From News, page 3, issue no. 370, June 2, 2008
Translated by Liu Peng
Original article: [Chinese]

China's protectionist measures in agriculture were necessary to ensure food security for 1.3 billion people; and the yuan exchange rate was beyond the scope of scrutiny by the World Trade Organization (WTO).

The above were among the answers given by Chinese officials during its second WTO trade policy review (TPR) held on May 21 and 23 in Geneva, where over 900 questions were submitted by members.

Zhang Xiangchen, director of the WTO affairs department at China's Ministry of Commerce, revealed that China had already provided written answers to about two-thirds of the questions, or 524. The remaining would be furnished in a month as required by the WTO secretariat.

TPR is an exercise mandated by WTO agreements, in which member countries' trade and related policies are examined and evaluated at regular intervals – the top four world largest economies every two years; every four years for those placed from five to 20; and every six years for the rest.

Since joining WTO in 2001, the first such review of China took place in 2006, but as China has ascended to the world's third largest economy, an assessment of whether its trade regime met international standards occurs every two years.

Clashing Swords
During the two-day review session, some WTO members had raised concerns over China's exchange rate mechanisms, agricultural and energy policies, and the liberalization of its service trade.

The WTO secretariat report published shortly before the review commented that China's "crawling peg" exchange rate regime weakened the effectiveness of its central bank's monetary policy.

The report also quoted an International Monetary Fund (IMF) evaluation that said China's managed path of the exchange rate and reserve build up, and coupled with intervention, suggested that exchange rate was mainly determined by official action.

One Chinese official from the Ministry of Commerce, who was present at the review session, told the EO that China explained its position on this issue by saying the subject of exchange rates was beyond the scope of trade review.

Whether or not the yuan was undervalued lacked a hard and fast standard, said the official, adding the issue should be left to market forces.

"It is difficult to tell the relation and interaction between exchange rate and monetary policy," He added.

Some members noted that despite having partly opened its agricultural market, the Chinese government continued to exert direct-control over this sector through various agricultural policies.

They said same applied to the energy sector, as China classified energy resources as a strategic commodity. As a result, the end products of energy resources in China were hardly subjected to the fluctuation of international prices.

However, with the rapid growth in demand for energy resources, such distorted market behavior might fail to solve the challenges ahead facing the industry.

In response, the above official said China's stand was that it had fulfilled its obligations in line with the WTO requirements for the agricultural sector.

The protectionist measure existed in China was common in other countries, added the official. He said China, as a country of 1.3 billion populations, needed to adopt some control measures to ensure food security.

In terms of agricultural productivity and farmers' income, he said, Chinese official replied that the Government attached a high priority to these issues, but regarded them as beyond the supervision scope of WTO.

On the calls by WTO members for China to further liberate its service industry, China said the degree of liberation depended on mutual understanding, as WTO members needed to make concessions and solve concrete problems in the negotiations.

The above official also revealed that during the review session, some members had criticized China's trade policy as regressing. For this, according to the official, assistant Minister of Commerce Qiu Hong had responded that China would firmly adhere to reform and opening up policy.

The official added that Qiu had also refuted criticisms on China's assistance to other countries as a form of "new colonialism" as baseless. Qiu was the head of the Chinese delegation to Geneva.

Review Preparations
In fact, preparatory work for the review led by the Commerce Ministry, which involved over 20 governmental organs, had started in early 2007.

In addition, over 50 deliberations with the WTO secretariat were held prior to the review.

The Ministry also submitted the Chinese Government Policy Statement to the WTO secretariat. These documents set the tone for discussions during the review session.

Prior to the review, the WTO published a secretariat report saying China would be assessed from four aspects: its economic environment, trade and investment regimes, trade policies and practices by measure, and trade policies by sector.

The report noted that though some aspects of China's trade policy regime remained opaque; it has continued to adopt measures to increase the level of transparency.

Among the efforts mentioned by the report include the introduction of the Regulation on Open Government Information, establishment of National Corruption Prevention Bureau, the implementation of Property Law, Enterprise Income Tax Law, Anti-Monopoly Law and the Law on Enterprise Bankruptcy.
 
"Continued trade-opening liberalization and structural reforms in China have contributed to real GDP growth rates in excess of 10% over the past 4 years, resulting in rising per-capita income and poverty reduction," WTO director-general Pascal Lamy told the EO on the second day of the review.

"China has continued to attach high priority to the multilateral trading system, and its trade policies continue to be open," he added.

However, the review chairperson's concluding remarks published at the end of the session noted that China faced a number of challenges, including the need to stimulate domestic consumption without boosting inflation, growing income inequality, unequal growth in different economic sectors, and social welfare and environmental concerns.

The remarks also touched on members concerns over Chinese customs procedures, import restrictions, anti-dumping measures, standards, technical regulations and SPS, and restrictions on foreign investment.

The remarks concluded that though members appreciated China's efforts in enhancing transparency, more improvement was needed, as "some aspects of China's policy regime, including standards and domestic regulations, remained complex and opaque".