WTO AND CHINA 'S LEGAL SYSTEM（1）


Sibao Shen


Ⅰ .INTRODUCTION



After more than 15 years efforts, China eventually became a full member of the World Trade Organization (hereinafter referred to as “WTO”) in November 2001. In the words of former Director-General Michael Moore, the decision was a defining moment that changed the world for the better. In China ,s case, it also marked a significant turning point in her modernization drive and reforms as she has truly started to integrate herself into the world economy and stepped unto the globe arena afresh. It is widely believed that China ,s entry into the WTO made WTO a true worldwide economic organization and contributed to accelerating the globalization of the world economy and improving the entire multilateral trading system.

For China herself, the accession into WTO means that China will be incorporated into the world economy as an essential part of the international market. WTO is a chief driving force pushing forward the worldwide economic globalization. This means that the world economy and market shall integrate into a globalization never witnessed in history. However, a full-fledged legal system is the prerequisite for such a system to grow, for there must be rules which provide stability and predictability for the economy and markets to follow, otherwise, globalization would create more uncertainties and even worldwide chaos instead of welfare and benefits.

The greatest contribution of WTO consists in the fact that it provides a series of trade regulations and rules which carry legally binding force upon its member states. Besides, such regulations and rules cover a vast range of the international trade, including trade in goods (GATT1994), in services (GATS) and in intellectual property rights (TRIPs). It is rather safe to say that for the first time in history, trade in these areas would follow fixed rules and have guiding principles. Such a development is certainly a great step in the right direction as the whims and instability in the past give way to certainty and predictability. In addition, these regulations and rules regulate more than 90% of the world trade and truly serve as the necessary basis and precondition of the economic globalization. It follows that one of the ways to realize the economic globalization is to establish and enforce the international trade rules and regulations embodied in WTO. On the other hand, as economic systems of different countries come to be integrated, each country has to make corresponding changes to its legal system and practices in foreign trade in an effort to catch up with the ever-changing situation. #p#分页标题#e#

In China ,s case, the improvement of her legal system to meet the new requirements of a post-WTO era is not only in line with China ,s own economic and societal developme n t needs, but also helps China compete well in the international marketplace and bring her into the multilateral trading system more smoothly. This article, therefore, will mainly focus on the relationship between WTO and China ,s legal system.
Ⅱ .THE INFLUENCES OF WTO ON CHINA ,S LEGAL SYSTEM

Ⅱ .1 More outside pressures on China ,s legal reforms

China ,s WTO entry introduces more outside pressures on China ,s reforms of her legal system as China voluntarily undertakes more international obligations than she has ever done so before. WTO stresses strict rule observation and enforcement. All member states are required to bring their laws and regulations into conformity with WTO 1 . Its coverage is so wide and sweeping that it endows WTO huge power to intervene into the domestic economic and legal affairs of the member states which are now subject to international scrutiny and monitoring. In trade areas, such international intervention is all more important as the trade affairs are no longer just within the jurisdiction of national governments and accordingly, international power steps in to regulate, which means national governments are no longer able to manipulate the trade flow as they did in the past-often to the detriment of the worldwide welfare. Often a national government has to abide by the decisions issued by the quasi-judicial bodies of WTO-Panels and Appellant Body, sometimes they have to amend their own laws to conform to the decisions 2 , which was a matter rarely heard in the past when national sovereignty was considered to override any other international obligations and trade powers often bullied the weak in disregard of normal trade flows.

In China ,s case, China ,s past reforms went on form up to down and from inside to outside. But essentially, China ,s reforms were largely internally driven. As far as legal reforms were concerned, they were often in response to the changing internal societal situation. But generally speaking, China was quite cautious about any international obligations undertaken as a result of entering international treaties or conventions. For instance, concerns over the issue of according national treatment to foreign individuals and enterprise in the past made this internationally accepted and practiced principle not formally recognized in law 3 (although it was often practiced, especially in terms of investment)in China and only the Most-Favored-Nation treatment is fully recognized and enforced. However, China ,s membership in WTO brought such a situation to a close, whereas China stepped onto the international trade arena as a responsible country and must act boldly and decisively. Now, WTO injects an impetus into China and presents a fresh opportunity full of promises. Combined with the inside powerhouse, this impetus is sure to be more persistent, more powerful and more far-reaching. The reforms used to be almost independent of outside p r essures, but now it should carry a new dimension of international obligations 4 . In other words, China now must take more international obligations into account when she ponders #p#分页标题#e#
1 Article X Ⅵ :4 of the WTO Agreement stipulates: “Each Member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements.” In legal sense, this means that the laws and regulations of a sovereign state are now subject to WTO rules and possible for the first time in history, an international organization thus is endowed with such a vast power to say no to a state if the latter is found in violation. The once absoluteness of sovereignty is thus circumscribed and called into questions in some circumstances.

2 This was amply demonstrated by the case “ United States —Anti-dumping Act 1916” (WT/DS136/R, WT/DS162/R, WT/DS136/AB/R, WT/DS162/AB/R), in which the U.S Anti-dumping Act 1916 was found to be in violation of the Article VI of the GATT1994 and the WTO Anti-Dumping Agreement. U.S was requested to bring its anti-dumping law into conformity with its international obligations and U.S lost this legal battle. Actually, rarely before did the attempt to force U.S to amend its domestic law for its international obligation succeed as U.S often circumvented the trade rules and sought WTO-inconsistent ways for its own benefits. This means a great deal for many small trade countries that lack the power to directly say no to trade powers like U.S, in this regard, WTO provides predictable rules and more significantly, a kind of protection for small trade countries for their benefits.

3 Shen Sibao, International Investment Law (1990), P256.

4 in the Report of the Working Party on the Accession of China (WT/ACC/CHN/49), the Working Party noted in para. 22 and 23 that China confirmed that the non-discrimination treatment shall be accorded to all imports and correspondingly, laws, regulations and other measures inconsistent with WTO rules shall be repealed. Such a commitment demonstrates China ,s consideration of her international obligations.

any reform measures and her reforms are tinted with international color. In this sense, China will become more world-oriented. #p#分页标题#e#

On the other hand, WTO itself emphasizes rule-making and observation, as the attention of the multilateral trading system has been shifted from the past “power-oriented” to the prevailing idea of “rule-oriented”. The complex doctrines and rules are developed largely in response to the demands of the trade circles who are tired of being subject to the whims of national governments. This is an evidence of the increasing importance of rules in international community. Modern history proves that “the rule of law” is the prerequisite for all nations to prosper economically; it is also true of trade developments. This means that China has no other choice than fully embraces this once alien idea and carry it out. China is now obliged legally to comply with all her commitments under the WTO as the motto “Pacta sunt servanda 5 ” carries a lot for a responsible nation like China . Indeed, WTO and its other members will closely monitor China ,s performance of her commitments and no violation would be tolerated at all.

The previous pattern that reforms pushed the open-door policy will become less obvious as a new pattern is emerging, that is, the open-door policy promotes the reforms. This pattern would surely have significant implications for China , as China shall come to be integrated into the international community. It follows that not only the economic structure shall adjust itself to the international standards, but the legal systems and practices in foreign trade shall undergo transformations in response to changes.



Ⅱ .2 The challenges and shocks to Chinese legal system and ideas

However, such a change is bound to entail price, and it may be very great. To be sure, China,s entry into WTO has not only great influences in trade matters, but also extends to China,s reforms of her legal system and more deeply, to the legal philosophy behind the system. The reason can be traced back to the roots of WTO. WTO and its predecessor GATT came into being chiefly through the sponsorship of the western trade powers. Basically, the rules and practices are based on ideas originating from the western legal system and practice and the underlying philosophy 6 . No doubt, the process of China ,s legal adjustment to a formerly strange system is inevitably painful. Although the transition from the traditional legal system to the western system started a century ago 7 , there is still a long way to go before such changes eventually take roots in the minds of average people in China , for the traditions die hard. The entry into WTO means that China has to abide by the rules originally established among western countries which are different from China ,s own social system and traditions. Such changes are very great, especially given the lingering influences of the old ones. #p#分页标题#e#

Therefore, China ,s accession into WTO is more than a matter of economic and trade concerns (not just like Japan and Brail who have adjusted their social and legal systems to the western style), it is really a true challenge to China ,s current system and her adjustability, especially in the case of the administrative and legal regimes. No doubt, such changes would raise some doubts in
5 Latin “Agreements must be kept” , Black Law Dictionary P1133.

6 For example, anti-dumping measures originated in Canada in 1904 and MFN treatment can be traced back to the international trade in the Mediterranean region in 16 th century.

7 A campaign to transform the traditional legal system was launched in 1905 when China was still in the Qing Dynasty. At that time, China was on the brink of downfall and the legal reforms broke down the traditional system and started to build a new system from scratch. The traditional legal system featured a mixture of civil and criminal laws with the criminal law being the mainstream of the whole system and the civil and commercial laws being neglected. Please see, Zhang Jingfan, A History of Chinese Legal System.
thoughtful minds. For example, whether the entry into WTO means that China must abide by the western legal and social ideas which lie behind WTO and are sometimes in conflict with Chinese traditions? Whether China ,s sovereignty may be subject to international restrictions, which may easily raise the age-old resentment against any outside intervention? Whether the requirement of WTO that both the judicial review mechanism and independent judicial system must be kept in position would leads to the division of power resembling that in western countries? All these issues have transcended the superficial issue of trade and gone deeper into the heartland. It is no wonder that many worries were expressed by people afraid that these changes might come upon China too quickly to suit a nation already in rapid transition. Some people even cried out their fears by crying “here come wolves” before and after the entry was completed. All these concerns should be neutralized to allow the reforms to progress smoothly. In this regard, great efforts have been under way to raise people,s awareness and dispel their concerns. #p#分页标题#e#



Ⅱ .3 An Accelerator of China ,s legal reforms process

According to the WTO Agreement and its annexes, each member of WTO should make sure that all of its laws, regulations and administrative rules should be in line with WTO 8 and China is not an exception 9 . China , consequently, shall fulfill all her obligations under WTO and will also be obliged to abide by its commitments made in bilateral and multilateral trade agreements with other nations. Many principles rarely seriously treated in the past will come to prominence and be practiced widely. For example, national treatment used to be meaningful for only scholars in the past, but now such a terminology has penetrated into the minds of many Chinese, as national treatment is a basic requirement of WTO. With the introduction of such a principle, those once seemingly legitimate restrictions imposed on foreigners would be gone and they would enjoy no less treatment in terms of civil rights than Chinese. This is a fresh change thrust upon China overnight.

In many respects, WTO regards China as a country belonging to non-market economy and therefore devises some obligations especially required of China 10 . This reflects the fact that western countries who are the chief actors of WTO do not trust China completely and, although they are happy to see that China was finally in WTO, they still want to wait and see what changes would happen in China in the post-WTO era. For instance, it is agreed that transitional trade policy review of China will be held once a year and last 8 years to check whether China shall have undertaken all the WTO Agreement and commitments as promised. This requirement is a rigid challenge and brings special attention to China ,s legal system.

However, looking back of China ,s performance in the past year since the accession, such worries are proved to be totally unfounded. Many changes have already taken place in many areas, including the legal area 11 . In this sense, China ,s accession accelerated the speed of legal #p#分页标题#e#
8 Please see footnote2.

9 Part Ⅰ ,2(a) of Protocol on the Accession of the People,s Republic of China provides for the uniform application of WTO Agreement and the Protocol in the entire customs territory.

10 Part Ⅰ ,16 of Protocol on the Accession of the People,s Republic of China provides for a kind of special safeguard measure particularly against Chinese products, which is due to last for 12 years after the date of accession. Such a measure specially targets Chinese products and implies awfully for China . Indeed, compared with the normal safeguard measure which must be applied to all nations without discrimination, such a special safeguard measure is clearly a discrimination against China . However, such a harsh condition is the ticket fee for China to pay for acceding into WTO.

11 According to Shi Guangsheng, Minister of the Ministry of Foreign Trade and Economic Cooperation of PRC(hereinafter referred to MOFTEC), the past year witnessed a very fine staring point for China as a full member of WTO. Mr. Shi highly praised China ,s performance. For example, he noted that China benefited greatly from her membership in WTO as China was the sixth largest trading country in the world in 2001 and her position was expected to rise this years. Source: news.sina.com.cn

modernization which would have otherwise developed at a much slower speed.

Ⅲ . CHINA ,S EFFORTS OF REBUILDING A MODERN LEGAL SYSTEM



Ⅲ .1 The necessity of law making and revision in China ,s laws and regulations

WTO rules are legally compulsory, which requires all members to the WTO to conform their legal systems to its nature. In short, each member shall make sure that her laws, regulations and civil & administrative procedures having an impact on the flow of trade are in line with her obligations of non-discrimination under WTO, that is to say, MFN treatment and national treatment shall be widely practiced. The rest two principles are principle of consistency and principle of transparency respectively, with the former requiring each member to implement WTO rules in her entire customs territory in line with its WTO obligations and the latter requiring each member to make public the laws and regulations and measures having an impact on trade, investment and intellectual property rights and to publish them in designated publications. China not only undertakes to carry out the above-mentioned tasks but also is trying her best to establish a mechanism of judicial review with the view to ensuring a system of just and efficient procedural remedies available for all interested parties. Therefore, the necessity of such law making and revision in China ,s laws and regulations has assumed great importance and urgency, as there is still a gap between what exists and what is expected and promised. #p#分页标题#e#



Ⅲ .2 The internalization of WTO rules in China

The obligations assumed by each member under WTO impose heavy burden on that member. Chinese courts are increasingly faced with the task of adjudicating cases in line with WTO, spirit when they are going to step into trade disputes that used to be in the domain of administrative power. They are confronted with the arduous task of bringing WTO rules into domestic application, both for the courts and for administrative agencies. The particular treatment of WTO rules within each member,s territory varies with each member. However, empirical and comparative studies amply demonstrate that the direct application of WTO rules within the legal system of a particular member would do more harm than good; it is even true of some members enjoying high degree of economic development and trade liberalization like European Union and Japan . The rationale of such treatment of WTO rules is that it is feared that the direct application would have dire impact on the economic and even political interests of that member, which is against the underlying reason for that member to join WTO. Therefore, members of WTO treat this issue with great care and concern and direct application of WTO rules is rare. In China,s case, the internalization of WTO rules in the best way out, as China has started off by bringing WTO rules into domestic application through the domestic legislative process and been implementing domestic laws for the sake of WTO rules. The direct application of WTO rules should not be favored. Only in this way can China successfully deal with the shock wave brought about by WTO rules that are in many facets in conflict with a great number of previous China,s domestic laws and regulations and with some Chinese cultural traditions and meanwhile, fully take advantage of the benefits of a WTO member. Of course, this is an onerous task and there is still a long way to member of WTO. Mr. Shi highly praised China ,s performance. For example, he noted that China benefited greatly from her membership in WTO as China was the sixth largest trading country in the world in 2001 and her position was expected to rise this years. Source: news.sina.com.cn go before it comes true. #p#分页标题#e#