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The Importance of International Trade for SMEs

Discuss about the Cross-Border e-Commerce Helps Smes Reach Global Market.

With the advent of globalization and e-commerce, there has been a significant increment in trade. Individual countries that participate in trade have their own domestic laws that help in the regulation of trade and commerce within their territory. International organizations and state laws help in smooth trading between countries. China has become an economy dense country and after becoming a member, China has acknowledged that to increase trade flow, China has to abide by the regulations. World Trade Organizations aims to facilitate trade and commerce and after becoming a member of the WTO, there has been a significant rise in trade. One of the best ways to grow into a big economy is by expanding the business into other countries. Export and import are done by countries to mark their presence in the world economy and also earn large profits by trading in other countries. World Trade Organization defines trade facilitation as a method of conducting trade by abiding harmonious international trade processes. China became a member of the World Trade Organization in the year 2001 and had implemented the process of removing trade restrictions in the year 1980s. The border barriers are an impediment to any country’s trade and one way to liberalize the trading rights is by removing the trade restrictions and barriers. To maximize trade it is important to regulate domestic laws that are importation friendly and the importers do not have to give in to trade restrictions. The steps that need to be taken by China to improve import and export are to standardize custom clearance and make uniform laws for every country trying to trade with China. E governance helps in speeding up the process of trade because everything is done online and there is no need for personal appearance of traders. With the growth of e-customs and formation of e-ports, there is an increased trade which has reflected in China’s economy. Several government agencies have tried to structure a road map to understand the development of trade and flow of goods and parts that needs to be worked on by the Government to remove impediments. The Government has devised methods to track the shipments and has framed a timeline by which the tracking has to be completed to come to a conclusion regarding the growth of economy. The telecommunication industry of China is the most robust and also one of the major exported goods that bring maximum revenue. The Chinese Government has been very pro development and has tried to take a lenient approach in helping them grow.

China's Role in Facilitating International Trade

Chine imposes a varied range of export controls to uphold the essence of national integrity and security and also indulges in multilateral export. The Standardization Administration of China also called the SAC is the governing body for the regulation of trade and enhancing the trading standards of China to meet their national goals. The China National Certification and Accreditation Administration issues compulsory certificates which are called the China Compulsory Certification. These help in regulation of trade and are also quality control bodies. There are regulatory agencies that look after the standards and quality. These standards are classified into industry, local, regional and enterprise standards and which are mandatory. The exporting and importing bodies associated with trading need to strictly adhere to the standards of regulation. China has always wanted to establish a foreign trade law framework which has put China in an advantageous position because other countries are reliant on China for trading. This framework has helped China grow into an economic superpower. Complying with the provisions of GATT has helped in increasing transparency. Initially the trade in China was a central concern where the Central Government was in charge of regulating trade but with the advent of decentralization, there has been involvement of the local government as well. The trade in China functions under two tiers- one tier is handled by the Central Government who takes charge of foreign trade. The departments under the Central Government are the Ministry of Foreign Trade and Economic Cooperation which regulates foreign trade and manages economic relations. The MOFTEC is responsible for overseeing trade and making sure that the commissions and the bureaus work at their optimal capacity. The MOFTEC works at the four most important and congested ports of China, in cities like Shanghai, Tianjin, Guangzhoue etc. they issue trade license to the exporters and assist in the proper functioning of the trade companies. The MOFTEC is also an advisory and regulatory body that oversees the functioning of trade. The foreign policy of China is divided into mandatory plan that is obligatory on the State to ensure that nothing anticompetitive trade practice happens and also that foreign exchange allocation takes place with the help of the mandatory obligations. To incentivize the trade, the MOFTEC will devise a flexible trade regime wherein there shall be free flow of goods and no extra barrier to trade than which is normal in the due course of business. The MOFTEC issues export and import license to traders and goods that pass the test of quality are given allowance to go ahead with the trade. After the decentralization of trading, the local governments have equal say in ensuring proper trade mechanism and the MOFTEC bridges the gap between central and local government. The licenses are given and the quotas are allotted to the FTCs. There is a constant tussle between the powers of the central Government and the local Government and China seems to be caught up in the fight over ownership.

Challenges Faced by Businesses in Foreign Markets


The foreign operator gets license from the Foreign Trade Enterprise Licensing System after meeting the requirements. To get a license, the foreign trade operator has to have its name registered and the scope of the trading policy has to be clearly stated without any ambiguities. The MOFTEC approves and examines the committees before reaching the decision of granting license. Though there is no express prohibition for an FTC to be set up in China, but   China does not allow the business to set up in China and does not allow them to set up an FTC. The FTC are not allowed to directly communicate with the Chinese customers and therefore it can be said that China applies a discretionary power in allowing business to set up FTCs. The decision to deny FTC is against the principles of free trade which is an intrinsic principle of the GATT.

Foreign Trade Law of the People’s Republic of China was enacted with the purpose of making themselves more available to the outside world and developing a foreign trade and maintaining proper order in terms of trade. The interests of the foreign traders are ensured by virtue of this law. China being a socialist market economy has to make sure that the interests of the traders is upheld and that a sound framework with regards to trade is formulated. This department of foreign trade deals exclusively with intellectual property rights and maximizes the principles of Trade related aspects of intellectual property rights (TRIPS). Foreign trade is essentially about exporting and importing goods. The law ensures a fair and harmonious trading system and the system is unified and there are no ambiguities in the authorities exercised.

Article 5 of the law aims to promote a symbiotic relation where the relations between the traders and the country is that of mutual benefit so that both the parties are benefited. There are some regional and economic trade zones where the trade relations are enhanced and the alliances between the parties are strengthened. One very important principle of the law is that it promotes equality and does not favour discriminations. The concept of Most Favoured Nation and National Treatment are based on the principles of equal treatment and harmony. Both the concepts promote that imported goods from other countries shall be treated like the goods of the domestic country are treated. This is a concept of the World Trade Organization that mandates that there shall be no discrimination between the goods of two countries and the goods shall be accorded similar treatment. It is in accordance with the principle that countries shall be in a harmonious relation and there shall be no competing interests between countries. The goods from an international market and the goods of the domestic market should be put on equal footing. This will allow other countries to trade in the host country because there shall be no fear of discrimination. National Treatment and Most Favoured Nation Treatment are trade friendly policies because countries are assured that they will face equal treatment. This concept is based on the principle of reciprocity and mutual benefit.


If a product is treated like it would have been treated had it been in a product of the domestic market, this promotes equality and harmony. All the signatories to the WTO shall be treated equally and China being a member of the WTO also abides by the same principle. China will be treated equally like any other member country of the WTO. The trade regulatory framework before allowing any trader to sell their goods shall examine the goods and in doing so shall also check that the goods are not against the practices and customs of the state and that the goods do not infringe upon the rights of the citizens of the country. China also pledges that it will not indulge in any trade practice which is against the fair competition principles. China shall not enter into any agreement with any other country which shall be prohibitory in nature and also discriminatory. All the individuals and units associated with foreign trade shall be governed by the laws of China and they shall ensure that the units comply with the eligibility criteria of the country. The law deals with authenticity of products sold and the quality of goods exported and imported. To make sure that the goods imported are of superior quality and do not harm the reputation of China, the export and import of goods shall be managed by the State. The traders will not get clearance from the State of it fails to show the quality certificate of the products and if the products do not conform to the requirements of China. This law provides ample opportunities for employment and also engages many traders so that trade is bolstered.

There is an automatic licensing programme undertaken by the legislature so that the process is fastened and there are no barriers to export and import. Though China is heavily inclined to make sure that trade enhances and China’s economy grows, it also places restriction on traders who intend to harm the security and harmony of the country. The aim of this law is to protect human health and safety and also safeguard the lives of animals and plants, so that the trade is not contradictory to public policy. Any export or import of goods that are restricted or prohibited shall not be allowed to be traded by China.

By virtue of being a party to international agreements and conventions, it is imperative for China to promote international trade in services. This allegiance to international trade in services shall be in view of the laws and regulations that are already prevalent in China. Even while indulging in trade in service, the paramount importance needs to be attached to the concept of human rights and state security.

Protection of intellectual property rights is a very important aspect when traders are dealing in goods. In cases when there is an infringement of intellectual property rights, the claimant shall have the right to sue the other party and bring cases for compensation. By being a signatory to the TRIPS regimen, it is mandatory for the other member countries to grant intellectual property rights protection to the member states and in cases when the other countries do not accord intellectual property rights protection, China shall with the help of the State Council ensure that the intellectual property rights of the trader are preserved. Seller of goods and traders spend days in preparing a product and then they go through the hard job of getting the mark registered so that no third party can claim rights. These intellectual property rights are negative rights which prevents the third parties from encroaching upon the rightful owner’s rights and prevents the mark from getting infringed. It is incumbent on all the member states to give due recognition to the trademark owners and traders who deal in goods which are trademark protected. The State also protects the rights of the traders from trademark infringement. In cases when an imported good infringes upon the rights of a foreign trader, the State shall take appropriate legal actions to ensure that the rights of the traders are preserved. There is a designated department for the enforcement of intellectual property rights and therefore whenever a product seemingly infringes upon any other product, the department shall reserve the right to prohibit the product and also put a restriction on the sale of the product till the court orders do not come out.


In china, trading is a contract wherein the traders are contractually obligated to make sure that all the terms of the contract are abided by the parties and that the terms of the agreement are not breached. In cases when a trader infringes upon the rights of another trader or breaches the contractual obligations, the state shall fix liabilities in accordance with the law. As discussed earlier, the law upholds the policy of national treatment and it is essential for the State to accord national treatment to the imported products so that there is no discrimination.

The law also gives remedies in cases of breach of contract or when the member states do not accord treatment of fairness and equity while trading. The State shall also ensure that no anticompetitive practice takes place. If any product seemingly causes substantive damage, the onus is on the status to ensure that proper measures are taken to eliminate the threat. While ensuring that no anticompetitive practice takes place in China, the State has to also make sure that the rights of the traders against third parties are preserved. Whenever any product from a third country or a member state encroaches upon the rights of the products of China, the State will take all precautions to drive the threat away.

An analysis of the law gives a clear picture of the trading system of China and also provides a better explanation for the State actions against traders. The aim of the federal regulation is to fasten the export import system under a harmonious framework and understanding the rights of the traders. To ensure that a country flourishes in the area of trade and becomes an economy of supreme strength, it is essential to put a legal statute in place which is binding on all the parties and which recognizes the rights of the traders and gives them due recognition. This federal regulation of trade in China is a comprehensive law for enforcing trade and commerce.

Reference

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Pérez-Aznar, Facundo. "The Use of Most-Favoured-Nation Clauses to Import Substantive Treaty Provisions in International Investment Agreements." Journal of International Economic Law 20.4 (2017): 777-805.

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Malbon, Justin, Charles Lawson, and Mark Davison. The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights: A Commentary. Edward Elgar Publishing, 2014.

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Fang, Lily H., Josh Lerner, and Chaopeng Wu. "Intellectual property rights protection, ownership, and innovation: Evidence from China." The Review of Financial Studies 30.7 (2017): 2446-2477.

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