February 15, 2000

Tariffs

• China will reduce its tariffs on textiles and apparel products from its current average tariff of 25.4% to 11.7% -- essentially implementing the textile harmonization formula. Reductions will commence upon accession and will be completed by January 1, 2005.
• Tariff rates agreed to in the 1997 U.S-China Bilateral Textile Agreement will be implemented and bound in the WTO by 2001. Further tariff reductions will be implemented by 2005.

• Currently in China, the right to engage in trade (importing and exporting) is strictly limited; only companies that receive specific authorization or who import goods to be used in production have such rights. This limits the ability of U.S. companies to do business in China, and has limited U.S. exports. China has agreed that companies in China and U.S. companies will be able to import most products, including textile and apparel products, into any part of China three years after accession. This commitment is phased in over the three-year period.
• China also generally prohibits companies from distributing imported products or providing related distribution services such as repair and maintenance services. China will permit foreign enterprises to engage in the full range of distribution services over a three-year phase-in period for almost all products, including textile and apparel products. (See separate papers on distribution services and related services.)

• Most Chinese quotas on priority U.S. exports will be eliminated upon accession, except that quotas on thirty yarn, synthetic filament tow, and fiber products will be eliminated after one year.
• The United States will apply the WTO Agreement on Textiles and Clothing to China with a phase-out of our quotas under that Agreement.

• China has committed to two strong provisions to address concerns regarding import surges of textile and apparel products:

-- A textile safeguard provides a mechanism to address market disruption in this sector based on provisions in 1997 U.S.-China Bilateral Textiles Agreement. The mechanism allows the imposition of quotas if market disruption occurs. This provision covers all products under the WTO Agreement on Textiles and Clothing as of 1 January 1995. The mechanism remains in effect until 31 December 2008.

-- China has also agreed to a product-specific safeguard that addresses rapidly increasing imports from China that cause or threaten to cause market disruption on a product-specific basis. This provision remains in effect for 12 years after accession.

• The U.S. and China agreed that we will be able to maintain our current anti-dumping methodology, which treats China as a non-market economy. This provision will remain in effect for 15 years.

• China has agreed to certain subsidy rules, including rules applicable to state-owned enterprises. Specifically, where government benefits are provided to an industry sector and state-owned enterprises are the predominant recipients or receive a disproportionate share of those benefits, the United States could take action under our unfair trade laws.
• In addition, the agreement establishes that the United States can determine whether government benefits, such as equity infusions or soft loans, have been provided to an industry using market-based criteria rather than Chinese government benchmarks.

• To alleviate the uncertainty associated with China’s inconsistent application, refund, and waivers of its 17% VAT tax, China has agreed to apply all taxes and tariffs uniformly to both domestic and foreign businesses.
• Additional subsidies issues will be addressed multilaterally in China’s Protocol and Working Party Report.

Last modified: Thursday, October 14, 2004 PM