Australia-China Chamber of Commerce and Industry
of New South Wales









Economic Co-operation Between China and Australia:

How Important Is It?

20 September 2001


Is a bilateral treaty necessary?

Why worry about procedures?

Will China’s evolving legal system change the approach?

What should be included in an “umbrella” agreement?

Why should non-government organisations be included?

Reference sources



For some time the Chamber advocated a bilateral treaty for trade and economic co-operation between Australia and China. 

We recently received a media release from Senator Cook, Shadow Minister for Trade, which stated:

Senator Cook said Labor will seek China’s agreement to negotiate a bilateral Trade Treaty [with China] early in the first term of a Beazley Government, aimed at maximising the economic and trade opportunities that accession [to the WTO] will bring.

It therefore seems appropriate to expand the views of the Chamber and to explain more completely why we think it is important.

Is it necessary?

Why is a bilateral treaty necessary now that China is about to become a member of the WTO?

The simple answer is that a bilateral treaty can include various aspects of trade and economic relations that are not formally part of WTO activities.  We mention some of these in the text following, but a statement as to what is derived from the WTO system might help to clarify the issue.

Three points emerged from the Chamber’s Roundtable Discussion on Australia’s Trade and Aid Policies with China (24 November 2000 – Morning Session), a summary of which is available on this Internet site: http:///

v      The aspect of the WTO and that is particularly important to Australia is the capacity for negotiations on trade liberalisation to proceed simultaneously on a multi-nation and multi-sector basis.  A relaxation of trade barriers on agriculture, for example, may require that the proponents of a more liberal agricultural trading system agree to trade concessions in other sectors, such as services or intellectual property rights. 

v      The binding nature of the WTO agreements gives some assurance that negotiated arrangements, generally with an assortment of concessions, will be adhered to after agreement is reached.  Without this, the often-protracted negotiations may not be taken seriously and the entire process may appear uncertain and questionable.

v      The dispute resolution procedure of WTO is an integral part of the binding nature of the WTO agreements but is not a major justification for the agreements, which is, put simply, to reduce tariff and non-tariff barriers to trade.

Moreover, it was noted at the roundtable discussion that:

v      Direct government-to-government contact among members of the WTO or of regional trade groupings assists in identifying potential constraints to further liberalisation and, when accumulated across all bilateral discussions, often sets the agenda for regional and global negotiations. 

v      Bilateral discussions are also of vital importance in resolving disagreements over trade and trading conditions before they require the use of an adversarial-based dispute-resolution procedure.  These discussions can also pick up trade issues that are not part of regional or multilateral agendas.

We believe that the most important element in a trade and economic co-operation agreement with China is the establishment of a procedure or structure for a mutually beneficial development of trade and economic relations. 

Why worry about procedures?

Why is the establishment of a procedure or structure important?

Despite a substantial amount of decentralisation of governmental responsibilities in China, the establishment of priorities and policy directions remains very much “top down”.  We like the way the underlying conditions for this were stated by Peter R. Moody Jr, professor of government and international studies at the University of Notre Dame, as published by ChinaOnline, (14 August 2001):

[T]he post-Mao reforms resulted in a softening of political authority.  Economic reform required some separation of the economy from political control and brought divisions of interest among politics, economy, and society, with unintended consequences for morals and morale.

Reform meant the abandonment of egalitarianism: in order for all to prosper, some had to get rich more quickly than others.  There has developed a polarisation of rich and poor.  Now it is necessary to pay more attention to fairness.

In practice the economy was only partly depoliticised.  Control over existing economic enterprises passed not into private hands but had frequently been devolved to local governments, whose officials might use the profits to line their own pockets or to resist direction from the centre.

As Moody did, we also observed an increase in what he called a “leftist revival in the face of China’s growing social problems; and increasing numbers of intellectuals were daring once again to openly criticise the authorities on liberal grounds”.  Perhaps in response to this “revival” the state apparatus in China was recently strengthened by clarifying the hierarchy of law-making authority.

We stated in Newsletter No. 16 (10 March 2000) that:

The Legislation Law [adopted by the 3rd Session of the Ninth National People's Congress on March 15, 2000] is intended to codify the law-making powers of the various bodies and therefore provides the first step in a separation of legislative power that is generally available in most federal systems of government through a constitution.

However, as with many other areas of Sino-Western comparison, the new law has definite Chinese characteristics.  It gives explicit recognition of the right of lower level governments to enact laws that are not available nationally, but the lower level governments must alter any such laws to conform to those that are subsequently enacted as national laws.

The Legislation Law also specifies that the power to interpret laws is limited to the Supreme People's Court.  If prosecutors disagree with the court's interpretation, they may take their disputes to the National People’s Congress for resolution. 

The implementation of the priorities and policy directions that are established at the central government level in China occurs mainly at the lower levels of government (provincial and municipal/county governments).  Economic co-operation between Australia and China requires that government agencies and non-government organisations in Australia fit into these various levels of government in China.

We believe this “fitting in” process cannot be effectively achieved without an “umbrella” procedure or structure that gives official recognition to the task of “fitting in”.  The procedure contained in a bilateral treaty for trade and economic co-operation is therefore essential in order to achieve trade and economic relations that can be tailored to changing needs and circumstances.

Will China’s evolving legal system change the approach?


Is it not possible that the “top down” approach to priorities and policy directions will change in China as it moves more completely into a system of “rule by law”?

The system in China is evolving and this evolution will have an impact on the way priorities and policy directions are set.  This change is nevertheless certain to be gradual.  A framework or “umbrella” for bilateral relations must evolve in a corresponding way, but that cannot occur if such a framework does not exist.

Experience elsewhere has shown that the judicial system in a nation with a one-party authoritarian system has considerable difficulty in retaining independence, either in appearance or in fact.  The reason should be obvious.  If a ruling executive is almost certain to remain in power for the foreseeable future, it is not easy for the judiciary to ignore entirely the stated expectations of the ruling executive.

While judicial independence in China may be difficult, the view we take is that a workable degree of independence is not impossible.  By “workable degree” we mean a sufficient amount of independence to instil confidence in the judicial system as an effective way of resolving disputes and in achieving fairness and equity in the treatment of the citizens of that nation.

As a result of the importance we attach to this issue, we recommended in 1999 (refer to the document at: that China should consider establishing a Chinese Academy of Law, which would act in a manner similar to the Chinese Academy of Science and the Chinese Academy of Social Science.  These academies are of course linked to the central government, but they have nevertheless gained a reputation within the global community for their high degree of dedication and professionalism. 

Perhaps more importantly, the academies generally work outside the formal Party structure in China.  We believe that such an organisation could work with provincial academies of law and make substantial contributions to improving the legal institutions without requiring a change that would be revolutionary in the context of the existing system in China.

We also believe that this would contribute significantly to trade and investment relations.

What should be included in an “umbrella” agreement?

What type of procedure or structure should be sought in a trade and economic co-operation treaty?

A satisfactory structure exists at the present time for central government departments and agencies in Australia and China to “fit together”.  This includes the Department of Foreign Affairs and Trade, Australian Agency for International Development (AusAID) and Austrade, as well as related institutions such as the Australian Centre for International Agricultural Research (ACIAR).

A similar structure does not exist for lower level governments.  This is of course not surprising since foreign trade powers in Australia are assigned to the Federal Government, but no such assignment exists in China.

Sister state and sister city relations provide the only official linkages between lower level governments in Australia and China.  We are currently preparing a summary of these relations and will try to make it available on the Internet by the end of October.  For the present discussion, we note that these relations have provided limited coverage of trade and investment matters and should be strengthened.

Data presented in our report on the Chamber’s Key Cities Strategy show that many provinces in China have a population that exceeds the entire population of Australia by a substantial margin.  This seems to bother Australians more than it bothers the Chinese.  The latter specifically seek comparable levels within a familiar hierarchy, and place relatively little weight on differences in size. 

We believe that a greater amount of coordination among levels of government in Australia can be achieved without encroaching on constitutional powers.  We recognise that a separation of powers requires a separation of responsibility and accountability.  This tends to work against constructive coordination among groups that are answerable according to distinctly different sets of rules. 

This, in itself, underscores our belief that a special-purpose treaty is needed in order to clarify and to codify the nature of the cross-institutional interactions. 

Why should non-government organisations be included?:

Why are non-government organisations in Australia and China important to the desired structure for trade and economic co-operation?

Jiang Zemin’s recent announcement of the “Three Represents” gives an indication of current priorities within the Chinese Communist Party (CCP).  It stated that the Party should represent China’s:

v      most advanced productive forces,

v      the most advanced modern culture, and

v      the interest of the people.

Western observers tend to shrug off such statements since they appear to be reiterative and are generally presented without a plan or strategy for achieving the stated objectives.  To understand them, it is necessary to consider what was stated before and to note what is stated later. 

We again use a quote from Moody (referred to above):

Democracy, the theory goes [in China], rests on a middle class; a middle class is produced by economic development; economic development follows from a market economy; and a market economy requires a state strong enough to repress special interests whose demands distort the free functioning of the market.

The interest of the people (or the “will of the people” in Western terminology) is to be assessed by the Party, but it cannot be determined solely from information that arises from within the Party. 

It is generally known that neighbourhood committees comprised a basic building block for the Party’s “information system” during the Maoist era.  Over time, these committees became “snoopers” and the information supplied to them by the neighbourhood was carefully filtered.  The “interest of the people” was therefore distorted and eventually become the “interest of the Party elite”.

The CCP cannot afford to allow this to happen again.  This means that a multiplicity of “basic building blocks” will be needed to allow a diversified expression of interest within a stable institutional framework.  The Party’s task of determining which of these interests are “special” and which are “common” will not be made easier by this multiplicity, but that assessment will be much more credible.

We believe that non-government organisations (NGOs) in Australia, especially industry associations and all others with a focus on trade and commercial activities, can make a contribution to the institutional strengthening that will be required in China.  Since multiplicity is a critical element for China, it should also be reflected in Australian NGO participation. 

The “umbrella” agreement need not specify this multiplicity.  It need only make official the instrumental role of the NGOs and establish a means for “fitting in” those who offer their participation.


Further Commentaries:

The issues relating to democratic institutions, governance, human rights and legal systems are much more extensive, and intensive, than we are able to include in this report.  The Chamber encourages discussions on these issues and would welcome contributions from readers.

We have no formal restrictions on the type of contributions that we might want to publish, but we nevertheless think it is desirable to give a few basic guidelines:

v      We prefer commentaries that have an eventual connection with trade, investment and economic co-operation.  The last of these includes anything that has an identifiable economic outcome, even if other outcomes (such as political, social or cultural) are associated with it.

v      We expect a liberal amount of realism in the commentaries.  For example, it is undeniable that the CCP has survived, and any comments about its present or future role in China should recognise that fact.

v      We will exercise “due diligence” in references to information we post to the Internet site.  For example, we contacted Peter J. Moody Jr, whose work we quoted, to inform him that we were doing so, and thus allow him the opportunity to be disassociated with this report if he chose to do so.

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