On November 20 – 21, 2011, Chinese Vice Premier Wang Qishan, US Secretary of Commerce John Bryson and US Trade Representative (USTR) Ron Kirk, co-chaired the 22nd session of the Joint Commission on Commerce and Trade (JCCT) meeting in Chengdu, China. The Chinese delegation included ministers and vice ministers from the Ministry of Agriculture (MOA), Ministry of Commerce (MOFCOM), Ministry of Foreign Affairs, Ministry of Finance, and National Energy Administration (NEA). The US delegation included the US Ambassador to China, the Director of Trade and Development Agency, and officials from the Departments of Agriculture (USDA), State, Treasury, Commerce (DOC), in addition to USTR officials.
During the meeting the two sides discussed a wide range of trade and investment issues of concern to both the Chinese and US governments. For the US government, these concerns relate to the following issues, inter alia : investment, intellectual property right (IPR) protection and enforcement, indigenous innovation (particularly as it pertains to government procurement), strategic emerging industries, the energy industry, administrative licensing, standards and conformity assessments, agriculture, health care goods and services, telecommunication goods and services, and travel and tourism. For the Chinese government, these concerns relate to the following issues, inter alia: US export controls, China’s non-market economy (NME) status, US application of trade remedies, and restrictions on Chinese investment in the United States in sensitive sectors.
The two sides reached a number of commitments, agreements, and Memoranda of Understanding (MOUs). More specifically, Chinese officials made specific commitments regarding several issues of concern to the US government, including IPR protection and enforcement as well as indigenous innovation, especially in the context of government procurement. More modest progress was made on the issues of standards and conformity assessments, as well as market access in the areas of new energy vehicles (NEV), medical devices and tourism. However, talks on issues relating to China‘s investment restrictions and market access for US agricultural exports resulted in few signs of advancement. We review the main highlights of the 22nd JCCT meeting below.
- New State Council-level IPR Leadership Structure. On November 9, 2011, China’s State Council Standing Committee announced the establishment of a national IPR Office, seated in MOFCOM, as a new “leading group” to coordinate interagency efforts to tackle IPR infringement and counterfeiting issues in China. China’s State Council confirmed at the JCCT plenary that Vice Premier Wang Qishan will head the new leading group and that the group would make permanent the leadership structure established under the 2010 Special IPR Campaign;
- Software Legalization. Vice Premier Wang stated that he will directly oversee the continuation of the software legalization for government agencies program. To date, all central government agencies have completed the inspection and correction of work related to software legalization. Vice Premier Wang specifically committed to ensuring that all 31 provincial level government agencies will complete their respective legalization efforts by mid-2012, and that all Chinese local and municipal level agencies will complete similar work by late 2012;
Also, within the JCCT IPR Working Group, the Parties made commitments to work together on the issues of online counterfeiting, online and library copyright protection, broadcast tariff rates, bad faith trademark filings and patent quality. In addition, Chinese and US government officials tasked the JCCT IPR Working Group with the study of investment, tax and other regulations relating to IPR provisions in order to determine whether government benefits and incentives are linked to similar IPR development requirements.
- Government Procurement. China announced that its State Council has finalized a measure requiring provincial governments, municipalities and autonomous regions to eliminate any catalogues or other measures linking innovation policies to government procurement preferences by December 1, 2011.
Strategic Emerging Industries and New Energy Vehicles
- Foreign Companies Eligible for Preferential Policies. China confirmed that it will invest RMB 10 trillion (US$1.6 trillion) in strategic emerging industries1 over the next five years. Furthermore, China committed to provide a “fair and level playing field” for all companies in these industries; and
- New Energy Vehicles (NEVs). China confirmed that: (i) the Chinese government does not and will not maintain measures that mandate the transfer of technology; (ii) in China’s NEV industry, “mastery of core technology” does not require technology transfer; (iii) the Chinese goverment does not and will not impose any requirements for foreign-invested companies to establish domestic brands in China in order to sell NEVs; and (iv) foreign-invested companies will be eligible for subsidies and preferential programs on an equal basis with their Chinese counterparts and these programs will be implemented in compliance with World Trade Organization (WTO) rules.
Energy Industry and Smart Grid Technologies
- Smart Grid Technologies. China committed that its Standardization Administration and NEA follow the principles of ”openness and transparency” in the development of standards. China confirmed that foreign entities are welcome to participate in China’s smart grid standards technical committees. The two sides welcomed ”continued bilateral cooperation” on the issue of smart grid standards.
Standards and Conformity Assessment
- China Compulsory Certification. China agreed to conduct technical exchanges with its US counterparts concerning the China Compulsory Certification (CCC) mark, which is China‘s principal regime for testing, and certifying the quality, safety, and efficacy of products sold in China. China also welcomes competent foreign participation in its CCC technical experts group.
- Avian Influenza. According to the US-China Business Council (USCBC), China confirmed its lifting of Avian Influenza-related bans on poultry products from Arkansas. The two countries agreed to continue technical discussions toward compliance with science-based international standards on the remaining bans on poultry products from four other US states;
- Market Access Barriers. According to USCBC, the parties committed to continue ongoing discussion and exchanges in regard to other agricultural products facing market access barriers, including beef and pears; and
- Five-Year Strategic Plan. USDA, China‘s MOA and General Administration of Quality Supervision, Inspection and Quarantine announced that they are finalizing the framework of a five-year strategic plan focused on food security, food safety and sustainable agriculture, though they did not announce a timeframe for the release of this plan.
- Down Classification. China‘s State Food and Drug Administration (SFDA) stated that it has studied lowering the risk classification of x-ray and in-vitro diagnostic (IVD) equipment in accordance with international norms. SFDA committed to issuing a list of x-ray equipment to be placed in a lower category by June 2012 and to also issue a draft catalogue of IVD equipment for public comment by June 2012; and
- Safety Standards. SFDA stated that it is conducting in-depth research and drafting transition procedures to facilitate the move to the 3rd edition of IEC 60601-1 safety standards for medical devices, which will be part of SFDA’s 2012 work plan.
- Regulatory Data Protection. Both sides agreed to conduct more in-depth research and exchanges on how China can establish and implement effective regulatory data protection through the revision of relevant legislative instruments; and
- Anti-Counterfeiting Collaboration. China announced the establishment of a new Complaint Center for Counterfeit Drugs in order to crack down on the distribution and sale of counterfeit drugs. The Center will facilitate the exchange of information regarding counterfeit drugs in China between the US government, the US pharmaceutical industry and SFDA.
- Streamlined Application Process. As a follow-up to its commitment from the 21st JCCT session in 2010, USCBC reports that China agreed to publish new procedures for applying for network access licenses and radio type approvals via a so-called “one-stop-shop” mechanism by the end of 2011; and
- Telecommunications Services Catalogue. China also announced plans to publish a draft of its value-added telecommunications services catalogue for public comment.
- Three Additional Provinces. The parties agreed to expand the US-China Tourism MOU to include three additional provinces (Henan, Jiangxi and Guizhou), bringing the total number of provinces where Chinese citizens can buy US leisure travel packages to 27.
- Specialty Automotive Products. MOFCOM and DOC agreed to discuss the market potential within the United States and China for specialty automotive products relating to safety and environmental protection.
- Regime Reform. The US government is currently in the process of reforming the US export controls system to improve national security and increase commercial opportunities for US firms, but experts note that the benefits are likely to be limited for China due to ongoing security concerns. However, according to USCBC, DOC and MOFCOM signed an agreement at the JCCT to facilitate high-tech trade through export control process improvements such as shortening the review period for certifying end-users in China and promoting the Validated End-User program.
Experts note that the 22nd session of the JCCT comes in the context of both increased tension within and attention to the US-China bilateral trading relationship. The November 20 – 21 meeting comes on the heels of the East Asia Summit in Bali, Indonesia, and the Asia Pacific Economic Cooperation (APEC) Leaders Summit in Honolulu, Hawaii, where the United States and China, among other countries, made commitments regarding several issues, including trade in environmental goods and services and innovation policies. In addition, experts note that tensions within the bilateral trading relationship have recently increased due to the October 11, 2011 US Senate passage of the “Currency Exchange Rate Oversight Reform Act of 2011” (S 1619), which aims to address China’s alleged currency manipulation, and the November 8, 2011 DOC initiation of an antidumping and countervailing duty investigation into imports of solar cells from China.
In this context, experts note that the commitments made at the 2011 JCCT were modest, but not unexpectedly so. According to USTR Kirk, US and Chinese government officials participating in the 2011 JCCT “reached agreement on a number of important outcomes, though [US government officials] hoped to accomplish even more”. More specifically, US government officials welcomed commitments made by the Chinese government on the issues of IPR and indigenous innovation, but expressed disappointment at the lack of progress in the areas of agriculture and investment. Experts note that although Chinese government officials did not secure significant commitments from the US government on their issues of key concern during the session, they often do achieve progress on other issues of concern through the numerous JCCT dialogues and working groups held throughout the year. According to Vice Premier Wang, this type of continued cooperation is crucial because, “[a]s major world economies, China and the United States would make a positive contribution to the world through their own steady development”.
Experts further note that the true success of the 2011 JCCT will be determined by whether or not the verbal commitments made at the meeting are fully implemented over the longer term. In this regard, experts opine that upcoming political transitions in both China and the United States will serve as a hindrance. While the 2012 US Presidential campaign has only recently begun, experts note that current Vice President Xi Jinping will likely become China’s new President in 2012. As both countries prepare for their respective political transitions, experts note that the US and Chinese governments are likely to avoid any actions that could be interpreted by their citizens as a concession to the other country.
The 2011 US-China JCCT Fact Sheet can be viewed at http://www.commerce.gov/news/fact-sheets/2011/11/21/22ndus-china-joint-commission-commerce-and-trade-fact-sheet
Trade Remedy Cases Involving China
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