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UNCLAS SECTION 01 OF 02 BEIJING 003509 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM HABJAN/PARK 
STATE PASS USTR STRATFORD/MARUYAMA/KATZ 
USDOC FOR ITA/PADILLA 
USDOC FOR OGC/CLAFFEE/BLANK 
USDOC FOR ITA/MAC/KASOFF/MELCHER/KARNAK 
TREASURY FOR HOLMER/SMITH/WRIGHT/HUANG 
TRANSPORTATION FOR MCDERMOTT/SZABAT/ALLEN/PORTER 
NSC FOR LOI 
 
E.O. 12958: N/A 
TAGS: ETRD ELTN EINV EAIR CH
SUBJECT: USTR MEETING WITH STATE COUNCIL LEGISLATIVE 
AFFAIRS OFFICE ON DRAFT POSTAL LAW 
 
THIS MESSAGE IS SENSITIVE BUT UNCLASSIFIED.  PLEASE HANDLE 
ACCORDINGLY.  NOT FOR DISTRIBUTION OUTSIDE USG CHANNELS. 
 
¶1.  (SBU)  SUMMARY:  USTR officials Claire Reade and Tim 
Stratford discussed China's draft Postal Law with State 
Council Legislative Affairs Office Director General Zhao 
Xiaoguang on September 2.  Zhao acknowledged that the 
current draft still restricts the rights of foreign 
companies to engage in domestic express document delivery, 
which he said is consistent with China's WTO commitments. 
Zhao said China welcomes foreign express delivery companies, 
but that the SC/LAO is under pressure to protect domestic 
companies.  Reade noted that the USG understands that 
companies other than China's postal monopoly did engage in 
domestic express document delivery prior to China's WTO 
accession, in which case, the principle of national 
treatment would obligate China to extend these rights to 
foreign companies. She offered to provide SC/LAO with 
examples of private or joint-venture companies involved in 
domestic express document delivery at the time of China's 
WTO accession.  Reade and Stratford stressed the benefits 
to China's economy of fully opening the express delivery 
market to competition, and urged SC/LAO to consider the 
interests of consumers and the Chinese economy overall, not 
just the interests of some companies.  END SUMMARY. 
 
¶2. (SBU) USTR Chief Counsel for China Trade Enforcement, 
Claire Reade and AUSTR Tim Stratford met with State Council 
Legislative Affairs Office (SC/LAO) Director General Zhao 
Xiaoguang on September 2 to discuss China's draft Postal 
Law and its possible effect on United States express 
delivery companies operating in China.  Present from the 
Embassy were Econmincouns, USTR Senior Trade Representative, 
USDOC Special Counsel, Commercial Officer, and Econoff. 
USDOC International Trade Specialist Janice Wingo also 
attended. 
 
¶3.  (SBU)  Reade stressed the importance of openness and 
competition to China's economic development, and noted the 
important role played by United States express delivery 
companies in China's development, including by improving 
communications between Central and Western China and the 
coastal regions. 
 
¶4.  (SBU)  Reade asked whether the USG could see a copy of 
the current version of the draft Postal Law, and whether it 
still contains provisions that would restrict foreign 
companies from engaging in domestic express document 
delivery.  Zhao said the draft Law is still under revision 
in the SC/LAO.  He said it would be difficult to share the 
draft or make it public, but that the SC/LAO is willing to 
hear the opinions of interested parties, such as United 
States express delivery companies, and take them into 
account. He said he has talked to Fedex, UPS and TNT 
several times.  Zhao acknowledged that the draft Law still 
contains the restrictive provisions.  He said the draft Law 
would not impose new restrictions on foreign express 
delivery companies, and that China welcomes U.S. companies 
in the express delivery business and intends to allow them 
an (unspecified) "slightly" greater role under the revised 
postal Law.  Zhao said China may grant authority to 
foreign express delivery firms to deliver documents 
domestically (e.g. from Changchun to Beijing) en route to 
an overseas location.   He said the draft Law is consistent 
with China's WTO commitments, which contains a carve-out 
for activities restricted to China's state postal monopoly, 
China Post. 
 
¶5.  (SBU)  Reade said companies that cannot deliver both 
documents and packages would be at a significant 
disadvantage in the China market.  On WTO commitments, 
Reade acknowledged that China has a GATS carve-out for 
activities reserved for China Post as of December 2001, but 
said it is not clear that such a monopoly really extended 
to domestic express document delivery.  She said the USG 
understands that companies other than China Post did engage 
in domestic express document delivery prior to China's WTO 
accession, and that if this is the case, China must treat 
 
BEIJING 00003509  002 OF 002 
 
 
foreign and domestic companies equally.   Zhao said he was 
aware of foreign companies engaging in express delivery of 
documents on international routes, operating under 
entrustment certificates, but was unaware of any licenses 
issued to foreign or domestic firms to engage in domestic 
express document delivery in competition with China Post. 
Reade offered to provide SC/LAO with examples of private or 
joint-venture companies that competed with China Post in 
domestic express document delivery at the time of China's 
WTO accession, and Zhao agreed to receive them. 
 
¶6.  (SBU)  Zhao said that China does value openness and 
competition, and recognizes the contribution of United 
States companies.  He claimed that American express 
delivery companies tell him they are satisfied with the 
legal and business environment in China.  Zhao went on to 
discuss the government's need to protect the local rights 
of "customers" and described China's express delivery 
industry as backward.  He noted that after restricting 
foreign competition in some sectors, e.g. tourism, giving 
domestic industry a chance to develop, China was able to 
eliminate market access restrictions that were permitted 
under China's WTO services offer.  Zhao said the SC/LAO is 
under pressure from domestic companies regarding the Postal 
Law. 
 
¶7.  (SBU)  Stratford urged Zhao to consider two points: 
first, that placing market access restrictions directly in 
the Postal Law will make it very difficult for China to 
remove these restrictions if it wishes to liberalize in the 
future.  Second, Stratford noted that while governments 
must take the interests of domestic companies into account, 
they must also realize that the interests of specific 
companies do not always coincide with the interests of 
their countries or the overall economy.  Reade added that 
consumers tend not to comment on draft legislation, so 
responsibility for this falls to government. 
 
¶8.  (SBU)  Stratford took the opportunity to invite SC/LAO 
to participate in the 9/18-19 Postal and Express Delivery 
Symposium in which the State Postal Bureau will participate. 
Zhao said one Deputy Director General from the SC/LAO will 
participate, and said the SC/LAO welcomes this opportunity. 
 
RANDT