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
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
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
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 WHENEXPORTING 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 WILLCHANGE 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,