U.S.-China Trade: Summary of 2003 World Trade Organization Transitional Review Mechanism for China Page: 28 of 101
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Summary of issues by theme Raised by Raised by China's response
United other WTO
States members
(GATT) 1994. Based on such understanding,
the rebate was a kind of subsidy paid to
domestic producers allowed by Article 111.8(b)
of GATT. (Verbale)
Work was underway on a further study of the
issue, but according to preliminary conclusions,
the policy of rebate upon collection adopted by
the Chinese government was a subsidies
payment to its national products and was
allowed under Article XIII. B of GATT which
stated that the provisions of that article should
not prevent the payment of subsidies
exclusively to domestic producers, including
payments to domestic producers which were
derived from the proceeds of internal taxes or
charges applied consistently with the
provisions of the article and the subsidies
effected through governmental purchases of
domestic products. In accordance with that
provision, China believed that its VAT policy
with regard to integrated circuits was not in
violation of the national treatment principle of
GATT. (Verbale)Reason for differential treatment of
diammonium phosphate (DAP)
produced in the United States, which
competes with similar phosphate
fertilizers produced in China, such as
monoammonium phosphate (MAP).Written,a
VerbaleChina had adjusted its policies in relation to the
fertilizer VAT, including the differential policies
on monoammonium phosphate (MAP) and
diammonium phosphate (DAP) in 2001, to
bring them into conformity with the national
treatment principle contained in Article III of
GATT 1994. After the adjustment, China
began to implement the same VAT policies on
imported and domestic fertilizers. However, it
continued to exempt MAP from VAT while
imposing VAT on DAP. Different VAT
measures on these two were adopted based
on the agricultural production requirements and
fertilizer products of China. MAP and DAP
were two different products with different uses
and users. Although the reserves of Chinese
phosphorite mines were quite abundant, most
of them were lean ores, so the cost of ore
concentration was quite high. As a result, in
order to fully apply phosphate resources and
protect the environment, China implemented
VAT exemption measures encouraging the
production of MAP directly from relatively lean
ores. Producers were also encouraged to
produce compound fertilizers. (Verbale)
Article III of GATT 1994 stated that same
duties should be levied on identical or similar,
mutually substitutable and directly competitive
products. However, MAP and DAP were
goods of a different nature and were not
directly competitive nor substitutable products
in China. They were not identical or similar
goods due to their different natures. They
were not substitutable products due to theirGAO-05-209R U.S.-China Trade
Page 28
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United States. Government Accountability Office. U.S.-China Trade: Summary of 2003 World Trade Organization Transitional Review Mechanism for China, text, January 25, 2005; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc301428/m1/28/: accessed April 19, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.