On the occasion of its 30th anniversary, the World Trade Organization (WTO) has chosen "re-globalization" as its theme to explore how to make trade more inclusive.

Zhang Xiangchen, Deputy Director-General of the WTO, said in an interview with Yicai Global that "re-globalization" means that we hope more developing countries, especially those in Africa, can participate in and integrate into this new round of globalization and benefit from it.

At present, it should be recognized that the WTO itself also faces new issues. For example, disputes over "green subsidies" for new energy vehicles will increase, but the WTO still needs to establish a complete trade framework or agreement to address climate change.

In this regard, Zhang Xiangchen told the reporter that regarding subsidies, the WTO has its own rules. However, facing the current new situation, that is, what constitutes a green subsidy, there is no consensus among the parties.

Advertisement

"To solve this problem, in the end, everyone needs to sit down and discuss what constitutes a green subsidy and what constitutes a bad subsidy. But currently, there is no such condition. It may be necessary to wait until a certain time is ripe, and everyone has to discuss (the issue), rather than relying on bilateral trade frictions or unilateral actions. This may require a tortuous process," he explained.

How to "re-globalize"

Since the establishment of the WTO in 1995, global trade has expanded rapidly, and interconnections have become increasingly close. Data from the WTO shows that the international trade system has helped 1.5 billion people out of absolute poverty, bringing new opportunities for businesses, workers, and consumers. At the same time, there is a view that the benefits brought by trade are not always shared equally. This situation needs to change.

Zhang Xiangchen told Yicai Global reporters that in the last round of globalization, the welfare brought by globalization was uneven, with some countries benefiting a lot and others less.

"We see opportunities in this round of 're-globalization'," Zhang Xiangchen said. For example, in terms of supply chain adjustments, some are due to technological development, some are due to changes in labor costs, and some are due to geopolitical tensions.

He further explained that under these circumstances, many multinational companies have changed their mindset from the first round of globalization, which prioritized efficiency, but now they must balance profits and safety. These multinational companies are more concerned about security issues, so they may adjust the allocation of resources in the global supply chain, which gives opportunities to some developing countries."Taking China as an example, there are disputes between China and the European Union on the issue of electric vehicles, so some companies have to transfer their production lines from China to other developing countries," he illustrated, noting that Morocco has recently attracted a large amount of investment from China in the field of electric vehicles because there are no tariff barriers from Morocco to the EU for production and export.

"These are just some examples that other developing countries can also attract a lot of investment from China and other countries," he said, adding that this is the view of WTO Director-General Okonjo-Iweala, who is striving to take advantage of the redistribution of resources to catch up with these digital and green transformations, and to a certain extent, integrate into the global value chain, and strive to benefit from these new dynamics.

To help African countries move forward in the supply chain and global value chain, Zhang Xiangchen said that the first step is to integrate into the global value chain.

He used the example of Apple's iPhone, which was initially a small part of the value chain, and when experts recently re-examined the iPhone, they found that China can now earn $25 from manufacturing each iPhone.

"If you are integrated into the global value chain, you have the opportunity to keep improving," he explained, many components can be produced in China without the need to import from other countries.

How to view the "green subsidies" issue

In addition to "re-globalization," the WTO also has to face some growing new challenges.

As the green transformation deepens, countries have taken a variety of measures to address climate change, which are extensive, both for environmental protection purposes and will have an impact on industry and international trade. Some experts have pointed out that so far, green subsidies are more of a policy concept, mainly involving subsidies to address climate change, and there has been controversy in recent years.

At the same time, it can be seen that cases related to subsidies for new energy products in the WTO have been increasing recently. For example, in March of this year, to protect the rights and interests of the development of China's new energy vehicle industry, China filed the United States' Inflation Reduction Act (IRA) and related measures of new energy vehicle subsidies to the WTO dispute settlement mechanism. Since China failed to reach a solution with the United States through consultations, on July 15, China requested the establishment of an expert group at the WTO.

The Ministry of Commerce also stated in a declaration that China agrees with WTO members to implement industry subsidies in a manner consistent with WTO rules, support green energy transformation, and promote economic and social development. The Ministry of Commerce once again urged the United States to comply with WTO rules and stop abusing industry policies to harm international cooperation in addressing climate change.From a regulatory perspective, the WTO does not have distinct special provisions for subsidies based on whether they are related to green environmental protection. Currently, under the WTO Agreement on Subsidies and Countervailing Measures, subsidies are categorized into prohibited subsidies and actionable subsidies. Prohibited subsidies mainly include import substitution subsidies and export subsidies, which are fundamentally banned. Regarding actionable subsidies, affected countries can conduct countervailing duty investigations, express concerns in relevant WTO committees, and also file lawsuits through the WTO dispute settlement mechanism.

There have also been some internal movements within the WTO. For instance, at the WTO Committee on Trade and Environment held in June, the African Group once again called for a readjustment of WTO rules, such as those restricting the development of green industries by developing member countries through subsidies and investment rules.

The African Group stated that it is necessary to "improve" WTO rules to allow developing countries to have policy space to pursue green industrialization. The African, Caribbean, and Pacific Group of States, represented by Samoa, expressed support at the meeting, saying that considering that developed countries have already used subsidies, local content requirements, and national aid, and other "discriminatory" green technology policies to enhance their competitiveness, such reform is crucial.

Zhang Xiangchen told reporters that the reason Africa is more anxious is that the actions taken by some members have a significant impact on African trade, but the larger members are more concerned about the impact of policies on their important trade partners.

He stated that there is currently a need for a more collective voice, or more facts and research data to be placed on the table for everyone to consider in a balanced manner, "Now is just the process of this transition."