China's two-way trade has been experiencing tremendous growth since the country was accepted into the World Trade Organisation (WTO) in November 2001. Last year, imports grew 21.2 percent year-on-year, while exports grew 22.3 percent.

This growth has not come at a price, however, as most of China's trading partners have adopted protectionist measures to offset the impact that Chinese products -- primarily low-priced commodities -- may have on their local industries. As such, technical trade barriers have become the biggest obstacle that Chinese exporters now encounter, and Hong Kong, as the Mainland's largest entrepot, inevitably is affected.

Some countries have used the SARS outbreak to add restrictions on China's exports, claiming they are doing so to stop the disease from spreading to their countries. For example, the Spanish and the U.K. governments and their importers have begun to ask Chinese enterprises to attach a certificate to exports declaring that they are "virus free." This has emerged as a new trade barrier against Chinese products.

The Science and Technology Department of China's Ministry of Commerce reported that 71 percent of Chinese exporters and 39 percent of Chinese commodities ran into overseas technical barriers with estimated total losses of US$17 billion in 2002.

Foodstuffs, agricultural produce and animal by-products were hardest-hit, with almost 90 percent of exporters accounting for US$9 billion of the total. Meanwhile, light industry products and machinery products have also suffered since China's WTO admission, reporting losses of US$4 billion and US$2 billion respectively. Technical trade barriers erected by the European Union account for 41 percent of the losses, followed by 30 percent by Japan and 24 percent by the U.S.

While Chinese exports subject to foreign anti-dumping measures occupy only about 1 percent of the national total trade in value, technical trade barriers can be deemed the biggest non-tariff impediment hindering China trade today.

Technical barriers hit basic, labour-intensive products most, especially textiles, household goods, minerals, metals and chemicals, foodstuffs and poultry products, machinery and electronic products and medicines.

Restrictions have been laid on the amount of pesticide residue in food products, and of lead in ceramics, PCP residue in leather goods and organic chlorine in tobacco. Similarly, machinery, electronic products and toys, textiles and packaging materials have to comply with various safety, burning-precaution and re-use standards respectively.

The WTO's Agreement on Technical Barriers to Trade stipulates that a member country can adopt technical trade measures on the grounds of safeguarding the safety and health of its people, animals and plants, environment as well as preventing fraud.

The wide variety of technical trade barriers that China faces is partly attributed to the non-conformity between the technical rules and regulations in the country, international practices and China's antiquated management systems, but some technical barriers are discriminatory and retaliatory. Hong Kong traders, especially those engaged in the buying and selling of the above-mentioned products, should therefore prepare for sudden changes to regulations.

Overseas technical standards

Revising China's outdated technical standards will be a long process. Some industries or commodities, including high-tech products, do not have any technical standards in China, and the country has yet to develop a sound Food Safety Law to upgrade inspections. In this regard, exporters must conform to importing countries' technical standards and supervision measures to ensure that their products meet the latter's requirements in terms of quality, production, transportation and distribution.

Chinese commodities may also fail to meet importing countries' standards of packaging, labelling and bar coding. European countries and the U.S. have set strict requirements and standards on the handling and renewal of packaging materials. Likewise, wording and graphical presentation of product labels have to meet certain technical requirements. In such countries, bar coding systems of foreign supermarkets and retail outlets are also subject to special standards.

Technical barriers targeting China

Many countries have set up draconian import standards and regulations to protect themselves against Chinese products. Japan has adopted double standards in inspecting the residue of a chemical in products containing chicken. Mainland products have to reach the requirement of 0.01 part per million (PPM) of a kind of veterinary drug residue whereas it is 0.05 PPM for the same category of exports from other countries. With opaque requirements, China will have great difficulty in hitting a moving target.

Given this scenario, "going out" seems to be the right strategy to avoid being hit by such trade barriers. This also explains Mainland enterprises' desire, especially electrical household product manufacturers, to invest, produce and sell their products abroad. Such options are not open to the hard-hit farming and food processing companies, however.

A two-way game

China's imports are growing as rapidly as its exports. Since joining the WTO, the country has become a star student in the school of technical trade and anti-dumping measures. Playing by international trading rules can at times be a rough game, but China has shown that it is up to the challenge, with the introduction of the new China Compulsory Certification System, which will come into effect in August this year.

As China's external trade is expected to continue its rapid growth, so too will the number of technical trade barriers that the country will need to overcome. This will present risks to trading companies, which they can minimise by keeping a close eye on global economic trends. Hong Kong has a freer flow of information than the Mainland, which local traders can use with their own strengths to help Mainland firms expand overseas. This will ultimately add to Hong Kong's role and importance to create a win-win relationship among businesses in both places.