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    November 16, 2011

Congressional Commission Sees China Falling Short on WTO Obligations

   William Ide | Washington
   Photo: AP

   A U.S. congressional commission monitoring the impact of China on
   American security and economic interests says although the world's
   second-largest economy has made progress since joining the World Trade
   Organization nearly a decade ago, many challenges remain for American
   and other foreign companies seeking to do business there.
   Next month, marks 10 years of China's entry into the World Trade
   Organization, and in many ways it is still failing to live up to its
   commitments.
   "China has yet to create a system that effectively protects
   intellectual property; something that is required of all WTO members.
   U.S. business software companies still report that China is the world's
   largest source of pirated software. Approximately eight of 10 computers
   in China still run counterfeit operating system software. Even more
   disturbing, China has stepped backward from its original promise to
   lower trade barriers and to treat foreign products and services
   fairly," said William Reinsch, chairman of the U.S. China Economic and
   Security Review Commission.
   In recent years, China has also been relying more on state owned
   enterprises and control of major sectors of the economy, limiting
   foreign access to its markets. "The government directs a vast array of
   subsidies to favored industries and seeks to nurture particular
   technologies behind protective barriers. This is contrary to the
   spirit, and in many cases the letter, of China's WTO commitments,"
   Reinsch said.
   Such shortcomings are significant because after this year China will no
   longer be obligated to respond to questions from members about its
   annual progress. When China joined the WTO in 2001, it agreed to annual
   reviews of its compliance in the first eight years and one final review
   this year.
   On the security front, the commission notes there is growing evidence
   that Beijing sponsors or condones malicious cyber activities, which
   facilitate industrial espionage and target U.S. and other foreign
   government systems.
   "When combined with the military's excessive focus on other disruptive
   military capabilities, such as counter-space operations, it presents an
   image of Chinese intentions that diverges significantly from Beijing's
   official policy of peaceful development," Reinsch said.
   The commission also notes that as China continues its military buildup
   and an effort to modernize its forces with an average annual growth of
   12 percent during the past decade, Beijing has recently achieved
   several military firsts.
   "It flight tested its first stealth fighter, conducted a sea trial of
   its first aircraft carrier, and made progress towards deploying the
   world's first anti-ship ballistic missile," Reinsch said.
   Despite such security advances and continued challenges on the economic
   front, Reinsch says he believes the challenges U.S.-China relations
   face make relations difficult, but they are surmountable.
   "I think we all have to be optimistic. The relationship is so important
   that we have to make it work. And every American administration over
   the last seven and every Chinese administration over the last three or
   four have been, I think, determined to make it work and we get over
   these individual humps," Reinsch said.
   But topping the list of its recommendations in the report, the
   commission has asked the president to assign the National Security
   Council to conduct a comprehensive agency-wide review of security and
   economic policies toward China, in an effort to assess where change is
   needed and address the serious challenges that remain.