Attendees from home and abroad discuss “Sustainable Trade Amid Global Climate Change” at this year’s Hongqiao International Economic Forum, an annual event during the China International Import Expo in Shanghai, on November 6, 2024.
This year marks the 30th anniversary of the World Trade Organization (WTO), which has played an indisputable role in facilitating global trade and boosting global growth. The WTO has a significant role in the era of climate change as it provides a platform for resolving green trade disputes. But as deglobalization rises, the world’s largest trade body with over 160 members and representing 98 percent of world trade has weakened, jeopardizing international cooperation. This is one of the major challenges sustainable trade faces today. The other is trade protectionism and its impact, especially on the new energy industry.
This was the warning delivered by Sustainable Trade Amid Global Climate Change, a report released by the Chinese think tank Center for China and Globalization (CCG) at a forum convened in Shanghai to discuss sustainable trade amid global climate change. The Hongqiao International Economic Forum, an annual event held during the China International Import Expo in November, also discussed the role of the WTO in tackling climate change, how to promote green collaboration between China, the United States and Europe, and the good practices of cross-sector firms.
Pascal Lamy, former director-general of the WTO, argued that the WTO is still relevant. It has contributed to opening up in trade with its efforts to improve efficiency and allocation of resources. Also, its negotiation mechanism has a significant role. For instance, via carbon pricing or bilateral or multilateral agreements, tariffs on vital environmental products can be canceled. If negotiations on products that help to protect environment and control climate change, such as clean and renewable energy, lead to an agreement, it will greatly reduce transaction costs on a global scale.
However, the world’s major economies are like islands with their own individual green policies, which need to be interconnected or be made universal. Lamy said while China has various green policies, the United States and Europe have their own too. “The crux of the matter is forming a joint force of the world’s three largest economies…We need to accelerate the pace of cooperation, jointly formulate sustainable trade rules, and promote green transition through smooth trade. The three giants should engage in dialogues and have cooperation in sustainable trade,” he added. “A multilateral trading system makes us richer, contributes to healthier relations, as well as the wellbeing of our people.”
Bayer showcases its vision of regenerative agriculture at the Medical Devices and Healthcare Exhibition Area during the 7th China International Import Expo, on November 5, 2024.
Climate Change, a “Pretext” for Protectionism
Yi Xiaozhun, former deputy director-general of the WTO and former vice commerce minister of China, raised the issue of protectionism, which has seen growth in recent days with the EU hiking tariffs on Chinese electric vehicles provisionally for five years. There are also fears of fresh tariffs coming from the United States under a new president.
Yi said some countries have unilaterally raised tariffs or adopted discriminatory subsidies using climate change as a pretext. These measures violate the WTO’s basic multilateral rules and may trigger retaliatory measures, further hindering multilateral cooperation on sustainable trade. Due to the high cost of green transition, governments in many countries do have preferential policies and subsidies in the early stage. However, they need to abide by WTO rules on such policies and subsidies. Protectionism doesn’t help to cope with climate change or push the green economy forward.
Does China Have ‘Green Overcapacity’?
China has also come under criticism, with some saying it is churning out “green overcapacity” that is a threat to the green industries of other countries. How valid is the criticism?
Wang Huiyao, president of CCG, argued that the demand for clean energy technologies and products in the world is far from the so-called overcapacity. He gave the example of solar panels, which can be a key player in combating global climate change. The International Energy Agency has forecast that global demand for new photovoltaic installations will reach 820 gigawatts. Yet in 2022, production was insufficient, meeting only one-quarter of that target, which was far from overcapacity. Similarly, the electric vehicle (EV) market grew exponentially in 2023, with global EV sales rising by 35 percent year on year. However, while global demand for EVs is projected to reach 45 million units by 2030, China exported only 1.2 million EVs in 2023, underscoring a severe supply shortage.
Also, the shortage mainly exists in developing countries, which urgently need financial and technical assistance from the international community to achieve low-carbon transition and tackle climate change. Therefore, all countries should promote the global flow of green technologies and products through an open and inclusive international trading system, and avoid politicizing or instrumentalizing climate issues. Any policy that hinders the global transition to a green economy, especially excessive trade restrictions, will weaken the global joint efforts to address climate change.
Wang pointed out China’s green credentials: It is now the world’s largest producer of clean energy, and renewable energy accounts for more than half of its domestic energy production. In 2021, China’s green trade reached US $1.16 trillion, surpassing the EU to become the largest green trading country in the world, accounting for 14.6 percent of the global total.
Eric Solheim, former under-secretary-general of the United Nations and former executive director of the United Nations Environment Programme, called China an indispensable part in the global green transition with its new energy layout, “which can promote the development of the global new energy industry.” Solheim shared what he has seen in the city of Urumqi in northwest China. It has the world’s largest solar power plant with an installed capacity of 4 GW, equivalent to all the new clean electricity in Algeria, the largest country in Africa. And its capacity will be expanded to 8 GW.
What some call China’s “overcapacity” in the production of solar cells and new-energy vehicles can be looked at from another perspective, he said. It means that China has provided a large sum of high-quality green public goods for the international community, which is exactly what is needed for further development. The green economy will develop even faster across the globe, and it requires more green production capacity and fairer competition, followed by more affordable green public goods supply.
Solheim stressed that trade is two-way. Products from the United States and Europe can be successful in the Chinese market, and vice versa. This will be beneficial to all countries in the long run.
The booth of JA Solar at the 17th International Photovoltaic Power Generation and Smart Energy Conference & Exhibition in Shanghai, on June 15, 2024.
Experiences on Shaping a Green Industrial Chain
Executives from multinationals described their organizations’ experiences and innovations. Anne Tse, CEO of PepsiCo Greater China and chief growth officer of PepsiCo Asia Pacific, said one-third of the global greenhouse gas emissions come from the food system, from production to consumption, including planting, animal husbandry, and fishing, as well as the manufacturing and transportation of food and beverages. Therefore, the industry bears a great responsibility for reducing carbon emissions.
Tse gave the example of PepsiCo’s Lay’s potato chips brand to explain what they are doing to reduce their carbon footprint. The company is engaged in renewable agriculture that uses renewable resources and follows standards for emission reduction from chips production to transportation, in collaboration with upstream and downstream partners on the whole industrial chain. Digital and intelligent methods are used to ensure precise fertilization and irrigation in the potato farms. Biodigesters are used to convert potato peels and other food waste into biogas and the electricity the company buys for its use is clean.
Fu Chengyu, former chairman of Sinopec, said ESG, the set of environmental, social and governance criteria to measure an organization’s environmental and social impact, is an internal driving force for enterprises in China. Carbon emission reduction, the main benchmark of ESG, is a requisite of new cutting-edge and subversive technologies. They are boosting new industries and creating new drivers for growth.
Sun Guangbin, senior vice president and chief sustainability officer of JA Solar, a Chinese solar firm, described the company’s initial struggles to overcome green technical barriers during its expansion overseas. But continued efforts ensured they complied with all ESG criteria, from manufacturing to business, and over a decade, JA Solar’s business has expanded. The electricity the company used for manufacturing last year included nearly 30 percent clean energy and the goal is to achieve carbon neutrality by 2050.
Given that climate change is an imminent threat to all, sustainable trade has an impact on building a climate-friendly global trading system. The green sector can prosper via international cooperation and policy coordination, promote the dual goal of environmental sustainability and economic growth, and steer international trade toward a green, low-carbon and sustainable direction.
