Testimony 

Before the Committee on Ways and 

Means, House of Representatives

United States Government Accountability Office

GAO

Not to be Released 

Before 11:00 a.m. EDT 

April 14, 2005 U.S.-CHINA TRADE 

Opportunities to Improve 

U.S. Government Efforts to 

Ensure Open and Fair 

Markets 

Statement for the Record by Loren Yager, Director 

International Affairs and Trade 

GAO-05-554T 
Page 1 GAO-05-554T 

Mr. Chairman and Members of the Committee: 

We are pleased to have the opportunity to comment on issues related to 

U.S.-China trade. Today’s hearing takes place not only at a time of 

increasing trade between the United States and China but also amidst a 

period of ongoing concern about the growing U.S. trade deficit with China, 

which totaled $162 billion in 2004. Managing this relationship with one of 

the United States’ most important trading partners is an effort that calls 

upon the resources of nearly every aspect of the U.S. trade policy 

apparatus. Our ongoing body of work has examined several aspects of this 

apparatus, including U.S. government efforts to ensure China’s compliance 

with complex and far-reaching World Trade Organization (WTO) 

commitments, as well as the federal government’s application of available 

trade remedies against China. As part of that work that has been issued to 

date, we have recently put forth a number of recommendations to the key 

executive branch agencies about how to improve the U.S. government’s 

efforts in these areas. 

To provide you with an update on these issues, this statement discusses 

(1) the key findings and recommendations from our recently issued work 

on U.S. government efforts to ensure China’s compliance with WTO 

commitments, as well as U.S. efforts to protect U.S. intellectual property 

rights overseas1

 and (2) issues related to how the United States has applied 

a key trade remedy—the China textile safeguard.2

 These observations are 

based on a series of reports initiated at the bipartisan request of various 

congressional committees. That work has included an analysis of China’s 

commitments, surveys and interviews with private sector representatives, 

the results of two annual assessments of the U.S. government’s 

compliance efforts, a review of overseas intellectual property rights 

protection, and, most recently, a review of the China textile safeguard.3

Our work on China-WTO issues included fieldwork in Washington, D.C., 

China, and at the WTO headquarters in Geneva, Switzerland, and was 

 1

See GAO, U.S.-China Trade: Opportunities to Improve U.S. Government Efforts to 

Ensure China’s Compliance with World Trade Organization Commitments, GAO-05-53

(Washington, D.C.: Oct. 6, 2004); and GAO, Intellectual Property: U.S. Efforts Have 

Contributed to Strengthened Laws Overseas, but Challenges Remain, GAO-04-912

(Washington, D.C.: Sept. 8, 2004). 

2

See GAO, U.S.-China Trade: Textile Safeguard Procedures Should Be Improved, 

GAO-05-296 (Washington, D.C.: Apr. 4, 2005). 

3

See Related GAO Products. 
Page 2 GAO-05-554T 

conducted in accordance with generally accepted government auditing 

standards. 

The complexity, breadth, and ongoing nature of many of the problems 

with China’s WTO compliance demonstrate the need for a cohesive and 

sustained effort from the key U.S. agencies to effectively monitor and 

enforce China’s implementation of its commitments. The U.S. Trade 

Representative (USTR), and the Departments of Commerce, State, and 

Agriculture (USDA) have coordinated on policy issues and increased staff 

resources to enhance their capacity to carry out these efforts. Our 

previous work acknowledged the administration’s concerted and 

deliberate strategy of high-level bilateral engagement with China. 

However, recent turnover of key U.S. trade officials has seemed to 

interfere with this strategy this year. These developments punctuate the 

relevance of our recommendations for the key agencies to institutionalize 

U.S. compliance efforts at the working levels through better strategic 

planning and human capital management. Specifically, in order that 

agencies more effectively plan and measure results, we recommended that 

each of the key agencies improve performance management of their 

China-WTO compliance efforts. Further, we recommended that, in an 

environment of high and regular staff turnover, the key agencies should 

direct additional management attention to ensuring that staff have an 

opportunity to acquire training relevant to their China-WTO compliance 

responsibilities. The agencies generally responded positively to most 

aspects of these recommendations, and indicated that efforts were under 

way to enhance performance management and provide additional training 

opportunities for staff. We are in the process of following up with the 

agencies regarding their specific plans for implementing the 

recommendations. Finally, in our review of intellectual property 

protection overseas, we found that coordination on policy matters had 

helped lead to strengthened laws but that enforcement in China and other 

countries remains weak. We suggested that the Congress review the 

efforts of the key interagency mechanism for coordinating law 

enforcement efforts on intellectual property. 

Managing the U.S.-China trade relationship goes beyond ensuring access 

for U.S. businesses seeking to enter China’s market. It also includes 

ensuring U.S. industries are protected from harmful surges in imports and 

unfair Chinese trade practices. The terms of China’s WTO membership 

allowed the United States and other members to put special mechanisms 

in place to respond to such situations while China’s economy was in 

transition. Our most recent report examined the U.S. government’s 

Summary 
Page 3 GAO-05-554T 

interagency Committee for the Implementation of Textile Agreements 

(CITA) use of one of these special mechanisms—the China textile 

safeguard. We found that procedural shortcomings have impaired effective 

application of this safeguard mechanism. First, 17 months elapsed before 

CITA issued any procedures and, second, the procedures did not clearly 

indicate how CITA would proceed in “threat-based” cases. A court-ordered 

injunction4

 has prevented further consideration of the threat-based cases 

until litigation is resolved and, as a result, new actual market disruption 

cases have been initiated instead. GAO does not take any position on the 

legal issues involved in the lawsuit, but this situation affects the speed, 

scope, and duration of potential relief for U.S. producers of these 

products. Additionally, the lack of production data impaired access to 

safeguard measures for U.S. sock producers and may pose similar 

problems if other producers in similar circumstances seek application of 

this mechanism. To address these issues, we recommended that CITA 

clarify its procedures for threat-based safeguard cases and that Commerce 

take actions to make production data more available for industry sectors 

that are at risk of experiencing disruptive import surges. The agencies did 

not comment on our recommendation relating to clarifying procedures for 

threat-based cases due to ongoing litigation and disagreed with our 

recommendations regarding production data, stating that such actions 

would be unproductive. We maintain that our recommendations would 

make the China textile safeguard more transparent and accessible. Lastly, 

we have an ongoing body of work on other import relief mechanisms 

regarding China, including countervailing and antidumping actions, and 

the China product-specific safeguard measures authorized under section 

421 of the Trade Act of 1974, as amended. 

Ensuring China’s compliance with its WTO commitments is a continuing 

priority for the U.S. government. The complexity, breadth, and ongoing 

nature of many of China’s problems complying with its obligations 

demonstrate the need for the U.S. government to have a well-coordinated, 

sustained effort to ensure China’s compliance. To that end, we have 

recommended that the key agencies involved in this effort take steps to 

improve performance management and ensure that staff has adequate 

opportunity to acquire the training necessary to carry out their 

responsibilities. The agencies generally responded positively to most 

 4

See U.S. Ass’n of Importers of Textiles and Apparel v. United States, Ct. No. 04-00598 

(C.I.T. Dec. 1, 2004). 

Recommendations to 

Improve the U.S. 

Government’s Efforts 

to Ensure China’s 

Compliance with its 

WTO Commitments 
Page 4 GAO-05-554T 

aspects of these recommendations, and indicated that efforts were under 

way to enhance performance management and provide additional training 

opportunities for staff. We are in the process of following up with the 

agencies regarding their specific plans for implementing the 

recommendations. Additionally, we recommended that Congress consider 

reviewing the efforts of a U.S. government coordinating group on 

intellectual property law enforcement. 

China’s WTO obligations span eight broad areas and include hundreds of 

individual commitments on how China’s trade regime is to adhere to the 

WTO’s agreements, principles, and rules and allow greater market access 

for foreign goods and services. Some of these commitments are relatively 

simple and require specific actions from China, such as reporting 

information to the WTO or lowering tariffs. Others, however, are 

significantly more complex and relate to systemic changes in China’s trade 

regime. For example, some commitments require China to adhere to WTO 

principles of nondiscrimination in the treatment of foreign and domestic 

enterprises. China has successfully implemented many of its WTO 

commitments, but a significant number of problems arose in these first 

years of China’s membership. Problems in implementing these obligations 

spanned all areas in which China had made commitments. Importantly, 

many of these compliance problems have continued from year to year, and 

many concerns relate to China’s inability thus far to make some of the 

systemic changes that its WTO commitments require. For example, 

USTR’s most recent report (2004) on China’s WTO compliance cites 

continuing problems with lack of transparency and protection of 

intellectual property—problems that USTR has cited in each of its annual 

reports since China’s accession to the WTO in 2001.5

We found weaknesses in the key agencies’ ability to assess the 

effectiveness of their China-WTO compliance efforts and determined that 

agencies would benefit from increased emphasis on planning and 

performance management. The Government Performance and Results Act 

and our substantial body of work on planning emphasize the importance 

and usefulness of developing unit- and program-level plans and measures 

that are connected to an agency’s overall mission. We acknowledge the 

 5

See USTR, 2004 Report to Congress on China’s WTO Compliance (Washington, D.C.: Dec. 

11, 2004). 

Problems with China’s 

WTO Compliance Are 

Broad in Scope, Complex, 

and Ongoing 

Key Agencies Need to 

Improve Performance 

Management of China 

Compliance Efforts 
Page 5 GAO-05-554T 

challenges of developing measurable goals, given the extent to which 

external factors can influence agencies’ trade compliance efforts; 

however, we believe that it is possible for these agencies to better quantify 

and measure results annually. 

We recommended that USTR and the Secretaries of Commerce, State, and 

USDA take steps to improve performance management pertinent to the 

agencies’ China-WTO compliance efforts. Specifically, we recommended 

that (1) USTR set annual measurable predetermined targets related to its 

China compliance performance measures and assess the results in its 

annual performance reports; (2) Commerce take further steps to improve 

the accuracy of the data used to measure results for the agency’s trade 

compliance-related goals; (3) State require its China mission to assess 

results in meeting its goals and report this information as part of the 

annual Mission Performance Plan; and (4) USDA further examine the 

external factors that may affect the agency’s progress toward achieving its 

trade-related goals and present the agency’s strategies for mitigating those 

potential effects. Furthermore, we recommended that the head of each 

agency direct the agency’s main China compliance units to set forth unit 

plans that are clearly linked to agency performance goals and measures, 

establish unit priorities for its activities, and annually assess unit results to 

better manage its resources. 

We found that the key agencies have opportunities to better manage their 

human capital involved in China-compliance activities. Specifically, in an 

environment of high and regular staff turnover, new staff are called upon 

to take up monitoring and enforcement activities that involve complex, 

long-term issues. New staffs’ effectiveness and efficiency is reduced when 

(1) no formal training is available to help them with their day-to-day 

activities and (2) when staffing gaps mean that they cannot learn from 

more-experienced predecessors. Increased management attention to 

provide an adequate mix of on-the-job training and formal training can 

help ensure that new staffs have the necessary tools for doing their jobs 

well. 

We recommended that USTR and the Secretaries of Commerce, State, and 

USDA undertake actions to mitigate the effects of both anticipated and 

unplanned staff turnover within the agencies’ main China-WTO 

compliance units by identifying China compliance-related training needs 

and taking steps to ensure that staff have adequate opportunity to acquire 

the necessary training. These actions could include determining which of 

the agencies’ existing courses would be appropriate for staff, determining 

Key Agencies Should Take 

Steps to Improve Training 

Opportunities 
Page 6 GAO-05-554T 

what types of external training are available, developing training courses 

on relevant issues, and establishing a plan and time lines for existing and 

new staff to receive training. 

We found that in contrast to the relatively successful coordination efforts 

agencies had in strengthening intellectual property laws overseas, a key 

mechanism for coordinating law enforcement activities has not been 

effective. The National Intellectual Property Law Enforcement 

Coordination Council (NIPLECC), which was established to coordinate 

domestic and international intellectual property law enforcement among 

U.S. federal and foreign entities, has struggled to find a clear mission, has 

undertaken few activities, and is perceived by the private sector and some 

U.S. agency officials as having little impact. 

We suggested that the Congress review the council’s authority, operating 

structure, membership, and mission and noted that such a review could 

help the council identify appropriate activities and operate more 

effectively to coordinate Intellectual property law enforcement issues. 

Subsequently, the 2005 appropriations act made changes that responded to 

some of these issues and provided funding for the council. 

The WTO China textile safeguard is a transitional mechanism that allows 

the United States and other WTO members to temporarily restrict growth 

in textile and apparel imports from China through the end of 2008, even 

though WTO textile and apparel quotas in general were eliminated on 

January 1, 2005. The U.S. government’s interagency Committee for the 

Implementation of Textile Agreements (CITA) has established procedures 

that explain to the public how it will consider safeguard action requests. 

These procedures stipulate that when requesting safeguard actions, 

producers must submit data on imports, market share, U.S. production, 

and additional information showing how imports from China have 

adversely affected U.S. industry or any other data deemed pertinent. 

CITA has applied safeguard quotas on specific products in response to 

four out of five U.S. industry requests that were primarily based on 

evidence of actual market disruption. Twelve threat-based requests remain 

unresolved. Since the recent imposition of a court-ordered injunction, new 

actual market disruption-based cases have been initiated. 

Procedural shortcomings have impaired effective application of the China 

textile safeguard. First, 17 months elapsed before CITA issued any 

Congress Should Review 

Efforts of Interagency Law 

Enforcement Coordinating 

Group on Intellectual 

Property 

Recommendations to 

Improve the U.S. 

Government’s Use of 

the China Textile 

Safeguard 
Page 7 GAO-05-554T 

procedures about the China textile safeguard, and, second, the procedures 

did not clearly indicate how CITA would proceed in threat-based cases. 

Currently, a court-ordered injunction prevents further government 

consideration of threat-based cases until litigation is resolved. We do not 

take any position on the legal issues involved in this ongoing litigation. 

Regardless of the result of the lawsuit, this situation will affect the speed, 

scope, and duration of potential relief available to U.S. producers who 

made these requests. Additionally, the unavailability of production data on 

about 20 percent of textile and apparel product categories—data that are 

necessary to fulfill CITA filing requirements—inhibits equal access to the 

safeguard. These categories represented about half of the total value of 

textile and apparel imports from China. Beyond these issues, uncertainty 

about future developments in global textile trade makes the future impact 

of the safeguard unclear. For example, it is unclear to what extent any 

textile safeguards imposed on China will provide relief to the U.S. industry 

or whether the textile safeguards will instead increase the market share 

obtained by other foreign producers, such as India, Pakistan, or Vietnam. 

In the event the courts should rule that CITA may process threat-based 

requests for China textile safeguards, we recommended that CITA amend 

its procedures to clarify how it will proceed in threat-based cases, 

including the information that producers should submit. To enhance 

access to safeguard relief for all segments of the textile and apparel 

industry that may face import surges, we also recommended that 

Commerce, as CITA’s chair, review the products and categories for which 

the U.S. Bureau of the Census production data are unavailable and, with 

public input, conduct a risk assessment aimed at identifying industry 

sectors at high risk of experiencing disruptive import surges from China. 

We further recommended that on the basis of the risk assessment, 

Commerce’s Office of Textiles and Apparel work with the Census Bureau 

to explore options to make production data concerning these industry 

sectors available for safeguard requests. The agencies did not comment on 

our recommendation relating to clarifying procedures for threat-based 

cases due to ongoing litigation, and disagreed with our recommendations 

regarding production data, stating that such actions would be 

unproductive. We maintain that our recommendations would make the 

China textile safeguard more transparent and accessible. 

In addition to our recent work on the textile safeguard, we are continuing 

a body of work on other import relief mechanisms. We expect that this 

ongoing work will result in a series of reports on relief mechanisms 

available to U.S. producers who are adversely affected by unfair or surging 

imports and the manner in which these remedies have been applied to 
Page 8 GAO-05-554T 

China. These reports will cover countervailing and antidumping actions 

and China product-specific safeguard measures authorized under section 

421 of the Trade Act of 1974, as amended. 

For further information regarding this statement, please contact Adam 

Cowles at (202) 512-9637. Matthew Helm also made key contributions to 

this statement. 

Contacts and 

Acknowledgments 
Page 9 GAO-05-554T 

U.S.-China Trade: Textile Safeguard Procedures Should Be Improved. 

GAO-05-296. Washington, D.C.: April 4, 2005. 

U.S.-China Trade: Summary of 2003 World Trade Organization 

Transitional Review Mechanism for China. GAO-05-209R. Washington, 

D.C.: January 25, 2005. 

U.S.-China Trade: Opportunities to Improve U.S. Government Efforts to 

Ensure China’s Compliance with World Trade Organization 

Commitments. GAO-05-53. Washington, D.C.: October 6, 2004. 

International Trade: Current Government Data Provide Limited Insight 

into Offshoring of Services. GAO-04-932. Washington, D.C.: September 22, 

2004. 

Intellectual Property: U.S. Efforts Have Contributed to Strengthened 

Laws Overseas, but Challenges Remain. GAO-04-912. Washington, D.C.: 

September 8, 2004. 

World Trade Organization: U.S. Companies’ Views on China’s 

Implementation of Its Commitments. GAO-04-508. Washington, D.C.: 

March 24, 2004. 

International Trade: U.S. Customs and Border Protection Faces 

Challenges in Addressing Illegal Textile Transshipment. GAO-04-345. 

Washington, D.C.: January 23, 2004. 

World Trade Organization: Ensuring China’s Compliance Requires a 

Sustained and Multifaceted Approach. GAO-04-172T. Washington, D.C.: 

October 30, 2003. 

GAO’s Electronic Database of China’s World Trade Organization 

Commitments. GAO-03-797R. Washington, D.C.: June 13, 2003. 

World Trade Organization: First-Year U.S. Efforts to Monitor China’s 

Compliance. GAO-03-461. Washington, D.C.: March 31, 2003. 

World Trade Organization: Analysis of China’s Commitments to Other 

Members. GAO-03-4. Washington, D.C.: October 3, 2002. 

World Trade Organization: Selected U.S. Company Views about China’s 

Membership. GAO-02-1056. Washington, D.C.: September 23, 2002. 

Related GAO Products 
Page 10 GAO-05-554T 

World Trade Organization: Observations on China’s Rule of Law 

Reforms. GAO-02-812T. Washington, D.C.: June 6, 2002. 

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