II. Trade issues and Market Participation The Delegation of the People's Republic of China and the Delegation of the United States of America held 5 rounds of negotiations in Beijing and Washington, D.C. As a result of these discussions, the parties believe that the entry of PRC commercial launch services into the international market has facilitated cooperation between the PRC and the U.S. in the space area, and agree that certain measures are appropriate to address certain issues regarding international trade in commercial launch services, including continued PRC participation in the international market for commercial launch services. Accordingly, after mutual and friendly consultations, the U.S. and the PRC have agreed as follows: A. The U.S. and the PRC support the application of market principles to international competition among providers of commercial launch services, including the avoidance of below-cost pricing, government inducements, and unfair business practices. B. The PRC shall continue to take steps to ensure that providers of commercial launch services controlled by or operating within the territory of the PRC do not materially impair the smooth and effective functioning of the international market for commercial launch services. (i) Among these steps, the PRC shall ensure that any direct or indirect government support extended to its providers of commercial launch services is in accord with practices prevailing in the international market. (ii) The PRC providers of commercial launch services shall not launch more than 11 principal payloads to geosynchronous earth orbit or geosynchronous transfer orbit for international customers during the period of this Agreement, excluding Apstar II, AsiaSat II, Intelsat 708 and Echostar I, which were reviewed and determined to be covered by the provisions of the 1989 Memorandum of Agreement. Any satellite launched by PRC providers that is entirely leased on orbit to international customers (pursuant to a commitment between the PRC and such customers) represents a launch of a principal payload for purposes of this Agreement. If not entirely leased on orbit to international customers, such a satellite may represent a launch of a principal payload if the satellite's capacity is primarily leased to international customers, depending upon the circumstances and facts of a particular case. (iii) (a) The United States and the PRC take note of the potential emergence of the market for launches to low-earth-orbit (LEO) since 1989 as a separately identifiable commercial market with its own particular characteristics. It is still under development and is closely related to the rapid evolution of the satellite market and telecommunications market. The two parties further note that participation of its providers of commercial launch services in an appropriate manner in this market segment will contribute to, rather than detract from, the development of this market segment. (b) Taking into account the current predictions for the growth in, and structure of, the LEO market, the United States recognizes that the participation of PRC launch services providers in that market segment could be substantial, so long as that participation is consistent with the provisions of this Agreement. The PRC states that its participation in the LEO market shall be consistent with the provisions of the agreement and with significant U.S. participation in the development of the LEO market and agrees to take steps to ensure that such participation will be proportionate and non-disruptive. (c) If either party believes that the other party is participating, or may participate in this market in a manner inconsistent with its commitments under the agreement, the parties shall meet pursuant to the consultations provided for under Article IV(2) to ascertain the facts of the situation and take appropriate corrective action. In assessing the effect, or potential effect of PRC participation in the LEO market relative to its commitments in this Agreement, the United States Government will be guided, inter alia, by the following factors: 1) The extent and growth of overall PRC and U.S. participation in the LEO market; 2) With respect to proposals to deploy LEO communications satellite constellations, the extent of participation by U.S., PRC, and third country launch service providers-in particular, whether the overall level of participation by launch service providers in countries with whom the U.S. has concluded a bilateral launch services agreement (measured according to distribution of payloads) in the deployment of any single LEO communications satellite constellation is greater than the participation of market economy launch service providers. The following factors should, inter alia, also be taken into account:   the extent of PRC and U.S. participation in the deployment;   launch scheduling requirements and the need to optimize launch vehicle selection to meet deployment or operational requirements;   the availability of competitively-priced market economy launches to meet these requirements;   opportunities made available to the parties for participation in the replacement market;   reasonable considerations by the proposed system operator regarding commercial risk sharing;   customers' requirements. (iv) The PRC agrees that its providers of commercial launch services shall offer and conclude any contracts to provide commercial launch services to international customers (including sole source or directed procurements) at prices, terms, and conditions which are on a par with those prices, terms and conditions prevailing in the international market for comparable commercial launch services offered by commercial launch services providers from market economy countries, including the United States. (a) When the differential between a bid, offer or contract by a PRC launch services provider and the bid, offer or contract by a commercial space launch services provider from a market economy country, including the U.S., to provide the commercial space launch services described in subparagraph (ii) above is less than 15 percent, it shall be assumed, unless information is provided to the contrary, that such bid, offer, or contract is consistent with subparagraph (iv) and that no special consultations are needed. When the differential between a bid, offer or contract by a Chinese launch service provider and the bid, offer or contract by a commercial space launch services provider from a market economy country, including the U.S., is greater than 15 percent and after taking into consideration the comparability factors described in Annex II, the U.S. believes that China's launch service prices are not consistent with subparagraph (iv), the parties shall have special consultations under Article IV of this agreement. (b) With respect to the commercial launch services described in subparagraph (iii) above, the Parties agree to undertake a detailed examination on a per payload basis, of the factors affecting the comparability of bids, offers or contracts for such services with a view towards completing this examination by the end of 1995. (v) If, after consultations, both parties agree, the PRC may offer an introductory price on only the first test flight of a new type of launch vehicle. (vi) The PRC agrees that any commitments to provide commercial launch services to international customers by PRC launch service providers shall be proportionally distributed over the period of the Agreement. To this end, the PRC shall make its best efforts to prevent a disproportionate concentration of such commitments during any two-year period of the Agreement. The PRC may make commitments in any three-year period of the Agreement consistent with subparagraph II (B) (ii) above. The PRC shall seek to ensure that PRC launches of principal payloads for international customers are performed as scheduled in the original launch commitment. (vii) The PRC agrees to require its launch service or insurance providers to offer international customers any insurance or reflight guarantees on a par with prevailing rates and practices in international markets for comparable risk. C. The U.S. stated that the U.S. does not provide government inducements of any kind in connection with the provision of commercial launch services to international customers which would create discrimination against launch service providers of other nations and has no intention of providing such inducements in the future. Accordingly, the PRC stated it agreed not to offer inducements of any kind in connection with the provision of commercial launch services to international customers which would create discrimination against launch service providers of other nations.