Results tagged “WTO” from The China Sourcing Blog
The US Trade Representative's office has just released a new report documenting the legal obstacles foreign firms face in their business dealings with China. As might be expected, there were many grievances, although the agency did concede that China has been far more welcoming to internationals than in previous years. Besides its focus on the topics of contemporary spats between China and the US – items such as steel, export subsidies and intellectual property rights (strangely, valuation of the RMB was omitted) – the American agency notably brought forth an issue in which the Chinese government has been particularly rigid: control of the media and telecommunications.
Under the terms of the Protocol of Accession to the WTO, China was obliged to allow non-state owned enterprises, including foreign owned enterprises, to import movies, DVDs, music, books, newspapers and journals. A WTO ruling against China called for a disbandment of this government-enforced monopoly, yet the Chinese government has remained very reluctant to release its control over these forms of media.
According to the report, once within China’s borders there are more hurdles. Movie imports destined for theatrical release are limited to 20 revenue-sharing films per year. The government then closely regulates the foreign film showings to ensure that their viewing time in the theatres does not exceed one-third that of Chinese movies. Then there is the provision that blockbuster films originating from abroad should not compete with those made domestically (think Avatar when Confucius was released). Prefer television? Foreign programmes are not allowed more than 25% of airtime, and are outright banned between seven and ten pm on the basic channels. Even on cable, the percentage is only increased to 30%. And of course, everything is subject to censorship.
Those in the telecommunications industry are equally obstructed. Foreign firms are limited to no more than 49% stakes in joint ventures, although none have been intrepid enough to enter the Chinese market within the last decade, nor have any local companies for that matter. There are only four nation-wide players – China Mobile, China Telecom, China Unicom and DBSat – and it seems that, based on the amount of restrictions on the industry, the Chinese government is content to leave its communication capabilities within the hands of these few domestic firms. Then there is the internet. Google completely evades mention by the US Trade Representative office.
Naturally, the report is not without its quirks. The first page mentions that the import of petroleum and sugar into China is reserved for state-owned enterprises, but that this is indeed consistent with its agreement with the WTO. One is left to ask, why sugar? Then in a later paragraph: “China still maintains high duties on some products that compete with sensitive domestic industries…Raisins face duties of 35%”. (May China anticipate Hillary Clinton’s next condemnation in a speech titled “Steel, Tyres and Raisins?”)
Humor aside, the US Trade Representative report says that despite the countless ways in which China has opened itself to international trade, if anything it has become more restrictive in its control of the media and its telecommunications systems.This may be an issue beyond the influence of trade representatives, American or otherwise.
A few months ago, as part of a long string of protectionist-oriented disputes involving China, the heads of 30 industry groups from North America, Asia and Europe wrote a letter to Chinese ministers in protest of a recent law involving the procurement policies of the Chinese government. From October 2009 onwards, China’s public purchases were to start favoring domestic technologies. The legislation was deemed a significant blow to trade for international high-tech firms, as China’s government procured USD 88 billion worth of goods and services in 2008, including 14% of the nation’s 40 million PC purchases.
The favoring of domestic enterprises is not an issue exclusive to China, however. Although over 20 countries have signed on to the World Trade Organization’s (WTO) Agreement on General Procurement (China has not), it is scarcely followed at all.
In the WTO’s own words, the agreement, “[has] not worked well”. It requires “non-discriminatory practices and open procedures in government procurement among member states, and covers not only central government purchasing of goods… but also procurement of services, including public works, and procurement at the sub-central levels of government. Procurement in public utilities is also included.” This applies only to contracts valued above a certain threshold, as set by the WTO for various procurement categories; below the threshold, countries can be as discriminatory as they please.
Participants are supposed submit statistics of their procurement activities on an annual basis, to include countries of origin and totals. Only eight countries have bothered to present anything at all. Their submissions suggest anything but engagement in “non-discriminatory practices”.
- Norway: The most recent statistics are from 2005. Of the USD 1,215 million procured, only 1.3% of supply, 6.9% of service and 1.3% of works contracts went to foreign companies
- South Korea: In 2004, the most recent data from South Korea, procurement contracts were valued at over USD 25 billion. Less than 1% went to foreign-based firms, these almost exclusively entered into by the Ministry of National Defense with firms based in the United States, Germany and the Netherlands
- Japan: 98% was procured domestically in 2008. Ironically, its Foreign Trade Commission did not contract at all with foreign-based companies
- US: The US submissions to the WTO are not broken down by country of origin. However, the website of the US Federal Procurement Data System does give this data, although buried within around 100 xls files – one for each federal agency. Sampling these files reveals that beneath the column heading “Country of Origin”, if there is anything at all, there is only 'US.' The USD 417 billion procured by the US in 2007 most likely came from its own 50 states
- Switzerland: Switzerland reports the highest proportion of overseas procurement. In its most recent submission of 2003 data (in French), it lists 60% of its above-threshold contracts going to domestic bidders, 29% to US firms and 9% to the EU, with 2% categorized as “other”
- Canada: does not list country of origin. The country reports 1,759 contracts made in 2007 valued at USD 1.9 billion
- Hong Kong: consistently submits a two-page document with their name, the date, and nothing else of informational value.
- Liechtenstein (yes, Liechtenstein): This constitutional monarchy of 35,000 people is a model of transparency. It lists all 109 of its 2008 government contracts, and even goes so far as to give the name of the company it has procured from. Somehow even tiny, landlocked, mountainous Liechtenstein manages to largely avoid procurement from abroad. Besides domestic contracts, there were only a handful from Switzerland, two from Iceland, one from Germany and one from Austria.
It seems discrimination in government procurement is a worldwide phenomenon. If the heads of these international industry groups want the Chinese government to partake in fairer procurement practices, the first step may be to convince their own governments to do the same.
According to data from the WTO's Global Antidumping Database, in Q3 2009 WTO member governments initiated 44 new product level investigations in response to domestic industry requests for the imposition of import restrictions, most of these (37) occurred under a national antidumping law. The cumulative number of new requests for protection during the first three quarters of 2009 was 30.3% higher than for the same period in 2008, and China continued to be the exporting country most targeted by new investigations in Q3, facing 23 (or 62.1%) of 37 new product-level investigations. For the whole of 2008, industry demands for new import restrictions against China under these policies were up 22.7%, while a 7.8% increase is expected in 2009. Interestingly, however, in the report accompanying the data, author Chad Bown concludes that
So protectionism may have been on the increase since the financial crisis - yet the targeting of Chinese exporters in this regard is nothing new. The series of anti-dumping duties recently levied in the US on imported Chinese products (notably on tires and steel pipe) have, however, caused the contentious shadow of protectionism to fall squarely over US President Obama's impending visit to China. The Chinese have countered with tariffs and investigations of their own, notably on whether cars imported from the US are being sold below market prices in China, yet surely these matters can all be talked out in a civilised manner when the two finally sit down for what is now a well overdue chat.WTO member use of trade remedies to target China's exports is not a new, crisis-related phenomenon, as it continues a trend dating back to China's WTO accession in 2001 and even earlier.
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