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Improved Tracking of China’s Implementation of Trade Commitments Needed, Report Says

Thursday, February 13, 2014
Sandler, Travis & Rosenberg Trade Report

A recent Government Accountability Office report states that the federal government needs to do a better job tracking China’s implementation of its trade-related commitments to the U.S.

Background. The U.S. and China engage in two high-level dialogues to address trade barriers and cross-cutting economic issues: the Joint Commission on Commerce and Trade and the economic track of the Strategic and Economic Dialogue. The JCCT, initiated in 1983, focuses on addressing trade matters and promoting commercial opportunities between the two countries. It has multiple working groups focusing on specific issue areas, operates year-round and culminates in an annual plenary meeting. The S&ED, which was established in 2009 (and preceded by the Strategic Economic Dialogue from 2006 to 2008), is a higher-level dialogue that discusses bilateral, regional and global economic and strategic issues. The S&ED’s economic track has four pillars, one of which focuses on trade and investment, and addresses short, medium and longer term economic issues. While the S&ED meets only once a year, discussions of economic track issues continue throughout the year.

China’s Commitments. The report identifies 298 trade and investment commitments made by China in the JCCT (184 since 2004) and the S&ED and its predecessor (114 since 2007). These commitments include statements affirming open trade principles, statements of policy intent and statements that focus on trade actions specific to a sector, but U.S. officials stress that not all of these commitments are of equal value and significance.

The GAO identified 11 issue areas that encompass most of the commitments. These areas, along with the number of associated commitments China has made in the JCCT and SED, respectively, are as follows.

- government procurement (15/8)

- high technology trade (2/9)

- innovation (11/10)

- intellectual property rights (62/9)

- investment (1/30)

- multilateral issues (20/26)

- open trade principles (0/70)

- sector-specific issues (110/11; see below)

- technical and regulatory barriers to trade (45/14)

- trade remedies (3/9)

- transparency (19/24)

- other (19/21)

Sector-specific commitments involve agriculture (19/1), distribution/retail (5/0), information technology and security (6/0), insurance (1/0), new energy vehicles (3/0), pharmaceuticals and medical devices (28/0), postal/courier (3/0), shipping (1/0), software (18/4), steel (1/0), telecommunications (12/0), textiles (1/0), transportation (3/5), travel and tourism (6/1), and wind power (3/0).

The report notes that 83% of China’s commitments in the JCCT and 82% in the S&ED do not specify timeframes for implementation, although U.S. officials say many commitments are either expected to be implemented by the next annual meeting or are considered to be ongoing.

Tracking. According to the report, U.S. agencies track China’s implementation of its JCCT and S&ED commitments through several means, including outreach to U.S. industry associations and companies, issue-based working groups and mid-year reviews in the JCCT, and bilateral consultations in advance of S&ED annual meetings. However, these agencies use various documents to track the status of implementation over time and do not have a single consolidated document or system that captures implementation status across both dialogues. Agencies have sought to identify commercial metrics such as increased sales to use as indicators of implementation progress where possible but face challenges in identifying appropriate data.

In addition, although several federal reports on trade barriers present information on JCCT and S&ED commitments, they do not provide a clear and comprehensive picture of progress in implementing those commitments. For example, the Office of the U.S. Trade Representative includes information in nine reports on trade barriers generally and efforts to address them but does not provide comprehensive information to Congress and the public on the status of implementation of JCCT and S&ED trade and investment commitments specifically. Additionally, differences in the formats of the reports make locating information on a given commitment or issue area across reports difficult in some cases. The GAO states that this lack of detailed, complete and easily accessible information makes it difficult for Congress and other stakeholders to fully understand the progress made by the implementation of these commitments in removing trade barriers.

Recommendations and Response. The GAO therefore recommends that USTR, in conjunction with Commerce and Treasury, work to provide clearer and more comprehensive reporting on the status of China’s implementation of its JCCT and S&ED trade and investment commitments. This reporting should include more complete information on the status of implementation as well as a more clearly identified source for consolidated information, which could be an existing report.

While DOC and USTR welcomed the report and said they would consider its ideas and findings, DOC suggested that it lacks the necessary resources to improve reporting and USTR opined that its current reporting is largely sufficient, though with some room for improvement.

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