U.S.  officials noted this continuation was an indicator that China was able to  address the more easily resolvable problems during 2002 but that the  remaining issues had proven to be more difficult for China to address. In addition to  the problems that persisted from 2002, about a quarter of all compliance  problems were new in 2003, with many of these problems arising from  phased-in commitments that China was due to implement in 2003. United States Continues to Pursue Resolution of Compliance Problems in 2004 and Noted Several Positive Developments

Since USTR’s December 2003 report, the U.S. government has continued to  pursue resolution of China’s WTO compliance problems. United States Increased Bilateral Engagement with China in 2003 on WTO Issues

U.S. government efforts to resolve WTO compliance issues with China in  2003 reflected an emphasis on high-level bilateral engagement. Key Agencies’ China Units Could Improve Their Performance Management Activities

Although the key agencies’ formal plans address trade monitoring and  enforcement activities, it is difficult to assess the effectiveness of the  agencies’ China-WTO compliance efforts based on their performance  management reports. Moreover, the  specific units within the agencies that are most directly involved with  China compliance activities lacked specific strategies for ensuring that they  supported their agency’s goals, and they did not measure their unit’s  results. The key  agencies have done much to enhance their capacity to carry out these  efforts by coordinating on policy issues and increasing staff resources. Nevertheless, the TRM and the benefits it  provides could be enhanced by increased member participation and more  timely U.S. preparation, which would improve the chances for full and  informed responses from Chinese officials and maximize the potential  exchange of information. Specifically, in an environment of high and regular staff turnover,  new staff are called upon to take up monitoring and enforcement activities  that involve complex, long-term issues. Objectives, Scope, and Methodology

As part of a long-term body of work that the Chairman and the Ranking  Minority Member of the Senate Committee on Finance, as well as the  Chairman and the Ranking Minority Member of the House Committee on  Ways and Means, requested, we examined how the U.S. Trade  Representative (USTR) and the Departments of Commerce, State, and  Agriculture (USDA) are positioned to monitor and enforce China’s  compliance with its World Trade Organization (WTO) commitments. Specifically, in this report, we (1) examined the scope and disposition of  China-WTO compliance problems that the U.S. government is working to  resolve; (2) reviewed the U.S. government’s bilateral and multilateral  approaches for resolving compliance problems; (3) assessed the agencies’  strategies, plans, and measures for ensuring China’s compliance; and (4)  assessed how the U.S. government has adapted its staff resources to  monitor and resolve China compliance problems. Our  evaluation of agency planning efforts was informed by our previous studies  on the Government Performance and Results Act of 1993 (GPRA). Summary of WTO Member Participation in China’s Transitional Review Mechanism, 2002 and 2003

China’s commitments to the WTO provide for an annual review, referred to  as the Transitional Review Mechanism (TRM), of China’s implementation  to take place within the WTO’s General Council and 16 subsidiary bodies. Previous GAO reports have discussed human capital management  challenges at State more thoroughly.
Why GAO Did This Study

China's 2001 accession to the World Trade Organization (WTO) required China to reform its economy and trade practices. As part of ongoing work, GAO reviewed how the U.S. Trade Representative (USTR) and the Departments of Commerce, Agriculture, and State pursued China's WTO compliance in 2003. Specifically, this report (1) discusses the scope and disposition of China's compliance problems, (2) reviews the U.S. government's bilateral and multilateral approaches for resolving these problems, (3) assesses the key agencies' strategies and plans for ensuring compliance, and (4) assesses how the agencies have adapted their staff resources to conduct compliance activities.

What GAO Found

China has successfully implemented many of its numerous WTO commitments, but USTR reported that over 100 separate compliance problems arose in 2002 and 2003. These problems ranged from specific, relatively simple issues to broader, more systemic concerns. Most problems continued from 2002 to 2003, an indication that China was able to address the more easily resolvable problems, while the more complex issues persisted. Furthermore, new problems emerged, with many arising from phased-in commitments that China was due to implement in 2003. The U.S. government continued to pursue resolution of compliance problems in 2004, and the agencies noted the successful resolution of several major issues of economic importance to U.S. companies. The key U.S. agencies have done much to ensure China's compliance, but GAO found three areas in which these key agencies could take steps to improve their efforts: First, U.S. efforts to address compliance problems emphasized high-level bilateral engagement with China in 2003, with increased senior-level delegations to China and elevated participation in formal consultative mechanisms. U.S. multilateral engagement with China in 2003 reflected more emphasis on working through regular WTO committee business, because the WTO's annual review of China's implementation, the Transitional Review Mechanism (TRM), has ongoing limitations. Nevertheless, the TRM has benefits and these could be enhanced by increased member participation and earlier U.S. submissions, which would maximize the potential for full and informed responses from China. Second, although interagency and intra-agency coordination on policy and high level compliance strategies was generally effective, GAO found various performance management limitations that make it difficult to clearly measure and assess the outcome of the key agencies' China-WTO compliance efforts. GAO found that the specific units within the agencies that are most directly involved with these efforts could improve how the agencies measure and report the results of their activities. Furthermore, developing clearer linkages between unit-level results and agency goals that are established in accordance with the Government Performance and Results Act of 1993 could enhance the effectiveness of these units' activities. Third, turnover and lack of training limited the effectiveness of increased staff resources for China-WTO compliance activities. New staff members were called upon to take up complex monitoring and enforcement activities while relying primarily on on-the-job training, which was complicated by high and often predictable staff turnover. Attention to human capital management is particularly important, given the long-term challenges associated with ensuring China's compliance.