USTR GENERAL CONSUL REIF VISITS SHANGHAI

UNCLAS SECTION 01 OF 02 SHANGHAI 000483 SENSITIVE SIPDIS STATE FOR EAP/CM STATE ALSO PASS USTR FOR CHINA OFFICE STATE ALSO PASS DOJ FOR INTERNATIONAL ANTITRUST- CHEMTOB E.O. 12958: N/A TAGS: ETRD WTRO SENV PGOV CH ECON SUBJECT: USTR GENERAL CONSUL REIF VISITS SHANGHAI REF: STATE 124680 (U) This document is sensitive but unclassified. Please protect accordingly. ¶1. (SBU) Summary: During meetings December with USTR General Counsel Timothy Reif, scholars from the Shanghai Municipal Government's WTO Center expressed worries about how to harmonize possible commitments to limit greenhouse gas emissions with existing trade policy regimes. AmCham Shanghai members who met with Reif were generally upbeat about the business climate despite chronic problems related to intellectual property protection and regulatory transparency. Shanghai Commerce Commission officials emphasized Shanghai's success in meeting Central Government standards for transparency but acknowledged Shanghai remains more conservative with respect to government openness than some other jurisdictions in China. End Summary. ========================================= WTO Center: Overreach and Climate Change ========================================= ¶2. (SBU) On December 7, USTR General Counsel Reif, accompanied by AUSTR Tim Stratford and Claire Reade, Chief Counsel for China Trade Enforcement, met Shanghai WTO Affairs Consultation Center President Wang Xinkui to discuss concerns over WTO Appellate Body overreach and the growing nexus between measures to address climate change and trade policy. General Counsel Reif began by asking WTO Center analysts for their thoughts on whether the WTO Appellate Body had overreached in certain cases. The WTO Center's Professor Gong Baihua agreed that there had been instances of overreach, corresponding to an increased reliance by WTO members on the dispute settlement mechanism. He was quick to point out, however, that overreach happened in both directions, and that it was often the losers of a case who claimed that the Appellate Body had overreached. WTO Center President Wang suggested that the Appellate Body should be "restrained" to prevent overreach in the future, but conceded that the body, in spite of its faults, would continue to serve a useful purpose "as long as it prevents trade wars." ¶3. (SBU) The discussion then shifted to a conversation over the expanding linkage between climate change measures and trade policy. Wang noted that, on the eve of the Copenhagen Climate Change Conference, China had pledged to reduce its carbon emissions to 40-45% of their 2005 levels per unit of GDP by ¶2020. Wang questioned whether mandates coming out of the Copenhagen Climate Change Conference will be dealt with under existing WTO agreements. General Counsel Reif stated that he was confident existing WTO rules will give us answers as to how to harmonize Copenhagen outcomes with WTO members' trade policy regimes, including whether the results of Copenhagen will be consistent with GATT Article III. Reif noted, however, that this conclusion depends on the terms of the actual agreement. ============================================= ========= AmCham Shanghai: Indigenous Innovation and Procurement ============================================= ========= ¶4. (SBU) During a luncheon roundtable at the American Chamber of Commerce in Shanghai, several members raised concerns over China's "catalogue of indigenous innovation products for government procurement", which they claim discriminates against international companies, favoring "indigenous" products instead. The USTR delegation noted that Washington is carefully monitoring this issue, had coordinated an interagency response in Washington, and had drafted a demarche to be delivered in Beijing on December 10 (REFTEL). The USTR delegation appealed to Shanghai AmCham members to continue to supply the USG with specific and actionable information to support their complaints. ¶5. (SBU) The AmCham members also cited continuing concerns over transparency, China's implementation of the Anti-Monopoly Law, and weak IPR protection. In addition, insurance industry representatives raised national treatment and market access concerns. Medical device manufacturers also expressed concerns over Chinese government procurement policy. Despite their SHANGHAI 00000483 002 OF 002 downbeat assessment of these non-tariff barriers, AmCham Shanghai members were upbeat when asked about the overall business climate; several members cited unexpected and unprecedented growth over the last quarter. ============================================= ============== ======= Commerce Commission: Government Transparency in Shanghai Improving ============================================= ============== ======= ¶6. (SBU) In a separate December 7 meeting, Shanghai Municipal Commerce Commission Secretary General Gu Jiahe stressed the Municipal Government's efforts to expand transparency. Shanghai has already implemented all of the "open government" regulations issued by the Central Government and is adhering to commitments made by China during the 2008 U.S.-China Strategic Economic Dialogue. While Gu claimed that most municipal laws and regulations are already available on-line, he admitted that the process for commenting on draft regulations is only partially available to the public "due to their complexity." Reif congratulated Gu on Shanghai's efforts and urged the Municipal Government to continue its work to expand transparency at the local level. He added that allowing for public consultation in drafting of regulations helps increase confidence in the regulatory environment and improves the investment climate. ¶7. (SBU) Gu enumerated many of the Municipal Government's accomplishments in improving access to information and stressed that all government offices have their own web sites, which provide the names of senior officials and relevant regulations and laws. Gu was especially proud of Shanghai's system for attracting foreign investment. He said that procedures for entering into joint ventures (JVs) or establishing wholly foreign-owned enterprises (WFOEs) are posted on-line and that investors receive a clear timeline from the municipal authorities to help them monitor the process of their applications. If a JV or WFOE application is refused, the applicant will be given the reason for the refusal. ¶8. (SBU) Reif asked about the current controversy surrounding a journalist's request for the publication of Shanghai's budget, which the Municipal Government refused, citing laws on state secrets. (Note: Guangdong Province, by way of contrast, responded to the same request by immediately posting their budget online. End note.) Gu demurred, reiterating that Shanghai had fully complied with the Central Government's open government initiative but conceded that, in this instance, other jurisdictions within China are more forward-leaning than Shanghai. Reif asked how the Municipal Government handles cases in which the open-government initiative guidance conflicts with state secret laws. Gu only acknowledged the existence of guidance but did not elaborate. ¶9. (U) This cable was cleared by USTR. CAMP