Commercial Rule of Law and the Impact of the WTO
Increasing awareness of the importance of
World Trade Organization (WTO) compliance has served as the motivation for
a number of reform efforts by national and local government bodies
throughout China. For the most part, however, these efforts are limited in
scope, and it is still too early to determine whether such efforts will
lead to the comprehensive changes in China's legal system that are
required for full WTO compliance. In the second year since China's
accession, many observers believe there has been some progress in meeting
its commitments. However, outstanding issues - particularly in sensitive
sectors such as automobiles, agriculture, and telecommunications and other
services - are attracting increasing attention from China's trading
partners and threaten to overshadow any positive achievements.
Transparency Developments
The Chinese government has made some progress in changing its legal framework and legislative process to bring them into compliance with its WTO commitments. The National People's Congress (NPC) has established a WTO group within its working committee on legal affairs; the group has been funding law professors to provide legislative drafts.(383) With advice from Chinese and foreign scholars, NPC drafters are working on a new anti-monopoly law, an administrative procedure law, and a Civil Code that is expected to include provisions regarding the protection of private property. Bar associations, including the All-China Lawyers Association, the Beijing Bar Association, and the Shanghai Bar Association report that their members have been participating in drafting trade-related measures and providing suggestions for changes to existing legislation that is not WTO compliant. More government bodies have made their laws and regulations available to the public through publication in gazettes and on Web sites.(384)
NPC-mandated changes to the structure of the State
Council in early 2003 may be a step toward greater transparency. The
integration of the trade functions of MOFTEC, the former State Economic
and Trade Commission, and the former State Development Planning Commission
into a new Ministry of Commerce (MOFCOM) may provide a more consistent and
coherent means of promulgating trade measures. In addition, trade analysts
expect trade measures to be more accessible to the public, as MOFCOM will
publish a single gazette collecting Chinese trade measures that were once
published in the gazettes of several government agencies.
Local government officials have cited China's transparency commitments as justification for launching other types of reforms. According to Yu Youjun, the mayor of Shenzhen, "the motivation behind the political reform program has been China's accession to
the World Trade Organization in late 2001 and the need to please multinational investors who increasingly insist upon a transparent, law-based environment."(385) According to one Western observer, "[t]his suggests that economic engagement with China... is actually causing the political changes that the proponents of engagement have predicted."(386) Additionally, Shanghai recently announced the creation of a press spokesperson position for the city government, invoking China's WTO commitment to transparent government as a reason for the step.(387)
Despite some developments, China's compliance with its WTO commitments has been uneven and incomplete. U.S. congressional analysts argue that China's compliance with its WTO obligations has been "hampered by resistance to reforms by central and local government officials seeking to protect or promote industries under their jurisdictions, government corruption, and lack of resources devoted by the central government to ensure that WTO reforms are carried out in a uniform and consistent manner."(388) Local protectionism may prove to be the major impediment to WTO-related reforms; central government concern about local protectionism has led to the promulgation of regulations on the subject.(389) While publication of enacted laws and regulations has become more regular, no uniform procedure yet exists for making draft legislation available for comment before implementation. Complaints abound that a ministry or commission will distribute a draft only to a select group. Others complain that interested parties often have no chance to review draft legislation before meeting with officials to discuss it. Even when government authorities make draft documents public, some critics say, the drafts are meaningless because the authorities treat the public "draft" that they have circulated as the final version. According to the U.S. Chamber of Commerce, "In many cases, this reluctance seems to be driven by a desire to protect domestic enterprises from competition or to slow or otherwise restrict market competition."(390) This
view is consistent with the belief of many analysts that significant
transparency problems occur in politically sensitive sectors such as
automobiles, agriculture, and telecommunications and other
services.
Nondiscrimination
China's WTO commitments include the promise of "national treatment" to nationals of WTO partners - treating foreign individuals and enterprises no worse than domestic individuals and enterprises with respect to its commercial policies.(391) Both the U.S. Trade Representative and private sector analysts charge that certain Chinese government practices contravene these non-discrimination obligations. In particular, China's practice of assessing a higher Value Added Tax (VAT) rate on certain imported goods than on similar domestically-produced goods has come under attack. In addition, policies providing VAT rebates on some goods intended for export rather than domestic consumption also have been criticized. U.S. and other foreign representatives of the semiconductor and fertilizer industries, as well as foreign businesses seeking to sell agricultural products, have raised VAT-related complaints in the past year. Moreover, U.S. companies say that China's implementation of its tariff rate quotas or "TRQs" for farm commodities unfairly favors domestic interests.(392) U.S. services firms, including insurance,
banking, and telecommunications providers, also argue that China's high
capital requirements, restrictions on branching, high prudential
requirements in service industries, and other restrictions amount to de
facto discrimination against foreign services providers. Finally, China's
restrictions on foreign investment in biotech industries may constitute a
violation of the commitment to provide national treatment to
foreigners.
Judicial Reform Developments
China's WTO commitments require it to provide prompt and independent judicial review of trade-related administrative decisions. Many of the judicial reforms discussed in Section V(c) are being driven in part by China's effort to comply with this WTO obligation. The Supreme People's Court has also issued three judicial interpretations clarifying the procedures, duties, and standards of courts in handling trade-related cases.(393) As noted, however,
general improvements related to judicial independence and competence have
been limited, and further progress is likely to be incremental.
Administrative Licensing Law
In a welcome development driven in part by WTO compliance considerations, the NPC Standing Committee passed an Administrative Licensing Law in late August 2003.(394)
Footnotes
383: Commission Staff Interview.
384: American Chamber of Commerce in the People's Republic of China, "WTO Implementation Report-Fall 2002," 2002, 12.
385: James Kynge, "China's bold political reform," Financial Times, 12 January 2003.
386: Ibid.
387: "PRC Scholar on Shanghai's Decision To Introduce Press Spokesman System," translated in FBIS, Doc. ID No. CPP20030605000068, Hong Kong Ta Kung Pao (Internet Version-WWW) in Chinese 5 June 2003.
388: "China-U.S. Trade Issues," CRS Report No. IB91121, 16 May 2003.
389: Regulations to Prohibit Local Protectionism in Market Economy Activities [Guowuyuan jinzhi zai shichang jingji huodong zhong shixing diqu fengsuo de guiding], issued 29 April 2001, arts. 1-3.
390: U.S. Chamber of Commerce, "First Steps: a U.S. Chamber Report on China's WTO Progress," September 2002, 5.
391: See Protocol on the Accession of the People's Republic of China to the World Trade Organization, paras. 3, 8.2; Working Party Report on the Accession of the People's Republic of China to the World Trade Organization, para. 111.
392: "China-U.S. Trade Issues," CRS Report No. IB91121, 16 May 2003, 9; U.S.-China Business Council, "China's WTO Implementation: a Mid-Year Assessment," 2 (2003).
393: Supreme People's Court, Regulations on Several Problems in the Trial of Trade-Related Administrative Litigation Cases [Zuigao renmin fayuan guanyu shenli guoji maoyi xingzheng anjian ruogan wenti de guiding], issued 8 August 2002; Supreme People's Court Regulations on the Application of Law in the Trial of Anti-Subsidy Administrative Litigation Cases [Zuigao renmin fayuan guanyu shenli fan butie xingzheng anjian ying yong falu ruogan wenti de guiding], issued 11 September 2002; Supreme People's Court Regulations on the Application of Law in the Trial of Anti-Dumping Administrative Litigation Cases [Zuigao renmin fayuan guanyu shenli fan qingxiao xingzheng anjian ying yong falu ruogan wenti de guiding], issued 1 January 2003.
394: People's
Republic of China Administrative Licensing Law [Zhonghua renmin gongheguo
xingzheng xukefa], enacted 27 August
2003. |
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