Creating a Climate for Sustainable Trade

With climate change becoming direr and theWTO “losing its teeth” at 30， experts renewcall for green collaboration among the world’sthree largest economies.

THIS year marks the 30th anniversary of theWorld Trade Organization （WTO）， whichhas played an indisputable role in facilitatingglobal trade and boosting globalgrowth. The WTO has a significant role in the eraof climate change as it provides a platform forresolving green trade disputes. But as deglobalizationrises， the world’s largest trade body with over160 members and representing 98 percent of worldtrade has weakened， jeopardizing internationalcooperation. This is one of the major challenges sustainable trade faces today. The other is tradeprotectionism and its impact， especially on thenew energy industry.

This was the warning delivered by SustainableTrade Amid Global Climate Change ， a report releasedby the Chinese think tank Center for Chinaand Globalization （CCG） at a forum convenedin Shanghai to discuss sustainable trade amidglobal climate change. The Hongqiao InternationalEconomic Forum， an annual event held during theChina International Import Expo in November，also discussed the role of the WTO in tackling climatechange， how to promote green collaborationbetween China， the United States and Europe， andthe good practices of cross-sector firms.

Pascal Lamy， former director-general of theWTO， argued that the WTO is still relevant. It hascontributed to opening up in trade with its effortsto improve efficiency and allocation of resources.Also， its negotiation mechanism has a significantrole. For instance， via carbon pricing or bilateral ormultilateral agreements， tariffs on vital environmentalproducts can be canceled. If negotiationson products that help to protect environment andcontrol climate change， such as clean and renewableenergy， lead to an agreement， it will greatly reduce transaction costs on a global scale.

However， the world’s major economies are likeislands with their own individual green policies，which need to be interconnected or be made universal.Lamy said while China has various greenpolicies， the United States and Europe have theirown too. “The crux of the matter is forming a jointforce of the world’s three largest economies…Weneed to accelerate the pace of cooperation， jointlyformulate sustainable trade rules， and promotegreen transition through smooth trade. The threegiants should engage in dialogues and have cooperationin sustainable trade，” he added. “A multilateraltrading system makes us richer， contributes tohealthier relations， as well as the wellbeing of ourpeople.”

Climate Change， a “Pretext”for Protectionism

Yi Xiaozhun， former deputy director-general ofthe WTO and former vice commerce minister ofChina， raised the issue of protectionism， whichhas seen growth in recent days with the EU hikingtariffs on Chinese electric vehicles provisionally forfive years. There are also fears of fresh tariffs comingfrom the United States under a new president.

Yi said some countries have unilaterally raisedtariffs or adopted discriminatory subsidies usingclimate change as a pretext. These measuresviolate the WTO’s basic multilateral rules and maytrigger retaliatory measures， further hinderingmultilateral cooperation on sustainable trade. Dueto the high cost of green transition， governmentsin many countries do have preferential policiesand subsidies in the early stage. However， theyneed to abide by WTO rules on such policies andsubsidies. Protectionism doesn’t help to cope withclimate change or push the green economy forward.

Does China Have ‘Green Overcapacity’？

China has also come under criticism， with somesaying it is churning out “green overcapacity” thatis a threat to the green industries of other countries.How valid is the criticism？

Wang Huiyao， president of CCG， argued thatthe demand for clean energy technologies andproducts in the world is far from the so-calledovercapacity. He gave the example of solar panels，which can be a key player in combating globalclimate change. The International Energy Agencyhas forecast that global demand for new photovoltaicinstallations will reach 820 gigawatts. Yetin 2022， production was insufficient， meeting onlyone-quarter of that target， which was far fromovercapacity. Similarly， the electric vehicle （EV）market grew exponentially in 2023， with global EVsales rising by 35 percent year on year. However，while global demand for EVs is projected to reach45 million units by 2030， China exported only 1.2million EVs in 2023， underscoring a severe supplyshortage.

Also， the shortage mainly exists in developingcountries， which urgently need financial and technicalassistance from the international communityto achieve low-carbon transition and tackleclimate change. Therefore， all countries shouldpromote the global flow of green technologies andproducts through an open and inclusive internationaltrading system， and avoid politicizing orinstrumentalizing climate issues. Any policy thathinders the global transition to a green economy，especially excessive trade restrictions， will weakenthe global joint efforts to address climate change.

Wang pointed out China’s green credentials：It is now the world’s largest producer of cleanenergy， and renewable energy accounts for morethan half of its domestic energy production. In2021， China’s green trade reached US $1.16 trillion，surpassing the EU to become the largest greentrading country in the world，accounting for 14.6 percent ofthe global total.

Eric Solheim， formerunder-secretary-general ofthe United Nations and formerexecutive director of theUnited Nations EnvironmentProgramme， called Chinaan indispensable part in theglobal green transition with itsnew energy layout， “which canpromote the development of the global new energyindustry.” Solheim shared what he has seen inthe city of Urumqi in northwest China. It has theworld’s largest solar power plant with an installedcapacity of 4 GW， equivalent to all the new cleanelectricity in Algeria， the largest country in Africa.And its capacity will be expanded to 8 GW.

What some call China’s “overcapacity” in theproduction of solar cells and new-energy vehiclescan be looked at from another perspective， he said.It means that China has provided a large sum ofhigh-quality green public goods for the internationalcommunity， which is exactly what is neededfor further development. The green economy willdevelop even faster across the globe， and it requiresmore green production capacity and fairercompetition， followed by more affordable greenpublic goods supply.

Solheim stressed that trade is two-way. Productsfrom the United States and Europe can besuccessful in the Chinese market， and vice versa.This will be beneficial to all countries in the longrun.

Experiences on Shaping a Green Industrial Chain

Executives from multinationals describedtheir organizations’ experiences and innovations.Anne Tse， CEO of PepsiCo Greater China and chiefgrowth officer of PepsiCo Asia Pacific， said onethirdof the global greenhouse gas emissions comefrom the food system， from production to consumption，including planting， animal husbandry，and fishing， as well as the manufacturing andtransportation of food and beverages. Therefore，the industry bears a great responsibility for reducingcarbon emissions.

Tse gave the example of PepsiCo’s Lay’s potatochips brand to explain what they are doing toreduce their carbon footprint. The company isengaged in renewable agriculture that uses renewableresources and follows standards for emissionreduction from chips production to transportation，in collaboration with upstream and downstreampartners on the whole industrial chain. Digitaland intelligent methods are used to ensure precisefertilization and irrigation in the potato farms.Biodigesters are used to convert potato peels andother food waste into biogas and the electricity thecompany buys for its use is clean.

Fu Chengyu， former chairman of Sinopec， saidESG， the set of environmental， social and governancecriteria to measure an organization’s environmentaland social impact， is an internal drivingforce for enterprises in China. Carbon emission reduction，the main benchmark of ESG， is a requisiteof new cutting-edge and subversive technologies.They are boosting new industries and creating newdrivers for growth.

Sun Guangbin， senior vice president and chiefsustainability officer of JA Solar， a Chinese solarfirm， described the company’s initial strugglesto overcome green technical barriers during itsexpansion overseas. But continued efforts ensuredthey complied with all ESG criteria， from manufacturingto business， and over a decade， JA Solar’sbusiness has expanded. The electricity the companyused for manufacturing last year includednearly 30 percent clean energy and the goal is toachieve carbon neutrality by 2050.

Given that climate change is an imminentthreat to all， sustainable trade has an impact onbuilding a climate-friendly global trading system.The green sector can prosper via internationalcooperation and policy coordination， promotethe dual goal of environmental sustainability andeconomic growth， and steer international tradetoward a green， low-carbon and sustainabledirection.