Qiushi Journal

China’s Accession to the WTO and the Development of Its Legal System

—Commemorating the 10th Anniversary of China’s Accession to the WTO

From: English Edition of Qiushi Journal

Updated:2012-07-04 15:08

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December 10, 2001 was an extraordinary day which marked China’s eventual accession to the World Trade Organization (WTO) after 15 years of arduous negotiations. As a direct participant of the negotiations to restore China’s status as a founding member of the General Agreement on Tariffs and Trade (GATT) and take it into the WTO, it is with deep feelings and great joy that I look back over the tense legal negotiations that took place over China’s accession to the WTO, which I played an instrumental part in, as well as the remarkable achievements that China has made in the development of its legal system during the past decade.

I. Legal issues pertaining to China’s WTO accession

1. Uniform application of the trade regime. The uniform application of the trade regime involved two unavoidable issues that required our serious attention: one was the status of the WTO Agreement in China’s domestic law, and the other was China’s domestic appeal mechanisms pertaining to the uniform application of legal systems, including the trade regime.

The status of the WTO Agreement in domestic law is an issue that pertains to the relationship between international law and domestic law. Primarily, this issue included two aspects: the question of whether the WTO Agreement was able to be directly invoked by China’s courts and other law enforcement agencies as the basis for hearings or other law enforcement activities after China’s accession to the WTO; and the question of what laws would be applied in the event that the WTO Agreement came into conflict with China’s domestic law. Put simply, this is a question of which legal system will prevail, the WTO Agreement or China’s domestic law. Upon our detailed analysis of the WTO Agreement as well as our observation of international and domestic experiences, we concluded that China should not commit to giving priority to the WTO Agreement or applying it directly in domestic law enforcement activities, as doing so would not only undermine the integrity of China’s legal system, but also the implementation of the agreement in China. In regard to this issue, China has reiterated the following principles. First, the WTO Agreement is a treaty for China. China always has abided by its treaty obligations and will do so in the future. China is currently making its best efforts to fully meet the obligations stipulated in the WTO Agreement, and will never cease to fulfill these obligations in the future. Second, according to the provisions of the WTO Agreement, the WTO allows its members to freely choose the means by which they fulfill their obligations. As with most other WTO members, China has opted to guarantee the domestic implementation of the WTO Agreement by formulating new laws in compliance with the WTO Agreement and revising or abolishing existing domestic laws that do not comply with the WTO Agreement. Third, judging from international experience, major WTO members such as the US, the European Union and Japan have adopted various measures in order to rule out the direct application of the WTO Agreement in their countries. Accordingly, the protocol on China’s WTO accession stipulates that China shall implement the WTO Agreement in an effective and uniform manner by revising existing domestic laws and enacting new ones in compliance with the WTO Agreement.

Two Russian buyers discussing a purchase order for textile products with sales staff in a privately-owned company in Yiwu City on November 24, 2011. Massive changes have taken place in the market city of Yiwu, Zhejiang Province, over the past decade. According to data issued by the Yiwu Municipal Administration of Industry and Commerce and the Municipal Trade Development Bureau, the overall scale of the markets in Yiwu has grown from over 1 million square meters to 4.7 million square meters in the decade that has passed since China joined the WTO. During this period, the number of market stalls has increased from 20,000 to 70,000; the number of resident foreign merchants has gone from less than 3,000 to more than 13,000; the number of foreign companies with offices in Yiwu has gone from less than 200 to 3,039 at present; and the total trading volume in the market has gone from 24.12 billion yuan in 2001 to 62.116 billion yuan in 2010, representing a net increase of 38 billion yuan. The trading volume in the China Small Commodity City in Yiwu for the first three quarters of the year has increased by 9.35% over the same period last year. / Xinhua (Photo by Zhang Jiancheng)

In regard to domestic appeal mechanisms, which pertain to the uniform application of the trade regime, this issue primarily involves legal systems that are exercised in China, such as legislative supervision, administrative reconsideration, and administrative litigation. We are in the belief that it is perfectly possible to resolve such issues in accordance with relevant Chinese laws. Disputes over concrete administrative actions can be resolved through administrative reconsideration or administrative litigation, while dissent over abstract administrative actions, such as regulations and rules, can be processed through legislative supervision procedures. Therefore, the protocol stipulates that China shall promptly address the demands of interested parties through remedial measures permitted by Chinese laws.

2. Transparency. There are two key points in regard to transparency: the solicitation of public opinion prior to the passage of legislation and time requirements concerning the publication and implementation of legal norms. After repeated debate, the following stipulation was agreed upon in the protocol: under ordinary circumstances, China shall, upon request, make the texts of relevant regulations and other policy measures available to other WTO members prior to their implementation; in emergency situations, said texts shall be made available when such measures are implemented at the very latest. However, the protocol includes exceptions for matters pertaining to national security, foreign exchange rates, and monetary policy, stipulating that regulations and policies in this regard may come into effect immediately upon publication. It should be pointed out that China has never committed to the solicitation of opinions regarding laws and policy measures during the stages of deliberation, drafting and consideration.

3. Judicial review. This mainly relates to the scope of China’s judicial review and the ultimate decision-making power of the State Council over administrative reconsideration. We maintained that China should only assume the obligations stipulated by the various WTO protocols, stating that we have no intention of undertaking obligations to provide indiscriminate judicial reviews for foreign exchange balancing measures, safeguards, and other measures pertaining to the implementation of the WTO Agreement. Moreover, we insisted that the ultimate decision-making power of the State Council over administrative reconsideration as defined by China’s Administrative Reconsideration Law must not be reversed. With regard to this issue, the protocol stipulates that judicial review shall be made available for matters specified by the WTO Agreement, and that an interested party who files an initial request with an administrative body shall have the right to choose to appeal to a judicial body, thereby safeguarding the ultimate decision-making power of the State Council over administrative reconsideration.

In regard to anti-dumping and countervailing measures, which pertain to China’s status as a market economy and to product-specific safeguards, we maintained that procedures or mechanisms must be specified in order to minimize the harm and prevent the abuse of such provisions, which have been designed by some WTO members to target China. In this regard, China put forward a powerful argument founded on just grounds, and after repeated clashes, other WTO members were compelled to provide China with the relevant assurances, setting up “sunset provisions” for the automatic abolishment of such provisions after a specified period of time.

II. A decade of remarkable progress in the development of the legal system

China’s accession to the WTO was a strategic decision made by the CPC Central Committee. At the same time, the development of socialist democracy and the socialist legal system is also a strategic task that has been established by the Party. Over the past decade, remarkable achievements have been made in the development of China’s legal system. From the perspective of China’s entry into the WTO, these achievements may be viewed as follows:

1. A nationwide effort was launched to promote our understanding of the WTO. At the beginning, a widespread effort to bring our understanding of the WTO up to standard was carried out throughout the central government, local governments, government organs, enterprises, and public institutions. As a result of these efforts, we gradually became aware of the need to abide by WTO regulations and act in compliance with common international rules. Governments at all levels have taken active steps to change their managerial ideas and approaches. Through constant study, they have increased their capacity to exercise powers in accordance with the rules and administer economic and social affairs through legal means. In addition, we have also transformed the way that the government functions, defining its key roles as “economic adjustment, market supervision, social management, and public services.” Along these lines, we have reduced government intervention in microeconomic activities, doing our best to withdraw from areas that the government need not administer and in practice cannot effectively administer.

2. The large-scale adjustment of the legal system was carried out rapidly. Following the conclusion of Sino-US bilateral negotiations, China began to adjust relevant domestic laws in order to align them with the WTO Agreement. We completed the revision and formulation of a series of laws and regulations prior to China’s accession to the WTO, including the Customs Law, the Law on Import and Export Commodity Inspection, three laws pertaining to foreign-funded enterprises, the Copyright Law, and eight other laws, as well as 37 administrative regulations. At the same time, 12 administrative regulations were abolished, 34 relevant documents were invalidated; and over 1,000 departmental rules and other policy measures were formulated, revised, or abolished by the relevant departments of the State Council. Moreover, a total of 190,000 local regulations, government regulations, and relevant documents were either revised, abolished or invalidated throughout China’s 31 provinces, autonomous regions and municipalities directly under the central government and in 49 relatively large cities. Since then, numerous efforts have also been made to straighten out relevant trading policy measures in accordance with the timetable agreed to by China. Government authorities at all levels are now accustomed to taking WTO rules into account when they are formulating new rules and policies.

3. All-round progress has been made in making legislation more scientific and more democratic. China has established an institutional framework for public participation in the legislative process. This framework consists of laws and regulations such as the Legislation Law, the Regulations on Procedures for the Formulation of Administrative Regulations, and the Regulations on Procedures for the Formulation of Rules. With the acceleration of China’s efforts to develop democracy and the rule of law, public participation in the legislative process has become a common practice guided by specific institutional guidelines. In principle, draft laws and administrative regulations are made public through various forms of media, including the Internet, so that the public may put forward their comments and opinions. This also applies to local legislation. In practice, not only have we done much more in regard to transparency than was requested of us by the WTO, we have even gone as far as to surpass the promises that we made at the time of our accession.

4. Supervision has been strengthened to ensure the effective and uniform application of the trade regime. China has established a system for supervising the implementation of laws, which consists of the Constitution, the Legislation Law, and the Supervision Law. This system, together with working systems such as the Provisions on the Registration of Regulations and Rules, is able to ensure that China’s laws, regulations and rules are consistent with the WTO Agreement. At present, China’s 31 provinces, autonomous regions and municipalities directly under the central government have all passed local laws to establish systems for the registration and review of regulatory documents. This marks the formation of a system for the registration and review of regulatory documents that features four-tier supervision performed by governments at five levels. At the same time, more accessible channels have been provided for citizens to request the review of regulatory documents. Owing to these efforts, the prospects for the effective and uniform application of the trade regime are becoming increasingly promising.

5. The socialist legal system with Chinese characteristics has been established on schedule. At the Fourth Session of the Eleventh National People’s Congress (NPC) held in March 2011, Wu Bangguo, Chairman of the Standing Committee of the NPC, solemnly declared that the socialist legal system with Chinese characteristics had been established. As of the present, there are a total of 240 laws, over 700 administrative regulations, and over 8,600 local regulations currently effective in China. Moreover, China has also concluded a comprehensive effort to review and straighten out all existing laws, administrative regulations, and local regulations. At present, legal branches covering all aspects of social relations have been put in place. Basic and major laws have been enacted for all legal branches, and are supported by a largely comprehensive set of corresponding administrative regulations and local regulations. In general, the interior components of this legal framework are scientific, harmonious and consistent. Being tailored to the realities of China, the socialist legal system with Chinese characteristics is not only geared towards the requirements for reform and opening up and socialist modernization, but also represents a concentrated expression of the will of the Party and the people. Taking the Constitution as its backbone, the system comprises of multiple layers of legal regulations established under numerous legal branches. With the formation of this system, we now have an essentially complete legal basis on which to govern our national economic development, political development, cultural development, social development, and our initiatives in regard to ecological protection and improvement. Therefore, the establishment of this system demonstrates that China has reached new heights in its efforts to apply the strategy of governing the country in accordance with the law.

III. Reflections and personal thoughts

The negotiations on China’s accession to the WTO were carried out under the firm leadership of the CPC Central Committee and the State Council. Clashes over legal issues took place throughout the entire course of negotiations for China’s accession to the WTO. Accession negotiations are about much more than tariff concessions and market access for certain products or industries; they indicate the extent to which the acceding party will accept and apply WTO rules as well as the conditions under which this will be done. In a certain sense, accession negotiations, especially at the multilateral stage, mainly deal with the way WTO rules will be applied to a future member. Therefore, it cannot be doubted that these negotiations will have a far-reaching and profound bearing on the political, economic, and judicial systems of the member in question. For this reason, the CPC Central Committee and the State Council attached a high level of importance to the negotiations, with several senior leaders personally overseeing efforts to formulate negotiation plans and strategies. We ensured that our approach to talks over legal provisions was an integral part of our overall strategy for the negotiations. These legal provisions mainly included the uniform application of the trade regime, transparency, and judicial reviews, which are highly political issues closely connected to national policy. Almost every key point and difficult issue pertaining to the legal system involved repeated deliberations and the formulation of numerous draft schemes. These schemes were submitted to the CPC Central Committee and the State Council for a final decision to be made, thereby ensuring that negotiations were carried out under the guidance and unified leadership of the central government from beginning to end.

Though the negotiations over China’s accession to the WTO were arduous, the challenges that China has confronted since its accession have been even more daunting. Developed Western countries attempted to capitalize on China’s entry into the WTO by forcing us to accept provisions that overstep our constitutional bounds. Such attempts were particularly apparent with regard to issues concerning the uniform application of the trade regime, transparency, and judicial reviews. However, we kept a clear head in this regard and frequently reiterated our position in line with the unified arrangements of the CPC Central Committee and the State Council as well as China’s laws and WTO rules. China may accept everything that is required by WTO rules, but will never accept anything that goes beyond WTO requirements and violates China’s constitutional principles. This is our bottom line, and under no circumstances will concessions be made in this regard. China put forward a powerful, just and restrained argument, and the major members of the WTO had no choice but to respond by abandoning their unreasonable demands. It should also be noted that China has adhered to the rules of the WTO and conscientiously fulfilled its commitments since its accession. As a part of these commitments, we have implemented tariff concessions, gradually dropped non-tariff measures, provided wider access to our markets, and treated investment from all parties equally. Objectively speaking, the implementation of WTO rules on a global scale has generally fallen short of expectations. This is mainly due to two reasons: First, the process for the formulation of WTO rules is dominated by developed Western countries, and these rules often go beyond the capacity of developing countries. Second, certain developed Western countries interpret WTO rules arbitrarily, using trade protectionism as a means of shifting their domestic risks onto others. In some ways, this reality has compelled China to step up the transformation of its pattern of economic development, accelerate its industrial transformation and upgrading, and achieve scientific development. It is essential that we fully grasp and make good use of international trade rules, and play a more assertive role in the new round of negotiations to formulate international trade rules. By doing this, we will be able to promote the development of a multilateral trading system that is more favorable to developing countries, and gain more leverage for the sound development of international trade rules, thereby safeguarding China’s interests.

Another urgent task is the training of all-round personnel who are educated in economics and law, well versed in domestic and international law, familiar with China’s situation and the world situation, and who have good foreign language skills. The knowledge and experience that we gained through 15 years of negotiations has allowed us to foster a number of leading personnel who boast a mastery of WTO rules, know how to use these rules to safeguard China’s interests, and who are able to deal with the challenges that China has encountered since its accession. In addition, these experiences have also enabled us to build up a contingent of talented personnel to underpin China’s comprehensive participation in the formulation of multilateral trade rules. However, we must also be fully aware that our overall understanding and grasp of international trade rules is still insufficient, that we lack experience in multilateral trade negotiations, and that we must continue to learn on a constant basis. We must attach great importance and devote great efforts to fostering large numbers of all-round personnel who are proficient in multilateral economic diplomacy through various channels.

(Originally appeared in Qiushi Journal, Chinese edition, No.1, 2012)

Author: Director of the Commission of Legislative Affairs of the Standing Committee of the National People’s Congress

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