Select Committee on European Scrutiny Third Report



COM(01) 517

Draft Council Decision establishing a Community position within the Ministerial conference set up by the Agreement establishing the World Trade Organisation on the accession of the People's Republic of China to the World Trade Organisation.


COM(01) 518

Draft Council Decision establishing the Community position within the Ministerial conference set up by the Agreement establishing the World Trade Organisation on the accession of the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipeh) to the World Trade Organisation.

Legal base: Articles 37, 44, 47, 55, 71, 80(2), 95, 133 and 308 EC; consultation; unanimity
Documents originated: 19 September 2001
Forwarded to the Council:
Deposited in Parliament: 15 October 2001
Department: Trade and Industry
Basis of consideration: EM of 16 October 2001
Previous Committee Report: None
Discussed in Council: 29 October 2001
Committee's assessment: Politically important
Committee's decision: Cleared


18.1  Accession to the WTO involves blanket market access negotiations in which individual members agree with the acceding country the levels of tariffs and non-tariff measures it will set on industrial goods, agricultural trade and services. This is followed by discussions in a Working Party open to all WTO members on the compatibility of the applicant country's trade policy regime with the obligations that constitute membership, resulting in the Protocol of Accession which effectively set out the terms and conditions of the new county's accession. The latter then have to be agreed by a two-thirds majority of the WTO General Council, and the Commission has brought forward in these documents two draft EU Council Decisions, ahead of the WTO Ministerial Conference from 9-13 November 2001. The first establishes the Community's position on China's accession, and the second its position on the accession of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipeh).

The current documents

18.2  In its explanatory memorandum on the draft Decision relating to China's accession, the Commission says that the entire negotiation — which began in 1986 — revolved around how China should adopt the WTO "acquis" of rules and agreements. It considers that, so far as the Community is concerned, the outcome will signal an enormous gain in enforceable rights with no significant change in its own commitment towards China, other than the granting of permanent MFN ("most favoured nation") status involving the phasing out by 2005 of import quotas on textiles. More generally, the Commission points out that, as China is the world's most populous country with a fundamental interest in the promotion and regulation of trade, her membership would mark an important step for the WTO in becoming a truly global organisation, and that one important consequence would be to provide China with a full seat in any future multilateral negotiations. The Commission also draws attention to the high standard of commitments given by China to open its economy to foreign imports, investors and businesses, with reductions from 17% to 9% in average industrial tariffs and the removal of all import quotas by 2005, the cutting by 10% in 2005 of the tariffs on the Community's most important agricultural exports, and the liberalisation envisaged for insurance, telecommunications, distribution, banking and securities, and professional services. The Commission suggests that, in addition to benefiting Community exporters, Chinese membership will also have a positive impact on her own economy and living standards.

18.3  The background to the negotiations with Chinese Taipeh, which commenced in 1992, is broadly similar, as is the Commission's analysis of the likely impact. In particular, it points out that, as the world's tenth largest trading entity, Chinese Taipeh will immediately become a key player in the WTO, and that its accession also takes the organisation another significant step towards becoming genuinely global. As with China, a high level of commitments is being given as regards the opening of the economy to foreign imports and businesses, and the Commission says that Chinese Taipeh's trade regime will be significantly more liberal than that of many existing members of a comparable level of development. In particular, average tariff levels will be low, quotas will be phased out "expeditiously", and service providers in all sectors will benefit from "excellent" market access conditions.

The Government's view

18.4  In her Explanatory Memorandum of 16 October 2001, the Minister for Trade and Investment at the Department of Trade and Industry (Baroness Symons of Vernham Dean) says that the Government has always supported Chinese accession to the WTO on the right terms, as part of its broad objective of drawing China more closely into the international system, and that it has worked closely with the Commission to ensure that UK priorities have been taken into consideration. She endorses the Commission's analysis of the consequences of Chinese accession, which she says will provide improved access for UK industry, and will be of particular benefit to the "crucial" services sector. She also says that Chinese membership will mean that foreign businesses should no longer be subject to unwritten local regulations or sudden unexpected changes in import arrangements, that there will be better protection for intellectual property, and that industries in existing WTO members will afforded protection against damaging export surges from China.

18.5  The Minister says that, throughout the negotiations, one of the UK's key aims has been to ensure that China's entry did not involve a dilution of the WTO Agreements, whilst being commensurate with the country's own level of development. In particular, she notes that, in view of China's transition from state ownership to a more market-based system, the accession package grants a number of special derogations in the early years of membership to enable her business to adjust. In this connection, a World Bank-led research project, funded by the Department for International Development, on the potential impacts on economic development and poverty reduction aims to assist the Chinese government to respond to the challenges and opportunities involved. The Minister also believes that WTO membership will encourage social, environmental and political improvements within China, and assist in the development of the rule of law there, since it enshrines the fundamental principles of transparency, non-discrimination, efficient administration and independent judicial review in trade policy. Likewise, although there are no direct links between WTO membership and human rights, the Minister says that the UK will encourage China to implement its obligations in ways which respect human rights, and will continue to encourage her to ratify ILO Conventions on forced labour, freedom of association and the right to organise.

18.6  In a separate Explanatory Memorandum, the Minister says that, like most other nations (including all our major partners), the UK does not recognise Taiwan as a state, and in 1972 acknowledged the position of the People's Republic of China that it was a province of China. Because of its particular position, Taiwan applied to join the WTO as a separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu (Chinese Taipeh).

18.7  On the substance of the application, the Minister says that the UK has always supported Taiwanese accession, and that the terms negotiated will enable foreign businesses to operate in a more transparent and predictable environment. She points out that accession will create new opportunities for UK companies, particularly in the services sector, where she describes Taiwan's offer as significantly liberal in scope. She hopes that this will lead to a redress in the substantial trade surplus which Taiwan current enjoys with the UK.

18.8  On the timing of the proposals, the Minister points out that, in view of the vote scheduled in the WTO Ministerial Conference on 9-13 November, it will be necessary for them to be adopted by the Council before then. We understand that adoption was in fact due to take place on 29 October.


18.9  For reasons which the Commission and the Minister have outlined, the accession of China and Chinese Taipeh to the World Trade Organisation are clearly significant — and welcome — developments, and we are pleased to note that they now seem to be in sight after many years' negotiations. Whilst we do not think any purpose would be served, particularly at this late stage, by the documents being debated, they are nevertheless of obvious importance, and we are therefore drawing them to the attention of the House.

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