GAO’s Previous Survey of U.S. Companies

In 2002, we conducted a study of U.S. companies’ views about the  importance of, the anticipated effects of, and the prospects for, China’s  implementing its WTO commitments. Responses were mixed when company  representatives assessed the commitment areas that we found to be of  greatest importance to their businesses. In addition, the importance placed  on specific commitment areas differed among respondents of the four  industry groups--agriculture, banking, machinery, and pharmaceuticals. It  is also important to note that many respondents reported they had no basis  to judge the extent to which China had made reforms related to some WTO  commitment areas, for reasons that varied depending on each company’s  experience and operations in China. The five specific commitment areas ranked as most important to  respondents overall were (1) standards, certifications, registration, and  testing requirements; (2) customs procedures and inspection practices; (3)  intellectual property rights; (4) tariffs, fees, and charges; and (5) consistent  application of laws, regulations, and practices. Most Respondents Reported a Positive Impact from China’s WTO Implementation

Most respondents reported that China’s implementation of its WTO  commitments had had a positive impact on their companies, even though  some company representatives indicated that China’s reform efforts would  continue to present challenges for their company operations in China. The majority of respondents reported that most of the  13 business activities such as revenue stream and volume of production in  China had increased. Company Business Activities in China Increasing

Overall, our questionnaire respondents reported that their company  activities have increased since China joined the WTO. Our results also  show that despite the problems U.S. companies are facing in China’s  implementation of specific commitment areas, more than two thirds of  respondents indicated that China’s WTO implementation had a positive  impact on their companies’ ability to do business in China. Our objectives for this report were to assess the views and  experiences of selected U.S. companies with a presence in China regarding  (1) the extent to which China has implemented its WTO commitments in  key industries and (2) the impact of China’s implementation of its WTO  commitments on these U.S. companies’ business operations. The  four industries included: agriculture, banking, machinery, and  pharmaceuticals. From the study population  of 149 U.S. companies with a presence in China, we received 79  questionnaires, for an overall response rate of 60 percent. Questionnaire of U.S. Companies in China (and U.S. [  ] Foreign-invested Stock Companies       7. Tariff & nontariff trade restrictions (increased market access)
1. [ (4)]  Some or little extent  4. World Trade Organization: Observations on China’s Rule of Law  Reforms.
Why GAO Did This Study

As the second largest source of foreign direct investment in China, U.S. companies continue their keen interest in China's implementation of its World Trade Organization (WTO) commitments. China's 2001 WTO commitments include specific pledges to increase market access, liberalize foreign investment, continue fundamental market reforms, and improve the rule of law. In 2002, GAO reported on selected U.S. companies' views, finding that many commitment areas, particularly those related to rule of law, were important to U.S. companies. GAO also found that company representatives expected China's reforms would have a positive impact on their business operations but expected some difficulties during implementation. In 2003, GAO continued to analyze companies' views about (1) the extent to which China has implemented its WTO commitments and (2) the impact of China's implementation of its WTO commitments on U.S. companies' business operations. GAO collected the views of representatives from 82 U.S. companies with a presence in China. GAO focused on companies in the agriculture, banking, machinery, and pharmaceutical industries. Results reflect a response rate of 60 percent of the study population. These responses may not reflect the views of all U.S. companies with activities in China.

What GAO Found

U.S. company representatives who completed GAO's 2003 questionnaire thought that China had implemented most of the 26 listed WTO commitment areas on average only to some or little extent. When respondents assessed five areas found to be of greatest importance to their companies overall--(1) standards, certifications, registration, and testing requirements; (2) customs procedures and inspection practices; (3) intellectual property rights; (4) tariffs, fees, and charges; and (5) consistent application of laws, regulations, and practices--responses were mixed, but they reported that China had taken at least some steps to implement these commitment areas. Our analysis showed that the importance placed on specific areas differed among the agriculture, banking, machinery, and pharmaceutical industries. For example, agricultural respondents identified tariffs as important while banking respondents identified scope of business restrictions for services as important. Few respondents were able to assess all of China's commitment areas for reasons that varied depending on each company's experience and operations in China. More than two thirds of respondents reported that China's implementation of its WTO commitments had a positive impact on their companies' ability to do business in China. However, some respondents indicated that China's reform efforts had created difficulties for their company operations in China. Overall, company representatives reported that company activities, such as volume of production in China and company revenue stream, have increased since China joined the WTO. However, respondents noted that changes in business activities cannot be directly attributed to China's WTO accession.