[*PG319]CHINA’S WTO ACCESSION: ECONOMIC, LEGAL, AND POLITICAL IMPLICATIONS
Abstract: This Article discusses the unparalleled economic, legal, and political change that has confronted China during WTO accession. The Article focuses on the relationship between China’s unique WTO accession process and China’s reform over the past two decades. The author suggests that WTO accession has acted as a lever for economic and legal reform by locking in reform and making it irrevocable. The Article begins with a historical background of China’s long road to accession and the way that this process worked to further the previously instated economic reform program. Next, the Article analyzes the manner in which WTO accession has initiated profound legal reform. The final section of the Article discusses the effects of adhering to WTO-related obligations on the future of political reform and suggests that the resulting weakened control of the Communist Party may ultimately lead either to continued growth and political liberalization or to mass unrest and a backlash of government repression.
As one of the newest members of the World Trade Organization (WTO),1 China is unique in a number of respects. First, it is by far the largest economic power among developing country members. By traditional measures, China fits well within the definition of a developing country—in most regions of the country, per capita GDP remains be[*PG320]low $1000.2 Indeed, during its negotiations for accession to the WTO, China argued that it should be entitled to the special and differential treatment extended to developing countries in the WTO agreements.3 At the same time, China stands apart from other developing countries as a producer of, and a magnet for, foreign investment. According to recent WTO data, China was the seventh largest merchandise exporter in the world, with aggregate exports of $249 billion in 2000.4 In addition, China received an estimated $46.8 billion in foreign direct investment (FDI) in 2001, making it one of the world’s largest recipients of foreign investment—second only to the United States if FDI flows to Hong Kong are included.5 Thus, China is both a developing country and an economic powerhouse.
China is also unique in a second respect; it is the only major WTO member that is still Communist.6 In 1982, six years after the end of the Cultural Revolution, the Chinese Communist Party (CCP) adopted a new Constitution reflecting Deng Xiaoping’s ideas for [*PG321]modernization and market reform.7 Since that time, China’s reform effort has continued at an extraordinary pace, as the Party has increasingly staked its legitimacy on China’s ability to sustain high levels of economic growth. As a result of Deng Xiaoping’s reforms, China has largely transformed its economy. However, it remains under the control of a Communist apparatus that struggles to maintain dominance even as it embraces modernization. Jiang Zemin’s “three represents” campaign, which emphasizes the CCP’s role in representing the interests of capitalists along with the interests of workers and peasants, is part of an ongoing effort by the Party to reform and revive itself.8 The CCP has opened its membership to entrepreneurs and may soon appoint several prominent businessmen to high positions within the Party.9 Currently, China is undergoing its first peaceful change of leadership in decades, as Jiang Zemin and other top CCP officials step down and cede control to a new generation of leaders.10 China is therefore at a turning point, both in terms of the transfer of power within the CCP and its new status as a WTO member.
[*PG322] The trajectory of China’s reform process over the past two decades mirrors China’s lengthy process of joining the WTO. This Article analyzes the relationship between these two processes. China’s experience as a WTO member is unique. Perhaps in no other country has WTO accession had such a profound impact on economic, legal, and political change as in China. Notwithstanding concerns expressed in the past by WTO members regarding China’s ability to comply with the obligations of WTO membership,11 more current developments suggest that the threat to reform in China does not stem so much from any lack of commitment on the part of the CCP,12 but rather from the possibility that disaffected groups in China will ultimately destabilize the political system. The irony of China’s situation is that the process of WTO accession, by accelerating market reform and expanding the private sector, has exacerbated income inequality in the country.
Part I of this Article describes China’s accession process, highlights the role the WTO has played in propelling forward China’s economic reform program, and contrasts China’s experience with that of other Communist countries that joined the General Agreement on Tariffs and Trade (GATT) during the 1960–70s. Part II examines the ways in which WTO accession has provided an impetus to legal reform. Finally, Part III speculates on the extent to which China’s WTO-related commitments will lead to political reform in the future.
No country has endured as lengthy an accession process to the GATT/WTO as China, nor has any country acceding to the WTO been asked to take on as many concessions as the price for admission. From the date that China was first granted observer status to the GATT to the date that China finally acceded to the WTO, almost twenty years elapsed.13 Some of the extraordinary terms to which China agreed to be bound as a WTO member are described below.
Generally speaking, the WTO accession process formally begins when a country informs the WTO Director-General of its desire to join.14 The WTO General Council then forms a “working party” of members to examine the application.15 After basic principles and policies have been resolved with the working party, individual WTO members enter into bilateral negotiations with the applicant country over the specific undertakings that the applicant will agree to as a condition of WTO membership.16 Upon completion of these bilateral negotiations, the working party finalizes the accession terms in three documents: the working party report, the protocol of accession, and the attached schedules containing the new member’s specific liberalization [*PG324]commitments.17 The final accession terms are then presented to the WTO body for a vote. If two-thirds of the WTO’s existing members vote in favor of accession, then the applicant may sign the protocol and join the WTO.18
Since China was a founding member of the GATT,19 its initial application in 1986 was for “resumption” of its membership as a GATT Contracting Party.20 A number of complications and intervening events prolonged China’s accession process. By spring of 1989, China and the United States had almost completed bilateral negotiations on the terms of China’s membership to the GATT.21 However, the Chinese government’s crackdown on pro-democracy demonstrators at Tiananmen Square resulted in the imposition of economic sanctions and an abrupt suspension of active negotiations until October 1992.22 Although China was a signatory to the Uruguay Round agreements, it was unable to conclude its accession negotiations by 1995, when the WTO entered into force. Thus, the GATT working party converted to a working party on China’s accession to the WTO. Momentum on China’s application was finally provided when the United States and China concluded a bilateral agreement on China’s entry into the WTO in November 1999. This led to the conclusion of a bilateral agreement on WTO entry between China and the European Union, the passage of Permanent Normal Trade Relations (PNTR) legislation by the U.S. Congress,23 and [*PG325]ultimately the WTO vote on China’s accession, which occurred at the Doha Ministerial Meeting in November 2001. The events leading up to China’s WTO accession are summarized in Table 1 below.
Table 1:Events Leading Up to China’s WTO Accession Year Event 1948 GATT goes into effect (China is a Contracting Party) 1950 China withdraws from GATT 1982 China granted observer status in GATT 1986 China notifies GATT of intent to renegotiate terms of membership Hong Kong becomes a GATT Contracting Party 1987 Working party on China’s membership to GATT established 1989 Discussions of China’s membership suspended until 1992 due to governmentSources: Hoekman & Kostecki, supra note 14, at 403–05; Gertler, supra note 19, at 66; PRC Ministry of Foreign Affairs, supra note 13; WTO Website, supra note 1.
There were a number of political events that disrupted relations between the United States and China and slowed progress on WTO accession talks, such as NATO’s bombing of the Chinese embassy in Belgrade in May 1999.24 However, China’s application was complicated by other factors as well. First, as mentioned in the Introduction,25 China’s dual status as a developing country and economic power posed a dilemma. While China’s negotiators insisted on “special and differential” developing country treatment, WTO members viewed China as a major source of cheap labor imports and thus a threat to domestic industry.26 Second, WTO members were concerned with the planned nature of China’s economy and sought evidence of sufficient market ori[*PG326]entation as a condition to membership.27 Business interests pressed for increased market access and commitments to promote transparency as a price for China’s accession.28 China initially resisted many of these demands but shifted its stance in early 1999.29 Finally, increased substantive coverage of the Uruguay Round agreements (including intellectual property protection, trade in services, and agriculture) broadened the scope of commitments demanded as a price of admission.30
China’s WTO obligations, in many respects, span further than the obligations of the WTO’s existing members.31 When one takes into account the size of China’s economy, its status as a developing country, and the degree to which China (until very recently) operated as a planned economy, the extent of China’s commitments are unprecedented.32 Summarized below are some of the more significant concessions that China agreed to in its protocol:
The Chinese tend to be sensitive to foreign interference in domestic affairs and attach a great deal of importance to reciprocity and mutual benefit in trade relations with the West.52 To some degree, this [*PG332]can be attributed to a history of humiliating and discriminatory treatment that China suffered at the hands of Britain, France, and the United States at the turn of the century.53 Viewed from this perspective, one wonders why the Chinese leadership agreed to WTO accession terms that, among other things, (1) require it to make broad and deep market access commitments across goods and services sectors; (2) bind China to Western norms of transparency, procedural fairness, and intellectual property protection; and (3) (with respect to the “nonmarket economy” treatment and the TPSS) single out China for less than most-favored nation (MFN) treatment.
There are obvious reasons why China would view WTO membership as beneficial. China stands to benefit from the recognition and prestige that WTO membership brings. WTO membership will deepen China’s integration into the world economy and signal its status as a world economic power.54 Conversely, the costs of remaining outside of the WTO may well exceed the costs of joining.55
Additionally, there are a number of theories that have been offered to explain why China’s leaders may have treated the issue of WTO accession with some degree of urgency. First, as some Chinese speculate, Jiang Zemin may have wished to complete the accession process [*PG333]before ceding power to a new generation of leaders.56 Second, China wished to finalize its accession prior to the round of trade negotiations scheduled to commence in Seattle in November 1999.57 Third and most significantly, the 1997 Asian financial crisis likely served as a “wake up” call for China,58 signaling the need to complete its process of economic reform. The worsening impact of the state-owned sector as a drag on economic growth, combined with the growing debt crisis in the state-owned financial sector,59 were problems that could not be ignored any longer. In this respect, China’s leaders may have viewed WTO accession as generating necessary momentum to complete the most politically difficult stage of China’s move to a market economy.60
The essential function of the WTO has been described as providing a means to “resolve conflicts of interest within, not between, nations.”61 A more vivid analogy, along these same lines, characterizes the WTO as a “mast to which governments can tie themselves to escape the siren-like calls of various pressure groups.”62 Although these descriptions were made with reference to Western political tradition, China’s situation provides a contrasting, but equally illustrative, example. While not a democracy, China nonetheless must deal with its own unique [*PG334]range of groups protecting their respective vested interests. These interests include central versus local governments, powerful ministry officials, the managers of China’s state-owned enterprises (SOEs), and the diversity of interests across China’s various provinces, which is pronounced due to the unevenness of economic growth within the country. Finally, there are divisions among different political factions within the CCP—some are convinced of the need to aggressively pursue market reform, while others are more reluctant, even reactionary.
WTO accession acts not just as a lever to force reform, but it also serves to lock in economic reform and make it irrevocable. In adopting the rules in China’s protocol of accession, the WTO framework acts as a sort of constitution, imposing economic discipline by constraining the ability of those in China’s government who might wish to take a different course of action. Thus, China’s recent accession illustrates how the commitments imposed as a condition of WTO membership may provide the political leverage necessary to move difficult economic reforms to the next stage. In terms of imposing market discipline on the country, one could say the WTO is analogous to the International Monetary Fund (IMF).63
The most direct form of discipline that WTO accession brings is the increased competition that China’s state-owned sector will face from opening up to foreign trade. But, as China expert Nicholas Lardy observes, if China’s state-owned banking sector continues to “channel disproportionate amounts of funds to inefficient state-owned companies,” then the discipline provided by increased competition on China’s domestic economy will be eroded, since the recipients of such funds [*PG335]gain an “unfair” advantage on the market.64 The brunt of the state-owned sector’s inefficiency is thereby borne by China’s banks. Indeed, the staggering burden of nonperforming loans on China’s banking sector is widely recognized as one of the most daunting challenges that the country faces in completing its transition to a market economy.65
There are two aspects of the WTO rules that could provide leverage to China’s government authorities in stemming the flow of funds from China’s banking sector to its state-owned enterprises: first, WTO restrictions on industrial subsidies; and second, China’s commitment under the GATS to open its banking sector to foreign competition.
[*PG336] The SCM Agreement66 discourages and, to some extent, prohibits China’s government from providing financial support to state-owned enterprises. The term “subsidy” is defined broadly in the SCM Agreement to include a financial benefit (such as a cash contribution, a tax break, or any contractual arrangement on terms more favorable than what the market would bear) granted by the government to an industry as a means of support.67 While subsidies may further legitimate policy objectives of China’s government in buffering its move towards a market economy (such as mitigating the effects of privatization on laid-off workers or supporting the development of new industries in regions that have been dominated by state-owned enterprises), the use of certain subsidies is either discouraged or prohibited by the SCM Agreement due to a distorting effect on trade.
The general approach of the SCM Agreement is to prohibit a limited range of subsidies while allowing other subsidies to be the basis for imposing countervailing duties.68 Specifically, prohibited subsidies include those that are contingent upon export or the use of domestic over imported goods.69 Notwithstanding China’s status as a developing country, most of the phase-out periods and other special rules applicable to developing countries under the SCM Agreement will not apply to China.70 In addition, China agreed in its protocol of acces[*PG337]sion to define a given subsidy as “specific,” and, therefore, subject to a countervailing duty action, if “disproportionately” large numbers of state-owned enterprises receive such subsidy.71 Thus, a preferential loan program from a state-owned bank that disproportionately benefits state-owned enterprises may fall within the definition of a specific subsidy and, therefore, could be subject to a countervailing duty action on imports produced by the subsidized enterprises.72 Thus, while only a limited category of subsidies is outright prohibited, a much broader range of subsidies will be actionable, which means among other things that they may be subject to countervailing duties.73
Whereas China’s subsidy commitments impose external constraints on the government’s ability to channel funds to state-owned enterprises, its commitment to open up the banking sector to foreign participation imposes discipline through market pressure. In other words, China’s GATS commitments should encourage reform of the banking system through competition from foreign enterprises. Under the GATS, each WTO member negotiated schedules of individual commitments to allow market access and/or to grant national treatment to foreign service providers across four different modes of sup[*PG338]ply: cross-border supply, consumption abroad, commercial presence, and presence of natural persons.74 In its GATS Schedule of Specific Commitments, China agreed to eliminate all “nonprudential” restrictions on the banking sector, including ownership and operation restrictions, by December 2006.75 If they meet the minimum asset requirements spelled out in the schedule,76 foreign banks will be allowed to establish branches or subsidiaries in China. Finally, foreign banks will be able to engage in local currency transactions after three years of profitable business operation in China.77
While some observers have expressed concern that the competition from foreign banks could divert sufficiently large amounts of domestic deposits out of the state-owned banks to threaten the collapse of China’s domestic banking system,78 others predict that foreign participation will force Chinese banks to more effectively compete and that their existence will not be jeopardized.79 Indeed, a [*PG339]number of foreign banks, such as Citibank, ABN Amro, and the Hong Kong and Shanghai Bank, have already entered China’s market and are competing with domestic banks for the country’s most creditworthy borrowers.80 There is even some early evidence that Chinese banks are learning and improving from the example and competitive pressure of foreign banks operating in China.81
To summarize, although far-reaching and potentially onerous, the commitments that China has undertaken in its protocol of accession will open the Chinese market to competition and pressure the government to end its practice of protecting inefficient state-owned enterprises—a practice that is a drag on the economy and threatens the continued stability of China’s banking system. In the same way, the external pressure of WTO obligations may accelerate China’s process of legal reform, as discussed in Part II below.
The importance of WTO accession as a component of China’s economic reform program can be contrasted with the experience of other Communist countries. There are a number of former Communist countries such as Mongolia or Albania that joined the WTO after the fall of Communism in their respective countries.82 In contrast, China’s continuing efforts to qualify for WTO accession (and later, to comply with the obligations of membership) has proceeded under the control of the CCP. While China is the only Communist country other than Cuba to gain accession to the WTO,83 a number of Communist [*PG340]countries in Eastern Europe joined the GATT during the 1960–70s. The experience of these countries provides an interesting counterexample to the Chinese one.
There were three Communist countries that joined the GATT during this period: Poland in 1967, Romania in 1971, and Hungary in 1973.84 These countries’ interest in the GATT coincided with the post-Stalinist period in Eastern Europe and its corresponding focus on raising technical standards and improving the standard of living in socialist countries.85 The terms of GATT accession for Hungary recognized the more decentralized nature of trade in Hungary’s economic system—the terms of accession were based, at least in principle, on the existing GATT framework of tariff schedules.86 In contrast, [*PG341]Poland and Romania joined the GATT without reforming their foreign trade systems, which, instead of utilizing tariffs, were based on targets specified in an economic plan.87 Instead of negotiating tariff reduction commitments, Poland and Romania each agreed to increase their level of imports from GATT member countries by a specified amount.88 In addition, the countries agreed to submit to periodic reviews that focused on the direction and make-up of each country’s foreign trade.89 In spite of its inconsistency with the MFN obligation, the new GATT members were permitted to trade on special terms with the bloc of countries in the Council for Mutual Economic Assistance (CMEA or COMECON).90
[*PG342] The accession of Hungary, Poland, and Romania to the GATT during the 1960–70s represented an important change in thinking regarding the role of Communist governments in the world trade system.91 However, the participation of these countries in the GATT failed to achieve a meaningful integration of their economies into the world trading system and did not affect fundamental reform within the countries. In terms of overall trade flows, a study of the effects of GATT accession for Hungary, Poland, and Romania shows that the balance of trade for all three countries vis-�-vis the GATT countries was generally negative.92 While imports from GATT countries increased dramatically during the early 1970s, the increase is attributable mainly to the availability of Western credit to importers.93 Indeed, countries such as Poland resorted to bilateral arrangements to eliminate persistent, discriminatory trade restrictions against Polish exports that the GATT framework was ineffective in addressing.94 Professor Kostecki concludes that GATT membership was of more symbolic than practical importance for these countries:
When judged from a political perspective, the GATT East-West arrangements are second-best solutions—both for the socialist bloc and the West. The GATT did not really succeed in becoming an instrument of Western policy . . . . despite [*PG343]the favouritism displayed toward the East European countries admitted to the GATT, Washington and Western Europe did not really grant them better commercial treatment than those East European states remaining outside the organization.95
China’s terms of accession to the WTO required deep concessions on China’s part and afforded China full participation as a WTO member and participant in the international market system. In contrast, Eastern Europe’s participation in the GATT was ultimately too limited in scope to overcome the political barriers between the Soviet Bloc and Western countries.
The reforms that occurred within these countries were also limited in scope. Even in more decentralized economies such as Hungary, the means of production were predominantly owned and controlled by the state until the disintegration of the Eastern Bloc in 1989. By the mid-1980s, the share of state trading as a proportion of value added in the economy was over eighty percent in Hungary, Poland, and Yugoslavia.96 Although pricing decisions in these economies were delegated to enterprises, in reality prices were not determined by market forces, but rather were manipulated by enterprise management for political or other reasons.97 Eastern Europe’s experience thus illustrates the limitations of the GATT in inducing reform in socialist countries.
While WTO accession has had a profound impact on both economic and legal reform in China, there is little evidence that participation in the GATT played a significant role in influencing reform in Eastern Europe. Several reasons could be offered to explain the difference. First, unlike the GATT, the WTO is a global trade organization with an expanded mandate,98 a formal structure, an ongoing process [*PG344]for conducting trade policy reviews of its members,99 and a binding dispute settlement mechanism.100 As a consequence, the terms of accession to the WTO are much more extensive and rigorous than the terms of accession to the GATT.101 Second, the political constraints in each case were very different. Since the advent of China’s “open door” policy in the late 1970s, the CCP has made market reform part of its ideology and has staked its legitimacy on the success of economic reform. In contrast, the reforms in Eastern Europe that coincided with GATT accession were constrained by the influence and control of the Soviet Union. Thus, whereas the Soviet Union merely acquiesced in Eastern Europe’s experimentation with GATT membership, China’s Communist leaders have actively sought WTO accession as a means of furthering its market-oriented agenda. Finally, the eventual collapse of the Eastern Bloc, a growing consensus among countries in favor of market-based economic policies, and the forces of globalization have all enhanced the ability of the WTO as an institution to influence policy within a given member country.
Notwithstanding the differences, there are a number of interesting parallels between the past experience of the Eastern European countries and present-day China. First, the current crisis that China faces with its debt burden and “soft budget constraints” on Chinese enterprises mirrors the economic problems that Poland, Hungary, and Yugoslavia faced in the 1980s.102 The debt and soft budget con[*PG345]straints are problems that result from partial liberalization of the state-owned sector. Second, as elaborated below,103 the dramatic scope of legal and economic reform in China over the past twenty years has created a crisis of values in China. The vacuum created by political liberalization and the introduction of a new legal framework in China has caused a rise in corruption and a sort of moral schizophrenia. This crisis of values mirrors similar crises experienced by countries in the Eastern Bloc, illustrated most dramatically in Yugoslavia, where dramatic legal and economic reform, along with the disintegration of the country, fueled intense nationalism, ethnic cleansing, and war.
Indeed, what sets China’s example apart from other WTO members is the degree to which China’s WTO undertakings served as a catalyst of legal and economic reform within the country. The following section describes China’s WTO obligations relating to transparency and considers the degree to which accession has and will contribute to legal change in China.
The previous section of this Article discusses how China’s WTO commitments may help propel economic reform through a politically difficult phase. WTO accession encompasses not only commitments to eliminate tariff and nontariff barriers to trade in goods but also a range of related commitments, including commitments to eliminate subsidies and to open service sectors to foreign participation. In addition to trade liberalization commitments, the WTO agreements include a special set of obligations that aim to promote transparency, predictability, and fairness in the implementation of China’s WTO obligations. These fall into three general categories: obligations relating to public availability of trade-related laws, uniform administration of the laws, and the existence of an independent and impartial system for the review of administrative decisions.104 China’s undertakings in promoting transpar[*PG346]ency, although limited in scope to the enforcement of China’s WTO commitments, have provided an impetus for legal reform in China.
The concept of transparency is central to the WTO agreements. Article X of the GATT 1994 requires that all trade-related laws, regulations, and rulings be promptly published and administered in an “impartial and uniform” manner.105 The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) devotes an entire chapter to enforcement obligations,106 and the GATS, in addition to publication and notification requirements, requires setting up “enquiry points” to provide information at the request of any member.107 Thus, the transparency-related obligations contained in the WTO agreements encompass not only the publication of trade-related laws, but also their accessibility as well as fair and effective implementation. In addition to these obligations, China’s protocol of accession includes a number of specific commitments that confirm as well as supplement the obligations contained in the WTO agreements. This section describes these rules, points out certain obstacles to their effective implementation, and notes the extent to which the Chinese government has achieved progress in implementation.
There has been much written regarding the differences between China’s legal culture and that of Western countries, including debate on the degree to which China is a country governed by the “rule of law.”108 This Article does not address all of these questions but instead [*PG347]describes the transparency-related rules that bind China as a WTO member and assesses the general progress China has made, and the challenges that remain, in implementing these obligations. When compared with the state of affairs in 1978, China has made impressive progress in creating the legal framework necessary to support a market economy. Certainly, GATT (and later WTO) accession has proceeded alongside this massive rebuilding of China’s legal system—a system that was virtually wiped out during the Cultural Revolution.109 Yet it is increasingly apparent that WTO accession has also provided a catalyst for China’s evolution away from a legal system driven by power relationships and towards a rule-based legal system.
Any assessment of China’s efforts towards establishing transparency, uniform application of law, and judicial review should be mindful of the mammoth task that the regime faced at the end of the Cultural Revolution, when China’s wrecked legal and political system had to be rebuilt from scratch. Viewed from this perspective, the progress that China has made in establishing a judiciary and a practicing bar are incomplete but nonetheless substantial.110 As a Chinese observer once said, Chinese law is “like a baby that has not grown up yet.”111
The Chinese government reestablished the legal profession in the early 1980s with the issuance of “provisional regulations” on lawyers, which defined the lawyer’s role as “serv[ing] the cause of socialism” and “protect[ing] the interests of the state and the collective.”112 [*PG348]In terms of sheer numbers, the number of lawyers in China has grown dramatically, from almost none at the start of reform to over 110,000 trained and registered lawyers in 1997.113 The demand for lawyers in China increased rapidly throughout the 1980s and 1990s, as market reform transformed business practice, foreign investment flowed into the country, and the Chinese began defending their rights in court.114 Today, the caliber of lawyer one sees in Beijing or Shanghai rivals that of lawyers in the West; however, the overall qualifications of the legal profession in China are still uneven.115
As with the legal profession, China’s judiciary was reestablished in 1979, at the beginning of Deng Xiaoping’s reforms and in a manner that reflected the strong ideological influence of the CCP.116 Throughout the 1980s, most Chinese judges lacked either a university education or legal instruction, and they were transferred to their posts from the CCP or from the military.117 Since that time, the court system has increased significantly in size (from 58,000 “court cadres” in 1979 to 250,000 judges in 1997)118 and, although still somewhat politicized,119 has developed a more professional competence. A 1995 law imposed more exacting qualifications for judges, including minimal education and other requirements.120 Since WTO accession, the government has [*PG349]pushed to enhance the capabilities of Chinese judges, as illustrated by some recent initiatives. In March 2002, a unified “National Judicial Examination” was administered to attorneys, judges, and prosecutors.121 Although it is not yet a universal prerequisite for serving as a judge, passing the examination is required for judicial promotion.122 More recently, the Supreme People’s Court (SPC) introduced a reform package aimed at improving the judiciary, including initiatives to require that all future judges pass the national judicial examination, provide specialized training for judges, and introduce a system of law clerks.123
In its protocol, China agreed that only those WTO-related laws, regulations, and other measures that are published and readily available to other WTO members and to the public shall be enforced, and that China shall make drafts of all such documents available for comment prior to their implementation or enforcement.124 In addition, China agreed to establish or designate an official journal for the publication of WTO-related rules, regulations, and other measures and to make copies of the journal readily available.125 Finally, China agreed to [*PG350]establish an inquiry point where all such information may be obtained.126
Chinese law currently requires that all legislation be published, typically in the gazette of the body that issued the legislation and sometimes in the national daily newspaper.127 The obstacle in implementing the WTO publication requirements relates less to China’s formal legislation than to making public the overlapping rules and less formal interpretations of law issued within China’s bureaucracy. Below the level of legislation issued by the National People’s Congress (NPC)128 and administrative regulation is an amorphous category of administrative directives referred to as rules (guizhang) and normative documents (guifanxing wenjian) that are issued by central and local government bodies as a means of instructing those vested with authority to carry out the law.129 In the early years of economic reform in China, it was standard practice for Chinese bureaucrats to issue such administrative directives, which had legal effect but were “internal” or unpublished.130 As discussed below,131 the use of such directives has decreased but has not disappeared.
A recently adopted Chinese law requires the publication of all legislation, not only NPC-level legislation and amendments, but also administrative regulations, local and regional regulations, departmental rules, and local level rules—that is, everything except normative [*PG351]documents.132 To the extent that normative documents are unenforceable (i.e., are not “law”), the publication requirements set forth in the law are consistent with China’s WTO obligations. However, as discussed below, the continued legal status of normative documents remains unclear.133
Even assuming that all governmental directives that have the effect of law are published, as a practical matter it is very difficult to access them. Therefore, the protocol specifically requires China to publish an official journal and establish a single inquiry point for WTO-related material.134 Just prior to China’s WTO accession, China’s Ministry of Foreign Trade and Economic Cooperation (MOFTEC) established such an inquiry point, the China WTO Notification and Enquiry Center, and has set up a website to facilitate the Center’s work of disseminating information.135 However, there is no single official journal for WTO-related law. Although MOFTEC has been publishing foreign investment and trade-related laws and regulations in an official gazette since 1993,136 according to China’s Working Party Report, the Chinese government listed, not one, but seven official journals that contain WTO-related information.137 Nonetheless, establishing an official WTO website could greatly facilitate the ability of outsiders to gather legal information. The website at least purports to make current information regarding the WTO accessible to the public, provides links to China’s [*PG352]WTO-related laws and regulations, and allows visitors to ask questions.138
China agreed in its protocol to apply and administer all WTO-related laws, regulations, and other measures in a “uniform, impartial and reasonable manner.”139 Scholars of Chinese law express skepticism regarding China’s ability to meet this obligation, which assumes the existence of enforcement institutions with clear lines of authority and the capacity to render neutral decisions.140 There are a number of characteristics of China’s system that impede the impartiality and predictability of those who administer the law.
First, Chinese legislation tends to be drafted in vague terms, with a lack of specific definition.141 These tentative, broadly worded rules create a broad sphere of authority and promote discretionary decision-making on the part of interpretive bodies.142 One consequence of this state of affairs is that Chinese bureaucrats are vested with great discretionary power. Second, perhaps due to the relative newness of China’s lawmaking institutions, the authority among China’s main legislative bodies to create law is ill-defined.143 This results in a proliferation of [*PG353]sometimes overlapping or contradictory laws at all levels of government. Finally, those vested with broad discretion to interpret and implement the laws tend not to be neutral but rather are influenced by a range of extralegal factors, including the political influence of the CCP, corruption, and the traditional importance in Chinese culture of personal relationships (guanxi). These factors are discussed in greater detail below.144
While acknowledging the reasons for skepticism regarding uniform application of law in China, it is important at the same time to appreciate the extent to which the CCP promotes and supports legal reform. China’s government has aggressively moved to create legal institutions to support the development of a market. The CCP’s emphasis on legal reform dates back to Deng Xiaoping’s “two hands” policy, which called for the development of the economy on one hand and the strengthening of the legal system on the other.145 The regime understands the need for a stable legal infrastructure, including neutral application and enforcement of the law, to support a market system. In addition, fostering neutral and predictable application of law is a means of promoting stability, which is of paramount concern to China’s leaders. WTO accession is providing China’s leaders additional leverage to push for the implementation of such commitments,146 although, be[*PG354]cause of the factors mentioned above, it is unrealistic to expect that these changes will be immediately realized.
China’s protocol requires it to establish (or designate) and maintain “impartial and independent tribunals, contact points and procedures” for the prompt review of all administrative actions relating to the implementation of the laws, regulations, judicial decisions, and administrative rulings of general application referred to in the WTO transparency-related rules.147 Review procedures must include the opportunity to ultimately appeal to a judicial body.148
In 1978, China had no meaningful legal institutions. As discussed above, the government has made remarkable progress since that time in creating a practicing bar and judiciary. In addition, the government passed legislation that offers a limited basis on which the administrative decisions of powerful bureaucrats may be subject to judicial review. Finally, the SPC has emerged as an important force in establishing some degree of coherence to the judicial review process in China. The latter two of these developments is discussed below. However, these encouraging developments must be viewed within the context of China’s political situation. Specifically, while Chinese law allows judicial review of administrative acts, and while China’s leaders remain committed to promoting the professionalism of judges in China, the fact remains that the courts enjoy neither power nor independence from the CCP.
As suggested above, government officials in China’s huge bureaucracy are very powerful and, in particular, are vested with the authority to implement WTO-related law.149 A key question from a legal standpoint is the extent to which China’s judges have the authority to review and correct administrative decisions. While this [*PG355]Article does not attempt to summarize all of Chinese administrative law, there are a number of statutes150 with features worth highlighting, since they reveal the existing limitations of an evolving legal framework for the review of administrative decisions in China. Three of these features are described below.
1. Extra-judicial review. Chinese law provides for the supervision of administrative decision-making by administrative or government bodies, conducted either internally (i.e., within the agency hierarchy) or externally.151 The limitation of administrative review, of course, is that by definition it is not independent, and thus it may be prone to conflicts of interest.152
2. Procedural safeguards for “administrative punishment.” At present, there is no comprehensive law imposing procedural requirements on administrative agencies.153 There is a 1996 law, the Administrative Punishments Law (APL), that scholars suggest may be a “blueprint” for such a code in the future.154 The APL is designed to eliminate arbitrariness and/or overlapping assertions of jurisdiction in the imposition of an administrative “penalty” (such as a fine or revocation of a li[*PG356]cense). The APL is a unique Chinese law in the degree to which it incorporates procedural safeguards, including the right to a hearing in certain cases.155 However, the APL is very limited in its scope. For example, the APL does not apply to the many administrative decisions that are not “punitive.” To the extent that the penalties covered by this statute include confinement, the APL resembles a criminal procedure statute more than an administrative statute.156
3. Limited judicial review of “concrete” acts. The availability of independent, judicial review of administrative acts has little precedent in China, where administrators tend to enjoy greater power and influence than judges, and where judicial and administrative processes tend to overlap.157 But in 1989, China adopted a controversial piece of legislation, the Administrative Litigation Law (ALL), which allows an individual to bring a lawsuit to challenge an administrative decision.158 An explanation of the ALL’s novelty to Chinese legal tradition is provided by one of the law’s drafters: “The stipulation in the Administrative Litigation Law that ‘common people can sue officials’ is an issue that is conceptually rather new. It is a question for which there is no custom and to which we have not adapted, and yet it is an enduring issue.”159
The scope of the ALL was narrowly drawn. Courts may only review specific or “concrete” acts, such as the imposition of a fine, the withholding of a license, or the breach of a personal or property right.160 This means that a foreign company would not be allowed under the [*PG357]ALL to challenge the rulemaking authority of MOFTEC, (for example, regarding a decision to place a particular good on a restricted import list).161 In addition, courts may only review administrative decisions for their legality—that is, they may not inquire into a decision’s appropriateness or reasonableness.162 Interestingly, the ALL provides that neither rules nor normative documents are binding on courts, although courts should “consult” any existing rules when rendering a decision.163
Although narrow in scope, the ALL has been utilized by Chinese plaintiffs with a relatively high success rate.164 Moreover, even though the number of cases decided under the ALL is relatively small, the incidence of lawsuits under the ALL has increased over time while that of administrative reconsideration (internal review) has decreased.165 This could mean that Chinese plaintiffs perceive that judicial review under the ALL is more effective than internal review.
The foregoing summary of Chinese legislation demonstrates that China has in place a legal framework for promulgating and publishing WTO-related law, uniformly administering such law, and reviewing [*PG358]administrative decisions that implement such law. While in some respects China’s legal framework may fall short of the obligations set forth in the protocol, in general, China has laws in place that comport with the protocol’s basic obligations. Of course, there is often a gap between creating laws and institutions on the one hand and implementing and enforcing the law on the other.
Notwithstanding the progress that has been achieved by the Chinese government with institutional reform, there remain a number of institutional factors that weaken the judiciary and impede judicial independence in China. The factors that undermine the neutrality of Chinese judges include: political influence and the continued involvement of CCP,166 the lower status of judges vis-�-vis administrators,167 financial interests in court decisions at the local level (i.e., the interconnectedness of local government and the private sector),168 the funding of courts at the local level and the resulting dependence of judges on local government,169 the pull of personal connections (guanxi),170 and outright corruption.171 More generally, the weakening authority of the CCP, along with the growing importance of wealth as a measure of success, has left a moral vacuum, which exacerbates conditions that promote corruption and complicates efforts to promote neutral and objective decision-[*PG359]making.172 Widespread corruption of public officials in China not only impedes effective lawmaking, but also has incited violence among disaffected groups in China.173 Minxin Pei describes corruption as a “growing cancer” on China’s political system.174 These factors will operate to prevent effective implementation of China’s transparency-related obligations, particularly the requirement to allow judicial review of administrative decisions.
Since these impediments to judicial independence are rooted in social and political conditions in China, making progress in these areas can only be achieved over time. Yet China is certainly not the only WTO member that faces institutional barriers to promoting transparency. What is unique about China as a WTO member is the degree to which the existence of “rule of law” in China became part of the accession debate. The transparency-related commitments outlined above may provide leverage to the CCP in furthering certain aspects of legal reform, such as promoting judicial competence and eliminating corruption throughout the country.
The judicial institution that has played the most active role in promoting judicial competence and independence in China is the Supreme People’s Court (SPC). The SPC has been described as the “most important and active interpretation authority in China.”175 In contrast with the U.S. Supreme Court, the SPC functions both as a tribunal and as supervisor of China’s judicial system.176 Institutional [*PG360]and economic reform has transformed the SPC since its re-emergence after the Cultural Revolution.177
In an effort to provide guidance to the courts and to bring some degree of coherence to the law, the SPC issues official opinions and interpretations of Chinese legislation in the official gazette of the SPC.178 Since 1985, the SPC has also published its decisions, or selected and revised versions of lower court decisions, in order to educate and provide guidance to the courts, thus enabling the judicial system to handle more complex cases.179 The SPC has also worked to improve the level of professionalism in the judiciary—for example, by introducing a reform package in July 2002 to enhance the qualifications of the judiciary.180
Significantly, the SPC has emphasized China’s WTO transparency-related obligations as a means to promote judicial independence in cases affecting international trade. In August 2002, the SPC issued what the CCP’s English language newspaper called a “landmark” regulation.181 The SPC’s Trade Regulation182 establishes the supervi[*PG361]sory powers of China’s courts, in accordance with the provisions of the ALL, to review administrative decisions relating to international trade and intellectual property.183 It allows parties, including foreign investors, to institute litigation in the courts to request judicial review of any “concrete” act of a government authority in connection with a WTO-related matter.184 The regulation specifies that, where more than one reasonable interpretation is applicable to a matter, the interpretation that is consistent with China’s international treaty obligations shall prevail.185 The vice-president of the SPC publicly stated that the purpose of the regulation is to “keep our domestic laws and regulations consistent with WTO rules.”186 While the Trade Regulation is particularly important, it is not the sole example of WTO obligations providing the impetus for legal reform. The government has also invoked China’s WTO obligations in connection with a number of other reform-oriented measures.187
The SPC’s authority to promote judicial independence is circumscribed both by the supremacy of the CCP188 and by specific statutory limitations on its authority to interpret law.189 Thus, it is important to [*PG362]recognize the political constraints in order to understand the extent to which legal reform is feasible. The American concept of “rule of law” encompasses not only transparency but also judicial independence and the notion that no person, including a government official, is above the law.190 China’s leadership has expressed a commitment to promoting judicial independence in a narrow sense of the phrase—that is, by ensuring that judges decide WTO-related cases (including review of administrative acts) on the basis of China’s international obligations, as opposed to being influenced by guanxi, corruption, or political influence at the local level. However, it is unlikely that such change will involve any significant expansion of the courts’ power vis-�-vis the CCP or the administrative apparatus. WTO accession has and will continue to further legal reform by enhancing the professionalism of the courts and reducing local government influence. Notwithstanding its limitations, China’s success in this endeavor would represent a significant step forward.
The title of Stanley Lubman’s book on Chinese legal reform is Bird in a Cage: Legal Reform in China After Mao. The metaphor of a bird in a cage expresses Professor Lubman’s view of the status of legal reform in China today—unquestionably existing and evolving, yet constrained as if enclosed behind bars.191 This is reflected in the lack of independence of the judiciary and the continuing dominance of the CCP over policy-making. Of course, to the extent that the Party’s priorities and objectives include promoting transparency in economic decision-making, the CCP policy will not constrain legal reform. Thus, it can be expected that efforts to enhance the professionalism and competency of the judiciary in China will continue. What is less certain is whether the judiciary will play a meaningful role in correcting abuses of discretion or WTO-inconsistent rulemaking by the administrative branch. While it is still rather early to judge, anecdotal evi[*PG363]dence suggests that WTO accession has already influenced some Chinese judges towards greater professionalism and neutrality, at least with respect to trade-related matters.192
As stated in the Introduction, China is at a turning point. While China has undergone dramatic economic and even legal changes in the process of joining the WTO, the CCP has endeavored to maintain rigid control over other spheres of Chinese society. While it is impossible to predict the future path of political reform in China, there are some encouraging signs that China’s integration with the world market might, over time, lead to political and social liberalization as well.
It is worth noting that China has already undergone extensive political reform over the past two decades. As with the discussion of legal change,193 whether China has achieved political reform depends on the viewpoint one takes. China’s political leadership either could be described as repressive and undemocratic (compared to Western norms) or much improved (compared to the Maoist era).194 However, China is unlikely to undergo a perestroika-style political reform any time in the near future.195 In contrast with Deng Xiaoping’s era of market reform, where benefits were immediately realized and the [*PG364]more difficult aspects of economic reform were delayed, WTO accession presents a more difficult stage for China. As a result, the Chinese leadership will continue to use repression as a way to stifle social discontent and will be very wary of loosening its grip on power.196 At the same time, the government recognizes the need to build political institutions sufficient to support a market economy and to that end is introducing limited changes, such as the legal reforms described in the previous section. In addition, market liberalization has weakened the CCP’s ability to control all aspects of the peoples’ lives.
One such limited political change is the government’s tolerance of democratic-style elections in parts of China’s rural provinces. The example of Buyun Township, a poor, agricultural region in Sichuan province, was described in The Economist’s recent survey of China.197 Several years ago, Buyun conducted direct elections for the position of township chief without seeking permission from the central government.198 In 2001, apparently to discourage other townships from following Buyun’s example, the CCP issued an order that the usual method of election be followed. However, Buyun township officials interpreted the wording of the order “creatively” and conducted competitive elections for a single candidate. In this manner, almost one-third of Sichuan’s townships allowed the public to elect candidates.199 Such limited experiments in democratic elections may be the result of encouragement from certain reform-minded leaders in the CCP,200 but it is also a function of the Party’s lack of control in the countryside.201
Another factor that has undermined the Party’s ability to control the public is the widespread availability of information over the Internet. Since the mid-1990s, when the Internet was introduced to China, [*PG365]the CCP has attempted to implement controls to prevent the public’s access to politically sensitive information. A recent example of this is the government’s blocking of Chinese Internet users’ access to the Google and AltaVista search engines.202 In preparation for the Sixteeenth CCP Congress in November 2002 (when Jiang Zemin stepped down as CCP General Secretary), the CCP cracked down on access to Internet material that was openly critical of the regime.203 However, as former President Clinton once observed, trying to control the Internet is like “trying to nail Jell-O to the wall.”204 There are other ways to access search engines like Google, such as by entering a numerical address.205 Even while imposing controls, the CCP at the same time encourages Internet use and has even allowed foreign participation in the telecommunications industry as a means of modernizing the economy.206 Thus, attempts by the CCP to control the Internet may ultimately prove to be elusive. In fact, the CCP has enough difficulty constraining its own press, which increasingly is following the dictates of the market rather than government directives.207
Finally, as people enjoy increased wealth and personal liberty as a result of market reform, a number of diverse groups in Chinese society are creating formal and informal organizations to promote their interests. These groups have increased in number and activity level as [*PG366]the Party’s ability to control the population has waned.208 While many of China’s non-governmental organizations (NGOs) were initially established by the state,209 others have evolved in a grassroots fashion through the activity of dedicated individuals.210 A look at several examples illustrates the impressive degree to which the initiative and creativity of individuals has been channeled into social causes, notwithstanding the constraints imposed by the CCP.
1. Maple Women’s Psychological Counseling Centre: a center that has been conducting policy research and providing counseling services for women in Beijing since 1988. It established a women’s telephone hotline and provides legal information through a telephone service. With the support of the Ford Foundation, it established an “Ark Family Centre” for single parents and their children.211
2. “Friend” Exchange: a magazine based in Qingdao with a circulation of 8000 whose purpose is to promote the physical and mental well-being of gays and lesbians. The magazine focuses on HIV/AIDS and STD awareness and education.212
3. Volunteer Mothers’ Association for Environmental Protection: an association based in Xi’an that organizes volunteer activities, education, and training to promote environmental awareness and public participation in environmental protection. It began a “Hand in Hand” school-[*PG367]based environmental education campaign involving over 120 elementary schools and has organized environmental awareness workshops.213
The Chinese government, wary of the potential of social groups to promote instability and discontent, has severely limited the ability of NGOs to operate, diversify, or otherwise expand their activity.214 Nonetheless, official attitudes towards these groups have begun to soften in light of the many contributions that they provide.215 The government thus has had an awkward time dealing with NGOs because, while some NGOs may be viewed by the CCP as fulfilling a valuable function, the CCP nonetheless imposes rigid constraints on their activities.
In addition to organized social activity, there is a range of informal social activity conducted by “dissatisfied” groups, including farmers, the unemployed, consumers, industry associations, labor unions, religious movements, special-interest groups, and separatists.216 Eventually, the CCP may need to liberalize constraints on social organizations as a “safety valve” to relieve the pressure created by such discontent.217 Some China observers have argued that the new generation of China’s leaders is likely to introduce modest political reform in China by legitimizing the activity of these organizations and allowing greater input by citizen groups in policy-making.218 In any event, while the [*PG368]CCP continues to crack down on dissident speech and other forms of public protest, the scope of permissible expression in China is much broader than it was in the past.219
What role has the WTO played in this process? While it has not played a direct role, WTO membership affects China indirectly in ways that will further undermine the CCP’s ability to control society. In March 2000, former President Clinton explained how WTO accession could accelerate a process of liberalization in China that has already been underway for some time:
By lowering the barriers that protect state-owned industries, China is speeding a process that is removing government from vast areas of people’s lives. In the past, virtually every Chinese citizen woke up in an apartment or a house owned by the government, went to work in a factory or a farm run by the government and read newspapers published by the government. State-run workplaces also operated the schools where they sent their children, the clinics where they received health care, [and] the stores where they bought food. That system was a big source of the Communist Party’s power. Now people are leaving those firms, and when China joins the W.T.O., they will leave them faster. The Chinese [*PG369]government no longer will be everyone’s employer, landlord, shopkeeper and nanny all rolled into one.220
The developments described in the previous paragraphs suggest that President Clinton’s predictions are being realized. What remains to be seen is whether the weakening of government control and economic dislocation, resulting from economic reform, will ultimately produce mass unrest and further repression,221 or whether it will produce continued growth and gradual political liberalization.
A Chinese government official from Jilin province recently shared an anecdote regarding his experience studying in the United States. He related how an American acquaintance he had met in Chicago asked him why he had come to the United States. When the Chinese official explained that he came to the United States “to learn more about the WTO,” he was very surprised to discover that the American did not know to what the acronym “WTO” referred. He asked whether such ignorance of the WTO is typical in this country.222 At one level, this example lends support to the stereotype of Americans’ lack of awareness regarding world affairs. But on another level, it illustrates how much the WTO has figured into the consciousness of the Chinese.223 The CCP tends to issue propaganda that is favorable regarding the WTO while downplaying any negative effects. The government’s message is [*PG370]that, while painful in the short term, WTO membership will be beneficial for China in the long run. Over the coming years, China will be tested. It will be tested economically through painful adjustments resulting from China’s exposure to the world market. It will also be tested politically, as the new generation of China’s leaders decides whether and how to adapt the CCP’s approach to governing an increasingly independent, informed, and economically diverse population.