WORLD TRADE
ORGANIZATIONG/TRIMS/W/31
18 August 2003
(03-4294)
Committee on Trade-Related Investment Measures Original:  English
COMMUNICATION FROM THE EUROPEAN COMMUNITY
AND ITS MEMBER STATES
The following communication, dated 14 August 2003, has been received from the Permanent
Delegation of the European Commission.
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TRANSITIONAL REVIEW MECHANISM PURSUANT TO PARAGRAPH 18
OF THE PROTOCOL ON THE ACCESSION OF THE PEOPLE'S
REPUBLIC OF CHINA ("CHINA")
I. GENERAL
1. In connection with its accession to the WTO, China assumed a number of commitments with
respect to existing WTO agreements and the obligations contained therein.
2. A number of these commitments relate to the WTO Agreement on Trade-Related Investment
Measures ("TRIMs") and are reflected primarily in paragraph 18 of the Chinese Protocol on
Accession which also establishes a transitional review mechanism ('TRM') providing for the General
Council to review China’s implementation of the WTO Agreement within one year after accession.
3. On TRIMs, has China committed itself to comp ly fully with the TRIMs Agreement through
abolishing legislation and other measures constituting TRIMs upon joining the WTO  and through
"providing relevant information, including inform ation contained in Annex 1A, to each subsidiary
body in advance of the review". More specifically, paragraph 3 of the Accession Protocol for China
reads:
“3. China shall, upon accession, comply with the TRIMs Agreement, without recourse to
the provisions of Article 5 of the TRIMs Agreement.  China shall eliminate and cease to
enforce trade and foreign exchange balancing requirements, local content and export orperformance requirements made effective through laws, regulations or other measures.
Moreover, China will not enforce provisions of contracts imposing such requirements.
Without prejudice to the relevant provisions of this Protocol, China shall ensure that the
distribution of import licences, quotas, tariff-r ate quotas, or any other means of approval for
importation, the right of importation or investment  by national and sub-national authorities, is
not conditioned on :  whether competing domestic suppliers of such products exist;  or
performance requirements of any kind, such as local content, offsets, the transfer of
technology , export performance or the conduct of research and development in China.”
II. CHINESE TRIMS – REQUEST FOR FURTHER CLARIFICATION
4. In response to the questions posed by the European Community and its Member States
(the "EC") in submission G/TRIMS/W/21, as well as questions posed by other WTO MembersG/TRIMS/W/31
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regarding modifications to its TRIMs, China issued Communication G/TRIMS/W/26. In addition to
this document, the Head of the Chinese Delegati on delivered a detailed and informative statement
dated 14 October 2002 during the 14 October 2002 meeting of the TRIMs Committee. That statement
provided further clarification concerning certain questions raised by other WTO Members.
5. Having carefully analysed the document a nd the statement in question, the EC would be
grateful for some additional clarification on a number of points. This would allow the EC to gain a
better understanding of and assess more fully the progress made by China in abolishing or modifying
its TRIMs and TRIMs incompatible legislation as required.
Question 1
Upon acceding to the WTO, China accepted to  provide information regarding a number of
economic policy areas (as well as other areas).
In the area of investment specifically, China accepted to provide the Committee on Trade-
Related Investment Measures with information about “completed revisions to investment guidelines
in conformity with the WTO Agreement”, cf.. Annex 1A, II, 2 (paragraph 85) of document
WT/ACC/CHN/49.
Can China confirm that such revisions have in  fact taken place, and, what the revisions
consist of more precisely, especially as regards the status of the Catalogue on Investment and
the categorisation of restricted;  permit ted;  and encouraged investments, and
requirements relating to transfer of technology?
Question 2
The above-quoted paragraph 3 of the Accession Protocol for China lays out a clear obligation
for China to not only abolish or amend TRIMs-incompatible legislation, but also to ensure that any
contracts containing TRIMs incompatible commitments and obligations would not be enforced.
However, the EC notes that – according to th e Chinese answers so far provided - obligations
contained in existing contractual arrangements will nevertheless remain valid and enforceable even
where such arrangements contain TRIMs-incompatible commitments.
During the last TRM regarding TRIMs China stat ed its respect for the freedom of parties to
enter into contracts and added that commitments en tered into by (foreign) producers continue to be
enforceable, as "such commitments cannot be deemed  invalid … [and] the enterprise shall continue to
honour its commitment made in the contract" and the fact that in relation to foreign investment, the
contracts and articles of association of a foreign invested enterprise become effective only after theyhave been approved by the competent authority.
That answer would appear to be in direct contradiction with the explicit undertaking under
paragraph 3 of the protocol to ensure that cont racts which contain TRIMs-incompatible commitments
and obligations are no longer enforceable.
Can China confirm that contractual arrang ements which contain TRIMs-incompatible
commitments and obligations should be amended in such a way that they will contain
obligations which are fully compat ible with the TRIMs Agreement?G/TRIMS/W/31
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Can China indicate how such amendments might be instituted, including through a
renegotiation of the relevant parts of a contract?
Can China confirm that for its part it will ensure that any contracts which may contain
TRIMs incompatible commitments and obligations will not be enforced before domestic lawcourts or other administrative tribunals or bodies and that the TRIMs-incompatible
commitments and obligations are to be considered null and void?
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