China has a strong track record of compliance --- demonstrates that they prioritize

reputational costs and are committed to building institutions for a peaceful rise.
Xiaowen Zhang and Xiaoling Li, 2014. Assistant professor of political science at Augustana College, PhD in
International Relations @ University of Southern California; and associated professor of law at the China Youth University
for Political Sciences in Beijing, China,Ph.D. in Law from the East China University of Political Science and Law. The
Politics of Compliance with Adverse WTO Dispute Settlement Rulings in China, Journal of Contemporary China, 23:85, 143-160.

Although much has been written about the factors affecting compliance with international commitments in general, little

systemic attention has been paid to compliance with WTO dispute settlement rulings. A few observers
have examined the record of compliance in WTO disputes and identified some features of the pattern of compliance. For
instance, Bruce Wilson finds that compliance has been more rapid where the WTO violations can be corrected through
administrative action as opposed to legislative action, indicating that the procedural arrangement of implementation in
respondent states influences the prospect of compliance.24 Regrettably, these studies are mainly descriptive, without offering
in-depth explanations for why respondent states sometimes fail to implement the panel/Appellate Body recommendations in
due time.25 Consistent with the political economy of compliance in general, compliance in WTO

disputes is an act generating uneven political and economic payoffs for various special interests in a
respondent state. Anticipating increasing competition as a result of compliance, the producer group that has been
benefiting from the status quo has strong incentives to block the implementation of panel/Appellate Body recommendations.
Under this circumstance, the prospect of successful implementation is

subjected to the political influence

of the affected producer group in the respondent state . However, there is no systematic study yet examining
how special interests within a respondent state may influence the prospect of compliance in WTO disputes.
Even less is known about how domestic politics in authoritarian countries like China may influence the prospect of compliance
in WTO disputes, as the vast majority of respondent states that have been found violating WTO obligations are democracies.26

Theoretically, decision makers in authoritarian countries face less domestic constraints when it comes
to complying with international commitments than democracies. While in democracies, re-election-minded
governments may drag their feet as long as possible before they change WTO-inconsistent trade policies just to please
politically influential special interests, decision makers in authoritarian regimes are largely autonomous, facing fewer
constraints from special interests. The choice of compliance is largely shaped by the perception of a small

group of individuals of the material and reputational costs of noncompliance, which in turn is
influenced by the relative power of the state and its degree of reliance on the good will of the
international community. Nonetheless, China's record of compliance in WTO disputes indicates that
there must be more going on concerning the politics of compliance in authoritarian China . Of the
disputes against China that went through WTO litigation, the U nited S tates was either the sole
complainant or the leading co-complainant, indicating a similar level of material costs if China chose
noncompliance and sanctions were authorized. Besides, these disputes were initiated when the same group of
Chinese leaders was in power (between 2006 and 2009). Despite these similarities, China made a different policy choice
in ChinaPublications and Audiovisual Productsthan for others. To explain this puzzle, an in-depth analysis of the compliance
decision-making process in China is needed.
WTO compliance decision making in China
Generally speaking, policy making in China is characterized by a fragmented authoritarian

model.27 Compared with democracies, policies in China are made by a much more concentrated group of individuals in a topdown manner. Although it is fragmented in the sense that various actors at different levels of the power hierarchy are charged
with the enforcement of policies, the framework places emphasis on achieving consensus and narrowing the divergent policy

goals of different ministries and agencies. At the central government level, the Ministry of Commerce (MOFCOM) is the primary
bureaucratic unit responsible for matters related to foreign economic relations. Within MOFCOM, there is a WTO Division in the
Department of Treaty and Law that handles WTO disputes. However, according to the mandate of MOFCOM, the Minister of
MOFCOM officially decides whether to bring a complaint to the WTO Dispute Settlement Body (DSB). Meanwhile, input from
the Premier or the Vice Premier in charge of foreign trade has a decisive influence on any final decisions. Since the measures at
dispute are often issued by various bureaucracies, the amendment of which often requires coordination, when facing
coordination difficulties as a result of conflicting bureaucratic interests, the Vice Premier in charge of MOFCOM will usually
intervene.28
Unlike democracies, China's legislature, the National People's Congress (NPC) and its Standing Committee, puts few

constraints on the ability of the executives to comply with international commitments. There is no
special procedural law regarding the implementation of WTO panel/Appellate Body
recommendations. If the measures at dispute are administrative regulations enacted by the State Council, the State Council
is entitled to revise or abolish them. Likewise, ministries or commissions under the State Council, the People's Bank of China,
the State Audit Administration, or other organs endowed with administrative functions, are responsible for the revision of
departmental rules they enact respectively. If the measure at dispute is a national statute, normal legislative procedures apply.
Panel/Appellate Body rulings are first studied by relevant government agencies, which then send their comments to the State
Council. The State Council drafts the legislative proposals to be submitted to the NPC or its Standing Committee for
deliberations and vote. Theoretically, NPC and its Standing Committee can block or delay implementation by voting down the
proposals. In practice, however, once a proposed legislation is submitted to be voted on at the NPC or its Standing Committee,
it almost always gets approved, especially when the bill is introduced by the State Council. For example, in the ten-year period
of the 8th and 9th NPC between 1993 and 2003, all 44 legislative proposals introduced by the State Council were passed with
high affirmative votes.29
The fact that the Premier or the Vice Premier in charge of foreign trade makes the ultimate decisions regarding WTO dispute
settlement indicates the broad, complex and sometimes sensitive ramifications of panel/Appellate Boding rulings. Although
respondent states are expected to implement panel/Appellate Body recommendations, a tactical matter in theory, they do
choose noncompliance or incomplete compliance for a variety of strategic reasons. Not only does the decision of compliance
impact the interests of affected industries, but also it often affects a country's long-term development objectives and its
relationship with key trading partners. For vital decisions like this, a high degree of centralization is often observed during the
policy-making process in China.30 According to Liyu Han and Henry Gao, under most circumstances, top

leaders in China are under no or little pressure from individual industries or businesses when it comes
to compliance with adverse WTO dispute settlement rulings.31 Their top concern is the material and
reputational costs of noncompliance to the country as a whole . Although as China's economy grows,
the material costs of noncompliance decline relatively, China still has great concern about the
reputational costs of noncompliance, which explains its largely satisfactory performance as a
respondent in the WTO DSS.
A peacefully rising China

As a rising economic power that takes continuous economic growth as its top priority, China is very
concerned about the reputational costs of noncompliance in the WTO DSS. Noncompliance will hurt
China's image as a credible power in the international community, upset China's trading partners and
undermine the legitimacy of the WTO, all of which are indispensible to China's economic
development.
The concern over the reputational costs of noncompliance is well aligned with China's national
objective of peaceful rising. Since early 2003, China's leaders have started to talk about the concept of peaceful rising
in various international settings.32 As explained by Bijian Zheng, a key advisor to the top Chinese leaders, peaceful rising is a
unique development strategy that China chose, different than that of any other emerging powers in modern history. Instead of
rising through invasion, colonization, expansion or even large-scale wars of aggression, China's rise has been driven by

capital, technology, and resources acquired through peaceful means. The key to rising in a peaceful
manner is to embrace economic globalization. According to China's current strategic plan, it will take
another 40 yearsuntil 2050before China can be called a modernized, medium-level developed
country. To rise peacefully, China needs an open and orderly world market so that China can continue
to take advantage of globalization .33 Being the central driving force behind economic globalization, the wellbeing of
WTO is therefore imperative to China's long-term objective. Acknowledging that, China strived for WTO membership. After
becoming a member, upholding the legitimacy of the WTO and maintaining amicable relations with trading partners became
imperative. However, both could be compromised by noncompliance in the WTO DSS.
In particular, noncompliance can mean two types of reputational costs to China. Firstly, noncompliance

will hurt China's reputation as a credible rule player in the international community, which in turn will
alienate its trading partners. Since joining the WTO, China has grown to be the largest exporter of manufactured goods
in the world. On the one hand, China has gained considerably from WTO membership, as the rapid growth of the Chinese
economy is, to a large extent, driven by international trade. On the other hand, China's huge trade surpluses have brought
considerable pressure to its trading partners. Their import-competing industries have been harmed by the inflow of Chinese
products and they keep a close eye on China and would take every opportunity to lobby the governments to take protectionist
measures against China. It has been argued that one of the purposes of China joining the WTO is to send a reassuring signal to
the world that China is a credible player in the international economic system.34 Noncompliance, openly reneging on China's
commitments to the international free trade community, will no doubt hurt China's reputation as a trustworthy rule player and
provide those who are already upset by a rising China with support when they lobby their governments. Since the future
goodwill and cooperation of others are essential to China's continuous growth, such reputational costs are serious. Secondly,

noncompliance will hurt China's reputation as a system builder. Because the WTO DSS is the central
pillar of the WTO, its effectiveness is crucial to the legitimacy of the WTO as a whole . As the second
largest member in the WTO and the largest developing country in the WTO, China's performance in
the WTO DSS attracts wide attention, especially among developing countries, who look up to China and
expect China to be a leader in the WTO. Noncompliance will not only undermine the legitimacy and
effectiveness of the WTO DSS and, in turn, the WTO as a whole, but will also hurt the image of China
as a system builder, affecting its future ability to lead.
China's relatively good performance as a respondent in the DSS has well demonstrated its high
concern over reputational costs. For the cases that China settled through mutually agreed solutions,
China could have waited until the adoption of panel reports and then further extended the litigation
process by filing an appeal before the Appellate Body. Since there are no retroactive remedies in the
current DSS, the material costs of noncompliance will only be lower in this case, as the affected
producer will benefit from the status quo for longer. In fact, many respondent states have chosen to
take advantage of this loophole, escalating the disputes all the way to the end of the litigation process
despite almost 90% of the adopted panel and/or the Appellate Body reports finding WTO
violations.35 In contrast, China has settled nine of the 19 resolved cases out of court, showing great
caution over the risk of reputational damage as a result of adverse panel/Appellate Body rulings.
When the chance of winning is perceived to be small, China has chosen to settle in order to avoid the
reputational costs, despite the material benefits of escalation.