Chinese Foreign Trade Law Jiaxiang Hu Professor of KoGuan Law School, SJTU

Chapter Two General Principles of Chinese Foreign Trade Law I. The Constitutional Source for the regulation of International Trade In 1993, China amended its Constitution, changing its economic development orientation from the planned economy to the socialist market economy. In 1993, China amended its Constitution, changing its economic development orientation from the planned economy to the socialist market economy. Article 15 of Chinese Constitution The state practices socialist market economy.

Chapter Two General Principles of Chinese Foreign Trade Law Article 1 of Foreign Trade Law The present Law is enacted for the purpose of broadening the opening to the outside world, developing foreign trade, maintaining the order of foreign trade, protecting the lawful rights and interests of the foreign trade business operators, and promoting the healthy development of the socialist market economy. The present Law is enacted for the purpose of broadening the opening to the outside world, developing foreign trade, maintaining the order of foreign trade, protecting the lawful rights and interests of the foreign trade business operators, and promoting the healthy development of the socialist market economy.

Chapter Two General Principles of Chinese Foreign Trade Law 1. Understanding the term “socialist market economy” (1)The dominant part of the national economy should be run by the State. (2)The Communist Party should be the leading party in the operation of national economy.

Chapter Two General Principles of Chinese Foreign Trade Law 2. International trade before the Foreign Trade Law was made (1)Open-Door Policy (1978) (2)Three Foreign Enterprise Laws * Sino-Foreign Equity Joint Venture Law * Sino-Foreign Contractual Joint Venture Law * Wholly Foreign-owned Enterprise Law

Chapter Two General Principles of Chinese Foreign Trade Law (3)Special Economic Zones The basic objective to delineate a special economic zone (SEZ) is the provision of a “dual legal order” which separates a specialized policy enclave from the rest of the jurisdiction in which the zone is located. The basic objective to delineate a special economic zone (SEZ) is the provision of a “dual legal order” which separates a specialized policy enclave from the rest of the jurisdiction in which the zone is located. The first SEZs are Shenzhen, Zhuhai, Shantou and Xiamen (Amoy) set up in The first SEZs are Shenzhen, Zhuhai, Shantou and Xiamen (Amoy) set up in 1984.

Chapter Two General Principles of Chinese Foreign Trade Law The newly established Shanghai Free Trade Pilot Zone (SFTPZ) is built on the four existent customs supervision areas: Shanghai Waigaoqiao Bonded Zone, Waigaoqiao Bonded Logistics Zone, Yangshan Bonded Port and Shanghai Pudong Airport Free Trade Zone, with the area of 28 square kilometers in total. The newly established Shanghai Free Trade Pilot Zone (SFTPZ) is built on the four existent customs supervision areas: Shanghai Waigaoqiao Bonded Zone, Waigaoqiao Bonded Logistics Zone, Yangshan Bonded Port and Shanghai Pudong Airport Free Trade Zone, with the area of 28 square kilometers in total.

Chapter Two General Principles of Chinese Foreign Trade Law II. The Treatment Offered on International Trade 1. General principles on the treatment offered by the government on the regulation of imports and exports (1) Imports originated from (2) Exports destined to

Chapter Two General Principles of Chinese Foreign Trade Law Article 6 of Foreign Trade Law In the field of foreign trade, the People’s Republic of China grants, according to the international treaties and agreements it concluded or acceded to, most-favored-nation treatment or national treatment to other contracting parties or members, or grants most-favored-nation treatment or national treatment to its counterparts according to the principle of mutual benefit and reciprocity. In the field of foreign trade, the People’s Republic of China grants, according to the international treaties and agreements it concluded or acceded to, most-favored-nation treatment or national treatment to other contracting parties or members, or grants most-favored-nation treatment or national treatment to its counterparts according to the principle of mutual benefit and reciprocity.

Chapter Two General Principles of Chinese Foreign Trade Law 2. Types of most-favoured-nation treatment (1)Unconditional MFN MFN offered without any conditions on the offered and scope MFN offered without any conditions on the offered and scope (2)Conditional MFN MFN offered based on the equal conditions of mutual benefit and reciprocity MFN offered based on the equal conditions of mutual benefit and reciprocity

Chapter Two General Principles of Chinese Foreign Trade Law (3)Code MFN MEN offered among a specific group of members united by an agreement MEN offered among a specific group of members united by an agreement (4) MFN exceptions---regional trade agreements between China and other WTO Members

Chapter Two General Principles of Chinese Foreign Trade Law * China---ASEAN * China---Pakistan * China---Chile * China---New Zealand * China---Singapore * China---Peru

Chapter Two General Principles of Chinese Foreign Trade Law * Mainland China---Hong Kong * Mainland China---Macao * China---Costa Rica * China---Iceland * China---Switzerland * China---Korea * China---Australia

Chapter Two General Principles of Chinese Foreign Trade Law (5)MFN in trade of goods Treatment offered in different stages of regulation Treatment offered in different stages of regulation Paragraph 1 of Article I of the GATT With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation or imposed on the international transfer of payments for imports With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation or imposed on the international transfer of payments for imports

Chapter Two General Principles of Chinese Foreign Trade Law or exports, and with respect to the method of levying such duties and charges, and with respect to all rules and formalities in connection with importation and exportation, and with respect to all matters referred to in paragraphs 2 and 4 of Article III, any advantage, favour, privilege or immunity granted by any contracting party to any or exports, and with respect to the method of levying such duties and charges, and with respect to all rules and formalities in connection with importation and exportation, and with respect to all matters referred to in paragraphs 2 and 4 of Article III, any advantage, favour, privilege or immunity granted by any contracting party to any

Chapter Two General Principles of Chinese Foreign Trade Law product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties. product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties.

Chapter Two General Principles of Chinese Foreign Trade Law (6)MFN in trade of services Uniform treatment among WTO Members on the market access of trade of services Uniform treatment among WTO Members on the market access of trade of services Paragraph One of Article II of the GATS With respect to any measure covered by this Agreement, each Member shall accord immediately and unconditionally to services With respect to any measure covered by this Agreement, each Member shall accord immediately and unconditionally to services

Chapter Two General Principles of Chinese Foreign Trade Law and service suppliers of any other Member treatment no less favourable than that it accords to like services and service suppliers of any other country. and service suppliers of any other Member treatment no less favourable than that it accords to like services and service suppliers of any other country.

Chapter Two General Principles of Chinese Foreign Trade Law (7)MFN in the protection of intellectual property Uniform treatment among WTO Members in the protection of intellectual property Uniform treatment among WTO Members in the protection of intellectual property Paragraph One of Article 4 of the TRIPS With regard to the protection of intellectual property, any advantage, favour, privilege or immunity granted by a Member to the With regard to the protection of intellectual property, any advantage, favour, privilege or immunity granted by a Member to the

Chapter Two General Principles of Chinese Foreign Trade Law nationals of any other country shall be accorded immediately and unconditionally to the nationals of all other Members. nationals of any other country shall be accorded immediately and unconditionally to the nationals of all other Members.

Chapter Two General Principles of Chinese Foreign Trade Law 3. Types of national treatment (1)NT without limitations NT offered without any conditions on the offered and scope NT offered without any conditions on the offered and scope (2)NT with limitations NT offered based on the equal conditions negotiated beforehand NT offered based on the equal conditions negotiated beforehand

Chapter Two General Principles of Chinese Foreign Trade Law (3)NT in trade of goods Treatment offered in different stages of regulation Treatment offered in different stages of regulation Article III of the GATT 1. The contracting parties recognize that internal taxes and other internal charges, and laws, regulations and requirements affecting the

Chapter Two General Principles of Chinese Foreign Trade Law internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production. internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production.

Chapter Two General Principles of Chinese Foreign Trade Law 2. The products of the territory of any contracting party imported into the territory of any other contracting party shall not be subject, directly or indirectly, to internal taxes or other internal charges of any kind in excess of those applied, directly or indirectly, to like domestic products. Moreover, no contracting party shall otherwise apply internal taxes or

Chapter Two General Principles of Chinese Foreign Trade Law other internal charges to imported or domestic products in a manner contrary to the principles set forth in paragraph 1. other internal charges to imported or domestic products in a manner contrary to the principles set forth in paragraph 1. 4.The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all

Chapter Two General Principles of Chinese Foreign Trade Law laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use. The provisions of this paragraph shall not prevent the application of differential internal transportation charges which are based exclusively on the economic operation of the means of transport and not on the nationality of the product. laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use. The provisions of this paragraph shall not prevent the application of differential internal transportation charges which are based exclusively on the economic operation of the means of transport and not on the nationality of the product.

Chapter Two General Principles of Chinese Foreign Trade Law (4)NT in trade of services NT offered only in the sectors committed by WTO Members NT offered only in the sectors committed by WTO Members Paragraph One of Article XVII of the GATS 1. In the sectors inscribed in its Schedule, and subject to any conditions and qualifications set out therein, each Member shall accord to services and service suppliers of any other

Chapter Two General Principles of Chinese Foreign Trade Law Member, in respect of all measures affecting the supply of services, treatment no less favourable than that it accords to its own like services and service suppliers. Member, in respect of all measures affecting the supply of services, treatment no less favourable than that it accords to its own like services and service suppliers.

Chapter Two General Principles of Chinese Foreign Trade Law (5)NT in the protection of intellectual property Due to the minimum level stipulated by the TRIPS, intellectual properties of other Members may enjoy supra-national treatment in certain WTO Members when their level of protection is lower than that stipulated in the TRIPS. Due to the minimum level stipulated by the TRIPS, intellectual properties of other Members may enjoy supra-national treatment in certain WTO Members when their level of protection is lower than that stipulated in the TRIPS.

Chapter Two General Principles of Chinese Foreign Trade Law Paragraph One of Article 3 of the TRIPS 1. Each Member shall accord to the nationals of other Members treatment no less favourable than that it accords to its own nationals with regard to the protection of intellectual property, subject to the exceptions already provided in, respectively, the Paris Convention (1967), the Berne Convention (1971), the

Chapter Two General Principles of Chinese Foreign Trade Law Rome Convention or the Treaty on Intellectual Property in Respect of Integrated Circuits. In respect of performers, producers of phonograms and broadcasting organizations, this obligation only applies in respect of the rights provided under this Agreement. Any Member availing itself of the possibilities provided in Article 6 of the Berne Convention Rome Convention or the Treaty on Intellectual Property in Respect of Integrated Circuits. In respect of performers, producers of phonograms and broadcasting organizations, this obligation only applies in respect of the rights provided under this Agreement. Any Member availing itself of the possibilities provided in Article 6 of the Berne Convention

Chapter Two General Principles of Chinese Foreign Trade Law (1971) or paragraph 1(b) of Article 16 of the Rome Convention shall make a notification as foreseen in those provisions to the Council for TRIPS. (1971) or paragraph 1(b) of Article 16 of the Rome Convention shall make a notification as foreseen in those provisions to the Council for TRIPS.

Chapter Two General Principles of Chinese Foreign Trade Law Paragraph Two of Article 2 of the TRIPS 2. Nothing in Parts I to IV of this Agreement shall derogate from existing obligations that Members may have to each other under the Paris Convention, the Berne Convention, the Rome Convention and the Treaty on Intellectual Property in Respect of Integrated Circuits.

Chapter Two General Principles of Chinese Foreign Trade Law III. Areas Regulated by Foreign Trade Law Article 2 of Foreign Trade Law The present Law applies to foreign trade and the protection of foreign-trade-related intellectual property. The present Law applies to foreign trade and the protection of foreign-trade-related intellectual property. The term “foreign trade” as mentioned in the present law refers to the import and export of goods, technology, and the international trade of services. The term “foreign trade” as mentioned in the present law refers to the import and export of goods, technology, and the international trade of services.

Chapter Two General Principles of Chinese Foreign Trade Law Paragraph Five of Article VIII of the WTO Agreement 5. There shall be a Council for Trade in Goods, a Council for Trade in Services and a Council for Trade-Related Aspects of Intellectual Property Rights (hereinafter referred to as the “Council for TRIPS”), which shall operate under the general guidance of the General

Chapter Two General Principles of Chinese Foreign Trade Law Council. The Council for Trade in Goods shall oversee the functioning of the Multilateral Trade Agreements in Annex 1A. The Council for Trade in Services shall oversee the functioning of the General Agreement on Trade in Services (hereinafter referred to as “GATS”). The Council for TRIPS shall oversee the functioning of the Agreement on Council. The Council for Trade in Goods shall oversee the functioning of the Multilateral Trade Agreements in Annex 1A. The Council for Trade in Services shall oversee the functioning of the General Agreement on Trade in Services (hereinafter referred to as “GATS”). The Council for TRIPS shall oversee the functioning of the Agreement on

Chapter Two General Principles of Chinese Foreign Trade Law Trade-Related Aspects of Intellectual Property Rights (hereinafter referred to as the “Agreement on TRIPS”). These Councils shall carry out the functions assigned to them by their respective agreements and by the General Council. They shall establish their respective rules of procedure subject to the approval of the General Council. Membership Trade-Related Aspects of Intellectual Property Rights (hereinafter referred to as the “Agreement on TRIPS”). These Councils shall carry out the functions assigned to them by their respective agreements and by the General Council. They shall establish their respective rules of procedure subject to the approval of the General Council. Membership

Chapter Two General Principles of Chinese Foreign Trade Law in these Councils shall be open to representatives of all Members. These Councils shall meet as necessary to carry out their functions. in these Councils shall be open to representatives of all Members. These Councils shall meet as necessary to carry out their functions.

Chapter Two General Principles of Chinese Foreign Trade Law 1. Goods (1)Except a limited number of goods which are restricted by quotas or licenses for imports or exports, most goods are imported or exported based on the fixed tariffs without limitations on numbers.

Chapter Two General Principles of Chinese Foreign Trade Law 2. Technology (1)China encourages the imports of advanced technology. (2)China regulates the exports of technology according to the Regulations on Technology Import and Export Administration.

Chapter Two General Principles of Chinese Foreign Trade Law 3. Service (1)Since 2001, China spent 5 years as the transitional period to meet its commitments on market access for trade of services. (2)Most sectors of services have been open to foreign services and suppliers of service with a few limitations on the national treatment.

Chapter Two General Principles of Chinese Foreign Trade Law IV. The Participants of International Trade 1. Transactions between traders are regulated by relevant laws chosen by the contractors. (1)Applicable laws include the laws of either country of the contractors or even the third country.

Chapter Two General Principles of Chinese Foreign Trade Law 2. States (1)The role of the States is to maintain the market order by setting the tariffs for imports and exports of goods, inscribing the commitments of market access for trade of services, and listing the items for imports and exports of technology.

Chapter Two General Principles of Chinese Foreign Trade Law 3. Separate customs territories (1)A separate customs territory is referred to a territory which has no sovereignty, but enjoys the high state of autonomy in commerce. A separate customs territory in the WTO enjoys equal rights and obligations as those sovereign State Members.

Chapter Two General Principles of Chinese Foreign Trade Law Hong Kong, Macao and Taiwan are current WTO Members as the separate customs territories. Hong Kong, Macao and Taiwan are current WTO Members as the separate customs territories. Paragraph One of Article XII of the WTO Agreement 1. Any State or separate customs territory possessing full autonomy in the conduct of its external commercial relations and of the other

Chapter Two General Principles of Chinese Foreign Trade Law matters provided for in this Agreement and the Multilateral Trade Agreements may accede to this Agreement, on terms to be agreed between it and the WTO. Such accession shall apply to this Agreement and the Multilateral Trade Agreements annexed thereto. matters provided for in this Agreement and the Multilateral Trade Agreements may accede to this Agreement, on terms to be agreed between it and the WTO. Such accession shall apply to this Agreement and the Multilateral Trade Agreements annexed thereto.

Chapter Two General Principles of Chinese Foreign Trade Law 4. Free trade areas and customs unions (1)The main target to form a free trade area or customs union is to further liberalize the market by reducing tariffs and removing non- tariff barriers.

Chapter Two General Principles of Chinese Foreign Trade Law Article 5 of Foreign Trade Law The People’s Republic of China promotes and develops foreign trade relations with other countries and regions, concludes or accedes to regional economic and trade agreements such as customs or tariff union agreements, free trade area agreements, etc., and joins regional economic organizations according to the principle of equality and reciprocity. The People’s Republic of China promotes and develops foreign trade relations with other countries and regions, concludes or accedes to regional economic and trade agreements such as customs or tariff union agreements, free trade area agreements, etc., and joins regional economic organizations according to the principle of equality and reciprocity.

Chapter Two General Principles of Chinese Foreign Trade Law Article 7 of Foreign Trade Law For any country or region that takes discriminatory banning, restriction or other acts against the People’s Republic of China in terms of trade, the People’s Republic of China shall be entitled to adopt, in accordance with the actual circumstances, corresponding measures against them. For any country or region that takes discriminatory banning, restriction or other acts against the People’s Republic of China in terms of trade, the People’s Republic of China shall be entitled to adopt, in accordance with the actual circumstances, corresponding measures against them.

Chapter Two General Principles of Chinese Foreign Trade Law Paragraph Eight of Article XXIV of the GATT 8. For the purposes of this Agreement: (a)A customs union shall be understood to mean the substitution of a single customs territory for two or more customs territories, so that

Chapter Two General Principles of Chinese Foreign Trade Law (i) duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX) are eliminated with respect to substantially all the trade between the constituent territories of the union or at least with respect to substantially all the trade in products originating in such territories, and,

Chapter Two General Principles of Chinese Foreign Trade Law (ii) subject to the provisions of paragraph 9, substantially the same duties and other regulations of commerce are applied by each of the members of the union to the trade of territories not included in the union;

Chapter Two General Principles of Chinese Foreign Trade Law Footnote 2 to Paragraph One of Article IX of the WTO Agreement: The number of votes of the European Communities and their member States shall in no case exceed the number of the member States of the European Communities. The number of votes of the European Communities and their member States shall in no case exceed the number of the member States of the European Communities.

Chapter Two General Principles of Chinese Foreign Trade Law (b) A free-trade area shall be understood to mean a group of two or more customs territories in which the duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX) are eliminated on substantially all the trade between the constituent territories in products originating in such territories.

Chapter Two General Principles of Chinese Foreign Trade Law Questions for Discussion: Questions for Discussion: Question One Question One How do you understand the terms of “planned economy” and “socialist market economy”? How do you understand the terms of “planned economy” and “socialist market economy”? Question Two Question Two What is the difference between a “equity joint venture” and a “contractual joint venture”? What is the difference between a “equity joint venture” and a “contractual joint venture”?

Chapter Two General Principles of Chinese Foreign Trade Law Question Three Question Three What is the difference between the former “special economic zones” and the current “Shanghai Free Trade Pilot Zone”? What is the difference between the former “special economic zones” and the current “Shanghai Free Trade Pilot Zone”? Question Four Question Four How do you understand the unconditional MFN, conditional MFN and code MFN? How do you understand the unconditional MFN, conditional MFN and code MFN?

Chapter Two General Principles of Chinese Foreign Trade Law Question Five Question Five Why, in some cases, can intellectual properties of other WTO Members enjoy supra-national treatment in some WTO Members? Why, in some cases, can intellectual properties of other WTO Members enjoy supra-national treatment in some WTO Members? Question Six Question Six What is a separate customs territory? What is a separate customs territory?

Chapter Two General Principles of Chinese Foreign Trade Law Question Seven Question Seven What is the difference between the “Shanghai Free Trade Pilot Zone” and a free trade area? What is the difference between the “Shanghai Free Trade Pilot Zone” and a free trade area? Question Eight Question Eight What is the difference between a customs union and a free trade area? What is the difference between a customs union and a free trade area?