WORLD TRADE  
ORGANIZATION  G/L/807 
4 December 2006 
 (06-5820) 
  
  
 
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 20 November 2006, 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 United States, Japan a nd the European Communities 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/560, G/C/W/561,  and G/C/W/568 respectively.  The Annex 1A  
information provided by China to the Council for the review was circulated in document G/C/W/569.  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 20 November 2006 are reflected in the minutes of 
the meeting in document G/C/M/86.  The relevant  paragraphs which reflect the discussion under 
agenda item III are annexed.  G/L/807 
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  ANNEX 
 
IV. TRANSITIONAL REVIEW UNDER PARAGRAPH 18 OF THE PROTOCOL OF 
ACCESSION OF THE PEOPLE'S REPUBLIC OF CHINA 
 A. R
EPORTS OF THE SUBSIDIARY BODIES OF THE COUNCIL FOR TRADE IN GOODS  
4.1 The Chairman  informed Members that, in accordance with paragraph 18 of the Protocol of the 
Accession of the People's Republic of China in docum ent WT/L/432, this Council was to report to the 
General Council on the Transitional Review.  He suggested proceeding in two stages.  The CTG 
subsidiary bodies had, as required, transmitted their re ports to the CTG.  As a first step, he would give 
Members the opportunity to make general comments on those reports and then he would propose that 
the Council take note of these Reviews.  Then, he  would move on to the CTG's own Transitional 
Review in which the CTG was required to review the information provided by China pursuant to 
designated parts of Annex 1.A of the Protocol.    
4.2 He reminded Members that the following CT G subsidiary committees had carried out the 
Review:  Market Access - the report was containe d in document G/MA/194;  Agriculture - the report 
was contained in document G/AG/23;  Customs Valu ation - the report was contained in document 
G/VAL/60;  Sanitary and Phytosanitary Measures - the report was contained in document G/SPS/43;  
Technical Barriers to Trade - the report was contained in document G/TBT/20;  Import Licensing - the report was contained in document G/LIC/15;  Rules of Origin - the report was contained in 
document G/RO/62;  Anti-Dumping - the report was contained in document G/ADP/15;  Subsidies 
and Countervailing Measures - the report was contai ned in document G/SCM/119;  Safeguards - the 
report was contained in document G/SG/82;  a nd TRIMs - the report was contained in document 
G/L/792.  
4.3 The representative of the United States
 recalled that this was the fifth Annual Transitional 
Review Mechanism for China, after which more th an one-half of the required reviews would have 
been completed.  After five years it might be helpful to remind Members why the TRM was required in the first place.  Unlike prior acceding Members,  China was allowed to accede to the WTO without 
having its trade regime in order.  China had to issue,  revise or repeal thousands of law, regulations and 
other measures.  This process began shortly befo re China acceded and continued well into China's 
WTO membership.  China was also granted numerous  transition periods in its accession agreement, 
meaning that it did not have to adhere fully to certain WTO disciplines until those transition periods were over.  The TRM was designed to help Me mbers understand and assess the progress that China 
had made in adopting and complying with WTO discip lines.  From that perspective, the United States 
believed that the TRM continued to be a useful mech anism.  It helped to provide needed additional 
transparency for China's trade regime, and it a llowed Members to seek and obtain clarifications 
regarding China's various trade policies and practices.   It also provided Members with a multilateral 
forum for conveying their expectations and con cerns with China's implementation and compliance 
efforts.  In that regard, the TRM was a useful  supplement to bilateral discussions with China. 
 4.4 After five years of WTO membership, Chin a should have implemented almost all of the 
commitments that it had made in its accession protocol.  Among the few commitments left to be 
phased in were particularly important ones in the area of financial services, scheduled for implementation in less than one month.  At presen t, the United States' expectation was that China 
should be acting and should be treated as a full member of the international trading system.  China was reaping the benefits of that membership, and it should be fulfilling all of the responsibilities that 
went with that membership.  Looking back over th e last five years, China had made significant 
progress in implementing specific commitments as well as in adhering to the ongoing obligations of a WTO Member under the WTO agreements.  At the same time, however, serious areas of concern 
remained on several fronts.  Many of the Reviews carried out by the subsidiary committees this year  G/L/807 
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  had generated productive exchanges and demonstrated th at China had put a lot of time and effort into 
reviewing and considering Members' questions and in preparing responses.  He recalled, in particular, 
the useful exchanges that took place before the Anti-Dumping, the SPS, and the TBT Committees.  
One or two other reviews, however, were significantly less productive.  That of the Market Access Committee stood out in this regard, which was wh y his delegation was re-asking several of the 
questions it had originally submitted for that Review.   
 4.5 He highlighted some of the concerns that the United States attempted to raise through the 
TRM exercises.  One common theme emerged from sev eral of the committees, including the Market 
Access, the TRIMS, the Import Licensing, and th e Subsidies Committees.  China had increasingly 
resorted to industrial policies that limited ma rket access by non-Chinese origin goods, or that 
allocated substantial governmental resources to su pport increased exports.  The objective of these 
policies seemed to be to support the development of Chinese industries that were higher up the 
economic value chain than the industries that ma de up China's current labour-intensive base, or 
simply to protect less competitive domestic industries.  He mentioned six examples of these industrial 
policies.  First, China had issued a comprehensiv e auto policy that included provisions discouraging 
the importation of auto parts and encouraging the u se of domestic technology.  It also required new 
automobile and automobile engine plants in China to include substantial investment in research and 
development facilities, even though China expr essly committed in its WTO accession agreement not 
to condition the right of investment on the conduc t of research and development.  While China 
pointed out that industrial policies like this one we re not in themselves binding, the problem was that 
they often led to the implementation of measures th at appeared to conflict with WTO rules.  One 
obvious example involved the April 2005 regulations on auto parts tariffs that served to prolong prohibited local content requirements for motor ve hicles; those regulations were currently being 
challenged by the United States, the EC and Canada in a WTO dispute settlement case.   
 
4.6 A second example of another major industrial policy concerned China's steel industry.  This 
policy called for the state's management of nearly ev ery major aspect of China's steel industry.  The 
United States and China had engaged in a productive dialogue in this area, which had increased each 
side's understanding of the other si de's concerns.  Third, it had become clear that China was using 
export restrictions on key raw materials such as c oke and fluorspar in an attempt to bolster the 
competitiveness of downstream producers.  China's export restrictions kept the domestic Chinese 
price for these raw materials artificially low, so  that downstream producers could gain a significant 
price advantage over foreign competitors.  Four th, increasingly, China had also pursued unique 
national standards in many areas of high technology, even where established international standards 
already existed.  Often, the goal seemed to be to foster the extraction of technology or intellectual property from foreign rights-holders.  Fifth, it appeared that excessive government subsidization 
continued to benefit a range of domestic industries in  China.  Notably, some of this subsidization 
involved prohibited export subsidies or prohibited import substitution subsidies.  The United States 
and other Members had repeatedly called for China to  withdraw these prohibited subsidies, but so far 
China had not acted.    4.7 Finally, a troubling trend had emerged over the last year, as China struggled with increasing 
foreign competition within China.  Instead of lo oking for the market to dictate outcomes, China 
increasingly was resorting to policies that combined restrictions on foreign investment with promotion of domestic companies.  This approach was evidenced by the State Council Opinions on the 
Revitalization of the Industrial  Machinery Manufacturing Industries , issued in June 2006.  This 
document called for new controls on foreign invest ment for 16 types of equipment manufacturing, 
such as the manufacturing of semiconductor equipmen t, aircraft engines, pollution control equipment 
and textiles machinery.  It combined these new cont rols on foreign investment with a number of 
initiatives designed to promote and develop domestic companies and to expand their market share in 
China.  As was evident from the Reviews in the Agriculture and the SPS Committees, government 
intervention was also a problem in the agricultural sector.  Trade in the agricultural sector was beset G/L/807 
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  by uncertainty, largely because of selective in tervention in the market by China's regulatory 
authorities.  Capricious practices by Chinese cust oms and quarantine officials could delay or halt 
shipments of agricultural products into China, while sanitary and phytosanitary standards with 
questionable scientific bases and a generally opaque regulatory regime frequently frustrated traders in 
agricultural commodities.  China's continuing ban on imports of U.S. beef and beef products was an 
area of particular concern.  It was this excessive government intervention, evident in so many areas of 
China's economy, that gave rise to many of the Unite d States' most difficult trade issues with China.  
This government intervention was a reflection of Ch ina's unfinished journey from a centrally planned 
economy to a free-market economy governed by the rule of law.  At the same time, even 
acknowledging that incomplete transition, there we re some types of measures that China simply 
should not be resorting to as a mature member of the international trading system.  Local content 
requirements, export restrictions and prohibited su bsidies – China should have abandoned its use of 
these types of measures some time ago.  The Unite d States looked forward to its continuing bilateral 
dialogue with China on these and other issues.  The United States continued to prefer using that route, where possible, to resolve its outstanding concerns. 
 
4.8 The representative of the European Communities
 said that China was now approaching the 
end of its own transitional period for implementing its accession commitments.  It was clear that China 
had reaped enormous benefits from its membership of the WTO and its access to the rules and transparent trading environment provided by the WTO and its Members.  China was now a major trading partner for all and with that came a res ponsibility to show leadersh ip and commitment, and 
demonstrate its own stake in the proper functioni ng of the WTO.  Transparency was an essential 
element of this organization;  the special scrutiny provided for in the Tran sitional Review Mechanism 
was approved by China as part of its protocol of ac cession, and as part of its deal in 2001.  Against 
that background, while his delega tion obviously welcomed the cons tructive dialogue, engagement, and 
information provided by China in a number of areas and committees under the TRM, his delegation 
was still concerned, as were others, about a number of  areas where there was a lack of co-operation by 
China in this year's TRM exercise.  His delegati on had been under-whelmed by the nature of Chinese 
responses to its questions, and was frankly disconcer ted when China's representative at the Market 
Access Committee recently said that the TRM was a discriminatory practice with which China would 
not co-operate.  He hoped that that statement could be  reflected upon and retracted at this meeting.  In 
short, his delegation would welcom e more concrete and detailed rep lies from China to the questions 
that his delegation had raised than had been the case in recent months.  His delegation had circulated a 
document (G/C/W/568) which set out questions to which his delegation wished to see a response from China.  He wished to flag six areas of particular c oncern to the EC where it was particularly interested 
and vigilant to see substantive responses from China.  
4.9 First, in respect to transparency, his dele gation would like to have more information from 
China about the way in which it had been implemen ting its commitment to provide advance notice of 
significant changes to its trade regulations and to  allow third countries to comment on those proposed 
changes.  A second area related to export restrict ions.  His delegation invited China to notify the 
quantities associated with its various export rest rictions on goods; to transmit to the WTO the 
justification, where there was one, for such export rest rictions;  and for those restrictions where, as far 
as his delegation could see there was no justification, like coke and rare earth, his delegation invited 
China to notify the EC and the WTO when and how it intended to bring those regimes in line with the 
WTO rules.  A third area concerned China's compul sory certification system, i.e. approval system, for 
industrial goods.  His delegation encouraged China to review that system and to develop  and 
implement it in a way that was less costly fo r exports to China, less burdensome in terms of 
procedures to be followed, and more proportiona te in terms of the requirements imposed upon 
products seeking entry to the Chinese market.  Fourth ly, regarding the automotive industrial policy,  
his delegation invited China to review the severe lim itations on foreign participa tion in joint ventures.  
It asked China to indicate when it planned to accede to the 1958 UNECE "Agreement Concerning the 
Adoption of Uniform Technical Prescriptions for Wheeled Vehicles, Equipment and Parts which can  G/L/807 
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  be fitted and /or be used on Wheeled Vehicles an d the Conditions for Reciprocal Recognition of 
Approvals Granted on the Basis of these Prescrip tions", which would represent an international 
standard and reduce technical barriers to trade in this sector.  Fifthly, regarding the steel industry development policy, he asked China to indicate its plans for enacting implementation measures and which Ministries were responsible for preparing the measures in questions.  His delegation also 
welcomed any information China might provide regarding any intentions to restrict or allow foreign 
majority investments in the steel sector.  Finally,  his delegation invited China to indicate its current 
thinking on the preparation for accession to th e WTO Government Procurement Agreement. 
 4.10 The representative of China
 expressed his delegation's appreciation for the efforts made by the 
various bodies and the CTG to draft their reports on the TRMs handled by those bodies.  After reading 
all the reports, he believed that there was a need to  consolidate the form by which the different bodies 
and the CTG were preparing their reports.  His de legation liked the format of the report of the 
Committee on Market Access because it was simple, clear, gave no confusion about what happened, 
and gave a reference to where Members could find the WTO discussions on this issue.  Other reports 
attached Annexes or paragraphs from the minutes of  the meetings which his delegation believed was 
unnecessary.  Therefore, his delegation took the oppor tunity to request that the subsidiary bodies 
follow the format of the Market Ac cess TRM report for their next year's  reports.  It was better to make 
a reference to the document number in which the minutes of the relevant meeting could be found 
rather than annex paragraphs from the minutes to the report.   Members' ability to find those 
paragraphs should be trusted.  His delegation also wondered why so me reports were from the Chair 
while others were from the Committees and wonder ed why there was such a discrepancy in the 
practice.  It would also be desirable to have a cons olidated report by the Co mmittee or by the Chair.  
Here his delegation could be flexible but a unified  practice in this regard would help Members to 
avoid any possibilities of confusion or questi ons about the format of the report.   
 
4.11 Regarding the US and EC statements, he appr eciated that there were different understandings 
of the functions and role of the TRM under Paragr aph 18 of the Accession Protocol.  The debate or 
divided views about the functions and roles of the TRM had always existed since the first year of  transition.  His delegation had a different understand ing than that of some Members on the role and 
mandate of the TRM.  Therefore, he could not agr ee with some of the assertions and allegations made 
by the US.  For instance, the US sai d that the reason why it raised th e same question in the CTG that it 
had raised in other subsidiary bodies was becau se the TRM in some subsidiary bodies was not 
productive enough.  The US said that in some CTG subsidiary bodies the TRMs generated productive 
exchanges whereas in some other bodies, e.g. anti-dumping and SPS, there was a less productive 
exchange.  His delegation had difficulty understanding  what was the US definition of productiveness?  
Where in Paragraph 18 was this found?  If Paragr aph 18 said that China had to be productive enough 
to satisfy the US, China would be that productive. Otherwise, China would be put in a position of 
whatever it did or did not do, risking not being productive enough for certain Members.  The same was true for the EC.  The EC said that it wanted detailed responses.  He would appreciate if the EC delegation could provide a definition of detailed resp onse, which would help China to meet or satisfy 
EC requests.  Otherwise, whatever efforts China ma de to participate in this exercise, Members could 
still say that it was not detailed enough, or not pro ductive enough.  He believed that if Members were 
requesting information under Paragraph 18, there w as no way for China to satisfy them.  China was 
prepared to participate in the TRM as Paragraph 18 mandated, no more or less productive.  Members' 
requests that went beyond Paragraph 18 were  beyond China's obligations to accommodate. 
 4.12 The US also alleged that China's agricultu ral trade was governed by great uncertainty and  
government intervention.  Remarks of this kind were irresponsible and contrary to the facts.  If US 
exports of agricultural products to China had made  a record in terms of value and quantity and had 
been conducted in a state of uncertainty, it seemed th at the US did not want to change this because it 
was good for the US.  The US allegations that ther e was still too much government intervention in the 
agricultural sector was typical of the hypocrisy on the part of US trade pol icy.  When government G/L/807 
Page 6  
 
  intervention was in the interest of the US, it welcomed this intervention.  When government 
intervention was perceived as not in the interest of the US  it was seen differently.  He had received many US delegations in China who were beggi ng for government intervention to solve certain 
problems.  Finally, he believed that some Members were raising the same questions as they had raised 
in some subsidiary bodies not because they were sp ecifically related to any specific commitments in 
China's accession, or because China was not impl ementing certain specific commitments well, but 
because they had trade concerns.  This was understa ndable.  However, after reading the submissions 
by some Members to the CTG this year, he believe d that they failed to understand the mandate of 
Paragraph 18, the purpose of the Transitional Review , or his delegation's responses.  If the problem 
was one of language, his delegation was prepared to e xplain in more detail what it meant or to repeat 
what it had said in the subsidiary bodies.   
 4.13 The representative of the United States
 said that his delegation would not agree to the proposal 
that all subsidiary bodies change the format of thei r reports after 5 years of the TRM.  The practice in 
most committees over the last 5 years was to have a brief factual report and attach the minutes of the 
meeting.  His delegation found this a useful format  particularly since China had refused since the 
beginning of the TRM to provide any written respon ses to any written questions .  As to the Chinese 
delegations' request for a definition of what "pr oductive" might mean, while it was not necessary to 
provide a definition, a basic idea of whether a re view had been productive was whether or not China 
had ignored Members questions.  When China ignored the questions and continued to refuse to answer 
them when raised a second time, his delegation c onsidered that to be unproductive.  Lastly, with 
regard to the Chinese claims that the US wa s hypocritical in complaining about government 
intervention when it caused trade issues, yet seeking government intervention to resolve trade issues, 
he believed that this was a function of China's incomplete transition from a planned economy to a 
market economy governed by the rule of law.  It  was not possible at this stage for the Chinese 
Government to simply step out and let the market dictate outcomes.  China's economy was not at that 
point yet.  When problems did arise, they had to  be fixed by further government intervention.   
 4.14 The Chairman
 proposed that the Council take note of  the statements made and of the 
subsidiary body reports.  4.15 The Council so agreed
. 
 
B. COUNCIL FOR TRADE IN GOODS -SPECIFIC REVIEW  
4.16 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.  China had submitted in formation as required u nder Annex 1A of the 
Protocol of Accession in document G/C/W/569.  He also drew Members' atte ntion to the questions 
from Japan contained in document G/C/W/561;  th e questions from the United States in document 
G/C/W/560;  and the questions from the Eu ropean Communities in document G/C/W/568. 
 4.17 The representative of China
 said that some questions posed were exactly the same or similar 
to previous questions.  China believed that it had given detailed, specific responses to these questions 
in the previous meeting as well as in meetings over the past 4 years.  His delegation believed this was 
happening because Members had different interpretati ons of Paragraph 18 of China's Protocol of 
Accession or because Members were not being atten tive enough to his delegation's statements and 
explanations.  He requested that Members refrai n from raising the same issues as those raised 
previously at this TRM.  Export  restrictions, whether in the form of export quotas or duties, as 
repeatedly stated on various occasions, were ma inly aimed at protecting the environment and 
preserving natural resources, especially exhaustible natural resources.  His delegation believed that 
measures in this regard were consistent with Artic le XX of GATT.  In order to achieve this goal, 
China both implemented domestic pro duction controls and export restri ction measures.  With respect  G/L/807 
 Page 7 
 
 
  to the US question, China's Mineral Resources Wh ite Paper of 2003 outlined the state of China's 
mining industry.  It was introductory material for the public media and public information instead of a formal government policy document.  Therefore,  there was no follow-up implementing measures to 
carry out in this White Paper.  Regarding the automobile imports, according to the GCA No. 38 of 
2006, this standard was used to distinguish whole year call for auto-parts.  As stipulated in GCA 
No. 125, these would not be implemented until 1 Ju ly 2008, before which China would continue to 
maintain auto-mobile imports as in the past.  As to the Government Procurement Agreement, China 
has made efforts in its participation in the accessi on of negotiations into this Agreement and was now 
preparing to start negotiations before December 2007.   At present, a working team of 21 Government 
Ministries or Agencies, including the Ministry of Finance and Ministry of Commerce, had been 
established to work on the initial o ffer for the accession negotiation.   
 4.18 Regarding the transparency issue, the Ch inese Government had faithfully implemented its 
accession commitments.  All Ministries or Government  Agencies, including the Ministry of Finance, 
AQSIQ, the General Customs Administration and the Mi nistry of Agriculture, etc. were requested to 
provide copies of their newly published trade-related rules to MOFCOM, which was now including 
all trade-related laws, regulations and rules in  the Chinese Foreign Trade Co-operation Gazette.  
However, it should be noted that while the MOFC OM Gazette published a compilation of the trade-
related laws, regulations and administrative measure s, other Ministries or Agencies could still publish 
their own Gazettes and make their own policy known to the public.  This was a more effective method 
for transparency, in his Government's experien ce.  A public opinion solicitation process, and draft 
trade-related regulations were also published on the website of the respective government competent 
bodies, which provided an easy access for interested  parties to make their voices heard.  Public 
hearings, symposium and discussion groups also helped to make interested parties involved.  On issues regarding importation and distribution of boo ks, newspapers, magazine s, pursuant to Articles 
14 and 16(a) of the Revised Foreign Trade Law, th e Chinese Government had the right to administer 
the importation and exportation of  certain products to protect public moral, public interest and 
national security in accordance with Article XX of GATT 1994.  Except for this issue, his delegation believed that the rest was more related to trade in  services rather than goods. Therefore, he referred 
Members to previous discussions in the Council fo r Trade in Services for China's position in this 
matter.    
4.19 As clarified in the Subsidies and Count ervailing Measures Committee, the VAT rebate for 
steel exports was definitely not an export subsid y.  There was no prohibitive clause in the SCM 
Agreement to prevent Members from using a policy t ool such as a VAT rebate rate lower than a VAT 
rate.  Since his colleague had made a detailed e xplanation of the VAT reba te on domestic equipment 
purchases, he did not want to elaborate, but enc ouraged Members to read the minutes of the SCM 
Committee meeting of 25 October 2006.  This was a measure to balance the tax burden between 
domestic and imported products rath er than give preferential tr eatment to domestic products.  
Pursuant to Article 18 of Annex 1A of the Protocol of China, his de legation did not regard reform of 
State-Owned Enterprises as relevant to the mandate  of the CTG Transitional Review Mechanism.  
Members should be aware of China's resolution to fu rther this reform.  This was definitely not a 
privatization process but aimed at introducing a more corporate structure and having enterprises 
operating according to the market economy.  For inv estment issues, the State Council had issued an 
opinion on the revitalization of industrial mach inery manufacturing industries.  While the State 
Council opinion provided guidance in the development of domestic industry, it was not compulsory or 
binding.  So far no implementing measures had been  enacted.  As for the matter of merger and 
acquisition regulations raised by the US, as stated in the TRIMs Committee, China did not regard this 
as related to the TRIMs Agreement or covered under the mandate of the CTG.  China was entitled to 
improve its FTA regime and, in this respect, it saw no inconsistency with the WTO Rules and its 
accession commitments.  Nor did China see any necessity to  discuss this in this Revew.  With regard 
to border trade, he requested the Member who ra ised this question to go through Announcement No. 
50 of 2003 published by the General Customs Admi nistration, and later Announcements No. 27 and G/L/807 
Page 8  
 
  39 which eliminated the preferential import duty for bor der trade.  At present China did not maintain 
any import preferential treatment for border trade.  As for steel policy, China's stance remained the 
same and there were no plans to implement this policy.  4.20 The representative of Japan
 did not think it was necessary to explain her delegation's 
questions in a detailed manner because they were  self-explanatory and, as the Chinese delegation had 
pointed out, some of them were repeated from last  year and from subsidia ry body questions.  Her 
delegation had re-submitted them because it was not satis fied with the answers fr om the past exercises 
and it was not convinced that China had fully carried out its commitments under the Protocol of Accession.  Her delegation wished to briefly respond  to the responses provided by China.  As for the 
customs duties regarding complete automobile featur es, China answered that the current policy would 
continue until 1 July 2008.  Her delegation would li ke to know the situation after that date.  As for 
export restrictions on cokes and fluorite, Ch ina was conducting both domestic control and export 
restrictions.  Her delegation was interested to  know how effectively China was conducting the 
domestic control.  Her delegation had requested some data and would appreciate if China could 
submit some data in its reply.  As for dist ribution services, her dele gation had submitted these 
questions because, in last years exercise, China ha d confirmed that these issues were taken up in the 
CTG.  However, her delegation was flexible and was waiting for the response on this issue in the 
Council for Trade in Services.  Her delegation l ooked forward to hearing good news from the China 
in the area of government procurement.  
4.21 The representative of the United States
 said that his delegation, in its written submission, 
raised some new questions as well as resubmitted prev ious questions posed in the Reviews of one or 
more subsidiary committee reviews.  The repeat ed questions were ones for which China provided 
incomplete answers or no response.  One of tho se repeated questions addressed the importation of 
books, newspapers, periodicals, electronic publications  and audio-visual products.  China did not 
allow foreign enterprises to import these products, even though the accession protocol gave them this 
right.  Previously, China had justified these import  restrictions under Article XX of GATT.  The 
question in the US submission was not one that ha d been answered.  His delegation knew that China 
had raised the Article XX exception, but his de legation's asked China to explain why these import 
restrictions were necessary.  Why could not China's public moral objective be achieved in a less trade-
restrictive manner?  A second area of enquiry in his delegation's submission involved export quotas 
and export duties maintained by China on raw materi als such as coke and fluorspar.  China addressed 
the issue of the export quotas.  His delegation's question pointed out that China had added export 
duties on these very same products to further disc ourage exports.  China did not address the export 
duties and his delegation would like an explanation of the trade-policy objectives.  Another enquiry 
involved VAT rebate on steel.  China explained that  these were not export subsidies.  His delegation 
did not allege that that was the case, but asked a ser ies of questions such as what was the trade-policy 
objective of these rebates, whether China provided those rebates for steel-making raw materials and 
semi-finished steel products, and on other steel products.  None of those questions had been answered.   
 4.22 In the interest of transparency, his dele gation sought to understa nd the new regulations on 
mergers and acquisitions that were in effect from August 2006.  China previously refused to provide 
any clarification for the TRIMs Committee because it said that the US had not linked its questions to 
violations of particular provisions in the TRIM s Agreement.  His delegation had hoped China would 
reconsider its position and provide the requested clar ifications.  He reminded China that the Chair of 
the TRIMs Committee had stated, in paragraph 46 of the Minutes that, "he wished to recall that this 
exercise in this Committee was an exercise in tran sparency, based on co-operation and would allow all 
Members to understand better the Chinese legislati on on a whole series of matters connected to 
investment".  It was not a challenge to the comp atibility of the Chinese legislation.  His delegation 
believed that all Members were interested in seei ng that the discussions in the Committee were as 
precise and cooperative as possible.  There were other WTO fora where the compatibility of the legislation of Members with the WTO rules could be  challenged.  His delegation was simply looking  G/L/807 
 Page 9 
 
 
  for responses to its questions in the interest of  transparency.  The US saw a variety of updated 
information on the operation of state-owned enterprises in China.  China had maintained that this was 
not relevant to the Committee when the questions were  posed there, and now China maintained that it 
was not relevant to the CTG.  His delegation wonde red where this information would be relevant and 
asked if China could reconsider its position and answ er the questions.  His delegation noted that in 
March 2006 China tried to implement its commitment to  establish a single official journal.  At that 
time China's State Council issued a notice directing all central, provincial and local government entities, to send copies of all their trade-related m easures to the Ministry of Commerce for publication 
in the gazette. The US welcomed this move and would like an update on the progress that was being 
made by the Central, provincial a nd local Government entities following the directive in this notice.   
 
4.23 The representative of  the European Communities
 took note of China's suggestion that because 
of different interpretations of the Protocol of  Accession, or because Members were not listening 
properly to China's explanations, Members were not fully satisfied and were asking the same 
questions.  His delegation believed that Members ask ed the same questions again because they were 
looking for factual replies to factual questions .  On this, there was no question of differing 
interpretations.  It was a famous Chinese who said that truth should be sought from facts – this was 
what Members were trying to do in this exercise.  He provided the example of export restrictions to show the way in which Members had been asking questions according to the letter and spirit of 
paragraph 18 of the Protocol and of the specific commi tments entered into by China in this Protocol.  
China had undertaken to eliminate, upon accession, e xport restrictions unless they could be justified 
under WTO Rules (Paragraph 165 of the Working Pa rty Report).  China had also accepted a legal 
obligation to notify any possible expor t restrictions to the WTO, in particular the quantities associated 
with those restrictions.  On these issues, his dele gation had not yet received  full factual information 
and asked China, in line with its commitments wh en it joined the WTO, to present a comprehensive 
table which would identify the products, the expor t restrictions, the quantities, export taxes, if 
appropriate, and any other restrictions on the produ cts in question.  His delegation had repeatedly 
sought such information.  His delegation welcomed  China's replies on a number of points.  But 
certainly in the area of export restrictions, the info rmation was lacking.   He noted that in China's 
submission, China said that it would circulate, "in a couple of days", information relating to the restrictions applied in 2006.  It was almost the en d of 2006 and this information, particularly on the 
quantities of the restrictions, would have been useful had it been available much earlier in the year.   
 
4.24 The representative of Cuba
 said that, in his delegation's view, this examination seemed a little 
discriminatory.  Other recently acceded Members, as well as original Members of the WTO were not subject to such detailed scrutiny in each of the WTO Committees.  It also seemed discriminatory to 
refer to government subsidy problems, as some Members had.  For many years and in many cases 
there had not been any changes as established by the Agreements in the matters of domestic 
assistance.  This was a system of double standa rds.  At the same time, to question supposed 
restrictions on exports or imports when one importa nt Member of the WTO maintained a large number 
of restrictions on the imports and exports of vari ous other Members which had not been notified nor 
did they comply with the MFN principles.  This  was once again a question of discrimination and 
double standards.  His delegation wanted to shar e these views for obvious reasons and ventured to 
hope that these other Members would provide full information about their import restrictions and 
export subsidies.  4.25 The representative of China
 thanked Cuba for its statement and its strong sense of justice.  
China was used to discrimination;  this was not the only place China was being treated 
discriminatorily. No other Member but China was requi red to go through this transitional review once 
a year in each subsidiary body.  The question here was that certain Members alleged that China ignored their questions, or China did not provide r esponses.  He recalled that China had ignored none 
of their questions.  China had given all the respon ses.  Of course, some of the responses were not 
positive.  However, a negative response was not satisf actory.  The point here was that some Members G/L/807 
Page 10  
 
  kept asking the same question, no t because these questions fell within the mandate of those subsidiary 
bodies or within the mandate of the TRM, but because,  they were unsatisfied with the answers they 
received.  This was the essence of the issue.  So long as China could not satisfy their request to address 
their concerns, they kept raising the questions in all of the subsidiary body Reviews, regardless of 
whether these questions fell into the mandate of t hose bodies.  He also considered some delegations 
arrogant to refuse to recognise that China had provi ded responses and answers.   The questions were 
raised again as if China had never provided responses.  He did not wish to go into substantive details 
about these issues because his delegation had repeat ed itself during the Reviews.  For instance, one 
Member claimed that China w as a centrally planned economy and was not a fully free market 
economy.  The statement by Cuba  indicated that th ere were Members who claimed that they were free 
market economies and still maintained a large num ber of export restrictions and government 
intervention in the form of anti-dumping restricti ons, trade remedy measures and legislations, and 
export restrictions.  His delegation was puzzled and did not really know how to satisfy those Members.   
 4.26 The representative of the United States
 acknowledged that China was the only WTO member 
who had to undergo a transitional review mechan ism and, in this sense, one could call that 
discriminatory.  At the same time, China was the only Member of which he knew which had been 
allowed to accede to the WTO without having its trade regime in order.  China had to issue, revise, 
repeal thousands of laws, regula tions and other trade measures and,  while it began shortly before 
accession, this process was not completed until well af ter accession.  In addition, China was given 
many transition periods in its Accession Protocol, meaning that it was allowed to comply over time 
with various WTO disciplines.  Because there w as discrimination in China's favour when China 
accede, this "discriminatory procedure" was put in place.  He also wished to continue to dispute 
China's claim that all of his delegation's questi ons had been answered many times before.  For 
example, questions 7 and 8 from his delegation's submission concerned export duties that were 
announced on 27 October 2006.  Those were not questions  that had been posed year after year.  They 
were asked but no response about the trade polic y objectives was received.  Another example was 
question 9 from his delegation's submission which ask ed three specific questions regarding the VAT 
rebates on steel.    4.27 The Chairman
 thanked all Members for their statements and the delegation of China for the 
answers that it had provided.  Regarding the form of  the report of the Review that was carried out, he 
proposed that the Council proceed in the same manner  as last year.  This would mean that a brief 
factual report would be prepared with references to the documents submitted and the portion of the 
minutes of this meeting which related to the Tran sitional Review attached.  The CTG report, as well 
as the reports of the subsidiary bodies, woul d then be transmitted to the General Council. 
 
4.28 The representative of China  said that he did not think there was a need to attach the relevant  
paragraphs of the minutes;  a reference to the re levant paragraphs of the minutes was sufficient. 
 4.29 The representative of the United States
 said that his delegation wanted to follow the past 
practice of this Council and attach the releva nt paragraphs of the minutes to the report. 
 
4.30 The representative of China  said that he would have  to consult his capital on this issue.  China 
was requesting the consolidation or streamlining of  the form of the TRM report.  Members could 
easily find the relevant portions of the minutes wher e the TRM was discussed.  Therefore, instead of 
attaching these paragraphs to the report, a referenc e to the paragraphs in the minutes was sufficient. 
 
4.31 Conclusion of this agenda item was suspende d for a short time pending further consultations. 
 4.32 In resuming consideration of this agenda item, the Chairman
 informed Members that he had 
held consultations with China.  He proposed that the Council take note of all the statements made and 
that taking into account the past practice of th is Council as well as the views expressed at this  G/L/807 
 Page 11 
 
 
  meeting, he would prepare a factual report which, t ogether with the subsidia ry body reports, would be 
presented to the General Council.  This would conclude the Transitional Review Mechanism. 
 4.33 The Council so agreed
. 
 
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