The U.S. – China WTO Accession Deal: A Clear Win for U.S. High Technology, Greater Openness And U.S. Interests March 1, 2000
Information Technology Has Helped Transform the U.S. Economy and Fuel Record Growth. Information technology (IT) has made a crucial contribution to the new economy, helping to fuel record growth, higher wages, and changes in the way business is done. IT accounts for only 8% of total jobs, but has been responsible for nearly one-third of U.S. economic growth. Declining IT prices have lowered the overall inflation rate by nearly one percentage point. Wages in the IT industry are 77% higher than the private sector average.
Access to China’s Growing Market Is Vital to Maintaining U.S. Global Leadership in Information Technology.
U.S. high technology industry exports to China have increased over 500% between 1990 and 1998. U.S. exports of communications equipment grew over 900% from 1990-1998. China’s information technology equipment market is estimated to be growing at 20-40% annually.
Some analysts predict China will become the world’s second largest personal computer market by the end of this year, and the third largest semiconductor market by 2001.
China is the world’s fastest growing telecommunications market. Only 5% of this market has been tapped. Each year, China installs enough phone lines to replace networks the size of Pacific Bell. By the end of 1999, China boasted approximately 40 million cellular subscribers. Only the U.S. telecommunications market is expected to be larger by the end of 2000.
In 1999 alone, the number of Chinese Internet users quadrupled, jumping from 2 million at the beginning of the year to 9 million. Growth predictions put Internet users at over 20 million by the end of 2000.
Opening China’s Information Technology Market Will Help Integrate China Into The Global Economy and Fuel An Information Revolution in China. The WTO Agreement will make communication tools cheaper, better, and more widely available. It will enable Chinese businesses and consumers to connect with the global economy and advance China’s integration into that economy. It will increase the flow and exchange of information among Chinese and between China and the outside world, in ways that no amount of censorship or monitoring can completely control. This cannot help but promote the right kind of change in China.
China’s Accession to the WTO Will Open China’s High Technology Market to U.S. Firms, While Granting Permanent Normal Trade Relations Would Simply Maintain The Market Access Policies We Already Apply To China. China made significant, one-way market-opening concessions across the wide range of high technology products and services. The United States made no market opening concessions. China will eliminate information technology tariffs by 2005, grant trading and distribution rights by 2003, open its internet and telecom markets to investment and services, and provide stronger protection of intellectual property. This will allow the United States to participate in building China’s information infrastructure. The Agreement also eliminates distortive investment practices such as local content, forced technology transfer and export performance requirements that can displace U.S. jobs. The Only Way to Guarantee the Benefits of This Agreement is for Congress to grant China PNTR.
China Will Eliminate Tariffs and Quotas On Information Technology Products By 2005. Chinese tariffs on information technology products currently average 13%. Upon accession to the WTO, China will adopt the Information Technology Agreement, which eliminates import duties on these products. China will eliminate two-thirds of its tariffs by 2003 and the remaining one-third by January 1, 2005. China will eliminate quotas immediately upon accession.
American High-Technology Companies Obtain Trading and Distribution Rights for the First Time. Currently, U.S. companies’ ability to do business in China is strictly limited because the right to engage in trade (importing and exporting), and to engage in distribution services (wholesaling, retailing, transporting, repairing, warehousing, servicing) is restricted to a small number of companies with specific government authorization. China has committed to allow any entity to import most products, including high-technology products, into any part of the country, and will allow U.S. firms to establish, own and operate distribution services within three years of accession. This will allow our businesses to export to China, and to have their own distribution network in China, rather than being forced to set up factories there to sell products through Chinese partners.
China Will Allow Foreign Investment in All Telecommunications Services for the First Time. China now prohibits foreign investment in telecommunications. With WTO accession, it will permit 50 percent foreign equity share participation for value-added services (including, for example, electronic mail, voice mail, Internet, on-line information and data base retrieval, and enhanced/value added facsimile services) and paging services two years after accession, 49 percent foreign equity share for mobile voice and data services (including all analogue/digital cellular and personal communications services) five years after accession, and for domestic and international services (including, for example, voice, facsimile, intra-company e-mail, voice and data services) six years after accession. Geographic restrictions will be eliminated for paging and value added services two years after accession, for mobile voice and data services in five years, and for domestic and international services in six years.
China Will Adopt WTO Norms for Telecommunications Regulation. China has agreed to implement the pro-competitive regulatory principles embodied in the WTO Basic Telecommunications Agreement. These include access to the public telecom networks of incumbent suppliers (i.e., interconnection rights) under non-discriminatory terms and at cost-oriented rates, as well as an independent regulatory authority. China has also committed to technology-neutral scheduling, which means that any basic service may be provided through any means of technology (e.g., cable, wireless, satellites).
The Agreement Will Provide Strong Protection For Intellectual Property Rights: China has agreed to implement the Agreement on Trade Related Aspects of Intellectual Property Rights immediately upon accession and with no transition period. The TRIP’s agreement is the best vehicle to combat piracy of U.S. software and create a healthy environment for the development of China’s software industry. Under the TRIPs agreement, the U.S. software industry will be better able to enforce its intellectual property rights in Chinese courts and administrative tribunals.
The Agreement Contains Strong Provisions Against Unfair Or Market-Distorting Chinese Trade. The Agreement guarantees our right to the special antidumping methodology we apply to non-market economies for 15 years after China’s accession to the WTO. China has also agreed to a twelve-year product specific safeguard that ensures that the U.S. can take effective action in case of increased imports from China that cause market disruption in the United States. This applies to all industries, including high technology, permits us to act based on a lower showing of injury, and to act specifically against imports from China. After twelve years, current U.S. safeguard provisions -- Section 201 -- will remain available to address increasing imports.
China Will Eliminate Practices That Cost American Jobs and Technology. China will abolish requirements that U.S. companies transfer their technology in order for U.S. companies to export or invest in China. This will better protect U.S. competitiveness and the results of U.S. research and development. In addition to implementing the WTO’s Agreement on Trade-Related Investment upon accession, China will eliminate trade and foreign exchange balancing, local content and export performance requirements and refuse to enforce contracts containing those requirements. China will not condition import approval or investment licenses on performance requirements of any kind, including offset and technology requirements or the existence of a competing domestic producer. All this will make it significantly easier for American companies to export to China from the United States, rather than having to set up in China in order to sell products there.
State-Owned and State-Invested Enterprises Will Compete on Commercial Terms: In this Agreement, China pledged that state-owned and state-invested enterprises will make purchases and sales solely on commercial terms, and will provide U.S. firms the opportunity to compete on non-discriminatory terms. These enterprises comprise a significant portion of the Chinese electronics industry and this Agreement provides rights to combat against discrimination against U.S. companies.
The United States Will Continue to Maintain Our Strong Export Control Policies And Laws: Nothing in this Agreement affects our export control laws or policies, or our ability and conviction to enforce them.
Examples of How The China WTO Accession Agreement Will Help America’s High-Tech Industries March 1, 2000
AMERICAN COMPUTER MANUFACTURERS CURRENTLY FACE HUGE BARRIERS WHEN EXPORTING TO CHINA. THIS WILL CHANGE WITH CHINA’S ACCESSION.
Tariffs averaging 13% can add hundreds of dollars to the price of a computer. A $1500 computer, for example, would be slapped with a tariff of nearly $200. U.S. manufacturers are often forced to use a state-run middleman to import into China. Joint venture contracts often require U.S. companies to transfer technology to their Chinese partners, use a certain percentage of locally sourced parts, and export a minimum quantity of their products. American companies in China are not allowed to distribute directly to customers, hamstringing their efforts to tailor products to specific markets, and preventing them from providing direct, quality after-sales service and support.
China has pledged to sign on to the Information Technology Agreement, thereby committing to eliminate tariffs on all products covered by the ITA -- two thirds of ITA products by 2003 and the remaining one-third by 2005. American companies will also be able to import most products, including ITA products, into any part of China. This will allow our businesses to export to China from here at home, rather than being forced to set up factories there to sell products through Chinese partners. U.S. companies that do operate in China will no longer be forced by government regulations to give up cutting-edge technology to their competitors, and will no longer be forced to use locally-made parts or to export a certain percentage of their products. U.S. companies will also -- for the first time -- be able to operate their own distribution networks in China, allowing them direct access to customers for sales and service.
CHINA NOW PROHIBITS FOREIGN INVESTMENT IN TELECOMMUNICATIONS: THIS WILL CHANGE WITH CHINA’S ACCESSION
Under the agreement, American companies will, for the first time, be allowed to invest in all telecommunications services. This will allow our companies to participate in building China's information infrastructure, connecting Chinese with each other and with the outside world. U.S. companies will be permitted to form joint ventures and provide telecom-related services, including, for example, electronic mail, voice mail, Internet, on-line information and data base retrieval, value-added facsimile services, and paging services. U.S. companies will also have the ability to provide mobile voice and data services, and domestic and international services, including voice mail, facsimile, and intra-company e-mail.
At the same time, China has pledged to permit foreign telecom service providers access to the public telecom networks of incumbent suppliers under non-discriminatory terms and at cost-oriented rates. This means that U.S. telecom companies cannot be discriminated against in seeking to provide their services over the existing infrastructure of Chinese telecommunications providers. In addition, any basic service may be provided through any means of technology (e.g., cable, wireless, or satellites).