations.  Articles therein on foreign-ex change balance, trade balance, local content and 
export performance which contradicted the TRIMs Ag reement had been clearly removed. However, 
without the consensus reached through consultation between the consenting parties on any terms of an 
existing contract, the contract itself or some of its  articles could not be altered or invalidated by a 
Chinese court or any other administrative body through  a mandatory order.  He requested Members to 
refer to his delegation's more detailed explanations made during previous reviews on this point, which 
he believed were complete and clear. 
23. Secondly, by strictly following WTO rules and its accession commit ments, the Chinese 
Government had updated the old version of the Ca talogue for the Guidance of Foreign Investment 
Industries, soon after its accession.  A new versi on had been published on 30 November 2004 jointly 
by the National Development and Reform Commi ssion (NDRC) and the Ministry of Commerce 
(MOFCOM) upon the approval of the State Council, and had officially taken effect on                         
1 January 2005.  The Catalogue was divided into three categories: the encouraged (257 items), the 
restricted (78 items) and the prohibited categories (35 items).  This was the guiding document for 
applying policies on foreign-funded projects and foreign-invested enterprises.   
24. He also confirmed that there was no mandatory  technology transfer requirement in China 
regarding the approval of foreign-funded projects. In addition, China would continue to amend the 
above-mentioned Catalogue when deemed necessary.  However, China did not have yet any plan to  G/TRIMS/M/22 
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 remove the area of "production and development of  genetically modified plants seeds" from the 
"prohibited" category. 
25. Thirdly, he would like to respond to the qu estions on China's new Automobile Industrial 
Policy.  He stressed that the new Policy had been composed in a transparen t way.  Sufficient public 
consultation had been undertaken through comments solicitation and symposia with deeply involved 
stakeholders, inter alia , with major auto makers from foreign countries.   
26. (1) China’s auto industry  was still in an initial stage of development.  The technological level 
and competitive power of its products still lagged far behind those of develope d countries.  As import 
quotas were phased out, import tariffs further slashed  and the market further developed in the post-
accession transitional period, fiercer competition ha d taken place in China’s auto market.  The 
shareholding requirement was based upon the fact that  China’s auto industry  was at a preliminary 
stage of development and it did not contradict any WTO principle or China’s accession commitments. 
27. (2) With regard to the "2+2" requirements on se tting up joint ventures in China, he confirmed 
that this requirement was designed to prevent inv estors from over-stretching their investment, opening 
multiple production sites and competing viciously w ith one another.  The new auto industry policy 
clearly stipulated that "investors which, in associa tion with their Chinese joint-equity partners, acquire 
or merge with other auto production companies in  China may be exempt from this requirement", 
which demonstrated the Government’s supportive attitude towards further consolidation of its 
automobile industry. 
28. (3) Due to the differences in tariff levels between  whole vehicle and auto parts, it had become 
imperative that a clear-cut definition of "Whole Vehicle" be made.  Measures on the Administration 
of the Import of Automobile Components Fulfilling the Characteristics of a Whole Vehicle, which 
had come into force on 1 April 2005, contained no  mandatory requirement on domestic whole-car and 
auto part manufacturers, so it did not contradict China’s accession commitments. Moreover, it was equally applicable to foreign-invested ente rprises established in China and domestic-funded 
enterprises, thus it did not go against the principle of national treatment.  
29. (4) Regarding the requirements on setting up an R&D facility for a new automobile plant, he 
repeated the rationale behind this policy.  China wa nted to make sure that any new plant could meet 
the increasing technical and legal requirements on  safety, environmental protection and energy 
saving, as well as customer demand in China thr ough setting up its own R&D facility.  However, 
setting up an R&D facility itself did not constitu te any mandatory requirement on transfer of 
technology.  Thus, China’s requirement was not against its WTO commitments. 
30. He indicated that for more detailed explana tions on the New Automobile Policy, Members 
could refer to China’s responses made under th e TRM in the Committee on Market Access and the 
Committee on Import Licensing Procedures this year, as well as to responses made in previous reviews. 
31. Fourthly, regarding China’s steel policy, he i nvited Members to refer to China’s statement 
made under the TRM at the Committee on Import Licensing Procedures the previous month. 
32. Lastly, he announced that responses to questi ons on books, newspapers and periodicals would 
be delivered under China's TRM at the Council on Tr ade in Goods in November 2005.  Regarding the 
questions raised orally by Chinese Taipei, and recalling a similar situation in the Committee last year, the representative of China
 urged the delegation of Chinese Taipei to respect the procedures of the 
review by submitting valid questions in writing, if an y, well in advance of the meeting to facilitate the 
process of the review in the future. G/TRIMS/M/22 
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 33. The Chairman
 thanked China for replying to the questi ons that had been submitted and for the 
very comprehensive statement it made. He also tha nked the delegations that had participated in the 
exercise.   
34. The Committee took note  of the statements made and agreed  that the Report of the Chairman  
to the Council for Trade in Goods1, together with the Minutes of the present meeting on this agenda 
item, be submitted to the CTG. 
E. ANNUAL  REPORT  (2005)  
35. The Chairman  said that Article 7.3 of the TRIMs Agreement required the Committee to report 
annually to the Council for Trade in Goods.  As a basis for the Committee's consideration of this matter, the Secretariat had prepared a draft annua l report which had been circulated in document 
G/TRIMS/W/43.  The report would be updated, as a ppropriate, to take account of the present meeting.  
He then invited reactions and comments from Members on the proposed draft report.  
36. The representative of China
 requested that paragraph 13 of the draft report be amended to 
include reference to the informati on provided by China under Annex 1A of the Protocol of Accession.  
37. The representative of Kenya  suggested that the section concerning the S&D proposals in the 
report should reflect the frustration of the Africa n Group that the Committee had been unable to meet 
the mandate  given to it by the General Council.  
38. The representative of the United States  said that while he understood the frustration expressed 
by the African Group,  he did not believe that stat ements that had not been made under the substantive 
topic and therefore had not been responded to , should be incorporated in the report.  
39. The Chairman  proposed that the Committee take note of the statements made by Kenya and 
the United States and that these statements be in corporated in the Minutes of the meeting.   
40. It was so agreed . 
41. The Committee adopted  ad referendum the Annual Report (2005) pending the Secretariat's 
completing it to take into account the discussions held at the present meeting.  
F. OTHER BUSINESS  
42. The representative of Brazil  said he wished to take this opportunity to thank the outgoing 
Chairman, Mr. Palayathan, for the good job he had done in conducting the Committee's work, in 
particular for the impartial and dynamic way in  which he had conducted the consultation process 
under his responsibility.  He also welcomed the new Chairman, Mr. Badral, and wished him good 
luck in his new assignment.  Several Members also expressed their gratitude to the outgoing 
Chairman, and gave a warm welcome to Mr. Ba dral, offering him their cooperation during his 
chairmanship.      
__________ 
                                                      
1 A draft Report of the Chairman to the Council fo r Trade in Goods was distributed to Members prior 
to the meeting in document G/TRIMS/W/44.