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93–683 PDF 2004

INFLUENCING CHINA’S WTO COMPLIANCE AND

COMMERCIAL LEGAL REFORM: BEYOND MONITORING

ROUNDTABLE

BEFORE THE

CONGRESSIONAL-EXECUTIVE

COMMISSION ON CHINA

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

APRIL 2, 2004

Printed for the use of the Congressional-Executive Commission on China

(

Available via the World Wide Web: http://www.cecc.gov

CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA

LEGISLATIVE BRANCH COMMISSIONERS

House Senate

JIM LEACH, Iowa, Chairman

DOUG BEREUTER, Nebraska

DAVID DREIER, California

FRANK WOLF, Virginia

JOE PITTS, Pennsylvania

SANDER LEVIN, Michigan

MARCY KAPTUR, Ohio

SHERROD BROWN, Ohio

DAVID WU, Oregon

CHUCK HAGEL, Nebraska, Co-Chairman

CRAIG THOMAS, Wyoming

SAM BROWNBACK, Kansas

PAT ROBERTS, Kansas

GORDON SMITH, Oregon

MAX BAUCUS, Montana

CARL LEVIN, Michigan

DIANNE FEINSTEIN, California

BYRON DORGAN, North Dakota

EXECUTIVE BRANCH COMMISSIONERS

PAULA DOBRIANSKY, Department of State

GRANT ALDONAS, Department of Commerce

LORNE CRANER, Department of State

JAMES KELLY, Department of State

STEPHEN J. LAW, Department of Labor

JOHN FOARDE, Staff Director

DAVID DORMAN, Deputy Staff Director

(II)

(III)

C O N T E N T S

Page

STATEMENTS

Levine, Henry A., Deputy Assistant Secretary for Asia Pacific Policy, Market

Access and Compliance, International Trade Administration, U.S. Department of Commerce, Washington, DC .................................................................. 2

Griffin, Leslie, Director, Asian Affairs, International Affairs Division, U.S.

Chamber of Commerce, Washington, DC ........................................................... 5

Wells, Linda, Chief Counsel for Commercial Law Development, Director,

Commercial Law Development Program, Office of General Counsel, U.S.

Department of Commerce, Washington, DC ...................................................... 9

APPENDIX

PREPARED STATEMENTS

Griffin, Leslie ........................................................................................................... 28

Wells, Linda ............................................................................................................. 31

(1)

INFLUENCING CHINA’S WTO COMPLIANCE

AND COMMERCIAL LEGAL REFORM:

BEYOND MONITORING

FRIDAY, APRIL 2, 2004

CONGRESSIONAL-EXECUTIVE

COMMISSION ON CHINA,

Washington, DC.

The roundtable was convened, pursuant to notice, at 10:30 a.m.,

in room 2255, Rayburn House Office building, John Foarde (staff

director) presiding.

Also present: David Dorman, deputy staff director; Susan Roosevelt Weld, general counsel; Selene Ko, chief counsel for trade and

commercial law; Carl Minzner, senior counsel; and Keith Hand,

senior counsel.

Mr. FOARDE. Good morning, everyone. My name is John Foarde.

I am the staff director of the Congressional-Executive Commission

on China [CECC]. Welcome to this issues roundtable on influencing

China’s WTO compliance and commercial legal reform.

Since China’s accession to the WTO in 2001, the Commerce Department has been conducting a small number of one-day technical

assistance seminars in China, covering such topics as IPR enforcement, franchising, and legislative drafting. While effective within

the limited scope that the Department intended, the Commerce

Department organized these seminars on an ad hoc basis and Commerce Department offices with relatively little experience in providing technical assistance have been conducting these sessions.

These seminars have been funded by unobligated funds that had

originally been allocated for other purposes in the Commerce Department budget.

To date, the Administration has not dedicated specific funds to

providing technical assistance to increase China’s capacity to fulfill

its WTO commitments. The fiscal 2004 budget increases funds for

several Federal agencies to dedicate to China’s WTO compliance efforts, but these monies are directed toward enhanced monitoring

and enforcement and not toward technical assistance. Congress has

dedicated no funds specifically to technical assistance to increase

China’s capacity to meet its WTO commitments.

The Commission’s Annual Report in 2002 recommended that the

Administration develop a comprehensive plan for WTO-related

technical assistance to China, and the same report also recommended that Congress appropriate funds for the Commercial

Law Development Program [CLDP] to implement a commercial

rule of law training program in China.

2

Given this background, we wanted to spend some time today

with Commerce Department representatives and with a representative from the business community to talk about commercial law

technical assistance to China and how we might move forward on

a program similar to those sponsored by China’s other trading

partners and that might be helpful to, and benefit, U.S. business

and trade interests.

We have three distinguished panelists this morning. All three

are good friends, and we welcome them all. I will introduce them

in more detail in a minute, but we have Hank Levine, Linda Wells,

and Leslie Griffin.

Our procedure on these roundtables, as we have done for the last

two years, is that we give each of you 10 minutes to make an opening presentation. After eight minutes have elapsed I will tell you

that you have two minutes remaining. Then when everyone has

spoken, we will open it up to questions and answers from the staff

panel. We hope to be joined by some personal staff of Commission

members. It is conceivable, since they are in session, that we might

even be joined by one of our Commission members, in which case

the member would preside and take over the chairing of this

roundtable.

So we will begin with Hank Levine. Henry Levine is Deputy Assistant Secretary of Commerce for Asia Pacific Policy, Office of

Market Access and Compliance in the International Trade Administration at Commerce. Hank’s responsibilities include market

access concerns and compliance with international trade agreements. He is a member of the Senior Foreign Service and on detail

from the State Department to Commerce. He has served the U.S.

Government as an East Asia policy expert in a number of capacities, including as U.S. Consul General in Shanghai, a Deputy

Director for Economic Affairs at the State Department’s Office of

Chinese and Mongolian Affairs, and as Director for Asia-Pacific

Economic Cooperation [APEC] Affairs in the Office of the U.S.

Trade Representative.

Welcome, Hank. Welcome back from China. Over to you for 10

minutes.

STATEMENT OF HENRY A. LEVINE, DEPUTY ASSISTANT SECRETARY FOR ASIA PACIFIC POLICY, MARKET ACCESS AND

COMPLIANCE, INTERNATIONAL TRADE ADMINISTRATION,

U.S. DEPARTMENT OF COMMERCE, WASHINGTON, DC

Mr. LEVINE. Thank you very much, John.

First of all, thanks to the Commission for the invitation and the

opportunity to be here and explain a bit about what we are doing.

As I think you know, of course, we at the staff level also enjoy our

work with the Commission and appreciate what you all are doing.

Again, I am just happy to be here.

I thought what I would do is say a few words, first, about the

background and the rationale for what we are doing in the technical assistance area, and then a little bit about some of the things

that we are doing. As you mentioned, I come from the market access and compliance part of Commerce. Some might even question

why it is that we, on market access and compliance, are so actively

involved in the technical assistance area. Obviously, we spend a lot

3

of our time working with individual companies that have individual

market access problems in China, a variety of different things. In

addition to that, of course, we work closely with the other agencies,

USTR in particular, as well as State, and so forth, in pressing

China to live up to its WTO commitments.

That work spans the realm from quiet persuasion; to jumping up

and down and expressing intense unhappiness; to formal negotiations, in some cases; to ultimately, as we saw a few weeks ago,

actually filing a case in the WTO dispute resolution process.

So we are involved directly in market access and compliance with

individual companies, and more broadly in pressing China on its

commitments. However, we recognize that, while we are pressing

China to do the right thing, it is also true that China needs a lot

of assistance in developing the laws, the regulations, the trained

personnel, and so forth that are necessary for it to implement its

WTO commitments. For this reason, we see our technical assistance or capacity building efforts as a very important part of our

overall efforts to ensure market access for U.S. companies in

China.

I would note, by the way, that in addition to the normal efforts

that China has to make to implement its WTO commitments—after

all, any country that joins the WTO has to go through a process

of rewriting laws and regulations—on top of that, I would emphasize, there is another whole layer of activity going on in China. The

fact is that China is undergoing a massive transformation, moving

from a planned economy in the direction of a market economy, and

virtually every aspect of China’s laws and economic structure is undergoing changes, whether it is the health care system, whether it

is government procurement, whether it is the retirement system,

technical standards, education, the news media, and so forth.

The Chinese, I will say, are very hungry for ideas about how

other countries are pursuing these issues. And while we as Americans realize that we are not perfect in everything we do, the fact

of the matter is that we have the strongest major economy in the

world and we have a pretty darned good system in many other respects. Therefore, we have a lot to offer the Chinese as they are

pursuing their transformation.

In fact, since our system is based on principles such as transparency, the rule of law, and having an objective and fair judicial

process, in providing our views and perspectives to China, I think

we are broadly promoting a number of U.S. interests while we are

also making a contribution to China’s own reform and development

efforts.

Finally, I would just note in this regard that of course the EU,

Japan, and other countries are very active in their technical assistance programs in China, and in many cases, of course, we share

the same values and attitudes as the EU, Japan, and others.

Therefore, their efforts are complementary or additive to ours. To

be honest about it, however, in certain areas, in economic areas, for

example, in areas such as technical standards or other approaches

to the market competition policy in other areas, we may have a different perspective from the EU, Japan, or other countries. Therefore, it is particularly important that we make our perspective

available to the Chinese as they are pursuing their reforms and

4

their restructuring. Otherwise, we could wind up in a situation

where all of their reforms and restructuring are based on principles

and concepts from other countries, to the detriment of U.S. companies and our economic involvement in the China market. So, it is

important in that regard, too.

So there are some brief comments on the background, the philosophy that drives our efforts.

With regard to the activities of my part of the organization, these

are led out of our China office, as John mentioned, using money

otherwise appropriated to Commerce. To give you some sense of

some of the activities that we are undertaking, we have two major

events coming up in May. One, our U.S.-China Health Care Forum,

undertaking with HHS. Again, I note that China is redoing its entire health care system, and, working with our companies, we want

to provide our perspectives on how you develop a modern health

care system, employing principles of transparency, protection of intellectual property rights, and so forth.

Also in May, we are working with U.S. private companies to host

a major seminar on the Chinese logistics system, which really relates to our interest in distribution services and trading rights, a

key part of China’s WTO commitments. We are trying to help

China understand how we in the United States have gone about

creating such a vibrant, efficient logistics system, primarily by allowing market principles to drive the development rather than

micromanaging by government agencies.

We are doing a lot in the area of standards. We have done a

number of standard seminars in the past in China. We have another one that we are looking at for the late spring or summer. We

are also working with a group of private U.S. standards organizations on opening a U.S. standards office in China, we hope with

some support from the Commerce Department.

Briefly, many other topics. We are working with the National

People’s Congress on legislative drafting. We have done seminars

on pharmaceutical regulatory issues and anti-counterfeit training.

We have done medical device regulatory training, and government

procurement seminars. IPR enforcement has been one of the major

themes and we have worked directly with China’s enforcement

agencies, the Procuratorate, and others, on how to strengthen their

enforcement of IPR.

To sum up, I think we have a broad set of programs that we are

undertaking, keyed to the priorities of the U.S. private sector,

using the resources that we have on hand. We consider it an important part of our market access and compliance activities.

I look forward to taking your questions and discussing this with

you further. Thank you.

Mr. FOARDE. Thank you very much, Hank.

Let us go on. Let me recognize Leslie Griffin. Leslie is Director

of Asian Affairs at the U.S. Chamber of Commerce here in Washington, and also Executive Director of the U.S.-Korea Business

Council.

In her work as Director of Asian Affairs, Leslie develops and executes U.S. Chamber programs and policy relating to U.S. trade and

investment in the Asia Pacific region. In carrying out the Chamber’s Asia trade agenda, she works extensively with member comVerDate 11-MAY-2000 11:40 Jun 08, 2004 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 93683.TXT China1 PsN: China1
5

panies, state and local chambers of commerce, business coalitions,

American chambers of commerce abroad, and U.S. and foreign governments. Her responsibilities include issues relating to U.S. business interests in greater China, Japan, and Korea. She serves as

staff executive for the chamber’s China WTO Implementation

Working Group.

Before coming to the Chamber, she served as a legislative analyst on tax and trade issues for the American Petroleum Institute

and worked as a budget analyst in the Congressional Budget Office. She has lived and taught in Nanjing, China, so she has a special relationship with China as well. We asked her to come this

morning to give a business perspective on commercial rule of law

development programs.

Over to you, Leslie, for 10 minutes. Thanks.

STATEMENT OF LESLIE C. GRIFFIN, DIRECTOR, ASIAN AFFAIRS, INTERNATIONAL AFFAIRS DIVISION, U.S. CHAMBER

OF COMMERCE, WASHINGTON, DC

Ms. GRIFFIN. Thank you, John. Thank you all for inviting me to

participate today.

As John said, I was asked to talk about some of the business

challenges that we are seeing in China, and then try to link those to

how a commercial law development program could be of assistance.

The Chamber definitely thinks that a Commercial Law Development Program, CLDP, consistent with Section 511 of the U.S.-

China Relations Act, would make a positive contribution to helping

China develop its capacity to fully implement its WTO commitments and to create a more transparent business environment for

our companies.

The Chamber strongly supported China’s WTO accession, and we

did so because we thought it would help support the country’s

broader reform efforts, as Hank mentioned, and, as I said, to create

a sound business environment. The trade and investment commitments that China made are enormous in scope, and the steps needed

to carry them out are equally enormous. Well over 1,000 Chinese

trade laws, regulations, and rulings had to be reviewed for WTO

consistency. Many new laws are now being drafted to cover sectors

that were previously closed to foreign participation. Throughout the

government, major departments are setting up WTO committees to

review industry-specific laws and millions of officials, legislators,

and judges are being trained. This challenge is particularly difficult

in the interior of China, where there is less familiarity with the

WTO’s mandates.

We understood all along that the implementation of these commitments was going to be difficult. We did not see this as an easy

ride. We think that in some areas their work has been impressive,

but in other areas there is a lot of additional progress to be made.

We do think that the Chinese Government has made a serious commitment to WTO compliance. But the same officials that make

these commitments readily acknowledge that they do not have the

depth of experience and the trained personnel on hand to carry

these commitments out, especially in some of the major reform

areas such as financial services and distribution rights.

6

I think that a CLDP program would give us a chance to work

with Chinese officials outside the context of a very specific negotiation or decision in ways that would allow us to build cooperation

for the future and present issues in their broad context.

So let us look at some of the compliance challenges we have seen.

The Chamber has a Chinese WTO Implementation Working Group

that is chaired by corporate leaders from various sectors. In the

last couple of years, we have done reports on China’s progress.

Rather than presenting a long list of sectoral issues, which I

could do, I am just going to focus on four broad baskets of concerns

that we have seen.

The first is transparency, which remains a key concern. The legal

and regulatory environment is not transparent. We do not see a

consistent enough use of advance consultations in the development

of new regulations, and we think that this type of consultation

would really advance the prospects for success in many sectors:

autos, telecom, direct selling, and such. It also would benefit China.

The professionalism and the experiences that foreign companies

have had in other markets would be very beneficial as China tries

to develop regulations that are economically sound and market

oriented. We hope to see ministries developing a regular dialog

with affected industries, as they have in some sectors, such as insurance. There has been a very good ongoing business-government

dialog. Express services. There have been some good examples of

dialog, and we want to see that continue.

The second broad area I would highlight would be, of course, intellectual property rights protection, where after two years of China’s membership, it is clear that the enforcement system is far

from effective. American companies lose billions of dollars each

year to piracy and counterfeiting. Examples include counterfeit

pharmaceuticals, especially those sold outside of hospitals, pirated

movies, books, films, and software. The unauthorized use of business software is rampant.

Then we are starting to see counterfeiting in industrial sectors,

like automotives, where there is theft of industrial designs. We

think that enforcement is not going to be effective until civil, administrative, and criminal penalties are routinely applied to infringers. And while we do see raids carried out at the central and

provincial levels, the penalties are just not at a high enough level

to really serve as a deterrent. We would like to see China continue

with its efforts to train judges in IPR laws, to provide adequate resources to police, prosecutors, and administrative agencies, and, to

make sure that these penalties are sufficiently high to serve as a

deterrent.

The third broad area I would highlight would be standards. We

obviously have a major issue confronting us right now with respect

to the wireless local area networks and encryption standards that

China is trying to mandate. China’s adoption of mandatory standards that are out of step with international standards efforts and

that do not consistently respect intellectual property rights are a

major concern to the United States IT industry. We would like to

see the Chinese Government participate more actively in international standard-setting bodies and to align its own standard

7

development efforts with internationally recognized standards and

practices.

Finally, I would highlight government procurement, where we

are concerned about China’s implementation of its government procurement law, which just came into force in January 2003. It applies to all goods and services procured by government entities.

They are going to be releasing detailed implementing regulations

sector by sector, starting with software. We think that the regulations they come up with in software are going to give us some hint

as to their thinking for many other sectors, and it is important

they get those right. They are going to be issuing a definition of

local software, and we hope that that sets a low threshold of what

is considered domestic software so that more American companies

can participate in the procurement market for software.

So then how, looking at those broad challenges, can a CLDP be

helpful? Well, first, I would acknowledge the excellent programs

that the Department of Commerce is already carrying out, the technical assistance seminars on IP standards, franchising, and other

areas. I would also recognize the good work of some private sector

entities, including John’s former employer, the U.S.-China Business

Council, which launched a U.S.-China Legal Cooperation Fund in

1998. That fund has extended a number of important grants over

the years to further develop transparent and impartial legal institutions in both countries.

But despite the impressive efforts being carried out, obviously

the challenges remain. In the case of IP, they seem to be expanding

in scope and dimension, not diminishing, so we think that a CLDP

could make a valuable contribution to the business landscape.

Looking at how CLDP is operating in other countries, its programs are helping political, regulatory, judicial, and commercial

leaders make important improvements in their policies. Significantly, a lot of CLDP’s work is actually focused on WTO accession,

and then implementation of WTO disciplines such as IP product

standards and market access. So it is easy to see a link between

the problems that we are facing and the kinds of positive contributions that a CLDP could make.

For example, with respect to transparency and the need for a

more consistent use of advance consultations, CLDP is working

with host countries to promote more transparent decisionmaking

and to involve businesses in the development of policies that impact them. CLDP efforts resulted in the first-ever public outreach

programs conducted by Russia’s Ministry of the Interior, and regular business outreach programs by the Albanian Ministry of Trade

and Industry, to name just two examples. And a CLDP program in

Egypt has increased the acceptance of U.S. standards by initiating

a relationship between ASTM International and the Egyptian Organization for Standardization and Quality Control.

I think the importance of having a U.S. Government program

along these lines is even more clear when you consider what Hank

raised, which is the efforts that our other trading partners with

China are making, such as the EU and Japan. In the case of the

EU, they are investing significant efforts into the development of

cooperative programs in China that are geared toward improving

the business prospects for European companies, and raising the

8

profile of the EU in that market. In 2000, the EU launched an EUChina Legal and Judicial Cooperation Program, focused on reform

of laws in the criminal, trade and commercial, and administrative

areas. China’s MOFCOM is the main implementing agency, but

this program also involves China’s Ministry of Justice, the Supreme People’s Court, and the National People’s Congress. These

are all important partners for the U.S. Government to be engaging

in a more sustained way through a CLDP program.

I think standards, as Hank said, also represent a key issue on

which the government has to adopt a more active approach. The

EU and Japan, in many cases, have a more natural advantage because of their domestic industrial policies. In some cases, the

United States has companies involved in competing standards,

which restricts our ability to advocate. But in those areas where

U.S. companies have a unified position, I think the CLDP could

help us marshal our advocacy resources to help those companies.

Finally, I would just say that beyond the efforts that Commerce

could carry out on its own, CLDP could make new funds available

for, and help coordinate better the efforts of, other existing academic, research, and NGO efforts in this area.

As one example, the U.S. Chamber-affiliated Center for International Private Enterprise [CIPE] is eager to expand its rule of

law programs in China. Its mission is to promote democracy

through economic reform and private sector development. They

would be effective in organizing, just as one example, a series of

workshops to explore mechanisms and policies appropriate for the

new economic environment created by China’s WTO membership.

A CLDP might also support an initiative like the new U.S.-China

Business Mediation Center. The Chamber serves on an advisory

committee to the Center. It is a commercial dispute facility that is

helping U.S. companies and Chinese companies look for alternatives for the adjudication of disputes. We think that the greatest

obstacle to increased use of mediation is a lack of awareness of how

mediation can be beneficial, and a CLDP might be helpful in this

regard.

So, wrapping up, we do think that the Chinese Government has

made a sincere effort with respect to carrying out its commitments.

We think it is important to distinguish, in areas where there are

shortcomings, between those areas where they are willfully not carrying out their commitments and where there is a genuine effort

under way, but there is just not the technical capacity to get the

job done. I think a CLDP program could be helpful in those latter

cases. CLDP programs have made a meaningful contribution in

countries all over the world, and they certainly belong in China, a

country that holds so much promise for U.S. companies. American

companies have a great stake in China’s success, and we should be

deploying all available resources to help improve the environment.

Thanks.

[The prepared statement of Ms. Griffin appears in the appendix.]

Mr. FOARDE. Leslie, thank you very much. Lots of food for

thought there.

Let me go on and recognize Linda Wells. Linda is the Chief

Counsel for Commercial Law Development and the Director of the

Commercial Law Development Program at the Department of ComVerDate 11-MAY-2000 11:40 Jun 08, 2004 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 93683.TXT China1 PsN: China1
9

merce in the Office of the General Counsel. We will hear more

about the program from her, I am sure. But before she became the

first director of CLDP she was Senior Commercial Counsel for the

Overseas Private Investment Corporation [OPIC] here in Washington, and was also associated with the law firm of White & Case.

Linda, welcome. Please.

STATEMENT OF LINDA WELLS, CHIEF COUNSEL FOR COMMERCIAL LAW DEVELOPMENT, DIRECTOR, COMMERCIAL

LAW DEVELOPMENT PROGRAM, OFFICE OF THE GENERAL

COUNSEL, U.S. DEPARTMENT OF COMMERCE, WASHINGTON,

DC

Ms. WELLS. Thank you very much. Thank you for the opportunity to meet with you this morning. Not only is it always a pleasure to talk with you all, but it is always nice to hear somebody sing

our praises.

The Commercial Law Development Program is part of the Office

of General Counsel at the Commerce Department. We were created

about 12 years ago for the purpose of providing support to countries that are either developing or in some form of transition to

help them develop a more market-friendly legal and regulatory environment. So, basically, more briefly stated, our mission is to

make it easier to do business.

We are a part of the General Counsel’s office, as I mentioned. I

should just explain because it confuses people sometimes. We are

a separate part of the General Counsel’s office, independent from

the policymaking and the compliance aspects of the rest of the

General Counsel’s office, for example, the Chief Counsel for International Commerce or the Chief Counsel for Import Administration, and also from the International Trade Administration, people

who are involved directly in negotiating and in compliance matters.

The advantage to that is that, although our policy obviously is the

same, we can take a track that is slightly outside the sometimes

more confrontational or controversial aspect of the Department’s

relationship with other countries.

In addition to the programs that Hank mentioned, the General

Counsel’s office has also been engaged in a series of roundtables

with its counterparts in China. Most recently, in December of last

year, there was a program on U.S. corporate law. Previously, the

Chinese have provided us with information about the changes that

they are making as part of the review of their legislation for WTO

compliance. The difference between what they can do and are

doing, which is very important, and what we can do, is that the

CLDP has the capacity to do types of assessments and follow-up

and the development of an integrated package of assistance that is

sometimes outside the capacity of some of the other offices, not only

within the General Counsel’s office, but also in other parts of the

Department.

CLDP provides consultations. We do conferences. We have skills

development programs. We can exchange experts. We actually

sometimes post people inside ministries. We had one fellow working inside the Albanian Ministry of Trade for four years. He had

an office there and just basically augmented their staff, in order to

help them develop the internal capacity to achieve some of the

10

things that they needed to do in their accession to the WTO, and

then, later, compliance with the commitments that they had made.

One of the things that CLDP can do is be a catalyst for reform.

The WTO work that we do, which, as Hank and Leslie mentioned,

is a very significant part of our portfolio, is oftentimes really just

a lever that we can use to try to promote wider reforms, either in

macroeconomic policy or in support of transparency and cooperation with the business community.

The strengths of CLDP, being a government agency, are largely

in the government-to-government area and in helping governments

work better with their private sector, because that is what we do.

So, we can share that experience and, I think, bring some credibility and some shared pressures, concerns, and perspective to our

counterparts that provides us, I think, with some measure of access

that we might not otherwise have.

We work on a very wide variety of issues, financial services, intellectual property, standards, public procurement, privatization,

judicial reform, pretty much the whole panoply of anything that

might affect business. But WTO is a major part of our focus.

In the WTO work, we have done both accession and post-accession implementation assistance. In the course of an accession assistance program, our work may focus on policy development, for

example, working with senior officials to understand market-oriented issues in countries that maybe perhaps have not had so

much experience with that. Also, we do the technical side of it, providing skills development in macroeconomic analysis, econometric

modeling, and things of that sort. We also provide assistance in the

actual accession process. So, for example, supporting preparation of

the memorandum of trade regime, helping with the preparation of

answers to ensure that they are responsive to the concerns of the

working party that is reviewing an application.

We also provide skills development training and negotiation, and

also even for interpreters. One of the things that we found in many

places is that the language becomes an artificial barrier because

the interpreters do not know how to say what the policy people are

trying to communicate.

From a more institutional perspective, we can work with our host

governments to develop government organizations and private-public communication fora that enable them to formulate sound economic policy and to implement it within the government and

through the business community. One of the things we find in

many countries, for example, is they do not have a mechanism for

coordinating within a government input into trade policy formation, and then later, execution. You wind up with a disjointed system where the people at the Ministry of Trade are totally on board,

fully committed, but the guy in the next ministry does not really

understand what they have done on his behalf and does not know

how to execute what they have promised. So we can work, and

have worked with many countries, to try to help support the development of both institutions and processes that lead to sound and

consistent trade policies and compliance.

We work, obviously, in the legal and regulatory reform area,

helping countries to evaluate their legal systems for compliance

with WTO commitments and norms, and to develop reforms,

11

amendments, new legislation where that is necessary in order to

bring them into compliance.

One of the steady things in all of the work that CLDP does is

trying to promote transparency and trying to promote private sector participation in the formation of trade policy. As Leslie mentioned, I think this is one of the areas where, independent of the

direct results that we are achieving, I think the attitude changes

that come with that are really a significant part of what we are accomplishing around the world.

A large part of our accomplishment, I think, is actually outside

the context of the specific technical assistance programs that we

are conducting, although I do not choose to diminish those. I think

we are achieving some very significant changes in both law, policy,

and organizational structures. But I think we are also serving a

useful purpose in the change of attitudes and the comfort level of

foreign officials that the United States is working with. One of the

advantages of a Commercial Law Development Program or other

kinds of technical assistance is that you can discuss these issues

outside the context of a specific negotiation or a specific trade dispute. In doing so, you can raise the comfort level of officials and

others who may not really understand what you are asking or why

you are asking it of them in this other context. If you can have the

conversation as a sidebar, you can actually make them understand

much better than in negotiations that are being undertaken why

there is a conflict, and perhaps resolve it more quickly, or prevent

it entirely.

I mentioned earlier, I think the ripple effect of what we are

doing, particularly in the transparency area, is also significant.

Once officials become comfortable talking with the business community, talking with other agencies, perhaps publishing things

that they are considering doing before the decision is made, as they

see that those are not really threatening, it is much easier for them

to adopt those practices in other parts of their work and much

more likely that they will demand others do the same with respect

to them.

Finally, the development of professional relationships. One of the

significant advantages, in my mind, of a Commercial Law Development Program is that, through our assistance programs, we get to

know each other. We understand each other’s ideas. We understand the values that we are using in approaching issues. We

understand the technical difficulties that our counterparts have, either we have or our counterparts overseas have. That mutual understanding, and just simply the personal introductions, I think,

have good, long-lasting effect. I know I can see in many of these,

these are just programs that we have conducted, that people who

participated have continued to have a relationship through the

years afterward. That has made it possible for them to send an email and say, ‘‘I am thinking about doing this, or I am going to do

that, or what do you think, or do you know anything about this? ’’

The communication that continues after the technical assistance

program ends has been invaluable to the people at the Commerce

Department and the other agencies with which we work.

Just in conclusion, Leslie talked about our work with other organizations. One of the things that CLDP prides itself on is working

12

with both private sector organizations from the United States, and

also with other international donors. Where the European Union is

doing a program, we may do it with them or we may balance their

presentation with one of our own. Sometimes there are areas where

we definitely, 100 percent, are on track with them, so we will let

them spend their money on one thing, and then we can spend our

money on something else, so that the result is a much greater use

of both of our resources. There are a lot of times where the private

sector can better affect the sort of results that we are looking for,

and as a consequence of that, we bring in private advisors, we work

in partnership with organizations such as CIPE and CIME, and the

University of Maryland, and some of the other donors that you may

know around here. I think that has proven a very effective strategy

for us because it enables us to coordinate and to bring in all types

of resources rather than just Commerce Department resources or

government resources.

[The prepared statement of Ms. Wells appears in the appendix.]

Mr. FOARDE. Linda, thank you so much.

Thanks to all three of our panelists.

I am going to give you a chance to rest your voices for just a

minute while I make an administrative announcement or two. In

a few weeks, the entire transcript of today’s roundtable will be

available on our website. That is, www.cecc.gov. If you have not

signed up already for our alerts, please do so there. You can also

unsubscribe there.

I would also like to announce that our next roundtable will be

held on Monday, April 19, after the Easter break, at 2 p.m. here

in this room, 2255. Our topic will be North Korean refugees in

China, and looking at the legal and policy aspects of the Chinese

Government’s attitude toward North Korean refugees. We will have

three distinguished panelists: one from Refugees International, one

from the Defense Forum Foundation, and a South Korean gentleman who has been very active in working on behalf of North Korean refugees in China. So, we look forward to seeing you here on

April 19. An announcement will go out on our e-mail list in a couple

more days.

Now let us turn to our question and answer session. Each of the

staff members here will get a chance to ask a question and listen

to the answer for about five minutes, and then we will do as many

rounds as we have time for before about 12 noon. I understand that

Hank may have to leave a few minutes early, so if you do, just let

us know. We appreciate very much your participation while you are

here.

Let me begin the questions by picking up on a couple of things

that were both in Hank’s presentation and Linda’s. That is, in your

work in other countries with CLDP, are there benefits that come

from separating the compliance budgets and personnel from the

technical assistance budgets and personnel, and would that be a

good model for what we do with China?

Ms. WELLS. I think there is a place for both to be involved. Both

can accomplish slightly different things. The advantage of having

a separate group outside the compliance context is that we do not

show up giving advice in week one, and then negotiating or filing

cases against them in week two. We are still part of the Commerce

13

Department, so it is not total separation, but it gives us a little

more credibility.

Mr. FOARDE. There is never any bleed-over? You never hear from

your cooperators that, well, you guys are beating up on us because

you just filed under 301, or something like that. Has that ever happened?

Ms. WELLS. We get lots of complaints. Sure. But what they can

do, is they can say, those guys have filed a case against us. We are

doing the best we can. What else do you want us to do? We can

help them figure out how to resolve the problem, how to change

what they are doing or how they are doing it so that it does come

into compliance. We can offer them a sounding board so they can

explore some of the options before they actually go into a negotiation to better understand why things are being asked of them, for

example.

Mr. FOARDE. Anybody else have a comment on that?

[No response.]

Can you talk a little bit about where the funds come from for

your CLDP programs?

Ms. WELLS. Ninety-nine percent of our funding comes from either

USAID or the State Department through interagency agreements.

They basically hire us to provide technical assistance.

Mr. FOARDE. So you have no program budget of your own, to

speak of, for this sort of thing.

Ms. WELLS. Not even just to speak of. We have no program budget

of our own. We also do occasionally work for USDA in cooperation

with other international organizations, but, as I said, 99 percent of

it is AID or State.

Mr. FOARDE. And those AID funds are normally ESF funds, or

DA funds, or both? Do you know?

Ms. WELLS. It is a mix. It depends on where it is and even in

some countries, we have a combination of different types.

Mr. FOARDE. Let me hand the microphone over to Dave Dorman,

my friend and colleague, who is the deputy staff director of the

Commission and works for Senator Chuck Hagel, our Co-chairman.

Dave.

Mr. DORMAN. Well, first, thank you very much to all of you for

coming today. This is a topic that is of great interest to all of our

Commissioners. I should say, in particular, this is a topic that is

of great interest to Senator Hagel, who has been working with our

ranking member on the Senate side, Senator Baucus, and other

members on the Senate side, to find some way to fund a CLDP for

China in a very tough budget environment.

In conversations with Senate staff on this particular topic, a

number of questions have come up. It would be very useful to answer these questions on the record because they are the sorts of

questions other people might think of when considering a program

like this. For the most part, I think that Congressional staff are

aware that the Office of Market Access and Compliance is conducting technical assistance seminars. Understanding there is no

CLDP program in China right now, but there are technical seminars ongoing, if funding was found for CLDP, what happens at that

point? Do the sorts of technical seminars that are being conducted

by Market Access and Compliance stop and CLDP picks up those

14

programs? Based on our own roundtable announcement, some technical seminars being conducted by Commerce offices with less than

perfect skills in conducting such seminars. So the first part of that

question is, what happens to the seminars that are being conducted

right now? Is that a function that would be transferred to the

CLDP office?

The adjunct of that question, and one that has come up frequently, is what sorts of coordinating mechanisms—occur between

the CLDP office and Market Access and Compliance when both offices are active in a country? What are the sorts of contacts and

conversations that go on between Market Access and Compliance

and CLDP in terms of ensuring that we are making the best use

of our dollars?

Ms. WELLS. Do you want to start?

Mr. LEVINE. Yes. I am happy to take a shot at the first question.

Then Linda, based on her experience, can either add to that or

whatever, and then Leslie can comment, too. What the heck.

[Laughter.]

The first question, essentially, is a hypothetical in the sense of,

‘‘What would we be doing if there were a CLDP program? ’’ I guess

what I could say is that, were we in that position, we would obviously want to take a good, hard look at the current programs and

activities, and then look at what CLDP could do. It would certainly

be my hope—obviously depending on the budget situation at that

time—that we in Market Access and Compliance would be able to

continue to undertake activities that could dovetail with, or supplement, the activities that CLDP would be doing.

Getting to your second question, we would want to coordinate

very carefully with CLDP and make sure that we are not duplicating and wasting scarce resources. So, I would hope that we

could continue to add value by filling in gaps, or supplementing, or

supporting and adding to other things CLDP would be doing.

Ms. WELLS. I would second that idea. As I said in my earlier

comment, I think there is a place for both and there is a need for

both. When the compliance people go and do technical assistance,

they are there with a slightly different face than my folks are. That

can be extremely useful. Just like we use private sector people to

do some things and government people to do some things, having

people from different parts of the government also can be useful.

I would share Hank’s hope that what we would wind up with is

a more integrated package. One of the things that having CLDP

would do, in addition to the existing compliance programs, would

be to enable us to perhaps do a little more of the diagnostic work

to support them and get their work as part of a coordinated package. We could do some of the followup and some of the supporting

assistance that might make it more likely for their programs to

show the results that we would like to see. I think we would want

to coordinate.

To answer your second question, whenever we are launching a

new program, and periodically throughout the implementation of

an existing program, we are consulting not only with other parts

of the Department of Commerce, but also the business community,

USTR, the State Department, Department of Agriculture, and

other organizations to make sure that we are staying focused on

15

the issues that are of greatest concern, either because they are

most important for our economic interests or because they are

proving to be sticking points in the bilateral relationship. So, we

are already consulting on a regular basis with other parts of the

Department, and I am sure that that would continue.

Mr. DORMAN. Good. Thank you.

Mr. FOARDE. Susan Roosevelt Weld is our general counsel. Over

to her for questions.

Susan.

Ms. WELD. I am interested in having the views of all of you, but

especially Linda, from your experience in doing CLDP programs

elsewhere. Are laws such as those in the PRC having to do with

state secrets a problem with promoting transparency? Do any of

the countries that you work in have that kind of legal framework?

Ms. WELLS. I will not comment directly on the Chinese law because I am not enough of an expert at this point. But, when we

started working in Poland, for example, it was illegal for a business

to show us their books. So it is not uncommon in the rest of the

world that there are rules about what kind of information can be

shared, that there is no prior publication. Forget about something

you are considering for announcement or a notice-and-comment

process. They do not even publish the laws, sometimes, even after

they are adopted. They think, in some places, that it is bizarre of

us to ask for them to do that.

Our experience has been, most of the time, that when you explain, when you have a discussion, when you can show your counterpart examples of what the benefits are of discussing things in

advance, what the benefits of sharing the information are, if the

objective of a law is to have people change the way they behave,

then they need to know about it. If you give them some skills and

you give them some experience, and you give them some comparative models that may not be quite as extreme as in the United

States but are in that direction, that we found people to be quite

responsive.

Ms. WELD. Thanks a lot.

Mr. FOARDE. It is now my privilege to recognize our friend and

colleague, Selene Ko, who is chief counsel for commercial law on

the Commission staff, and responsible for helping organize this

roundtable. But I have to begin on a somewhat melancholy note,

because this is Selene’s very last issues roundtable for us. She is

leaving us April 9 to go to the Office of the Legal Adviser at the

U.S. State Department, where I worked some years ago. Perhaps

in the future, she will help keep Hank Levine out of trouble. I want

to thank Selene for being such a stalwart colleague, and such a dynamic force, on the Commission staff these past two years.

Now it is time for your questions. Go ahead.

Ms. KO. Thank you all for being here. As the panelists here

know, this has been a particular effort on my part to examine the

CLDP issue. One thing I thought might be good to have on the

record, something that we have all discussed, both in the context

of the CECC Annual Report and in private conversations, is: if everyone believes that CLDP would be such a good thing in China,

why is there no U.S. Government budget for it? To whatever extent

16

you all might be able to share your thoughts on that, it would be

appreciated.

Mr. LEVINE. Well, obviously, when we are looking at the overall

Administration budget, those decisions are made at the White

House, and ultimately by the President, looking at, as we all know,

an enormous number of competing demands for limited tax dollars.

Frankly, there is not much more that I could say. At my level, and

generally in the Commerce Department, we work within the framework provided both by the White House budget, and then the

money that is appropriated by the Congress.

Ms. GRIFFIN. Well, my understanding, too, is that I think there

are some reasons why AID is not operating in China now, much

like the Overseas Private Investment Corporation [OPIC] is not operating in China now. We would like to see these programs opened

in China. I think that OPIC, just for example, is something that

could be a valuable resource for American companies there. So,

there are legacies of some past sanctions, I think, that have prevented some of these organizations from extending money for programs in China. We think it would be helpful to see us be able to

take advantage of those.

Ms. KO. Thank you.

Mr. FOARDE. Let me recognize Carl Minzner, who is a senior

counsel on the Commission staff as well.

Carl.

Mr. MINZNER. Thank you very much for coming here today. I

quite appreciate the opportunity to hear your opinions about the

CLDP program that I think many people would like to undertake.

I want to return to something that you all touched on a little bit

earlier. I think all of you talked, particularly you, Ms. Griffin,

about types of projects and issues that the CLDP could be used to

address. For the moment, I think I would also like to get more of

your input on the format of particular projects, the particular way

in which projects might be able to be carried out. All of you touched

on this a little bit earlier. For example, we talked about having

full-time staff members in other countries, notably in Albania. Ms.

Griffin raised funding possibilities such as the U.S.-China Legal

Cooperation Fund.

Could you all talk about programs in a little bit more detail?

Speculate. It does not have to be a promise to undertake a particular program. Speculate on particular formats of programs that

might be useful to undertake in China.

I appreciated something that Ms. Wells mentioned, that you

noted that one of the things that is important in the Chinese context is establishing long-term relationships. I think you also said

that with regard to many other countries. How could some of these

issues be addressed through particular types of formats that programs might take if a CLDP China program were to be initiated?

Ms. WELLS. I do think, based on what I know about China, that

the long-term issue is going to be particularly significant. I think,

if we were in China, we would probably want to focus on that in

structuring things. That insight would lead me to think that we

would probably place a higher emphasis on having people resident

in China. Given the problems that we see in national versus

sub-national, central versus sub-central, implementation of WTO

17

commitments, that probably also means putting people outside Beijing. I think that one of the strategies we would want to employ

in the sector-specific work that we might do would be to establish

working groups that would meet on a regular basis. We have done

this, for example, in Eastern Europe.

In Southeast Europe, we have, through the Stability Pact, some

trade working groups that meet a couple of times a year. It is the

same people. Simply getting those people together in one room has

provided some continuity and some results that I think have been

really significant, and might be a model to replicate in China.

Mr. LEVINE. I would just add for the record that I guess there

have been a couple of references to the fact that some of the ongoing programs are undertaken by folks who do not have an enormous amount of background in doing programs. I think our folks

who have been working on the current programs really are doing

a superb job, with the resources and under the circumstances that

they have been working.

Having said that, clearly, one of the limitations that we face in

our current work is the constraints on our ability to have the more

sustained type of effort, I think, that you are talking about. We do

try to build in continuity to the extent that we can, so we might

go out one year and have a seminar on IPR enforcement, and the

next year try to build on that and follow up, and so forth. But in

terms of the types of things that Linda is talking about that a

CLDP is capable of mounting with a more sustained presence on

the ground, that type of sustained and deep continuity is beyond

our abilities at the moment.

Ms. WELLS. Could I just second what Hank is saying? A lot of

the people who are doing the ad hoc work that the Commerce Department has been doing are the same people that we would use.

It is not that those individuals are not good at what they are doing,

it is simply that, when they come home, they have a primary responsibility to do something else. Their availability for designing

and implementing follow-up work is just not the same as somebody

whose purpose in life is to try to do that.

Ms. GRIFFIN. I do not really have a lot to add, other than if you

look at the U.S.-China Legal Cooperation Fund’s website and see

the fund that they established, the types of grants that they have

given, there are many different things you can do, whether it is an

interdisciplinary seminar on WTO standards issues, or best practices manuals in Chinese, or training seminars for judges. There is

just a whole series of things that can be helpful to us.

Mr. FOARDE. I would now recognize our friend and colleague

Keith Hand, who is also a senior counsel on the Commission staff.

Keith.

Mr. HAND. Thank you all very much for your comments. A number of you raised the issue of local inaction versus lack of capacity.

I am wondering if you could tell us what areas fall under the willful inaction category as opposed to lack of capacity. In the areas

where the problems are primarily political, do you see CLDP playing a role or is CLDP only useful in the capacity building context?

Ms. GRIFFIN. It is funny. When I put that in my remarks, I

feared I would get that question. There are far more baskets you

could create. I mean, there are examples where there are legitiVerDate 11-MAY-2000 11:40 Jun 08, 2004 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6633 93683.TXT China1 PsN: China1
18

mate, if unwelcome, interpretations of ambiguous commitments

that they made. At times there are aggressive interpretations of

things that could be reasonably interpreted either way. There are

cases where there is a blatant disregard for a commitment, cases

where it is a technical capacity issue, and cases where they are just

not putting enough resources into the problem, into addressing a

problem. I would not try to assign a particular commitment to a

particular category. When we entered into this process, we knew

certain areas were going to be particularly politically sensitive, in

agriculture and in other areas, where we knew the challenges

would be particularly great.

But I do think that, in those cases where it is a case of technical

ability and training that is keeping China from being able to carry

out its commitments, that a CLDP program could be beneficial.

There is one example that I think is really telling. If you look at,

say, in the insurance sector and the kinds of changes China needs

to make; in the case of the China Insurance Regulatory Commission [CIRC], is, at the same time, trying to create a regulatory regime for the insurance industry that is compliant with WTO; it is

trying to review about 100 pending license applications; it is trying

to train and deploy new officials in the new cities that are opening

up as geographic restrictions come off; and it is trying to approve

new insurance product offerings. All of this, for the entire country

of China, with 600 officials at CIRC.

Now, by comparison, New York State’s Insurance Commission

has 900 people just working on that one state. So, it gives you a

sense of the scope of the training effort that is needed and the technical capacity that is needed to be able to fulfill some of these commitments.

Mr. LEVINE. I think it was Albert Einstein who once said,

‘‘Things should be made as simple as possible, but no simpler.’’ The

fact is, in looking at China, this is an enormously complex problem.

Like Leslie, I would hesitate to draw any percentages as to what

percent is due to the lack of skills and what is due to lack of political will, or to assign particular topics to baskets. The simple fact

of the matter is that there is no magic bullet here. In promoting

U.S. interests in our relationship with China, we need to be making maximum efforts in every one of the areas. That is, on the policy side, we and USTR, by negotiating, and pressing and bringing

WTO cases where we need to do that. But also on the development

side, pursuing the maximum amount of capacity building and technical assistance that we can provide. Without assigning particular

percentages or areas here, in fact both sides of the coin are enormously important and we really need to do as much as we can.

Ms. WELLS. If I can just add one technical point. There are ways

that technical assistance programs can be used to help overcome

policy resistance. I am thinking, for example, in the area of intellectual property. The people who are pirating products are very

vocal and will make it clear that clamping down on them is going

to cause problems for them. The rights holders whose product is

being stolen, the local rights holders, and the people from the

community who are being disadvantaged because they do not have

access to products because companies will not sell into an environment where there is so much piracy, tend not to be vocal. One of

19

the things that assistance can do is to help them mobilize and more

effectively articulate that they are an interest group, that they

want their government to provide the sort of protection that the pirates may not want provided. It gives a different constituency a

voice, and that can help overcome the policy issue.

Mr. FOARDE. Let me pick up the next round by trying to clarify

a couple of things.

Linda, who are the experts that work for you? I know that CLDP

here in Washington is a lean and hardworking group. So, clearly,

with the level of effort that you have in the countries that you are

operating in, you cannot do it all out of your office. Where do you

get the people that work on programs in individual countries?

Ms. WELLS. From other parts of the Department, other government agencies, the private bar, the judiciary, educational organizations, people who are retired government officials. It is a wide mix.

What we try to do is to identify who is going to have the best expertise, and then go after them. Who is going to be able to best

communicate the issue to their counterpart?

Mr. FOARDE. So not just people from Commerce, but it could be

from any part of the U.S. Government or educational institutions

in the United States.

Ms. WELLS. Or law firms.

Mr. FOARDE. Law firms. Everything.

Ms. WELLS. Or other technical assistance providers. There are

times we will hire someone else to do something. We have worked

with CIPE, we have worked with CIME, we have worked with the

International Law Institute [ILI], and a number of other not-forprofit organizations. We will also bring in consultants who will

work for us for a daily fee.

Mr. FOARDE. So, without trying to get into too much of a hypothetical, in principle, if you had CLDP in China, you would draw

on this same universe of experts to do the type of work that you

might be able to do, if there were a program.

Ms. WELLS. That would be my expectation.

Mr. FOARDE. Right.

Another question for you that is related, and also comes from a

comment that Leslie made in her remarks, about the capacity of

CLDP to serve as a coordinator of U.S. NGO efforts and a clearinghouse, if I understood correctly. Is this happening already in the

places elsewhere in the world where you work? If so, how does it

work, exactly?

Ms. WELLS. It is happening. How it works in any given place

may vary. In Russia, for example, where we have been working

with them on their WTO accession for several years, we actually

sit down a couple of times a year with the European Union and the

British to talk about what their resources are, what issues they

may address, what we might address, what things we want to do

together and separately, so that we get the maximum bang for our

buck.

Just for example, I mentioned earlier the Southeast Europe program. We are working there, among other things, on customs implementation for the regional free trade agreements that they are

entering into. So we have got the World Customs Union, as well

as the U.S. Customs Service, involved. We are also doing a proVerDate 11-MAY-2000 11:40 Jun 08, 2004 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 93683.TXT China1 PsN: China1
20

gram with the American Chambers of Commerce [AmChams]

throughout the region, so we have got the AmChams involved in

that.

In other cases, one of the things that we have done with them

is actually work on negotiation skills. So, we have brought in ILI,

which does a very good negotiation training program, to essentially

serve as a subcontractor to us. So what we are trying to do in all

cases is identify what the obstacles are and figure out which resources should best be applied to get the results we are looking for.

Mr. FOARDE. While at the same time you are trying to avoid duplication. In other words, your own program is not doing something

that a U.S. NGO is already doing.

Ms. WELLS. Right.

Mr. FOARDE. Or another country is already doing.

Ms. WELLS. Right. In fact, one of the things we sometimes do is

offer to co-sponsor something that someone else was already doing,

or to send people that we are working with to somebody else’s

program. In West Africa, for example, we have been doing some

work in public procurement. We actually sent some people to another organization’s conference because we thought it would be a

good opportunity for them to meet with some international players.

I should mention that one of the things that we do, particularly

in our regional programs, that might have some applicability in

China, in Western Africa, for example, sub-Saharan West Africa,

we are helping them to establish and to strengthen the capacity of

alternative dispute resolution and mediation centers. There may be

some applicability in China. And in addition to connecting them to

centers here in the United States and to some Internet-based mediation services, we have also got them working together so that they

are helping each other figure out how to select and train mediators.

We have helped them put out a brochure about the resources available in the region. So, we are also working with our local counterparts to help them network.

Mr. FOARDE. Let me go on and recognize Dave Dorman for another question.

David.

Mr. DORMAN. Yes. I think we have come to conclusion on the difficult question of whether everyone here would support a CLDP

program for China. But let me turn it around. Have the Chinese

indicated in any way that they would be receptive to such a program? I know in your written statement, Linda, you mentioned you

went to a seminar some years ago, and part of the purpose of that

seminar was to gauge the receptiveness of the Chinese to a program like this. Do we know that there are open arms in China

waiting for something like this to happen?

Ms. WELLS. Well, I will start, but I think Hank probably has

more recent information. My experience with them personally has

been that they were very receptive, that they are really very interested in hearing what we have to say. Whether they do something

with it, I am not going to judge at this point, but they were extremely willing to talk. We spent hours over scheduled time going

through issues and discussing the consequences of some of the

things that we were talking about.

21

The rest of the General Counsel’s office, as I mentioned, has been

doing this legal exchange program. They have had the same experience: the program has been very much in demand on the part of

the Chinese, and the information has been very well received and

the follow-up communication quite steady. But you may have better information, Hank.

Mr. LEVINE. No. I think that, as a general matter, there is enormous hunger in China for the types of information, the types of activities that a CLDP undertakes. Again, we see it. Our problem,

typically, is not being able to do enough, really, to meet the demand on the Chinese side for seminars, for information in many

of the areas that are so critical to our interests. As a general matter, then, I think there is absolutely no doubt that China would

welcome enhanced cooperation and activities in these areas. Now,

I do not know enough about CLDP to know whether there are any

specific elements or ways of cooperation and so on that would be

particular problems in China.

If we talk about issues, as I understand it, CLDP is quite flexible

in how it pursues its cooperation and, I would assume, would adapt

itself to the Chinese system. For example, Linda mentioned that in

some countries you might have someone who was actually assigned

to a host government ministry. Again, at this stage, whether that

type of an arrangement could work in China as a particular method, I do not know. The program would have to adapt itself. But

there is absolutely no doubt in my mind that, in terms of the content, the types of activities, the Chinese would be very receptive,

indeed.

Ms. GRIFFIN. I cannot speak to their views on accepting government-to-government assistance, but just in terms of business input,

we have definitely seen a willingness of the Chinese to ask for our

companies’ input in a few different sectors. In particular, I know

in direct selling and insurance there has been some good dialog

going on. Typically, I found that they like to do it outside, in a lowkey fashion, not with cameras flashing in a U.S.-China business

negotiation of some kind. But, in a private way, they have reached

out to us to have us bring some companies together to talk about

an issue.

I think it speaks to the point each of us made earlier, which is

that it is helpful to have a program like this outside of a formal

decision that needs to be made, or a negotiation that is going on,

and they are perfectly willing to hear what our companies have to

say. It is in their interests to hear about the experiences our companies have had in other countries.

Mr. DORMAN. One of the things that always comes up in discussions that I have been involved with concerning CLDP—and you

have already touched on it, Linda—is that our European friends

and allies are much more involved in providing technical assistance

of the type that we are talking about here than the United States

has been engaged in. The underlying piece of this issue that always

seems to be just there, is that the sorts of technical assistance that

the Europeans are providing are beneficial to China, are beneficial

to European countries, but somehow are against our interests. Is

this true? Now, what I suspect, and maybe what you can help me

with, is the answer to this question is far more complex.

22

But beyond that, this question plays into something that you

said, Linda. Do our CLDP programs interact with other countries

that are providing similar sorts of assistance, and coordinate those

activities? Are programs like this reinforcing across the board?

So if you could all comment just briefly on these questions I

would appreciate it. Thanks.

Mr. LEVINE. I am happy to start, and then Linda can talk in

more detail about CLDP.

What you said is absolutely right. There are obviously elements

of the programs that the EU or Japan, for example, or Australia,

Canada, and others are running in China that are entirely consistent with the kinds of programs we would run if we had the

resources and we were running them, and they contribute to transparency. They contribute to the rule of law, et cetera, and there is

no issue.

On the other hand, clearly there are also areas in which some

of the ideas that are being presented, to the extent they are accepted by the Chinese, would give companies from the EU, for example,

or from Japan an edge in the market. One of the obvious outstanding areas is the area of technical standards. In fact, what we

have seen in any number of areas is China adopting standards that

are based on European standards, for example, in many cases to

the detriment of our companies.

Interestingly, what you find is that very often the companies in

the United States that would have the greatest problems as a result of that type of standard-setting process tend to be the smaller

companies.

The big multinational company that is already operating globally, they are operating in Europe, they are operating in Japan,

and so forth, might find it easier to accommodate itself to a European-type standard, for example, for a product that could be sold

in China. On the other hand, our smaller U.S. companies would be

the ones who would have a much harder time with that, and that

is why with the resources that we currently have, we have put a

relatively large amount of effort into the standards area. We really

do see it as a priority.

So I think that standard setting is a classic example of where the

agendas are slightly different, but there are going to be many other

areas where they are quite similar, with no problem at all.

Ms. WELLS. Just to reinforce what Hank said, standards, I think,

is the key area where we find that there is some difference. Particularly since so many of CLDP’s clients are countries that are in

the process of acceding to the European Union and are very Europe-oriented, standards is a special issue in a lot of our programs.

We can provide a balance. We can explain that you can set up

standards that provide you with safe, quality products without excluding anybody’s products. Just that added perspective, I think,

sometimes is very beneficial to U.S. exporters.

The other area you mentioned has about reinforcing messaging.

One of the reasons that we like working with other assistance providers is that if the United States goes in and says, this is a good

idea, it is the United States saying it is a good idea. But if the

United States, and the Europeans, and the Japanese, and some

other countries come in and say, ‘‘We all do the same thing, or

23

some version of the same thing,’’ it is not a policy push, it is just

the way the international market works, and it makes some of

those reforms that we are suggesting a lot more palatable.

Mr. LEVINE. Maybe I would add just two further thoughts. There

is one other area that comes to mind, for example, at least potentially. I do not think it has been that much of an issue, but an area

such as competition policy, for example, where there could well be

some differences in the way that the United States and the European Union look at the issue of competition policy. So, there are

some other issues that would come to mind. But reflecting on it

here, beyond that there is another point in all of this. Even in

areas where the ideas that we would be presenting would be identical, or quite similar to the ideas that other countries were presenting, in the process of running the program you are developing

relationships. In many of these programs, in fact, the audience is

not just government officials. The government that is funding the

program will bring in representatives of their companies to participate. So even where the fundamental content and the ideas of the

third country’s program are identical to something we might do,

there is a relationship building in a U.S. program. I do not want

to say a marketing effort, but there can be some significance. So

just to flag that when we are thinking about the competitive aspect

here. It is a significant issue and leads us in the direction of concluding that the United States should be doing the maximum that

we are able to do in undertaking these types of programs.

Ms. GRIFFIN. There is nothing I can really add to what has been

said on the subject, other than the point that Hank brought up

about small business. Just to put on the table that, yes, small business has a real stake in these programs and their success, whether

it is in standards or whether it is in, for example, transparency. I

think more small businesses would be looking at China if it did not

seem like such a morass of regulations that they do not understand. With respect to IP protection, these companies do not have

armies of lawyers to go out and file patent cases and things like

that. So, I think that these programs could be really beneficial for

small business.

Mr. FOARDE. Susan Weld, another question?

Ms. WELD. I would love to ask about your programs to encourage

implementation, especially in the IP area. How do you go about

that? I am thinking of a seminar out of one of the Asian conferences about implementation of the laws against piracy. One

presenter said foreign firms go in and do implementation work on

behalf of the Chinese Government, whose efforts had not been effective. I wonder, what are your views?

Ms. WELLS. We are the slow and steady type rather than fixing

a problem quickly, which some people find frustrating, but in our

view it has a more beneficial long-term effect. Our objective is to

put ourselves out of business, essentially. Our strategies are designed to make it possible for our host to do whatever it is that

needs to be done themselves. So what we would do on focusing on

any sort of implementation issues, is to figure out why it is not already being implemented. So whether it is a policy matter; whether

the senior management did not really buy into the commitment

that somebody else made on their behalf; whether it is a knowledge

24

issue—they do not know how to do what they have committed to

do; whether it is a resources issue; we are a lot more limited in

what we can do to solve that sort of thing, except that we can bring

attention to the fact that there is a resources issue. Sometimes it

is a communication issue. We can help with that. So, we will try

to figure out what is missing in the implementation chain and see

if we can focus on that. Is that responsive to what you were trying

to get to?

Ms. WELD. More or less. I wanted to follow-up, to ask about the

idea of placing someone inside of a Chinese Government agency. Do

you think that is something that would be possible? I know, with

respect to some of our assistance on HIV–AIDS, it has been effective to put people inside of the Ministry of Health. So, I wonder if

that is something which could be done as you do your work in

China.

Ms. WELLS. I do not think there is a single answer to that. I

think that, in some places, it might be possible and welcome. In

other places, even if it were welcome, it might not be appropriate.

My experience is similar, I think, to what Leslie was saying, that

while people were eager to talk with us, sometimes they did not

want to talk to us in their office. So, it might be more effective to

have some off-site place. In our other programs, we have found that

the utility of having somebody inside the government has evolved.

In Russia, for example, we had somebody inside the Ministry of

Trade for a long time. Then we got to a certain point in the relationship where that really was not the practical way to do things,

and we moved them offsite. In fact, at this point our Russia office

is staffed by Russians rather than being staffed by Americans.

So things evolve. I think we just have to figure out, with respect

to the particular agency that we wanted to work with, what the

best way of doing it would be.

Ms. GRIFFIN. Correct me if I am wrong, but the Quality Brand

Protection Committee in China [QBPC], which is bringing together

U.S. entities, Japanese entities, EU entities to try to make progress

on IP enforcement is, if I am not mistaken, actually housed within

a government entity. It is within an association for enterprises

with foreign investment that falls within the Ministry of Commerce. I think they have found that to be an effective means to develop a comfort level within the government about their activities.

Mr. LEVINE. I would just add that I think the answer is, as Linda

also was suggesting, that it depends. It would be something that

would have to be approached on a case-by-case basis, thinking

through—again, as Linda said—whether this approach is the best

way forward on this particular issue. In fact, my understanding is

that the U.S. Centers for Disease Control has someone in Beijing

who is co-located basically with the Ministry of Health.

Ms. WELD. That is right.

Mr. LEVINE. So on that issue, CDC does have someone. Now,

whether that is something that could be automatically or easily

replicated across the board with all ministries on all issues would

remain to be seen. But certainly that, as one tool would be one of

the things that people would want to look at and see. If it turns

out in a particular case that that is not possible or not the most

25

effective method, then I know CLDP has lots of other arrows in its

quiver.

Mr. FOARDE. It is fitting that, as we are coming up on the end

of our time this morning, that I would offer the last set of questions

to Selene Ko.

So, Selene, please go ahead.

Ms. KO. This is a question for Leslie and Hank. When you talk

to people in China who participate in technical assistance programs, what kind of feedback do you get from them with respect

to U.S.-sponsored technical assistance as compared with the kinds

of programs that are offered by China’s other trading partners? Beyond substantive differences, do they find there to be any other differences in terms of quality or the way information is presented

that could inform how a U.S. Government-sponsored CLDP program might be able to operate in China?

Ms. GRIFFIN. I have not talked to folks who have compared for

me.

Mr. LEVINE. I do not have a detailed response, but it is a very

good question. I have not had occasion, ever, to get into a detailed

discussion and hone in on the topic of discussion. It would be interesting for me to ask my colleagues out at our embassy. What we

do hear frequently is that, quality aside, we hear the issue of quantity. Chinese officials note the very extensive efforts that the EU,

in particular, is undertaking.

We often hear that comparison, that the U.S. Government seems

to be doing a lot less than, for example, the EU is doing. So, in

terms of quantity, we hear that. With regard to quality, that is

something to look into.

Ms. GRIFFIN. Actually, the only thing related to your question is,

first of all, our companies say that they want to make sure that,

with these CLDP programs, that the private sector has an adequate opportunity to contribute to the shaping of the training programs. So, that is one point.

The second thing I would say with respect to transparency in our

own system, is that I think people need to get a better understanding of where exactly funds for this type of effort reside

throughout the U.S. Government. It seems like there will be a Patent and Trademark Office [PTO] delegation out in China, and then

they will learn that there is a State Department delegation in a

neighboring province. I just think it would be helpful if someone

could somehow put in one place all of these activities and all of the

sources of funding that exist for them.

Ms. KO. Thank you very much.

Mr. FOARDE. We are close to the end of our time. So, on behalf

of Congressman Jim Leach, our Chairman, and Senator Chuck

Hagel, our Co-chairman, and the other members of the Congressional-Executive Commission on China, thanks to Hank Levine,

Leslie Griffin, and Linda Wells for being so generous with your

time this morning on this gray, rainy Friday, and for sharing your

views and your insights with us.

26

Again, the Commission staff will hold another staff-led issues

roundtable on Monday, April 19 at 2 p.m. here in this room on

North Korean refugees in China.

Thanks to our panelists and to all who attended. We will bring

this one to a close for today. Thank you all.

[Whereupon, at 12 p.m. the roundtable was concluded.]

(27)

A P P E N D I X

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PREPARED STATEMENTS

PREPARED STATEMENT OF LESLIE C. GRIFFIN

APRIL 2, 2004

I. INTRODUCTION

Thank you for inviting me here this morning to share the U.S. Chamber’s views

on establishing a program to support commercial rule of law development in China.

As the largest business federation in the world, with member companies of every

size, sector, and region, the U.S. Chamber is well placed to offer its views on issues

of commercial significance in the U.S.-China relationship.

The U.S. Chamber believes that there would be great value in establishing a Commercial Law Development Program (CLDP) in China consistent with Section 511 of

U.S.-China Relations Act of 2000. New initiatives and technical assistance provided

under such a program would help China strengthen its capacity to more fully implement its WTO commitments and to create a more predictable and transparent business environment for U.S. companies.

II. U.S. CHAMBER SUPPORT FOR CHINA’S WTO ACCESSION

The U.S. Chamber strongly supported China’s accession to the World Trade Organization.

It did so because of its belief that China’s entry into the global trading body would

encourage the growth of private enterprises in China, foster greater openness, deepen

the country’s reform efforts, and help to create a sound business and legal framework.

The trade and investment liberalization measures to which the Chinese government has committed itself are impressive and the steps required to implement them

are enormous. Well over 1,000 Chinese trade laws, rulings, and regulations have

been reviewed for WTO consistency, and many new laws and regulations are being

written to cover industries previously off-limits to foreign participants.

Throughout the Chinese government, major departments have set up WTO committees to review industry-specific laws. Meanwhile, millions of officials, legislators

and judges are being trained to regulate a market economy. The challenge is particularly difficult in China’s interior, where few officials are familiar with the WTO’s

mandates. Hundreds of WTO case studies are being translated into Chinese and

WTO training centers have been established in a number of cities.

Implementation of obligations as broad as China’s was always understood to be

difficult, and American businesses have never assumed that it would be a short or

easy ride. In some respects, China’s implementation efforts have been impressive,

and the rapid growth in two-way trade and investment into China reflects this. But

in other areas, including intellectual property rights protection, transparency, standards, and government procurement, among others, additional progress is needed and

a CLDP in China could be very beneficial.

China’s leaders have made a serious commitment to WTO compliance and to more

transparent decisionmaking. But these same leaders acknowledge that they don’t

have the depth of experience or trained personnel on hand in many areas to carry

through with the major commitments the country has made in such areas as financial services or the expansion of distribution rights. Having the opportunity to work

with Chinese officials outside the framework of a specific negotiation or decision will

allow U.S. officials to share expertise and best practices, frame issues in a broader

context, and generally encourage greater cooperation in the future.

III. CONTINUING COMPLIANCE CHALLENGES

Over the first 2 years of China’s WTO membership, the U.S. Chamber has undertaken to observe and encourage the country’s progress with implementing its WTO

commitments through its China WTO Implementation Working Group chaired by

corporate leaders in a range of industries. In its 2002 and 2003 reports, the Chamber highlighted both China’s areas of progress and its shortcomings. Without going

into a long list of sector-specific issues, let me highlight a small number of the broad

challenges faced by our member companies in China and the changes that we hope

to see before offering some thoughts on the potential benefits of a commercial rule

of law program in addressing these issues.

29

Transparency

Transparency in the legal and regulatory environment remains a key concern for

U.S. Chamber members operating in China. Improvements in regulatory clarity and

the consistent use of advance consultations would do much to advance the prospects

for success in industries ranging from autos to direct selling to insurance to telecom.

In line with its WTO commitments, as well as internationally accepted standards

and good business practices, China should give both local and foreign professionals

a reasonable period of time to review and comment on proposed new measures. The

international experience that many foreign professionals bring to China can be of

great assistance in the development and acceptance of market-oriented and economically sound policies. Ministries should establish and maintain a regular dialog

with industry experts to address the needs of various sectors.

Regulators must not also be competitors in the marketplace. In the area of

express delivery services, for example, China Post’s regulatory functions must be

separated from its business functions. Similarly, in the telecommunications sector,

additional measures are necessary to increase the independence of the regulator, the

Ministry of Information Industries, from the major state-owned operators in the

telecom industry.

China’s transparency obligations will make its governing institutions more accountable, thus limiting opportunities for corruption. Government procurement

transparency, for example, will help stimulate competition and reduce the likelihood

that business opportunities will be directed to well-connected enterprises.

Intellectual property rights

After nearly 2 years of membership in the WTO, it is clear that the China’s intellectual property rights (IPR) enforcement system still has significant weaknesses

and is far from effective. Foreign investors in China lose billions of dollars each year

due to piracy and counterfeiting.

Enforcement of IPR will not be effective until civil, administrative, and criminal

penalties are routinely applied to infringers of IPR. While China’s government at

the central and provincial levels carries out raids and other enforcement actions,

administrative penalties are small or nonexistent and there is no commitment to

pursue criminal prosecutions with deterrent penalties.

Counterfeit pharmaceuticals are a significant problem in China, especially in the

area of over-the-counter products sold outside of hospitals, and the agriculture sector reports evidence of counterfeit fertilizer. Pirated music, books, business software,

movies, and video games are also readily available on the market, and unauthorized

use of software by businesses is rampant, hindering the ability of both indigenous

and U.S. creators and rights holders to build successful businesses. Newly emerging

problems include Internet piracy, such as the illegal and unauthorized download of

online journals and other materials. Moreover, counterfeiting is taking place in industrial sectors such as the automobile industry, where there is increasing theft of

industrial designs.

The U.S. Chamber would like to see China undertake a coordinated nationwide

IPR enforcement campaign. The government should make revisions to the penal

code such that it fully applies to all rights under copyright as well as all other piracy-related crimes. At the same time, China should take more effective customs

and border measures to curtail the massive importation of pirated materials into the

country. To support these efforts, China should continue with its efforts to train

judges in IPR laws; provide adequate resources to relevant police, prosecutors, and

administrative agencies; and ensure that penalties for intellectual property violations are sufficiently strong to serve as a deterrent.

Standards

The U.S. Chamber is concerned about China’s use of discriminatory standards to

erect barriers to fair competition. For example, China’s adoption of mandatory national technology standards that are out of step with international standards efforts

and that don’t consistently respect intellectual property rights are troubling to the

U.S. IT industry, many members of which have made significant investments in

China. With its strong manufacturing capabilities and rapidly growing consumer

base, China will play an increasingly important role in the development of the Asian

and global IT industry.

The U.S. Chamber would like to see the Chinese government participate more actively in international standard setting bodies and align China’s national standard

development efforts with internationally recognized and developed standards and

practices. In addition, we hope to see the government foster respect for intellectual

property rights embodied in standards, including through the adoption of rules that

are consistent with international practice for the treatment of intellectual property

30

in standards negotiations. For China, these steps will ensure the interoperability of

products used and/or produced in China with those in the rest of the world.

Government procurement

The U.S. Chamber is also concerned about China’s use of the government procurement law to protect local industry. The procurement law came into force on January

1, 2003, and applies to all goods and services procured by government entities. Implementing rules will eventually be developed for all sectors, but the government

is beginning with the software sector. The way in which the law is implemented for

software will set a precedent for the way the other sectors are treated. An open,

competitive, transparent, nondiscriminatory and technology-neutral government procurement regime is in China’s interest and in the interest of China’s major trading

partners.

Detailed implementing regulations and a definition of local software are expected

to be released in May. U.S. industry has proposed definitions of ‘‘domestic’’ to

Chinese authorities for their consideration, but it is unclear whether this input will

utilized. We encourage the Chinese government to make the threshold for what constitutes ‘‘domestic’’ as low as possible to maximize the number of U.S. companies

that can participate in the government procurement market for software.

IV. VALUE OF A COMMERCIAL LAW DEVELOPMENT PROGRAM IN CHINA

Since the passage of the U.S.-China Relations Act in 2000, the U.S. Department

of Commerce has conducted a number of technical assistance seminars in China, including valuable training programs focused on intellectual property rights, standards, and franchising. Private sector commercial rule of law efforts also exist, such

as the U.S.-China Legal Cooperation Fund established by the U.S.-China Business

Council in 1998. The latter program has extended a number of important grants

over the years to support the further development of strong, transparent, impartial,

and equitable legal institutions in both nations.

But despite the impressive efforts being undertaken by the U.S. government and

private sector to address China WTO compliance and commercial rule of law issues,

significant challenges remain. And in the case of intellectual property protection, the

challenges seem to be expanding, not shrinking, in size and dimension. Beginning

a Department of Commerce-run Commercial Law Development Program (CLDP) in

China would make a much-needed contribution to the long-term improvement of the

business landscape faced by American companies in China.

CLDP programs operating in other parts of the world are helping political, regulatory, judicial, and commercial leaders to make important improvements in their

policies, laws, and organizational structures. Significantly, a major portion of

CLDP’s efforts support WTO accessions and implementation of WTO disciplines, including in areas like intellectual property rights, product standards, and market access, among other areas. One can quickly see a link between the types of challenges

encountered by the U.S. business community in China and the beneficial role that

a CLDP program could play.

With respect to transparency and the need for a more consistent use of advance

consultations, for example, CLDP is working with host countries to promote more

transparent decisionmaking and to involve businesses in the development of policies

that impact them. CLDP efforts resulted in the first-ever public outreach programs

conducted by the Russian Ministry of the Interior and regular business outreach

programs by the Albanian Ministry of Trade and Industry, to name but two examples. And a CLDP program in Egypt has increased the acceptance of U.S. standards

by initiating a relationship between ASTM International and the Egyptian Organization for Standardization and Quality Control.

The importance of having a sustained U.S. Government program along these lines

in China becomes more clear when one considers the commercial rule of law efforts

being undertaken by other Chinese trading partners, like the European Union. The

EU is investing significant efforts into the development of cooperative programs in

China that are geared toward improving the business prospects for European companies in China. Currently, for example, the European Union runs a EU-China

Legal and Judicial Cooperation Program that helps to address the concerns of European companies in China and raises the profile of the EU in that market.

Launched in March of 2000, the program’s focus is on reform of laws in the criminal, trade/commercial, and administrative areas and on capacity building in China’s

legal and judicial organizations. China’s Ministry of Commerce is the main executing agency, but other implementing agencies include the Ministry of Justice, the

Supreme People’s Court, and the National People’s Congress. These are important

partners for the U.S. government to be engaging in a more sustained way, through

a program like CLDP, on commercial rule of law issues.

31

Standards represent a key issue on which the U.S. Government must adopt a

more active and strategic approach in China. The EU, the Japanese, and others in

many instances have a natural advantage on standards because of their domestic

industrial policies, and they work hard to advance their companies’ interests.

Though in some cases U.S. companies are involved in competing standards, which

restricts the U.S. government’s ability to intervene, through a program like CLDP

the U.S. Government could marshal its advocacy resources for those sectors and

technologies in which there exists a unified U.S. company position.

V. SUPPORT FOR OTHER NGO EFFORTS

Beyond the efforts that Commerce could carry out itself with its own internal expertise, a CLDP could make new funds available for other business, academic, and

other non-governmental efforts focused on promoting private sector participation in

trade policy formation and efforts to strengthen the commercial rule of law.

As one example, the U.S. Chamber-affiliated Center for International Private Enterprise (CIPE) has expressed interest in expanding its rule of law programs in

China. CIPE’s mission is to promote democracy through economic reform and

private-sector development. CIPE would be effective in organizing a series of workshops in China to explore mechanisms and policies appropriate for the new

economic and social environment created by China’s WTO membership. With participation by local government officials, business executives, legislators, economists,

and lawyers, CIPE programs could, for example, focus on the economic impact of

China’s WTO membership, emphasizing the need for specific institutional changes

including making the judicial system more independent of government and political

interests.

A CLDP also could support such initiatives as the new U.S.-China Business Mediation Center, just launched in the fall of 2003. The U.S. Chamber serves on an advisory committee to the Center, a commercial dispute resolution facility that helps

U.S. and Chinese companies develop alternatives to adjudication of disputes that

may arise between them. The greatest obstacle to increased use of mediation between Chinese and American businesses is a lack of awareness among companies

and lawyers of how mediation works and the business benefits that mediation can

offer. A CLDP could be useful in this regard.

A CLDP could also play an important role in coordinating these various non-governmental efforts by sharing access to relevant players and promoting consistent

messages in ways that would make each effort more effective.

VI. CONCLUSION

The U.S. Chamber believes China has made a sincere commitment and effort to

comply with WTO obligations. But China does not currently have sufficient personnel with the experience or technical background and training needed to develop

and implement market-oriented laws and regulations. As one considers China’s

WTO shortcomings, it is important to distinguish between areas where the country

is willfully not carrying through with a commitment versus those where there is a

legitimate effort underway but there is a lack of technical capacity to get the job

done. A CLDP program could be of great assistance in the latter cases.

CLDP programs have made a meaningful contribution in countries all around the

globe, from Central and Eastern Europe to the Middle East to Africa to the former

Soviet Union. They certainly belong in China, a country that holds so much opportunity for American companies of all sizes and for the global economy. China’s WTO

compliance and economic reform challenges are enormous and the U.S. Government

should be deploying all available resources and working cooperatively with China

on these efforts. Clearly the American business community has a strong stake in

China’s success.

PREPARED STATEMENT OF LINDA WELLS

APRIL 2, 2004

MISSION

The mission of the US Department of Commerce Commercial Law Development

Program (CLDP) is to improve the legal environment for doing business in developing and transitional countries around the globe, and thereby foster greater political stability and economic opportunity for local entrepreneurs and U.S. companies

alike.

32

METHODS AND ISSUES

CLDP consultative services and training programs assist political, regulatory, judicial and commercial leaders to identify and make needed improvements in their

policies, laws and organizational structures. CLDP activities are designed to meet

the evolving needs of its hosts. They include, among other things, major conferences

that introduce large groups to new issues, highly technical skills training for small

cadres of local experts and resident (or itinerant) consultants who spend significant

time working in a country executing longer-term projects or consulting on issues

that benefit from on-going cooperation. CLDP activities serve as a catalyst for

change, enabling leaders to take steps that, while important for the long term economic health of their nation, may be difficult in the short term. As a U.S. Federal

agency, CLDP is particularly strong in providing government-to-government assistance and in helping governments and their business communities to communicate

more effectively. Most CLDP activities are funded by the US Agency for International Development.

During fiscal year 2003, CLDP conducted approximately 100 discrete technical assistance activities. This is in addition to the daily assistance provided by CLDP’s overseas offices and resident advisors and the information provided by the websites

and newsletters CLDP sponsors.

A significant portion of CLDP’s activities support WTO accessions and implementation of WTO disciplines including laws and procedures affecting intellectual

property rights, customs valuation, market access, trade remedies, and product

standards, among other things. In addition to its work with respect to WTO disciplines, CLDP provides technical assistance with respect to mortgage, insurance

and other financial service regulatory matters, government, judicial and business

ethics, public procurement, electronic commerce, anti-trust, privatization of stateowned enterprises, alternative dispute resolution, investment, judicial case management, trade policy analysis, econometric modeling, project finance, trade finance,

spectrum management, public notice and comment processes and negotiation skills.

CLDP also provides support to local business, research and governmental organizations that promote private sector participation in trade policy formation and

regional legal harmonization (merging common law and civil law traditions, for example) and regional economic integration (simplifying cross-border trade within a

region).

In addition to its policy and skills oriented activities, CLDP works with leaders

to develop more effective intra-ministerial and intra-governmental organizational

structures and administrative procedures.

RESULTS

Since its inception in 1992, CLDP has provided technical assistance to more than

fifty countries in Central and Eastern Europe, the former Soviet Union, the Middle

East, Northern and Sub-Saharan Africa and South-East Asia. In addition to maintaining full-time advisors and assistance support offices in Moscow, Kiev, Chisinau,

Riga, Vilnius, Tallinn, Bucharest, Sofia and Tirana over the years, CLDP has conducted more than 500 separate training and short-term consultation programs and

provided training to more than 8,000 policymakers, regulators, judges, lawyers,

teachers and business persons.

CLDP provided WTO accession technical assistance to six of the first eight postSoviet states to join the WTO (Bulgaria, Estonia, Latvia, Lithuania, Albania and

Moldova). CLDP also is working with the governments of Russia, Ukraine and Algeria to facilitate their WTO accessions. CLDP continues to provide assistance to

Moldova, Albania, Egypt and other nations struggling to implement their WTO commitments.

CLDP assistance has been instrumental in public procurement reform, adoption

of investment, intellectual property, insurance, mortgage, and a wide range of other

legislative and regulatory reforms in many of its host countries. CLDP has assisted

with the creation or reorganization of trade policy agencies in Eastern Europe, the

Middle East and Northern Africa, anti-monopoly offices in Northern Africa and

Eastern Europe, and intellectual property regulatory and business organizations in

Nigeria, to name a few.

CLDP also has served as a catalyst for regional economic integration in Eastern

Europe, Sub-Saharan Africa and Western Africa through facilitation of the negotiation and implementation of free trade agreements and the creation or strengthening

of regional organizations working to promote harmonization of laws, regulatory procedures and dispute resolution mechanisms of importance to business.

CLDP is working with all of its host countries to promote more transparent decisionmaking and, in particular, to involve businesses in the formation of policies that

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affect them. These efforts have resulted in the first-ever public outreach programs

conducted by the Russian Ministry of the Interior and regular business outreach

programs by the Albanian Ministry of Trade and Industry, to cite but two examples.

In addition to the direct results of its technical assistance, CLDP has found that

its activities have equally important indirect benefits.

First, the exposure to new, market-oriented ideas helps host country participants

to explore concepts that may be totally unfamiliar to them or with which they may

have only enough familiarity to feel uncomfortable, and therefore resistant, when

expected to incorporate the concepts into their daily work. Having the opportunity

to discuss the concepts with knowledgeable parties outside the context of a specific

negotiation or decision enables them to become comfortable with the issue, to understand its broader significance and to understand how it affects their role and the

concerns of their constituencies. This, in turn, results in more effective participation

in future negotiations and better decisionmaking when presented with these issues

in the course of their work.

Second, experience has shown that principles shared during the course of technical assistance activities blend into other aspects of the participants’ lives. An official

who grasps the benefits of transparency and has learned to incorporate transparent

procedures in one aspect of his work, for example, is more likely to incorporate such

procedures in additional aspects of his work, and to demand that others do the

same. Third, the opportunity to discuss issues of common interest outside the demands

of our official relationships has enabled all participants, whether from the US or

abroad, to develop a better understanding of the challenges we all face, the special

obstacles that each country must grapple with and the values and processes we are

applying when making decisions. Counterparts from both countries also have an opportunity to spend time working together toward a common objective. All of this

leads to better communication and generally better cooperation in the future; we

and our overseas partners know who to call if a question or a problem arises and

what each of us is likely to consider in trying to address the matter.

SYNOPSIS OF CLDP PROGRAMS

CLDP has conducted too many assistance activities to note here with any completeness, but the following provides a brief synopsis of its work.

Central and Eastern Europe

CLDP assistance in Estonia, Latvia, Lithuania, Poland, the Czech Republic, Slovakia, Romania and Bulgaria and Albania concentrated on WTO accession, public

procurement, government ethics, intellectual property rights, foreign investment,

project and trade finance, customs, export controls and product standards matters.

The countries with which CLDP worked on WTO accession and export control matters all succeeded in joining the WTO in relatively short order after CLDP began

working with them and all became founding members of the Wassenauer Arrangement. These CLDP programs (other than in Albania) ended in the mid-1990s when

AID closed or curtailed its funding for work in those countries.

In 2000, CLDP returned to the region as part of the USG’s Stability Pact activities with the twin objectives of promoting trade liberalization in each of the countries in the region and promoting greater trade and economic integration within the

region. CLDP and other donors are working with Albania, Bosnia and Herzegovina,

Bulgaria, Croatia, Macedonia, Romania and Yugoslavia on this project.

In addition to these regional efforts, CLDP has been working with Albania continuously since 1992, first to help with the creation of key commercial laws and the

introduction of market-oriented policies, then to support Albania’s WTO accession

and now to aid implementation of its obligations as a new member and to strengthen its technical capacity to make sound trade policy decisions.

New Independent States

CLDP began working with Russia, Ukraine and Moldova in the mid-1990s to

facilitate their accessions to the WTO, including the policy, legislative, regulatory,

negotiation, communication and other skills development work inherent in those

countries’ transition to market economies and to WTO compliance. The focus of

CLDP’s work in Moldova shifted to implementation with their recent accession.

CLDP’s Ukrainian program continues to support the working party process, but has

a particular emphasis on improving intellectual property rights protection. In addition to ongoing efforts to support the working party process and legislative reform,

CLDP’s activities in Russia have added significant efforts to encourage public outreach and to assist with sub-national implementation of WTO commitments that

Russia will be making. CLDP also conducted a limited program in Russia with the

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objective of improving communication among Russian law enforcement bodies and

between them and the Russian business community, particularly US businesses operating in Russia.

Middle East and North Africa

CLDP’s Egypt program is quite eclectic, incorporating work in intellectual property rights, trade policy, anti-trust, trade remedies, alternative dispute resolution,

mortgage and insurance regulation, e-commerce-related spectrum management

issues, and training of diplomats in economic policy and international commerce

issues, among other things. CLDP, which was a relative late-comer to the Egyptian

assistance provider community, has been able to work very successfully with other

assistance providers to complement their work by providing information or advisors

to which they did not have the same level of access as CLDP or by being able to

fill specific assistance requests on very short notice.

CLDP’s work in Northern Africa (Tunisia, Algeria and Morocco) has concentrated

primarily on electronic commerce, public procurement, anti-trust, insurance regulation, technology sector development and WTO accession/compliance issues. In 2003,

CLDP also launched a program to support negotiation and implementation of the

Moroccan Free Trade Agreement.

We expect to launch a regional commercial law and financial services reform program that will involve most of the countries of North Africa, the Middle East and

the Gulf as part of the Middle East Partnership Initiative during 2004.

Sub-Saharan Africa

In West Africa, CLDP has focused on alternative dispute resolution, judicial case

management, intellectual property rights, judicial ethics and investment codes and

has fostered creation of several international committees, all with the overall objective of increasing regional legal integration. Countries participating in the West Africa program include Benin, Burkina Faso, Cameroon, Chad, Congo, Cote d’Ivoire,

Equatorial Guinea, Gabon, Guinea, Guinea Bissau, Mali, Niger, Nigeria, Senegal

and Togo.

In Nigeria, CLDP’s work has concentrated on improving the protection of intellectual property rights through strengthening the public and private stakeholder organizations, fostering dialog between them modernizing the legislative and regulatory

framework for protection of patents, trademarks and copyrights and increasing public appreciation of the value of (and need to respect) intellectual property rights.

CLDP worked with the Southern African Development Community (SADC) to

help its members self-diagnose compliance with their TRIPs obligations and to develop strategies for bringing themselves into compliance and for using the SADC administrative structures to facilitate that result. Countries participating in the SADC

program, which has now concluded, were Angola, Botswana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe.

CLDP has been working with Angola to introduce modern judicial case management techniques into the Angolan courts to support their efforts to improve both the

speed and transparency with which matters are handled by the court.

CLDP also conducted four programs to introduce sub-Saharan business persons

to the African Growth and Opportunity Act (AGOA) and to demonstrate how to take

advantage of its incentives. Business and government representatives from Benin,

Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Congo, Cote d’Ivoire, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Ghana,

Kenya, Lesotho, Malawi, Mali, Mauritania, Mauritius, Namibia, Niger, Nigeria,

Rwanda, Senegal, Seychelles, Sierra Leone, South Africa, Swaziland, Tanzania,

Uganda, Zambia and Zimbabwe attended the AGOA programs.

Asia

Ad hoc funding arrangements have enabled CLDP to conduct a limited amount

of work in Asia.

A CLDP-sponsored consultant worked with Vietnamese officials to draft Viet

Nam’s first commercial code and CLDP staff members have provided support on

WTO and trade policymaking concepts.

In April of 2000, CLDP Chief Counsel Linda Wells participated in a two-week

State Department Rule of Law program designed to share WTO-related information

with the Chinese and to gauge their knowledge of the issues and their receptiveness

to potential technical assistance on WTO and other commercial law matters. The

2002 and 2003 annual reports of the Congressional-Executive Commission on China

included recommendations that Congress appropriate funds to establish a CLDP

commercial rule of law program with China. CLDP is working with the Department

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and others to endeavor to secure funding that would enable it to engage in a more

comprehensive cooperative program with China.

Latin America

CLDP has been asked on a number of occasions to provide technical assistance

to nations in the Western Hemisphere, particularly with respect to transparency

and trade issues. Several states have indicated that they would like CLDP support

as they prepare to enter into the Free Trade Agreement of the Americas and the

intermediate agreements that will lead to it. CLDP is seeking the funding needed

to fulfill such requests.

For additional information, please contact the CLDP office in Washington, DC.

Commercial Law Development Program, Office of General Counsel, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC

20230 USA. Telephone: 202–482–2400; facsimile at 202–482–0006; e-mail:

cldp@doc.gov.

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