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 -------------- -------------- ¶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 BEIJING 00000095 002 OF 002 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