ITC Releases Report on China Practices and Policies Affecting Imports, Exports, Etc.
The International Trade Commission has released the public version of its report requested by the House Committee on Ways and Means entitled, "China: Description of Selected Government Practices and Policies Affecting Decision Making in the Economy."
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The report includes a description of the government practices and policies in China that restrain imports and exports.
The report also analyses the effect of China's governmental practices and policies on: industrial development; the rationalization and closure of uneconomic enterprises; privatization of state-owned enterprises (SOEs) and private ownership; price coordination; utility rates; taxation; the banking and finance sectors; infrastructure development; research and development; and worker training and retraining.
Highlights of ITC's Findings With Respect to Imports and Exports, Etc.
The following are the highlights of the ITC's findings on China's government practices and policies with regard to import and export restraints, antimonopoly law, and state-owned assets:
Import restraints. The ITC's summary of findings states that China's central government has issued regulations since 2004 to restrict or prohibit imports used under the processing trade relief (PTR) program as well as to restrict or prohibit the types of products that can be exported under the PTR program1.
Other restraints on imports include automatic licensing requirements for certain items and import bans on certain technologies and machinery.
Additional restraints on imports include a lack of transparency with respect to customs regulations and burdensome documentation requirements; tariff-rate quotas on certain agricultural products and fertilizer; burdensome and inconsistently applied product certification requirements; government procurement measures that favor domestic products over imports; nontransparent sanitary and phytosanitary standards; and the failure to adopt international standards.
Export restraints. China's key restraints on exports include the following: selective reduction or elimination of value added tax (VAT) rebates for exports; export licensing regime; export taxes; restraints on exports of certain apparel; and tying export privileges to environmental performance.
Antimonopoly law to take effect in August 2008. The report states that China's new Antimonopoly Law is scheduled to enter into force in August 2008. Although the law may address some concerns about monopolistic practices when it is implemented, it does not cover the agricultural sector, government-controlled monopolies, or SOEs. In addition, the new law allows monopoly agreements in certain cases.
State-owned assets commission. The ITC's report also provides an analysis of the the December 2006 policy directive from China's State-Owned Assets Supervision and Administration Commission (SASAC), a directive that outlines the industries the Chinese government considers to be strategically important, including the following: armament, power generation, petroleum and telecommunications. The directive also identifies a group of "pillar industries," including the following: machinery, automobiles, and information technology.
In its directive, SASAC provided, for the first time, insight into the type of industries in which the government will maintain strong ownership positions. The new policy directs SASAC to maintain at least a 50% equity stake in each "strategic industry" firm, as well as in principle "pillar industry" firms.
(The ITC notes that this is the first in a series of three reports. The second study is to assess the relative impact of these policies on selected sectors; and the third study is to examine the role of these policies in influencing patterns of production and investment in the Asian region.)
1China's processing trade sector involves the importation of products to be used in the production of semi-finished or finished goods solely for export. A processing trade relief program affords duty-free treatment for imported inputs used in the processing trade sector, and VAT rebates upon export of processing trade goods.
ITC Report, "China: Description of Selected Government Practices and Policies Affecting Decision Making in the Economy," (Investigation No. 332-492, dated December 2007) available at http://hotdocs.usitc.gov/docs/pubs/332/pub3978.pdf
ITC press release announcing the report's release (News Release 08-033, dated 04/10/08) available at http://www.usitc.gov/ext_relations/news_release/2008/er0410ff2.htm