Transcript of CCG session in WTO Public Forum
CCG | September 10 , 2024
As part of the WTO 2024 Public Forum, the Center for China and Globalization (CCG) organized a session titled “Leveraging China’s green transition for global climate mitigation: perspectives, opportunities and challenges” on September 10. Moderated by Henry Huiyao Wang, founder and president of CCG, the session featured a panel of experts including:
Xiaozhun Yi, former WTO Deputy Director-General; former Vice Minister of Commerce of China
Amina Mohamed, Founder and President, Trade Negotiations and Investment Forum; former Cabinet Secretary of Kenya
Elviry Fabry, Senior Research Fellow, Jacques Delors Institute
Adam Posen, President, Peterson Institute for International Economics (PIIE)
Cautioning that the fragmentation of trade practices and policies poses a threat to global efforts in climate action, Henry Huiyao Wang called for strengthened global climate cooperation and alignment with the WTO trade system.
Henry Huiyao Wang, Founder and President, Center for China and Globalization (CCG)
We’re gathered today at this critical time of the WTO Public Forum to fight against climate change. The 2 degrees Celsius target set by the Paris Agreement to safeguard the planet’s future is now at risk. We have gone through all kinds of heat waves, floods, and disasters unprecedented in the history of mankind, so the significant efforts of international community to keep pace with the escalating reality of climate change is also at risk.
Under the acceleration of global warming from around the world, every government has moved to to adopt very different measures to promote green transformation, slow down the climate change, and make adjustments. However, the fragmentation of the policies and trade practice has been slowing down these efforts. How to cope with that is a challenge that we have to face. Therefore, we urgently have to get global cooperation in place for that important area of climate change.
The topic of today is really highly relevant in the green transition. To reach this climate goals set forth in the the Paris Agreement, substantial investments in clean energy and are not just necessary but are critical. The International Energy Agency (IEA) has called for an annual investment of 4.5 trillion U.S. dollars in the green energy field. Yet in 2023, only 1.8 trillion U.S. dollars was spent—far from overspending. The stark disparity between what is needed and what has been achieved highlights urgent need for highly cost-effective products, advanced technologies, and efficient resource allocation. For example, let’s consider the solar panel products, which present an immense growth opportunity for the world to take advantage to fight climate change. The IEA projects that global demand for new solar installations will reach 820 gigawatts, but by 2022, we have only achieved a quarter of that—again, far from overcapacity. Both the challenges and opportunities are enormous.
The same goes for the electric vehicles. Indeed, the market is undergoing exponential growth in 2023. Global EV sales surged by 35% year and year. But projection suggests that by 2027, we will reach 30 million vehicles worldwide for EV demand, so there’s a huge demand on EV vehicles. China has only exported 1.2 million EVs in 2023, so there’s a an enormous shortage of that. As a matter of fact, in 2023, Germany exported 80% of its cars globally and Japan exported 50% of its cars globally.
This brings us to the World Trade Organization, the most important international institution facilitating world trade and mitigating disputes. The WTO now faces the challenge of rising trade protectionism and the fragmentation of different practices. So in this context, what can WTO do to boost green trade and help achieve the balance between demand and supply in the green transition? This is what we want to discuss.
I’m very glad to say that today, we have assembled among us a team of experts to present the topic. We have Ambassador Amina Mohamed, Founder and President of the Trade Negotiations and Investment Forum and former Cabinet Secretary of Kenya, sitting on my right; and further right, Ambassador Xiaozhun Yi, former WTO Deputy Director-General and also former Vice Minister of Commerce of China; we have Dr. Elviry Fabry, Senior Research Fellow at the Jacques Delors Institute in France. And last but not least, we have one well-known Dr. Adam Posen, President of the Peterson Institute for International Economics (PIIE). These are really famliar name we often hear from.
First, I’d like to invite Ambassador Yi because you have been here for two terms as WTO Deputy Director-General, and you were also the formal Vice Minister of Commerce of China. What are the driving forces behind China’s development of new energy industry? And how do you view the growing concerns of the performance of Chinese EVs in overseas markets? In your view, how can China’s green policy contribute to this climate mitigation that is badly needed?
Xiaozhun Yi, former WTO Deputy Director-General; former Vice Minister of Commerce of China
Thank you very much, Huiyao. Let me answer your last question first. I believe China’s green policies can accelerate green transition, not only in China but also globally. In order to save my time, I would invite the audience to take a look at our fact sheet. It’s kind of a 3-pager. It’s very interesting and very informative. It’s on China’s energy transition, which you can find on the small table outside this room.
Let me move to your first question. Indeed, in recent years, China’s rapid development in the new energy industry has sparked some international debates. So I would like to share with you some of my thoughts on this matter.
First, China’s success in the new energy sector is largely due to its early start and consistent efforts that have never wavered. China began addressing pollution as far back as the late 1970s and early 1980s. At that time, rapid industrialization and urbanization were causing serious environmental problems. By the 1990s, all major cities in China were suffering from severe air pollution, forcing the government to take bold action towards a green transformation. In 2011, cities like Beijing and Shanghai imposed quota and lottery systems for passenger car license plates to tackle traffic congestion and air pollution. However, in order to encourage the adoption of electric vehicles, the exception was made to allow consumers to skip the lottery if they choose to purchase an EV, then they could get immediate access to a license plate instead of waiting for years. I think it’s a huge incentive for the new rich in China.
Even when EVs were quite rare on roads, China began building charging infrastructure nationwide through financial subsidies and public-private partnerships to attract private investment. Between 2015 and 2020, the government invested more than 20 billion RMB yuan in EV charging infrastructure. By the end of June this year, China has over 10.24 million charging stations. Among them, 3.1 million were public stations, and the rest were private piles. They support the charging needs of 24 million EVs.
Government policies also have a crucial role to play. Since 2004, the Chinese government has regularly raised fuel consumption standards for passenger cars, pushing for more energy-efficient technologies. A few days ago, just before I came to Geneva, a?new policy draft?was aired for car companies, which proposes setting fuel consumption standards based on vehicle weight. For example, vehicles under 2.51 tonnes must limit fuel consumption to 4.7 liters for 100 kilometers. This is quite a high standard, which represents a way to force manufacturers to make their cars green. It’s also a strong incentive for technological innovation.
My second point is that green economic transition should not come at the cost of sacrificing WTO rules. Green transitions in the early stages are costly, and governments are supposed to provide some support and subsidies as the market forces alone cannot drive this change. However, all policies, whether industrial, trade, or financial, must comply with the WTO rules. Any unilateral measures that disregard these rules should be considered unacceptable. Using climate action as a pretext for protectionism not only hinders one’s own green transition but also drags down global efforts to combat climate change.
My third point is, contrary to what some in the U.S. and Europe might claim, the development of China’s new energy industry is not by virtue of government subsidies. Relying on subsidies could never create a healthy industry. China’s success is more about fostering market competition, rapid technological innovation, and its super large market scale.
Take China’s solar industry as an example, Intense competition constantly puts less competitive players out of business. Even once-dominant companies like Wuxi Suntech Shangde eventually collapsed due to such tough competition. Today, China’s solar cells achieve a conversion efficiency of 25.5% and the solar power has reached grid parity.
Similar stories can also be found in the EV industry. In 2018, China had over 480 EV manufacturers, but now only around 50 remain alive. The full-fledged competition drove companies to accelerate innovation and continuously reduce their cost. It’s interesting to know that the EV development cycle in China takes only 18 to 24 months, whereas in Europe, it normally takes four to five years.
The Chinese government has also made a lot of efforts to encourage EV consumption. The policy includes purchase tax exemptions, priority in vehicle registration, no driving day limit, etc. These benefits apply equally to imported cars and foreign-invested companies. Coupled with solid infrastructure, such policies have created huge demand for EVs in China. In 2023, China had nearly 42 million EVs on the road, more than the total of the U.S., Germany, France, and the UK combined, representing about 61% of the world’s total. According to Wright’s Law in economics, every time China’s EV output doubles, production costs drop by more than 20%. Obviously, China’s low EV production cost largely lies in its massive market scale.
Finally, this is something in my heart. More than 20 years ago, China adopted a series of measures to protect its weak auto industry. Measures taken included strict import quotas, high tariffs of up to 200%, government subsidies, and strict restrictions on foreign investment from entering auto industry. However, such high protection only let China’s auto industry further falling behind.
The success story of Chinese EV industry today is mainly attributed to China’s accession to the WTO, with bold market opening and its full integration into the global value chain. China has not only abolished the import quota to fulfill WTO commitment but also unilaterally liberalized access restrictions on foreign investment and reduced the tariffs on passenger vehicles down to 13.8%.
To make long story short, opening-up and market competition have been the real driving force behind the flourishing EV industry in China. That’s why I’m deeply concerned that some major developed countries are repeating the same therapy that China failed years ago. To me, prohibitive tariffs and investment barriers will only cost them opportunities for their auto green transformation. Thank you.
Henry Huiyao Wang
Thank you, Ambassador Yi, for your excellent presentation about the latest development and all the green transition China has undertaken. I can testify, for example, I live in Beijing. Almost 90% of the smog of Beijing has gone now. The air is really clean. Actually, over 50% of the pollution, according to the Beijing Municipal Government, was contributed by the vehicles. Now half of the Beijing vehicles are green and you face no restrictions to buy green cars, rather than those that apply to combustion engine cars throughout China. I can see that policy plus the big market applications make a huge difference. Of course, on top of that, you have Tesla, BMW, Mercedes, and Volkswagen that make green cars in China as well. We’re going to see this new momentum to help combat climate change.
I want to come back to Ambassador Dr. Amina Mohamed. You come from Africa and you know how the green transformation has impacted the African continent and developing countries in general. What measures can be taken to take advantage of this green transition and green revolution, so to speak, to bridge the gap in energy sectors so we can have better opportunities and implications for the future green development?
Amina Mohamed, Founder and President, Trade Negotiations and Investment Forum; former Cabinet Secretary of Kenya
Thank you very much. Let me just say how wonderful it is to be back around Geneva. Thank you for organizing this session. I’d also like to thank my fellow panelists for also having honored the invitation to be present. You’ve posed really direct questions to me about how the green transition and related trade policy measures impact economic growth in developing countries. And I will talk about Africa, having just come from Nairobi and working on trade negotiations and investment right now.
So let me say this, first of all, we’ve embraced the green transition. I think there’s no doubt about that. I think African countries have been talking about green much longer than this agenda has been embraced by the rest of the world. I’ll just give you an example of Kenya, for instance. We started our green energy transition in 1981. I don’t think that many people were talking about a green energy transition at that time, but that was really the first time that we established a geothermal facility in our country to begin to move away very gradually and very slowly from full dependence on fossil fuels, while obviously, everybody was still dependent on fossil fuels to a certain extent. I would like to just tell you that three-quarters of our energy requirements today are made from renewables, whether it is, geothermal, hydro, winds, or solar.
The only challenge that we have, and I’m really happy that we’re discussing this, is that most of these technologies are actually manufactured outside our countries. Huge challenge for us; not affordable, in many cases, not even accessible. So for us, I think the biggest challenge that we face today, to be able to move the needle a little forward, is to ensure that we are granted full accessibility, including support in the manufacture and the development of these technologies, but also that the technologies, when they are available to us, be made affordable so that our countries can fully embrace this.
I know that Henry spoke about how much had been pledged and what was really on the table. So there’s a need for a faster movement—some momentum towards ensuring that the facilities that the funds that have been created to support this green transition actually happen. So what happens with our trade policy measures as a result of this movement away from the frameworks that we’ve had?
I have to tell you that some of our policies were actually developed in the very recent past. For many countries that have just joined the WTO in the last 10 to 15 years, these policies have been in place for 10 years, maybe less, because they began a journey of developing and formulating their policies to align with WTO rules and regulations. These are new policies in effect, and we’re telling everybody that they need to change.
In order for this to happen and to happen as quickly as we’d like to see—because again, Henry has referred to the tragic consequences of not embracing change—we will need to support these countries. It’s being told that you need to change, and you change. Then when you think that now you have a critical mass of people that you have trained to actually implement the standards that are in place, then you have to change them again, and you have to adjust them again, and sometimes deconstruct them completely. So for Africa to be able to do that, and to do that within a meaningful timeframe for the whole climate transformation and change, we will need the support that must come in, support in terms of technical support but also financial support, because implementing these policies will require a lot of heavy lifting.
So that’s the first thing that I would like to say. Basically, two sides of the coin: one side, lots of opportunities, creation of new jobs, cleaning up of the environment, being part of the global effort on climate, changing infrastructure. In cases, for instance, like Kenya, where we are changing our transport infrastructure to make it sustainable, obviously, embracing the new technologies in transportation, whether it is the electric buses and cars or whether it is any other forms of infrastructure that we need to put in place, building infrastructure, for instance.
We’re investing a lot in many of these areas, but the support really needs to be present. There has to be an understanding of just how much we’ve had to do in a very short period of time. We had countries that gained independence in the 1980s, for instance, some in the 1990s, and then embarked very fast on engaging the rest of the world, putting in place everything that needs to be done to be part of this global environment and then have to quickly change.
There’s also the need to comply with new product standards, new process standards, and even with the new production standards. All that requires a lot of heavy lifting. Sometimes what we’ve found on the continent is that you have environmental standards that have been putatively introduced, and some of these camouflage protectionism. Just in terms of, for instance, in agriculture, we export a lot of agricultural products to many parts of the world. And for many years, we’ve had standards in place and then all of a sudden, you have a very short notice period within which to transition from the standards that you’re used to and that you spend a lot of money putting in place to new standards that are completely different but also very costly. So meeting all these new standards will obviously require a lot of collaboration, a lot of partnerships, and a lot of support.
I think the other area—and it’s an important area because without it, there’s no technological development or technological advancement—is the extractive sector. The minerals that are required for this transition are in Africa mainly—they are also in other parts of the world, but mainly on the continent. Traditionally, and that tradition has continued to today, what we’ve done is that we’ve allowed companies to come in, extract the minerals, whether it’s cobalt, lithium, magnesium, all the minerals that are required for any advancement—titanium, for instance, in a place where I live not far away from, and so on. So we’ve extracted them and exported them in raw form.
I think that if we are really serious about the green transition, we’ll need to do what we’ve done for all other products and allow for either semi-processing or full-processing on the continent. That would reduce the carbon footprint of exporting, importing, and exporting it again.
So that’s something that I think we really need to take into account. How do we fully include Africa in this green transition, but in areas where Africa has an advantage, and in areas where the whole globe is actually dependent on Africa in order to move forward? I think again, it’s about partnerships, support, and joint ventures. Africa cannot do it alone, and it will need the support of everybody. It will need for companies to come in and negotiate on how to be supportive of these processes.
We on the continent have for many years received fully-processed and ready-to-consume products, so it’s not so difficult to understand. But it’s actually necessary and it probably will become important for that to happen on the other foot as well, so that we are able not just to export the raws but export semi-processed, maybe at some point fully-processed commodities, products to the rest of the world—so that this partnership has much more meaning, that this partnership is much more fundamental and reliable, and this journey is much more predictable and sustainable. I think that’s probably what I would say on the first issue.
The other question I was asked was what kind of measures we should put in place as developing countries, as Africans, to take advantage of this green transition. I think I’ve mentioned some of that, that we need to invest in some critical sectors, whether it is in renewable energies, which we in Kenya have done quite successfully and have supported countries in our region to do the same. I think we have helped develop geothermal in Ethiopia, Tanzania, and Djibouti very transparently and openly, and in a very supportive manner. I’ve talked about grid infrastructure and the need to invest in that, and of course, the need to make sure that our manufacturing also, which has to be green, is invested in. So we need to have sound policy and regulatory frameworks that will encourage everybody else, but also our local private sectors to invest in green technologies and to create stable regulatory environments.
I don’t know whether Henry Wang wants me to comment on the implications of the subsidy wars for WTO rules and the concerns of the African governments. We in developing countries have issues with subsidies, but as long as these subsidies do not in any way stop the market, as long as they don’t in a fundamental way interfere with the operations of the market and discriminate against a set of countries, I think we all know that none of us lives in a utopian environment. The subsidies have been here. They’ll continue to be here unless we all agree at some point, like we did with export subsidies in agriculture in Nairobi 2015, to do away with them. I don’t think that one country or one region can do it on its own. I think it has to be something that we all agree is necessary, is needed, and must be done.
But we also know, and that’s the truth, that most of the major trading partners that we have have dropped any pretence of serious compliance with commitments to WTO rules. That in a way has created a crisis in the multilateral trading system. We need to address that. I won’t say we need to repair it because that means we have reached a point almost of no return, but I think that we really need to address compliance with rules that we set for ourselves. I think it’s something that we must continue to do.
And I think that part of that conversation has to be about the subsidy practices that are in place because they discriminate mostly against those of us who are from the South. In effect, what they do is that they impair the efficient operations of the free market that we all need. Finally, we cannot afford to subsidize the continent. I think that is something that will elude us, and the result is unfair competition. We’re kind of getting used to that, but hopefully, we’ll be able to deal with that.
The other issue that I think was raised with me was the role of trade in the global energy transition, how can the multilateral trading system develop a sustainable agenda that achieves the goals of both trade and climate. I think that it’s easy to have to be that balance that is struck because trade along with investment, especially FDI, are at the center of the global energy transition. For this to work and for everyone, balance must be achieved. It must be achieved between trade and climate. The only way that this can happen is if we all agree to cooperate and compete on the basis of established trade rules and climate rules. I don’t think that this is something new that we are saying. There are rules both in trade and climate. If we’re able to, in some ways, cooperate and compete on the basis of those rules, we will strike that balance.
But here again, it’s not just about that. It’s also about the PTAs that must work efficiently. I’ll tell you this: for many of us, and maybe just for my country, I think we’ve made it a priority to make sure that we strive really hard to strike that balance between trade and climate. So we’re encouraging our farmers, and some of them are very small-scale farmers, to embrace new technologies and smart agriculture. We are working with some partners, very, very few, by the way, to just make sure that they have the knowledge of how to move from one to the other.
Let me also say that there is a very clear and urgent need for manufacturers of green technologies to take into account what we are saying at this session, that in order for us to transition from old to new, they must provide accessible and affordable technology options to all of us. We see opportunity in every approach that is taken. We are optimists by nature, and we refuse to see difficulty even in this challenge that we’re facing right now. So we would again call on our development partners to understand that the change we are embarking on is not an easy one for us. Change is true and constant and we need to always keep changing and adjusting, but these are big changes that are required, really big changes.
We have many priorities that are competing. We’ve made this one of the top priorities. We need everybody else to do the same to make it a key priority. We cannot achieve this if we only put measures in place in one part, two parts, or some parts of the world, it has to be global—we know that. The consequences of climate change are global. They are not regional, national, or provincial; they are global. So every measure that we take must also have that global dimension. It must be about partnerships, healthy competition, fairness, and equity. Thank you.
Henry Huiyao Wang
Thank you, Ambassador Amina. I think you outlined very well the African, actually all the developing countries’ green transition in green development. Very glad to hear that Africa is doing so much on the green transition. You mentioned wind, solar, hydropower, all developed and, of course, expecting more investment there. I think on the green transition, for example, Chinese EVs have invested in Latin American, Asia, Europe, and I’m sure Africa as well. China and Africa have just recently held a summit in Beijing. So I’m sure there will be tremendous cooperation in the future in terms of the green transition to help African and developing countries.
Now, I think we still have two very important panelists. We would like to have Dr. Elviry Fabry, Senior Research Fellow at the Jacques Delors Institute in France, to give us some European perspectives. So what is the EU domestic and international approach on green transition? The EU at one time said that by 2035, they’re going to phase out all the of the combustion engine vehicles, but what about that now? What can the EU propose in achieving the green transition? I’d really like to have Elviry to give some of her perspectives.
Elviry Fabry, Senior Research Fellow, Jacques Delors Institute
Good afternoon, everybody. Thank you very much, Henry, and thank you very much for the invitation. It’s really an honor to be with such distinguished guests to discuss this issue, which is really a central one today.
To analyze how the EU views the Chinese green transition and how it is positioning itself vis-a-vis the Chinese green transition, let me just go back to some years ago, what was the state of play of the European green transition? For long, the EU has considered itself as a leader in the green transition. It wasn’t the only one—you just mentioned that Kenya in the 80s had already quickly engaged. But since the turn of the 2000s, the EU was considering transitioning its energy policy and has started subsidizing the developments of renewable energy. It has developed a huge regulatory base for that green transition, and the European Commission that has just ended was really focused on that goal. It has led to the new Green Deal, to the Fit for 55 set of intense and severe regulations. And you just mentioned the target of 2035, which is not phasing out of the ICE (internal-combustion engine), but forbidding the sales of new ICE in the EU by 2035, so only growing some EV sales in the European markets.
The European approach of the green transition is based on predictability, compliance with the WTO rules, sticks with the regulation. And it’s more known for those sticks than for the carrots that it has provided to the industry even if looking back at those past years, we already see that the whole amount of all the subsidies that have been provided to the European industry is more important than what is now engaged in the American market. But while doing so, it has also adapted its legislation to align import regimes with the domestic regimes that we’re grounding the green transition. So we think about CBAM, the deforestation regulations, and the due diligence regulations. I will come back on that because it has raised some criticism from other parts of the world. But the idea was to increase the level playing field between what was imported in the EU and the efforts made by domestic production, and also to use those regulations as a leverage to incentivize others to engage in the green transition.
Yet two years ago, there has been a sort of brutal waking call with the announcement of the IRA in the U.S., and at the same time, with the rise of imports of Chinese EVs in the European market, the realization that China was a very important leader in the green technologies. It wasn’t new, but the realization that China was already controlling large parts of the supply chains of green technologies and increasing that control of the whole supply chain came up as a sort of more brutal realization. The EU is reaching its targets for the reduction of GHGs quite quickly, and it’s very confident that it would reach the target by 2030. In 2024, it has already decreased its emissions by 47% compared to 2005, and the goal was to reduce them by 60%.
If the EU is well engaged in that green transition, and it has been boosted by phasing out the Russian fossil fuels, the concern is now about the challenges that are rising from the strategic triangle of not only engaging into fighting against climate change, but also competing on the ground of the green technologies and supporting its industries in the face of increasing competition coming not only from China but also soon from the U.S.
There are also some economic security concerns with the issue of the concentration of production, a issue that is not only a European concern not to have overdependency on one main origin of production. If we look back at what has been invested in the U.S. with the IRA, we can consider today with the delay of many projects or even the cancellation of some projects, that may be a little more complex on the U.S. side. But there’s much more impredictability with the coming elections and the position of Donald Trump on the Green Deal, reframing the Green New Deal, a green new fund. It forces us to aniticipate that if he was reelected, there would be at least a slowing down of those subsidies, tax credits, and everything. That’s not good news for the green transition itself, but at least the concerns that the EU has on the competitive side would be quite tamed.
It leads us to consider that it’s even more important to keep China engaged into this green transition as an important goal. But the Europeans remain very uncomfortable with the Chinese engagements in the green transition because it remains the first emitter of GHGs. It is still consuming half of the global coal extraction. And at the same time, it is a key strategic leader of the green industry. And you just mentioned about the domestic car part, which is huge and the efforts have been huge even in the charging construction. It’s just amazing that you have reached those numbers in such a short period. But the fact that the U.S. is now close not only to the Chinese EVs—it was already—but also to Chinese technologies, is increasing pressure on the European markets. And the need to support the European green industry is key to preserve that issue of the necessity to have diversification of production of those green technologies in the world and, as Ambassador Mohamed was underlining, precisely, to have that diversification in all the continents.
So how has the EU been adjusting its strategy? The target of 2035 most probably won’t change. When you speak to the key stakeholders in the European markets, not only the OEMs, but also the suppliers need regulatory stability, now that we have that target. The countervailing duties that will soon be voted concerning the imports of Chinese EVs in the European market will most probably be voted and implemented. We’ll see. Question mark, but there’s not much suspense at this stage on that.
But the issue is rather what it is saying about the adjustment of the European strategy concerning that EV market, which is in a way sort of a laboratory of a potential adjustment of the European economic and trade strategy. The publication of Mario Draghi’s?report?yesterday is probably raising the issue to the right level. I guess some of you had time between yesterday and today to look at what the main message is. It’s a message of urgency. Draghi is calling for a wake-up call, not only focusing on such an issue like the EV issue, but more structural issues for the European competitiveness. And with a decrease of productivity and competitiveness compared to the U.S. and China, he is really focusing on the need to pool investment capacity in the EU. And this has a lot to see with the capacity to integrate rather the EU and to go beyond what was the break of the taboo of a common borrowing and to increase that capacity. I won’t come back on all of his proposals, but I think beyond that, he’s already mentioned some of the elements for the Europeans.
With the countervailing duties, going back to our issue of the EV sector, they already have reached some of the objectives that they had—to have the Chinese automotive construction not only importing but also moving to the EU rather than only providing the EU markets with the supply. But this needs to be complemented with other measures that would rather incentivize not only the assembly function in the EU, but also to allow for production in EU and technological transfer because that’s where we stand today.
So if the EU has calibrated its countervailing duties to preserve some access to the European market, it wasn’t about closing the market, there may be some new initiatives allowing to condition more FDI to facilitate the production of those EVs and more broadly, of green technologies in the EU markets. The Europeans will continue to comply with WTO rules, but it’s all about being innovative with a level playing field and innovative measures and based on sustainability, which could allow to adapt to local content requirements. I think those are fields where, while preserving the compliance with WTO rules, some European merchants would be interested to build in to preserve their industry and to preserve the capacity and also to provide the rest of the world with the green technologies.
Henry Huiyao Wang
Thank you, Dr. Fabry. Absolutely, the EU engagement with China in the green transitions, as you said, is very important. I think we have to abide by WTO rules. Also, I would think from a personal point of view that actually, China and the EU has already had a huge potential in collaboration. Mercedes has just invested over 1 billion RMB in its green R&D center in Beijing. As a matter of fact, the EU exports more than 1 million cars to China whereas China probably exports less than half of that to the EU. We don’t want to have a tariff dispute there, but absolutely it’s important in China and the EU both safeguard the WTO rules and promote the green transition for the Global South and at the whole world. Thank you for all the points you made.
Now, last but not least, I’d like to have Dr. Adam Posen. He’s the President of the Peterson Institute, as we all know, a well-known U.S. think tank. CCG has many collaboration with the the Peterson Institute in the past. So from the U.S. point of view, I know that you’re very popular here and you are going to have a quite a few panels, what we would like to hear from you on this panel is the U.S.-China bilateral trade and economic relations. As a matter of fact, we see President Biden raised the tariffs on Chinese EVs to 100%, but actually very few Chinese EVs ever get into the U.S. market. So was that really protectionist of some kind? How is the U.S. approaching the green transition with the U.S. election coming up? As we all know, we have to work together to fight climate change for green transition.
Adam Posen, President, Peterson Institute for International Economics (PIIE)
Thank you, President Wang. Thank you all for turning out today and thanks to my distinguished panelists. In many ways, it would be better if it was a current or former U.S. official instead of me on this panel, not so much because they’d tell you things you want to hear, starting my timer, but just that would better convey in some ways the challenges the world faces. You probably shouldn’t read too much into the fact that I’m here instead. It probably is more to do with the election than with anything else. But you should read a little bit into the fact that you have an NGO person from the U.S. rather than an official or ex-official in this area.
Where I want to start is essentially Dr. Fabry’s last sentence. Jean Pasani-Ferry and I have published a book recently called?The Green Frontier?about the state of knowledge and the state of play in trying to advance the green agenda, the green transition. And there are various nuances, but the most important point is simply we need widespread rapid adoption and spread of good green technologies as they become available and affordable. And as I warned against the Biden administration in?an article?18 months ago, one of the biggest impacts of the Biden administration’s contradicting their genuine concerns with climate with their Buy American, Build American, Subsidize American and no climate carbon tax is that this will inevitably lead to a much slower, much even, much less generous and effective spread of green technology throughout the world. It is most likely to lead, and under Trump it would be worse, to a hiving off of the U.S. market technological standards and energy technology from the rest of the world, because the US will put up barriers that will force its consumers, its households, its businesses, its local government institutions to buy overpriced American products and to do things to a different standard than the rest of the world, and then will try to somehow insist that others should buy from them anyway. This is not gonna work.
So to me, as we sit here, and this is gonna be a theme that I and others will be harping on throughout the next few days of the Public Forum, which some of the colleagues here on this panel represent, is we need a positive agenda to go forward among third nations, meaning people other than the U.S. and China, without the U.S. and China. And if it turns out you can get the U.S. or China to credibly commit to do something useful, great. But we do not let the US or China veto development, spread, and progress of technology.
Now, I count the EU as a third nation in that it’s not U.S. or China. And for many reasons, including some of the ones Dr. Fabry mentioned, the EU has been in many ways a much more constructive force on climate in terms of changing its own energy usage patterns and its own pricing of carbon, more than either U.S. or China. Nonetheless, the phrase that we have to keep the car industry here, we have to keep technological competitiveness and so on, of course, opens the door to the EU being almost as disruptive as the U.S. and China.
And yes, Mario Draghi released a report yesterday which had many good aspects, including issues of centralizing fiscal policy and finance in Europe that I support, but which left vague and room for these kinds of industrial policies in there. And I think the challenge for the EU is to recognize that they have to, and I’ve argued this on various forums and grounds, not play the American or the Chinese game, which they’re gonna lose anyway, and they should be leading the alternative game, which is multilateral in spirit, if not multilateral in legal practice.
So turning from that, I do think, however, that the realities that Ambassador Yi and President Wang and especially Ambassador Mohamed put out there do suggest that there is room potentially for EU, China, and some parts of Africa, some parts of Southeast Asia for collaboration. There is no question while it is contradictory in China that China is such a large coal user and emitter, it is bringing down its carbon emission per unit of GDP and is leading the world in various green technologies. And given the ability of the Politburo to make enforceable decisions that one can imagine and possibly strive for, an EU-China agreement that would admit many others and frankly leave the U.S, on the outside would advance the world’s climate agenda. This would have to be a high-standard agreement, the same way that if China were to enter CPTPP, it would have to meet reasonable standards of openness. I hate the phrase “level playing field,” so let’s just talk about allowing competition rather than anti-competitive behaviors. But given the fact, which remains true that even in, for example, EVs, China has many domestic competitors, it’s not just one company that this could be dealt with.
The final point I would make is in terms of prioritization, for people of good faith working around the WTO from whatever country you come from or your employer is based, that the gains both for climate and for economic growth primarily come from the usage of green technology, the creation of scale and networks and infrastructure around those technologies and not from the production of those technologies. And if everybody from Kenya to France to China to the U.S. insists that they have to produce the technology, and therefore we get fighting standards, conflictual subsidies, large-rather-than-small amounts of waste, political pressures for developing countries to choose one side or the other in order to be part of somebody’s supply chain and so on, that will set back both climate and growth. So there is room to be idealistic, there is room to go for freer trade in green goods, and to, if necessary, section that off from all these other trade disputes and conflicts we have for the sake of the world. Thank you very much.
Q&A
Henry Huiyao Wang
Thank you. Dr. Posen. I think you outlined an very interesting overview that China, the EU, and developing countries have to work together. Of course, all the other countries cannot take sides between China and the U.S.
Adam Posen
Stop being disingenuous, Henry. Other countries are constantly being forced to take sides between the U.S. and China. We all have to stand up to try to create a safe space for them not to have to make that choice.
Henry Huiyao Wang
Absolutely. That’s the spirit of the WTO that we’re all here to hear all the great panelists’ discussions. I agree with that. We have 10 minutes left, but I would like to have a brief final round of maybe 30 seconds for each of you to share the views on:
What are the roles of trade in helping the energy transition? I mean, we probably have to create a new narrative. It is common sense that we have climate change and we have a crisis on hand, yet we are so indifferent and we have all those different approaches. Actually, we’re fighting among ourselves, not fighting the common threat of climate change. Now it doesn’t matter who leads that and who is doing better. I think we all have to work together and help each other. That’s probably the common spirit that we have to generate from this WTO forum.
I’m thinking if we are having this common threat, a common crisis, the mankind has to work together to fight this climate change. And then whoever does the best, we have to learn from each other. When they have a great product like Boeing or Airbus, everybody buys it. There’s no overcapacity issue. Then there are all the other agricultural products that we will use. There’s no overcapacity. The world has never had overcapacity. I don’t know where that narrative comes from. So I really think that if we can have all the tools available to fight climate change, let’s use it. Let’s have a WTO standard to use it. That’s really the bottom line.
So I would like to have each of you 30 seconds on this issue, how we can really use the WTO rules to safeguard global energy transition instead of individual rules—if that happens, we would all go back to the primitive days and the laws of the jungle, which is not good.
Amina Mohamed
Thank you very much. I think that I come from a part of the world that is very compliant. We believe in the multilateral trading system and we’ve been part of for a while now, and we believe in DSU. So we’re compliant. In fact, the question should refer to those that may not be compliant from other parts of the world.
But I just wanted to say two things. One is that the whole issue of moving manufacturing around is a key issue. It’s one of the issues that I was discussing. Africa cannot be the only part of the world where raw materials move out; there’s no manufacturing, and there’s no interest in establishing any manufacturing on the continent. We need to change that. We need to address that. We need to pay attention to that. If totally processed, minerals are still not palatable to the rest of the world, then let’s do some semi-processing on the continent.
The other one that I would like to talk about is again, the preservation of industry. I think all of us have—in some cases nascent, in others much more developed—industries that we’re interested in and where we have a comparative advantage. And I think that it’s really important that we’re all kind of supportive of that. But I think it’s true that we really have to have a positive agenda. We deal with everybody, so I can’t even sit here and I talk about any part of the world that we would rather not deal with. I think the climate crisis is such that it’s global in nature and we need all hands on deck to be able to deal with it. So just to encourage everybody, nobody should turn away. I think everybody should be looking in the same direction. I think some have much more resources, technology and all the rest, and others that have the natural environment that can help in evolving this technology further. But again, I just want to say thank you very much for organizing this wonderful session.
Xiaozhun Yi
If we want to get to net zero, trade is indispensable. Recently, ICC issued a strong warning. It called on all countries to adhere to the letter and the spirit of the existing WTO rules and work through the WTO to resolve economic frictions. So I believe that for the WTO, the first thing is to ensure that all WTO rules will be well-respected when members develop their own policies. In this regard, a fully and well functioning WTO dispute settlement mechanism is critical.
Elviry Fabry
Obviously, while we remain focused on the rivalry between the U.S. and China with EU in the middle, we’re not paying enough attention to all the developing countries and the poorest countries, and that’s an angle that needs to be tackled much more by the WTO. There was a?proposal?that was put forward by the Europe Jacques Delors who wants to create a global triangle forum at the WTO, but introducing much more nexus between development, environment, and trade within committees of the WTO. So that’s something that should be implemented.
I think I would also see some leeway at the WTO to focus more on rare earth as a sort of public good, and develop some positive narrative on the way so that some partnership can be developed to open the possibility to increase the added value of the resource-rich countries, but also to provide some access and to prevent some export restrictions because we see that there’s a huge potential for disruption of supply chains in the coming years with different kinds of export restrictions coming from different countries. We have a problem with the monopoly of refining in China, which is an impressive capacity that China has the block but trying to preserve the access to the raw material in an industry that is widespread in the world. Because I agree with you that not everybody needs to produce the green technologies, but we need to preserve that diversity of access because it is the basis of our open global market.
Adam Posen, President, Peterson Institute for International Economics (PIIE)
I guess two points. First, everybody in this room knows, and Europeans from their other experiences outside the WTO know, you get the most reform from a country in the negotiations over entry. So if China and Europe and others can agree on a suitably high-standard agreement that excludes the U.S.—because the U.S. won’t be able to agree—but doesn’t deliberately exclude the U.S., that is the best way of getting the U.S. to reform.
Q (from the audience)
My question is, when you have people on the streets protesting because the taxes that are being raised against them are so heavy, and some of these taxes include issues of climate change and climate change reform, what is a poor country like Kenya supposed to do? Can this issue also be a major topic at the level of global trade policy discourse?
Amina Mohamed, Founder and President, Trade Negotiations and Investment Forum; former Cabinet Secretary of Kenya
Thank you. Actually, a great question. I think it calls for coherence between the policies that are enacted at the national level and those that are formulated at the global level. Because of that incoherence, you see countries doing things that may not be in their own best interest. So the whole idea is making sure that the policies that are formulated and that we consume at the domestic level are good for us. I would just add that there should be much more policy coherence between all different levels of engagements and conversations.
You referred to the demos in Kenya. I think we’ve had them in many countries now. And the same issues arise. It’s about the creation of jobs, and that’s why it’s so important that as we discuss all these other issues, we focus on the sectors in our economies where we can actually have partnerships, we can have foreign direct investments to create the industries and the jobs that are required so that we don’t have this misalignment between the young people that have finished school and have been trained in a certain way and the requirements of the job market. There are so many issues. I think that it can’t just be a one-dimensional thing. Many facets will have to be addressed.
Note: The above text is the output of transcribing from an audio recording. It is posted as a reference for the discussion.
