The U.S.-China JCCT: Outcomes

Established in 1983, the U.S.-China Joint Commission on Commerce and Trade (JCCT) is a government-to-government consultative mechanism that provides a forum to resolve trade concerns and promote bilateral commercial opportunities.

Previously led by the U.S. Secretary of Commerce and the Chinese Commerce Minister, the status of the JCCT was elevated following the December 2003 meeting of President Bush and Chinese Premier Wen to focus higher-level attention on outstanding trade disputes.

This year’s JCCT – chaired by Commerce Secretary Don Evans, U.S. Trade Representative Robert Zoellick and Chinese Vice Premier Wu Yi – achieved concrete results on key U.S. systemic concerns and laid the foundation for further progress. Leveling the Playing Field -- Structural Issues and Market Economy Status

One of President Bush’s key goals in the trade arena is to ensure that the playing field is level, meaning that competition is determined by the market, rather than government intervention. In prior decisions, the Commerce Department has found that China does not yet qualify as a market economy under the U.S. antidumping law. In the case of China, the surest means to ensure that the playing field is level is to encourage China’s ongoing structural reforms, which are intended to create a market economy.

In order to assess China’s reforms to date, as well as to identify the steps China would have to take, under U.S. law, to achieve market economy status, China and the U.S. agreed during the JCCT meetings to the establishment of a working group, to be jointly chaired by James Jochum, Assistant Secretary for Import Administration from the Department of Commerce, and the appropriate Director General from MOFCOM. The immediate goals of the group will be to:

-- Consult closely regarding the criteria under U.S. law needed to achieve market economy status;
-- Review, under the framework established by U.S. law, the broad spectrum of policies and practices that are a part of the ongoing structural reform in China ; and
-- Identify the steps necessary for China to qualify as a market economy under U.S. law.

The working group will provide a forum dedicated to the discussion of these issues, including concerns about unfair trade problems and the remedial measures applicable to them, which do not readily fall within the mandate of any of the other working groups currently in existence under the JCCT.

The United States attaches great importance to the establishment of this group so that our two governments may explore and discuss China’s economy and its ongoing economic reform program, pragmatically address concerns about trade- and market-distorting practices that might otherwise lead to bilateral trade frictions, and consider the Government of China’s concerns about China’s non-market economy status under the U.S. antidumping law.

This working group is the embodiment of the spirit of cooperation forged between Premier Wen Jiabao and President Bush when they met last year and we welcome China’s participation.

Export Controls

The U.S. Department of Commerce reached an agreement with the Ministry of Commerce of the People’s Republic of China on procedures to strengthen end-use visit cooperation and help ensure that U.S. exports of controlled dual-use items are being used by their intended recipients for their intended purposes. During the JCCT meetings, China and the U.S. agreed to the following:

This new end-use visit understanding specifies procedures for conducting end-use visits, while also providing a mechanism for consultations on other end-use visit issues that may arise.
The understanding resolves a long-standing issue of great importance to the U.S.-China high-technology relationship.

Resolution of this longstanding issue will allow for increased U.S. exports to China of high-technology items subject to appropriate safeguards. This new end-use visit understanding provides an important example of the United States and China working together to solve practical problems to the benefit of both their peoples, as well as the increasing consensus on the objectives of the underlying strategic purposes of the controls.

Trade Promotion

In December 2003, President Bush and Premier Wen agreed that significantly increasing U.S. exports to China would be a priority of both governments, and that the JCCT was a key vehicle for accomplishing this effort.

Currently there are almost 13,000 U.S. small and medium-sized businesses that export to China. China is the seventh largest market for U.S. merchandise exports. This year should see an increase in opportunities for U.S. small and medium-sized businesses (SMEs), as Chinese tariffs continue to decrease due to their WTO commitments and additional non-tariff barriers are eliminated. Despite these advantages, China is a difficult market for U.S. companies due to distance, language, and numerous Chinese regulations.

To help U.S. companies overcome these barriers and take advantage of the opportunities, the JCCT has been working on a joint proposal on trade promotion. A key element of this proposal is an agreement between the China Council for the Promotion of International Trade (CCPIT), the U.S. Department of Commerce and the U.S. Small Business Administration. This alliance includes:

-- CCPIT logistical support to DOC trade missions, especially those organized for SMEs.

-- Introducing U.S. SMEs to Chinese firms and government entities seeking suppliers of goods, products or services, especially through downstream procurement. CCPIT has pledged to help U.S. SMEs gain access to Chinese supply chains, either directly or via subcontracting.

This approach, coupled with the new Virtual Business Information Center, will dramatically increase our ability to help U.S. SMEs export to China.

Textiles

By way of background, U.S. imports of textiles and apparel from China reached $11.6 billion in 2003 while U.S. exports to China of these products totaled $225 million (50 to 1 in China’s favor). China’s exports of textile products to the U.S. have surged dramatically since quotas were lifted on an array of such products at the end of 2001. The U.S. consumer market is undoubtedly important to the Chinese industry.

Those facts have created tensions in our bilateral trade relationship. Those tensions led the U.S. industry to exercise its right to petition for relief under a special textile safeguard, bargained for by the United States as a part of China’s WTO accession. As a part of their arguments in support of their petition, the U.S. industry maintained that China has policies and practices that distort trade and investment in the textile sector including: high tariffs, improper customs valuation practices, arbitrary import taxes, non-transparent import licensing, subsidies provided to state-owned enterprises, VAT rebates, and currency undervaluation. Intellectual property rights violations, including textile design “knock-offs” and trademark piracy, have also been a serious problem in China.

The U.S. interagency Committee for the Implementation of Textile Agreements (CITA) determined on November 17, 2003 that market disruption or threat thereof existed for imports of three textile products from China (brassieres, robes, knit fabric) that were subject to industry petitions. Quotas were put into place on December 24 for a one-year period. Consultations were held with China on the safeguards on January 12-13, 2004 in Beijing and on March 3 in Washington. No further consultations have been scheduled and the quotas remain in place.

At the same time, there is a growing market in China for American fiber and other textile products. Cotton exports, for example, have grown significantly in recent years, providing a reliable source of high-quality fiber to the Chinese industry. Given the competitiveness of may U.S. textile producers, there are new opportunities available in those sectors of the market where the capital intensive nature of U.S. production and their leading designs can offer an edge.

To begin addressing the many difficult issues affecting our relationship in this sector, the U.S. and China have agreed to reinforce their existing dialog on textile trade. Under this plan, China has committed to:

-- Upgrading ongoing discussions to the Under Secretary-Vice Ministerial level, to attempt to understand and try to resolve issues.
-- As a part of this dialog, a seven company U.S. business delegation visited Beijing in March, in conjunction with a visit by Commerce Under Secretary Aldonas, to meet with counterparts in Chinese industry.
-- Discussions addressed mutual trade and investment opportunities, barriers to U.S. exports of textile products to China, intellectual property rights, and possible scenarios for the bilateral textile trade relationship when quotas are eliminated at the end of this year.

-- Further business-to-business discussions in the United States later this year, with a view to improving the trade imbalance in this sector.

For additional information on agriculture, see the web site of the U.S. Department of Agriculture (www.usda.gov). For further information on other JCCT results – including industrial policies, intellectual property and services – see the web site of the Office of the U.S. Trade Representative (www.ustr.gov)

The U.S.-China Joint Commission on Commerce and Trade –
April 21, 2004