U.S.-China Trade:

Opportunities to Improve U.S. Government Efforts to Ensure China's Compliance with World Trade Organization Commitments

GAO-05-53: Published: Oct 6, 2004. Publicly Released: Oct 6, 2004.

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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.

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.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The U.S. Trade Representative (USTR) established internal target dates for submitting written questions about 30 days in advance of each WTO committee meeting related to China's Transitional Review Mechanism and tracked their success at meeting these targets.

    Recommendation: To improve multilateral engagement with China on WTO compliance issues, the U.S. Trade Representative (USTR) should take steps to maximize the potential benefits of the Transitional Review Mechanism (TRM). These steps could include establishing and meeting internal deadlines to submit written questions to the Chinese delegation 4 to 6 weeks or more before each TRM and coordinating with other WTO members to increase participation in the review.

    Agency Affected: Executive Office of the President: Office of the U.S. Trade Representative

  2. Status: Closed - Implemented

    Comments: The Department of Commerce informed GAO in December 2004, that the agency was providing training on the use of the Compliance/Market Access database to its entire International Trade Administration staff. In addition, in September 2007, the agency reported to GAO that beginning in 2005, the agency had undertaken several activities to train employees to ensure data accuracy in its Compliance/Market Access database. For instance, the agency's Trade Compliance Center has been offering on-going training sessions to instruct staff in key case procedures and guidance, how to identify trade barriers, and the inner workings of the Compliance/Market database to ensure complete and accurate case records. Furthermore, in fiscal year 2007, the Trade Compliance Center trained 195 International and Trade Administration staff have been trained on case procedures and guidance as well as how to document their work in the database.

    Recommendation: Additionally, the USTR and the Secretaries of Commerce, State, and Agriculture (USDA) should take steps to improve performance management pertinent to the agencies' China-WTO compliance efforts. Specifically, USTR should set annual measurable predetermined targets related to its China compliance performance measures and assess the results in its annual performance reports. The Secretary of Commerce should take further steps to improve the accuracy of the data used to measure results for the agency's trade compliance-related goals. The Secretary of State should require the China mission to assess results in meeting their goals and report this information as part of the annual mission performance plan. The Secretary of USDA should further examine the external factors that may affect agency's progress toward achieving its trade-related goals and present the agency's strategies for mitigating those potential effects. Furthermore, the head of each agency should direct their main China compliance units to set forth unit plans that are clearly linked to agency performance goals and measures, establish unit priorities for their activities, and annually assess unit results to better manage their resources.

    Agency Affected: Department of Agriculture

  3. Status: Closed - Implemented

    Comments: In October 2004, GAO reported (U.S.-China Trade: Opportunities to Improve U.S. Government Efforts to Ensure China's Compliance with World Trade Organization Commitments) on how the U.S. government was positioned to monitor and enforce China's compliance with its World Trade Organization (WTO) commitments in 2003. GAO assessed USDA's strategies, plans, resources, and other activities related to China's compliance with its commitments to the World Trade Organization (WTO). Among our findings, we reported that the individual units within USDA responsible for China did not have unit plans to guide their activities, including establishing priorities and goals to measure their progress in enforcing China-WTO compliance. Thus, we determined that it was not possible to determine the effectiveness of each unit's efforts with regard to China-WTO compliance. GAO recommended that the Department of Agriculture (USDA) take steps to improve performance management pertinent to the agency's China WTO compliance efforts by setting for the unit plans that are clearly linked to the agency performance goals and measures, establish unit priorities for its activities, and annually assess unit results to better manage its resources. In November 2004, USDA's Foreign Agricultural Service (FAS) concurred that including unit-level planning and performance reporting into the agency's GPRA planning and measuring activities would improve oversight and guidance of key program activities, and, in fact, several of FAS's key annual performance plan measures were unit-level or division measures. In July 2007, USDA officials told us they developed China unit plans partly in response to GAO's report and provided a draft of the FAS's China Country Strategy. In March 2008, the FAS finalized this draft strategy in its 2008 annual China report. The strategy establishes USDA's priorities in China, and sets forth specific goals and objectives for USDA to accomplish in China. The China unit's plan in its 2008 annual report clearly links to the agency's performance goals and measures.

    Recommendation: Additionally, the USTR and the Secretaries of Commerce, State, and Agriculture (USDA) should take steps to improve performance management pertinent to the agencies' China-WTO compliance efforts. Specifically, USTR should set annual measurable predetermined targets related to its China compliance performance measures and assess the results in its annual performance reports. The Secretary of Commerce should take further steps to improve the accuracy of the data used to measure results for the agency's trade compliance-related goals. The Secretary of State should require the China mission to assess results in meeting their goals and report this information as part of the annual mission performance plan. The Secretary of USDA should further examine the external factors that may affect agency's progress toward achieving its trade-related goals and present the agency's strategies for mitigating those potential effects. Furthermore, the head of each agency should direct their main China compliance units to set forth unit plans that are clearly linked to agency performance goals and measures, establish unit priorities for their activities, and annually assess unit results to better manage their resources.

    Agency Affected: Executive Office of the President: Office of the U.S. Trade Representative

  4. Status: Closed - Implemented

    Comments: In December 2004, State said the agency intended to continue to use the mission performance plan as a tool to evaluate its effectiveness as well as look for additional ways to concretely assess its performance. In fact, State indicated to GAO that it had instituted new guidelines requiring each mission to formally evaluate performance goals and report performance in the annual Mission Performance Plans (MPP). We reviewed subsequent China Mission performance plans. In its fiscal year 2007 China's MPP reported on the performance goal related to China's WTO implementation. The performance plan clearly linked the performance indicator to the performance goal and strategy and presented baseline data, performance targets and most importantly, performance results.

    Recommendation: Additionally, the USTR and the Secretaries of Commerce, State, and Agriculture (USDA) should take steps to improve performance management pertinent to the agencies' China-WTO compliance efforts. Specifically, USTR should set annual measurable predetermined targets related to its China compliance performance measures and assess the results in its annual performance reports. The Secretary of Commerce should take further steps to improve the accuracy of the data used to measure results for the agency's trade compliance-related goals. The Secretary of State should require the China mission to assess results in meeting their goals and report this information as part of the annual mission performance plan. The Secretary of USDA should further examine the external factors that may affect agency's progress toward achieving its trade-related goals and present the agency's strategies for mitigating those potential effects. Furthermore, the head of each agency should direct their main China compliance units to set forth unit plans that are clearly linked to agency performance goals and measures, establish unit priorities for their activities, and annually assess unit results to better manage their resources.

    Agency Affected: Department of Commerce

  5. Status: Closed - Implemented

    Comments: The United States Trade Representative (USTR) conducted a one-time interagency "top-to-bottom review" of U.S. trade policies toward China. USTR's review considered GAO's prior work, which identified opportunities to improve U.S. government efforts in this area. USTR reported on the results of this review in 2006 and concluded that the U.S. refocus its trade resources and priorities. In 2007, USTR officials informed GAO that it used the top-to-bottom review as a planning tool for USTR's China Affairs Office. In April 2008, GAO reported (GAO-08-405) that USTR officials told us they use the top-to-bottom report as the planning tool for USTR's China Affairs Office, and it guides USTR's as well as the U.S. government's engagement with China on trade issues. While USTR officials told us they do not formally assess the progress they have made in implementing it, they said that in their regular discussions on China, they are inevitably addressing the issues in the top-to-bottom report. GAO noted that the top-to-bottom report has many of the characteristics of a good plan: it clearly defines objectives, goals, and action items; provides a detailed discussion of problems; delineates agency responsibilities; provides specific activities and programs; and identifies human resources needed to achieve action items; nevertheless, we recommended improvements.

    Recommendation: Additionally, the USTR and the Secretaries of Commerce, State, and Agriculture (USDA) should take steps to improve performance management pertinent to the agencies' China-WTO compliance efforts. Specifically, USTR should set annual measurable predetermined targets related to its China compliance performance measures and assess the results in its annual performance reports. The Secretary of Commerce should take further steps to improve the accuracy of the data used to measure results for the agency's trade compliance-related goals. The Secretary of State should require the China mission to assess results in meeting their goals and report this information as part of the annual mission performance plan. The Secretary of USDA should further examine the external factors that may affect agency's progress toward achieving its trade-related goals and present the agency's strategies for mitigating those potential effects. Furthermore, the head of each agency should direct their main China compliance units to set forth unit plans that are clearly linked to agency performance goals and measures, establish unit priorities for their activities, and annually assess unit results to better manage their resources.

    Agency Affected: Department of State

  6. Status: Closed - Implemented

    Comments: Key trade agencies have continued to increase staff positions to meet the demands of the U.S.-China trade relationship and to mitigate turnover. Staff resources more than doubled at headquarters and in Beijing since 2004. The estimated number of full-time equivalent staff in units most directly involved with China trade compliance efforts increased from 60 in fiscal year 2003 to 135 in fiscal year 2007. USTR doubled its staff positions in headquarters from 5 to 10 positions and established an internal China Enforcement Task Force that includes staff from USTR's Office of General Counsel and the China Affairs Office to prepare and handle potential WTO cases. USTR also added personnel in its China office to coordinate collection and integration of information on current and potential China trade issues. In response to increased responsibilities arising from the new U.S.-China trade relationship, USTR, Treasury, and Commerce's U.S. Patent and Trademark Office added four new positions at the embassy in Beijing. Department of Commerce's and USDA's Foreign Services in China are the largest overseas office for each department. For example, 10 percent of Commerce's Foreign Commercial Service is in China. In addition, as a result of an increased focus on China, the FAS has increased the number of staff that work in China, which now accounts for 10 percent of its overseas staff, according to USDA. In 2004, GAO reported that the four key trade agencies lacked specific training relevant to executing China-WTO compliance responsibilities, but since then the Departments of Commerce and State, and USDA have offered staff new opportunities for training on trade monitoring and compliance. Training opportunities for staff have increased, but most training is still ad hoc and does not apply specifically to China trade compliance. Department of State staff overseas stated they had sufficient funds for training. In addition, both departments offer courses online for staff. Department of State offers about nine training courses related to WTO compliance issues to its employees, as well as employees from other agencies. In fiscal year 2007, approximately 172 individuals took these courses. Since 2005, Department of Commerce has offered several training courses related to compliance and market access. Commerce employees in International Trade Administration participated in training on compliance and market access database. In addition, to ensure data accuracy in the Department of Commerce's case database, about 195 employees have been trained on case procedures and received guidance on how to document their work in the database. USDA officials stated the agency increased training opportunities for its China staff since 2005. However, all agencies note that they will still experience some staffing gaps and shortages from time to time despite their best efforts to mitigate turnover. For instance, USTR's China Affairs Office had four staff depart and hired five additional staff. The International Trade Administration officials in the Department of Commerce said that there is still a relatively high amount of staff turnover because employees in the Market Access and Compliance acquire a skill set that is highly desirable and attractive to the private sector. Overseas, both the Departments of State and Commerce have experienced staffing challenges. For example, there has been a high level of turnover in the economic section at the embassy, which has resulted in significant gaps in filling positions and reorganizations to compensate for lost expertise. Similarly, the Department of Commerce's Trade Facilitation Office has been understaffed and has experienced high turnover in two staff positions according to department officials.

    Recommendation: Further, USTR and the Secretaries of Commerce, State, and USDA should undertake actions to mitigate the effects of both anticipated and unplanned staff turnover within the agencies' main China-WTO compliance units by identifying China compliance-related training needs and taking steps to ensure that staff have adequate opportunity to acquire the necessary training. These actions could include determining which of the agencies' existing courses would be appropriate for staff, determining what types of external training are available, developing training courses on relevant issues, and establishing a plan and timelines for existing and new staff to receive training.

    Agency Affected: Executive Office of the President: Office of the U.S. Trade Representative

  7. Status: Closed - Implemented

    Comments: Key trade agencies have continued to increase staff positions to meet the demands of the U.S.-China trade relationship and to mitigate turnover. Staff resources more than doubled at headquarters and in Beijing since 2004. The estimated number of full-time equivalent staff in units most directly involved with China trade compliance efforts increased from 60 in fiscal year 2003 to 135 in fiscal year 2007. USTR doubled its staff positions in headquarters from 5 to 10 positions and established an internal China Enforcement Task Force that includes staff from USTR's Office of General Counsel and the China Affairs Office to prepare and handle potential WTO cases. USTR also added personnel in its China office to coordinate collection and integration of information on current and potential China trade issues. In response to increased responsibilities arising from the new U.S.-China trade relationship, USTR, Treasury, and Commerce's U.S. Patent and Trademark Office added four new positions at the embassy in Beijing. Department of Commerce's and USDA's Foreign Services in China are the largest overseas office for each department. For example, 10 percent of Commerce's Foreign Commercial Service is in China. In addition, as a result of an increased focus on China, the FAS has increased the number of staff that work in China, which now accounts for 10 percent of its overseas staff, according to USDA. In 2004, GAO reported that the four key trade agencies lacked specific training relevant to executing China-WTO compliance responsibilities, but since then the Departments of Commerce and State, and USDA have offered staff new opportunities for training on trade monitoring and compliance. Training opportunities for staff have increased, but most training is still ad hoc and does not apply specifically to China trade compliance. Department of State staff overseas stated they had sufficient funds for training. In addition, both departments offer courses online for staff. Department of State offers about nine training courses related to WTO compliance issues to its employees, as well as employees from other agencies. In fiscal year 2007, approximately 172 individuals took these courses. Since 2005, Department of Commerce has offered several training courses related to compliance and market access. Commerce employees in International Trade Administration participated in training on compliance and market access database. In addition, to ensure data accuracy in the Department of Commerce's case database, about 195 employees have been trained on case procedures and received guidance on how to document their work in the database. USDA officials stated the agency increased training opportunities for its China staff since 2005. However, all agencies note that they will still experience some staffing gaps and shortages from time to time despite their best efforts to mitigate turnover. For instance, USTR's China Affairs Office had four staff depart and hired five additional staff. The International Trade Administration officials in the Department of Commerce said that there is still a relatively high amount of staff turnover because employees in the Market Access and Compliance acquire a skill set that is highly desirable and attractive to the private sector. Overseas, both the Departments of State and Commerce have experienced staffing challenges. For example, there has been a high level of turnover in the economic section at the embassy, which has resulted in significant gaps in filling positions and reorganizations to compensate for lost expertise. Similarly, the Department of Commerce's Trade Facilitation Office has been understaffed and has experienced high turnover in two staff positions according to department officials.

    Recommendation: Further, USTR and the Secretaries of Commerce, State, and USDA should undertake actions to mitigate the effects of both anticipated and unplanned staff turnover within the agencies' main China-WTO compliance units by identifying China compliance-related training needs and taking steps to ensure that staff have adequate opportunity to acquire the necessary training. These actions could include determining which of the agencies' existing courses would be appropriate for staff, determining what types of external training are available, developing training courses on relevant issues, and establishing a plan and timelines for existing and new staff to receive training.

    Agency Affected: Department of State

  8. Status: Closed - Implemented

    Comments: Key trade agencies have continued to increase staff positions to meet the demands of the U.S.-China trade relationship and to mitigate turnover. Staff resources more than doubled at headquarters and in Beijing since 2004. The estimated number of full-time equivalent staff in units most directly involved with China trade compliance efforts increased from 60 in fiscal year 2003 to 135 in fiscal year 2007. USTR doubled its staff positions in headquarters from 5 to 10 positions and established an internal China Enforcement Task Force that includes staff from USTR's Office of General Counsel and the China Affairs Office to prepare and handle potential WTO cases. USTR also added personnel in its China office to coordinate collection and integration of information on current and potential China trade issues. In response to increased responsibilities arising from the new U.S.-China trade relationship, USTR, Treasury, and Commerce's U.S. Patent and Trademark Office added four new positions at the embassy in Beijing. Department of Commerce's and USDA's Foreign Services in China are the largest overseas office for each department. For example, 10 percent of Commerce's Foreign Commercial Service is in China. In addition, as a result of an increased focus on China, the FAS has increased the number of staff that work in China, which now accounts for 10 percent of its overseas staff, according to USDA. In 2004, GAO reported that the four key trade agencies lacked specific training relevant to executing China-WTO compliance responsibilities, but since then the Departments of Commerce and State, and USDA have offered staff new opportunities for training on trade monitoring and compliance. Training opportunities for staff have increased, but most training is still ad hoc and does not apply specifically to China trade compliance. Department of State staff overseas stated they had sufficient funds for training. In addition, both departments offer courses online for staff. Department of State offers about nine training courses related to WTO compliance issues to its employees, as well as employees from other agencies. In fiscal year 2007, approximately 172 individuals took these courses. Since 2005, Department of Commerce has offered several training courses related to compliance and market access. Commerce employees in International Trade Administration participated in training on compliance and market access database. In addition, to ensure data accuracy in the Department of Commerce's case database, about 195 employees have been trained on case procedures and received guidance on how to document their work in the database. USDA officials stated the agency increased training opportunities for its China staff since 2005. However, all agencies note that they will still experience some staffing gaps and shortages from time to time despite their best efforts to mitigate turnover. For instance, USTR's China Affairs Office had four staff depart and hired five additional staff. The International Trade Administration officials in the Department of Commerce said that there is still a relatively high amount of staff turnover because employees in the Market Access and Compliance acquire a skill set that is highly desirable and attractive to the private sector. Overseas, both the Departments of State and Commerce have experienced staffing challenges. For example, there has been a high level of turnover in the economic section at the embassy, which has resulted in significant gaps in filling positions and reorganizations to compensate for lost expertise. Similarly, the Department of Commerce's Trade Facilitation Office has been understaffed and has experienced high turnover in two staff positions according to department officials.

    Recommendation: Further, USTR and the Secretaries of Commerce, State, and USDA should undertake actions to mitigate the effects of both anticipated and unplanned staff turnover within the agencies' main China-WTO compliance units by identifying China compliance-related training needs and taking steps to ensure that staff have adequate opportunity to acquire the necessary training. These actions could include determining which of the agencies' existing courses would be appropriate for staff, determining what types of external training are available, developing training courses on relevant issues, and establishing a plan and timelines for existing and new staff to receive training.

    Agency Affected: Executive Office of the President: Office of the U.S. Trade Representative

  9. Status: Closed - Implemented

    Comments: Key trade agencies have continued to increase staff positions to meet the demands of the U.S.-China trade relationship and to mitigate turnover. Staff resources more than doubled at headquarters and in Beijing since 2004. The estimated number of full-time equivalent staff in units most directly involved with China trade compliance efforts increased from 60 in fiscal year 2003 to 135 in fiscal year 2007. The U.S. Trade Representative (USTR) doubled its staff positions in headquarters from 5 to 10 positions and established an internal China Enforcement Task Force that includes staff from USTR's Office of General Counsel and the China Affairs Office to prepare and handle potential WTO cases. USTR also added personnel in its China office to coordinate collection and integration of information on current and potential China trade issues. In response to increased responsibilities arising from the new U.S.-China trade relationship, USTR, Treasury, and Commerce's U.S. Patent and Trademark Office added four new positions at the embassy in Beijing. Department of Commerce's and USDA's Foreign Services in China are the largest overseas office for each department. For example, 10 percent of Commerce's Foreign Commercial Service is in China. In addition, as a result of an increased focus on China, the FAS has increased the number of staff that work in China, which now accounts for 10 percent of its overseas staff, according to USDA. In 2004, GAO reported that the four key trade agencies lacked specific training relevant to executing China-WTO compliance responsibilities, but since then the Departments of Commerce and State, and USDA have offered staff new opportunities for training on trade monitoring and compliance. Training opportunities for staff have increased, but most training is still ad hoc and does not apply specifically to China trade compliance. Department of State staff overseas stated they had sufficient funds for training. In addition, both departments offer courses online for staff. Department of State offers about nine training courses related to WTO compliance issues to its employees, as well as employees from other agencies. In fiscal year 2007, approximately 172 individuals took these courses. Since 2005, Department of Commerce has offered several training courses related to compliance and market access. Commerce employees in International Trade Administration participated in training on compliance and market access database. In addition, to ensure data accuracy in the Department of Commerce's case database, about 195 employees have been trained on case procedures and received guidance on how to document their work in the database. USDA officials stated the agency increased training opportunities for its China staff since 2005. However, all agencies note that they will still experience some staffing gaps and shortages from time to time despite their best efforts to mitigate turnover. For instance, USTR's China Affairs Office had four staff depart and hired five additional staff. The International Trade Administration officials in the Department of Commerce said that there is still a relatively high amount of staff turnover because employees in the Market Access and Compliance acquire a skill set that is highly desirable and attractive to the private sector. Overseas, both the Departments of State and Commerce have experienced staffing challenges. For example, there has been a high level of turnover in the economic section at the embassy, which has resulted in significant gaps in filling positions and reorganizations to compensate for lost expertise. Similarly, the Department of Commerce's Trade Facilitation Office has been understaffed and has experienced high turnover in two staff positions according to department officials.

    Recommendation: Further, USTR and the Secretaries of Commerce, State, and USDA should undertake actions to mitigate the effects of both anticipated and unplanned staff turnover within the agencies' main China-WTO compliance units by identifying China compliance-related training needs and taking steps to ensure that staff have adequate opportunity to acquire the necessary training. These actions could include determining which of the agencies' existing courses would be appropriate for staff, determining what types of external training are available, developing training courses on relevant issues, and establishing a plan and timelines for existing and new staff to receive training.

    Agency Affected: Department of Agriculture

 

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