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23rd U.S.-CHINA JOINT COMMISSION ON COMMERCE AND TRADE
U.S. Trade Representative Ambassador Ron Kirk and U.S. Commerce Acting Secretary Rebecca Blank, together with Chinese Vice Premier Wang Qishan, co-chaired the 23rd Joint Commission on Commerce and Trade (JCCT) in Washington, D.C., on December 18-19, 2012. U.S. Secretary of Agriculture Tom Vilsack also took part in the discussion to address agricultural concerns. Other participants included U.S. Ambassador to China Gary Locke, U.S. Trade and Development Agency Director Leocadia Zak and representatives from the State and Treasury Departments. Senior Chinese officials from 25 ministries and agencies also attended.
Provided below are key results from this year’s JCCT. Industry facts and figures appear in italics.
INTELLECTUAL PROPERTY RIGHTS, LOCALIZATION OF IPR & TECHNOLOGY
According to a 2011 report by the U.S. International Trade Commission, U.S. industry losses in China from intellectual property rights infringement in 2009 totaled roughly $48 billion.
Copyright – State-Owned Enterprise Software Legalization
- China confirmed that it requires state-owned enterprises under the authority of the China Banking Regulatory Commission and central state-owned enterprises directly supervised by the State-Owned Assets Supervision and Administration Commission of the State Council to purchase and use legitimate software, including but not limited to operating system and office suite software.
Judicial Interpretation on Intermediary Liability
- Building on an existing JCCT commitment to develop a Judicial Interpretation making clear that those who facilitate online infringement will be jointly liable for such infringement, China announced that its Supreme People’s Court will publish a Judicial Interpretation on Internet Intermediary Liability before the end of 2012.
Localization of Intellectual Property and Technology
- China reaffirmed that technology transfer and technology cooperation are the autonomous decisions of enterprises. China will not make this a precondition for market access. If departmental or local documents contain language inconsistent with the above commitment, China will correct them in a timely manner.
- Multi-level Protection Scheme (MLPS)
Article 21 of China’s 2007 MLPS Administrative Measures specifies an indigenous intellectual property requirement for the selection of information security products for level three and above with the objective of protecting national information security. China will conduct a process to revise this measure and seek the views of all parties, including through dialogue with the United States.
- Official Use Vehicles
China’s central, provincial, and local level governments procure more than $16 billion in official use vehicles per year.
China committed to delay issuing the 2012 Party and Government Organ Official Use Vehicle Selection Catalogue and to discuss U.S. concerns with regard to the draft catalogue and applicable vehicle selection rules with the United States.
- High and New Technology Enterprises
The United States and China will maintain communication on U.S. concerns regarding whether China’s High and New Technology Enterprise Certification Administration Measures and related rules apply equally to Chinese and foreign invested enterprises or contain technology transfer or intellectual property localization requirements, including through the U.S.-China Innovation Dialogue.
China reported that in 2011 government procurement was $179 billion dollars. China’s government procurement has been growing at 25 percent per year over the past seven years.
- China’s definition of government procurement in its Government Procurement Law is narrower than the definition in the WTO Government Procurement Agreement (GPA). Accordingly, China recognized that some Chinese government procurement projects are for public service and that some enterprises, including some state-owned enterprises, procure in the public interest. Understanding that many enterprises are for profit with diversification of ownership, including being publicly listed, China and the United States will conduct consultations, under the GPA framework and through bilateral dialogues, focused on projects for public service and on the entities that procure in the public interest.
Testing and Certification for the China Compulsory Certification (CCC) Mark
Approximately 20 percent of U.S. exports to China are delayed due to China’s Compulsory Certification mark requirement.
- China confirmed that eligible foreign-invested testing and certification entities registered in China can participate in CCC mark-related work and China’s review of applications from foreign-invested entities will use the same conditions as are applicable to Chinese domestic entities.
ZUC Encryption Algorithm
Removing the pressure on operators to use the ZUC encryption standard would relieve a burden on highly competitive U.S. telecommunications component exporters competing for an estimated $30 billion in market opportunities by the end of 2013.
- China agreed it will not mandate any particular encryption standard for commercial 4G Long Term Evolution telecommunications equipment.
In 2011, U.S. aerospace firms exported $6.3 billion in aircraft and aircraft parts to China, which currently operates more than 800 U.S. commercial aircraft.
- China committed to engage in discussions with the United States on measures related to fleet planning associated with the civil aviation industry.
TRADE, AGRICULTURAL, AND INVESTMENT ISSUES
Strategic Emerging Industries (SEIs)
China plans to invest $1.5 trillion in the strategic emerging sectors in the next five years and has set a target for SEIs to account for 8% of China’s GDP by 2015 and 15 percent of China’s GDP by 2020.
- The Chinese Government clarified that it will provide foreign enterprises fair and equitable participation in the development of SEIs, including the 20 major projects announced on May 30, 2012 by Premier Wen.
- China committed that policies supporting SEI development comply with the World Trade Organization’s national treatment rules and that such policies are equally applicable to qualified domestic and foreign enterprises.
- Relevant Chinese Government ministries will engage in dialogue and exchange with relevant U.S. departments on the development of SEIs.
Medical Device Pricing
China is the world’s third largest market for medical equipment and is expected to become the second largest market in the next few years. Based on the estimates, total market size is expected to grow from approximately $11.4 billion in 2010 to $39 billion in 2015.
- China committed that any measures affecting pricing of medical devices will treat foreign and domestic manufacturers equally, and that China will take into account comments from the United States on this issue, including how to improve transparency.
Value-Added Tax (VAT)
- China confirmed that a Ministry of Finance-led delegation would hold discussions with the United States, beginning in the first half of 2013, in order to work toward a mutual understanding of China’s VAT system and the concepts on which a trade-neutral VAT system is based.
Draft Smart Terminal Regulations
U.S. industry estimates that total spending on smartphones in China will rise to $57 billion in 2012. China is also the fastest growing market for mobile applications in the world – the number of app sessions increased by 1126 percent in the first quarter of 2012 when compared to the same quarter in 2011.
- China confirmed that it will take the views of all stakeholders into full consideration in regard to the regulation of information technology and telecommunications hardware, operating systems, applications, app stores, and other related services. The United States and China will continue to discuss this issue at the working level as China works to revise and improve the current draft.
- The U.S. Department of Agriculture (USDA) affirmed new access for pears in the Chinese marketplace through a commitment to allow reciprocal trade between the two countries beginning in 2013. Additionally, USDA and China’s Ministry of Agriculture made a commitment to a biotechnology pilot program, which could provide greater cooperation in the approval process for new products.
Regulatory Data Protection
- To promote scientific advancement and to establish effective regulatory data protection, China agreed to define new chemical entity in a manner consistent with international research and development practices in order to ensure regulatory data of pharmaceutical products are protected against unfair commercial use and unauthorized disclosure.
Environmental Industries Forum
The Environmental Industries Forum (EIF) is a bi-annual event that draws Chinese and U.S. environmental businesses and government officials together to discuss issues and opportunities in China’s environmental sector. The EIF concept was developed jointly between the Ministry of Environmental Protection, U.S. Department of Commerce, and U.S. Environmental Protection Agency under a Memorandum of Understanding.
- The United States and China will hold the 3rd Environmental Industries Forum next year during the China International Environmental Protection Exhibition and Conference in Beijing.
U.S.-China Legal Exchange
The U.S.-China Legal Exchange is a longstanding dialogue between the United States and China, providing an annual opportunity to exchange information about recent developments in commercial law and to promote the strengthening of commercial rule of law in China.
- The U.S. Department of Commerce and China’s Ministry of Commerce successfully led the 2012 U.S.-China Legal Exchange, during which representatives from the Government of the United States informed members of the Chinese business, legal, and academic communities in Harbin, Beijing, and Guiyang of recent developments in specific areas of U.S. commercial law. To promote greater U.S.-China trade, the U.S. representatives described developments in the U.S. legal regimes governing electronic commerce and intellectual property rights under the recently-enacted America Invents Act and intellectual property enforcement developments. Both sides agreed to convene the 2013 Legal Exchange in the United States, and to work together promptly to agree on the topics of the exchange and the cities in the United States where it will take place.
The U.S. business community consistently ranks China’s administrative licensing process as a primary challenge to doing business in China. U.S. companies view China’s administrative licensing as one of the top areas in which they experience protectionism, as an impediment to new and expanding businesses, and as being unnecessarily costly.
- In April 2012, the United States and China launched a joint exchange on administrative licensing rules, focusing on the use of technology to facilitate licensing procedures and on methods used to educate the business community about licensing procedures. This fall, we expanded the exchange to include the U.S. and Chinese business communities, and we engaged in a robust discussion of specific concerns of businesses with administrative licensing in both countries. Both the United States and China agree to continue this work in 2013 with the goal of facilitating commercial activity impacted by administrative licensing.
Trademark - Bad Faith Trademark Registrations
- The United States and China agree to continue close communications and exchanges through the existing channels to promote the work in developing solutions to the issue of bad faith trademark registrations.
- In the Statistics Working Group meeting on November 13 in Hangzhou, China the United States and China agreed to expand the reconciliation exercise to include services. The U.S. and China agreed to exchange statistical data and information on coverage, definitions, and methodologies to support this effort. The reconciliation will begin in 2013 with an examination of travel and transportation statistics and then be expanded in 2014 to two other services categories.
Standards and Information Technology
- The United States and China agreed to hold a technical dialogue in Spring 2013 to discuss approaches to improving cybersecurity in critical infrastructure.
- On September 5, 2012 officials from China and the United States convened the third annual U.S.-China Spectrum Roundtable to discuss their respective plans to make additional spectrum available for advanced wireless services. Of particular note was discussion of both sides' efforts to make more spectrum available for use by unlicensed devices on a technology neutral basis, particularly in the 5 GHz band.