In a statement of 18 June 2003, accompanying the release of the mid-year assessment of China's fulfilment of its WTO commitments by the US-China Business Council (USCBC), Robert Kapp, the group's president, noted growing concerns among US firms over China's ability to deliver on key WTO commitments.

The USCBC report concludes that since joining the WTO in December 2001, "China's uneven implementation of its commitments regarding transparency remains a particular disappointment for foreign firms". World trade rules require member states to publicise draft legislation or regulations for public comment prior to promulgation, but China has apparently failed to follow these rules.

This is not to say that either the US business community or the Bush administration is showing signs of running out of patience with China's WTO implementation efforts. At least in the near future there is no danger of that. On the contrary, US business leaders are willing to give China the benefit of a doubt as far as temporarily falling behind this year's reform program schedule is concerned.

For instance, it is understood that the severe acute respiratory syndrome (SARS) crisis, which came on the heels of recent leadership change, along with major administrative reorganisation among key economic agencies early this year, delayed pending reforms.

Moreover, the USCBC report also observes that China's vice premier responsible for foreign trade and investment, Wu Yi, has been appointed as health minister to combat SARS and deal with the fallout from the crisis, which "is likely to distract her from WTO issues in the short term".

On the positive side of the ledger, it is generally acknowledged that China continues to implement its tariff-reduction commitments promptly. But this is counter-balanced by a host of key unresolved implementation issues from 2002. The latter include agricultural and industrial quotas and tariff-rate quotas (TRQs), standards for genetically modified organisms (GMOs), high capital requirements for establishment of businesses in the services sector, a variety of tax measures that appear to discriminate against foreign products and ongoing problems with regulatory transparency and insufficient intellectual property rights (IPR) protection.

Just as important, key challenges China must meet this year are market openings in the areas of trading and distribution rights as well as telecoms. In view of the US, regulations to grant trading rights and licences for logistics, distribution and after-sales service to foreign-invested companies (FIEs) remain unsatisfactory. China's approach in these vital areas appears to fall short of what the Bush administration had expected and US firms had hoped for.

In a separate but related issue, the USCBC report points out that Chinese regulators have cast doubts on whether foreign companies may distribute third-company products. Currently, IEs may distribute and offer after-sales service only for the products, which they manufacture in China. That of course prevents them from distributing products made by another firm or even those of their parent company.

Another contention is China's continuing refusal to lower the capital requirements for non-banks that want to offer auto financing to Chinese customers. The capital requirements China has floated would require foreign companies to have a capital deposit of about US$ 60 million. However, the US automobile industry views auto financing as a critical piece of the puzzle for gaining market share and argues that a capital deposit requirement of US$ 5 million should be sufficient. Most observers do not believe that it will be possible to bridge this gap.

By most objective standards the Chinese government has done an admirable job of trying to comply with its WTO obligations. Both US government officials and business leaders stress this fact. However, some US officials have quipped that dealing with China on technical trade issues is reminiscent of arms control negotiations with the former Soviet Union during the Cold War, as the playing field appears to be constantly in motion.

To guard itself against too many untoward surprises, the Bush administration has put into place a rigorous structure in monitoring China's fulfilment of its WTO commitments. This consists of an inter-agency group as a subcommittee of the Trade Policy Staff Committee (TPSC) chaired by the Office of the US Trade Representative (USTR). The TPSC meets regularly to analyse the steps China has taken to meet its obligations and to determine how the US should respond in specific instances. The US government is also soliciting input informally from US businesses operating in China, the USCBC and other trade and business associations.

As part of the monitoring effort, the General Accounting Office (GAO), the congressional watchdog agency, unveiled in June 2003 a new database containing information on China's WTO implementation efforts. The database contains three searchable tables: (1) the text of China's WTO accession agreement; (2) China's tariff and non-tariff measures on foreign goods; and (3) China's schedule of services trade commitments. In a letter to members of Congress and executive branch agencies, the GAO stressed, "The flexibility and comprehensiveness of the database can enable users to quickly and more efficiently analyse China's commitments".

The Bush administration has assured the business community that monitoring of China's WTO accession commitments will not only draw attention to the problems that crop up, but try to resolve them. So far this low-key approach has worked, as USTR has raised issues of concern with the appropriate Chinese ministries on the bilateral level.

Nonetheless, only time will tell whether the Bush administration can stay this course when domestic US industries and members of Congress call for action, amid alleged "unfair" trade practices and the rising bilateral US trade deficit with China. The first signs that corporate America's patience may be wearing thin are manifesting themselves, reflected in the USCBC's report and in growing concern among members of Congress.