CHINA EXPORTS M11 MISSILES



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Presidential
Business Development
Mission To
Beijing, Shanghai, Guangzhou
and
Hong Kong

led by
The Honorable Ronald H. Brown
Secretary of Commerce

August 27 - September 3, 1994

*****
Background Information

CHINA ISSUES SUMMARY

Trade Trends
U.S. exports to China in 1993 totaled $8.8 billion, an historic high. Growth in U.S. exports, however, has been over-shadowed in recent years by our trade imbalance, which reached $22.8 billion in 1993, second only to our deficit with Japan. Our imbalance for the first five months of 1994 reached $9.2 billion, up 23 percent as compared to the same period last year.

Market Access
At the conclusion of a year long investigation on October 10, 1992, the U.S. and China signed a Memorandum of Understanding (MOU) which provides for the phased elimination of non-tariff barriers on key U.S. exports and tariff reductions in certain sectors. The Chinese recently took steps under the agreement to increase transparency and remove import licensing requirements, quotas, and controls. USTR continues to press for full implementation.

IPR
On May 26, 1991, USTR initiated a Section 301 investigation of China'S IPR regime. At the conclusion of six rounds of consultations on January 17, 1992, the U.S. and China signed a Memorandum of Understanding that commits China to provide improved protection for U.S. intellectual property in the copyright, patent, and trade secret areas. Although China has greatly improved the legal regime for protecting intellectual property (IPR), enforcement is a - growing problem. On December 1, 1993, China was placed on the Priority Watch List for lack of IPR enforcement. On June 30, USTR Kantor named China a "priority foreign country" under the Special 301 Trade legislation and initiated a six-month investigation into China's protection of IPR. Negotiations are scheduled for August in Beijing.

Export Controls
Last August, the U.S. imposed sanctions on China for an M-11 missile-related transfer to Pakistan. On January 7, 1994, it was decided that although communications satellites licensed by the State Department are covered by the sanctions law, export licenses for communications satellites licensed by the Deparunent of Commerce may be approved. Two such export licenses for communications satellites were recently approved by the Department of Commerce.

Textiles
China has exported in excess of its quotas in circumvention of our bilateral agreement U.S. Customs investigations showed that many shipments of Chinese textiles were transshipped and/or falsely labeled as originating in third countries. On January 17, 1994, the U.S. and China signed a Memorandum of Underslanding establishing a new three year textiles agreement which imposes a cap on China's previously unlimited silk exports, reduces quota growth for the final two years of the agreement, and includes transshipment language prodding for penalties and factory visits.