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World Trade
Organization RESTRICTED S/C/W/233
26 November 2003 (03-6295) Council for Trade in Services Original: English

COMMUNICATION FROM THE UNITED STATES

Transitional Review Mechanism in connection with Paragraph 18 of
the Protocol on the Accession of the People’s Republic of China

The following communication, dated 24 November 2003, from the Delegation of the United States is being circulated to the Members of the Council for Trade in Services.

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Questions from the United States to China concerning services

DISTRIBUTION SERVICES
In its accession agreement, China committed to eliminate national treatment and market access restrictions on foreign enterprises providing (through a local presence) wholesaling, commission agents’, retailing and franchising services, along with related services, such as repair and maintenance services, within three years of its accession (or by 11 December 2004), subject to limited product exceptions.
Under this measure, China permits joint ventures with minority foreign ownership to apply for authority to engage in wholesaling services for domestic merchandise and merchandise imported for its own account in certain pilot areas (provincial capitals, certain municipalities and special economic zones), subject to certain product exceptions and stringent requirements relating to assets, wholesale volume, past import and export levels and prior experience, among other matters.
In addition to committing to permit joint ventures and wholly foreign-owned enterprises to distribute goods that they make in China immediately upon accession, without any market access or national treatment limitations, China agreed to permit foreign service suppliers to supply retailing services for almost all goods, whether made in China or imported, through joint ventures with minority foreign ownership, subject to geographic restrictions (allowing China to limit market access to five Special Economic Zones and eight cities) and quantitative restrictions (allowing China to limit the number of joint ventures that can operate in six of the eight cities).
According to some reports, these regulations may impose a number of restrictions solely on foreign retailers, including high capital requirements for each new store, limits on the number of approved but unopened stores, and a compliance grading system that can result in suspension of the right to open new stores.
Please explain how the creation of a China Post monopoly on the delivery of the delivery of letters under 500 grams does not conflict with China’s WTO commitments, particularly the horizontal commitment in China’s Services Schedule not to reduce market access by imposing conditions on ownership, operation or scope of activities that are more restrictive than those in place on the date of China’ s accession.
Section 5 of the Basic Telecommunications Reference Paper also specifically calls for an independent telecommunications regulator that is separate from, and not accountable to, any supplier of basic telecommunications and makes decisions on an impartial basis.
In the telecommunications sector, however, China has not yet established an independent regulator, as the Ministry of Information Industries (MII) is not structurally and financially separate from all telecommunications operators and providers.