RESTRICTEDWORLD TRADE
ORGANIZATIONG/C/M/71
4 December 2003
(03-6439)
Council for Trade in Goods
MINUTES OF THE MEETING OF THE COUNCIL FOR TRADE IN GOODS
26 NOVEMBER 2003
Chairman:  H.E. Ambassador Hovorka (Czech Republic)
The meeting of the Council for Trade in Goods  was convened by airgram WTO/AIR/2214 and
Add.1 and the proposed agenda for the meeting wa s contained in document G/C/W/475.  The meeting
proceeded on the basis of the proposed agenda.
I. REVIEW OF THE OPERATION OF THE TRIMS AGREEMENT UNDER
ARTICLE 9 ...................................................................................................................... .........2
II. REQUEST BY CANADA, THE EUROPEAN COMMUNITIES AND THE
UNITED STATES – TR IMS EXTENSIONS.........................................................................5
III. TRANSITIONAL REVIEW UNDER PARAGRAPH 18 OF THE PROTOCOL
OF ACCESSION OF THE PEOPLE'S  REPUBLIC OF CHINA........................................6
IV. FREQUENCY OF NOTIFICATIONS OF STATE TRADING ENTERPRISES
UNDER ARTICLE XVII OF GATT 1994 AND THE UNDERSTANDING ON
THE INTERPRETATION OF ART ICLE XVII OF GATT 1994 .....................................15
V. STATUS OF NOTIFICATIONS UNDER THE PROVISIONS OF THE
AGREEMENTS IN ANNEX 1A OF  THE WTO AG REEMENT......................................16
VI. MARKET ACCESS MATTERS ...........................................................................................17
A. COMMITTEE ON MARKET ACCESS – PERIODIC REPORT OF THE
COMMITTEE...................................................................................................................... .....17
B. INTRODUCTION OF HARMONIZED SYSTEM 1996 CHANGES INTO WTO
SCHEDULES OF TARIFF CONCESSIONS – REQUESTS FOR A WAIVER –
ISRAEL (G/L/646, G/C/W/468), T HAILAND (G/L/647, G/C/W/470) ..................................17
C. EXTENSION OF WAIVER FOR THE PURPOSE OF ESTABLISHING A NEW
SCHEDULE – SRI LANKA (G /L/644, G/C/W/469)...............................................................17
VII. REGIONAL TRADE  AGREEM ENTS ................................................................................18
A. EC-LEBANON INTERIM AGREEMENT –  NOTIFICATION FROM THE
PARTIES TO THE AGREEMENT  (WT/REG153/N/1, WT/REG153/1) ...............................18
B. FREE TRADE AGREEMENT BETWEEN TURKEY AND CROATIA –
NOTIFICATION FROM THE PARTIES TO THE AGREEMENT(WT/REG156/N/1 
AND CORR.1, WT/REG156/1)....................................................................18
C. FREE TRADE AGREEMENT BETWEEN TURKEY AND BOSNIA AND
HERZEGOVINA –  NOTIFICATION FROM THE REPUBLIC OF TURKEY
(WT/REG157/N/1, WT/REG157/1).........................................................................................18G/C/M/71
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D. SINGAPORE-AUSTRALIA FREE TRADE AGREEMENT – NOTIFICATION
FROM THE PARTIES TO THE AGREEMENT   (WT/REG158/N/1, WT/REG158/1)..........18
E. FREE TRADE AGREEMENT BETWEEN CROATIA AND BOSNIA AND
HERZEGOVINA – NOTIFICATION FROM THE REPUBLIC OF CROATIA
(WT/REG159/N/1, WT/REG159/1).........................................................................................18
VIII. CONSIDERATION OF ANNUAL REPORTS OF SUBSIDIARY BODIES OF
THE COUNCIL FOR T RADE IN GOODS .........................................................................18
IX. ADOPTION OF THE ANNUAL REPORT OF THE COUNCIL FOR TRADE
IN GOODS TO THE GENERAL CO UNCIL......................................................................19
X. OTHER BU SINESS............................................................................................................... .19
I. REVIEW OF THE OPERATION OF THE TRIMS AGREEMENT UNDER
ARTICLE 9
1.1 The Chairman said that as agreed at the last CTG meeting, he had held informal consultations
with a number of delegations on how to address the review mandated under Article 9 of the TRIMs
Agreement and to take stock of the situation in this regard. The aim of his consultations was simply to
allow for a frank exchange of views on this issue, without prejudice to anyone's position or to anyresult from the discussions.  Those consultations were useful in creating a better understanding of
each other's positions and of the main issues at stake.  Despite an active involvement from all,
positions continued to be divided on how to proceed with the review.  A number of ideas were
explored on how to energise the process.  However, none of them met with a broad consensus.  He
knew that some Members might wish to take this opportunity to elaborate on their ideas or makeadditional comments on the Article 9 review.  He therefore invited those delegations to proceed with
their ideas and comments so that all Members coul d have an opportunity to consider them and to
express their views on this matter.  Before opening the floor to Members, he requested delegations to
focus on new ideas or elements in our discussion and refrain from repeating well known and recorded
positions regarding the nature, scope and possible outcome of the review.
1.2 The representative of Brazil recalled that two suggestions had been made in order to energise
the discussions.  First, following a suggestion made by Colombia in the meeting in June, Members
discussed the possibility of having a further study or technical note based on the current notifications
presented to the TRIMs Committee on the extensions.  The idea would be to evaluate how suchnotifications in various areas in which TRIMs were allowed for a further period of time had impacted
world trade.  The second suggestion was that the CTG could also invite UNCTAD to present one
chapter of its latest World Investment Report.  Th e chapter dealt with performance requirements, and
in his view was an update on the joint UNCTAD-WTO study.
1.3 The representative of Colombia recalled that at a previous meeting of the CTG Colombia had
suggested supplementing the joint UNCTAD-WTO study with a study concerning the TRIMs
notifications which were made, the sectors they covered, some statistical data on trade flows under
these measures, and also similar details on extensions granted.  Likewise, Colombia had suggested
that on the basis of the analysis of this informa tion, future discussions would be structured in an
orderly and methodical manner so as to move forward in the review.
1.4 The representative of Cuba agreed that the CTG could invite UNCTAD to give a presentation
of one of its chapters from its last annual re port regarding investments throughout the world.  He
recalled that UNCTAD had made an important contribution to the negotiations in the framework of
the WTO.G/C/M/71
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1.5 The representative of India said that in terms of new suggestions, Members had heard two
initiatives, one by Colombia which they had made at the last CTG meeting suggesting that the WTO
Secretariat compile a factual document showing TRIMs-related notifications reported, the sectors
covered, some statistics of trade flows under the relevant measures and similar details on extensions
granted.  The other proposal was from Brazil, which suggested that the Council invite UNCTAD topresent its chapter on performance requirements contained in the World Investment Report 2003.  He
believed that both suggestions were constructive and could provide useful additional inputs to inform
the debate as they would help Members understand trade and development aspects of TRIMs.  This of
course did not preclude any additional input by way of Members sharing their own experiences with
the operation of TRIMs.
1.6 The representative of the European Communities recalled that the suggestions by Colombia
and Brazil could not be agreed upon in the informal consultations.  He believed that there was no need
to change anything in the TRIMs Agreement and there was no need to come up with a proposal for
amendment as a result of the review.  There was a lack of consensus on this fundamental point.  His
delegation did not think that the review needed to be reenergised as it had been conducted and
unfortunately did not come up with a common view.  Should Members want to examine issues related
to the implementation of TRIMs, he invited them to make their comments under item 2 of the agenda.
Here, delegations who had successfully experienced the phasing-out of their national TRIMs would
be asked to share their experience;  delegations which still had to implement their obligations would
be asked to explain the nature of their difficulties.
1.7 The representative of Pakistan supported the views expressed by India and Brazil.  The EC
maintained that there was no need to energise the review, but he felt that Article 9 of the TRIMs
Agreement provided for a review and so far it had not been possible to reach agreement.  There was a
need, therefore, to continue with the discussion.  He suggested that in addition to what Brazil and
Colombia had proposed, the Secretariat could prepare a bibliography of material related to TRIMs.His delegation would be willing if the Secretariat or UNCTAD would take Pakistan as a case study,
where 85 per cent of TRIMs were dismantled in the transitional period.
1.8 The representative of the United States associated himself fully with the remarks made by the
EC.  For his delegation the CTG had taken this review as far as it could be taken.  It began in the year
2000 and had run for two years, and from his st andpoint there was no prospect of any kind of
fundamental change to the TRIMs Agreement.  A review was not the same thing as a fundamental
reopening and renegotiation of an Agreement, whic h was why he thought that the two proposals that
had been put forward to provide information did not have the prospect of moving the CTG any closer
to a consensus.  He agreed with the suggestion made by the EC that agenda item 2 dealing with the
specific experience of the countries that had requested TRIMs extensions was something that was of
interest and was an area where Members could have some useful discussion.
1.9 The representative of Canada thought that exchanging Members' experiences with TRIMS
would be best done under item 2 or in the TRIMS Co mmittee.  It had become clear that there was no
consensus on the need to propose amendments to the TRIMS Agreement.  The lack of consensus was
not due to the process, but rather to the issues of substance.  When he considered the possibility of a
new study, he looked back at the study that was ma de less than two years ago and did not see the need
for a new one.
1.10 The representative of Pakistan considered  that the joint UNCTAD-WTO study was important
in remedying a situation in which the CTG did not have enough resource material to engage in a
meaningful review.  He recalled that the review was important to Pakistan from a developmental
perspective.  After a long debate the joint study provided a lot of impetus to the Article 9 review.  It
was only after that that there was substantial and meaningful discussion in the CTG on this agendaG/C/M/71
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item.  Subsequently India and Brazil circulated a joint proposal, which was still on the table.  It still
remained to be discussed substantially.  He believed that proposals coming in for further institutional
support, from either UNCTAD or the WTO Secretariat, would help Geneva delegates and also
capital-based experts to study and examine TRIMs effects.  He was not prejudging the outcome of
those studies but was basically proposing that such studies would provide further impetus to the
ongoing exercise.  To say that the review process had been taken as far as possible would be far fromthe truth.   He could not agree with those who sa id that the review should not fundamentally change
the TRIMS Agreement.  The Article 9 language was very clear as to what the objectives of the review
were and did not circumscribe in any manner the ambit of the CTG's discussions.
1.11 The representative of Brazil stated that UNCTAD had observer status in the CTG and had
been tasked by the WTO in paragraph 21 of the Doha Ministerial Declaration to help the WTO in
conducting work in the group on trade investment.  Re garding this review, he reiterated the value in
inviting UNCTAD to present a relevant chapter on performance requirements in its international
investment report.  He was aware that some Members were not as enthusiastic about this idea as his
delegation.  His delegation participated in many WTO bodies and if UNCTAD was not allowed to
speak in the CTG, this would have to be taken into consideration when facing other invitations to
other organisations to speak in the WTO.  He hoped that it would not be necessary to do that and thatone could count on using whatever source of information may be needed.
1.12 The representative of India said that his delegation attached considerable importance to the
Article 9 review and the two proposals under consideration were basically about having more input to
this debate in the form of factual information.  He was therefore a little puzzled why Members shouldhave difficulty accepting such proposals.  As Colombia had mentioned, India was willing to engage
with Members and see how one could address Members' concerns in terms of the scope of these
proposals.  Therefore he urged Members not to dismiss these proposals outright and reflect further on
how there could be a more structured programme of debate in the CTG.
1.13 The representative of Brazil reaffirmed his delegation's understanding that Article 9 of the
TRIMS Agreement authorised the introduction of amendments to its text, in light of experience.
TNCs had played an important role in the development of Brazil's economy.  Brazil continued to be
one of the main beneficiaries of foreign direct investment and for a long time had been working to
build a stable legal and economic environment for such investments.  But governments must not beprevented from putting in place measures to maximize the benefits to the host country from the
presence of powerful economic agents.  In this regard, there was a serious imbalance in the current
text of the TRIMs Agreement.  It arose from the exclusive focus on the presumed trade-distorting
effects of government-mandated investment measures, while ignoring the more severe restrictive
practices that might be followed by TNCs.  It was well known that TNCs often operated according to
a worldwide strategy which, for obvious reasons, did not take primarily into account the interests of
each host country.  Major decisions on investments, production, expansion of activities, imports andexports were driven by the purpose of maximizing the benefits to their shareholders.  While the
objectives of a TNC, according to its global strategy, might often coincide with the interests of the
host countries, they might also diverge.  It was up to governments, and not to TNCs, to look after the
broader interests of the host countries and to try to reconcile such interests with the legitimate
concerns of TNCs.  Given their unequal bargaining power, developing countries were particularly in a
vulnerable position in dealing with the TNCs.  As noted earlier, performance requirements were
stipulated by them to ensure congruence or at least some coherence between the operations of foreign
investors and technology suppliers and the developmental needs and priorities of developing
countries.  There was, therefore, a one-sided approach governing the TRIMs Agreement, as far as
developing countries were concerned.  This was another reason calling for the review of the TRIMSAgreement.  It could not be considered an adequate or balanced approach, for example, to proscribe
export obligations stipulated by host countries without at the same time addressing the export
restrictions or market allocations which might be imposed by TNCs on their affiliates.G/C/M/71
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1.14 The Chairman concluded that there were still divergences on whether and how to proceed
with the Article 9 review.  He therefore proposed that the Council take note of the statements made
and agree to revert to this item at its next meeting.  He also proposed to continue the informal process
of consultations on this matter.
1.15 It was so agreed.
II. REQUEST BY CANADA, THE EUROPEAN COMMUNITIES AND THE UNITED
STATES – TRIMS EXTENSIONS
2.1 The Chairman said that this item had been included on the agenda of this meeting at the
request of the delegations of Canada, the European Communities and the United States.  In
November 2001, the Council for Trade in Goods had decided to extend the transition period to
eliminate TRIMs with respect to eight developing country Members (Argentina, Colombia, Malaysia,
Mexico, Pakistan, the Philippines, Romania and Thailand).  The additional transition period had
already expired in the case of two Members.  For the rest, it was due to expire on 31 December 2003.Pursuant to the relevant decisions of the CTG on this matter, the Members in question were required
to report to the CTG on the progress they made in phasing out the remaining TRIMs by the end of
2002.
2.2 The representative of Canada thanked the Members who had previously submitted their
progress reports as part of their TRIMS extensions and noted that these reports contained useful
information, for example, when the TRIMS in question had been phased out and in which official
publications these eliminations were notified.  The report also sent a strong signal that Members were
committed to the principle of transparency and to m eeting their WTO obligations as stipulated in the
TRIMS Agreement.  He was concerned by the absence of progress reports from certain countries.  Hethanked the Philippines for submitting their statement which had been circulated in document G/C/38
indicating that their remaining TRIMS, covering  local content and foreign exchange balancing
requirements had been eliminated.  He asked the Philippines if the elimination of the TRIM had been
notified in an official government publication.  The representative of the Philippines replied that she
would endeavour to get the appropriate reply.
2.3 The representative of the United States thanked those Members that had provided updates that
were required by the terms of the TRIMs extensions.  The information they had supplied allowed
Members to have a better idea of the progress these Members were making towards meeting the
phase-out required.  Regarding Pakistan, he was awar e of press reports, that may or may not have any
foundation in fact, that Pakistan intended to keep its auto TRIMs past the deadline of December 2003,
so he asked Pakistan to describe the current status of the phase-out and specifically whether theyintended to meet the December 2003 deadline and, in line with that, whether there were other TRIMs
measures that they could provide information on.  In the case of Malaysia, he was also aware that
Malaysia had reported that it was taking steps to reduce or eliminate local content requirements in the
automotive and other sectors.  Penalties related to local content and compulsory sourcing of
automotive products were meant to be eliminated by the end of 2002 and penalties relating to thecompulsory sourcing of another 19 items were s upposed to be eliminated by the end of 2003.  He
asked the delegation of Malaysia whether they could verify that those items that were supposed to be
liberalised by the end of 2002 in fact were liberalised, and whether Malaysia was in a position to meet
the December 2003 deadline for the elimination of the remaining measures.
2.4 The representative of the European Communitie s considered the information contained in the
reports as being very useful and he invited the delegations that should have submitted reports to abideG/C/M/71
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by their obligations.  His delegation was inviting not only countries under the obligation to submit
reports to explain what the situation in their country was, but also others, to share with the CTG their
experience in implementing the phasing out of TRIMs.
2.5 The representative of Pakistan thanked the CTG for according Pakistan and some other
countries a transition period of four years.  In these four years Pakistan had been making an all out
effort to eliminate all outstanding TRIMs.  Pakistan had 102 deletion programmes at the start of the
transition period:  68 related to machinery, another 18 to domestic appliances and 16 to automobiles.
He was pleased to inform the Council that, except for the 16 programmes relating to automobiles,
Pakistan had been able to eliminate all other programmes.  Pakistan was able to eliminate 41
programmes by June 2002, then another 22 programmes by June this year and had provided in the
budget that another 23 would be eliminated by December this year.  So Pakistan had eliminated 86
programmes, i.e. 85 per cent of the TRIMs programmes.  In view of this, Pakistan would expect thatCTG Members would consider sympathetically another request for an extension for a reasonable
period, say two years, for removal of any outstanding TRIMs.  This would help Pakistan not to disrupt
its ongoing programme of employment generation, promotion of domestic manufacturing capabilities
and reduction of automobile prices for the domestic market.  He added that while Pakistan was doing
this, it was also carrying out its tariff reforms.  Applied rates on the relevant products were about65 per cent and now the maximum rate had been  brought down to 25 per cent.  The automobile
industry had certain tax concessions which in other countries which had similar policies might not be
called TRIMs, but Pakistan was being transparent and calling them TRIMs.
2.6 The representative of Malaysia asked the Council to note that it had in place one TRIM
measure that had been granted an extension until the end of 2003.  Malaysia would phase out this
TRIM in accordance with the decision that allowed for the extension until the end of 2003.
2.7 The representative of Brazil asked the delegation of Pakistan if it could provide further
information on the development consequences of the programmes they have implemented during the
last year.
2.8 The representative of Pakistan was not in a position to do this right away and would get back
to his administration.  As a general comment, however, in the case of consumer durables, previously
Pakistan could only make about 10 per cent of its requirement, but due to TRIMs and thedevelopment of local industry, he thought that Pa kistan was now meeting almost 80 per cent of its
domestic requirement.  His general impression was that in those industries where Pakistan utilised
TRIMs it had had positive feedback.
2.9 The representative of Canada said the information offered by Pakistan had been very useful
and highlighted the point about the importance of progress reports.
2.10 The Chairman thanked delegations for their comments and for the information provided.  He
proposed that the Council take note of the statements made.
2.11 It was so agreed.
III. TRANSITIONAL REVIEW UNDER PARAGRAPH 18 OF THE PROTOCOL OF
ACCESSION OF THE PEOPLE'S REPUBLIC OF CHINA
3.1 In accordance with paragraph 18 of the Protocol of the Accession of the People's Republic of
China in document WT/L/432, the Chairman said that the CTG would report to the General Council
on the Transitional Review.  As last year, he suggest ed that the Council proceed in two stages.  First,G/C/M/71
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the CTG subsidiary bodies were required to transmit their reports to the Council for Trade in Goods.
This they had done and, as a first step in today's review process, he wanted to give Members an
opportunity to make general comments on those report s, and would then propose that the Council take
note of the Reviews that had been carried out in the CTG subsidiary bodies.  Then the Council would
move on to its own report.  Turning to the report s of the subsidiary bodies, the Chairman reminded
Members that the following CTG subsidiary bodies had carried out the Review:  Committee onMarket Access (document G/MA/150);  Committee on Agriculture (G/AG/18);  Committee on
Customs Valuation (G/VAL/56);  Committee on Sanitary and Phytosanitary Measures (G/SPS/29);
Committee on Technical Barriers to Trade (G/TBT/W/236);  Committee on Import Licensing
(G/LIC/11);  Committee on Rules of Origin (G/RO/56);  Committee on Anti-Dumping (G/ADP/12);
Committee on Subsidies and Countervailing Measures (G/SCM/111);  Committee on Safeguards
(G/SG/66);  and Committee on Trade-Related Investment Measures (G/L/648).
3.2 The representative of the United States noted that three of the questions that they had
submitted for the transitional review sought clarifications about matters that were addressed before the
Committee on Market Access and the Subsidies Committee.
3.3 The representative of the European Communities said that the EC attached great importance
to the TRM exercise, and considered that it was of utmost importance to ensure a proper and
meaningful functioning of this mechanism over the years to come.  Taking into account the
experience of last year and to make the 2003 exercise more meaningful, the EC had decided this year
to:  (i) as last year, transmit the questions well in advance of each meeting (typically six weeks);  (ii)
focus on a limited number of priorities;  and (iii) raise only issues discussed already a number of timesin the WTO committees or in bilateral meetings and therefore well-known to the Chinese side.  The
objective of the EC was to have in each subs idiary body under the Council for Trade in Goods a
meaningful discussion and detailed replies from the Chinese side to this limited number of questions.
The assessment made by the EC about this year’s TRM exercise in the subsidiary bodies under the
Council for Trade in Goods was mixed:  while the Chinese side provided useful clarifications onseveral matters of concerns, the EC impression was that it did not obtain satisfactory replies from the
Chinese side to a number of questions raised notably in the Import Licensing, Market Access, TBT
and SPS Committees.  The EC would come back to these issues in the relevant Committees and
bilaterally with China in the coming months.
3.4 The Council took note of the reports and of the statements made.
3.5 The Chairman said that China was required to  provide information to the CTG in accordance
with paragraph 18.1 of the Protocol of Accession.  The relevant information requirements were listed
in Annex 1A.  China had submitted information as required under Annex 1A of the Protocol of
Accession in document G/C/W/474.  He also drew attention to the documents by Japan contained in
G/C/W/471 and Corrigendum 1, and by the United St ates contained in document G/C/W/473.  The
European Communities also subsequently circulated its submission in document G/C/W/476.
3.6 The representative of China addressed the Council on the implementation of China’s
commitments with regard to trade in goods within  the framework of paragraph 18 of China’s Protocol
of Accession and also responded to Members’ quest ions and concerns.  Prior to the meeting, as
required by Annex 1A to the Protocol of China’s Accession, China had submitted information
regarding the repeal or modification of laws and regulations by the principle of non-discrimination,
policies affecting trade in goods and policy of government procurement, etc.  A delegation composed
of senior officials from relevant governmental authorities including the Ministry of Commerce, the
State Development and Reform Commission had been formed to attend this review.  Responding toquestions raised by Members, the representative said the following:G/C/M/71
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1.  On Transparency
3.7 In line with China’s reform and opening up process, and to implement the commitments upon
its accession, China was now, according to its arrangement of legislative plan, revising relevant laws
and regulations mentioned by some Members in their questions.  Amendments to these laws and
regulations would be open for public comment pursuant to provisions of the Legislation Law  and
Regulations on the Drafting Procedure of Administrative Regulation .  In addition, China would also
notify those laws and regulations to the WTO.  Above all, China would fully fulfil its commitments
on transparency made upon its accession to WTO.
2.  On Export Restrictions3.8 Fluorspar was a kind of non-regenerative resource under the protection of the Chinese
Government.  The mining of fluorspar had a significantly negative impact on the environment.  China
had been attaching great importance to the exploitation, processing and consumption of exhaustible
resources.  From the 1970s, China had begun to impose export quotas on fluorspar while restricting
the domestic mining and production of fluorspar.  Pursuant to China's Foreign Trade Law , the
Regulations on the Administration of Import and Export of Goods  and China's commitments upon
accession, China still imposed export quota administration on fluorspar.  Due to the depleting of
fluorspar resources and its shrinking production, the domestic consumption and export of fluorspar
had, in turn, gradually decreased.  China's export quota administrative measure on fluorspar was
consistent with the "general exceptions" provided in Article XX of GATT 1994 – " nothing in this
Agreement shall be construed to prevent the adoption or enforcement by any contracting party ofmeasures: including those relating to the conservation of exhaustible natural resources if such
measures are made effective in conjunction with restrictions on domestic production or
consumption;" .  Furthermore, according to the WTO rules, the general abolition of quantitative
restrictions set forth by the Article XI did not preclude the various exemptions as contained in
Articles XII to XXI of GATT 1994.  During recent ye ars, domestic and foreign prices of fluorspar had
risen to various degrees.  This rise in price was determined by the rules of market rather than the
export quotas by the Chinese Government.
3.  On Value-Added Tax Policies
3.9 China currently applied 17 per cent VAT on both domestic and imported goods, which was
fair and non-discriminatory in terms of the value of goods.  The current VAT rebate policy was
consistent with the national treatment rule under Article III of GATT 1994.  In China, customs
imposed duties and VAT for the importation of copper scraps, copper ore concentrates and raw
copper by copper-smelting enterprises reaching a certain production scale.  After paying the duty and
tax, a company could apply for the drawback of 30 per cent VAT on presentation of duty-paid proofs.
The refunded tax should be applied to the technological innovations of the enterprise.  VAT rebatepolicy on copper materials applied to all enterprises reaching certain production scale, and was not
conditioned on ownership of the enterprise or local content.  Copper-smelting enterprises had to pay
VAT while importing copper materials.  The amount of VAT should be the total sum of dutiable
value and tariff multiplied by VAT rate for copper materials.  According to relevant policy and
provisions, the government would refund 30 per cent of the paid VAT to the enterprise.   This policyonly applied to imported copper scraps, copper ore concentrates and raw copper and did not apply to
other products.  China did not implement any similar policy on other products or adopt any other
preferential policies on copper-processing enterprises.
4.  On Border Trade:3.10 The WTO did not provide for the specific definition, forms and territorial scope of border
trade, and only set forth a fundamental provision that "the provisions of this Agreement shall not beG/C/M/71
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construed to prevent advantages accorded by any contracting party to adjacent countries in order to
facilitate frontier traffic".  Therefore, special preferential treatments for border trade were allowed by
the WTO, and advantages and conveniences accord ed by a contracting pa rty to adjacent countries
were not inconsistent with the basic principle of the WTO, i.e. MFN.  China had committed in its
accession protocol to apply WTO Agreements and the protocol across the whole customs territory
including border trade areas, and would develop and implement laws, regulations and other measuresin relation to trade in goods in a uniform, impartial and rational manner.  Border trade policies had
been uniformly implemented and enforced in the provinces and regions in border areas of China as an
important part of China's foreign trade policies.  According to Bulletin No. 27 and No. 39 issued by
the State General Customs Administration on 1 May 2003 and 11 June 2003 respectively, China had
removed boric acid and 19 other products from the list of products subject to border trade import
duties policy.
5.  Government Procurement:
3.11 Since became a Member, China had been actively laying the ground work for the full
implementation of the commitments relating to gove rnment procurement contained in its accession
protocol, and these efforts had yielded remarkable results in many ways.  China’s first Government
Procurement Law  was published in 2001 and was followed by the enactment of a series of
supplementary rules.  The implementing regulation to the Law was also being drafted.  Since the
Government Procurement Law  took force, purchase activity falling under the provisions of the State
Council had to follow government procurement procedures, which had to be made transparent.
According to the existing regulations of Ministry of Finance, procurement from foreign suppliers had
to go under international public tendering.  Info rmation relating to the bidding and winner had to be
made public via the media designated by the Ministry of Finance.  Up till now, no complaints from
foreign suppliers had been filed to the Ministry.
3.12 In addition, opinions had been solicited extensively concerning the  Administrative Measures
on Tendering and Bidding for Goods and Services under Government Procurement,  which was due to
be promulgated in December 2003.  Administrative Measures on Information Publication of
Government Procurement  and Measures on Complaints by the Suppliers  would be promulgated
together with the Administrative Measures on Tendering and Bidding for Goods and Services under
Government Procurement.  Administrative Measures on Software Procurement by the Government ,
Administrative Measures on Expert Recruitment for Government Procurement  and Examination
Measures on Institutions of Government Collective Procurement  were to be promulgated at the end of
2003.  Comments on these measures had also been solicited.  The Ministry of Finance had made the
accession to the GPA one of its research subjects in 2003.  The establishment and composition of the
panel of experts would be further decided based upon the results from the preliminary study, while the
timetable for the launch of negotiations would be set in the same manner.
6.  On Customs Valuation:
3.13 With regard to the questions posed by Members concerning customs valuation, China had
provided responses in the context of TRM held by the Committee of Customs Valuation on
6 October 2003.  If Members had further questions to China’s responses during TRM, they could raisethese questions under the appropriate agenda item in the meeting of the Committee with the mandate,
to which China would provide answers according to due procedures.
7.  On trading right s:
3.14 According to China’s commitments upon acces sion, China would progressively liberalize the
availability and scope of the right to trade so that within three years after accession all domestic
enterprises and foreign enterprises and individuals, including sole proprietorships of other WTOG/C/M/71
Page 10
Members, would have the right to export and import all goods (with the exception of products listed
in Annex 2A of the Protocol reserved for importa tion and exportation by state trading enterprises)
throughout the custom territory of China.  She stressed the point that the trading rights in this context
only referred to the right of importation and exportation, not including the right of distribution in
China.  The liberalization of distribution rights would be executed in accordance with the Schedule of
Specific Commitments on Services and governing regulations in China.
3.15 Given the above-mentioned commitments and relevant laws and regulations governing
foreign-invested enterprises, the enterprises in China with foreign investment had the right to import
equipment, technology, raw material and other goods for self-use, and export their products.  While
for the importation and domestic distribution of the goods other than the above listed, the enterprises
should apply for the expansion of its business scope of distribution in accordance with China’s
timetable regarding distribution in the Schedule of Specific Commitments on Services and otherrelevant regulations in China.  Furthermore, the Chinese Government also allowed foreign-invested
enterprises to engage in import and export, domestic purchase and distribution in China through the
establishment of specific trading company, holding company, logistics company, distribution
enterprises, procurement centre, etc.  At present, the Foreign Trade Law of China  was being revised.
The current draft of the  Foreign Trade Law  did not contain the requirements on minimum registered
capital, import or export performance and history experience.
Implementation of WTO obligations by other Members:3.16 With reference to the Article 18 of the Accession Protocol, "China can also raise issues
relating to any reservations under Section 17 or to any other specific commitments made by other
Members in this protocol, which have a relevant mandate."  Under Paragraph 241 of the Report of the
Working Party on the Accession of China which specifies the commitments undertaken by the textile
clothing import restraining Members of the WTO, the United States was obliged to increase the
growth rates of quotas in force on the date of China’s accession to the WTO by the respective growth
factors provided for in the Agreement on Textiles and Clothing (ATC), including the 25 per cent
growth factor applicable to Stage 2 of the ATC implementation.  However, the United States had
failed to fully implement its obligations by not applying the full 25 per cent growth factor to China.
Since the issue remained unresolved after several rounds of bilateral consultations between China and
the United States, China requested the Textile Monitoring Body to review this matter.  The TMBrecommended, after thorough and careful review conducted in January 2003, that the United States
apply the 25 per cent growth factor in full to China and make the necessary adjustments to its
methodology accordingly (see G/T/TMB/R/95).  So far the United States had not yet made such
adjustments in compliance with TMB’s recommendation.  Such a failure on the US side had adversely
affected the market access available to China and upset the balance of rights and obligations between
China and the United States under the ATC.  The textile and clothing sector continued to play a
significant role in China’s economic and social development in terms of both job creation and povertyalleviation.  China hoped that the United States woul d immediately take actions to remedy the above-
mentioned problem and fully implement its commitments under the WTO.
3.17 The representative of the United States thanked the Chinese delegation for their responses.
The first question dealt with trading rights, the right to import and export goods in China.  This was a
key area in the China accession negotiations, along with the commitments on distribution services.
For foreign invested enterprises, China committed to a phased-in liberalisation of trading rights.  By
11 December 2002, joint ventures with minority foreign ownership should have had full trading rights
without conditions.  By 11 December 2003, joint ventures with foreign majority ownership should
have had those same rights.  The Working Party report in paragraph 83 required China to eliminateexport performance requirements, trade balancing requirements and prior experience requirements.  In
that same paragraph the only minimum registered capital requirements allowed were those for
Chinese enterprises, that is wholly Chinese-invest ed enterprises.  In the measures that China hadG/C/M/71
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issued to date, dealing with trading rights for fore ign invested enterprises, it had imposed stringent
requirements and conditions on eligibility.  There were minimum registered capital requirements,
import level and export level requirements, and there were prior experience requirements.  These
measures had acted to greatly restrict the number of foreign enterprises or foreign invested enterprises
that were eligible to gain trading rights.  He was in terested in China's response to or explanation as to
how it justified those measures in light of paragraph 83 of the Working Party report.
3.18 This phased-in liberalisation essentially concludes on 11 December 2004, when full trading
rights are to be available to all enterprises in China and all foreign enterprises and individuals.  He
understood from the Chinese delegation's response that China is now working on amendments to the
foreign trade law that would effect that commitment due 11 December 2004.  He welcomed the
delegate's statement that those amendments would not contain any of these conditions on minimum
registered capital, import and export levels, or prior experience.  The United States, however, soughtfor China to reconsider its position and to immediately make changes to those existing measures so
that the joint ventures with minority or majority foreign ownership would have the trading rights to
which they should be entitled at this point.
3.19 The next area that the US had addressed in its questions was value-added tax policies.  It
asked one question specifically dealing with the value-added tax policy on integrated circuits.  In the
past, before the Market Access Committee, China had sought to justify its discriminatory value-added
tax policy in this area by citing GATT Article III, paragraph 8(b).  In its question the US cited two
examples of a GATT and WTO panel report that made clear that discriminatory VAT policies ran
afoul of Article III, that was whether they were effected through a simple reduction of the VAT thathad to be paid or, as China did, where it was effected through a rebate of the VAT that had already
been paid.  In either event those types of policies were considered discriminatory under Article 3 and
he was interested in China's views on those reports.  With regard to the questions on the VAT policies
on copper scrap, the United States was just seeking clarifications as to how these policies worked:
first, he was trying to understand if the entity that paid the VAT in the first place was always theentity that received the VAT rebate subsequently;  the second clarification was whether or not the
rebate was only available upon exportation.
3.20 The next area dealt with the export restrictions on fluorspar.  The Chinese delegate had
addressed the question on export quotas on fluorspar and China's explanation was that while exportquotas were generally prohibited, Article XX allowed an exception in this case, because China
maintained comparable restrictions on domestic consumption.  Although the Chinese delegate did not
cite the specific measures that China used to effect the domestic restrictions, in the past China had
referred to compensatory taxes and other charges.  However these charges applied equally to domestic
sales and to exports, so those would not seem to qualify for the required comparable restrictions on
domestic consumption.  As Japan had pointed out in its questions on this issue, what had been seen
was domestic consumption increasing in recent years while exports had been decreasing.  The secondissue the US had raised under export restrictions on fluorspar, which he did not hear the Chinese
delegate address, dealt with export licence fees.  Article VIII of the GATT only allowed fees that were
limited to the costs of services rendered.  He believed the Chinese delegate had said that the price of
fluorspar, both domestically and on export, was determined by market forces.  However, the export
licence fees that China maintains on fluorspar were assessed on a per unit basis and it more thandoubled the cost of fluorspar.  He was interested in what justification the Chinese delegation could
cite for maintaining those export licensing fees in the light of GATT Article VIII.
3.21 With regard to border trade, he appreciated the Chinese delegate's response but had not heard
whether or not she had provided a list of the products that still received preferential border tradetreatment.  He would like at least a citation of a measure where he could clarify that matter.G/C/M/71
Page 12
3.22 Lastly, on government procurement, he noted his delegation's interest in China beginning the
negotiations for GPA membership as soon as possible.
3.23 In response to China's comments regarding textiles, the US representative said that it was true
that the ATC required an increase in China's quota growth rates because China had joined the WTO
during the second stage of the ATC implementation period.  Where he disagreed with China was onthe methodology that should be used in determining that quota growth increase.  The US position was
that because China had joined the WTO only 21 days before the end of stage 2, the fundamental
principle that a Member did not begin acquiring the benefits of the WTO Agreements until it was
actually a Member of the WTO allowed the US to pro-rate the increase in the quota growth rate for
that period of stage 2 of the ATC when the US was calculating what those increases should be.  His
delegation had explained in further detail to the TMB the reasons behind the US use of this
methodology.  The document that was cited by the Chinese delegation with the findings of the TMBexplained in greater detail why it was that the US had adopted this methodology.
3.24 The representative of Japan referred to the document G/C/W/471 and requested that the
Chinese delegation supply additional information and data for the questions addressed in the above
communication from Japan, because the statement made by the Chinese delegation failed to respondto all questions.  In addition, the representative of Japan noted that the Chinese delegation had
mentioned that for fluorspar domestic consumption actually decreased along with exports.  This
contradicted his delegation's understanding of trends in domestic consumption.  He believed that there
must be some discrepancy between the data on which he had based his comments and those on which
the Chinese delegation had based their statement.  The representative of Japan stated that he wouldappreciate it if China could further explain or furnish more data on this question.  On government
procurement, he expressed our appreciation of the explanation given, and looked forward to getting
more updated information whenever new developments occurred.
3.25 The representative of the European Communities concentrated on three concerns:  first, the
trading rights issue (right to import and export for foreign invested companies):  the Chinese
statement on this issue at the Import Licensing Co mmittee did not clarify whether the shortcomings in
the current Chinese legislation highlighted by the EC in both the Import Licensing and the Market
Access Committees would be corrected and whether, in line with China’s commitments, all majority-
owned foreign joint-ventures would be able to obtain trading rights from 11 December 2003, withoutany condition and for all goods related to their activity.  This notably supposed the abolition of the
distinction currently made by the Chinese side but  not foreseen under China’s Protocol of accession,
between so-called "trading JVs" and "manufacturi ng" JVs, the elimination of conditions on prior
experience and capital requirement and the unclear requirement for existing JVs to request in some
cases a "change of [their] scope of business".
3.26 Second, the establishment of a dual distribution network for domestically produced and
imported automobiles:  while the question from the EC on this issue was unfortunately left
unanswered by the Chinese side at the Market Access Committee of 20 October 2003, the Chinese
side officially confirmed its intention to set up separate distribution network a few days later in a
bilateral meeting.  The EC was told that the objec tive of China was to establish such system in the
coming months.  As was done then and on a number of occasions in the past (notably during last yearTRM in this Council), the EC would like to strongly  reiterate its deep concerns with regards to this
planned measure and to its WTO compatibility.  The EC would be grateful if China could explain
whether it intended to reconsider this measure and, if not, what was the state of play of the legislative
process for its adoption and when China intended to notify it for comments.  In this respect, given the
potentially very disruptive impact such a measure would have on the activity of foreign automotivefirms in China, the EC would like to urge China to make available the text of the planned measure as
soon as possible.G/C/M/71
Page 13
3.27 Finally, as a follow-up to the question asked last year, the EC raised the question of China’s
accession to the Government Procurement Agreement (GPA).  In the Working Party for WTO
accession China had stated that it would initiate negotiations for membership in the GPA as soon as
possible.  Now that two years had elapsed since China’s accession to the WTO, the EC would be
grateful if China could indicate when it intended to start negotiation in order to join the GPA.  The EC
would also like to stress that, until its accession to the GPA, China should, in line with itscommitments ensure that all government entities  conduct their procurement in a transparent manner
and that all foreign suppliers be provided with equal opportunity to participate in that procurement
pursuant to the MFN principle.
3.28 The representative of Canada commended China for its efforts during this second year of
membership in the WTO.  Canada acknowledged the sustained commitment that China had
demonstrated to the ongoing process of evolution and reform of its international trade regime.Continued progress was resulting in increased trade between China and other WTO Members
including Canada, as well as in economic growth within China.  Canada recognised progress in areas
of particular interest, notably with regard to clarification of frontier/border trade issues and towards
implementation of its commitments under the Information Technology Agreement.  Products on the
ITA list were an important and growing part of our bilateral trade and would play a significant part inthe development of China's economy.
3.29 Another noteworthy area was on some SPS issues where ongoing cooperation between
Canadian and Chinese authorities was bringing satisfactory solutions that would benefit Canada's
exporters of food products.  While Canada acknowledged progress made to date, there continued to beareas of concern.  For example, Canada shared the views expressed by some Members regarding a
perceived lack of transparency in China's approach to TRQ and quota allocation for certain products,
particularly agricultural commodities.  Canada was a significant producer of canola and was taking
advantage of the new export opportunities for this commodity.  However, China's approach to
regulating genetically-modified organisms (GMOs) was evolving and Canada was eager to ensure thatits growing trade in canola was not negatively affected.  Canada continued to monitor closely China's
compliance with its WTO obligations in these, and other areas.  Canada was prepared to work
constructively with China to ensure that commitments China had given to all WTO Members were
sustained and achieved.
3.30 The representative of China thanked the speakers for their interventions and, concerning the
questions and comments made, invited her colleagues to provide further responses.  Regarding trading
rights, as pointed out by the China HOD in the context of China's protocol of accession, trading rights
only referred to import and export, not distribution.  In this regard, foreign invested enterprises with
majority or minority ownership should follow the relevant provisions of the regulations with regard to
foreign invested enterprises.  These enterprises could import goods, services and technologies for their
own use, and if those enterprises imported goods and services to be distributed within Chineseterritory they needed firstly to file the applicat ion for changing their business scope and after doing
that they could undertake distribution business in China.  With regard to the capital requirements of
trading companies set up by foreign investment, one was referring to foreign trade companies only.
Regarding the question raised by the US about ho lding companies, their functions were much more
than trading, and China imposed capital requirements on those companies.  With regard to logistics
companies set up by foreign investment, these co mpanies were actually involved in distribution,
purchasing and a series of other activities.  So with this expanded business scope China had to impose
capital requirements for these companies.  China was now revising its foreign trade law.  According
to the draft of the foreign trade law China would further specify the trading rights and their
availability to foreign invested companies.
3.31 Regarding export restrictions which directly concerned fluorspar, in order to protect those
non-generative resources China was now imposing a quota restriction system on the export ofG/C/M/71
Page 14
fluorspar.  This was in line with the general exceptions as enshrined in Article XX of the GATT 1994.
The US had raised a concern that China might have collected an export licence fee which ran at
80-150 per cent of the production cost of fluorspar.  She pointed out that with regard to the export
licence, only 20 RMB was collected for the cost of the licence itself.  No other fees were charged.
Secondly, fluorspar was a scarce resource with great market demand.  Production was falling in recent
years in China, where the costs of exploitation and transportation were constantly rising, whichresulted in a surge of demand and shortage in supply.  It was this gap between the supply and the
demand which was the cause of the rise in price and was not the result of quota restrictions imposed
by the Chinese Government.  With regard to the question raised by Japan on the increase of domestic
consumption of fluorspar, she considered that in  recent years the production of fluorspar had been
constantly decreasing.  Exports, together with domestic consumption, had also been decreasing
significantly.
3.32 With regard to border trade, he considered the border trade policy of China was in line with
the MFN principle of GATT 1994.  The list of preferential treatment for border trade was published
by the Ministry of Finance with approval by the State Council and the executive agency was the
general customs administration in China.  The list was published in several batches and up until now
there had been no complete and uniform document containing all products subject to preferentialtreatment for border trade.
3.33 With regard to the automobile distribution network in China, a new automobile development
policy was in the process of being drafted.  During the drafting process China had extensively
solicited the opinions from various parties, including US and EU manufacturers.  The final solution ofthis problem would have to wait until the final text of this new policy was ready and published.  With
regard to the questions raised by some Members on the VAT regime, he began with an explanation of
the VAT rebate system in China for integrated circ uits.  The VAT tax, as reflected in the prices of
integrated circuits, was the same for all products a nd was not treated differently with regard to the
ownership of these manufactures.  With regard to the cases raised by the US on the panel rulings onsome related cases, he said the following:  with rega rd to the wine tax cases raised by the US, the tax
policy actually covered a two-layer tax regime for wine distribution.  According to the law the lower
rate applied to wines produced below a certain production scale, and imports of wines were subject to
a higher rate in general.  The Canadian Government  claimed that this violated the national treatment
rule.  Because these measures were different from state to state in the US, this was also challenged bythe Canadian Government.  The US was held to lose in this case.  He thought there are essential
differences between the US tax policy on wines and China's VAT rebate policy on integrated circuits.
If lower tax rates applied to domestic products they would benefit from a relatively low price, and a
higher tax rate on imported goods would pose a kind of discrimination.  This type of difference in tax
rates for domestic and imported goods was inconsistent with the national treatment principle.  A
policy concerning this case was not comparable to the VAT rebate policy on integrated circuits in
China.
3.34 With regard to the question concerning the Indonesian automobile case, the interpretation of
the WTO DSB on the subsidies paid to the producers was that if the subsidies were derived from
indirect taxes, first of all they should be imposed on a non-discriminatory basis, and at the same time
the subsidies must be paid to producers directly, which was stated in Article III.8(b) of the GATT.This should not be a financial benefit indirectly accruable to producers, such as those paid to
consumers of the products manufactured by domestic producers.  Therefore his delegation was of the
view that the current VAT drawback system for inte grated circuits was in full conformity with the
above interpretations and with Article III.8(b) of GATT 1994.
3.35 With regard to the VAT regime on copper scrap, he stressed the point that after payment of
duties, enterprises could apply for a drawback of VAT on presentation of duty paid proofs.  This
policy only applied to exporters of finished products and semi-finished products.  This tax rebateG/C/M/71
Page 15
system was equally applied to all enterprises reaching a certain production level regardless of the
ownership of the enterprise.
3.36 The representative of Japan said that concerning fluorspar his delegation requested China at a
later stage to submit to Japan the sources of the data for the domestic consumption of fluorspar so that
the statistics upon which the Chinese information was based could be verified.
3.37 The representative of the United States said on the fluorspar issue, the US would be interested
in understanding more about the import licence fees.  US companies were paying fees that doubled
the cost of fluorspar, but the Chinese delegation ha d said that the fee was only 20 RMB.  He did not
understand this discrepancy at this point.  These fees  had been in place for several years so he would
appreciate a clarification at some point on that issue.  With regard to trading rights, he was not
addressing specifically logistics companies and holding companies which carried out a range ofduties.  China's commitments were to allow foreign invested enterprises to have full trading rights
without conditions, without capital requirements, without import and export level requirements, and
without prior experience requirements.  On the VA T issue with regard to integrated circuits he
disagreed on what the WTO precedent was.  With regard to border trade, he understood that the list of
products had been issued in several batches and at some point he would be interested in finding outwhat those various measures were.
3.38 The representative of China thought that the responses contained in her statement and
information exchanged in the discussion should be sufficient to address the major concerns of
Members.  Also, multilateral and bilateral channels which were supplementary to each other could beutilised to accommodate the concerns of Members.  The implementation of China's commitments
made in the WTO accession was an integral part of China's opening up and economic reform policy.
China had been faithfully fulfilling its commitments towards other WTO Members on a friendly and
mutually beneficial basis.  China as a developing country was facing enormous difficulties in
implementing its commitments.  It was therefore her sincere hope that WTO Members would adopt along-term approach and a pragmatic attitude towards China's implementation process.
3.39 The Chairman thanked the delegation of China for the answers that it had provided and also
those delegations that had raised questions and made comments.  Regarding the form of the CTG
report, he suggested that the Council proceed in the manner it did last year.  This would mean that abrief factual report would be prepared with references to the relevant documents and attached to it the
portion of the minutes of this meeting which related to the Transitional Review.  The CTG report
(G/L/664), together with the report s of the subsidiary bodies, would then be transmitted to the General
Council.
3.40 It was so agreed.
IV. FREQUENCY OF NOTIFICATIONS OF STATE TRADING ENTERPRISES UNDER
ARTICLE XVII OF GATT 1994 AND THE UNDERSTANDING ON THE
INTERPRETATION OF ART ICLE XVII OF GATT 1994
4.1 The Chairman drew Members' attention to a recommendation adopted by the Working Party
on State Trading Enterprises for a change in th e frequency of notifications (G/STR/5).  The
Chairperson of the Working Party was not present to introduce this recommendation and had provided
the CTG Chairman with the following statement:
"During recent notification review exercises the Working Party has observed that compliance
with the notification obligation is less than satisfactory.  In light of this unsatisfactory state ofG/C/M/71
Page 16
affairs the Working Party has held discussions in order to find a solution to the problem of
compliance with the state trading notification obligation under Article XVII of GATT 1994
and the Understanding on the Interpretation of Article XVII of GATT 1994.  As a result of its
discussions the Working Party has adopted recommendation for action by the Council which
focuses on the periodicity of the notifications  (G/STR/5).   Thereby, the Working Party
recommends to the Council that:  (a)The periodicity  of state trading notifications be modified;
(b) The new and full notifications on state trading be due every two years instead of every
three years;  (c) The requirement of updating notifications in the intervening years be
eliminated;  (d) This change in the periodicity of the notifications enter into force as of the
year 2004, with a full and new notification being due in that year;  (e) The guidelines for
completing the questionnaire section of the Questionnaire on State Trading be amended to
bring it into conformity with the new frequency for state trading notifications.  Accordingly,
the text after the titles Sections I, II a nd III should be amended to read: "to be subm itted in full
every two years."  Also, the text after the title Section IV should read: "to be submitted every
two years on a calendar, fiscal or marketing year basis…".
Additionally, after a trial period of four years, commencing on 30 June 2004, the Working
Party shall review the situation, with regard to compliance with the notification obligation andthe frequency of notifications, with a view to determining whether to extend the application of
this recommendation, either as presently drafted or in a modified form for a further period."
4.2 In the absence of comments, the Chairman proposed that the Council take note of the
Working Party Chairperson's statement and approve the recommendation of the Working Party on the
frequency of notifications (G/STR/5) and agree to implement it as of the year 2004.  It was so
decided.
4.3 In accordance with item (e) of the recommendation, the Questionnaire on State Trading had
been revised to bring it into line with a biennial frequency of notifications.  This revised questionnairehad been circulated as document G/STR/3/Rev.1, and was now before the CTG for approval.  The
Chairman proposed that the Council approve the changes to the questionnaire.  It was so decided
.
V. STATUS OF NOTIFICATIONS UNDER THE PROVISIONS OF THE
AGREEMENTS IN ANNEX 1A OF THE WTO AGREEMENT
5.1 The Chairman noted that as indicated on the cover page of document G/L/223/Rev.10 and
Corr.1, the Council had adopted, at its meeting in October 1996, a recommendation by the Working
Group on Notification Obligations a nd Procedures to maintain on an ongoing basis a comprehensive
listing of notification obligations under the provisi ons of the Agreements listed in Annex 1A of the
WTO Agreement and compliance with those obligati ons.  The update was contained in the document
before the Council and included all notifications up to 30 June 2003.
5.2 The representative of China raised the issue of how notifications for newly acceded Members
should be recorded in the document for the years prior to a Member's accession.  The Chairman
announced his intention to look into this matter a nd more generally into the overall utility of the
document.
5.3 The Council took note of the document and the statement made.G/C/M/71
Page 17
VI. MARKET ACCESS MATTERS
A. COMMITTEE ON MARKET ACCESS – PERIODIC REPORT OF THE COMMITTEE
6.1 The Chairman said that the Market Access Committee had forwarded the waivers accompanied
by the periodic report of the Committee.  As the report was factual in nature, and reflected the work
undertaken in that body, he suggested that th e CTG take note of it.  It was so agreed.
B. INTRODUCTION OF HARMONIZED SYSTEM 1996 CHANGES INTO WTO
SCHEDULES OF TARIFF CONCESSIONS – REQUESTS FOR A WAIVER – ISRAEL
(G/L/646, G/C/W/468), THAILAND (G/L/647, G/C/W/470)
6.2 The Chairman said that this item concerned requests for waivers in connection with the
introduction of HS96 changes into WTO Schedules.  Members would recall that the Market Access
Committee had agreed some time ago that extensions of the waiver on a collective basis would nolonger be granted.  However, this would not prec lude Members from requesting waiver extensions on
an individual basis.  Two Members had forwarded to the Secretariat requests for waivers in
connection with the introduction of HS96 changes to their schedules of accessions.  Pursuant to
Article IX of the WTO Agreement, these requests for waivers were before the Council for Trade in
Goods for its consideration;  in each case, draft decisions had been circulated in G/C/W documents toassist the Council in its consideration of these requests.
6.3 The Council approved the waiver requests for Israel and Thailand and recommended
 that the
draft decisions contained in G/C/W/468 and G/C/ W/470 be forwarded to the General Council for
adoption.
C. EXTENSION OF WAIVER FOR THE PURPOSE OF ESTABLISHING A NEW
SCHEDULE – SRI LANKA (G/L/644, G/C/W/469)
6.4 The Chairman said that the request from Sri Lanka had been circulated in document G/L/644
and a draft decision in document G/C/W/469.  The Council approved an extension of the waiver for
Sri Lanka until 30 April 2004 and recommended that the draft decision contained in document
G/C/W/469 be forwarded to the General Council for adoption.G/C/M/71
Page 18
VII. REGIONAL TRADE AGREEMENTS
A. EC-LEBANON INTERIM AGREEMENT –  NOTIFICATION FROM THE PARTIES TO
THE AGREEMENT  (WT/REG153/N/1, WT/REG153/1)
B. FREE TRADE AGREEMENT BETWEEN TURKEY AND CROATIA – NOTIFICATION
FROM THE PARTIES TO THE AGREEMENT  (WT/REG156/N/1 AND CORR.1,
WT/REG156/1)
C. FREE TRADE AGREEMENT BETWEEN TURKEY AND BOSNIA AND
HERZEGOVINA – NOTIFICATION FROM THE REPUBLIC OF TURKEY
(WT/REG157/N/1, WT/REG157/1)
D. SINGAPORE-AUSTRALIA FREE TRADE AGREEMENT – NOTIFICATION FROM THE
PARTIES TO THE AGREEMENT   (WT/REG158/N/1, WT/REG158/1)
E. FREE TRADE AGREEMENT BETWEEN CROATIA AND BOSNIA AND
HERZEGOVINA – NOTIFICATION FROM THE REPUBLIC OF CROATIA(WT/REG159/N/1, WT/REG159/1)
7.1 The Chairman drew Members' attention to the five Agreements listed that had been notified
under GATT Article XXIV.  The texts of the Agreements and their notifications had been circulated
in the documents listed.
7.2 In the absence of comments, the Chairman proposed that the Committee on Regional
Trade Agreements carry out the examination of the above-quoted five Agreements in accordance with
the following terms of reference:  "to examine, in light of the relevant provisions of the GATT 1994,
the five free trade agreements just referred to and to submit a report to the Council for Trade in
Goods.  It is understood that the understanding read  out by the Chairman of the Council for Trade in
Goods under Item 7 of the agenda of the meeting of the Council for Trade in Goods on 20 February
1995, as contained in document WT/REG3/1, will apply mutatis mutandis  to the examination of the
agreements.  It is also understood that, during the examination, due account will be taken of the
intrinsic differences between customs unions and free trade areas."  It was so agreed.
VIII.  CONSIDERATION OF ANNUAL REPORTS OF SUBSIDIARY BODIES OF THE
COUNCIL FOR TRADE IN GOODS
8.1 The Chairman clarified that pursuant to th e "Procedures for an annual overview of WTO
Activities and for reporting under the WTO" (WT/L/105) which were adopted by the General Council
on 15 November 1995, all bodies constituted under agr eements in Annex 1A of the WTO Agreement
are required to submit annually a factual report to the Council for Trade in Goods.  The reports were:
Committee on Market Access (document G/L/658);  Committee of Participants on the Expansion of
Trade in Information Technology Products (G /L/659);  Committee on Agriculture (G/L/662);
Committee on Customs Valuation (G/L/654);  Textiles Monitoring Body (G/L/650);  Committee on
Sanitary and Phytosanitary Products (G/L/661);  Committee on Technical Barriers to Trade (G/L/657);
Committee on Import Licensing (G/L/652);  Committ ee on Rules of Origin (G/L/656);  Committee on
Anti-Dumping Practices (G/L/653.);  Committee on Subsidies and Countervailing Measures (G/L/655);
Committee on Safeguards (G/L/651);  Committee on Trade-related Investment Measures (G/L/649);
Working Party on State Trading Enterprises (G/L /660).  The Council took note of these reports.G/C/M/71
Page 19
IX. ADOPTION OF THE ANNUAL REPORT OF THE COUNCIL FOR TRADE IN
GOODS TO THE GENERAL COUNCIL
9.1 The Chairman drew Members' attention to the draft report of the Council circulated in
document G/C/W/472.  In accordance with the "Proce dures for an annual overview of WTO Activities
and for Reporting under the WTO" (WT/L/105) which was adopted by the General Council on 15
November 1995, it was agreed that "The respective sectoral Councils should report in November each
year to the General Council on the activities in the C ouncil as well as in the subsidiary bodies" and that
the reports of the sectoral Councils should be "factual in nature, containing an indication of actions and
decisions taken, with cross references to reports of subordinate bodies and could follow the model of the
GATT 1947 Council reports to the CONTRACTING PART IES".  In the absence of comments, the
Council agreed to adopt the report as such, subjec t to the updating required to take account of the
Council's work at this meeting.  The final version of the report was subsequently circulated in document
G/L/665.
X. OTHER BUSINESS
10.1 The representative of the European Communities reiterated the concerns that we had already
expressed in this Council roughly one year before concerning the tariff treatment of some modified
milk products in Panama.  There had been several contacts with the Panama mission in Geneva and
the EC had requested that either the previous status be re-established, that is the application of the
bound tariff of five per cent instead of the now applied tariff of 65 per cent, or, failing that, that
Panama should notify its tariff modification and offer Article XVIII negotiations.  In today's situation
neither of these two options have occurred and his delegation urged Panama to take the appropriateaction.  Furthermore, his delegation stood ready to pursue the matter bilaterally with Panama.
10.2 The representative of Panama took note of the EC's concerns  and said that his delegation had
been collaborating with the European Communities with  a view to fulfilling the rectifications.  His
delegation also stood ready to continue bilateral talks.
10.3 Finally, the Chairman raised the matter of the date of the next meeting.  The next CTG
meeting was tentatively scheduled to take place on Monday, 26 January 2004.  The agenda would
close on 15 January 2004.
10.4 He then closed the meeting.
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