China WTO and PNTR Position Paper

CHINA WTO & PNTR POSITION PAPER

EIA Supports Permanent Normal Trade Relations (PNTR) Status for China

Whereas China has committed to overhaul its economic structures, all the U.S. must do is make permanent China's Normal Trade Relations status under U.S. law.
Without PNTR, China will not, and is not required to, grant the United States the benefits of its market-opening concessions. Ironically, our overseas competitors would receive the benefits of the November 15 agreement, while U.S. companies are shut out.

China's Importance to the Electronics Industry

China is the single most promising emerging market in the world today for the U.S. electronics industry. In 1999, U.S. electronics exports reached $3.3 billion, up from $1.3 billion in 1994 -- an annual increase of 17 percent. To take one example, the Chinese personal computer market is expected to double in five years, and could even rival the U.S. market in ten years.
As China enters the Information Age, it will purchase more high-tech equipment from the world's leading supplier -- the United States.

- By December 1999, China was expected to have 39.7 million mobile phone subscribers, with an annual growth rate of 58.8 percent.

- China adds 15.1 million fixed telephone lines annually.

- The number of Internet users more than doubled between June and December 1999, from approximately 4 million to 8.9 million.

- The number of websites also increased dramatically in that time, from 9,906 to 15,153.

In 1998, more than one third of what the U.S. electronics industry produced was exported overseas -- over $150 billion in goods. More than a third of the 1.8 million employees working at U.S. electronics companies depend on exports for their jobs, and the percentage goes up annually.
The electronics industry is especially dependent on foreign markets for its economic well being. China is an important export and import market for our most competitive companies.

- On the export side, China is already an important market for U.S. products, but its potential is enormous. China is a market of one billion people whose consumers are buying more electronics than ever before.

- On the import side, China is a major source for components that are incorporated into larger products. The availability of these components, which often are not produced domestically, is essential to the competitiveness of the industry.

The High-Tech Industry Supports China's Accession to the World Trade Organization

As part of the bilateral agreement reached on November 15, 1999, China agreed to:

Implement the Information Technology Agreement by 2005, which will eliminate tariffs on a wide range of high-tech products.
Provide U.S. firms significant market access rights that include the ability to import, export and distribute their goods throughout China. State-owned enterprises would be prohibited from discriminating against U.S. firms in their buying decisions.
Enforce laws protecting intellectual property, and preventing local content requirements and forced technology transfers.
Open the telecommunications market to foreign competition and investment:

- China has agreed to implement the pro-competitive regulatory principles embodied in the Basic Telecommunications Agreement (including cost-based pricing, interconnection rights and independent regulatory authority), and agreed that foreign suppliers can use any technology they choose to provide telecom services.

- China will allow 49% foreign investment in all services immediately upon accession, and will allow 50% foreign ownership for value added in 2 years and paging services in 3 years. This is a change from the April 8 deal, in that China had indicated it would allow 35% foreign ownership for value-added and paging services two years after accession and 51% four years after accession.

- China will phase out all geographic restrictions for paging in 3 years, value added, and closed user groups in 3 years, mobile/cellular in 5 years and domestic wireline services in 6 years. China's key telecommunications services corridor in Beijing, Shanghai and Guangzhou, which represents approximately 75% of all domestic traffic, will open immediately on accession in all telecommunications services.

- Internet services will be liberalized at the same rate as the other key telecommunications services, and China will permit provision of telecom services via satellite.

Regarding antidumping, the U.S. will continue to treat China as a non-market economy. Moreover, in applying countervailing duty law, the U.S. will be able to take the special characteristics of China's economy into account when we identify and measure any subsidy benefit that may exist. This provision will remain in force for 15 years after China's accession to the WTO.
Should China fail to abide by these commitments, China is subject to the WTO's Dispute Settlement Mechanism, including the possibility of multilateral trade sanctions.

WTO Membership Promotes Economic and Political Reform

The practical effect of adhering to WTO principles and commitments:

Makes China's economic reforms of the last two decades irreversible, and sets China on a course for further free-market reforms.
Commits China to abide by the same multilateral trading rules -- like national treatment, Most-Favored-Nation, and impartial dispute resolution -- that we and our other major trading partners already abide by.
Requires greater transparency from China's legal system and bureaucracies, creating unprecedented accountability for the country's decision makers.
Creates the foundation for China's prosperity and improving the quality of life for a billion people.
Promotes the free flow of ideas and information through enabling greater Internet penetration, music and movies, financial information and other news, and increased exposure to U.S. companies and citizens.