ON RECENT DEVELOPMENTS
Economic Co-operation Between China and Australia:
How Important Is It?
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.
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:///www.accci.com.au/trade/rt1sum.htm:
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.
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.
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:
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
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.
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, http://www.chinaonline.com
(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
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.
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
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
As a result of the importance we
attach to this issue, we recommended in 1999 (refer to the document at: http://www.accci.com.au/trade/lawsem.htm)
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.
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
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.
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:
most advanced productive forces,
the most advanced modern culture, and
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
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
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.
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
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
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