U.S.-China Trade:

USTR's China Compliance Reports and Plans Could Be Improved

GAO-08-405: Published: Apr 14, 2008. Publicly Released: May 14, 2008.

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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.

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.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: In response to the GAO recommendation, USTR indicated, in a letter to congressional committees, that it was exploring how in its annual reports it would provide a more precise and easily tracked measure of the progress being achieved to ensure that China complies with its WTO commitments. The agency noted that quantifying these issues was inherently difficult and might restrict its ability to achieve substantive progress on WTO commitments with China. In addition, the agency noted that quantifying these issues may not be the most effective deployment of its resources. Since GAO's 2008 report, the Executive Summary of USTR's annual reports to Congress on China's WTO compliance have included a 2-3 page narrative summary table of China's WTO compliance efforts as well as an expanded history of events at key meetings. Nevertheless, these reports still fail to systematically identify the number, type, and disposition of the trade issues USTR is pursuing with China and report this and more useful quantitative and qualitative trend information in the summary analysis.

    Recommendation: To improve policymakers' and the public's understanding of China's trade compliance situation, the USTR should clearly and systematically identify the number, type, and disposition of the trade issues it is pursuing with China and report this and more useful trend information in its annual China trade compliance report to Congress.

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

  2. Status: Closed - Not Implemented

    Comments: USTR has indicated that its 2006 top-to-bottom report was a policy document and not a performance plan that needed to be updated periodically. They said the document was intended to provide a framework for how U.S. agencies should engage China and was not intended to establish a new mechanism for measuring performance or adjusting future goals. USTR indicated that it understood the need for updated information, so the agency would work to highlight the steps the Administration has taken to implement the top-to-bottom review and any major changes in the U.S.-China trade relations in the various annual reports USTR produces. Nevertheless, as stated in the report, GAO suggests that USTR reconsider its treatment of this report as a onetime policy statement and that it update and improve the report in order to enhance accountability and inform all stakeholders, including Congress and the public.

    Recommendation: To help achieve U.S. trade objectives with China, USTR should update and improve the plans reported to Congress in its 2006 top-to-bottom report by considering recent developments and the results of ongoing U.S. monitoring and enforcement activities and by reviewing how specific implementing steps and action items align with broad objectives and priority goals. USTR should also take steps to formally monitor implementation of these plans over time.

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


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