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China and GATT : a comparative study on the issues of Mainland China, Hong Kong and Taiwan in international… Li, Yuguo 1994

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CHINA AND GATT:A COMPARATIVE STUDY ONTHE ISSUES OFMAINLAND CHINA, HONG KONG AND TAIWANIN INTERNATIONAL ORGANIZATIONSBYYuguo LiB.A., Heilongjiang University/Harbin (1982)LL.M., Foreign Affairs College/Beijing (1985)A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THEREQUIREMENTS FOR THE DEGREE OF MASTER OF LAWSinTHE FACULTY OF GRADUATE STUDIES(FACULTY OF LAW)We accept this thesis as conformingto the required standard.THE UNIVERSITY OF BRITISH COLUMBIAMarch 1994© Yuguo Li, 1994In presenting this thesis in partial fulfilment of the requirements for an advanceddegree at the University of British Columbia, I agree that the Library shall make itfreely available for reference and study. I further agree that permission for extensivecopying of this thesis for scholarly purposes may be granted by the head of mydepartment or by his or her representatives. It is understood that copying orpublication of this thesis for financial gain shall not be allowed without my writtenpermission.epartment of___________________The University of British ColumbiaVancouver, CanadaDate /6, i9Q4-DE-6 (2188)AbstractAs economic transactions become more and more important for all countries in theirinterrelations, the GATT contracting parties are considering the applications of thePeople’s Republic of China (PRC) and Taiwan to enter into this world tradeorganization. This happens at a time when the Uruguay Round negotiations haveresulted successfully in an agreement between the contracting parties to set up theWorld Trade Organization. The two applicants are very important in the worldeconomy. Apart from negotiations on the concrete concessions of the two applicants,other questions are under consideration. The applicants share a common backgroundthat the PRC, Taiwan plus Hong Kong and Macao are originally from one China, andHong Kong will be under the sovereignty of China in 1997 which will probably speedup the unification of the four parts into one China someday. So it is not too early toconsider questions which may arise from the influence of the accession style of themainland and Taiwan on relations and positioning between the two sides of the TaiwanStraits, and the interrelations between the four parts concerning participation ininternational organizations before and after unification. All four parts of China may beentitled respectively to participate in this international economic organization beforeand after unification. But the negative impacts on unification which may come aboutby the style of acceptance of the countries into the GATT cannot be ignored. Theissues of the interrelations between the four parts of China in GATI’ should also bediscussed.11Table of ContentsAbstract IITable of Contents iiiAcknowledgements viCHAPTER I. INTRODUCTION 1A. CHINA, TAIWAN AND HONG KONG 1B. GATT 4C. SIGNIFICANCE OF CHINA’S PARTICIPATION TO THE GATI’SYSTEM 6D. PROS AND CONS TO CHINA OF PARTICIPATION IN THE GATI’...8E. METHODOLOGY 10CHAPTER II. PEOPLE’S REPUBLIC OF CHINA AND GATf 12A. CHINA’S MEMBERSHIP IN THE GATI’ AND TAIWAN’SWITHDRAWAL FROM IT 13B. LEGAL ISSUES OF RESUMING CHINA’S MEMBERSHIP1NGAT 161. Legal Effects of the Replacements of Governmentsin China 172. The Invalidity of Taiwan’s Withdrawal from GAIT 173. The Legal Representation of the PRC Government 204. Retroactive Effects of Recognition 205. Difference between Recognitions to State and Government 221116. Theoretical Aspects of Government Succession 237. Practice of Succession in the GATI’ 258. Resuming v. Accession 30C. COMPATIBILITY OF CHINA’S ECONOMIC SYSTEM WITHTHE GATI’ 361. GAIT’s Purpose of Free Trade 372. Non-Market Economies 383. Co-existence with GATT 39CHAPTER III. TAIWAN AND THE GAIT 47A. INTRODUCTION TO TAIWAN 47B. RELATIONS BETWEEN TAIWAN AND THE GAIT 49C. SEPARATE CUSTOMS TERRITORY 51D. APPROACHES AVAILABLE FOR TAIWAN TO JOIN GAIT 53E. GOVERNMENT QUALIFIED TO ACT ON BEHALF OF SCT 58F. THE PRC’S AITITUDE ON TAIWAN’S APPLICATION 61CHAPTER IV. HONG KONG AND THE GAIT 65A. INTRODUCTION 65B. HISTORICAL BACKGROUND 66C. HONG KONG’S EXTERNAL RELATIONS AND STATUS ININTERNATIONAL ORGANIZATIONS 701. Situation of Hong Kong’s External Relations 702. History and Status of Hong Kong in InternationalOrganizations 72ivD. HONG KONG’S CAPACITY TO JOIN INTERNATIONALORGANIZATIONS 741. Definition and Evolution of International Organizations 752. Membership and Exceptions 76E. HONG KONG’S RIGHTS AND DUTIES IN EXTERNALRELATIONS AFTER 1997 81F. BINDING FORCE OF THE JOINT DECLARATION 85G. THE RELATIVE PRACTICE OF GATT 91CHAPTER V. INTERRELATION OF THE MAINLAND, TAIWANAND HONG KONG IN INTERNATIONALORGANIZATIONS AFTER UNIFICATION 96A. STRUCTURE OF CHINA’S POLITY: ONE COUNTRY,TWO SYSTEMS 96B. “ONE COUNTRY, TWO SYSTEMS” VS. “ONE COUNTRY,TWO INTERNATIONAL PERSONALITIES” 981. Peculiarity of “Multi-System Nations” 1002. Inapplicability of Multi-system Nation Theory 1013. The Case of China 102C. COEXISTENCE OF THE MAINLAND AND TAIWAN IN THEGA SYSTEM 104CHAPTER VI. CONCLUSION 106Bibliography 108VACKNOWLEDGEMENTSI would like to take this opportunity to thank the many people who have helped,advised and supported me in the preparation and production of this thesis.This thesis was submitted as a master thesis at the Faculty of Law of the University ofBritish Columbia. I would like to thank my friends at the Faculty of Law, inparticular, those in the Centre for Asian Legal Studies, the Graduate Program and theLaw Library, for their support and assistance.I want to especially thank my friends, the co-supervisors of my thesis, ProfessorPitman B. Potter and Professor Maurice D. Copithorne, Q.C., for their great supportand guidance in the research and preparation of this thesis.I owe a debt of gratitude to Mrs. Lillian Ong, Ms. Gillian Bryant and Mrs. Joanne Y.Chung for their very kind concern and support to me in various ways during myresearch and the preparation of this thesis.I owe special thanks to my friend, Mr. Christopher Lee, who was kind enough to helpme to polish the final draft of this thesis. I would like to express my deep gratitude toall my friends who offered me their concern and so much encouragement and supportthroughout my work on this thesis, and so much else.It goes without saying that any errors or shortcomings in this thesis are wholly myown.Yuguo LiBeijing, Spring 1994viCHAPTER I: INTRODUCTIONA. CHINA, TAIWAN AN]) HONG KONGChina is a geographical term which describes a large Asian state with apopulation of approximately 1.2 billion people, which comprises twenty-two percent ofhumanity, and territory covering as much as 9.63 million square kilometres.1 Atpresent, this country is not fully unified, being separated into four parts under differentadministrations, i.e. Mainland China, Taiwan, Hong Kong and Macao, two of themunder the control of foreign countries. Since 1949, the mainland of China has beenunder the control of the government of the People’s Republic of China (hereinafter thePRC), which has world-wide recognition as the sole legal government of China. HongKong and Macao, for a long time, have been under the sovereign control of theGovernments of the United Kingdom and the Republic of Portugal. In the last decade,the negotiations between the P.R.C. and the United Kingdom and Portugal resulted inagreements on the transfer of the two territories to the sovereign control of the P.R.C.,in 1997 and 1999 respectively.2 Taiwan is the last among the four parts on which nonegotiations have been undertaken yet about unifying with the other three parts. But itis very encouraging that the improvement of relations between the two sides of the1 Source: Zhongguo Baike Nianjian (Encyclopedia of China), (Beijimg: The Encyclopedia ofChina Publishing House, 1986), p.27.2 See text at note 145.1Taiwan Straits have developed recently.3. In April 1993, substantial contact betweenthe two sides was started by the Wang-Koo talks in Singapore. The talks were thehighest level and most formal contact between the two sides after a long-time ofconfrontation, despite still being semi-official.4The mainland of China, Taiwan and Hong Kong together play a very importantrole in the world community. The PRC government enjoys world-wide recognition asthe sole legitimate government of China, and holds the seats for China in mostinternational organizations,5 such as the representative of China as a permanentmember of the Security Council of the United Nations. It has great economic potentialto the world economy, for it has the largest market, low-priced labor, and an ambitiousplan for its economic reform. In foreign trade, Chinese export performance has beenvery impressive in recent years. In 1993, the total value of its imports and exports wasUS$ 196 billion, exceeding the Republic of Korea, Spain, Taiwan and Singapore, andranking it as the eleventh largest trading power in the world.6Hong Kong, including the island of Hong Kong, Kowloon and the NewTerritories, is an area of 1067 square kilometers with a population of more than fiveThe Taiwan Straits is between the island of Taiwan and the mainland.The talks were held between Mr. Wang Daohan, President of the mainland’s Association forRelations Across the Taiwan Straits (Arats) and Mr. Koo Chen-fu, Chairman of Taiwan’s StraitsExchange Foundation (SEF). On April 29, 1993, Mr. Wang and Mr. Koo signed four agreements. Theywere: (1) the general agreement on the Wang-Koo talks; (2) the agreement on institutionalized contactsand talks between the two organizations; (3) the agreement on the use and verification of notarycertificates across the Straits; and (4) the agreement on inquiries and compensation concerning registeredmail across the Straits. The four agreements went into effect on May, 29, 1993. See, China Daily,August 16, 1993.The PRC has membership in many international organizations in the fields of economics,finance and trade, e.g., ECOSOC, ESCAP, UNDP, UNIDO, UNCTAD, FAO, IMF, WBG, CCC, ILO,ADB, etc. See Shen Xia, Xiangyin Chu, ed. The Dictionary of General Agreement on Tariffs andTrade, (Beijing: Foreign Trade Education Press, 1993), p. 559.6 Annual Report, GAfl’, 1993. See, Jingji Ribao (Economic Daily), Beijing, 6 April, 1994.2million people. Hong Kong has been separated from China ever since the end of theOpium War. The separation is the consequence of three Chinese-Anglo agreements ofthe nineteenth century.7 Up to now, Hong Kong has transformed itself into an export-oriented industrial city with a very important status in the world economy as one of theleading financial centers. In 1993, Hong Kong ranked as the eighth largest tradingpower in the world, with the total of important and export including the transferredtrade as high as US$ 278 billion.Taiwan is an area of 35,981 square kilometers, encompassing the islands ofTaiwan, Penghu, Kinmen and Matsu, on which the population is approximately 20million people. Unlike Hong Kong, Taiwan has been viewed as being a part of Chinafrom almost all sides and is taken as one party in “an unfinished civil war”.9 Though ithas rarely been formally recognized as a sovereign state, Taiwan has been verysuccessful in its eocnomic growth. In 1993, it was ranked as the world’s thirteenthlargest trading power with its record of import and export as much as US$ 162billion. 10Separation Between Mainland and TaiwanThe complicated case of the two parts of China (the Mainland and Taiwan)should be traced back through history. The decline of the Qing Dynasty (from 1644 to1911), the last feudal dynasty in the history of China, was marked by the Opium War,and the 1911 Xin-Hai Revolution ended it. In its place, the first republic in China, theSee the text at note 148.8 Supra note 6.Ralph N. dough, Taiwan’s International Status, Chinese Yearbook of International Law andAffairs 1981, vol. 1, ed. by llungdah Chiu, p. 18.10 Supra note 6.3Republic of China, led by a nationalist party, the Kuomintang, came to being. After37 years (from 1912 to 1949) in power, the nationalist party was defeated by acommunist party, the Communist Party of China, in a bloody civil war from 1945-1949. The Republic of China fled to the islands now called Taiwan. Meanwhile, as anew government, the PRC government was set up on the mainland. Since then, thetwo governments have been coexisting, with each claiming itself as the only legitimategovernment of China.The issue of China’s unification has brought many questions about the internalstructure as well as the capacities of the above-mentioned parts of China in externalrelations, for instance, their participation in international organizations, in particular,the GATT as we are concerned with here. This concern is the starting point of mythesis.B. GATTThe GAIT is a global organizaton of international trade, which has 107contracting parties, plus 24 countries to whose territories the GAIT has been appliedand which now, as independent States, maintain a de facto application of the GAITpending final decisions as to their future commercial policy.” Approximately 90% ofthe total gross trade of the entire world is undertaken between the contracting parties ofthe GATT.12The GAIT is one of the principal governmental organizations concerning11 GATT membership (April 1993), (1993) 5 World Trade Materials 3, May.12 Zhong Yi, GAIT and China, Renxnin Ribao (People’s Daily), Beijing, overseas edition,February 21, 1992.4international economic relations, along with the International Monetary Fund (IMF),and the International Bank for Reconstruction and Development (IBRD, or the WorldBank).’3 To meet the necessity of mutual reduction of tariffs, the United NationsEconomic and Social Council (ECOSOC), in February 1946, adopted a resolutioncalling for a conference to draft a charter for an International Trade Organization.’4The ITO Charter was completed in Havana in 1948, and called the “Havana Charter”.At the Geneva meeting in 1947, three major parts were devoted respectively to: (1)preparation of a charter for an ITO; (2) negotiation of a multilateral agreement toreciprocally reduce tariffs; and (3) drafting the “general clauses” of obligationsrelating to tariff obiligations. The second and third parts together constitute the GAITthe General Agreement on Tariffs and Trade. The GATT was designed to operateunder the umbrella of the ITO, but since the ITO never came into being, the GAIT isapplied as a treaty obligation under international law, only through the Protocol ofProvisional Application (PPA).l5The GAIT’s purpose is to promote the liberalization of world trade through thereduction of obstacles to trade. The concept of the most-favored-nation standard(MFN) is the foundation of trade liberalization, which is embodied in Article 1 of theAgreement.16During the last five decades, the GAIT has been improved and enriched by theThese international institutions comprise the “Bretton Woods System”. Although the GATT wasnot formed at the 1944 Bretton Woods Conference, nevertheless the Bretton Woods Conferencecontemplated the necessity of an International Trade Organization (ITO). See, John H. Jackson, TheWorld Trading System: Law and Policy of International Economic Relations, (Cambridge,Massachusetts: The MIT Press, 1991), pp. 27-28.14 1 UN ECOSOC Res. 13, UN Doc. E/22 (1946).15 55 UNTS 308 (1947).16 Art. 1, GAIT. See John H. Jackson and Williams 3. Davey, Documents Supplements To LegalProblems of International Economic Relations, (St. Paul: West Publishing Co., 1986), 2nd ed. p.4.5following important rounds of tariff negotiations:1. Geneva Round in 1947, leading to the conclusion of the GAIT;2. Torquay (England) Round in 1951 enabling the original ContractingParties to GATT to negotiate tariff concessions inter Se;3. Kennedy Round, 1964-67, resulting in significant tariff reductions inpercentage terms;4. Tokyo Round in 1973-79; and5. Uruguay Round in 1987-1993, completed with the agreement to establishthe World Trade Organization.’7C. SIGNWICANCE OF CHINA’S PARTICIPATION TO TIlE GATTSYSTEMThe GAIT was designed to ameliorate a problem that had stymied theinternational economy in 1930s, the growth of obstacles to trade resulting fromprotective tariffs. The GAIT promotes trade liberalization by establishing a worldtrading system and binding its members with three basic principles: (1) reciprocity;(2) non-discrimination; and (3) transparency. As with the evolution and developmentof the GAIT itself, the interdependence of the world’s economies and the increasingimportance of the GAIT as a universal trading system and a key international economicorganization, it becomes more and more unacceptable and inconsistent with the purposeof the GAIT for China to remain outside of the GAIT.The remarkable increase of China’s economy in the last decade and itsremarkable share of world trade makes this country more important to the world17 Supra note 5, Shen Xia, Xiangyin Chu, Renmin Ribao (People’s Daily), Dec. 17, 1993.6economy. Compared with the 105 contracting parties to the GAIT, China’s foreigntrade makes it the eleventh largest trading power in the world. Considering theeconomic performance of the Mainland, Hong Kong and Taiwan in recent years, theweight of China’s economy will be raised even more assuming a regional economicintegration between these parties.Another factor which needs attention is that, to the contracting parties,especially those industrialized countries, China’s huge market will offer more economicopportunities, especially in the recession years. So, it would be very important toregulate all the international economic transactions between China and its tradingpartners in the GAIT system in order to realize the ideals of reciprocity, nondiscrimination, and to set up a proper universal trading order.The last point which needs to be mentioned is that apart from the otherconsiderations, the “universality” of the GATT trading system makes it extremelynecessary to have China within the GAIT scheme. China’s participation would beundoubtedly helpful to strengthen this international organization in the face oftendencies toward protectionism and regionalism, which are opposed to the ideal of theliberalization of world trade. So, it will be very important to have China within theGAIT system for the purpose of properly establishing a true world order for economicsand trade.It would be beneficial for the whole world if all countries behave as required bythe international rules in the field of world trade, so that a normal world trading ordercan be set up. So, there is every reason to accept such a country in this uniqueinternational organization of trade and bind all its imports and exports within the rulesof the GAIT, and there seems no reason to exclude such a country out of thisorganization. Through a review of the history of this country in the last 14 years, itcan be found that it has been changing to coincide its practices with the rules of the7world community.D. PROS AND CONS TO CHINA OF PARTICIPATION IN THE GATTChina can be listed as one of the trading powers in the world.18 The tradebetween China and the contracting parties of the GATE comprises more than 85 % ofChina’s total foreign trade. To China, access to the GATT will be very beneficial to itstrading conditions and also may bring a great impact to the trading system and itsdomestic industry. This is the main consideration for the decision makers of Chinawhen they decide to take action towards China’s inclusion in the GAIT. The benefitsto China by acceding to the GAIT will be:1. China may, through membership in the GAIT, fulfil full participation ininternational economic activities in an all-round way and complete its entry intoall of the principal international economic organizations. China is already amember of the other two main international economic organizations, the IMFand the IBRD.2. Participationin the GATT would allow China to enjoy greater access tothe world market, enlarge its foreign trade, and promote the development of itsforeign economic relations by adopting international rules of trade.3. China would be provided with a greater defense against protectionist anddiscriminatory tendencies of developed countries, and be able to join the debateand fight against protectionism through the forum of this organization. Also,18 Supra note 6; see, Li Lanqing Speech on a meeting of the inspection on imported and exportedgoods of China, 18 December, 1992, Shijie Ribao (World Journal, daily), 19 December 1992. Mr. LiLanqing, Minister of the Ministry of Foreign Economic and Trade. In the Spring 1993, he wasappointed Vice Premier of the State Council of China.8China would have access to the GAIT’s dispute settlement mechanisms to wardoff protectionism and discriminatory treatment.4. It would be helpful for China to have the unconditional most-favored-nation (MFN) treatment, as the GAIT requires that all contracting partiesshould be accorded such status.5. As a developing country, China may enjoy preferential tariff treatmentunder the U.S. Generalized System of Preferences (GSP). China has gainedGSP treatments from all developed countries that have such schemes except theU.S.196. China’s participation in the GATT would be of great help to it indeepening and developing its internal economic reforms. China’s economicdevelopment and prosperity has paramount significance to the stability andpeace both of the world and the country itself. In the last 14 years, China hasmade remarkable efforts and also great progress with its economic reforms. Atthe 14th National Conference of the Communist Party of China, the basic linewas stipulated as establishing “the Socialist market economy”.20 This was ahistoric change for a socialist country like China, though the line is stillmodified with the world “socialist”. This change is affirmatively considered asa “creative and revolutionary” change and much encouragement is needed,because for China, the progress needs support from all sides to have enough19 At the first United Nations Conference on Trade and Development (UNCTAD) in 1964, theSecretary General of that UN organization shepherded through the adoption of a report designed to focusinternational attention on the need for special rules for the trade of developing countries. The final legalstep for these special rules was taken in the GAIT, in the form of a GATT waiver to the MFN clause,called the Generalized System of Preferences. The waiver was granted in 1971 for a ten-year period, soit expired in 1981. As part of the Tokyo Round negotiations, the Contracting Parties adopted an“enabling clause” in a declaration entitled “Differential and More Favorable Trreatment, Reciprocity andFuller Participation of Developing Countries”. See, supra note 13, John H. Jackson, p. 278.20 Supra note 8.9time to grow in a healthy way. To the international society, it is definitelynecessary to have a country like China stable politically and prosperouseconomically.Though China would obtain certain privileges in international trade by fullparticipation in the GATI’, in turn, it would have to make concessions by opening itsmarkets to the GAIT members and would have to submit its trade regime tointernational scrutiny and surveillance. Furthermore, China would have to undertakemeasures to liberalize its trade regime that would be commensurate with the GAITrequirements. The hard bargaining on the terms for China’s access is foreseeable.China will be asked to make other arrangements to ensure that its imports wouldincrease in return for tariff concessions on the part of the contracting parties withmarket economies. Those arrangements would be concentrated on the reduction of thelevel of imports determined by a state plan; reduction of the substantial licensingrequirements; abolishing the administratively set exchange rate; free access to foreignexchange; and so on.E. METHODOLOGYFor the research as to the above questions, comparative study is employed as themethodology. Different emphasis will be placed on the PRC, Hong Kong, and Taiwanrespectively. In Chapter I, the introduction, information will be given on thebackground of China, Taiwan and Hong Kong, GAIT, the significance of China’sparticipation in the GAIT system, and pros and cons to China of participation in theGAIT. Chapter II deals with the PRC case. Most analysis will be concentrated on thelegal issues concerning China’s resumption of GAIT membership, as well as thecompatibility of China’s economic system with GAIT. Chapter III deals with the10Taiwan case. Analysis is unfolded around Taiwan’s application to accede to the GAITas a separate customs territory, and some legal issues concerning this. In Chapter IV,the analysis will be focused on Hong Kong, such as Hong Kong’s status and capacity inits external relations, particularly in international organizations, as well as the influenceof Hong Kong’s transfer to China in 1997 on its capacity towards its internationalobligations. Chapter V mostly deals with issues concerning the impact the unificationof the four parts of China would bring to their respective capacities in externalrelations.11CHAPTER II: PEOPLE’S REPUBLIC OF CHINA AND GATTOn 10 July 1986, the PRC officially applied to resume its membership in theGAIT.2’ In February 1987, China submitted a memorandum on its foreign traderegime to the GATE.22 On 4 March, 1987, China asked the GAIT to set up aworking group to consider China’s trade regime and determine the conditions underwhich China could rejoin the GAIT23. China is a very unique case because it is nowin the midst of a transition from a centrally-planned economy to a market economy24’and its application is to “resume” its seat in GAIT instead of acceding to it.A. CHINA’S MEMBERSHIP IN THE GATT AND TAIWAN’SWITHDRAWAL FROM ITChina’s membership in the GAIT can be traced back to the moment when this21 Supra note 5, Shen Xia, Xiangyin Chu, p. 231. See, China Bids to Rejoin Trade Body, ChinaDaily, Beijing, 14 July, 1986.22 Thid, Shen Xia, Xiangyin Chu, p. 231. See, “China Moves Step To GATT Membership”,China Daily, Beijing, 16 February, 1987.23 See, Focus (GATT Newsletter), No.44, March 1987.24 See, Jiang Zernin, Report to the Fourteenth National Congress of Communist Party of China inBeijing on November 1992, “Speed Up The Space of Reform, Opening and Modernization and WinGreater Victories in the Socialist Cause With Chinese Characteristics”, People’s Daily, November 1992;also see FBIS-CHI-92-204-S, October 1992. Mr. Jiang is the General Secretary of the CentralCommittee of the Conimumst Party of China and he was elected President of the P.R.C. in the laterelection in Spring 1993.12international trade institution was established. China, represented by the Nationalistgovernment, participated in all the negotiations aimed at establishing the InternationalTrade Organization (ITO) and the GATI’ as early as 1946. On 30 October, 1947,China signed the Final Act of the General Agreement and became one of 23 originalcontracting parties of the GATT. On 21 April, 1948, China deposited its Instrument ofAcceptance of the Protocol of Provisional Applications (PPA) of the GeneralAgreement. Pursuant to paragraph 3 of the PPA, China provisionally applied theGeneral Agreement from 21 May, 1948.25 During the following activities within theGATE, such as the first and second rounds of the multilateral tariff negotiations, whichwere held in Geneva in 1947 and in Annecy in 1949 under the auspices of GATE,China participated in the negotiations for tariff concessions with the other contractingparties and accepted protocols modifying GATT provisions and ratifying the GeneralAgreement. 26Soon after these events happened, there was a replacement of governmentswithin China. On 1 October, 1949, the Nationalist Government of China was oustedfrom power and replaced by the PRC.27 The replacement of governments within Chinawas followed by the complicated question of the representation of China in the GAITand a prolonged absence of China’s participation in this organization. The PRC cameinto power over most parts of China’s territory except the Taiwan Islands as well as thesmall islands of Penghu, Kinmen and Matsu, on which the deposed regime installed25 See, GATT: Status of Legal Instruments, GATT/LEG/1, Supp. No. 13, April 1988, pp. 1-3.26 China accepted the First Protocol of Rectification of the General Agreement on 7 May, 1948,the Second Protocol of Rectification on 14 September, 1949 and the Third Protocol of Rectification on13 August, 1949.27 After it had taken over almost the entire territory of China, and won the Civil War defmitively,the CPC established a coalition government and changed the state from the Republic of China to thePeople’s Republic of China. On 1 October, 1949, the Central People’s Government declared itselfestablished.13itself.The deposed regime, losing its effective control over most parts of China, couldno longer fulfil the GA11 obligations it had been subject to in the name of China,mainly the commitments of tariff concessions to other contracting parties, because theproducts involved were exported from and imported to the mainland of China. In thissituation, realizing its incapacity to act on behalf of China in the GA’IT, it notified theSecretary-General of the United Nations of its decision to withdraw from the GeneralAgreement28on 7 March, 1950. Meanwhile, the PRC government was prevented bythe special historical situation and exceptional circumstances from participating ininternational organizations, including the GATF, for many years.Chin&s Re-entering the GATTThe motives of China’s active efforts to resume its seat in the GATT are basedon the following concerns: the need to rebuild its domestic economy; and the desire toparticipate in the world’s economic activities. In its first three decades from 1949, thePRC was characterized by radical ideology in politics and centrally-planned economy.The trade commitments and tariff concessions under the GATT between China andother contracting parties ceased to be applied. Normal trade relations between Chinaand many of the GAIT contracting parties actually ceased to exist.2928 See, GATTICPI54, 8 March, 1950.29 In the 1950s and 1960s, China’s foreign trade was undertaken mainly with the Soviet Union andother East European countries. Meanwhile most Western countries followed the U.S.A. in an economicblockade of China. For example, among the thirteen countries with which the PRC had diplomaticrelations in 1949, eleven were communist countries. In contrast, among the thirty three countries withwhich the PRC had diplomatic relations as of 1959, only six were Western counttries. Those wereDenmark, the Netherlands, Norway, Sweden and the United Kingdom. See, Gene T. Hsiao, TheForeign Trade of China: Policy, Law, and Practice, (Berkeley: University of California Press, 1977),p. 28, Table 9. In 1993, the PRC has bilateral trade agreements with 103 countries, including 71contracting parties of GAIT. See, supra 5, Shen Xia, Xiangyin Chu, p. 569.14Due to this situation, China ceased to apply the GATT to the contractingparties. In the 1950s, China’s foreign trade was mainly carried out under bilateralagreements.30 From the 1960s, the increasing share of China’s trade with contractingpaties of the GATT became evident.The PRC, ever since its founding, took executive and legislative actions on theissue of legitimacy. Shortly after its founding, the PRC government notified the worldcommunity and all major international organizations generally that it was the solelawful representative of China, and that the seat occupied by the deposed regime shouldbe assumed by the government of the PRC since the Taiwan authorities no longer hadthe right to represent China.31As a matter of fact, the PRC has been absent in the GATT as a contractingparty. Actually, it did not take its seat back in the U.N., the unique and universalpolitical international organization, until 1971.32 “It was appropriate for it to deferaction on its GATT seat until the U.N. question was resolved.”33After China assumed its proper seat in the U.N. in 1971, and particularly from1980 when the country had already begun economic reconstruction, it started too make30 From 1949 to 1964, China concluded 408 bilateral economic treaties and agreements with forty-eight states out of a total number of 762 bilateral treaties and agreements which China reached with fifty-three states and the United Nations. See, Gene T. Hsiao, “Communist China’s Trade Treaties andAgreements, 1949-1964”, Vanderbilt Law Review, vol. 21, 1968, pp. 626, 656-658.31 See, Zhong Hua Ren Mm Gong Ho Guo Dui Wai Wen han hi, (Collections of Materials onForeign Affairs of the P.R.C.), vol. 1 (1949-1950), pp. 85-139. Also see, Hungdah Chiu, CommunistChina’s Attitude Towards the United Nations: A Legal Analysis, American Journal of InternationalLaw, vol. 62, p. 22, note 6.32 In 1970, the United Nations General Assembly adopted Resolution 2758 (XXVI), by which therights of the representatives of the PRC Government in the United Nations were restored and therepresentatives of the ROC Government were expelled. See, G.A. Res. 2758, 26 U.N. GAOR Supp.(No. 29) at 2, U.N. Doc. A/8429 (1972).Robert E. Herzstein, “China and the GATL Legal and Policy Issues Raised by China’sParticipation in the General Agreement on Tariffs and Trade”, 2 Law and Policy in InternationalBusiness, vol. 18, 19986, p. 396.15initial contact with the GAIT, which was followed by a series of actions betweenChinese officials and the GAIT. In 1980, China participated in the UNCTADsponsored program of Cooperation among Developing Countries and Exports of Textileand Clothing, and then took part in the textile negotiations which related to the secondsession of the Multifibre Arrangement (MFA) in 1981. Finally, in 1983, Chinabecame a signatory to the GAIT MFA.34In 1982, China expressed interest in sending representatives to participate in theGAIT Contracting Parties meeting as observers and this request was acceptedaccordingly. It is notable that China has been reiterating its position that itsparticipation will always be “without prejudice to the Chinese government’s positionwith regard to its legal status in GAIT” .35 All of these efforts made by China led tothe possible passing of the completed process for it to return to the GAIT and itsformal request of resuming its proper status in the GAIT in 1986.B. LEGAL ISSUES OF RESUMING CHINA’S MEMBERSHIP IN GATTThe PRC government is applying for the GAIT membership by claiming theresumption of its original membership in the organization, rather than accession. Thelegal issues which this gives rise to should be discussed and analyzed.The MFA is open to all countries, whether or not contracting parties to the GATT.For example, this position can be shown in its official communications to the ContractingParties through the Secretariat such as its accession to the MFA (COM.TEX/W/142), its request forparticipation as observer in Sesions of the Contracting Parties (L/5344, L15549), and participation in theCouncil of Representatives (L/57 12).161. Legal Effects of the Replacements of Governments in ChinaChina was one of the 23 original signatories of the GATT36. In 1949, the PRCreplaced the Republic of China.37 The ROC government lost its control on themainland as well as the legitimate status and went to the Islands of Taiwan, which is aterritory as small as one fifty-sixth of the whole territory of China.This replacement of governments does not affect the continuity of the state,resulted in the transfer of the representation of China from the ROC to the PRC. Thus,the PRC became the legitimate government of this country, having the right to succeedto the status of China in international organizations. As a result, the Taiwan regimelost authority to represent the country of China.2. The Invalidity of Taiwan’s Withdrawal from GATTOn 6 March, 1950, the deposed regime which occupied China’s seat in theGAIT ever since 1949 notified the UN Secretary General of its decision to withdrawfrom the GAIT.38 This withdrawal from the GATE is not at all lawful, and withoutany legal effect because the membership belonged only to the country of China, not toa part of that country. Any regime which had no legal right to represent the country,though occupying a part of the territory, cannot conduct a valid act in excess of itsauthority. This view was shared by many delegates at the Contracting Parties36 Preamble, GATI’, 55 U.N.T.S., 194, also GAIT, Basic Instruments Supplement Documents,(BISD), vol. IV.. China was represented by the ROC government.In the author’s view, before the replacement of the governments happened in China, the R.O.C.government had been the legitimate government of China. But after that time, the self-called ROC”government in Taiwan ceased to be the legitimate government of China. This limitation of the titles hasimportant significance.38 See, GATTICPI54.17conference held in Torquay in November 1950. In its statement to the meeting, theCzechslovakian delegate expressed his government’s position that his country did notrecognize the validity of China’s withdrawal from the General Agreement because thenotification was made by persons having no legal powers to act on behalf of China.39On 27 June, 1951 the Government of Czechoslovakia notified the Executive Secretaryto the same effect in the context of disputing the U.S. withdrawal of concessionsnegotiated with China.40.As a matter of international law, the legitimacy of the ROC government as thegovernment of China ceased when it was ousted. As a result, all its conducts after thedate in the name of China are null and void, including its “withdrawal” from theGAIT. The question on the validity of the withdrawal was raised again when theTaiwan regime requested observer status in the GAIT in 1965. “Observer status” is anon-membership status in the GAIT, which gives no rights and obligations to theobserver concerning the requirements of the organization. Viewing the observer statusas a means of access, Taiwan requested observer status as a way to return gradually tothe GAIT. It would also provide Taiwan another chance to be recognized as thegovernment of China. Based on their recognition of the PRC as the sole lawfulgovernment of China, many contracting parties, including Czechoslovakia, Cuba,Yugoslavia, France, the United Kingdom, Sweden, the Netherlands, Denmark,Norway, the United Arab Republic (now Egypt), Poland, Indonesia and Pakistan,rejected Taiwan’s request.41 Finally, Taiwan was granted observer status because thediscussion of the validity of its request was circumvented by the announcement of theSee, Chung-chou Li, Resuming of Chin&s GATT Membership, Journal of World Trade, 26 vol.21, 1987.40 See, GATT/CPI115IAdd.l. Thid, Chung-chou Li.41 See, Contracting Parties Summary Record, SR. 22/3, 1965.18Chairman of the Contracting Parties that the admission of observers did not prejudicethe position of the Contracting Parties or of individual contracting parties towardsrecognition of the government in question. It is important that Taiwan’s observer statusin the GATI was finally terminated by a decision of the GAIT Secretariat. The legalbasis of this GAIT decision is the Contracting Parties’ agreement to follow thedecisions of the U.N. on essentially political matters. Though the GAIT is not aspecialized agency of the United Nations, it stipulated that its decisions would coincidewith the U.N. ‘s decisions with respect to political matters. In 1950, the GeneralAssembly stipulated that the Assembly’s resolutions on the representation issue “shouldbe taken into account” by other organs of the United Nations” 42 In 1970, the UnitedNations General Assembly adopted Resolution 2758 (XXVI), by which it “decided torestore all rights to the PRC and to recognize the Representatives of its Government asthe only legitimate representatives of China to the United Nations, and to expelforthwith the representatives of Chiang Kai-shek from the place which they unlawfullyoccupy at the United Nations and in all the organizations related to it,”43 TheContracting Parties to the GAIT implemented this Resolution by re-examining thedecision they had taken in 1965 on the observer status of China, and deciding to expelthe representatives of Taiwan. Thus, the GAIT not only took the position of expellingTaiwan from the organization as an observer, but also, by its decision, accepted thelegal effect that the representatives of Taiwan had not legal authority to represent Chinain the GAIT as soon as the PRC was founded on 1 October, 1949.42 G.A. Res. 396, 5 U. N. GAOR Supp. (No. 20) at 24, U. N. Doe. A/1775 (1950).Supra note 32.193. The Legal Representation of the PRC GovernmentThe PRC’ s position of the representation of China has been supported not onlyby the theory of international law, but also by the practice of the UN and most otherinternational organizations as well as almost all the countries in the world. As a result,this support to the PRC’ s representation means the denial of the legitimacy of theactions of the Taiwan authorities on behalf of China after 1949.The terms employed in the U.N. Resolution 2758 (XXVI), like “restore” thePRC’s rights and “expel” Taiwan from the seat they “unlawfully occupied”, showedclearly the UN’s stand that the PRC should have succeeded to the rights and duties forthe country from the date of its founding, and from the same date, Taiwan’s occupationin the UN became “unlawful”. That is the basis of the decision of the GATTContracting Parties on the termination of Taiwan’s observer status in the organization,because the representatives were only the “persons having no power to act on behalf ofChina”, including the “notification of the Taiwan regime to withdrawal from theGATE in March of 1950”. So, a reasonable conclusion should be that China’s seat inthe GATE has never been lawfully suspended, in other words, it should still beavailable for the lawful representatives of the PRC.4. Retroactive Effects of RecognitionIt is generally agreed upon among international lawyers that, in principle, thepersonality of State is not affected by a change of its government or of personscomposing its government,45 and “. . . in the recognition of governments, there is noSee, supra note 40.See, Ti-Chiang Chen, The International Law of Recognition, (London: Stevens & Sons Ltd.,1951), p. 97,note2.20question of the creation of personality. For the personality belongs to the state andsurvives the change of government” •46 The international practice of recognition showsthat recognition is an administrative function, and different governments, consideringthe political factors in different angles based on their own interests, make the decisionsof recognition at different times. It is an explainable opinion that the recognition isonly a declaration of the existence of a fact. The political conduct of recognition doesnot have the legal effect because this would mean the recognized state begins itsexistence after the conduct of recognition. Its existence begins at the time it came intopower to control the country. In international practice, the doctrine of the retroactivityof recognition has been an accepted principle of English law as early as 1921 since thedecision in Luther v. Sagor, in which case the Court of Appeal held that the SovietGovernment having been recognized, it must be treated as “ having commenced itsexistence at a date anterior to any date material to the dispute between the parties tothis appeal” .47 This principle was reaffirmed later when the Soviet decrees madebefore recognition were later treated as acts of a sovereign authority.48 In anothercase, the Supreme Court of the United States explained the doctrine further through thefollowing:When a government which originates in revolution or revolt isrecognized by the political department of our government as the de juregovernment of the country in which it is established, such revolution isretroactive in effect and validates all the actions and conduct of thegovernment to recognition from the commencement of its existence.49Ibid, p. 103.See, [1921] 3 K.B. 536, 543. Also see, D.P. Achenial, International Law, 2nd ed., (London:Stevens &SoneLtd, 1990), p. 192.48 Supra note 45, Ti-Chiang Chen, p. 173, note 13.See, [1918] 246 U.S. 297, 302-303. Ibid, Ti-Chiang Chen, p.175.21In 1936, the Institute of International Law resolved that “recognition de jure isretroactive in its effects from the date when the new state actually begins to exist as anindependent State.”50According to the principle of retroactivity, China’s (PRC) membership in allinternational organizations of which China (ROC) had been a signatory shouldcommence from the date it was established.5. Difference between Recognitions to State and GovernmentIt is on this presumption, on which the principle of the retroactivity ofrecognition is established, that, in the case of a changeover of governments, thesuccessor government which is habitually obeyed by the bulk of the population of thatstate exercises effective authority within its territory, meanwhile the deposedgovernment has lost the control over the territory thus the latter is no longer entitled torights nor subject to duties on behalf of the state.In the case of Taiwan’s “withdrawal” from the GATE in 1952, it is clear thatthe reason for the decision to withdraw is nothing but its loss of capacity to effectivelycontrol the state and its failure to fulfil China’s GATI obligations, mainlycommitments of tariff concessions to contracting parties since the products involvedwere exported from mainland China. More basically, whether a governmentrecognizes a new government in another state, generally speaking, does not affect itsrecognition of that state if a new government is in power. In other words, the refusalto recognize a new government does not deny the recognition already given to thatState.Annuaire, 1936, Art. 7. Supra note 47, D.P. Achenial, 2nd ed. p. 185.226. Theoretical Aspects of Government SuccessionAs a matter of international law, the “change of government does not affect thepersonality of the State. . . even when the change is revolutionary. and “thus itmay introduce the proposition that the legal rights and responsibility of states are notaffected by changes in the head of state or the internal form of government, ... if thereis continuity, the legal personality and the particular rights and duties of the stateremain unaltered. “52• When a government is replaced by a new one, the personality ofthe State does not change. The replacement of governments does not affect thecontinuity of states or its status in the international community. All internationalobligations committed by the deposed governments are expected to be succeeded whilethe international responsibility of the state should be undertaken by the newgovernment. What has been changed within this state is the representatives ofauthority. Though, in some cases, this kind of change leads to a change in thedomestic political structure, in a legal context, the change is purely domestic. So,many cases support this principle by the fact that the representatives of a newgovernment take the seat of the State, replacing the deposed government, ininternational organizations, and they are treated as the representatives of the State byforeign countries.51 D.P. O’Connell, International Law, (London: Stevens & Sons Ltd., 1970), 2nd ed., vol. 1, p.394.52 Ian Brownlie, Principles of Public International Law, (Oxford: Clarendon Press, 1979), thirded. p.87. Comments on this topic are also from Louis Henkin, Richard Crawford Pugh, OscarSchachter, Hans Smit, International Law: Cases and Materials, (St. Paul, Minn: West Publishing Co.,1980), p.675, “The replacement of one state by another is different, of course, from the changes ingovernment which take place without affecting the legal identity of the state,” and H. Lauterpacht,Recognition in International Law, (Cambridge, England: The University Press, 1947), p.87, States arenormally concerned with changes in the composition or in the form of government which occur in othercountries; the international personality of the state is not affected by transformations of that kind.”.23Questions also arise on the attitude of this new government towards the rightsand obligations in international relations enjoyed and undertaken by the predecessorgovernment in the name of the states. According to the principle of state sovereignty, anew government of a state may make its own judgement on the succession of theinternational rights and obligations. In practice this discretion is always consideredabused because the denial and abolishment of its former international obligations is socontroversial to the principle of estoppel and cause retaliation from the concernedcountries. This pick-and-choose style is under argument and brings, in practice, manydisputes.However, as it represents the state which used to be represented by itspredecessor, “a successor government is required by international law to perform theobligations undertaken on behalf of the state by its predecessor.53. Also, its rights willnot remain unless it undertakes the accompanying obligations. As to the membershipof states in international organizations, in most cases, this remains unchanged when achangeover of governments occurs. The first category of examples is of aconstitutional changeover of governments, which is undoubtedly of no effect to thestatus of the state in international organizations.The second category is of the succession between the new and old governmentsby revolution, which also supports the conclusion that the personality of state is notaffected by the change of government, thus the status of the state in internationaltreaties should be intact.The third category is newly-independent countries. Even if it is of thesuccession of state, far from that of government, the states of this category succeed tothe memberships in international organizations of their predecessor states.54 From theSupra note 51, D.P. O’Connell, p. 394.24general practice, it appears conclusive that in the sense of succession, since theconditions of the personality of a state is not affected by the change of governments,the new government should succeed to the rights of representation for the membershipof the State in international organizations unless it explicitly declares its unwillingnessto succeed.55The above-said analysis, though simple due to the length of this thesis, supportsstrongly and reasonably the conclusion that the PRC government, ever since the date ofits founding, should succeed from its predecessor government all the rights ofrepresentation of the State of China concerning international organizations, such as theGAIT.7. Practice of Succession in the GATTWithin the framework of the GAIT, the succession of membership in theorganization between governments has less frequently been a problem than has thesuccession of states.By reviewing and examining the GAIT practice on the succession of states, wecan know the principles and considerations of the contracting parties of the GAIT onsuch issues, which will give the answer to this question on the succession ofmembership in the GAIT either by a successor state or a new government of a statewhose status in the GAIT is not at all affected by the changeover of the governments.The provision in the General Agreement relative to state succession is ArticleXVI, paragraph 5(c). This special clause provides:54 For example, the new Dominion of India claimed to be the same international personality asBritish India which had been one of the founding members of the United Nations, and therefore itremains a member of the U.N.55 See, D.P. O’Connell, The Law of State Succession, (Cambridge, England: The UniversityPress, 1956), p. 67.25If any of the customs territories, in respect of which a contracting partyhas accepted this Agreement, possesses or acquires full authority in theconduct of its external commercial relations and of the other mattersprovided for in this Agreement, such territory shall, upon sponsorshipthrough a declaration by the responsible contracting party establishingthe above-mentioned fact, be deemed to be a contracting party.56This clause was originally recommended by the Ad Hoc Sub-Committee of theTariff Agreement Committee, when the General Agreement was drafted. At that time,Burma, Ceylon and Southern Rhodesia, under the control of the British Government,had autonomy in external commercial relations. The question was whether thoseterritories could be admitted to participate as full contracting parties in the GAIT. Theaffirmative answer to this question led to the existing Article XXVI par. 5(5). “Sincethe date of acquiring full autonomy in external commercial relations almost alwayscoincided with the date of acquiring full independence, this special clause has provideda convenient formula a flexible application of which has in fact facilitated statesuccession.”57In the case of the Federation of Rhodesia and Nyasaland,58 after theGovernments of the United Kingdom and Southern Rhodesia submitted jointdeclarations respectively on September 22, 1953 and November 6, 1953 to themembers of GAIT, which declared that the Federation had acquired full responsibilityfor matters covered by the General Agreement, the contracting parties in a declaration56 This clause was originally Article XVI paragraph 4, section proviso (55 U.N. Treaty Series 274)in almost identical wording, which became par. 4(c) pursuant to an amending protocol of August 13,1949 (62 U.N. Treaty Series 114), and then par. 5(c) pursuant to the Protocol Amending the Preambleand Parts II and III of the General Agreement which entered into force on October 7, 1957 (228 U.N.Treaty Series 204).Tasuro Kunugi, “State Succession in the Framework of GATT”, American Journal ofInternational Law, vol. 59, 1965, p.270.58 Southern Rhodesia was an original signatory to the Protocol of the Provisional Application ofthe General Agreement. The Federation of Rhodesia and Nyasaland was established by the Act of theBritish Parliament dated March 24, 1953, which became effective on August 1, 1953.26on October 29, 1954, decidedthat the Government of the Federation of Rhodesia and Nyasaland shallhenceforth be deemed to be a contracting party ... and to have acquiredthe rights and obligations under the General Agreement of theGovernment of Southern Rhodesia and the Government of the UnitedKingdom.. .59This undeniable right of succession to the status of their predecessors in thisorganization can be viewed in many other similar cases, showing the practices of theGATT.60 Though new states were expected to follow a process by sendingdeclarations to the contracting parties of the GAIT, the practice affirms a state’ssuccession to the GATT.61 The examples of state succession to the GAIT all happenedwith respect to new states established by decolonization, thus the personalities of thestate were changed somehow. This is affirmative support for the succession ofgovernments to the rights and obligations in the GAIT where no changes to thepersonality of the states has occurred.Another important point coming from the analysis on the GAIT practice on themembership of successor states with respect to their memberships in the organization isthat the succession of states should begin from the date the new states are established.In the case of Nigeria, the contracting parties made a declaration on Dec. 18, 1960,B.I.S.D., 3rd Supp. (1955), pp. 29-39.60 Such cases involve Ghana, Malaya, Nigeria, Sierra Leone, Tanganyika, Trinidad and Tobago,as well as Uganda, Laos and Guinea in their acquisitons of memberships in the GATI.61 Ghana became independent on March 6, 1957, the contracting parties made the declaration onOctober 17, 1957, BTSD, 6th Supp. (1958), p.9; Malaya became independent on August 31, 1957, andgot the declaration from the contracting parties on October 24, 1957, BISD, 6th Supp. (1958), p. 9-10;Nigeria, became independent on October 1, 1960, and got the declaration from the contracting parties onDecember 18, 1960, BISD, 9th Sup. (1960), pp.13-14; Sierra Leone became independent on April 27,1961 and got the declaration from the contracting parties on May 19, 1961, BTSD, 10th Supp. (1962),pp. 11-12; Tanganyika became independent on December 9, 1961 and got the declaration from thecontracting parties on December 9, 1961, BISD, 10th Supp. (1962), 14-15; Trinidad and Tobagobecame independent on August 31, 1962 and got the declaration from the contracting parties on October23, 1962, BISD, 11th Supp. (1963), pp. 44-45.27which reads in part:“the Government of the Federation of Nigeria is deemed to be acontracting party to the General Agreement on Tariffs and Trade as from1 October 1960 [the date of its independence ]hI.62The explicit words are used to make the effect of the declaration under Article XXVI,par. 5(c), “retroactive whenever it was necessary.63In these examples, it can be found in the GAIT practice that succession ofstates should begin from the date of their establishment. It appears more clearly that,in the cases of succession of governments, the personality of states are not changed, inother words, the states remain the same as before the changeover happened, thus theirstatus in the international organizations should be nothing more than unaffected. It is abasic assumption through which comes the necessity of Article XXVI, par. 5(c) ofGAIT. This provision is just an arrangement for the new states in succeeding therights and obligations of their predecessors in the GAIT by non-accession procedures.It should be noted that the GAIT allows the new states concerned an option asto whether to succeed to their predecessors’ memberships in GAIT by declaring theirwishes.“It is, however, characteristic that a new state, and not the organization,has an option as to whether that state should succeed or not under ArticleXXVI as it has been interpreted and applied” 64In other words, a new state still has the membership in the organization of itspredecessor state before it explicitly shows whether or not it wishes to succeed to it. Itmay be concluded that the principle of identity or continued personality of a new state62 BTSD, 9th Supp. (1961), pp. 13-14.63 Supra note 57, Tatsuro Kunugi, p.273. The same method was also used in the cases of SierraLeone, Tanganyaka, Trinidad and Tobago, and Uganda, which were deemed to be contracting parties asfrom the dates of their independence.64 Thid, Tasuro Kunugi, p.285.28should be an essential test of its succession of the multilateral treaties.But it is clear that it is the successor states not the GATT which has the optionto succeed or not. The declarations of their wishes do not represent applications ofaccession but succession to the rights and obligations of the predecessor states. Therequirements of declaration seem to “suggest that state succession under Article XXVIis not entirely ‘automatic’ in the sense that new states continue to be bound by theGATT instruments irrespective of the intention of the states concerned.”65 Since not allnew states concerned submit their declarations prior to or soon after their becomingindependent, questioned that how much time would be reasonable for the new states toconsider succession before they actually make their decisions through declarations.Taking a review of the history of the GATI’ for such a question, there seems tobe no reasonable and decisive standard of timing till now.66. The frequent changing of65 Thid, p. 273.66 The Recommendation of November 18, 1960 stated:Recognizing the governments of newly-independent territories will normally require sometime to consider their future commercial policy and the question of their relations with the GeneralAgreement, and that it is desirable that meanwhile the provisions of the General Agreement shouldcontinue to be applied to trade between these territories and the contracting parties to GATI’.The Contracting Parties recommend that contracting parties should continue to apply de facto theGeneral Agreement in their relations with any territory which has acquired full autonomy ... for a periodof two years from the date on which such autonomy was acquiredSee, BISD, 9th Supp. (1961), pp. 16-17. Ibid, Matsuro Kunugi, p.274.And the Recommendation of December 9, 1961 allowed a further period of one year withrespect to any state which before expiry of the two-year period requests an extension of the time limit.The decision of November 14, 1962 allowed further time by stating that:Considering that it is desirable to prove further time for these states... and that an inform time -time for the expiry of the Recommendation of 9 December 1961 in respect of these States and by theContracting Parties.Recommend that contracting parties should continue to act upon the [said] Recommendationuntil close of the last ordinary session of the Contracting Parties in 1963 ..., and29the time limit of de facto application shows the extent of the difficulty in setting up a“reasonable” standard applicable to various cases which are very complex.8. Resuming v. AccessionIn pursing its GATT membership, the PRC has insisted on resumption ofChina’s original contracting status in the GATT instead of accession as a new member.It has been repeatedly claimed in the PRC government’s statements that resumptioninstead of accession is the first among the three principles the Chinese government setout for its entry into the GATL67 Early in July 1986, the PRC government advisedthat, upon recalling that China was one of the original contracting parties to theGeneral Agreement, the PRC government had decided to “seek the resumption of itsstatus as a contracting party to the GAIT’ and was prepared “to enter into negotiationswith the GAIT contracting parties on the resumption of its status as a contractingp.ity” 68 In the subsequent elaboration in a statement of the Chinese delegation to theGATT, this approach of resumption was further explained to support the argument thatthe PRC’s resumption of China’s status as a GAIT contracting party is justified underinternational law and supported by international practice, and the PRC has the right torequest such resumption.69The position of the Chinese government to insist on resumption instead ofDecide to review the status of the above-mentioned territories at their last ordinary session in1963.See, BISD, 10th Supp. (1963), PP. 53-54. Thid, Matsuro Kunugi, p. 275.67 The other two principles are: (1) joining the GATT as a developing country; and (2) nospecial discriminary provisions attached in the China protocol. See Statement by Shen Jueran, DeputyMinister of Foreign Economic Relations and Trade, Head of the Chinese Delegation at the Third Sessionof the GAIT Working Party on China, Geneva, 26 April, 1988.68 GAIT Doc. L/6017, 14 July, 1986.69 Thid.30accession into the GATE has substantive significance only to the question of who hasthe right to represent the country, the PRC government or Taiwan authorities (theROC). The core of the issue is the question of orthodoxy. This reflects the unsolvedquestion left over by the civil war from 1945-1949. In the last 40 years, the PRC hasbeen successfully striving for recognition from the world community. The questionmay hang on the relationship between the PRC and the ROC especially facing therecent inclination towards unification of the country. The basis of the application ofresumption is the reflection of the one China policy, i.e., the political consideration onTaiwan’s independence. In essence, it is more political rather than legal, and moredomestic rather than international.70Though resumption to the GAIT may, to the PRC, solve the question of therepresentation of China, some other realistic problems, relating to GATT regulations,would still make the resumption approach inapplicable. Those are as follows:(1) The case of China’s resumption in the GAIT differs from the othercases concerning restoration of China’s memberships in the United Nations, IMF,World Bank and other related organizations where China’s seat had been occupieduninterruptedly by the ROC until replaced by the PRC. The relations between Chinaand the GAIT have been suspended, while the relationship in the other cases wascontinuous. During the suspension, China has been absent in the GAIT for more than40 years, without fulfilling its GAIT obligations. Such a long absence weakens supportfor the application of resumption. The Taiwan authorities had no right to represent70 This opinion can be affirmed by the practice of the PRC to take it as a definite condition ofestablishing diplomatic relations with foreign countries that the PRC is the sole legal government ofChina and Taiwan is only a part of the country. Also this principle is applied in the relationshipsbetween China and most international organizations in which membership is applied only to sovereignstates, e.g., the United nations, IMF, and World Bank. But the PRC does not oppose Taiwan’sapplication to enter into the GATT, and it only demands that it should accede to the GATT beforeTaiwan.31China after 1949, and its withdrawal from the GATT was null and void. But it doesnot mean that this case can refer to the models of the Mainland restoration of China’sseats in the United Nations as well as the IMF, the World Bank and other relatedorganizations, because in the GATr China’s seat has been interrupted or suspended forsuch a long time.It is well known that the PRC government adopted an analytical approachtowards the existing treaties its preceding government concluded instead of abrogatingor automatically succeeding all the old treaties. This policy is described as one inwhich the PRC government would make its determination as to owhether to “recognize,abrogate, revise or renegotiate” each of such treaties according to its content.71According to this policy, the PRC government should have shown its attitude clearlytowards its membership in the GATT long before the late 1970s. Instead, it did notexpress its interest in the GATT until the late 1970s and its official position regardingits GAIT membership remained unclear and indefinite until its formal request forresumption. During the years ever since the changeover of governments in China, thePRC government has carried out all of its foreign trade through separate bilateralagreements with most of the GAIT contracting parties, providing for MFN treatmentin their respective bilateral trade and other trade-related matters,72without bearing anyGAIT obligations.71 This principle was stipulated in Article 55 of the Common Program of the Chinese People’sPolitical Consultative Conference (1949), which served as a quasi constitution of the PRC from 1949 to1954. See 3. Cohen and H. Chiu, People’s China and International Law, (Princeton: New Jersey,Princeton University Press, 1974), v. II, 1121-1129; T. Wang, International Law, (Beijing: LawPublishing House, ed. 1981), p. 121. This article provides: The Central People’s Government of thePeople’s Republic of China shall examine the treaties and agreements concluded between the Kuomintangand foreign governments, and shall, in accordance with their contents, recognize, abrogate, revise, orreconclude them respectively.72 China had bilateral trade agreements containing MFN clauses with over ninety countries andregions, as at 1988, and most of those countries are GATT Contracting Parties. GATT Doc. Spec (88)13/Add 4.32(2) The changes to the domestic trade policy and economic system withinChina after 1949 has made it questionable for China to fulfil its old GATT obligationsof tariff concessions. The statement of the PRC’s delegation gives the realisticexplanation to the approach of resumption:However, having taken into account the contractual nature of theGeneral Agreement, we agree to enter into substantive negotiations withcontracting parties for the resumption of China’s contracting party statusand set the rights and obligations. In view of considerable changeshaving taken place during the suspension of relations between China andGATI’, my government proposes to take a non-retroactive approach toissues which occurred during the period of suspension.73This suggestion shows that PRC is willing to enter into substantive negotiationsin order to set its rights and obligations on the basis of contemporary conditions and thenon-retroactive approach would avoid all the legal issues arising out of old rights andobligations. Generally speaking, this is the approach of resumption in form, butaccession in substance.All the practice and analysis mentioned above constitute the negative influenceswhich challenge and weaken the PRC’s request for resumption of its status in theGATI’.(3) In China’s case, resumption may meet some legal problems, includingthe applicability of Article XXXV of the General Agreement, the availability of the“existing legislation” exemption for China. These include:a. Applicability of Article XXXV. Article XXXV of the GeneralAgreement, entitled “Non-Application of the Agreement between particular ContractingParties”, provides a contracting party with the right not to apply the GeneralAgreement with another if either party does not consent to such application and has notSupra, note 64.33entered into tariff negotiations with the other at the time either accedes to the GAIT.74A contracting party which invokes Article XXXV against another at the time of thelatter’s accession may vote in favor of such accession pursuant to Article XXXIII.75No contracting party would be forced to enter into GAIT relations with anotherwithout its consent.76Since Article XXXV can only be invoked at the time of accession pursuant toArticle XXXIII, it would not be applicable to China in the case of resumption. In thisway, only the original signatories of the PPA have the right to invoke Article XXXVagainst China. The inability to invoke Article XXXV would be unfair to thosecontracting parties which acceded to the GAIT after the time China began to be absentin GAIT in 1949 or China withdrew from the GAIT in l950. No matter which oneis the legal reason, China’s membership in GAIT and its substantive relations withother contracting parties were suspended either from 1949 or 1950. No GAITrelations can be found between China and those contracting parties which acceded tothe GAIT since then. The issue cannot be ignored especially comparing the current107 contracting parties with only 23 original signatories to the General Agreement in1948. It is understandable for China to resume its GAIT membership as a specialcase, but it would raise the question that resumption to GAIT relations between ChinaArticle XXXV, para. 1. For discussion of Article XXXV and its origin and application in theGATT history, see John H. Jackson, World Trade and the Law of GATT, (Jndianapolis: Bobbs-Merrill,1969), pp. 98-102.Article XXXIII, GATI’.76 Historically, Article XXXV was drafted to accommodate the change in voting requirement underArticle XXXIII from unanimity to a two-third majority, which raised the possibility that a contractingparty could be forced to enter GATT relations with another country without consent. See Ya Qin, Chinaand GATI’: Accession Instead of Resumption, J. of World Trade, vol. 27, No. 2, April 1993, note 32,p.93; Jackson, supra, note 13, p.92.‘ Ibid, Ya Qin, p. 83.34and those counttries is inapplicable since no such relations ever existed before.78b. The “existing legislation” exemption. The existing legislation clause,also known as the grandfather clause, is provided in the PPA and every protocol ofaccession. It permits each contracting party to apply Part II of the General Agreement,which covers mostly restrictions on the use of non-tariff barriers, only “to the extentnot inconsistent with existing legislation” at the time of its entry into GATT.79Concerning the availability of the “existing legislation” exemption for China, it wouldbe hard to define the date for any legislation which already existed with respect to thisexemption. For resumption of China’s membership in GATT, the date for China toenter into the GAT[’ as an original signatory is the date it signed the PPA. So, theapplicable date of existing legislation for the original contracting parties is 30 October,1947.80 Now in the case of resumption, no such exemption seems to be applied toChina since the legislation before that date has long since been abolished by the PRC.The suggestion that the applicable date for China’s existing legislation exemption be thedate of its resumption instead of the date of the PPA would appear inconsistent with theGATE rules and practice.81Regarding all this background which nearly makes the resumption of the PPAimpracticable, both the GATE contracting parties and the PRC seem to accept the78 Ibid.The PPA, 1(b).80 A GAT.F ruling was made that PPA “refers to legislation existing on 30 October, 1947, the dateof the Protocol as written at the end of its last paragraph.” See, Date of Reference for the Phrase“Existing Legislation” in Paragraph 1(b) of the Protocol: Ruling by the Chairman on 11 August, 1949,2 BISD, 35 (1952).81 The Chinese delegation stated at the meeting of the Working Party on China that “upon theresumption of its membership, China would apply Part II of the General Agreement to the fullest extentnot inconsistent with domestic legislation existing at the time of resumption.” GATT Doc. Spec (88)13/Add. 5, p.2.35approach of resumption in form and accession in substance. A GATI working party onChina’s status as a Contracting Party was set up in March 1987 with the mandate to“examine the foreign trade regime” of the PRC and to “develop a draft Protocol settingout the respective rights and obligations”, and now the China Working Party is in theprocess of tariff negotiations and drafting of the protocol.82 In this way, the approachof resumption means only the recognition by the contracting parties of the PRC’ s rightto succeed its preceding government since October, 1949 and the invalidity of Taiwan’swithdrawal from the GAT’T in 1950. At the same time, the non-practicability ofresumption is apparent concerning the realization of the GATE rights and obligationsby the way the GATT Working Party on China has been working on renegotiation ofthe new tariff concessions and other obligations. Behind this method is the requirementthat the PRC’s claim on the invalidity of Taiwan’s withdrawal from the GATT meetsno challenges and the contracting parties’ concern about how much interest they can getthrough the process of bargaining rather than the question of China’s representationdescending from history, which would not make any difference to their interests atpresent.C. COMPATIBILITY OF CHINA’S ECONOMIC SYSTEM WITH THEGATTThough the PRC should be entitled to status in the GATI because it shouldsucceed to the international rights and obligations its preceding government had taken,the basic changes which have happened to the economic system inside this country82 GAIT Doc. L/6191/Rev. 2, 26 April, 1988.36make it arguable as to whether its economic system is consistent with the GATTrequirements. The most principal character of the change is the centrally-plannedeconomic system which is greatly different from the system before 1949. This newsystem, plus many other historical factors, made all the obligations and concessionscommitted by the former government impossible for the new government to honor atthat time.So the analysis should go from review of the GAIT system to the practice ofGATT with non-market economies. Finally an examination should be taken of China’seconomic system and the recent economic reforms, to determine as to whether there iscompatibility between China’s economic system and the GATT.1. GATT’s Purpose of Free TradeThe basic assumption of the GATE is an international free market system oftrading. It is believed “that free international trade is beneficial to a nation becausewhen each nation specializes in making the products that it can make most efficientlyand trades them for the other products it needs, overall welfare is increased in eachnation.83 Generally, free trade promotes a mutually profitable division of labour,greatly enhances the potential real national product of all nations, and makes possiblehigher standards of living all over the globe.The objectives of GATE are: raising standards of living, ensuring fullemployment and a large and steadily growing volume of real income and effectivedemand, and developing the full use of the resources of the world and expanding theproduction and exchange of goods.84 These objectives should be achieved by: entering83 John K. Jackson, William J. Davey, Legal Problems of International Economic Relations, (St.Paul: West Publishing Co., 1986), 2nd ed., p.17.84 Supra note 31, John H. Jackson, William 3. Davey, p. 3.37into reciprocal and mutually advantageous arrangements directed to the substantialreduction of tariffs to trade and to the elimination of discriminatory treatment ininternational commerce.85 This international trading system “is obviously based onrules and principles which more or less assume free market-oriented economies.”86The GATT, pursuant to trade liberalization, is a trading system based on private marketmechanisms in the domestic economies. Thus, any interference, especially fromgovernment, in market mechanisms, is supposed to be limited.In the reality of world trade, the tariff is most generally used as a restriction onthe import of goods. As it is the principal form of a trade barrier, tariff reduction isthe major method for countries to mutually ensure that their exported goods can fairlycompete in foreign markets since the commitments for tariff concessions are reciprocal.The tariff reduction means greater access in other markets for its exports and is thuslooked to for the quid pro quo of greater access to its own market for products of othercountries. The most-favoured-nation treatment becomes the fundamental principle toapply tariff reduction to the goods of all contracting parties equally. Thus, twocornerstones of the GAIT trading system are: national treatment reflecting theprinciple of reciprocity and MFN treatment as the principle of non-discriminationamong all contracting parties.2. Non-Market EconomiesAfter World War II, some countries changed to socialist political and economicsystems, of which the PRC was one. With central planning as the typicalcharacteristic, this kind of economic system differs from the free market-oriented85 Thid, p.3.86 Supra note 28, John H. Jackson, p.283.38economies, so it is called a non-market economy (NME). In the non-market economiesin contrast to the market economies, the economic model makes all the assumption offree trade hardly applicable, because in those countries “... resources are not regulatedby a market, but instead by central planning; the government does not interfere withthe market process but replaces it” 87Compared with the market function in market economies, the determining forcein the centrally planned economies for price and quantity of goods is not the marketitself but central plan, i.e., the pre-established economic goals set up by the planningauthorities. In this way, the price of goods does not adequately reflect their productioncost. Thus, the centrally planned economies can make the access of imported goods totheir market much more difficult than market economies through unfair competitionwith the methods of mandatory production, plan-oriented pricing, lack of freelyconvertible currency, state trading and import monopolies. As a result, the GATI’mechanisms, based mainly on tariff concessions to ensure market access in faircompetition, would not be so efficient as the GATT contracting parties suppose them tobe. In short, to the market economies, it would not be fair to play the same game withtwo sets of rules in the competition with the centrally planned economies, by which themarket economies would definitely benefit less.3. Coexistence with GATTIt is arguable whether there is a definitely unbridged gap between the twoeconomic systems in their GATT relations.(1) Regulations in the GAIT Context. In the text of the GAIT, there are noprovisions to preclude the non-market economies. In preparing the draft of the GATT,87 Kevin C. Kennedy, The Accession of the Soviet Union to Gatt, 21 Journal of World Trade Law,2, 1987, vol. 23, p. 26.39the drafters proposed an article entitled “ Expansion of Trade by Complete StateMonopolies of Import Trade,” which was supposed to apply to non-market economies.This article was removed finally because the Soviet Union did not become a member ofthe International Trade Organization (ITO).Article XVII of the GATT addresses the problem of the State Tradingenterprises, which is the oniy rule related to non-market economies. This articlerequires “[Ejach contracting party undertakes that if it establishes or maintains a Stateenterprise, ... such enterprise shall ... act in a manner consistent with the generalprinciples of non-discriminatory treatment ... for governmental measures affectingimports or exports by private trade;”88 and “such enterprises shall ... make any suchpurchases or sales solely in accordance with commercial considerations, ... and shallafford the enterprises of the other contracting parties adequate opportunity “•89 Bythis article, we can see that the coverage on the State Trading in the GATE, though notso precise as to stipulate the non-market economies, implies no exclusion of the non-market economies from the GAIT.The requirements set up in Article XXXIII do not preclude accession of non-market economies, which reads: “[A] government not party to this agreement, ... mayaccede to this agreement ... on terms to be agreed between such government andContracting Parties. Decisions of the Contracting Parties ... shall be taken by a two-thirds majority.”90 Actually, on one hand, “even in market economies there are manyinstitutions which do not operate under free-market principles, such as state tradingagencies or monopolies, government-owned industries, and the like;”9’ and on the88 GAIT, Article XVII, par. 1(a).89 Ibid.90 Ibid.40other hand, “the experience of Romania, Hungary, Yugoslavia and Poland in theGAIT, however, offers evidence that while their economic, social, and politicalsystems are different from the market economy model to which the GAIT wasintended to apply, they are not so fundamentally different that mutually beneficialaccommodation is impossible.”92It seems proved, by the fact that the GAIT has explicitly accepted some non-market economies under special provisions or protocols, that GAIT should have noproblems accepting new non-market economies, because those precedents show thepossibility of compatibility of non-market economies within the GAIT.2. Practice of the GAIT. Among the examples of NMEs’ membership inthe GAIT, Cuba and Czechoslovakia were accepted to the GAIT before they shifted toa non-market economy structure.93Yugoslavia acceded to the GAIT in August 1966 through the normal accessionprocedure, i.e., under the terms of a Protocol of Accession identical to a marketeconomy country and on the basis of tariff concessions. After the establishment of therelations between Yugoslavia and the GAIT Contracting Parties, Yugoslavia’seconomy was no longer “centrally planned” as it had been in 1951. Prior to itsentering into the GAIT, Yugoslavia’s significant economic reforms successfullydecentralized its foreign trading system. So, Yugoslavia got provisional accession tothe GAIT in November 1962 and then the full accession in August 1966, without any91 Supra note 16, John H. Jackson, p.283.92 Eliza R. Patterson, “Improving GATI’ Rules for Non-market Economies,” Journal of WorldTrade Law, vol. 20, No. 2, 1986, P. 185.Cuba and Czechoslovakia became contracting parties in 1948 with the protocols of originalentrant. Also see, supra note 28, John H. Jackson, p.287.41further commitments.94Poland acceded to the GAIT in October 1967, following Yugoslavia. After afruitful period of association between Poland and the GAIT, which provided for annualreviews of trade relations between them, Poland became a full member of GAIT, withthe commitment to “increase the total value of its imports from the territories ofcontracting parties by no less than 7 per cent per annum”, a figure designed to equalthe increase in Poland’s exports expected to result from the operation of the GAIT andfrom the tariff reductions and other concessions granted by the contracting parties.95Romania, after having been an observer to the GAIT for more than 10 years,acceded to the GAIT on the terms of commitment to “increase its imports from thecontracting parties as a whole at a rate not smaller than growth of total Romanianimports provided for in its Five-Year Plans.”96Hungary applied for GAIT membership in 1969 and acceded to the GAIT in1973 on the normal schedule of concessions in accordance with Article XXXIII, andwithout any additional commitments, partly because it had successfully decentralized itstrade regime and introduced a new tariff system.97From these practices of the GAIT admitting non-market economies, it seemsgenerally accepted that the membership for non-market economies in the GAIT shouldbe conditioned with its ability to conduct its trade according to GAIT principles ratherReport of the Working Party on the Accession of Yugoslavia, GATT, BISD, 14 Supp. 49(1967), and Protocol for the Accession of Yugoslavia, GATr, BISD 15 Supp. 53(1968).Protocol for the Accession of Poland, GATT, BISD, 15 Supp. 46 (1968); and Report of theWorking Party on the Accession of Poland, GATT, BISD, 15 Supp. 109 (1968).96 Protocol for the Accession of Romania, GAIEF, BISD, 18 Supp. 5 (1972), and Report of theWorking Party on the Accession of Romania, GATT, BISD, 18 Supp. 94 (1972).Protocol for the Accession of Hungary, GATT, BISD, 20 Supp. 3 (1974), and Report of theWorking Party on the Accession of Hungary, GATT, BISD, 20 Supp. 34 (1974).42than other factors.It is suggested that two general provisions should be contained in the non-market economies’ protocols as an integral part of the framework: ... the first, a basicguideline according to which it would be agreed that the GAIT will be applied by andto the non-market economies “to the extent compatible with its economic system;” thesecond, a dual commitment by the non-market economies to use all the means availablein their economic and foreign trading systems in a manner which will ensurecompliance with the GAIT, and not to use the means available in its economic systemsto nullify and impair the benefits of the GAIT.983. Analysis for China Case. In the case of China’s application to resumemembership in the GAIT, its efforts to decentralize its foreign trade system and thetransition from its centrally planned economy to a market economy qualify China formembership in the GAIT.After years of economic reforms which have brought prosperity to China’seconomy, bringing it closer to the requirements for participating in the GAIT andmore integrated into the world economy, this country decided to take a decisive step inits economic reform. On 12 October, 1992, the Secretary General of the CommunistParty of China, hang Zemin, declared in his report to the 14th National Congress ofthe Communist Party of China, that “the target of our country’s economic structurereform is to build a socialist market economic system.”99 He further explained thetarget using the following words:the market is allowed to play a fundamental role in the allocation ofresources under the macroscopic regulation and control of the socialistcountry, so that economic activities obey the requirements of the law of98 Supra note 92, Eliza R. Patterson, p.186.Supra note 24, FBIS-CHI-92-204-S, p.8.43value and adapt to changes in the supply demand relationship.”°°This socialist market economy is similar to other market economies in the worldin its general features. First, market force shall play a decisive role in nationalallocation of resources and operation of national economy; second, it has to follow therule of market force, particularly the law of value, interplay of supply and demand andcompetition rules; third, it shall gear enterprises to be responsible for their ownbusiness operation, profits and losses and compete on an equal footing; fourth, all thefactors of production, including imports, capital, labor and technology and etc., shallenter into the market, while government exercises indirect macro control of theeconomy, and all economic relations shall be based on a comprehensive legalsystem. 101To structure this economic system, much remarkable progress has been made inexposing enterprises to market competition, further reducing state mandatory plans,pressing ahead with price reform, accelerating establishment of a legal system, andintensifying reform of foreign trade regime. 102For the purpose of the reform of foreign trade, China has been makingcommitments to concede tariffs on a large scale, eliminate the restrictions on licensing,foreign currency exchange and imports examinations. As for the licensing, more thantwo thirds of the import licensing requirements will be removed within two or threeyears.103 As for the tariff concessions, following the lowering the duty rates of 225tariff lines early in last year, China decided to continue to lower the duty rates of 3371100 Thid.101 Statement of Mr. Tong Zhiguang, Head of the Chinese Delegation at the 12th Session of theWorking Party on China, 9 December 1992.102 Ibid.103 Shijie Ribao, (World Journal, daily), 6 January 1993.44tariff lines on 4 December 1992.104 This will result in the reduction of the tariff levelby 7.3%. which represents the broadest and most significant tariff cuts the People’sRepublic of China has ever made.Comparing the relative practice of the GATI’ to China’s change, the points canbe concluded as: one, the requirements for membership to the GATI’ are not only thenature of the economic system, but also their ability to adhere to their GATTobligations as well, and furthermore, the former is less important as a form and thelatter more important as the basic requirement; two, the precedents of the GAITmembership of some non-market economy countries like Yugoslavia, Poland, Romaniaand Hungary proves the compatibility of non-market economies with the GAIT, withsome conditions. All these points are positive support for China’s return to the GATI’.The Working Party set up by the GAIT to consider China’s trade regime ceasedits work from 1989, and continued its work in 1991. The consideration on China’sforeign trade regime was finished at the 11th session on 21 October, 1992 and theProtocol of Accession on Resuming China’s status as contracting party was beingprepared at the 12th session of the Working Party in December 1992.105 Thus, thesubstantive negotiations are going on for the terms, or “admitting ticket”, for China’smembership.Furthermore, the necessity of China’s resumption of its contracting party statusin the GAIT does not lie in unilateral benefits to China, but rests with the fulfilment ofthe GAIT’s purpose of establishing a global institution for international trade.On this idea, John H. Jackson wrote:104 Thid, 5 December 1992; RenininRibao (People’s Daily), overseas ed. 5 December, 1993.105 This session was held from December 9-10, 1992 in Geneva, at which substantive negotiationswere undertaken on the major contents of the Protocol on China, thus the basis was set up for thefollowing drafting. Supra, note 5, Shen Xia, Xiangyin Chu, p. 592.45[I]t is my view that it will be very difficult in the long run to denymembership in the GAIT to any important nation of the world. Sincethe GAIT is the principal world trading institution, strong argumentscan be made that it must be a universal institution, for both political andeconomic reasons. Politically, it must be recognized that an importantgoal of the economic institution is the preservation of peace and theprevention of tensions which could lead to war or other conificts. Aninternational institution which accepted all nations of the world into anendeavour to try and accommodate respective interests would seem to bean important part of that general policy. In addition, economicconsiderations suggest the possible enhancement of world welfarethrough the additional trading opportunities, economies of scale, andcomparative advantage of general inclusion of all important trading blocsof the world. 106The GATE, as an international institution for world trading, is not supposed tofunction for its purpose by using GATE membership as a bait to try to force differentnational economic systems to change.” Its responsibility should be “to change and tofigure out an appropriate way to accommodate the different economic systems.”107Supra note 13, John H. Jackson, p. 290.107 Ibid.46CHAPTER III. TAIWAN AND THE GATTA. INTRODUCTION TO TAIWANTaiwan, in the formation of the Island of Taiwan, as well as the smaller nearbyIslands of Penghu, Kinmen and Matsu with a population of approximately 20 millionpeople, has been under the effective control of the government of Taiwan, the ROC.In the terms of economy, Taiwan’s per capita income was more than US$6,000 in1989.108 In 1993, Taiwan’s imports and exports make it the thirteenth largest tradingarea in the world.109This position that Taiwan is a part of China is shared by both sides of theTaiwan Straits, the Mainland and Taiwan. This “one China” principle is explained asthat there is only one China and Taiwan is one of its provinces. It was during thecolonization period in 19th century when, after the Sino-Japanese War, Taiwan wasinvaded by Japanese. According to the Treaty of Shimonoseki, Taiwan was ceded toJapan. This unequal treaty was signed under the force of Japan and its lawfulness wasquestioned and opposed not only by China but other countries during the World War II.In the Cairo Declaration in 1943, the United States and the United Kingdomproclaimed that Taiwan was the territory “stolen” by Japan and should be “returned tothe Republic of China”. Such provisions were reaffirmed in the Potsdam108 Chung-yang Jih-pao, Nov. 25, 1989, p. 2.109 Supra, note 6.47Proclamation. After World War II, Taiwan was returned to China, thus closing itshistory of foreign occupation. From then on, Taiwan was once again a province ofChina.The Civil War in China between the Nationalists and the Communists afterWorld War II resulted in the changeover of governments on 1 October, 1949. On thatdate, the PRC was established and the communists began to control most parts ofChina, meanwhile the ROC government was deposed and the Nationalists withdrew toTaiwan.For more than forty years, the Mainland and Taiwan have been separatelycontrolled by the two sides. Up to now, most of the countries and internationalorganizations have recognized the legitimacy of the PRC and support explicitly orimplicitly the position of both sides of China on a “one China” principle. The titlePRC” is recognized worldwide as the lawful government of China. At the same time,Taiwan has been under the control of the ROC government separately from the otherparts of China. So, Taiwan, as an entity active independently in world affairs,especially in economic transactions, refers to the territory controlled by the ROC afterOctober 1949. The ROC was the legitimate government of China before 1949, at thattime it controlled the whole of China. But after 1949, it became only the authoritativegovernment of the Taiwan area, losing its legitimacy as the government of the whole ofChina. Generally speaking, there is an intrinsic difference in the sense of legitimacybetween the ROC before October 1949 and the one after that time, though under thesame title.48B. RELATIONS BETWEEN TAIWAN AND THE GATTThe relations between Taiwan and the GATT should be traced back to as earlyas October 1949, before which date, there were no relations between Taiwan and anyinternational treaties at all. As for the civil war of China resulting in the changeover ofthe governments, the ROC was deposed and lost its legitimate control over the country,meanwhile the PRC took over the power to control the country and became thelegitimate government of China.The Nationalists used the same title of the ROC for their authorities on Taiwanafter October 1949, for they still tried hard to be active in international transactions inthe name of China. Realizing and recognizing the fact that it could no longer controlthe trade policies and practice of the mainland, the Taiwan authorities notified theSecretary-General of the United Nations that it was withdrawing from the GAIT, asprovided in GAIT Article XXXI, on 7 March 1950.110In 1965, Taiwan requested observer status in the GAIT in the name ofChina.Hl The request was approved despite much opposition. The focus of thediscussion was on the question of the legitimacy of the representatives of the Taiwanregime. The opposition came from the opinions that the representatives of the Taiwan110 The Taiwan government made, in the name of China, withdrawals from many internationalorganizations in 1950’s. For example, it gave the one year’s notice of denunciation of the Convention onInternational Civil Aviation on 31 May, 1950. As of December 1988, Taiwan maintained membershipstatus in only nine international organizations: the International Union for Publication of CustomsTariffs (IUPCT); the international Committee of Military Medicine and Pharmacy (ICMMP); theInternational Criminal Police Organization (INTERPOL) under the name of “China, Taiwan”; theInternational Office of Epizoites (JOE); the International Cotton Advisory Committee (ICAC) under thename of “China, Taiwan”; the Asian Productivity Organization (APO); the Afro-Asian RuralReconstruction Organization (AARRO); the Asian and Pacific Council (ASPAC); and the AsianDevelopment Bank (ADB) under the name of “Taipei, China”.111 Supra note 28.49regime were “persons having no legal powers to act on behalf of China”.112 In 1970,Taiwan was unrecognized by the United Nations and was expelled “from the placewhich they unlawfully occupy at the United Nations and in all the organizations relatedto it,” because it was considered unlawful that the Taiwan regime acted in the name ofChina.113 As a result, the Contracting Parties, at the 27th Session in November 1971,recalled its decision on granting observer status to Taiwan and decided to removeTaiwan from the seat of observer in the GAIT.On 1 January, 1990, Taiwan requested, in a letter to Mr. Arthur Dunkel, theDirector-General of the GAIT, accession to GAIT under Article XXXIII of theGeneral Agreement in the capacity of the separated customs territory of Taiwan,Penghu and Matsu.114 This decision reflects the determination of the territory tocooperate with other trading nations in the GAIT to “defend an open trading systembased on competition among free enterprises in the world markets”.115 This action canalso be considered as another step of Taiwan to take part in the internationaltransactions with the realistic attitude of Taiwan towards its status in the internationalrelations.116112 Supra note 40.113 Supra note 26.114 Taiwan’s Bid to Join GAIT Set to Raise Political Storm, Financial Times, 5 Jan. 1990.115 Memorandum on Foreign Trade Regime of the Customs Territory of Taiwan, Penghu, Kinmenand Matsu Submitted by the Republic of China to the General Agreement on Tariffs and Trade (1 Jan.1990), Chinese Yearbook of International Law and Affairs, edited by Hungdah Chiu, vol. 9 (1989-90),p.226.116 Taiwan has already participated in some international treaties as a non-sovereign entity.Examples will be given later in this paper.50C. SEPARATE CUSTOMS TERRITORY IN GATTThe Separate Customs Territory (SCT) in the GAIT is the very specialmembership in this international trading system. As early as in the course of draftingthe General Agreement, considering that the General Agreement would deal only withtariffs and trade matters and there were some territories with autonomy only in externalcommercial affairs but not in political affairs, the drafters agreed to accept these SCTsin the GAIT as contracting parties.The relevant clauses of territorial application in the General Agreement. ArticleXXIV:2 stipulates that,for the purpose of this Agreement a customs territory shall be understoodto mean any territory with respect to which separate tariffs or otherregulations of commerce are maintained for a substantial part of thetrade of such territory with other territories.117Article XXIV, 1 provides that the provisions of this Agreement shall apply totwo kinds of territories. The first is the kind ofthe metropolitan customs territories of the contracting parties, and thesecond is the kind of any other customs territories in respect of whichthis Agreement has been accepted under Article XXVI or is beingapplied under Article XXXIII or pursuant to the Protocol of ProvisionalApplication, ... each such customs territory shall, exclusively for thepurpose of the territorial application of this Agreement, be treated asthough it were a contracting party.118This classification of the two kinds of territories actually refers to the reality ofinternational relations at the time the General Agreement was drafted. After WorldWar II, there were still many colonies in the world. These territories did not have117 GATI Article XXIV:2.118 GATT’ Article XXIV, 1.51political independence, so they were not sovereign entities. They were under thecontrol of their suzerain states. But some of them had full autonomy in the conduct ofexternal commercial relations, despite their political dependence on their suzerainstates. In Article XXIV: 1, the metropolitan customs territories mean those sovereignstates which have suzerain relations with their colonies, and the phrase “any othercustoms territories . . .“ refers to those colonial territories qualified under therequirements of Article XXVI or Article XXXIII.Article XXVI:5(a) provides that “[Ejach government accepting this Agreementdoes so in respect of its metropolitan territory and of the other territories for which ithas international responsibility “) Article XXVI:5(c) provides that any of thecustoms territories possessing or acquiring full autonomy in the conduct of its externalcommercial relations and of the other matters provided for in this Agreement, “shall,upon sponsorship through a declaration by the responsible contracting party establishingthe above-mentioned fact, be deemed to be a contracting party” 120 Hong Kong andMacao are contracting parties of this group, which acquired the membership underArticle XXVI:5(c). Among this group, Burma, Ceylon and South Rhodesia are theprecedents, which became contracting parties with the status as an SCT or a colony. Inother words, their relations with the GAIT were established by their suzerains underArticle XXVI:5(a) of the General Agreement.The requirements of membership in the GAIT, is different from most of theinternational organizations. It emphasises the applicant’s autonomy in externalcommercial relations. In other words, a government of a territory can be qualified as acontracting party of the GAIT, if, together with other requirements, it acts on behalf119 GATT Article XXVI:5(a).120 GATT Article XXVI:5(C).52of a separate customs territory possessing full autonomy in the conduct of its externalcommercial relations and of the other matters provided for in the GAIT In this way,the GAIT allows applications for membership to be filed by not only “governments” inthe traditional sense, but also by a “government acting on behalf of a separate customsterritory possessing full autonomy in the conduct of its external commercial relationsand of the other matters provided for in this Agreement.”121By using terms like “government” and “contracting party” in the GATT formembership, instead of “state” or “country” or “member states”, the definition of thecontracting party surely includes governments of both sovereign states and separatecustoms territories.B. APPROACHES AVAILABLE FOR TAIWAN TO JOIN GATTIn the GAIT practice, there are three groups of contracting party statusaccording to the approaches of acquiring the membership. The first group refers to the23 original contracting parties which signed the Provisional Protocol of Application(PPA) when it entered into force; the second group is made up of those acceding to theGAIT under Article XXXIII, which has never been used by any applicants in theprocedure to accede to the GAIT except Taiwan; the third group is of those acquiringthe membership under Article XXVI:5 (c), which has been the main entrance for theexisting SCT members of the GAIT.Article XXVI:5 and Article XXXIII constitute two different provisions of theGeneral Agreement, regulating the accession of the SCTs in the GAIT. In the first121 GAY1’ Article XXXIII.53case, the SCTs, under Article XXVT:5, as above-mentioned, a customs territory shouldbe deemed to be a contracting party “upon sponsorship through a declaration by theresponsible contracting party”, through which way most SCT contracting partiesfulfilled their procedure of accession to the GATI’. The other case allows for the SCTsto become contracting parties under Article XXXIII, which provides that “... agovernment acting on behalf of a separate customs territory possessing full autonomy inthe conduct of its external commercial relations and of the other matters provided for inthis Agreement, may accede to this Agreement, ... on terms to be agreed between suchgovernment and the Contracting Parties.” But in the GAI1” s history, the ArticleXXXIII approach has never been invoked by the SCTs in their accession to the GAIT.In contrast, the SCTs prefer to adopt the Article XXVI:5 (c) approach for accessionbecause in this way they can be exempted from making further tariff and tradeconcessions with contracting parties. It is interesting that Taiwan’s application for theGATE membership becomes the first case under Article XXXIII.Taiwan’s Decision. The political perspective of Taiwan’s decision to apply forthe GATT membership under the title of SCT comes from the reality of China’ssituation from October 1949, especially from the 1970s.22 Based on the doctrine thatthere is only one China and Taiwan is part of China, which is claimed by both sides ofthe Taiwan Straits, Taiwan, in efforts to participate in international transactions, gaveup holding onto the title of the ROC in joining in international transactions under the122 In Oct. 1949, the PRC government replaced the ROC government as the legitimate authoritiesfor the country, with the actual control over most parts of China, meanwhile the latter kept its controlonly over a very small part of China, i.e., the islands of Taiwan and Penghu, as well as the islands ofKinmen and Matsu offshore from Fujian province of the mainland. Tn 1971, the action the UnitedNations General Assembly took to adopt Resolution 2758 (XXVI) led to the removal of Taiwan fromnearly all governmental international organizations. As a result, the PRC government returned to mostinternational organizations, and in a broad sense, returned to the international community.54reality of the wide recognition from the international community that the PRC shouldrepresent China. 123Taking account of the awkward situation in which Taiwan has beenunrecognized as the representative of the sovereign state of China, which thus preventsTaiwan from applying for membership in the GATT as the government of a country,and the urgent need to join the world trading institution in order to directly benefitfrom the open system heralded by the GATT, Taiwan decided to request its accessionto the GAIT as a SCT in accordance with Article XXXIII of GAIT.As to the regulations for the SCTs entering into the GAIT, there are two ways,i.e. the SCTs can be contracting parties either by “sponsorship through a declaration bythe responsible contracting party ... under Article XXVI:5(c), or through theapplication procedure by “ a government acting on behalf of an SCT possessing fullautonomy in its conduct of external commercial relations and of the other mattersprovided for in this Agreement”, “... on terms to be agreed between such governmentand the Contracting Parties”.Accession for SCTs under Article XXVI:5(c) requires three constituents. First,a contracting party has accepted the General Agreement in respect of a SCT. Second,the SCT possesses or acquires full autonomy in the conduct of its external commercialrelations and other matters provided for in the Agreement. And third, a sponsorship isneeded through a declaration by the responsible contracting party establishing theabove-mentioned fact. In this way, no new negotiations are necessary for the accession123 In March 1981, the Olympic Committee of Taiwan agreed to accept the 1979 decision of theInternational Olympic Organizations (IOC) by which Taiwan would be allowed to compete in the gamesprovided it did so under the name “Chinese Taipei Olympic Committee” and used a new flag and anthemrather than the flag and anthem of the ROC. Up till now, Taiwan has maintained its memberships in theInternational Criminal Police Organization (INTERPOL) under the name of “China, Taiwan”, theInternational Cotton Advisory Committee (ICAC) under the name of “China, Taiwan” and the AsianDevelopment Bank (ADB) under the name of “Taipei, China”.55of SCTs.Such negotiations, in contrast, are unavoidable in the other kinds of cases foraccession of SCTs under Article XXXIII. In this way, the accession of a governmentacting on behalf of an SCT possessing full autonomy in the conduct of its externalcommercial relations ... must be based on the terms to be agreed between suchgovernment and the Contracting Panes, ... and a two-thirds majority of the ContractingParties is needed for such decision. The negotiations offer the existing contractingparties a good chance to bargain with the applicants for more favourable tariffconcessions and other preferential treatments. The SCT applicants must pay for the“admission ticket”.Comparatively, to save on the expense on the “admission ticket”, SCTs, inaccession under Article XXVI:5 (c), are required to be in a situation in which theirexternal relations are under the responsibility of their suzerain governments. Thiscategory of cases includes Burma, Ceylon and South Rhodesia as well as Hong Kongand Macao in recent years.In Taiwan’s case, it cannot accede to the GATI either as a government ofsovereign state because the opinion of “One China” is constituted in the laws of bothsides of the Taiwan Straits and supported by the common sense of internationalcommunity, or as an SCT under the sponsorship through a declaration by a governmentestablishing the fact of its autonomy in the conduct of its external commercial relationsand other GATI matters. That is why Taiwan has taken the choice to accede to GATIunder Article XXXIII.Taiwan, in its Memorandum to the GATT, refers to itself as “[T]he CustomsTerritory of Taiwan, Penghu, Kinmen and Matsu encompassing the islands of Taiwan,Penghu and the islands of Kinmen and Matsu off Fukien.124 It is separated from56mainland China by the Taiwan Straits”. “[T]he Territory has enjoyed de factoautonomy. It constitutes a separate customs territory with full autonomy in the conductof its external commercial relations”.125The common ground between the two sides of the Taiwan Straits about thelegitimacy of the State is that both the mainland and Taiwan are inseparable parts ofChina. Both sides claim one China. In political perspectives, the fact of coexisting ofthe PRC government and the Taiwan government is only the continuity or the productof the Civil War in China. As a matter of international law, it is groundless to considera territory as a nation-state if it itself does not claim so, like the case of Taiwan.124“Fukien” means Fujian Province in China.125 Supra, footnote 115.57E. GOVERNMENT QUALIHE]) TO ACT ON BEHALF OF SCTIt is reasonable to question whether Taiwan’s government is eligible to accede tothe GAIT as a “government acting on behalf of a separate customs territory possessingfull autonomy in external commercial relations and the other matters provided for inthis Agreement.”According to the GATI’, two kinds of governments may accede to theGAIT.126 The first kind is the government of a sovereign states which in most of thecases act as the creators and participants of all the international treaties andinternational organizations. The other kind is the government of a SCT which mayaccede to the GAIT under certain requirements. Those requirements are mainly asfollows.1. The degree of autonomy of an SCT with respect to external commercialrelations and other GAIT matters. In the cases of Burma, Ceylon and South Rhodesia,such autonomy was requested to be proved, (a) the ability to determine and modify itstariffs without the consent of its suzerain state; (b) the ability to apply the GeneralAgreement without reference to its suzerain state; and (c) the ability to enter intocontractual relations on commercial matters with foreign governments. This apparentlyfalls under Article XXVI:5 (a) and (c), because such SCTs have their suzeraingovernments which have international responsibility for them and have established thefact that these SCTs possess or acquire full autonomy in the conduct of their externalcommercial relations and other GAIT matters.2. The procedure for SCTs to accede to the GAIT. In some cases,126 Article XXVI:5, Article XXXIII.58sponsorships are required by the responsible governments through declarations.127 Asin Article XXXIII, ... a government acting on behalf of a separate customs territorymay accede to this Agreement, ... on behalf of that territory ...“. It is ambiguouswhich government it refers to, the local government of the SCT, or the centralgovernment of the country to which the SCT belongs to, or either one. Thisambiguity, together with the “admission ticket” provided in Article XXXIII, makes thisan unused Article, and has caused some legal problems in the first case of itsapplication ever in the GATT history, i.e. the Taiwan case.In this case, Taiwan is part of China of which the PRC government is the onlylegitimate one. On the other hand, there is no suzerain relations between the two sidesof the Taiwan Straits. All the requirements are not applicable. It seems impossible foreither the PRC’s sponsorship through a declaration for Taiwan accession to the GATT,or the PRC government’s accession on behalf of the SCT of Taiwan. Compared withArticle XXVI:5 (c), the provision in Article XXXIII about SCT can be applicable onlyin the case that an SCT meets the requirements of accession to the GATI’ and acceptsthe Agreement while the central government of the country, of which the mentionedSCT is a part, is not a contracting party. Even in this case, the accession of such SCTto the GATT is often thought to require some kind of confirmation from the centralgovernment of the country which such SCT belongs to. An SCT should be understoodas a part of the territory of a country with different and separate tariff system andpolicies from the rest of the parts of the territory of the same country, with fullautonomy in the conduct of its external commercial relations. An SCT is by no meansa sovereign state. It is only a part of the territory of a sovereign state with fullautonomy in external commercial relations. The government of an SCT is only a local127 Article XXVI:5(c).59government of that country. On the basic international law principle of statesovereignty, such local government cannot participate in any external relations withoutcertain confirmations from the central government unless stipulated otherwise in itsdomestic laws.That is the basis of the requirements of sponsorship in the form of declarationfor an SCT to accede to the GATI in Article XXVI:5 (c). In the modern world, thereare such territories which are neither sovereign states nor belong to certain sovereignstates. Surely there are some former colonial territories which became semi-independent under the trusteeship system set up by the United Nations after World WarII. In these cases, the external relations of these territories are under the supervision ordirection of appointed sovereign states. In other words, these sovereign states areresponsible for the external affairs of these territories. Assuming this situation, thedrafters of the GATT kept in mind that a non-sovereign separated customs territoryshould have a sovereign country responsible for its external affairs. Though the SCThas “full autonomy in the conduct of its external commercial relations...” and thus canbe deemed as contracting party according to the GATT provisions, its accession isconditioned with the sponsorship of the country which is responsible for its externalrelations and has established the fact of its autonomy in external commercial relations.Reviewing the relevant practice of the GATE’, most SCTs belong to this groupand they all acceded to the GATE’ under Article XXVI: 5(c). Taiwan’s case is the firstone applying the provisions of Article XXXIII.According to the requirements in Article XXVI:5(c), it would be difficult forthe PRC government to be the sponsor for Taiwan’s accession to the GATT because,firstly, the PRC government is not a contracting party yet; secondly, the PRCgovernment has not been responsible for Taiwan’s external affairs, and thirdly, thePRC government can in no way be considered the one who has established the fact that60Taiwan “possesses or acquires full autonomy in the conduct of its external commercialrelations and of the other matters provided for in the Agreement”.Based on the one-China principle and the worldwide recognition of the PRC asthe legitimate government of China, Taiwan authorities can only be considered as agovernment of a local entity of China. Measured by both the GATr regulations andpractice, it would be without precedent to accept a government of a local entity of asovereign country to GAIT without a certain kind of confirmation from the centralgovernment of that country.What the PRC is concerned about is not to impede Taiwan’s accession to theGAIT, but to avoid any negative impacts upon the one-China principle. Due to thecurrent situation on the relations between the two sides, it is also impossible for Taiwanto agree with the confirmation from the PRC as a precondition of its accession to theGAIT. The major divergence is on the relations between the two governments. Tothe PRC government, the relations between the two sides should be positioned as theone between the central government and the local government. It is unacceptable toTaiwan to be considered as a local government, because in this way, it would lose itsbargain margin in the negotiations with the mainland.F. THE PRC’S ATTITUDE ON TAIWAN’S APPLICATIONThe attitude of the PRC government towards Taiwan’s application forcontracting party status as a SCT influences the consideration of all contracting partieson this matter.On 16 January, 1990, half a month after Mr. Arthur Dunkel, the Director-General of the GAIT, received the letter sent by the Taiwan government requesting61accession to GATE under Article XXXIII as a SCT, he was notified by the PRCgovernment that Taiwan’s action was an “utterly-illegal application”.128 It was the firstreaction by the PRC to Taiwan’s request for GATI membership, which was constituentwith the PRC’s long-time policy on Taiwan’s efforts to take part in internationalorganizations as an independent political entity. In the last four decades, especiallyfrom 1972 when the PRC returned to the United Nations as well as the otherinternational organizations related to it, the PRC has been trying hard to advocate to“expel” or “exclude” Taiwan as the representative of China in all internationalrelations. The basic point is on the representative of the country, or in other words,who is the legitimate authority over China. Essentially, it is the extension of domesticpolitical conflicts to external affairs. Fearing that Taiwan, under political pressure andthe instigation both from inside and outside, would be separated from the country, thePRC holds on to the one-China principle, and is determined to prevent and stop theseparation of Taiwan from China at every cost.129 It reflects the unmovable stand ofthe PRC on the matter of principles. Coming from this viewpoint, the PRC opposesTaiwan’s request to be contracting party as an SCT. By analysis on the provisions ofthe GATT, we may find the legal reasons for both Taiwan’s request and the PRC’sopposition.Under Article XXVI:5(c), a SCT shall be deemed to be a contracting party withthe conditions of “sponsorship through a declaration by the responsible contractingparty” establishing the fact that the concerning SCT “possesses or will acquire full128 China Moves to Block Taiwan’s Bid for GATT’, Financial Times, 17 January, 1990.129 Supra note 24, Jiang Zemin, FBIS-CHI-92-204-S, 21 October 1992, P. 20. In this report, Jiang,the Secretary-General of the Communist Party of China, reaffirmed that “Taiwan is an inalienable part ofChina’s sacred territory. We resolutely oppose “two China,” “one China, one Taiwan”, or “one country,two governments” in any form. We resolutely oppose any attempts and actions designed to make Taiwanindependent.62autonomy in the conduct of its external commercial relations and other mattersprovided for in this Agreement”. In this case, a certain relation is required between theSCT and the contracting party which is responsible for the external relations of the SCTand has established the SCT’s full autonomy in it’s conduct of external commercialrelations and of the other matters provided for in the General Agreement. The rationaleof this article is based on the fact that, at the time the Agreement was drafted, therewere many colonies like Burma, Ceylon and South Rhodesia, which were notindependent politically but had their own autonomy in external commercial relations.So comes the requirement of the sponsorships through declarations by their suzerains.In this way, the procedure is simple and such SCTs can enjoy the continuity ofmembership by virtue of its legal relationship with their current metropolitan power,instead of paying the “admission ticket” by new commitments in the form of newprotocols. Reviewing the practice of GAIT about accepting SCTs as contractingparties, it can found that nearly all SCTs who are contracting parties fulfilled theadmitting procedure under Article XXVI:5(c), like Burma, Ceylon and South Rhodesiaand so on.Taiwan’s case is peculiar for although both sides between the Taiwan Straitsstick to the one-China principle, the reality of the divided territory of China in the lastfour decades does not mean any likely relations of suzerainty between them. The fullautonomy of Taiwan in the conduct of its external commercial relations is notestablished by the PRC government. Taiwan surely cannot follow this procedure toseek its membership in GATE, because it would spoil its grounds in the struggle withthe mainland government for the legitimacy to present China, and further it wouldresult in its recognition of the legitimacy of PRC government. It would be incredibleand impossible for Taiwan to accept such a sub-ordinate position given the currentpolitical reality. Because it can accede to the GAIT neither as a sovereignn nation nor63as an ACT under Article XXVI:5(c), Taiwan took the last and the only choice, i.e. toaccede as an ACT under Article XXXIII. 130All the controversies around Taiwan’s application focus on Taiwan’s legal statusin international transactions. The relevant practice of Taiwan, the mainland and theinternational community give positive verification on this question. First, both of thetwo sides agree that there is only one China, and Taiwan is a part of China. Second,Taiwan has not been accepted by very many in the world community as a sovereignstate, whereas the representation and participation of the PRC government as thelegitimate government of China has been recognized by most countries andinternational organizations in the world.131 This reality is with the acquiescence of theTaiwan government.’32 Third, the activities of the ROC in international relationsbefore October 1949 was definitely the state behavior of China. Due to theestablishment of the PRC government in 1949, the ROC lost its legal basis forexistence as the legitimate government of China. 133130 A SCT can accede to the GATT under Article XXXIII which requires the applicant to pay forthe “admission ticket”, which, in Article XXXIII, reads as the “terms to be agreed between suchgovernment and the Contracting Parties”, and the “decisions of the Contracting Parties ... shall be takenby a two-thirds majority.”131 The PRC has diplomatic relations with 155 countries at present.132 Taiwan has given up claiming the legitimate representation for China, and uses the title of“China, Taipei”, or “China, Taiwan” in many international organizations. Its application for the GATTas an SCT is another example by which it explicitly claims its representation for the territory of Taiwan,Penghu, Kinmen and Matsu only.133 In other words, the ROC, in a legal sense, has a very different definition before and after thedate of 1 October, 1949. Before then, the ROC was the legitimate government of China in internationalrelations. After then it has not been recognized as the government of China by most countries of theworld community and is considered only a de facto government with control over a small part of thecountry. Its activities under the title of the ROC in international relations after 1949 is not at all thecontinuity of the former Chinese government in legal sense, because its activities in the name of “China”have no authority, no representation, thus are unlawful.64CHAPTER IV. HONG KONG AN]) THE GATTA. INTRODUCTIONHong Kong, as a very important international financial center and free harbour,has established itself as an important player in the global economic arena. It is one ofthe world’s largest banking center, the world’s tenth largest trading entity, and one ofthe world’s busiest container ports. Hong Kong is also a major foreign exchange andcommercial market, the regional headquarters of a large number of multinationalenterprises, and Asia’s leading communications center. Hong Kong has very closeconnections with the mainland in trade.In the last more than a hundred years, Hong Kong has been separated fromChina by three Sino-British treaties.134 On 19 October, 1984, People’s Republic ofChina and Britain signed the Joint Declaration on the Question of Hong Kong betweenthe Government of the People’s Republic of China and Her Majesty’s Government ofthe United Kingdom of Great Britain and North Ireland, according to which HongKong will return to China on 1 July, 1997.135 The transfer of sovereignty over HongKong to China raises many new questions. One important field related to the transferis Hong Kong’s status in international relations as well as the internal relations withinChina between Hong Kong and the central government concerning international134 Those treaties will be reviewed in the text at note 141.135 Treaty Series No. 26 (1985), Cmnd. 9543.65transactions, especially in the major international trade organization, the GeneralAgreement on Tariffs and Trade.On 24 April 1986, the Secretariat of the GATT notified the contracting partiesthat Hong Kong had become a contracting party of the GATI’ on 23 April, 1986.136China is now in the process of resuming its membership in the GATT. On the otherhand, Hong Kong will be under the exercise of the sovereignty of China. Thecomplexity leads our analysis to the following steps, i.e. the positioning of Hong Kongin China, Hong Kong’s status in international organizations, and capacity to participatein international relations, the succession of treaty rights and obligations on Hong Kongafter 1997, and the relations of the Hong Kong Separate Administrative Region(hereinafter Hong Kong SAR)137 with the central government in the field of externalaffairs and so on.Another case is about Macao. Concerning that much similarity lies betweenMacao and Hong Kong in the sense of their status in international organizations andtheir capacity in external affairs as non-sovereign entities, Hong Kong is chosen insteadof Macao as the example for the following analysis.B. HISTORICAL BACKGROUNDIn 1840, the Opium War broke out between the British and China. On 29August, 1842, the British government forced the Chinese government of the Qing136 GATT, Doc. GATT/1384, 24 April, 1986.137 According to the Joint Declaration between China and British in 1984, Hong Kong will be in thestatus of Separate Administrative Region with high autonomy.66Dynasty to sign the Treaty of Nanjing,’38 by which the Island of Hong Kong wasannexed to Great Britain. In 1856, Britain launched the Second Opium War, andforced the Qing government to sign the Convention of Beijing139 on 24 October, 1860,which was originally called the Supplementary Protocols for the Treaty of Nanjing.Under this convention, the Qing government was forced to cede the Chinese territorysouth of Boundary Street on Kowloon Peninsula, facing the Island of Hong Kong, toBritain. Thirty years later, taking advantage of China’s defeat in the Sino-JapaneseWar of 1894-1905, Great Britain forced China to sign the Convention for the Extensionof Hong Kong Territory on 9 June, 1898, by which a much larger area north of theKowloon Peninsula, later called the New Territories, was leased to Great Britain for 99years.’4°These three treaties were considered by Chinese governments as “unequaltreaties” 141 As early as during World War II, the government of the Republic ofChina demanded the termination of the 1898 lease of the New Territories in thenegotiations with Great Britain for the termination of British extraterritorial and otherspecial rights in China.142 After the PRC government replaced the ROC governmentin late 1949, its policy on this matter was very clearly declared in the following words:138 Treaty of Nanjing, August 29, 1842, Great Britain-China, art. III, 50 British and Foreign StatePapers ( Gr. Brit.) 389; 93 Parry’s T.S. 465, 467.139 Convention of Friendship, Oct. 24, 1860, Great Britain-China, art. VI, 50 British and ForeignState Papers ( Gr. Brit.) 10; 123 Parry’s T.S. 71, 73-74.140 Convention for the Extension of Hong Kong Territory, June 9, 1898, Great Britain-China,reprinted in Hertslet’s China Treaties 130 (3d ed. 1908); 186 Parry’s T.S. 310.141 This policy has been shared by both the Chinese Nationalist government before 1949, i.e. theRepublic of China, and the Chinese Communist government after 1949, i.e. the People’s Republic ofChina. See, Hungdah Chiu, Comparison of the Nationalist and Communist Chinese Views of UnequalTreaties, in China’s Practice Of International Law, 239, 248-56, ed. by 3. Cohen, 1972.142 Hungdah Chiu, Introduction, in 20 Case Western Reserve Journal of International Law, No. 1,1988, p. 2.67At the time the People’s Republic of China was inaugurated, ourgovernment declared that it would examine the treaties concluded byprevious Chinese governments with foreign governments, treaties thathad been left over by history, and would recognize, abrogate, revise, orrenegotiate them according to their respective contents.As a matter of fact, many of these treaties concluded in the past eitherhave lost their validity, or have been abrogated or have been replaced bynew ones. With regard to the outstanding issues, which is a legacy fromthe past, we have always held that, when conditions are ripe, they shouldbe settled peacefully through negotiations and that, pending a settlement,the status quo should be maintained. Within this category are thequestions of Hong Kong, Kowloon, and Macao and the questions of allthose boundaries which have not been formally delimited by the partiesconcerned in each case. 143In its practice in the following years, the Chinese government has never givenup its claim on Hong Kong.144143 A Comment on the Statement of the Communist Party of the United States of America, Peopl&sDaily (Remain Ribao), Mar. 8, 1963. Supra note 71, Jerome A. Cohen and Hungdah Chin, p. 380 (1974).144 One case of the Chinese striving for their sovereign rights over Hong Kong in the 1960s to the1970s is about the listing of Hong Kong with the colonial territories. Tn 1964, the World Youth Forumadopted a resolution putting Hong Kong and Macao on a par with Timor Island, Papua, Oman, Adan,and South Arabia and demanded “independence” for those places in accordance with the 1960 UnitedNations Declaration on the Granting of Independence to Colonial Countries and Peoples. For theDeclaration, see G.A. Res. 1514, 15 U.N. GAOR Supp. (No. 16) at 66 U.N. Doc. A/4648 (1960). Thisresolution met a strong protest from the PRC delegates. In the United Nations, the PRC readdressed itspolicy after its entry into the United Nations. On March 10, 1972, the Chinese Ambassador to theUnited Nations, after finding that the General Assemblys Special Committee on Colonialism includedHong Kong and Macao in its list of colonial territories, sent a letter to the Chairman of the Committee,stating that:As known to all, the question of Hong Kong, and Macao belongs to the category of questions resultingfrom the series of unequal treaties left over by history, treaties which the imperialists imposed on China.Hong Kong and Macao are parts of Chinese territory occupied by the British and Portuguese authorities.The settlement of question of Hong Kong and Macao is entirely within China’s sovereign right and doesnot at all fall under the ordinary category of colonial territories.Consequently, they should not be included in the list of colonial territories covered by the Declaration onthe Granting of Independence to Colonial Countries and Peoples.With regard to the question of Hong Kong and Macao, the Chinese government has consistently held that68The Resolution of the Question of Hong Kong. After negotiations on thefuture of Hong Kong between the two sides, the PRC and Britain initialled the JointDeclaration on the Question of Hong Kong.’45 According to the Joint Declaration,Hong Kong will be under the sovereignty of China on 1 July, 1997, and Chinapromises Hong Kong’s prosperity with the detailed policy on Hong Kong, the post-1997 Hong Kong regime, and its international relations. These policies mainly includethat Hong Kong will enjoy a “high degree of autonomy” except in foreign and defenceaffairs, as a Special Administrative Region; Hong Kong will maintain the capitalisteconomic and trade systems for fifty years after 1997. As to its international relations,the Declaration affirms that Hong Kong may participate in relevant internationalorganizations and international agreements. It may establish official and semi-officialeconomic and trade missions in foreign countries, using the name “Hong Kong, China”to maintain and develop relations and conclude and implement agreements with states,regions, and relevant international organizations in appropriate fields.they should be settled in an appropriate way when conditions are ripe. The United Nations has no rightto discuss these questions.For the above reasons, the Chinese delegation is opposed to including Hong Kong and Macao in the listof colonial territories covered by the declaration and requests that the erroneous wording that Hong Kongand Macao fall under the category of so-called colonial territories be immediately removed from thedocuments of the special committee and all other United Nations documents.145 The Joint Declaration on the Question of Hong Kong between the Government of the People’sRepublic of China and Her Majesty Government of the United Kingdom of Great Britain and NorthIreland, was signed on 19 October, 1984, and the instruments of ratification were exchanged on 27 May,1985.69C. HONG KONG’S EXTERNAL RELATIONS AND STATUS ININTERNATIONAL ORGAMZATIONS1. Situation of Hong Kong’s External RelationsHong Kong’s significant status in international economic transactions makes itvery necessary to let Hong Kong participate in international treaties, though it hasnever been a sovereign subject.The international activities of Hong Kong are so worldwide as to includemembership and participation in several international organizations and multilateralconventions, as well as negotiation and conclusion of agreements with foreigngovernments. Actually, Hong Kong, either through the United Kingdom or as aseparate member, is in fact participating in more than 85 multilateral treaties orarrangements, relating to arbitration, aviation, copyright, settlement of investmentdispute, judicial assistance, maritime matters, the control of narcotics, patents,publications, satellite communications, telecommunications and other matters.146Hong Kong has also been granted separate export quotas by its major trading146 Tn May 1990, the international organizations Hong Kong participates in include the UnitedNations Economic and Social Commission for Asia and the Pacific (ESCAP); International Bank forReconstruction and Development (IBRD); International Monetary Fund (IMF); United Conference onTrade and Development (UNCTAD); Food and Agriculture Organization (FAO); International LaborOrganization (ILO); International Maritime Organization (IMO); Universal Postal Union (UPU);International Telecommunication (ITU); International Telecommunication Satellite Organization(INTERSAT); International Atomic Energy Agency (IAEA); International Criminal Police Organization(INTERPOL); General Agreement on Tariffs and Trade (GATT); Asian Development Bank (ADB);Asian and Pacific Development Centre (APDC); Asia-Pacific Postal Union (APPU); Asia-PacificTelecominunity (APT); Customs Co-operation Council (CCC); International Typhoon Committee (ITC);International Development Association (IDA); International Finance Corporation (IFC); InternationalHydrographic Organization (IHO); International Maritime Satellite Organization (INMARAT); UnitedNations Commission on Narcotic Drugs (UNCND); World Health Organization (WHO); WorldMeteorological Organization (WMO).70partners such as the United States, the U.K., Canada, and the European EconomicCommunity. Hong Kong maintains its own memberships in 312 internationalnongovernmental organizations. There are more than 60 countries that maintainconsulates and eight British Commonwealth countries that maintain commissioner’soffices (i.e. consulate in fact) in Hong Kong. Externally, Hong Kong has many officesin other countries.147 Being a part of Hong Kong’s external relations, the bilateralagreements between Hong Kong and other governments are many and range widely. 148147 At the governmental level, Hong Kong maintains offices in London, Geneva (under the U.K.Mission to the United Nations European Headquarters), Brussels, Toronto, Tokyo, and Washington(under the British Embassies), and New York (the offices of the Commissioner for Hong KongCommercial Affairs in the British Consulate General). For the industrial promotion, Hong Kong hasoffices in Tokyo, London, Stuttgart, and San Francisco. The Hong Kong Trade Development Councilmaintains offices in 17 cities such as Vienna, London, Paris, New York, Toronto. Hong Kong’sinterests are represented by the British embassies or consulate for the areas or countries in which it has nospecial offices.148 Under the authorization from the British Government and the agreement of the Sino-British JointDeclaration, Hong Kong is entitled to act on behalf of itself, for example, in one of the important fieldsof governmental cooperation, civil aviation. The international standardization of machinery for technicalor operational safety in air transport need the determination, assurance and control of sovereign states,most of the concerned agreements are signed between the governments of sovereign states. So, all thebilateral air service agreements which were in force in respect of Hong Kong were between the U.K. andthe concerned countries. For example, Australia, Burma, Canada, Sri Lanka (Ceylon), France,Germany, India, Indonesia, Italy, Japan, Kenya, Korea, Kuwait, Lebanon, Malaysia, New Zealand,Philippines, Portugal, Singapore, South Africa, Switzerland, Thailand, USA. See Gary Heilbronn,Hong Kong’s First Bilateral Air Service Agreement: A Milestone in Air Law and An Exercise inLimited Sovereignty. Also see, Hong Kong Law Journal, vol. 18, Jan. 1988, No. 1, p.&l, note 2.On 26 June, 1987, the Agreement between H.K. and the Netherlands Concerning Air Servicescame into force. It was signed at the Hague on 17 September, 1986. See, Special Supplement No. 5 toHong Kong Gazette, June 26, 1987 and replacing, for Hong Kong, UK-Netherlands agreement (cmd No.6893, Aug. 13, 1946) entry into force in Hong Kong, Nov. 31, 1971, by cmnd No. 4856. It is the firstair service agreement entered into by Hong Kong in its own right also it is the first example ininternational aviation’s relatively short history of an international air services agreement being made by apolitical entity possessing less than the full sovereignty. Up to now, the H.K. has concluded agreementson civil aviation with Netherlands, Switzerland, Canada, France, New Zealand, Malaysia, Brunei andBrazil.712. History and Status of Hong Kong in International OrganizationsHong Kong’s relations with, and its activities in international organizations hasbeen formed and determined by the special relation between Hong Kong and Britain inhistory.In the passing century, the government of the United Kingdom has beenresponsible for Hong Kong’s international relations, because of its dominance over itsoverseas territories. But Hong Kong has been authorized with considerable autonomyin the area of commercial and cultural relations. Hong Kong’s status and functions arevaried in different international organizations according to the various natures andregulations of those organizations. Cases are classified in general as follows:(1) Some international organizations regulate that only states (sovereignstates) are qualified for membership. Hong Kong can be a participant in theconferences of these organizations as a member of the U.K. ‘s delegation to suchorganizations. In other words, Hong Kong takes part in the activities of theseorganizations only because the U.K. has the membership. Hong Kong has no separatestatus in these organizations, though its representative, as a member of the U.K. ‘sdelegation, may, in some cases, make a speech on matters concerning Hong Kong. Incase of the International Maritime Organization of which 55 maritime countries aremembers. The U.K. became one of its members on May 3, 1967. The membershipbrought Hong Kong within the application of the Convention as well as being aterritory of which the U.K. was responsible for international relations.(2) In some international organizations, memberships are open not only tostates, but also to some areas or the governments of these areas, with the former(states) as the formal members and the latter as formal members, quasi-members,associate members and observers, etc. Hong Kong has various separate status in such72organizations. For instance, the Economic and Social Committee of Asia and Pacific(ESCAP, it was first called the Economic Committee of Asia and Far East, ESCAFE)is a subsidiary body of the United Nations Economic and Social Council. Hong Kongwas included in the geographical scope of Asia and the Far East by Resolution 37 (IV)of the ECOSOC on March 28, 1947 by which the ESCAFE was established. In theResolution 69(V) of ECOSOC on August 5, 1947, Hong Kong was classified within thelimits of the function and administration were of ESCAFE, thus becoming one of theareas qualified to be associate members when the applications for the membershipswere submitted by the member states which are responsible for the internationalrelations of these areas. Afterwards, Hong Kong became an associate member of theESCAP through the application of the U.K. In the Asian Development Bank (ADB),Hong Kong obtained a separate membership by its own qualification for the ADB. It isregulated in the Protocol of the Asian Development Bank that the memberships areopen to the members and quasi-members of the UNESCAP, other countries in thisarea, and the developed countries in the United Nations or the special agencies of theU.N. Hong Kong’s membership as a quasi-member in the ADB was obtained throughthe U.K. ‘s application on March 27, 1969 according to Article 3(3) of the Protocol ofthe ADB.(3) In some international organizations, though the memberships are limitedto states or the official representatives of states, the territories or the governments ofthe territories for which a member state is responsible for its international relations areallowed to take part separately in the regional organizations or conferences subsidiaryto the organizations in the names of themselves, such as the International CriminalOrganization (ICO). The Hong Kong Branch of the International Criminal organizationwas established in 1960, subordinate to the British National Bureau of ICO.Afterwards, Hong Kong’s representative took part in the plenary conferences of the73ICO as a member of the British delegation, and in the names of “U.K., H.K.” and“H.K.” made presentations in the conferences on the Asian Region called by theSecretary General and some seminars concerning criminal affairs.In some international organizations, the memberships are open not only tostates, but to states which, though they are not located in the certain regionsthemselves, are responsible for the international relations of some areas in theseregions. For instance, according to such regulations, the U.K. became a member ofthe West Pacific Region Committee of the World Health Organization by theResolution WHO 2.103 of the World Health Organization on June 30, 1949, becausethe U.K. was responsible for the international relations of Fiji (not independent then)and Hong Kong which were located in the West Pacific Region. Before 1970, HongKong and Fiji sent their representatives in turn to take part in these conferences as thedelegation of the U.K. in the name of the U.K.. Hong Kong itself has represented theU.K. in these conferences after Fiji became independent.D. HONG KONGtS CAPACITY TO JOIN INTERNATIONALORGANIZATIONSOn Hong Kong’s capacity in international organizations as a non-sovereignentity, consideration is concentrated to the status of non-sovereign entities ininternational organizations according to practice, and so on. It is necessary toscrutinize the evolution, essence, and the characteristics of international organizations.741. Definition and Evolution of International OrganizationsThe development of international organizations is an outstanding characteristicof the modem world of mankind in the sense of international cooperation and progress.In general, international organizations are defined as “bodies of various kinds set up bymultilateral agreements between States for various co-operative purposes .... Suchorganizations are normally created by multilateral treaty, but may be created in otherways, such as by resolution of the United Nations General Assembly”149 or as an“intergovernmental organization constituted by States to which its Member States havetransferred competence over matters governed by this Convention, including thecompetence to enter into treaties in respect of those matters,”150 orintergovernmental organizations [arej created by nation-states to promote commonpurpose through agreements among themselves • •“•151The functions of international organizations at present range from the universalinternational political organizations such as the United Nations to the regionalinternational organizations as the Central American Common Market (CACM),covering the issues of political, economic, social, cultural, scientific, and technologicalcooperations among states.Ever since the beginning of the contemporary system of sovereign territorialstates from the end of the Thirty-Years War in 1648, concluded by the Peace of149 David M. Walker, The Oxford Companion to Law, (New York: Oxford University Press,1980), p.641.150 This phrase is used in Annex IX, Art. 1 of the United Nations Convention on the Law of the Seato describe the international organizations such as the European Community. Parry and Grant,Encyclopedia Dictionary of International Law, (New York, U.S.: Oceana Publications, Inc., 1986),pp.277-78.151 Lung-chu Chen, An Introduction to Contemporary International Law, (New Haven: YaleUniversity Press, 1989), p.50.75Westphalia, the interactions between states in Europe were, in the seventeenth and thegreater part of the eighteenth centuries, determined by the concerns of these statesabout prestige, military power, and territorial security. But under the impact of theIndustrial Revolution, international economic relations assumed greater importance, andby the nineteenth century interstate relations increasingly embraced matters ofcommerce and trade in manufactured goods.152Since World War II, the number of international organizations has growntremendously. One of the main reasons for that growth is the fact that the number ofstates has more than tripled since then, largely as a consequence of decolonization.2. Membership and ExceptionsGenerally speaking, the membership of International Government Organizations(IGOs), in most cases, belongs only to states, because “the subjects of the rights andduties arising from the Law of Nations are States solely and exclusively.”153 The basicassumption is that only nation-states are capable to represent a nation’s interests andinteract with each other in this sense. 154With respect to International Non-governmental Organizations (INGOs),membership does not require the participants to be representative of the government ofa nation-state. INGOs carry out a variety of border-crossing activities to attain theirgoals in the pursuit of the interests for which they have been created. These activities152 Werner J. Feld, Robert S. Jordan , Leon Hurwitz, International Organizations, (New York:Praeger Publishers, 1983), p.1.153 II. Lauterpacht, Oppenheims International Law, 8th ed. (Longmans, Green and Co. Ltd.,1955), p. 19.154 Ibid, pp.4-S. ‘Law of Nations or International Law (Droit des gens, Volkerrecht)is the name forthe body of customary and treaty rules which are considered legally binding by States in their intercoursewith each other.”76create relationships of the INGOs with both governmental and nongovernmental entitiesand actors; such relations have been labelled transnational in contrast to traditionalinternational relations, which are generally understood to apply only to activities andcontracts between governmental actors.Except for the distinction between IGOs and INGOs, some exceptions can stillbe found to show that some non-state territories have certain status in some IGOs.a. Canada and Australia, as dependent members of the Commonwealth,were members of the Universal Postal Union prior to the First World War. At thattime, they did not “become subjects of International Law (although the position wassomewhat anomalous) when they were admitted, side by side with the mother country,as parties to administrative unions, such as the Universal Postal Union. Even whenthey were empowered by the mother importance with foreign states, they still did notthereby become subjects of International Law, but simply exercised for the matters inquestion the treaty-making power of the mother country which had been to that extentdelegated to them.”155 This exception shows a precedent of the participation of nonsovereign entities within the Commonwealth in the IGOs.b. Danzig. The details of the settlement regarding Danzig under the PeaceTreaty of Versailles and the Paris Convention of 1920 between Poland and Danzig area matter of the past. It is still interesting to analyse the characteristics of theinternational personality. 156155 Thid, H. Lauterpacht, p.198.156 Thid, H. Lauterpacht, p. 193, footnote 5. The Free City of Danzig was created a separate Stateby Article 100-198 of the Treaty of Peace with Germany in 1919 and “placed under the protection of theLeague of Nations,” which was represented at Danzig by a High Commissioner. The constitution, thatis, the political organization, of the Free City was placed under the guarantee of the League. A treaty ofNovember 9, 1920, between the Free City and Poland regulated the relations between them upon anumber of points and provides that the Polish Government shall undertake the conduct of the foreign77The Permanent Court of International Justice upheld Danzig’s claim to beentitled to an international personality of its own, and “the ordinary rules governingrelations between States” applied in the relations between Danzig and any other state.In accordance with these rules the general principles of international lex specialis, “tothe treaty provisions binding upon the Free City and to decisions taken by the organs ofthe League under these provisions.”157Danzig, as a half-sovereign state half-protectorate, would have had to receive ineach case the prior consent of Poland before she could have taken part in any of thenormal activities of international organizations. To answer the question whetherDanzig could become a member of the International Labor Organization, the Courtheld that, unless Poland waived in advance her objections to any action of Danzig as amember of the International Labor Organization, the Free City was not eligible formembership.158 In other words, Danzig could be a party to international organizationssuch as the ILO, with the consent of Poland.c. Ukraine and Byelorussia. The Ukrainian Soviet Socialist Republic andByelorussian Soviet Socialist Republics were, herewith, the two republics of the formerSoviet Union. These two republics took part in the San Francisco Conference in 1945by which the United States was established, among 50 states, and they becamemembers of the U.N. as “Sovereign States.”This is an exception to the requirement of sovereignty. Neither of the tworepublics were sovereign states under international law because they were part of therelations of the Free City as well as the diplomatic protection of its citizens when abroad. Thus Polandexercised on behalf of the League this very important aspect of the Protectorate, and all disputes betweenthe Free City and Poland arising out of this matter or any other matter under the Treaty of Versailles orany arrangements or agreements made thereunder are decided in the first instance by the HighCommissioner of the League, subject to an appeal by either party to the Council of the League.157 A/B 44, (Series A/B, the P.C.I.J., 1931-1940).158 [161 B 18, at 15, (Series B. the P.C.I.J. 1922-1930)78Soviet Union and controlled by that government. But they got admission to fullmembership in the United Nations.159 This is a precedent to allow a state extrarepresentation through assigning sovereign status to territorial units within a state, andalso the precedent that non-sovereign states can become members of this largest ofpolitical intergovernmental organization)6°A similar phenomena to the Ukraine and Byelorussia is India’s status as anoriginal member of the League of Nations, although its full sovereignty was notestablished until 1947.161 Another exception is the Philippines being also accorded thestatus of original member prior to the transfer of sovereignty. All the concessions tothe memberships of the Ukraine, Byelorussia, India and Philippines in the two majorpolitical, intergovernmental organizations did not meet generally accepted standards ofstatehood and made important exceptions and precedents in the history of theinternational organizations.d. Other cases. Many cases of this kinds of exceptions of the membershipin IGOs appear to form a clear picture that many non-sovereign entities are formalparticipants in IGOs by various flexible provisions of these IGOs. In the GATT, 28parties (plus Kiribati, Tonga and Tuvalu) are the territories to which the GATI’ applied159 Stephen S. Goodspeed, The Nature and Function of International Organizations, 2nd ed. (NewYork: Oxford University Press, 1967), pp. 81-82.160 The two republics also participated in some U.N. specialized and related agencies, such asInternational Atomic Energy Agency (IAEA), International Court of Justice (ICJ), International LaborOrganization (ILO), International Telecommunication Union (ITU), United Nations Education, Science,and Culture Organization (UNESCO), Universal Postal Union (UPU), World Health Organization(WHO), World Intellectual Property Organization (WIPO), World Meteorological Organization (WMO),and International Civil Aviation Organization (ICAO).161 The membership of the League of Nations was stated as being open to “any full self-governingstate, dominion or colony” might be admitted by a two thirds vote of the Assembly. See A. LeRoyBennett, International Organizations, (New Jersey: Prentice Hall, Inc., 1977), p. 66.Source: ZhongguoBaike Nianjian (Encyclopedia of China), (Beijing: The Encyclopedia of China Publishing House, 1986),p.2779to before their independence, and another case is Hong Kong, which became acontracting party in 1986. The Holy See (Vatican City) has memberships in TAEA,ITU, UPU, and WIPO.162As the requirements of membership in various international organizationsdepend upon the very regulations of each organizations, it is very hard to classify themaccording to their membership requirements. Many of the organizations’ decisions willbe made by its organs consisting of representatives of member states.According to the Charter of the United Nations, the requirement formembership in this organization is stated as follows:Membership in the United Nations is open to all other peace-lovingStates which accept the obligations contained in the present Charter and,in the judgement of the Organization, are able and willing to carry outthose obligations.’63The case of the memberships of Ukraine and Byelorussia in the United Nationsreflects mainly the bargaininig and concessions made between the two superpowers inorder to keep political balance in future confrontation. But, as the modern world founditself in desperate need of enhancing cooperation among the members of thisinternational society, member states of some international organizations put moreweight upon consideration of the capacity and willingness of an applicant to carry out162 Political Handbook of the World, 1981 (New York: McGraw- Hill, 1981), pp. 673-76.163 Article IV, para. 1, Charter of the U.N. In the Advisory Opinion of International Court ofJustice in 1948, the requisite conditions are five in number: to be admitted to membership in the UnitedNations, an applicant must be: (1) a State; (2) peace-loving; (3) accepted the obligations of the Charter;(4) able to carry out these obligations; and (5) willing to do so. See, International Court of Justice,Advisory Opinion, 1948. [19481 I.C.J. 57. Also see, Frederic L. Kirgis, Jr., International Organizationsin Their Legal Setting: Documents, Comments and Questions, (West Publishing CO. 1977.), pp. 84-85.A widely recognized definition of statehood is stipulated in Article 1 of the Convention on Rights andDuties of States, signed in Montevideo in 1933, which is as follows: “The state as a person ofinternational law should possess the following qualifications: a) permanent population; b) a defmedterritory; c) government; d) capacity to enter into relations with other States.” Frederic L. Kirgis, Jr.,p. 89.80the obligations of membership in the organization.E. HONG KONG’S RIGHTS AND DUTIES IN EXTERNAL RELATIONSAFTER 1997The Arrangement between the PRC and the U.K. in Part XI of Annex I of theSino-British Joint Declaration on Hong Kong’64 was made so that Hong Kong, inaddition to its high autonomy in internal affairs within the territory, enjoyed somerights in its external relations.1. The representatives of the Hong Kong Special Administrative Region(Hong Kong SAR) Government may participate, as members of the delegations of theGovernment of the PRC in negotiations at the diplomatic level directly affecting theHong Kong SAR concluded by the Central People’s Government.2. The Hong Kong SAR may on its own, using the name “Hong Kong,China”, maintain and develop relations and conduct and implement agreements withstates, regions and relevant international organizations in the appropriate fields,including the economic, trade, financial and monetary, shipping, communications,tourism, cultural and sporting fields.3. The representatives of the Hong Kong SAR Government mayparticipate, as members of delegations of the Government of the PRC, in internationalorganizations or conferences in appropriate fields limited to States and affecting theHong Kong SAR, or may attend in such other capacity as may be permitted by the164 Supra note 145. The Sino-British Joint Declaration includes three annexes. Annex I: Elaborationby the Government of the Peoples Republic of China of Its Basic Policies Regarding Hong Kong: AnnexII; Sino-British Joint Liaison Group; Annex III: Land Lease.81Central Government and the organizations or conferences concerned, and may expresstheir views in the name of “Hong Kong, China”.4. The Hong Kong SAR may, using the name of “Hong Kong, China”,participate in organizations and conferences not limited to States.It is clear from the declaration that Hong Kong is authorized to participate in theinternational organizations or conferences “not limited to States”. Furthermore, it isauthorized to participate even in international organizations or conferences limited toStates.Hong Kong SAR may participate, with the restrictions of being members of thedelegations of the PRC Government, “in appropriate fields ... and affecting the HongKong SAR.” With the permission of the Central People’s Government and theorganizations or conferences concerned, Hong Kong SAR may attend in “such othercapacity and express their views in the name of ‘Hong Kong, China”. Though thevague words “appropriate fields” and “affecting” are employed, which will depend onthe interpretation of the Standing Committee of the National People’s Congress, it isvery important that Hong Kong SAR is authorized to maintain and develop relationsand conclude and implement agreements on its own with States, regions and relevantinternational organizations, with some limitations.As to the application concerning international agreements to the Hong KongSAR, the Joint Declaration stipulates that these are dealt with according to differentcases.1. The international agreements to which the PRC is or becomes a party.The application of such agreements to the Hong Kong SAR “shall be decided by theCentral People’s Government.” But this decisive power is with the restriction of“according to the circumstances and needs of the Hong Kong SAR” and “seeking the82views of the Hong Kong SAR Government” beforehand.2. The international agreements which are implemented in Hong Kong, butto which the PRC is not a party, may remain implemented in the Hong Kong SAR.3. The international organizations of which the PRC is a member and inwhich Hong Kong participates in one capacity or another. In this case, the CentralGovernment “shall take the necessary steps to ensure that the Hong Kong SAR shallcontinue to retain its status in an appropriate capacity in these internationalorganizations.” This wording shows the policy of the PRC towards Hong Kong SAR’ sremaining in these international organizations, but leave enough space for consultationwith the concerned international organizations for their consent.4. The international organizations in which the Hong Kong is a participantin one capacity or another, but of which the PRC is not party. In such cases, theCentral Government shall facilitate the continued participation of the Hong Kong SARin an appropriate capacity in such international organizations.All these arrangements are based upon two principles. One is the principle of“State sovereignty”, which means that “foreign affairs are the responsibility of theCentral People’s Government,”165 and the Hong Kong SAR is a part of China with a“high degree of autonomy.” The basis of the SAR is that “Hong Kong’s access to itsprincipal overseas market in the industrialized world, which is crucial to Hong Kong’sindustry, depends upon recognition of the separate nature of these interests.”166 Thepurpose of these arrangements is that the Hong Kong SAR will be able to look after itsown particular interests in certain areas by virtue of the power to be given to it toconclude agreements in appropriate fields and to be represented in the delegations of165 See, Explanatory Notes, Annex I, the Sino-British Joint Declaration.166 Thid.83the PRC at negotiations of direct concern to Hong Kong.For the implementation of the Joint Declaration, the Sino-British Joint LiaisonGroup has been working ever since May 27, 1985, when it came to being according toAnnex II of the Joint Declaration. As to the transition arrangements of the relevantinternational rights and duties concerning Hong Kong, the agreement has beenconcluded within the Liaison Group, in the first five years of its work, about theparticipation of the Hong Kong SAR in appropriate capacity in 24 internationalorganizations.167As to the continued application after 1997 to the Hong Kong SAR ofmultilateral international agreements which are presently implemented in Hong Kong,both sides within the Liaison Group have agreed in principle until June 1992, with thecontinued application to the Hong Kong SAR of 35 international agreementsimplemented in Hong Kong presently, including those relating to customs, research,health, trade, post and international private law. 168As to the conclusion of bilateral agreements between Hong Kong andconcerning countries in appropriate fields, it is agreed within the Liaison Group that theHong Kong Government, with the appropriate authorization of the British Government,may, in the transitional period, conclude bilateral agreements in the fields like civilaviation, extradition and investment protection with the concerned countries; theseagreements will, in principle, continue to be effective from July 1, 1997.169167 Achievements of the Joint Liaison Group and its Sub-group on International Rights andObligations, 1985-May 1990.168 Ibid.169 Thid.84F. BI]D1NG FORCE OF THE JOINT DECLARATIONThe above arrangements made by China and Britain drew some questions abouttheir binding force not only on the two sides, but on third parties.First, whether the Joint Declaration has binding force on the two parties, orwhether it is a treaty. The Chinese negotiators insisted that the document would beunder the name of “declaration” ,170 rather than an “agreement”. It made no differenceon the legal nature of a document whether to use explicitly the term “treaty”. TheChinese mode of thinking originates from the attitude of the Chinese Government torefuse to recognize the effectiveness of three treaties on Hong Kong, as “unequal”treaties.Actually, it is no longer doubtful because both sides repeatedly emphasized thelegal binding effects of this declaration.171 “By signing a declaration instead of atreaty, China merely sought to avoid the political embarrassment of admitting thatBritain had a previous legal right to Hong Kong.”72 In international law, a statementof agreement is a promise that will be upheld by the force of law, and a declarationintended as an international agreement is a treaty. 173 Obviously, both the sides signed170 In the process of designation, Xinhua, the Chinese official news agency, uses the term“declaration” to describe the coming document, and never uses the word “agreement” which the Britishpreferred to. See, Hong Kong clears the First Hurdle, Asian Wall Street Journal,Oct. 1, 1984, p.6.171 Zhou Nan, the then Chinese Deputy Foreign Minister, stated that the agreement “provides aneffective guarantee for Hong Kong’s future prosperity and stability”, in Hong Kong Lives, Asiaweek,Oct, 5, 1984, p.22. and the legal binding nature of this agreement has been confirmed by the high Britishofficials in many cases, Thid., p.6.172 Susan Karamanian, Legal Aspects of the Sino-British Draft Agreement on the Future of HongKong, Texas International Law Journal, Winter 1985, vol. 20, No. 1, p. 183.173 Vienna Convention on the Law of Treaties, opened for signature on May 23, 1969, U.N. Doe.A/CONF. 39727, art. 2(1)(a), reprinted in 8 I.L.M. 679 (1969). Also see, T.Elias, The Modern Law of85the declaration as a treaty and are willing to be bound by it. The Declaration was sentto the United Nations for registration under Article 103 which was clearly an attempt toemphasize its binding nature.Secondly, a very interesting point on the discussion of the binding effects of thisdeclaration is that of its effects on the third parties, especially those provisionsconcerning Hong Kong SAR’s participation in the international organizations, whereHong Kong’s status does not only depend on the attitude of China and Britain, but veryimportantly on the consent of the members of those international organizations.According to the Moving Treaties Frontiers Rules, the transfer of sovereignty of aterritory causes the transfer of the international rights and duties applied to thisterritory. Or, “territorial changes alter treaty frontiers but the regime of alreadyexisting treaties is itself not affected.”174 The two aspects of the moving treatiesfrontiers rule are expressed as follows. The positive aspect is that the treaties of thesuccessor state begin automatically to apply in respect of the territory as from the dateof the succession. The negative aspect is that the treaties of the predecessor state, inturn, cease automatically to apply in respect of the territory.”175 Yet, this rule has noeffect of jus cogens, and the parties of the Sino-Joint Declaration excluded some of theconsequences from the succession of states,176 to avoid the unacceptable effects onHong Kong’s future prosperity and stability.But such a bilateral agreement does not have an erga omnes (“binding allothers”) effect. So, all the arrangements need the acceptance of third parties. That isTreaties, 13-14 (1974); also N. Green, International Law, 161-53 (1973).174 George Ress, “The Hong Kong Agreement and Its Impact on International Law’, Hong Kong, AChinese and International Concern, edited by Jurgen Domes and Yu-ming Shaw, (Boulder, U.S.A.:Westview Press, 1988), p.145.175 H. Waldock, Third Report on the Law of Treaties, Y.I.L.C. (1969), pt.2, p.52.176 See the text at note 165.86the reason that there are rather vague formulations, such as “appropriate arrangementsfor the application to the Hong Kong SAR of international agreements to which thePRC is not a party”, and refers to the participation in “an appropriate capacity” ofHong Kong in international organizations)77 In Annex I of the Joint Declaration, it iseven worded that “this will require consultation with third countries.”178Though Hong Kong’s present status in those international organizations dependmainly on its own potential and importance in the international transactions, it isunavoidable to say that its membership in many international organizations are legallybased on three conditions: first, its identification as a territory (or crown colony) of theU.K.; second, the representation of the United Kingdom Government in thenegotiations for its access; and third, the terns negotiated by the U.K. Government.So, those circumstances and conditions will be definitely changed as the changeof sovereignty happens on July 1, 1997, though the signers of the Joint Declarationhave tried hard to keep most of Hong Kong’s international rights and duties basicallyintact in order to “Keep Hong Kong’s prosperity and its importance in the worldeconomy.179But since Annex I, Art. XI does not have an erga omns effect, there is a ratherlarge field for complications and much work must be done before the question issolved, because Hong Kong’s status in each international institution or organization ortreaty depends on the specific regulations and the willingness of the members of thebodies.177 Supra note 174, George Ress, p.145178 Annex I, the Sino-British Joint Declaration.179 From all the arrangements by the Sino-British Joint Declaration and the work of the JointLiaison Group for the continuation of Hong Kong’s remaining in international organizations, it is clearthat both sides have tried to reduce the cost of the transfer of sovereignty.87The Annex I, Art. XI enables Hong Kong, using the name “Hong Kong, Chinato maintain and develop relations and implement agreements with foreign states andregions and relevant international organizations in the appropriate fields. Thisformulation clearly constitutes Hong Kong as an entity with the capacity to enter intointernationally binding relations within the specified fields and enables Hong Kong toplay a full role in these fields, “including the economic, trade, financial and monetary,shipping, communication, tourism, cultural and sports fields.”180The complications sometimes may lead to the predicament to the territory evenin the following cases. In the first case, Annex I, Art XI provides that “internationalagreements to which the PRC is not a party but which are implemented in Hong Kongmay remain implemented in the Hong Kong SAR.” As we know, treaties are madeapplicable to Hong Kong by their terms or by British legislation.181 In the case thatHong Kong is a member of an international organization as an adjunct of the Britishdelegation, and the PRC is not or even will not be a member in 1997, questions willarise to Hong Kong’s presence especially when the meetings are confined to sovereignstates.Take the question of the participation of Hong Kong, China as a contractingparty in the GAIT after 1997 needs to be studied.In Art. XXVI, 5(c) of GATT, it clearly differentiates between the “responsiblecontracting party” and “customs territory”. The separate customs territory, whichacquires full autonomy in the conduct of their external commercial relations, aredeemed “to be a contracting party” upon the declaration from the responsiblecontracting party. A government of a separate customs territory becomes a contracting180 Anthony Neoh, “Hong Kong’s Future: The View of a Hong Kong Lawyer”, California WesternInternational Law Journal, vol. 22, 1991-1992, No. 2, pp.351-2.181 Thid, p.350.88party under Art. XXVI, 5(c) on the terms and conditions previously accepted by themetropolitan government on behalf of the territory. Under this procedure, Hong Kongbecame a contracting party with the United Kingdom as its metropolitan government.The question appears here whether Hong Kong, China would continue to be deemed acontracting party after 1997 when the responsible government for the territory willchange and the new one is not (for the time being) a contracting party of the GAIT.182In the provisions of the GAIT, there is no regulation stipulating whether aseparate customs territory, which does not gain independence, may continue or bedeemed a contracting party or not, when it changes its dependence from the formerresponsible metropolitan state which is a contracting party to a state which is not acontracting party of the GAIT.183 So the question of the continuation of the status of“Hong Kong, China” in the GAIT after 1997 will cause discussion among thecontracting parties and needs consent from them. Hopefully, it can be predictedoptimistically that it would be resolved based on two factors: one is the unaffected andunchanged full autonomy of Hong Kong in the conduct of its external commercialrelations after 1997, and the other is that the PRC becomes a contracting party, whichis quite possible in the near future. The GAIT council, at the time Hong Kong becamea contracting party of the GAIT in April 1986, made statements promising that theterritory could retain its separate status after the PRC acquires sovereignty over it. 184In the second case, Annex I, Art. XI of the Sino-British Joint Declarationprovides that “the application to the Hong Kong SAR of international agreements to182 Supra note 174, George Ress, pp. 146-147.183 Ibid.184 Harold K. Jacobson and Michel Oksenberg, China’s Participation in the IMF, the World Bank,and GATT: Toward a Global Economic Order, (Ann Arbor, U.S.A.: The University of Michigan Press,1990), p.101.89which the PRC is or becomes a party shall be decided by the Central Government, inaccordance with the circumstances and needs of the Hong Kong SAR, and after seekingthe views of the Hong Kong SAR Government.” From the legislator’s willingness, therestricted power of decision of the Central Government is to some degree symbolic in aforeseeable future in “appropriate fields.” In the case of the membership of “HongKong, China” in the GAIT, it is confirmed by the declaration of the PRC that “HongKong, China” will continue to be deemed a contracting party after 1997.On the presumption that both the PRC Government and the Hong Kong SARGovernment are members of an international organization, still a critical question needsto be resolved, i.e. whether, after the return of sovereignty to China, the internationalrights and duties of this territory from the predecessor state are still acceptable toeither the successor state or the third parties. If this is not acceptable to either side, itwould damage the territory’s status in international agreements, and bring newnegotiations. For example, in the case of GATT, the conditions under which HongKong is now to be deemed a contracting party of the GAIT are those that previouslyhave been negotiated by the United Kingdom. Assuming the PRC becomes acontracting party before 1997, it would still make quite a difference whether a Britishcrown colony, i.e. a territory for which the United Kingdom is and has beenresponsible and for which the relevant conditions have been negotiated, or a territoryfor which the PRC is responsible becomes automatically a contracting party or is“deemed to be a contracting party” without a new negotiation of the conditions.185It will depend on whether the terms and conditions negotiated for Hong Kong’sstatus of contracting party as a separate customs territory are still acceptable withoutany renegotiation or changes to the contracting parties after 1997. There is no185 Thid,p.146.90regulation in the context of the GATLG. THE RELATIVE PRACTICE OF GATTAccording to Article XXVI, 5(c), “if any of the customs territories, in respectof which a contracting party has accepted this Agreement, possesses or acquires fullautonomy in the conduct of its external commercial relations and of the other mattersprovided for in this Agreement, such territory shall, upon sponsorship through adeclaration by the responsible contracting party establishing the above-mentioned fact,be deemed to be a contracting p.ry.”186 This clause was originally intended to dealwith the questions over whether Burma, Ceylon, and Southern Rhodesia, which,according to the British Government, were possessed of autonomy in externalcommercial relations, could be admitted to participate as full contracting parties to theGeneral Agreement.’87 “This special clause has provided a convenient formula for aflexible application of which has in fact facilitated state succession” only because thedate of acquiring full autonomy in external commercial relations almost alwayscoincided with the date of acquiring full independence.”188186 This clause was originally Art. XXVI, par.4, section proviso (55 U.N. Treaty Series 274) inalmost identical wording, which became par. 4(c) pursuant to an amending protocol of Aug. 13, 1949(62 U.N. Treaty Series 114), and then par. 5(c) pursuant to the Protocol Amending the Preamble andParts II and III of the General Agreement which entered into force on Oct. 7, 1957 (278 U.N. TreatySeries 204).187 It was worked out by the Ad Hoc Sub-Committee of the Tariffs Agreement Committee when theGeneral Agreement was drafted by the Second Session of the Preparatory Committee of the U.N.Conference on Trade and Employment in September 1947. And further, the Ad Hoc Sub-Committeesuggested to include this special clause for the similar case in the future. See, U.N., Second Sess. of thePreparatory Committee of the U.N. Conf. on Trade and Employment: Docs. E/PC/T/198 and 205, andEIPCIT/TACIPVI13, 24, 25, and 28 (1947).188 Supra note 57, Kunugi, p. 270.91But in the case of “Hong Kong, China”, the customs territory does not gainindependence but becomes a dependent part of the P.R.C. as a SAR.189 Thisdifference would not change Hong Kong’s qualifications.First, Hong Kong, as a separate customs territory, “has accepted thisAgreement” through a declaration of a contracting party, British Government, to whichHong Kong is a dependant. This identification and situation coincides with clause. So,Hong Kong can be such a case.Second, according to the Joint Declaration, the Hong Kong SAR will enjoy“full autonomy in the conduct of its external commercial relations and other mattersprovided for in this Agreement.” This should be the basic requirement for such acustoms territory “to be deemed to be a contracting party”. In other words, if, asprovided in the Joint Declaration, Hong Kong SAR’s full autonomy in the conduct ofits external commercial relations is not changed or affected by the transfer ofsovereignty in 1997, its status as a contracting party should be renegotiated, because itsabove-mentioned autonomy is not affected by the transfer of sovereignty.The relevant practice of GATT which has almost always coincided with thecases accompanied by political independence cannot be elaborated to the effect thatpolitical independence becomes one of the requirements or conditions. A customsterritory not politically dependent but with full autonomy in the conduct of its externalcommercial relations can be a contracting party, no matter whether or not itsmetropolitan country is changed from one to another.Third, another requirement of this clause is a procedural one, i.e. thesponsorship through a declaration by the responsible contracting party establishing theabove-mentioned fact.” It is easy to identify that on July 1, 1997, the PRC can be the189 Supra note 174, George Ress, p. 145.92country responsible for establishing the above-mentioned fact. The key problem is thatif the PRC is not a contracting party (since it is not for the time being), it will not bequalified as a “responsible contracting party11. This situation was out of the predictionof the GA’IT drafters, i.e. a separate customs territory succeeds its status as acontracting party when it changes it subordination, but it finds the country itsubordinates to is not a contracting party to the GAIT.As developments occur in the working group on China, it is quite possible thatthe PRC will be a contracting party before 1997. If so, the PRC will be the“responsible contracting party establishing the above-mentioned fact” to givesponsorship through a declaration for the status of “Hong Kong, China” as acontracting party. Another unpredicted question comes out as whether the declarationof the PRC Government for Hong Kong’s becoming a contracting party on April 23,1986 is valid, for the PRC was not a contracting party at that time, or will anotherdeclaration be needed when the PRC is qualified by its sovereign jurisdiction overHong Kong after July 1, 1997.The Terms for “Hong Kong, China” as a Contracting Party. Hong Kongbecame a contracting party under the terms negotiated when it was subordinate to GreatBritain. So comes another concern about the obligations or terms for “Hong Kong,China” to be a contracting party, or whether it is possible that the date of July 1, 1997would be a chance for the contracting parties to bargain for more benefits on a quid proquo, and furthermore whether this demand, if any, has any legal basis.With a review of the former discussion, it can be found that Hong Kong becamea contracting party mainly because its full autonomy in the conduct of its externalcommercial relations. Consequently “Hong Kong, China” may, at that time, succeedto the rights and obligations it has before July 1, 1997, because nothing is changed with93this autonomy. So no regulations in the context of the GAIT would be found tosupport the suggestion of new negotiations for new terms. After Indonesia becameindependent on December 28, 1949, the Netherlands, at the Fourth Session of theContracting Parties, proposed that Indonesia should become a contracting party.190 Inthe Declaration of April 1, 1950, the Contracting Parties took a note that Indonesia hadbecome a party under the provisions of Article XXVI and that consequently certain“sections of the schedules had in effect become separate schedules relative toIndonesia.”191According to the general practice of the GAIT concerning the succession ofrights and obligations, when a customs territory transfers its subordination from onecountry or another, or becomes independent, the above-mentioned rights andobligations remain unaffected. In this kind of cases, it makes no difference whether thecustoms territory becomes politically independent or a part of another country. Thispoint of view can also be supported by the provisions of GATI’ per se. Thoseconcerning regulations are concentrated on:(1) The purpose and object of the General Agreement to substantially reducethe tariffs and other barriers to trade and to eliminate the discriminatory treatment in190 Tn an official publication prepared by the GATE Secretariat, it is noted that “Indonesia, havingacquired independence status, become a contracting party in its own right on 24 Feb. 1950.” BTSD, 1stSupp. (1953), p.6.191 BISD, 2nd Supp. (1954) 15-16. After the formation of the Federation of Rhodesia andNyasaland as semi-autonomous members of the Commonwealth which was established by the Act of theBritish Parliament dated March 24, 1953 and became effective on Aug. 1, 1953, the Governments ofGreat Britain and Southern Rhodesia sent joint declaration dated September 22 and November 6, 1953, toinform the Contracting Parties that the Federation had acquired full responsibility for matters covered bythe General Agreement. The Contracting Parties adopted a declaration on October 29, 1954, by whichthey considered the Declarations sent to the Contracting Parties by the Government of Southern Rhodesiaand the Government of the United Kingdom as a notification and declared “that the Government of theFederation of Rhodesia and Nyasaland shall henceforth be deemed to be a contracting party ... and tohave acquired the rights and obligations under the General Agreement of the Government of SouthernRhodesia and of the Government of the United Kingdom ..‘. BISD, 3nd Supp. (1955), pp. 29-30..”94international trade.’92 To realize this purpose, all separate customs territories shouldbe deemed to have equal rights to participate in this Agreement, no matter whether theyare sovereign states or not, if they meet the requirements of full autonomy in theconduct of external commercial relations.(2) So comes the title of “contracting party” for all members of hisAgreement instead of those such as “member states”, without any hierarchicalclassification of members such as “full member”, “associate member” and so on.All those regulations reflect the basic principle of non-discrimination or equalityin the mind of the drafters of the General Agreement.It is definite that Hong Kong’s transfer to the sovereign control of the PRC in1997 should not affect its status as a contracting party, as well as its rights andobligations under the GAIT.192 GATr, Preamble, par. 3. See, supra note 31, John H. Jackson and William J. Davey, 2nd ed.(St. Paul: West Publishing Co., 1986), p.3.95CHAPTER V. INTERRELATION OF THE MAINLAND,TAIWAN, AND HONG KONG IN INTERNATIONALORGANIZATIONS AFTER UNIFICATIONIt is not unrealistic that “Hong Kong, China”, as a part of China, willconcurrently with the PRC be members in the GATT, assuming that the PRC willattain its membership in this international trade organization before long, as well as insome other international organizations. Questions arise consequently in a foreseeablefuture, such as, if and when Taiwan will possibly reunify, along with Hong Kong andMacao, with mainland China, and how these regional entities of China plus Macao willmaintain a harmonious coexistence in some international organizations given the needand possibility.A. STRUCTURE OF CHINA’S POLITY: ONE COUNTRY, TWO SYSTEMSThe two very important legal documents on the Hong Kong’s future, the SinoBritish Joint Declaration and the Basic Law on Hong Kong,’93 are peculiarly based onthe doctrine of “One Country, Two Systems”.194 For the definition and content of the193 Supranote 183.194 Zhang Youyu, The Reasons for and Basic Principles in Formulating the Hong Kong SpecialAdministrative Region Basic Law, and its Essential Contents and Mode of Expression, 2 Journal ofChinese Law, 9, (1988).96concept of “One Country, Two Systems”, Deng Xiaoping’s statement is necessary to becited here:“One country, two systems” must be discussed on two levels. On onelevel is the fact that within a socialist country we will be permitting aspecially privileged area to be capitalist not just for short period of time,but for decades or a full century. On another level, we must affirm thatthe principal system throughout the country is socialistThis unprecedented doctrine will be decisive no only on Hong Kong’s status inChina but also on the fate of Taiwan’s unification with the mainland both in the nearfuture and the foreseeable long term.From July 1, 1997, according to the Joint Declaration, the Hong Kong SARwill neither be an internationalized territory, nor have the sovereignty and territorialjurisdiction in the hands of different states, rather the Hong Kong SAR will be a part ofthe national territory of the PRC.The Hong Kong SAR will enjoy a very high degree of autonomy in many fields.This autonomy is under the limits of sovereignty, which means territorial integrity.The content of the sovereign control of the Central Government over the Hong KongSAR includes those regarding foreign affairs and defence, meanwhile the Hong KongSAR has such a high level of autonomy in its internal affairs that it can even keep thecapitalist economic and social systems for 50 years. The Hong Kong SAR actually isauthorized with special status in its external relations, to guarantee further economicdevelopment, including its capacity to enter into both bilateral agreements with otherstates and multilateral treaties to some degree, e.g. the power to conduct its ownrelations to conclude agreements with states, regions, and international organizations in“appropriate fields”.The autonomy gives the Hong Kong SAR a status similar to or even beyond that195 Thid.97of the component units within a federal state196 and much more capacity to exercisefunctions and undertake rights and obligations in external relations rather than that ofthe component units of other federal states. By this special status, the Hong KongSAR’s relations and connections with the Central Government is looser than thatbetween the component units and the federal governments in those federal states.With respect to Taiwan’s unification with the Mainland as well as with theHong Kong SAR and Macao SAR, Taiwan’s concern focuses on the relations with themainland government and the harm to its economic prosperity. But, in the externalrelations, given the even more favourable status than the Hong Kong SAR is beingoffered by the mainland, Taiwan will enjoy more autonomy, such as in its capacity ofparticipation in international organizations and treaty-making with foreign states. Itmight be very attractive for Taiwan, provided the conditions are ripe, to have suchstatus, though such arrangements need a lot of legal work before they can be realized,such as the consent of third parties and technical arrangements for this would-bereunified country.B. “ONE COUNTRY, TWO SYSTEMS” VS. “ONE COUNTRY, TWOINTERNATIONAL PERSONALITIES’The Hong Kong model will be the realization of the doctrine of “One Country,Two Systems”. It only refers to the domestic polity. As to its influence on the196 As examples, the Cantons of Switzerland can conclude treaties “in respect of public, economy,frontier relations and police”, see, Art. 9, Art. 86 (5), Art. 102 (7), the Constitution of Switzerland,;also see, W.E. Rappard, La Constitution Federal de La Suisse (Boudry, La Baconniere, 1948), pp. 192and 393 for commentary. The Federal Republic of Germany gives the Lander the power to concludetreaties with foreign states, Art. 32 (3) of the Basic Law, also see supra note 186, Luigi Di Marzo, p.32.98evolution of China’s polity, this step will lead to a federalism polity within China in thefuture, given the fact that Hong Kong SAR enjoys such a high degree of autonomy.From this autonomy, the Hong Kong SAR is given much capacity in the conduct ofexternal relations though limited to non-political, or non-sovereign matters. But thiscapacity, because it comes from the autonomy, is based on the constitutionalauthorization, not its identification of “international personality”.Under the “One Country, Two Systems” style, the sovereignty of a state isintegrated, and belongs to the Central Government, and the autonomy of the SAR isacquired from the authorization of the constitution. The SAR Government is a localgovernment, thus the SAR does not enjoy any part of the sovereignty. Hong Kongneither has had an independent international personality with the characterization of anentity sui generis, nor will it have any after 1997.So, under the conception of “One Country, Two Systems”, the capacity of theSAR in international relations is different from that of the Central Government. Theformer’s capacity is acquired from the constitution of the nation, while the latter’scomes from its sovereignty which cannot be deprived in any case. This nation’scapacity in international relations cannot be deprived and is the basic and mostimportant characteristic compared with that of a SAR. So, the former’s capacitycannot be exaggerated as being an international personality equal to that of the CentralGovernment, and can only be, at most, a partial international personality.The same logic and deduction is also applicable to Taiwan if and when it unifieswith the mainland China, regardless of the difference between Hong Kong and Taiwan.Compared with the “One Country, Two Systems” scheme, some authors makethe suggestion of the “multi-system state”197 concerning the case of Taiwan. The197 Hungdah Chiu, “The International Legal Status of Republic of China And The Issue ofReturning to International Organizations”, Chinese Annual Report of International Law and World99kernel of this theory is “One Country, Two International Personalities”.1. Peculiarity of “Multi-System Nations”According to the opinions on the multi-system nations, main characteristics canbe summarized as follows:(1) In such a nation, two or more parts of the territories of this nation are separatelyself-controlled;(2) “Each part formerly belonged to a unified country; and while divided now, eachpart still maintains the national goal of unification.”;198(3) Each part claims to be the sole legal government of that country in internationalrelations, thus, the representation of this country in an international conference wasgiven to one part only, while the other part was totally excluded from participation inthat conference;199(4) None of the parts will accept an arrangement that both the concerned parts berecognized as independent states. “On the contrary, each government insists on beingrecognized as the sole legal government of both parts of the country, including that partover which it has no effective control. “;2(5) Each part tries to use “political pressure from its allies to prevent the other partfrom being recognized as a state or to prevent the government of the other part frombeing recognized as the legal government even within the territory under the latter’sAffairs, (Taipei: Commercial Publishing House, 1989), ed. by Hungdah Chiu, vol.3, pp. 3-26. Alsosee, Queng-cheng Fu, Report at the Seminar on Foreign Policy and Policies on the Mainland, Thid,pp.144-iSO.198 Hungdah Chiu, “The International Law of Recognition and Multi-System Nations: With SpecialReference to Chinese (Mainland-Taiwan) Case,” Chinese Annual Report of International Law and WorldAffairs, (Taipei: Commercial Publishing House, 1981), vol.1, ed. by Hungdah Chiu, p. 5.199 Ibid.200 Ibid.100effective control.” •201These characteristics are summarized from the practice in Korea and China, aswell as the former Germany and Vietnam.2. Inapplicability of Multi-system Nation TheoryFrom the above analysis, it is clear that the nation would be divided into two ormore international personalities by the division of state sovereignty. As known, themost basic characteristic of state sovereignty is the integration, which explicitlyincludes the indivisibility. In practice, such division of sovereignty is far from beingrealized if only one part agrees so. And no force or influence can be a decisive factorfor such division of sovereignty without the consent of the concerned parts of so-calledmulti-system nations. So, such conception of multi-system nation is contrary to theinternational law, and there is no precedence in the relevant practice.Among the divided states, Germany was the most different from the case ofChina, and cannot be used as a precedent. The former Germany used to be two parts:the Federal Republic of Germany (FRG) and the German Democratic Republic (GDR).The sovereignty division of Germany was decided by international agreement betweenoutside powers, which in fact resulted into two sovereign states. Legally, they couldnot be considered one state when they existed in the world as East Germany and WestGermany. On the contrary, the two Germanies acted and were treated as two sovereignstates with full independence. This is evidenced by the fact they were admitted to theUnited Nations on September 18, 1973 and have normalized their relations through thetreaty of December 21, 1973 on the Basis of Intra-German Relations and accompanyingdocuments. 202201 Ibid1013. The Case of ChinaThe case of China (Mainland and Taiwan) is very different from that ofGermany in many characteristics. The first difference lies in the diminutive size ofTaiwan compared to the rest of China, and the smaller population of Taiwan, around20 million, compared to the 1.2 billion on the mainland.The second is that both sides claim the situation as an unfinished civil war, orthe current situation is the continuation of the civil war. Both sides deny the orthodoxyof the other part. The long-lasting civil war, if we call it so, has stepped on the way ofpeaceful solution long ago. The long time waiting for negotiations which show thegood faith in trying to find a peaceful solution does not constitute a “considerableperiod” in which Taiwan can be said to be an independent state.Thirdly, both sides oppose the policy of “One China, one Taiwan”, i.e. there isonly one China. Consequently, “no claim of separate statehood for Taiwan has beenmade and in such a case it is difficult to maintain that such an unsought statusexists.”203 Or, from another scholar, since “it considers itself as a part of the “old”China thus excluding the concept of being a separate and divided state.”204Fourthly, it is well accepted by the world community that there is only oneChina and the PRC Government is the sole legal government of this country. The PRChas very wide diplomatic relations with almost all countries in the world and occupiesthe seats of China in all international organizations in which the country hasmemberships, while the ROC maintains diplomatic relations with only 23 states which202 I.L.M., vol. 12, 1973, pp. 16-24.203 Malcolm N, Shaw, International Law, 2nd ed., (Cambridge: Grotius Publishing, Ltd., 1986),p.149.204 Meinhard Hilf, “Divided States”, “Encyclopedia of Public International Law”, ed.,(Amsterdam: Elsevier Science Publishers B.V., 1987), p.127.102are all small countries with little influence in the world community.Actually, in world-wide acknowledgement, Taiwan is, at most, a part of Chinaunder separate administration.205 From practice, “Taiwan is not a State, because itdoes not claim to be and is not recognized as such: its status is that of a consolidatedlocal de facto government in a civil war situation” ,206 and furthermore, the governmentof Taiwan has not operated as that of an independent state for a long time, even duringthe period from 1949 to 1972, the legality of its presence as the government of China isvery much in question and groundless. So, it can be concluded that the conception ofmulti-system nation still remains at the level of hypothesis, or at least, it does not suitthe Taiwan case. Because the presumption of the theory is contrary to the basic ofprinciple of sovereign integration in international law. Taiwan should not be the caseto affirm the applicability of this conception, though it may be the only case amongthose who try to approve this hypothesis.Furthermore, talking about the capacity of Taiwan and Hong Kong ininternational relations under the structure of “one country, two systems”, if and whenunified with the mainland, the two cannot be included in the category of “one country,two personalities”.Generally speaking, two different systems can equally and peacefully coexistwithin one country in each part of the territory, without interference to each other. Butthis equality cannot be extended over the boundary of the country, thus there is onlyone representation for the country in international relations. So the possibility of twointernational personalities for the country is precluded. To meet the needs of thedifferent economic and social systems in the SARs, some special functions and205 Supra note 204, Meinhard Hilf, p.217.206 Crawford, The Creation of States in International Law, (London: Oxford University Press,1979), p. 151.103responsibilities are authorized by the constitution for the SARs to participate ininternational transactions, but this is limited to non-political affairs and is acquired notinherent.C. COEXISTENCE OF ThE MAINLAND AND TAIWAN IN TIlE GATTSYSTEMTaking account of the GAIT’s function of regulating the relations of rights andobligations between the Contracting Parties with different tariffs and trade systems andits membership covering countries and non-state SCTs, Taiwan’s status will not beharmful to the reunification of China some days in the future. First, Taiwan’sparticipation in the GAIT as a SCT will not enhance the possibility of its politicalindependence. Second, the different tariff systems which apply to the mainland andTaiwan constitute de facto two Chinese customs territories to have their owncontracting party status in the GAIT. It would be extremely difficult in practice forthe PRC government to accept the General Agreement on behalf of the SCT in Taiwaneven after the PRC accepted the Agreement. Furthermore, it is acceptable to all sidesthat the two different tariff systems, the two customs territories as well as the twoChinese contracting parties in the GATE will exist even after the reunification of Chinain future.Though in political reality, Taiwan’s relations with the mainland have beenunder abnormal circumstances between the PRC government and the Taiwangovernment, the legal status of Taiwan as a local entity of China has been legallydetermined by not only the history and reality in China in the last decades, but also theinternational treaties as well as the practice of international organizations among which104the United Nations is the major one. The GATT has been carrying the policy to followthe U.N. decisions on essentially political matters.105CHAPTER VI. CONCLUSIONAs the world trading system develops, especially through the establishment ofthe World Trade Organization, and the great progress of China’s economic reform aswell as Asian economic growth, it becomes more than important to accept the PRC andTaiwan into the GATE as well as the WTO. The development of the work on theapplications of the PRC and Taiwan to the GATE, the working Groups, up to now, arereaching the substantial work on the drafting of the protocols.207 So it is predictablethat the approval of the Contracting Parties on the two applications would not be faroff. The analysis on the significance of the participation of the PRC and Taiwan inGATE will help to eliminate all doubt on the great importance to accept the twoapplicants in GATE, both to the applicants and the GATE itself.While the contracting parties consider mostly on whether the two applicantsmeet the requirements for the membership of GATE and how much they can benefitfrom the tariff concessions and commitments given by the two applicants, it would bewise not to be involved in the domestic dispute within China and take actions againstthe general principles and practice of the international relations. Conclusively, it isacceptable that the PRC accedes to the GATE in the style of resumption and prior toTaiwan. More attention will be drawn onto the evolution of the process of the207 The negotiations on China’s application to the GATT are reaching to the step of the discussionon the protocol and tariffs concession. See, China and U.S. Will Discuss the Protocol of China’s Reentry to the GATT, People’s Daily, (Renmin Ribao), Beijing, July 24, 1993; The Negotiation onChina’s Re-entry to GATT Comes to the Substantial Step, People’s Daily, (Renmin Ribao), Beijing,August 15, 1993; People’s Daily, (Renmin Ribao), Beijing, March 16, 1994; The 16th Meeting of theWorking Party on China Ended in Geneva, People’s Daily, (Renmin Ribao), March 19, 1994.106unification of mainland China, Taiwan, Hong Kong and Macao, as well as theinteractions of the four regions within China and under the state sovereignty of China,than the comparatively independent capacity of Taiwan, Hong Kong and Macao in theirexternal relations. Their co-existence in the GAIT before unification would increasetheir cooperative relations with each other, thus creating a positive push for theunification of the whole of China, which is, to some degree, the common purpose ofmost people in the four parts.107BIBLIOGRAPHYD.P. 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