USTR’s Annual Reports to Congress Do Not Systematically Analyze China’s Progress in Resolving Compliance Issues

USTR’s annual reports to Congress do not have the systematic analysis  needed to clearly provide an understanding of China’s compliance  situation. While the reports describe many issues with China’s compliance  and progress on resolving such issues, they lack summary analysis about  the number, scope, and disposition of reported problems that would  facilitate understanding of key China trade issues and developments and  allow the agency to track its effectiveness in monitoring and enforcing  China’s trade compliance. Therefore, we conducted a systematic content  analysis of USTR’s reports in order to quantify the number, type, and  disposition of trade issues. We identified 180 compliance issues from 2002  to 2007, spanning nine trade areas ranging from very specific issues to  broader, more complex concerns. In addition, our analysis showed that China’s progress in  resolving issues varies by trade area. See table 4 for  examples of issues that made no progress over the period 2003 to 2007. On one hand, we found that USTR and the other agencies have made  considerable progress implementing planned action items listed in the  report. While this report lays out  USTR’s plans for U.S.-China trade relations, USTR does not formally  assess its progress or measure its results as we have recommended in our  past reviews of USTR plans. The lack of clear linkages between U.S.  objectives and planned action items and vague language make it difficult  to determine whether the steps agencies reported taking were effective. Furthermore, the report has not been updated to reflect subsequent  developments. We found  that some previously identified challenges—staffing gaps and limited  Chinese language capacity—remained at some agencies. They also increased staff training opportunities. Lack of Linkages and Specificity Make It Difficult to Assess Progress

Assessing USTR’s progress toward achieving its objectives for U.S.-China  trade is difficult since the broad objectives and the more specific action  items are not clearly linked in the top-to-bottom report. The top-to-bottom  report sets forth the following six U.S.-China trade objectives:    Participation—integrate China more fully as a responsible stakeholder  into the global rules-based system of international trade and secure its  support for efforts to further open world markets; Implementation and compliance—monitor China’s adherence to  international and bilateral trade obligations and secure full  implementation and compliance;   Enforcement of U.S. trade laws—ensure that U.S. trade remedies and  other import laws are enforced fully and transparently, so that Chinese  imports are fairly traded, and U.S. and Chinese products are able to  compete in the U.S. market on a level playing field;   Further market access and reform—secure further access to the Chinese  market and greater economic reforms in China to ensure that U.S.  companies and workers can compete on a level playing field;   Export promotion—pursue effective U.S. export promotion efforts with  special attention to areas of particular U.S. export growth potential in  China; and   Proactive identification and resolution of trade problems—identify mid-  and long-term challenges that the trade relationship may encounter, and  seek proactively to address those challenges. Conclusions

Clearer information on the number and disposition of trade issues with  China and the trends over time helps Congress and the public understand  the results of U.S. government monitoring and enforcement activities. We were asked to (1) evaluate the degree to which USTR’s  annual reports to Congress on China’s World Trade Organization (WTO)  compliance present information necessary to clearly understand China’s  compliance situation and (2) examine the status of USTR efforts to  implement the action items and achieve the objectives presented in its  February 2006 top-to-bottom report.
Why GAO Did This Study

Congress mandated that the United States Trade Representative (USTR) annually assess China's trade compliance and report its findings to Congress. In addition, USTR conducted an interagency "top-to-bottom review" of U.S. trade policies toward China. USTR's resulting February 2006 report outlined U.S objectives and action items. GAO was asked to (1) evaluate USTR's annual China trade compliance reports to Congress and the degree to which they present information necessary to fully understand China's compliance situation and (2) examine the status of the plans presented in USTR's February 2006 top-to-bottom report. GAO systematically analyzed the contents of USTR's compliance reports from 2002 to 2007 and reviewed information on the status of agencies' monitoring and enforcement activities.

What GAO Found

USTR's annual reports to Congress, which detail U.S. industry concerns with China's compliance and progress on resolving such concerns, are very consistent in format and language. However, they lack any summary analysis about the number, scope, and disposition of reported issues that would facilitate understanding of developments in China's trade compliance and better tracking of the effectiveness of U.S. monitoring and enforcement efforts with China. For example, USTR's narrative reports make it difficult to understand the relative level of progress China made in each trade area in a given year. USTR reported issues that spanned nine trade areas and ranged from very specific issues to broader concerns; however, USTR's narrative reports make it difficult to ascertain specific changes or trends. GAO's systematic content analysis quantified the number, type, and disposition of trade issues and identified 180 individual compliance issues from 2002 to 2007. GAO analysis showed that China resolved a quarter of these issues, but made no progress on one-third of them. Also, GAO's analysis revealed that China's progress in resolving compliance issues varied by trade area and has been slowing over time, especially since 2004, when most progress was made. GAO could only partially determine the status of U.S. agencies' implementation of USTR's 2006 top-to-bottom report, which outlines broad objectives and priority goals for U.S.-China trade relations as well as specific action items. GAO found that key trade agencies made considerable progress implementing planned action items. They increased bilateral engagement with the Chinese and monitoring and enforcement capacity by increasing staffing levels and training opportunities, but staffing gaps and limited Chinese language capacity are challenges at some agencies. However, GAO could not determine agencies' progress toward achieving some U.S. objectives and goals identified in the report. USTR does not formally assess its progress or measure program results. The lack of linkages between U.S. objectives and planned action items and undefined terms make it difficult to assess whether the steps agencies described taking were effective. Furthermore, the report has not been updated to reflect recent developments.