Disclaimer:
Opinions expressed in the case studies and any errors or omissions
therein are the responsibility of their authors and not of the
editors of this volume or of the institutions with which they are
affiliated. The authors of the case studies wish to disassociate the
institutions with which they are associated from opinions expressed
in the case studies and from any errors or omission therein.
> Case
Studies main page
> Introduction
ON THIS PAGE:
> I.
The problem in context
>II. The local and external players and their roles
> III. Challenges faced and the outcomes
> Case study 1: automobiles — auctioning licence
plates and national treatment
> Case study 2: an early-warning system for anti-dumping disputes in China
> IV. The Shanghai WTO Affairs Consultation
Centre: lessons for others
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I. The problem in context back to top
China’s accession to the World Trade
Organization in 2001, following fifteen years of difficult negotiations,
was a watershed event both for the WTO and its members and for China.
Chinese government officials and those who followed the progress of the
negotiations over the years knew that accession would bring with it the
necessity of a large number of reforms in domestic economic policies,
many of which would require adapting the outlook of Chinese business
establishments. Those who understood the WTO also knew that it would be
difficult to implement certain of the accession-related changes in ways
that met the expectations of China’s trading partners.
WTO membership also brought with it the
opportunity to take advantage of new market access opportunities and new
protections now available to China under the rules-based system of the
WTO. As a non-member of the WTO, China found that its exports were often
the subject of discriminatory treatment in overseas markets. In
addition, as a country that was making the transition from a centrally
planned economy to one where market forces would set prices and
determine resource allocation, China often saw its exporting enterprises
subjected to anti-dumping actions that treated Chinese exporters
unfairly — often because of China’s designation as a ‘non-market
economy’.
Shanghai has been at the forefront of China’s
economic reforms and opening-up to the outside world, and has played the
leading role in China’s adaptation to world trade rules. It was
experts from the Shanghai Institute of Foreign Trade who, in early 1985,
first proposed to the Chinese central government that China’s GATT
membership be resumed. This was followed by the establishment of a
Shanghai Research Centre on GATT, which drew upon the expertise of
researchers from Shanghai and other Chinese universities.
The Shanghai WTO Affairs Consultation Centre
(the Centre), sponsored by the Shanghai People’s Municipal Government,
is a professional, non-government consulting institution set up to
provide legal and policy advice on WTO affairs, as well as WTO-related
training services. Since its establishment, the Centre has contributed
greatly to the fulfilment of China’s WTO accession commitments,
especially through support given to the central and regional governments
in their adaptation to the WTO regime.
This case study examines the underlying
rationale for the establishment of the Centre, the people in Shanghai
and elsewhere who have contributed to the work of the Centre and the
challenges faced by the Centre since its establishment. It is overall a
story about how local government (supported by the central government)
has been able to work with universities and trading enterprises
successfully to establish and maintain an institution that is a model
within China for how to organize to take full advantage of WTO
membership. It is a model that should also be adaptable to other
countries’ situations.
II. The local and
external players and their roles back to top
A combination of external
developments and local visionaries contributed to the eventual
establishment of the Centre. Even then, it was not a project that could
be realized overnight. In retrospect, Shanghai was probably the only
city in China where progressive local government officials, academics
and the business community could have achieved the critical mass
necessary to set the Centre’s establishment in motion in the pre-WTO
period.
When China and the European
Union (EU) reached bilateral agreement on the terms of China’s WTO
accession and signed an accord to this effect in May 2000, it became
clear that China’s WTO accession process was being accelerated. At the
important annual Chinese central government Economy Work Meeting, the
then President Jiang Zemin and Premier Zhu Rong ji declared that
preparation for WTO accession should be actively carried forward. To
step up preparation for WTO accession, the Development Research Centre
of the Shanghai People’s Municipal Government, the Shanghai Planning
Commission, the Shanghai Economy Commission and the Shanghai Foreign
Relations and Trade Commission led the development of a ‘Shanghai
Action Plan Regarding China’s Accession to WTO’, which contained
eighteen guidelines on WTO accession preparation. The publication of
this action plan by the municipal government in August 2000 symbolized
an important shift in Shanghai’s WTO preparation work from a research
phase to a more active implementation phase.
One of the major initiatives
of the Action Plan was to set up a professional WTO consulting institute
in Shanghai. In October 2000 this initiative culminated in the founding
of the Shanghai WTO Affairs Consultation Centre. Those core individuals
who planned the organization and activities of the Centre in these early
days decided that the broad scope of the Centre’s planned activities
called for a management team that would be interdisciplinary in nature.
In line with this thinking, the chief officers of the key divisions of
the Centre come primarily from Fudan University, the East China
Institute of Politics and Law and the Shanghai Institute of Foreign
Trade. All of these individuals work for the Centre on a contract basis.
Overall, there are six divisions in the Centre: the Consulting Services
Division, the Information Services Division, the Training Services
Division, the Monitoring and Early-Warning of Trade Remedy Measures
Division, the Research Services Division and the Post-doctoral Programme
Division. The Centre also has a high-level advisory committee with
members from home and abroad, including the former director general and
deputy directors general of the WTO, and some renowned WTO experts and
scholars from China.
The peak decision-making body of the Centre is
the Board of Trustees, which comprises representatives from Shanghai’s
various WTO-related government departments and industry associations.
Under the leadership of the Board of Trustees, the president of the
Centre takes care of daily business matters. The current president is Dr
Xinkui Wang, who is also the president of the Shanghai Institute of
Foreign Trade.
III. Challenges faced and
the outcomes back to top
During the period in which
China’s GATT status and the Uruguay Round were negotiated, the
Development Research Centre of the Shanghai Municipal People’s
Government arranged for foreign trade and international law specialists
to conduct a number of policy-focused research projects on the
implications for Shanghai of resuming China’s GATT membership and the
Uruguay Agreements. Following the creation of the WTO in 1995, these
specialists extended their work to cover issues related to the General
Agreement on Trade in Services (GATS) and the Agreement on Trade-Related
Aspects of Intellectual Property Rights (TRIPS).
Research experts in Shanghai
continued their work after the WTO’s establishment and began to focus
on the eventual implications for China and their region of the country’s
planned accession to the WTO. Through the research and monitoring of the
negotiations, it became clear that joining the WTO and adequately
implementing the commitments that China would be asked to undertake
would not be an easy task. In the late 1990s it was also becoming clear
that China’s growing industrial export base and highly competitive
position in world markets would increasingly subject Chinese exporters
to trade harassment in other markets — in particular to anti-dumping
actions where China was often discriminatorily treated as a non-market
economy.
In response to this research,
the Shanghai Municipal People’s Government recognized that Shanghai’s
preparation for China’s WTO accession needed to be made as early as
possible, and that further and more detailed work was needed on the
challenges and opportunities that would follow accession. This work was
initiated by the Development Research Centre of the Shanghai Municipal
People’s Government, the Shanghai Planning Commission, the Shanghai
Economy Commission and the Shanghai Foreign Relations and Trade
Commission, and was undertaken by a number of departments and WTO
specialists. A research report on the impact on Shanghai of China’s
WTO accession was completed by the time the Sino-US WTO accession
agreement was signed in November 1999.
When the decision was finally
made on 26 October 2000 to establish the Shanghai WTO Affairs
Consultation Centre, it was done purposefully, with the Centre being
backed both by a written constitution and also by a clear statement of
its mandate. In the documentation issued at that time by the original
executives of the Centre, it was described as being the new ‘driving
force behind Shanghai’s endeavour to turn itself into “One dragon
head and three centres” and provide the city greater room for growth
in the world’. The objective of the Centre was clearly described as
taking active measures to cope with the opportunities and challenges
that Shanghai would face after accession to the WTO. It was decided at
the start that, constitutionally, the Centre’s main functions would be
to provide training, information, study, information and legal aid
services which are related to WTO affairs; to assist governments,
enterprises and public institutions to familiarize themselves with and
to adopt practices that are in accordance with the relevant WTO rules;
and to expand trade and economic co-operation with other countries
around the world.
From the outset, the presence
of the Centre appears to have been beneficial for Shanghai, in view of
the clear need to strengthen and promote both Shanghai’s and China’s
very important WTO accession-related work. In this respect, the Shanghai
Municipal People’s Government has made a point of consulting the
Centre before promulgating its WTO-related regulations and policies. The
Centre has also received strong praise for its work from abroad. The
embassies of WTO members — including those of the United States, the
European Union, Japan and Australia — have all communicated actively
with the Centre. Indeed, the Centre has become a significant channel for
communicating information related to WTO affairs.
In terms of its operations,
the Centre provides the following major services to governments,
enterprises and the public:
-
Consultancy services. Since its foundation, the
Centre has provided consultancy services in relation to the central
government’s participation in WTO multilateral trade negotiations;
supported the central government in efforts to modify laws and
regulations to conform with China’s accession commitments;
supported local enterprises in defending their rights under WTO
rules through remedies such as anti-dumping and other safeguard
measures; formulated development blueprints for domestic enterprises
to cope with various trade barriers; and provided early warning in
relation to anti-dumping or other safeguard measures. The ‘WTO
Consultation Online Hotline’ set up by the Centre has also become
a major resource for its stakeholders.
- Information services.
The Centre has been collecting and disseminating WTO-related
information through various channels since its establishment, and
has become an important information source for the central and
regional governments, enterprises and scholars alike. The Centre’s
website(1)
reports WTO-related news from both home and abroad. Its ‘WTO
Reference Centre in Shanghai’, set up by the WTO Secretariat, has
become the major collection of WTO-related materials in Shanghai.
The WTO Newsletter edited by the Centre is issued every two
weeks, and covers a wide range of both domestic and foreign WTO-related
news. The Centre also translates and publishes the WTO Appellate
Body’s reports and other monographs concerning WTO issues on an
annual basis, to provide its readership with a timely and in-depth
understanding of WTO affairs.
- Training services. The
Centre provides training programmes on WTO affairs for various WTO
specialists and participants, such as government officials and
lawyers. Since 2001, the Centre has delivered the ‘50/100 Senior
Expertise Training Project on WTO Affairs’ to more than 1, 000
trainees. More than one hundred of these trainees have undergone
further professional training in other major WTO member countries.
Some of these have returned to take up key WTO-related posts in
government and business enterprises.
- Research work. The
Centre benefits from a far-reaching research network made up of
doctorate advisers, professors, and well-known experts and scholars
in China and overseas who collaborate in their research into WTO-related
issues.
- Forum on WTO affairs. A
major success of the Centre over the years has been the
establishment of its annual WTO affairs forum as a globally
recognized forum on China and WTO issues. An initiative of the
municipal government, the WTO affairs forum takes place annually in
November during the Shanghai International Industrial Fair. Advisors
to the Centre and WTO experts from China and overseas are invited to
the Centre for the forum, which provides a unique opportunity to
review the problems and opportunities associated with China’s
progress in realizing the benefits of WTO membership.
- In providing its
information and consultancy services the Centre relies heavily on a
network of WTO liaison officers in government, business enterprises,
intermediary organizations, industry associations and related
departments across Shanghai. This provides the Centre with both a
feedback mechanism on the state of compliance with WTO accession
requirements and, potentially, a vehicle for addressing particular
issues that arise in this context. To the extent that such problems
are then addressed, this has the potential to result in far-reaching
improvements to Shanghai’s business environment.
- The practical
orientation and value of the Centre are illustrated by two case
studies on issues on which it has focused in recent years. Both the
case studies addressed here demonstrate not only the expertise
developed by the Centre on WTO issues over the years but also the
direct and practical ways in which enterprises can benefit from the
Centre’s expertise.
Case study 1: automobiles — auctioning licence plates and national treatment
back to top
In Shanghai, individuals
seeking to purchase and register an automobile for their own use must
obtain a licence plate for the proposed vehicle through a monthly
auction conducted by the municipal government authorities. The system is
designed both to reduce the total number of automobiles released onto
the streets of the city at any one time and also to act as an important
revenue source for the municipality. The reasons for the auction are
domestic, and nothing in the system is supposed to be designed in a way
that would affect international trade.
On 7 August 2002, US consulate
staff informed the Centre that, to their knowledge, Shanghai’s monthly
licence plate auction for individual and private-company buyers was
relying on one method of auctioning and allocating licence plates for
domestically produced cars and that another method was being employed in
the case of licence plate auctions for imported cars. The US authorities
alleged that the imported cars were being subjected to discriminatory
treatment that adversely affected market access for imports.
After being informed of the
allegations, the Centre’s specialists immediately began an
investigation, and notified the Shanghai Municipal Development Planning
Commission. An examination of the July auction rule used by the Shanghai
International Commodity Auction Co. Ltd, as outlined on its website,
showed that plans called for 3, 000 licence plates for domestically
produced cars to be auctioned, compared with just thirty licence plates
for imported cars. On further investigation it also became apparent that
the Commodity Auction Co. had set a floor price at auction for imported
cars (26, 000 yuan), but that no similar floor price existed in the case
of domestically made cars. The practical effect was that domestically
made cars were available at considerably lower prices (the average
winning sealed bid at auction was 20, 904 yuan).
In terms of the relevant laws
and regulations, the Centre’s specialists acknowledged that the
Chinese government’s accession commitments required imported cars and
auto parts to be given ‘national treatment’. The Centre’s
specialists also recognized that there was an indispensable relationship
between a car and its licence plate, such that any restriction applied
to a licence plate also applied to the car. Accordingly, given the WTO
national treatment principle(2) and the general elimination of quantitative
restrictions,(3) the different systems put in place by the regional
government for the acquisition of domestically made and imported cars
resulted in different treatment and were therefore inconsistent with
China’s WTO commitments. Under WTO rules, this had a direct effect on
the extent to which the Chinese government was meeting its WTO
obligations, as it is responsible for abolishing ‘regional
regulations, rules and other regional measures that contradict WTO
obligations and duties’.(4)
To avert a potential trade
dispute and protect Shanghai’s reputation as a place to do business,
the Centre was committed to addressing this particular example of
non-compliance. It entered into negotiations with the Shanghai Municipal
Development Planning Commission and suggested that any different
treatment by the licence plate auctioning systems be discontinued. As a
result, since October 2002 there has been no floor price for imported
cars and no difference between domestically produced and imported cars
in terms of limits placed on the number of cars auctioned.
In this case, the Centre’s
approach was to build up a contact network, and seek a number of
opinions on whether the relevant laws and regulations were in line with
WTO rules. This included the opinions of representatives of foreign
enterprises. At the same time, the Centre carried out its own
investigations and analysis, and was able to work with the relevant
government departments on a quick and practical solution. In this
respect, the Centre was an important link between government departments
and the business sector.
Case study 2: an early-warning
system for anti-dumping disputes in China back to top
China’s enterprises have
exploded onto the international trade scene in recent years and have
rapidly established major footholds in most major export markets. By the
end of 2003, China’s total trade volume reached US$850 billion. At the
same time, Chinese exporters became the number one target of trade
remedy measures taken by other governments around the world. Based on
official statistics, counting from the first anti-dumping action taken
against Chinese exporters in 1979 up to July 2004, Chinese exporters
have been subjected to a total of 643 investigations covering regular
and specific trade remedy measures initiated by thirty-four countries
and regional groupings. More than 4, 000 individual export products have
been involved in these investigations.
While there has been this
steep rise in trade remedy cases against China, many Chinese exporters
lack the knowledge of the trade rules or the financial resources
required to defend their interests. The Shanghai municipal government
and the Centre recognized trade remedy actions early on as an area where
the Centre could provide practical assistance to Chinese manufacturers
and exporters. Working with the Ministry of Commerce in Beijing (MOFCOM)
and with the Shanghai municipal government, the Centre started a project
in mid-2002 aimed at developing a monitoring and early warning system on
trade remedy measures with the objective of providing professional
services to governments, exporters, manufacturers, chambers of commerce
and trade associations.
Under the leadership of Dr
Wang Xinkui, president of the Centre, Dr Yao Weiqun, associate
president, and his professional team at the Centre were charged with
developing a unique online monitoring and early warning system on trade
remedy measures against China based on the use of information
technologies. Prior to implementing the system in practice, the design
team proceeded in phases. In the first phase of the design stage
(Version 1.0, setting the United States as its subject), the monitoring
and early warning system (V1.0) covers bilateral trade conflicts between
China and the United States involving anti-dumping, and all the past and
ongoing cases in this field are analyzed online to provide basic
information for an early warning of future possible conflicts. At the
same time a sub-system of this Version 1.0 was developed for
transitional textiles safeguard measures taken by the United States
against Chinese textile exports.
Over a two-year development
period, the team gained a rich experience working with companies,
chambers of commerce, trade associations and other professional services
as it sought to hone its information technology interface with aspects
of economic and trade patterns in combination with WTO rules. Over time,
a system has gradually evolved that integrates computer science with the
operation of trade and economic variables. In July 2003 the Centre
launched the two prototype early warning systems in trial form. The
first sign of success came with the issuance by the Centre’s experts
of an early warning report based on a petition by six US textile
manufacturers’ associations to the US Department of Commerce, aimed at
initiating a procedure for transitional textile safeguard measures.
In June 2004 the Centre
announced the establishment of V1.0 for anti-dumping disputes between
China and the United States, in response to the increasing number of
anti-dumping disputes with developed countries following China’s WTO
accession (WTO statistics show that of 2, 416 anti-dumping cases being
investigated at the end of 2003, about one-seventh involve China).
In its first stage, the V1.0
system covers 189 varieties of export goods in eighteen categories
(mainly textiles, home appliances, steel and furniture) which are
contained in the items accounting for some 60 per cent of China’s
annual total exports to the United States. Registered companies receive
information on the quantity, future prices and dumping margins of
Chinese products exported to the United States. Companies can also
obtain monitoring reports on US trade remedy measures, and receive
training services to help them respond to anti-dumping investigations or
charges. They can register as members and access the information by
logging on to two websites.(5)
One measure of the Shanghai
Centre’s success with the system is news that the Chinese Ministry of
Commerce is now considering plans to develop early-warning systems on
trade disputes in other major harbour cities, as a precursor to a
nationwide world trade services system.
IV. The Shanghai WTO
Affairs Consultation Centre: lessons for others back to top
The Shanghai WTO Affairs
Consultation Centre is practically unique in the world in terms of its
organization, focus and role. It is an important example of how
government, business, academia and outside experts can think ahead to
both the problems and opportunities likely to arise in connection with
participation in the WTO system and then take action to organize
themselves to deal with these problems and opportunities.
Although China is a developing
country, Shanghai is undoubtedly a relatively rich region, both within
China and in comparison with many other areas around the world. Clearly,
there may not be many others (inside or outside China) with the
resources to develop the high technology trade remedy measures
early-warning system that the Centre has put into place. But there are
surely less resource-intensive alternatives that could still provide
value for money as government, business and outside experts work
together to provide practical assistance to those seeking to draw
maximum benefit from the rights and obligations of the WTO system.
Within China, the Shanghai Centre has been
recognized both by the central government in Beijing and by other
neighbouring authorities as a valuable model for co-operation. The
Centre’s influence, therefore, is not limited to Shanghai but extends
throughout China and beyond. Its experience vindicates the decision by
the Shanghai Municipal People’s Government to establish the Centre.
Its example is one that could be followed by other countries striving
for WTO membership, as well as those already in the WTO seeking to draw
greater benefit from the opportunities provided by the multilateral
trading system.
NOTES:
1.- www.sccwto.net. back to text
2.- GATT Art. III (national treatment) states:
‘The contracting parties recognize that internal taxes and other
internal charges, and laws, regulations and requirements affecting the
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.’ back to text
3.- GATT Art. XI (General Elimination of
Quantitative Restrictions) states: ‘No prohibitions or restrictions
other than duties, taxes or other charges, whether made effective
through quotas, import or export licences or other measures, shall be
instituted or maintained by any contracting party on the importation of
any product of the territory of any other contracting party or on the
exportation or sale for export of any product destined for the territory
of any other contracting party.’ back to text
4.- Report of the Working Party on the
Accession of China, para. 70. back to text
5.- www.sccwto.net and www.shcei.gov.cn. back to text
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* Chief Officer for Information Services, Shanghai WTO Affairs
Consultation Centre.
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