Chinese Foreign Trade and Investment Law - Coursework Example

Name : xxxxxxxxxxx Institution : xxxxxxxxxxx Title : Chinese Foreign Trade and Investment Law Tutor : xxxxxxxxxxx Course : xxxxxxxxxxxx @2010 Introduction The World Trade Organization is a global organization whose main aim is to supervise and liberalize the practice of international trade all over the globe. Its inception dates back to the year 1995 when it was formulated to replace the General Agreement on Tariffs and Trade. The organization bears the responsibility of regulating activities of trade between countries that are its members in which case it provides a framework that formalizes trade agreements between member countries. The organization provides a framework which is applied in its member countries that enables the member countries to easily negotiate and formalize trade agreements in an easier way. It as well plays the role of resolving disputes with an aim of forcing its members to adhere to the agreements of the organization which are signed by the member states and ratified by each parliament if the member states. The important aspects that describe the function of the World trade Organization is the fact that it oversees the implementation, administration and operation of agreements made under its umbrella. It as well provides a forum through which disputes between countries that appertain to trade can be negotiated to foster their settlement (World Trade Organization, 2010). China’s entry into the World trade Organization took place in 2001. China is ranked as the world’s seventh largest trader and her membership into the organization is viewed as a move that is of great benefit to the growth of trade in the country. This is based on the benefits that accrue to the members of the organization resulting from the regulation measures of the organization. This is based on the fact that the regulation measures are aimed at making it easier to carry out trade between these countries. WTO accession and membership Membership into the organization has a unique characteristic based on the fact that the process through which countries become member of the organization varies from country to country. This can be attributed to the fact that the countries have different laws regulating its trade activities which need to be taken into consideration during the membership process (Qingjiang, 2002). The terms of the accession are as well dependant of the economic development of the country in question including its trade regime at the moment. The process usually takes a minimum of five years though in some instances it can take longer as a result of political interference or the country’s lack of commitment to the process. The World Trade Organization has a procedure of accession in which an offer of accession is only given to a country following consensus between the interested parties. The process of accession is marred with the submission of application by the interested country to the General council. In the application the interested country is expected to describe all aspects of its trade and economic policies that are aligned to the agreements of the organization. The parties working on the application lay focus on issues of disagreement that arise between the rules of the organization and the laws governing the applicants international and domestic trade. This is the process that gives rise to the conditions of entry that the applicant nation is expected to meet to join the organization. It as well considers the transitional period within which the applicant nation is expected to meet the conditions and may as well give leeway to some countries in complying with the rules of the organization. The terminal process of the accession is the bilateral negotiation over tariff levels and the access of market for goods and services. This takes place between the applicant nation and the other working party members of the organization. The commitments of the new member apply equally to all members of the organization governed by non-discrimination rules which can as well be negotiated bilaterally. This is followed by the sending of all the agreements made to the general council of the organization which approves the terms of accession. The applicant nation’s parliament is then to ratify the Protocol of Accession after which the country becomes a member of the organization (World Trade Organization, 2010). China’s accession to the World Trade Organization China has been on the quest of joining the World trade Organization, a quest that dates back to the inception of the organization. Though this has not been possible until 2001 when her application was regarded and she joined the organization. The west was less enthusiastic in embracing China as a member as a result of varied respects that include the political unrest that happened in the year 1989 (Fergusson, 2008). The keen interest that China had in joining the organization can be attributed to the advantages that the country would gain as a result of the membership. This is terms of the fact that it would help in the restoration of her national image abroad as well as the acquisition of trade markets abroad. The country’s membership into the organization was important as it would spell an end to the indignity that it faced in pleading its case each year for it to access markets such as the United States. It would as well put an end to the unilateral actions that the country faced. However, after the inception of the organization China was faced by a number of difficulties that set back her aspiration of joining the organization. These included leadership issues that made it hard for the nation to participate in the signing of international treaties which included her joining of the organization. This explains the reluctance that the nation had in joining the organization after its inception. This made it appear as if the nation was only interested in being a founding member of the organization rather than a lifetime member. The eventual joining of China into the organization is as a result of diplomatic struggle that the country has engaged in. the situations that the country faced made it hard for the western country to easily approve its application to the organization. Her formal membership came after members of the organization ratified her application. The ratification was not easily won as China had to pay a price for it. In this case she had to satisfy the demands of its trading partners which in this case included the United States and the European Union (Fergusson, 2008). This was a move that was aimed at satisfying these partners that she was doing enough in opening up its economy to international competition. The tuning point of China’s long quest of membership to the organization came when she signed a trade deal with the United States in 1999. This was significant in leading to her approval in the organization as the ratification of her application resulted from the advanced nation in the organization that let her into the organization. This was based on the fact that they now felt China had made the necessary reforms to her economy sufficiently to meet the requirement of the organization. Despite this advantage that it had in the ratification of her application to the organization it had more to do. This resulted from the technicalities of the bilateral as well as multilateral negotiations which proved not to be simple (Cheong & Hung, 2003). This negotiation created need for China to make advancements in other sectors which would make member countries of the organization satisfied and comfortable with giving China the status of a developing country. This is a status in the organization that gives the country bearing the status a loose timetable for meeting the obligations of the World Trade Organization. The status as well brings about differential and favorable treatment in the realization of the obligations of the organization to the country in question. China placed much emphasis in trying to join the organization over the years indicating the importance that the organization had to the growth of china. This though is not largely as a result of the opportunities that it would create for the nation economical but as well the national heritage that it would reap for the nation. This is based on the fact that her membership would change the nature in which debate and policy were carried out within China. This is due to the fact that the World trade Organization establishes a structure in which trade policies are required to be based on rules. These policies are as well to be supported by legal binding contracts made between governments. Taking part in such a structure had the impact of bringing about lasting and significant difference to the nation. It would create a challenge to China’s past economic policy principles and at the same time alter the mode through which fortunes were distributed to particular interest groups in china. These created the persistent need that China had of joining the organization leading to the long struggle to join the World Trade Organization (Cheong & Hung, 2003). The joining of China to the organization spelt a price that China had to pay. These were centered on its regulation of international trade which is the key area of focus of the World Trade Organization. These reforms included a decrease in the tariffs for imports which implied that the member parties of the organization would not be charged high tariffs when exporting goods and services to China. She was as well required to reorganize its policies to allow foreign firms from the member states of the organization to sell their products directly in the Chinese domestic market. This meant increased competition in the domestic market and elimination of the need of foreign firms having to go through Chinese trade organizations in selling their assets in the country. She was as well expected to open up her telecommunications and finance sectors to allow more foreign competition (Fergusson, 2008). Chinese legal framework governing foreign trade Foreign Trade in China is addressed by the Foreign Trade Law which has been revised over the years in line with the demands of the country. The FTL has basic principle on which it operates including a unified system for fair and free trade. This is a principle that gives responsibility to the Ministry of Commerce under the state council the overall and principal authority of foreign trade through out the country (Donald, 2003). This is aimed at ensuring that there is free and fair trade in the operation of foreign trade. The legal framework in which the country governs foreign trade allows for the existence of tariffs with the importance of raising state revenue to enable the state to run the trade. The goals of the trade organization is to reduce the tariffs imposed on international trade an area in which China has made remarkable reforms in the reduction of the tariffs. The tariff change has however been gradual based on the fact that the country could not easily change the tariffs to the required measure at once. This is in an aim of reducing the tariffs charged on imports from the high percentage that they were at the time when the country entered the World Trade Organization towards the required level of the organization (Penelope, 2002). A major characteristic of the tariff change is the fact that it is fluctuating differentiated by the difference on products on which it is charged. During the ratification of China into the World Trade Organization, she made a promise of reducing her tariffs at a rate of one percent each year. Tariffs have been seen as a major barrier of international trade which is an area of application which the World Trade Organization regulates. This explains the reason as to why China has been reducing her tariffs over the years. The country has as well been on the verge of eliminating import restrictions o items which was a major agreement made during its ratification in the World Trade Organization. In this case the country was expected to eliminate import quotas, import licensing as well as foreign exchange control. China has been known to subject a wide array of items to import quotas that include agricultural products. At the same time most of the products that are subjected to quotas are as well subjected to import licenses. This was viewed as a way in which China’s economy was not open to international competition. This is based on the fact that it makes it expensive for foreign countries to participate in trade with country. The legal framework of China’s foreign trade has been focused on reducing the barriers of international trade as stipulated by the World Trade Organization (Donald, 2003). Does the framework complies with China’s WTO accession commitment Following her ratification into the World Trade organization, China has taken major legal steps in the leveling of foreign trade as well as its normalization (Donald, 2003). This is based on the fact that the nation has passed laws that are aimed at making it easier for foreign firms to compete in the domestic market on equal basis with Chinese companies. The country has as well passed laws that give permission to both Chinese as well as foreign individuals to freely participate in international trade in the area. This can be understood as the country’s commitment to the requirements it had to meet during its accession. Despite the changes that the country has made in the regulation of its foreign trade more needs to b done. This is based on the fact that the nation still remains more protected in foreign trade of services an indication that the changes that have been made have largely focused on goods trade. The openness of her economy to foreign trade in service has been regarded to at par with that of countries such as India which is regarded to be very restrictive. She is as well ranked low among nations with whom it is easy to trade with a factor that can be attributed to the regulations that it still upholds to its foreign trade according to reports in 2007 (Fredrik et al, 2007). This is an indication that despite the fact that she has made progress in the opening up of her economy to foreign participation her legal framework of foreign trade does not fully comply with that of its accession to the trade organization. However, the transition of China in the realization of the conditions of the World Trade Organization is a gradual process that is expected to take time for it to be fully complete. This can be taken to explain the short comings in the governing of foreign trade in China. This is based on the fact that the country is a developing nation and at the same time needs to as well ensure the safety of its domestic market. The success that the country has made in the realization of the regulations set for it by the World Trade Organization can be attributed to the commitment that the country has in the realization of its membership in the organization. This is based on the benefits that will accrue to the nation as a result of its full membership into the union. The legal framework of China in the governing of foreign trade is in line with China’s World Trade Organization accession commitment on the basis of the fact that they open up the economy of the country to foreign competition. This is based on the reduction and elimination that the country has made in its framework aimed at the realization of its accession commitments. On the contrary it can as well be viewed as not to comply with the accession commitments of the country to the World Trade Organization. This is in line with the fact that the framework with which the country is governing its foreign trade creates barriers to foreign trade in some areas. These barriers in foreign trade are as a result of the fact that the country has not yet cleared all the barriers in her governing of foreign trade. These include quotas and licenses as well as high tariffs that are involved in the foreign trade (Donald, 2003). These have been seen as barriers to the foreign trade based on the fact that they make it hard for foreign based organizations to invest in the country. This is as a result of the added expenses that these foreign organizations are forced to incur in the trading process to cater for these barriers. China cannot be blamed for being reluctant in the elimination of these barriers. This is in argument with the fact that the country has made significant elimination of barriers in foreign trade that have been centered on trade in goods. The barriers that are within the framework of governing foreign trade are largely focused on foreign trade in services and significant changes seem to be progressing. The bottom line in the determination of whether the framework of governing foreign trade complies with that of the World Trade Organizations is the fact that it does not. This is in line with the procedure through which countries wishing to gain membership of the organization have to undergo. In line with this procedure the applicant nations are expected to reform their governance of foreign trade before the accession process. China did not undergo this complete procedure and as a result the lack of compliance between its governance of foreign trade and her World Trade Organization accession commitments. This explains the flaws that exist in this legal framework with which China governs foreign trade on the basis of the fact that it creates barriers for the effective participation of other nations in foreign trade with China (Fredrik et al, 2007). Reasons The fact that the legal framework with which China governs her foreign trade does not comply with her accession commitments is as a result of the terms on which her application to the organization was ratified. This is based on the fact that the acceptance of China’s application to the Word Trade Organization was by large influenced by members of the organization namely the United States. This led to an agreement that was rather extraordinary in the sense that it defied protocol and dropped some requirements for China (Fredrik et al, 2007). The drop of these requirements was in argument with the fact that it would take long for China to realize these requirements. The agreement was as well sparked by the fear that the leaders behind China’s bid to join the Word Trade Organization would die before these realization putting an end to China’s chances of joining the organization. Based on these reasons the United States as well as other nations that are members of the World Trade Organization made an agreement that allowed China to join the organization without fully meeting the requirements of membership. This is based on the fact that the accession process of a nation to the World Trade Organization requires the acceding country to have in place the laws and regulations that are required by the organization for effective foreign trade. This has the implication that prior to the accession process the acceding needs to have made changes in the governing of its foreign trade by imposing laws and regulation that comply with those of the World Trade Organization. However, this was not the case with China as she was given exemption from this major requirement of membership (National Bureau of Asian Research, 2002). The exemption that was given to China in the ratification of her application to the Word Trade Organization is the resulting aspect that has led to the lack of compliance. This is based on the fact that it gave China the authenticity to become a member of the World Trade Organization without fully meeting the required reforms to the governing of foreign trade. This meant that China continued to govern her foreign trade on laws that were not in line with those of the organization. However, this was an agreement in which China had to reciprocate to the favor she had received by reforming her governing of foreign trade to comply with the regulations of the World Trade Organization. This explains the changes that the country has made in its legal framework that governs foreign trade in an aim of complying with the rules and regulation of the organization on foreign trade. China’s quest in joining the World Trade Organization took it over fifteen years in which it employed many changes in its trade regime. This was a period that was marred with complexity to the protocol on which her accession took place. There was also a nexes demonstration that was displayed on a wide array of practices in China most of which were not complaints of the World Trade Organization at the time of China’s accession to the organization. A couple of members of the World Trade Organization at the time were as well concerned over the welfare of China’s economic system being marred with underlying obligations of the World Trade Organization. These concerns extended to the extent to which China’s economic system would mash as a result of the underlying obligations imposed of China by the World Trade Organization. These were areas of consideration that influenced the agreement by the member states of the World Trade Organization to give exemptions to China (National Bureau of Asian Research, 2002). These are reasons that have played a major role in the lack of compliance of China’s legal framework of governing foreign trade with China’s World Trade Organization accession commitments. The process through which the application made by China of joining the World Trade Organization was to a large extent dictated upon by the information fed to the organization by the United States as well as the European Union. This was based on the experiences that they had following their dealing in foreign trade affairs with China. This largely influenced the decision by the organization of accepting the application made by China despite the fact that she had not completed the required reforms. This was the contributing factor that led to the influence of the organization to allowing the participation of China under such conditions (Fredrik et al, 2007). This is a contributing factor that can be attributed to have led to the current situation in which China’s governance of foreign trade does not comply with that that of her accession to the world trade organization. Conclusion The World Trade Organization is an organization that is aimed at regulating trade affairs between member states in an aim of improving international trade across the globe. In this case it creates rules and regulation with which it governs the involvement of nations in international trade. China has been on a verge of reforms in a quest to improve its economy. This has led to its persistent application to join the World Trade Organization. This is move that has been sparked off by the benefits that accrue to the member states in terms of economic prosperity as well as added advantages that it has to the image of the country globally. Membership to the organization is as well a benefit based on the structure of the organization that brings about a proper legal system to the member states. China’s quest for membership has taken long based on the setbacks that it has received during the process most of which are domestic. The participation in trade that China had with the United States and the European Union gave way to the ratification of her application to the organization based on merit that was accorded to her from these member states. This was the contributing factor that led to the exemption that China was given in the ratification process leading to the lack of compliance between her legal framework governing foreign trade and that of the World Trade Organization. This is based on the fact that China was exempted from the procedure of ratification in which the acceding nations is required to have met all its requirements before its accession. China’s accession took place before she had meet all these requirements but she vowed to make them in the near future. Bibliography Cheong C. & Hung Y. 2003. Handbook on China's WTO accession and its impacts. Beijing: World Scientific. Donald C. 2003. China’s Legal System and the WTO: Prospects for Compliance. Retrieved August 22, 2010 from Fergusson, F. 2008. World Trade Organization Negotiations: The Doha Development Agenda. Retrieved August 22, 2010 from . Fredrik E. et al. 2007. China’s Trade Policy Post-WTO Accession: Focus on China-EU Relations. Retrieved August 22, 2010 from National Bureau of Asian Research. 2002. China’s WTO Accession: The Road to Implementation. Retrieved August 22, 2010 from Penelope B. 2002. China joins the WTO: how, why, and what now? The overall, long-term, effects should be positive, but don't expect too much, too soon - Statistical Data Included. Retrieved August 22, 2010 from Qingjiang K. 2002. China and the World Trade Organization: a legal perspective. Beijing: World Scientific. World Trade Organization. 2010. How to become a member of the WTO. Retrieved August 22, 2010 from Read More