China's Long WTO March

The GATT establishes the general principles governing trade in goods, including tariff binding, non-discrimination, elimination of quantitative restrictions, and transparency requirements. China will no longer be permitted to retain its strict control over trading rights or employ quantitative restrictions such as import bans, licenses or quotas. China will be required to dramatically reduce tariff levels on a wide range of goods ranging from automobiles to fibre-optic cables. Most-favored-nation (MFN) and national treatment, the legal cornerstones of the WTO regime, will be accorded to imported goods. Consequently, China will no longer be able to discriminate between goods from different WTO member countries, nor can China offer domestic products more favorable treatment than foreign products that have entered the domestic market. In addition, all of China's trade and investment related laws and policies will have to be published or otherwise made publicly available to enhance transparency.

The TRIMs Agreement that supplements the GATT will prohibit China from imposing performance requirements upon foreign-invested enterprises. Accordingly, local content, trade-balancing, foreign-exchange-balancing and export performance commitments, whether as entry prerequisites or qualifications for access to incentives, will no longer be able to constitute a compulsory aspect of China's foreign investment approval procedures.

GATS

China will be required to open its services market under the GATS, particularly in the financial services, insurance and telecommunications sectors. Under the Sino-U.S. bilateral market access agreement, for example, China committed to eliminating many foreign-equity restrictions in the telecommunications sector, allowing foreign investors to hold up to a 49% interest in value-added telecommunications companies upon China's accession and up to 50% two years later. China also agreed to phase in the trading and distribution rights within three years of accession, which has perhaps been the most frustrating problem confronted by foreign investors in China.

Under the GATS the requirement of national treatment and elimination of quantitative restrictions will only apply to specific service sectors that China has included in its schedule, although the principle of MFN treatment and transparency will cover all service sectors. More liberalized market access is expected to be achieved on a progressive basis through subsequent rounds of negotiation.

TRIPS

China is expected to improve its intellectual property rights regime under the TRIPS. National treatment must be given to foreign intellectual property rights holders and a tighter protection and enforcement system must be put into place.

DSU

China will, for the first time, be governed by a formal international dispute settlement mechanism for inter-governmental disputes over trade policies. The DSU delineates stages for dispute resolution including consultation, panel process and even retaliation to facilitate a prompt settlement. In the event of non-compliance, an aggrieved member country can bring China to the Dispute Settlement Body and further seek enforcement of an award by implementing WTO authorized sanctions.

The Long March Continues

The enormity of the task ahead is perhaps best illustrated by Beijing's recent decision to amend 140 laws and regulations in the coming year and abolish a further 570 laws and regulations. This will be the first step in China's next long march towards full implementation of its WTO obligations.

By Mitch Dudek and Alex Wang
Jones, Day, Reavis & Pogue,
Shanghai