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Congressional Research Service, "China-U.S. Trade Issues," March 14, 2002

This CRS report was written by Wayne M. Morrison, specialist in Asian trade and finance.
March 14, 2002

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U.S.-China economic ties have expanded substantially over the past several years; total U.S.-China trade rose from $5 billion in 1980 to $122 billion in 2001; China is now the fourth-largest U.S. trading partner. Yet, U.S.-China commercial relations have been strained by a number of issues, including a surging U.S. trade deficit with China (which totaled $83 billion in 2001), China’s restrictive trade and investment practices, and its failure to provide adequate protection for U.S. intellectual property rights (IPR).

During the 1990s, the United States actively pressed China to liberalize its trade regime and improve protection of U.S. IPR. Under the threat of U.S. trade sanctions, China signed bilateral trade agreements with the United States on market access (1992) and IPR protection (1992 and 1995). These agreements produced mixed results: market access and IPR protection have significantly improved in China, but U.S. firms continue to face numerous trade barriers, and IPR piracy remains a serious problem in China.

In recent years, the United States has sought to use China’s application to join the World Trade Organization (WTO) as a means to gain greater market access in China. The United States insisted that China could join the WTO only if it substantially cut trade and investment barriers. After many years of tough negotiations, a consensus in the WTO on the terms of China’s membership was reached in September 2001. China’s accession was formally approved by the WTO on November 10, 2001, and on December 11, 2001, it formally became a WTO member.

China’s entry into the WTO will require it to significantly reform its trade regime by eliminating or reducing an extensive array of tariff and non-tariff barriers on goods, services, and foreign investment. The removal of these barriers could result in significant new opportunities for U.S. exporters.

In order to ensure that the WTO agreements would fully apply between the United States and China (once China joined the WTO), the 106th Congress passed legislation (H.R. 4444, P.L. 106-286) authorizing the President to grant China permanent normal trade relations (PNTR) status after it joined the WTO (the President extended PNTR status to China on December 27, 2001). The Act also requires the U.S. Trade Representative (USTR) to annually issue a report assessing China’s compliance with its WTO trade obligations. Finally, the Act and established a special Congressional-Executive Commission to examine China’s human rights policies.

The 107th Congress will likely press the Bush Administration to closely monitor China’s compliance with its WTO commitments. A number of issues regarding China’s compliance have already arisen. The required annual report by the USTR on China’s WTO implementation will likely become the focal point of potential congressional concerns over China’s compliance.

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