China's Safeguard Measures Under the New WTO Framework
Fordham International Law Journal
Copyright c 2001 by the authors. Fordham International Law Journal is produced by The Berkeley Electronic Press (bepress). http://ir.lawnet.fordham.edu/ilj
China’s Safeguard Measures Under the New
Lihu Chen and Yun Gu
This Essay inquires into the nature of China’s new safeguard regulation, its significance in
China’s new trade regime, and, in the authors’ view, some of its shortcomings. Part I gives a brief
overview of the purpose of safeguard measures and the place of safeguard regulations in China’s
new trade regime. Part II describes some of the challenges that China’s producers will face in the
wake of the newly liberalized domestic market, and observes that the use of safeguard measures
will become both necessary and important in the coming years in order to facilitate adjustment
to this new environment. Part III, for the benefit of interested readers who do not otherwise have
access to Chinese law, provides a brief overview of the primary component of China’s safeguard
Lihu Chen* Yun Gu**
On November 10, 2001, the Ministerial Conference of the
World Trade Organization ("WTO") in Doha required only
eight minutes to approve China as a full member of the largest
international trade organization, with more than 140 members.'
This satisfying ending concluded China's fifteen-year odyssey
seeking admission to the WTO. Just sixteen days later, the State
Council, China's chief executive branch, published the first
regulation specific to safeguard measures, PRC Regulation on
Safeguard Measures.2 This swift implementation by the Chinese
central government can be viewed as a sign of its acute awareness of
the challenges ahead, as well as a solid first step towards the
thorough transformation of the government's administrative and
legislative processes in order to comply with WTO requirements.
China's safeguard regulation came into force onJanuary 1, 2002.
Because of its newness, and the newness of China's trade policy
reforms, many questions have arisen as to the regulation's
nature and significance.
This Essay will inquire into the nature of China's new
safeguard regulation, its significance in China's new trade regime,
and, in our view, some of its shortcomings. Part I gives a brief
overview of the purpose of safeguard measures, and the place of
safeguard regulations in China's new trade regime. Part II
describes some of the challenges that China's producers will face in
* Professor of Law, Suzhou University Law School.
** Teaching Fellow, Masters of Law, Suzhou University Law School.
1. Press Release, World Trade Organization, WTO Ministerial Conference
Approves China's Accession (Nov. 10, 2001), available at http://www.wto.org/english/
2. PRC Regulation on Safeguard Measures, PEOPLE'S DAILY, Dec.
http://www.people.com.cn/GB/paper464/4948/531473.html (Chinese version).
the wake of the newly liberalized domestic market, and observes
that the use of safeguard measures will become both necessary
and important .in the coming years in order to facilitate
adjustment to this new environment. Part III, for the benefit of
interested readers who do not otherwise have access to Chinese law,
provides a brief overview of the primary components of China's
I. INTRODUCTION OF SAFEGUARD MEASURES IN CHINA
When increased import of a product constitutes a
substantial cause of serious injury to domestic industry, safeguard
measures allow the importing country to "escape" from its
obligations under international trade agreements in order to give
affected industries temporary relief from competition. This
"escape" enables them to adjust to heightened import levels.
Safeguard measures are used by many countries as an effective
means of protecting domestic industry.
Under the WTO framework, safeguard measures were
originally allowed by Article 19 of the 1947 General Agreement on
Tariffs and Trade ("GATT").' More recently, the WTO
Agreement on Safeguards has clarified and elaborated the basic rules
of GATT Article 19.' Safeguard measures are one in an array of
"extraordinary" protective measures under WTO agreements
that governments are permitted to impose on imported goods.
The most significant other measures include antidumping
duties, which are imposed on imports that are deemed by the
importing government to be sold at less than normal value in the
importing market in a way that damages domestic industry; and
countervailing duties, which are imposed on imports that are
deemed by the importing government to have been produced
with unfair subsidies in the exporting State.
Like "antidumping" and "countervailing" measures,
safeguard measures are imposed in order to protect domestic
industry against import competition. Also, like these other kinds of
protections, safeguards can only be imposed if the imports are
3. See World Trade Organisation, The Agreements: Anti-dumping, Subsidies,
Safeguards: Contingencies, etc., availableat http://www.wto.org/english/thewtoe/whatise/
4. World Trade Organisation, Agreement on Safeguards, available at http://www.wto.
shown either to have injured or threaten to injure domestic
. An important difference, however, takes us right to the
heart of safeguard measures: safeguard measures aim to deal
with the import increase under conditions of normal market
competition. That is, unlike countervailing or antidumping duties,
safeguards do not offset an "abnormal" or "unfair" trade act by
foreign producers or foreign governments.
There are other differences in the rules relating to
safeguard measures that flow from this unique quality. In principle,
safeguard measures cannot be targeted at imports from a
particular country, and safeguard investigations should not be country
specific. In addition, a higher level of injury-"serious injury,"
as opposed to "material injury" for antidumping and
countervailing duties-must be shown in order to justify the imposition
of safeguards. Thus, the criteria for safeguards are stricter than
those for antidumping and countervailing measures.
These parameters arouind safeguard proceedings flow from
the WTO framework. Thus, WTO obligations ensure a certain
uniformity and consistency in the use of safeguards by member
governments. In addition, the WTO Agreement on Safeguards
establishes certain minimal procedural requirements, as well as a
general obligation of transparency, to avoid the arbitrary use of
safeguard investigations by Member States.'
China's efforts to build a domestic safeguard framework
date from 1994, the year in which China adopted its Foreign
Trade Law6 as part of a series of preparatory reforms in
anticipation of its entry into the WTO. Article 29 of Foreign Trade Law
therefore provides that "where a product is imported in such
increased quantities as to cause or threaten to cause'serious injury
to domestic producers of like or directly competitive products,
the State may take necessary safeguard measures to remove or
ease such injury or threat of injury."7
In this law, China recognized safeguard measures as one of
its fundamental methods of regulating foreign trade. However,
after the Foreign Trade Law was enacted, a chilly period of
6. Foreign Trade Law (China), available at http://www.rhwx.com/bl/bl03-3.htm
7. Id. art. 29 (author's trans.).
lence followed in which the central government failed to adopt
the necessary subsidiary laws and regulations to implement
Article 32.8 Without concrete guidelines for the implementing
agency and an investigation procedure, the operation of the
safeguard framework is impossible. Indeed, prior to the
identification of the Chinese Ministry of Foreign Trade and Economic
Cooperation ("MOFTEC") in the PRC Safeguards Regulation,
no implementing agency or procedures for safeguards against
imports into China had been established.9
The WTO Agreement on Safeguards clearly stipulates that
each member shall adopt appropriate domestic legislation
before it imposes safeguard measures. Such legislation shall
identify an agency that will carry out the investigation and will
establish detailed guidelines for the procedures and forms of
safeguards to be imposed. In line with the WTO transparency
principle, the Chinese government should implement its rules
and regulations concerned with trade in a uniform, impartial,
and reasonable manner. It should also underscore the
importance of establishing judicial, arbitration, and administrative
procedures for the review and control of the agencies charged with
trade and customs policy. Given this obligation, China's
enactment of the PRC Regulation on Safeguard Measures is a step
forward by the central government to conform to its obligations
under WTO rules.
II. REALITY BEHIND CHINA 'S SAFEGUARD MEASURES
In the two decades since China inaugurated its economic
liberalization reforms, China has steadfastly adhered to the
policy of opening up to the outside world, developed foreign trade,
and actively attracted foreign investment. Despite this general
8. The Law set forth the basic conditions for implementation. Article 32 provides:
"the authority or agency designated by the State Council shall conduct investigations
and make determinations in accordance with relevant laws and administrative
regulations." It is clear, then, that the agency delegated by the State Council has the full
authority to investigate the increased import products and the damage on domestic
industry they caused, and issue a decision accordingly. However, no concrete
delegations have been made to any agency.
9. However, China's export product has been the target of safeguard measures
investigations by foreign governments. For example, both the Sino-South Korea Garlic
Case in 2000 and the Sino-Japan Green Chinese Onion Case in 2001, were settled by
MOFTEC through bilateral consultation and negotiation with its Japanese and Korean
climate of liberalization, important aspects of economic reality
in China's manufacturing and agricultural sectors will likely
create the need for safeguard measures central to China's trade
policy going forward. This section outlines some of the challenges
facing domestic producers in China, their consequent
vulnerabilities to import competition, and the resulting need for
Labor-intensive production occupies a fairly high
proportion of China's industrial economy, while the proportion of high
technology-intensive projects is quite low. Although unremitting
efforts have been made to restructure Chinese industry by
increasing capital investment and restructuring industry
technology (following the national industry policy of "Innovate new
technology, Upgrade Hi-tech industry"), the government alone
will not be able to resolve the significant problems ahead for the
Chinese manufacturing industry. A particular problem for
China is its large State-owned enterprises, which have hindered
China's ability to maintain rapid economic growth. These
enterprises are particularly distressed by problems of low labor
productivity, slow completion of projects, and low profit margins,
and are therefore most in need of the adjustment opportunities
provided by safeguard measures.
Second, China has slowly ceded its traditional comparative
advantage in labor-intensive industries to countries such as
Poland and the Czech Republic in Eastern Europe, whose labor
costs are low and where economic growth has been rapid of late.
This consideration combined with the fact that developing
countries such as India and Brazil have increased their
competitiveness in labor-intensive industries, indicates the pressing
competition and challenges China's industry will have to face.
Third, although the "socialist-market" economic system 1"
10. The "socialist-market" economic system is the goal of China's economic
reform. It was first put forward by the Fourteenth National Congress of the Communist
Party of China ("CPC"), held in 1992, and established Deng Xiaoping's theory of
building socialism with Chinese characteristics as the guiding policy in China. Then it was
adopted into a constitutional amendment at the First Session of the Seventh National
People's Congress on March 29, 1993.
Its principal contents may be summarized as follows: adopting a series of
macroadjustment and control measures to carry out the reform in depth and in all aspects,
has taken shape and the market is increasingly playing a
fundamental role in the allocation of resources in China's domestic
economy; the competition between enterprises is still somewhat
disordered and without clear-cut direction. The government's
macroeconomic policies have not completely solved difficulties
such as overlapping investment and wasted resources. In
general, most Chinese economists are discouraged by the
competitiveness of Chinese manufacturing industry compared with its
Fourth, among the township enterprises,1 ' which constitute
half of China's national economy, the percentage occupied by
public ownership will continue to be the iain form of ownership as various types of
ownership are jointly developed; the operation mechanism of State-owned enterprises
will be further transformed to meet the requirements of the market economy; the
property rights and responsibilities of enterprises will be clearly defined, the functions of the
government separated from those of enterprises, and enterprises scientifically
managed; an open and unified national market system will be established, closely
integrating urban and rural markets, providing for reciprocal flows between domestic and
international markets, and promoting the optimization of resource allocation; changing
the government's functions in economic management and establishing an optimal
macro-regulatory system chiefly employing indirect means; an income distribution
system based on distribution according to work will be established in which efficiency is
given precedence and fairness in distribution is taken into account; and a multi-tier
social security system will be set up to accelerate the development of China's economy.
The Fifteenth National Congress of the CPC, held in 1997, put forward the
viewpoint that the non'public ownership sector is an important component of China's
socialist economy. Encouraging essential production factors, such as capital and
technology, to participate in the distribution of gains enables the reform of China's economic
system to take bigger steps. Now, China's socialist market economy system is being set
up, the basic functions of the market in resource allocation have been obviously
strengthened, and the initial framework of the macro-adjustment and control system
has taken shape. By 2010, China will have established a comparatively sound socialist
market economy, which will be comparatively mature by 2020.
11. The term "township enterprises," according to the PRC Township Enterprises
Law, which was enacted on October 29, 1996, refers to enterprises to be run by
townships or villages, and includes a wide range of cooperative and individual enterprises
owned, financed, or run by farmers, defined as the rural population, or by the township
or village government. As national statistics indicate, the term is also used to cover
collectively and individually owned enterprises (as well as self-employed persons) if they
have registered at the offices of industry and commerce and are run by farmers.
Township enterprises cover manufacturing, construction, mining, transport and
communications, commerce, services, and other businesses. The purpose is to undertake the task
to promote economic growth, absorb the surplus rural labor force, and discourage
excessive urban migration. Township enterprises have become the principal force for
revitalizing the rural economy. They succeeded in absorbing 92 million rural workers,
a substantial proportion of the surplus rural labor force from 1978-94. Income from
township enterprises, including taxes retained by counties, townships, and villages, has
become the major source of financial support for local governments.
traditional industry and products is too high while the
percentage occupied by new industry and products is fairly
unremarkable. Industry restructuring, industrial upgrading and
optimization, and improvement of corporate efficiency lag far behind the
demand of the changing structure and composition of market
needs. This conflict is a prominent obstacle in China's
economic development process. 12
Fifth, there are few large-scale conglomeration-forming
enterprises that can fight the tempest of international market
competition. Taking the tobacco industry as an example, it is
obvious that few Chinese tobacco enterprises can compete with
foreign companies such as Philip Morris Companies Incorporated,
although there are now 170 tobacco enterprises and more than
2,000 tobacco trademarks in China. Foreign companies will
cause intense competition in the Chinese domestic market. The
fear in China is that foreign companies view the Chinese market
as a big cake to share amongst themselves, while driving their
Chinese counterparts out of the market by making use of their
disadvantages in competition. 13
Before these five problems facing China's manufacturing
industries can be resolved, China's entry into the WTO, and the
accompanying reduction or elimination of tariffs and non-tariff
barriers to trade, will likely result in the influx of large volumes
of imported goods. These import surges will surely damage
China's domestic industry. Safeguard measures can play a
crucial role in providing fragile domestic industries in China with a
period of protection in which they can grow strong enough to
face foreign competition.
The impact of trade on China's agricultural sector presents
another important consideration. Agriculture is at the. heart of
China's domestic economy. Consequently, its success will ensure
China's economic and political stability. The healthy and steady
growth of the agricultural industry benefits not only farmers, but
also manufacturers who depend on agricultural products. The
Chinese government has paid a lot of attention to agriculture,
and has made heavy investments to modernize agricultural
production. Admittedly, when compared with levels twenty years
ago, large strides have been made in agricultural production. In
some districts, agricultural productivity has even reached fully
modern levels. However, Chinese agriculture continues to face
daunting tasks and problems.
First, eighty percent of the national population works in
agriculture, while fifty percent of the national workforce, around
350 million people, undertakes the whole of national agriculture
production. This situation differs from that of most developed
countries, where the proportion of agricultural workers is
lower.14 Excess labor supply for agriculture and low output
efficiency, combined with the reality that there is not enough land
for all agricultural workers, has created a serious problem of
labor overabundance in the countryside.
Second, Chinese agricultural technology is not on the same
level as that of their foreign counterparts, which results in high
output costs and low international competitiveness.
Third, the household registration and land tenure system 5
in China has caused the scattering of planting, 6 and the degree
of modernization in agriculture remains quite low. Compared
with the high mechanization and large-farm operations of
developed countries, the disadvantages of Chinese agricultural
production methods is glaring.
Fourth, administrative agencies exercise far too much
control over the production and distribution of agricultural
com14. See Song Hong, IndustrialAdvantage, ComparativeAdvantage and Competitive
Advantage: Gains and Painsfrom China's Entry into WTO, 4 INT'L ECON. REV. 7 (1999).
15. The "household registration and land tenure system" refers to the household
contract responsibility system, linking remuneration to output, and beginning the
dismantlement of the people's commune system, eliminating the links between
organizations of State power and economic organizations. Contracting land out to peasants
altered the distribution form of land and mobilized peasants' enthusiasm for
production, which was first introduced in China in 1979. It recognized the land-use rights of
individual households and allocated lands to individual households for a period of
time. The land-users could keep the entire output after fulfilling their tax and other
obligations. In 1993, the Constitution was amended to incorporate this system at the
First Session of the Seventh National People's Congress on March 29, 1993.
16. This system separated the original integrated farm into many parts operated by
different household farms. So, the scale of farm is smaller than before and the planting
is scattered according to the desire of different households.
modities, with the result that prices are often distorted and
adjustment mechanisms of the market are prevented from
From the factors discussed above, we can see that the
current state of Chinese agricultural production is stagnation rather
than development. In the past few years, the government has
implemented welcome increases in technology and capital
production inputs. Nevertheless, the heavy historical burden and
large scale of current industry means that these policies do not
have an obvious short-term effect.' 7 Accession into the WTO
forces the opening up of the domestic agricultural commodity
market and continues a nationwide campaign to eliminate
obsolete laws and regulations contradictory to WTO rules. Also,
Chinese tariff and non-tariff protection on agriculture has to be
abolished. In the face of the tough competition of foreign
agriculture commodities that are of better quality and lower prices,
China's agriculture has to fight a battle that will decide its fate
and future. So, if domestic agricultural products suffer serious
injury or threat of injury by virtue of increased imports of
agricultural commodities, the government will have no choice but to
take possible measures as effective weapons to protect domestic
industry. Safeguard measures are on the top layer of the cabinet
of arms at the government's disposal.
III. NEW SAFEGUARD MEASURES REGULATION IN CHINA
To carry out its promise to abide by the rules of the WTO,
and to adapt to the legislative and development demands of its
new economy, China has revised a number of laws and
regulations and will continue to perfect the legislative system regarding
overseas economic and trade affairs. Among those laws, the PRC
Regulation on Safeguard Measures plays a special role in China's
trade regime. To call it the "cornerstone" of the Chinese foreign
trade system is not overestimating the significance of this new
regulation. As an indication of its significance as an
administrative regulation concerned with foreign transactions, the PRC
Regulation on Safeguard Measures has a total of five chapters
and thirty-five articles. In these articles, the Regulation sets forth
basic principles and concepts. It stipulates the conditions,
inves17. These policies can have a positive long-term effect, such as strengthening
China's agriculture industry.
tigation, forms, time limits, and review of safeguard measures in
an explicit way. This section provides a brief overview of the
major elements of this new legal framework.
Pursuant to the Regulation, there are three conditions to
fulfill before safeguard measures may be initiated. The first
condition is an increase in the quantity of imports that is both
absolute and relative. The second condition is that the increase of
imports causes or threatens to cause serious injury to a domestic
industry that produces like or directly competitive products.
The last condition is that a causal link exists between the
increased imports and the serious injury or threat thereof."8 If all
conditions are met, safeguards can be imposed in a variety of
forms, such as tariffs, quantitative restrictions, and so on.1 9
MOFTEC is in charge of investigating and making a
determination on the increase of imports.2" A second ministry, the State
Economic and Trade Commission, is responsible for the
investigation and determination of injury.21 MOFTEC is also in charge
of consultation, notice, and dispute consultation with foreign
parties. 22 The basic guideline to implement safeguard measures
is to comply with the "fair, open and appropriate" tenet. 23
Chapter One of the PRC Regulation on Safeguard Measures
contains General Provisions that include only two articles. It
provides that the goal of the Regulation is "to promote healthy
development of foreign trade" and the Regulation is
"formulated in accordance with the Foreign Trade Law of the People's
Republic of China."24
Chapter Two lays down guidelines for the safeguard
investigation. Running from Article 3 to Article 16, the guidelines set
18. PRC Regulation on Safeguard Measures, supra note 2, arts. 2, 11.
19. See id. art. 20.
20. See id. art. 21. The Regulation states that:
If the safeguard measures take the form of tariff increases, MOFTEC shall
propose its suggestion and the Tariff Policy Commission of the State Council shall
make a decision based on suggestion of MOFTEC. And MOFTEC shall
publicly announce the ruling. If the safeguard measures take the form of
quantitative restriction, MOErEC shall make a decision and publicly announce the
ruling. The Customs Bureau shall implement above decision from the date
stipulated in the publication.
Id. (author's trans.).
21. See id. art. 6.
22. See, e.g. id. arts. 5, 14, 18, 25, 33.
23. See id. arts. 23, 12, 24.
24. Id. art. 1 (author's trans.).
out two means of initiating an investigative procedure. One
guideline provides that a:
natural person, legal person or their related organizations
concerned with domestic industry (hereinafter referred to as
'the applicant'), may submit a written application for a
safeguard measures investigation to MOFTEC in accordance with
the provisions of this regulation. MOFTEC should examine
ftihlee tahpeplcicasaetiofonr iinnvtiemsteigaantidons.h2o5uld decide whether or not to
The other mode of initiating an investigation is that "if, without
an applicant's written application, [MOFTEC] has sufficient
evidence to believe that the increased import caused injury to
domestic industry, it may decide on its own to file a case for
The notice obligation is stipulated clearly in this chapter.
Under this obligation, MOFTEC must notify the WTO
Committee on Safeguards of its decision to file a case for investigation.
Article 8 establishes a standard to determine whether increased
imports have caused or are threatening to cause serious injury to
a domestic industry. The following factors should be
the rate and amount of the increase in imports of the product
concerned in absolute and relative terms; the share of the
domestic market taken by increased imports; changes in the
level of sales, production, productivity, capacity utilization,
jpurroyfittos adnodmelosstisces,inadnudsterym.2p7loyment; other factors causing
inThis Article also points out that the determination of the
existence of a threat of serious injury shall be based on facts and not
merely on allegation, conjecture, or remote possibility. When
factors other than increased imports are causing injury to the
domestic industry at the same time, such injury shall not be
attributed to the increased imports.28
Another important provision in this chapter sets out the
rules on confidential information. It says:
Any information obtained in investigation which is thought
25. Id. art. 3 (author's trans.).
26. Id. art. 4 (author's trans.).
27. Id. art. 8 (author's trans.).
28. See id. arts. 2, 11.
confidential by its provider, MOFTEC and State Economic
and Trade Commission may treat it as such. If the
application to keep information confidential is reasonable, the
provided information should be treated as confidential and
parties providing confidential information may be requested to
furnish non-confidential summaries thereof. Such
information shall not be disclosed without permission of the party
This Article is significant because it reflects the spirit of the
WTO and incorporates the protection of confidential
information into safeguard measures in China for the first time.
Chapter Three, running from Article 17 to Article 26,
provides the form and procedure of safeguard measures
applications. In addition, this chapter stipulates some quite important
principles of the WTO Agreement on Safeguards. For example,
safeguard measures shall be applied to an imported product
irrespective of its source. 30 Before applying a safeguard measure,
MOFTEC shall provide an adequate opportunity for prior
consultations with those governments with a substantial interest as
exporters of the product concerned. 1
Chapter Four, running from Article 27 to Article 31,
establishes measures for the time limit and review of safeguard
measures. It provides that the period of application of a safeguard
measure shall not exceed four years. However under the
following conditions it may be extended: in conformity with the
procedures set out in this Regulation, that the safeguard measure
continues to be necessary to prevent or remedy serious injury;
that there is evidence that the industry is adjusting; that the
obligation on notification and consultation has been fulfilled; or
that the safeguard measure after extension is not stricter than
the safeguard measure before it. The total period of application
of a safeguard measure and any extension thereof, shall not
exceed eight years. 2
Chapter Five (Article 32 to Article 35) contains a number of
"supplementary provisions" that establish miscellaneous
limitations and guidelines for safeguard investigations. For example,
Chapter Five explicitly states that "the People's Republic of
29. Id. art. 13 (author's trans.).
30. See id. art. 23.
31. See id. art. 25.
32. See id. art. 27 (author's trans.).
China may adopt corresponding measures against any country
or region adopting discriminatory safeguard measures against its
exports. 33 Chapter Five also provides that "MOFTEC is
responsible for all consultation, notification and dispute settlement
concerned with safeguard measures. ' 34 Finally, Chapter Five
allows "MOFTEC and the State Economic and Trade Commission
[to] formulate specific measures in accordance with these
Generally speaking, the content of the Regulation is in
compliance with China's obligations under international trade law,
i.e., GATT Article 19 and the WTO Agreement on Safeguards.
The Regulation embodies the principles of the WTO
agreements and some provisions simply reproduce the text of the
WTO Agreement on Safeguards. The Regulation is also in line
with the basic requirements of China's Foreign Trade Law. The
legislative model that the Regulation adopts is quite similar to
the Anti-Dumping Regulation and Anti-Subsidy Regulation,
published at the same time, that address other types of trade
restrictions China may impose under the GATT/WTO. 6
IV. DEFECTSIN THE PRC REGULATION ON
We assert that the analysis should not end here. Further
questions arise as to whether, despite this surface acceptability,
the Regulation contains defects that will appear in its
application. The following section identifies some defects, and offers
suggestions for improvement of the Regulation.
The Regulation's first problem has to do with the
competent authority for safeguard measures. The difference between
safeguard measures, antidumping actions, and anti-subsidy
measures reflects not only the substantive rules promulgated by some
countries, but also the arrangement of competent authorities.
The United States and Australia, for example, have established
33. See id. art. 32 (author's trans.).
34. See id. art. 33 (author's trans.).
35. See id. art. 34 (author's trans.).
36. Anti-Dumping Regulation was published on October 31, 2001 and became
effective on January 1, 2002, available at http://www.cacs.gov.cn/new/wto/wto01.htm
(Chinese version). The Anti-Subsidy Regulation was published on October 31, 2001
and became effective onJanuary 1, 2002, availableat http://www.cacs.gov.cn/new/wto/
wto02.htm (Chinese version). Both regulations were enacted by the State Council.
that safeguard investigations should be carried by one chief
agency and that the determination whether to apply safeguard
measures ultimately rests with the executive branch." Allocating
the investigative authority in one branch is reasonable since the
quantitative analysis involved in safeguard measures is much
simpler than that involved in anti-dumping and countervailing duty
measures (in particular, the former proceeding does not require
showing of "unfair" trade action whereas the latter two
proceedings do). Furthermore, the decision whether to take safeguard
measures requires the discretionary assessment of many political
and trade policy factors. It is more appropriate, therefore, for
the decision to be made at a relatively high level of government.
In contrast to the U.S. or Australian procedure, the safeguard
proceeding in China is conducted by MOFTEC and the Tariff
Policy Commission of the State Council. MOFFEC has the
authority to make decisions on whether to apply safeguard
measures, and does not need permission from any higher
government entity.3 8
We suggest that any future amendment to the Regulation
should include a provision that the chief competent authority on
investigation procedure is the State Economic and Trade
Commission and MOFTEC should bear the responsibility of
consultation, notice, and dispute settlement affairs concerning safeguard
measures. Further, no matter what form safeguard measures
take, the decision should be made by the State Council-the top
executive branch of China. This arrangement would not only
aid top Chinese leaders to balance the costs and benefits of
international trade, but also help to control the extent and scope
to which safeguard measures should be applied. Moreover, this
provision would assign responsibilities between different
agencies more clearly, which would avoid the administrative
inefficiency and enforcement disorder caused by the fact that the
investigating and deciding authorities overlap among different
Secondly, pursuant to the Regulation, safeguard measures
shall be applied only to the extent necessary to facilitate
adjustment of domestic industry. Also, mid-term reviews of safeguard
37. In Australia, the decision is made by the Cabinet, while in the United States,
the power is the President's.
38. See PRC Regulation on Safeguard Measures, supra note 2, art. 21.
measures shall take into account the ability of the domestic
industry to adjust. 9 The legislators realized the importance of the
relationship between safeguard measures and domestic industry
adjustment and have taken the adjustment into consideration.
In our opinion, safeguard measures have evolved from a strictly
protectionist approach to a new focus on upgrading the
competitiveness of domestic industry. Safeguards should enable
domestic industry to improve itself through industry adjustment. As a
new member of the WTO, this function is critical to China's
ability to face international competition. Consequently, the
Regulation should increase China's progress towards strengthening the
emphasis on industry adjustment. We propose that language
should be added to the Regulation that reflects this emphasis.
The recognition of "the importance of structural adjustment and
the need to enhance rather than limit competition" should be
introduced into the Regulation as an explicit goal of safeguard
legislation, in order to highlight that goal in view of domestic
enterprises and industrial administration authorities. 40 A
structural adjustment requirement should be added to the content of
the written application for safeguard measures, which requires
the petitioning enterprises to undertake adjustment in order to
qualify for the protection of safeguard measures. Any such
amendment should also provide for supervision of the
effectiveness of structural adjustment measures. If the enterprise in
question has failed to adjust itself positively to improve its
competitiveness after the period of protection afforded by safeguard
measures, those protections would be removed.
Thirdly, the Regulation's provisions for implementing
conditions of safeguard measures should be elaborated and
expanded so as to afford greater certainty. In determining
whether increased imports have caused or are threatening to
cause serious injury to a domestic industry, the Regulation
provides that "a domestic industry" shall be understood to mean the
producers as a whole of the like or directly competitive products
operating within the territory of China, or those whose collective
output of the like or directly competitive products constitutes a
major proportion of the total domestic production of those
39. See id. arts. 24, 27, 29.
40. In the Preamble of the WTO Agreement on Safeguards, there is the same
products.41 This language is in harmony with the WTO
Agreement on Safeguard Measures. Notwithstanding this, however,
the application of this law is problematic in China. This is
because the Regulation does not deal with the "district industry"
protection coming with the development of the economy. The
"district industry" concept has been recognized by some
developed countries. It means that if in a certain geographic district,
producers as a whole of the like or directly competitive products,
or those whose collective output of the like or directly
competitive products, constitutes a major proportion of the total
domestic production of those products, and the output is mainly
focused in this district while the import product is also
concentrated in this district, the producers in this geographic area can
be viewed as "a domestic industry. 42
The newly enacted Anti-Dumping Regulation and
Anti-Subsidy Regulation both stipulate that "district industry" can be
viewed as "domestic industry" in some special circumstances.43
Thus, it is better to add such a provision on "district industry"
into the Regulation. Although there is no article in the WTO
Agreement on Safeguards mentioning "district industry," it is
not contradictory to the tenets and goals of the WTO and it is
allowed under the framework of the WTO.
With reference to common international practice, the
Regulation requires that the increased import cause or threaten to
cause serious injury to the domestic industry.4 4 However, there
are two ways to determine the criteria to judge whether there is
causality between increased import and injury. Which one
should be adopted: The criterion of major factors or the
standard of substantive cause? There is no instruction on this
question in the Regulation. Generally speaking, the criterion of
substantive cause is much easier to reach than the criterion of major
factors. Given the fact that some industries and enterprises have
been affected to various degrees by increased imports and suffer
from certain negative impacts caused by increased imports since
China entered into the WTO, it is more appropriate to use the
criterion of substantive cause to determine the causality.
41. See PRC Regulation on Safeguard Measures, supra note 2, art. 10.
42. See, e.g., 19 U.S.C.A.§ 2252(c)(4) (1998).
43. See Anti-Dumping Regulation, supra note 36, art. 11; Anti-Subsidy Regulation,
supra note 36, art. 11.
44. See PRC Regulation on Safeguard Measures, supra note 2, art. 11.
Besides these defects, the Regulation also faces criticism
with respect to its provision on agricultural products. Compared
with manufactured products, agricultural products have a longer
production period and a shorter sale period because of their
seasonal character. Thus, if imported agricultural products cause
or threaten to cause serious injury to like or directly competitive
domestic products, it is urgent to remedy the domestic
agriculture quickly. Delay would cause damage to producers, which
would be difficult to repair. As such, the Regulation should be
fully aware of the special nature of agricultural products and
make arrangements accordingly. But the Regulation only
provides that "MOFTEC and the Ministry of Agriculture should
jointly investigate the injury to domestic industry concerned with
import of agricultural products."45 However, common practice
around the world is that the duration of the safeguard measures
on agricultural products shall not exceed one year, during which
period the competent authorities shall supervise the import of
the agricultural product continuously and promptly notify
domestic enterprises with their evaluation of the potential impact
on domestic industry. The position of agriculture is very
important in China, so safeguard measures on agriculture should be
delineated in the Regulation.
Other questions need to be answered. Is it possible to offer
aid for industry adjustment when the competent authorities
make a decision on safeguard measures? Can the competent
authorities increase tariffs and implement quantity restrictions at
the same time? What is the exact percentage referred to as a
"major portion" in Article 10.46 All these problems will be
encountered in practice and they may be addressed in the
implementation rules of the Regulation.
As binding international law, WTO agreements assert that
Member States should undertake corresponding obligations
while enjoying rights according to the principle of balance
be45. See id. art. 6.
46. See id. art. 10. "A domestic industry refers to the producers as a whole of the
like or directly competitive products operating within the territory of PR China, or
those whose collective output of the like or directly competitive products constitutes a
major proportion of the total domestic production of those products." Id. (author's
tween obligations and rights. The ability to apply safeguard
measures under critical economic circumstances is a right that WTO
Member States enjoy under the WTO international legal
framework. However, it is not a right without limits. Rather, the right
to impose safeguard measures is subject to certain conditions
required by the WTO agreement. In some ways, we should realize
that these conditions are much stricter than the conditions of
anti-dumping actions or anti-subsidy measures. Safeguard
measures can protect the domestic industry, but a more important
function is to increase the competitive capability of domestic
industry. Of course, the latter function depends heavily on
whether the concerned country has prioritized industry
adjustment and has accordingly incorporated adjustment with the
Joining the WTO will accelerate the industrial restructuring
of China, allow the advantageous industries to get even stronger,
and improve the quality and level of China's economic
development. To implement the WTO Agreement on Safeguards and to
protect domestic industry in conformity with WTO
requirements, China has established and continues to improve the
regime of safeguard measures.
Economic globalization is the objective trend of economic
development in the world today. Globalization is marked by the
free flow and optimized allocation of capital, technology,
information, and service, making economic interdependence and
interaction between various countries ever stronger, and bringing
about new driving forces and opportunities for economic
development in all countries. However, nobody can deny the fact that
Under circumstances where the international economic new
order is not yet established and the difference in the economic
development level of all countries is fairly large, the benefits
enjoyed by different countries from the process of economic
globalization are not balanced.
China, as the largest developing country in the world, has its
own role to play in this new era. The legal system of China is in
the process of modernization, and China's accession into the
WTO surely has played and will play a special role in this
phenomenon. The Chinese safeguard measures system depicted
here provides just one example.
12. See Han Jian & Jiang Changyun, The Problems Faced in the Reform Process of Our Country's Countrysideand Township Economy Structure , MATERIALS ON ECONOMY RESEARCH, No. 6 , June 1999, at 19.
13. See Die Jianrong, Strategy of China TobaccoIndustry FacingWTO Challenge , LBERATION DAILY , Aug . 31 , 2001 .