CHINA'S INITIAL GPA OFFER

C O N F I D E N T I A L SECTION 01 OF 02 BEIJING 000095

SIPDIS

SIPDIS

STATE PASS FOR EAP/CM, EEB
STATE PASS TO USTR
USDOC FOR 4420/ITA/MAC/CEA/RKARNAK/JPRUITT/IKASOFF
USTR FOR STRATFORD/WINTER/MCCARTIN/GRIER
TREASURY FOR OFFICE OF INTERNATIONAL INVESTMENT
TREASURY FOR OASIA/ISA - DOHNER AND HAARSAGER
GENEVA PASS TO USTR

E.O. 12958: DECL: 01/09/2033
TAGS: ECON ETRD WTRO EFIN EINV EIND CH
SUBJECT: CHINA'S INITIAL GPA OFFER

REF: BEIJING 07 6814

Classified By: Econ Minister Counselor Robert S. Luke. Reasons: 1.4 (B/
D).

Summary
--------------


1. (SBU) On January 7, Embassy Beijing Economic officers met
with Ministry of Finance (MOF) Government Procurement
Management Division II Treasury Department Director Wang Shao
Shuang regarding MOF,s December 28 submission of its
Government Procurement Agreement (GPA) and initial offer.
Director Wang did not provide a copy of the offer, but set a
stage for low expectations. Wang noted the difficulties
involved in meeting its commitment to submit an initial offer
by the end of 2007, emphasized repeatedly that this is only
China,s initial offer, caveated that China intends to take
the GPA negotiation stage seriously, and assured that China
intends to hold extensive consultations with other GPA
members including the United States and European Union. Wang
also stated that MOF remains interested in a future Trade and
Development Agency (TDA) orientation visit to the United
States, but that it would have to wait until after MOF
members return from GPA discussions in Geneva late February
before setting a specific date. End Summary.

Meeting Wu Yi,s Promise, But Limited Initial Offer
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2. (SBU) Director Wang met with Embassy officials January 7
to officially notify us that China submitted its GPA
application and initial offer to the WTO in Geneva on
December 28. Wang said the fact that China accomplished this
task attests to how seriously MOF has taken Vice Premier Wu
Yi,s April 2006 Joint Commission on Commerce and Trade
(JCCT) commitment to have China submit an initial offer to
join the GPA by the end of 2007. Wang emphasized that
typically a country has up to six months from when it
proffers an application to the WTO to join the GPA to submit
its initial offer. However, due to Wu Yi,s 2006 JCCT
commitment, China submitted both its application and initial
offer simultaneously, meeting Wu Yi,s promised deadline.


3. (C) Director Wang underscored difficulties involved in
meeting Wu Yi,s deadline and strongly hinted that the scope
of the initial offer is extremely limited. Wang did not
share a copy of the offer and only revealed that the initial
offer includes only four of the GPA,s five annexes, noting
that China has not submitted any entities to be covered under
Annex II (state agencies). Wang emphasized repeatedly that
this is only China,s initial offer and that, as GPA
negotiations move forward, the Chinese government expects
significant adjustments to its offer to be made. Later
Embassy review of the initial offer document (obtained from
Washington) further revealed:

- significantly limited coverage of goods and services;
- extremely high thresholds;
- a provision (General Notes Article 11) that postpones
implementation until 15 years after China accedes;
- extremely broad exclusions including any procurement
related to infrastructure construction and related
supplies and services for public utilities, and;
- a provision (General Notes Article 3) that could be used
to justify non-implementation, which states "When a
specific procurement may impair national policy
objectives, the Chinese government may consider it
necessary in singular procurement cases to deviate from
the principle of national treatment in this Agreement."

Lowered Expectations, Forward Challenges
--------------


4. (SBU) Wang elaborated on the fact that the GP Law in China
has only existed since 2003 and that, prior to joining the
WTO in 2001, the concept of government procurement did not
exist in China. Wang explained that in contrast to the
United States, China,s domestic GP laws and system are still
in their infancy, and that coordinating among several
different government entities in order to develop an agreed
initial offer, made the task especially challenging. He
stressed that China intends to take the GPA negotiations
stage "seriously" and that negotiations would involve both

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external negotiations and consultations among other GPA
members, particularly the United States and European Union,
and internal negotiations with stakeholders within China. He
noted forward challenges include - raising awareness among
the general populace about the benefits of GPA - and working
within the GPA framework to have other GPA members recognize
China,s "special circumstances" as a developing country.

TDA Visit and Study Programs
--------------


5. (SBU) Director Wang expressed interest in a TDA
orientation visit to the United States, but said it would
have to wait until after MOF members return from GPA
discussions in Geneva late February, 2008 before setting a
specific date. Wang also expressed a strong interest in
sending one or two MOF officials to the United States for a
six-month to one-year GP study program.
RANDT