Right time to revamp foreign trade law
(Xu Li)
Updated: 2004-05-12 09:15

On April 6 the Standing Committee of the National People's Congress approved the revised foreign trade law, which takes effect on July 1.

The modified law sees some of the old articles changed and new ones added. It now covers 11 chapters and 70 clauses compared to eight chapters and 44 clauses in the previous legislation, which was enacted in 1994.

Ten years after the original law was enacted, Chinese enterprises have gained more experience and enhanced their ability through market competition. And they are faced with a market bigger than ever in the wake of China's World Trade Organization (WTO) entry.

Though it was justifiable for the government to strictly control foreign trade activities 10 years ago because of fears about the lack of competitive edge of Chinese enterprises in the international market, that's no longer the case.

Chinese enterprises and individuals are prepared and ready for competition in a broader market. The government sees the need to encourage enterprises to fully employ the opportunities arising from the relentless liberalization efforts by WTO members and from the painstaking efforts our government has made in the entry negotiations.

The revised law loosens its grip on foreign trade activities and allows the greatest possible opportunity for Chinese enterprises and individuals to conduct foreign trade activities and thus enjoy the fruit of free access to the international market.

Though denial of access ensures denial of problems, as the old mentality dictated, this surely is not the attitude the new foreign trade law takes. Rather, the new law takes a more open attitude toward foreign trade activities as well as problems that loosened government control may entail.

We have reason to believe the new law will encourage China's foreign trade activities. It allows individuals who were formerly denied the opportunity to enter the foreign trade business. It also removes some previous restrictive qualifications for foreign trade operators.

Under the new law, the only condition for Chinese entities to do foreign trade is a registration in the relevant government industrial and commercial administration or other forms of business registration.

The government will not decide whether an entity is capable of doing foreign trade; the entity itself makes the decision. Once it makes an affirmative decision, it can proceed without administrative intervention.

The new law encourages foreign trade operators to make overseas investment and to undertake overseas engineering contracting or labour co-operation. It also encourages trade activities by small and medium-sized enterprises.

In case foreign trade operators are subject to administrative or criminal penalties for violating the laws or relevant administrative regulations, the new law allows room for the perpetrators to resume the business in the future. The old one denied that opportunity.

The new law provides that the relevant government departments may decide not to accept the applications of the perpetrators for import or export quotas or licenses within three years after a penalty decision or verdict takes effect, and it does not mention revocation of the business registration of the perpetrators as the previous law did.

As the new law removes the administrative barriers, it establishes new systems and mechanisms so the government is able to keep tabs on trade flows, update an analysis on the macroeconomic effect of such trade flows, and provide information services for the interested public.

Such systems and mechanisms are important in that they help avoid the disturbances that may ensue free trade. The rules for such systems and mechanisms will be prepared by the relevant government authorities.

Apparently the new law will only become meaningful and balanced with the establishment of such monitoring and information systems, and the government will offer a better service for foreign trade operators on the basis of such complementary systems and mechanisms.

Likewise, co-operation between different governmental departments as those in charge of trade, customs or foreign exchange affairs assures a proper foreign trade order and thus is also important in the pursuit of free trade.

The changes in the new law reflect the fact the government has cast aside unnecessary administrative control over business decisions and practices, and started to focus on the management role necessary for maintaining a stable free trade environment.

This is a big step forward in the right direction.

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