Like import and export restrictions discussed in Chapter 2, energy subsidies also have environmental implications. The IEA defines ‘energy subsidy’ as ‘any government action that concerns primarily the energy sector that lowers the cost of energy production, raises the price received by energy producers or lowers the price paid by energy consumers’. Such subsidies are granted to promote energy security, employment and economic growth, innovation as well as social and/or environmental goals. Energy subsidies are subject to WTO disciplines. Removing fossil fuel subsidies will help reduce fossil CO2 emissions to the levels necessary to contain global warming and improve public health by cutting pre-mature global air pollution deaths by more than half. By contrast, providing subsidies for renewable energy can advance a climate-friendly policy of diversifying and decarbonizing national energy systems. Thus, the energy–environment nexus here centres on the issues of eliminating harmful fossil fuel subsidies, on the one hand, and exploring policy flexibilities for renewable energy subsidies, on the other.

This chapter critically examines the People’s Republic of China’s engagement with international trade law from the perspectives of rule-taking and rule-making, including China’s pre-reform planned economy-based trade regime, its voluntary internalization of global trade rules in the decade before its World Trade Organization (WTO) accession, trade reform to comply with WTO rules, the China–US trade war (in violation of international trade law) and the Chinese position on WTO reform. It argues that, in its reform and opening-up period (1978–present), China has largely been a rule-taker and a responsible – albeit possibly reluctant at times – status quo power in the United States-led, West-dominated international economic system. On the other hand, it has also taken an instrumentalist approach to international trade law with a foreign trade policy pragmatically oriented towards achieving a balance between trade liberalization and protectionism based on calculated uses of industrial policy tools and non-tariff barriers to support selected domestic industries.

China, the EU and the United States are the world’s largest traders, and many of the tensions in the trading system arise in the relations among them. Our premise is that reforming WTO is a necessary condition for the organization to be a more salient forum for the three large economies to address trade tensions, and that agreement among these three trade powers in turn is necessary to resolve the problems of the WTO. After a brief discussion of the global challenges that ought to be on the WTO agenda and of the systemic context, we discuss both how China understands WTO reform and how the other two leading powers see the China problem in the WTO. We consider how the three see transparency, plurilateral negotiations, economic development differences, fisheries and industrial subsidies, WTO working practices, and dispute settlement. We conclude by considering the implications of our analysis for fostering cooperation between the three major trade powers in the WTO.

After lengthy and tough negotiations, China became a member of the World Trade Organization (WTO) in 2001, which is widely considered as a landmark economic event in modern world history. The WTO accession marked a milestone of China’s economic opening and success in integration into the world economy. China’s trade opening, as well as global economic integration and multilateral trade rules, worked together to facilitate China gaining extraordinary economic and trade growth. In return, China has proved to become an indispensable engine for global economic growth, and its WTO membership has made the WTO a truly global and more relevant international organization. On the occasion of the 20th anniversary of China’s WTO membership, this chapter focuses on China’s performance in the multilateral trading system during the past 20 years, analyzing China’s overall implementation of WTO commitments and its contribution to the world economy and trade. More specifically, it takes the Initiative on Investment Facilitation as an example to analyze China’s leading role in spearheading recent “Joint Statement Initiatives” under the WTO framework. Furthermore, the chapter touches upon how China could assume its responsibility and commitment to the broader WTO reform.

There is an increasing need for international cooperation with respect to trade – to meet the challenges to human health and food security and to deal with climate change, to provide for the greater well-being of the world’s peoples. For conflict-affected countries, integration into the trading system is a path to attaining and then maintaining peace. To be successful in meeting these challenges, much will depend on the external environment – conditions that enable and others that obstruct collaboration. But there is also an environment internal to the trading system, making its institution, the WTO, more fit for purpose by putting into place the necessary reforms.

This book is designed as a guidebook to the multilateral trading system, its past, its present, and a look toward its potential future. It includes taking the reader on a virtual walk through the corridors of the WTO, the Italianate Centre William Rappard, after hearing of the history of trade and trade negotiations, to sit in on some of the working sessions of delegates. The book’s objective is to convey an understanding of the value of the WTO, as well as the values that it promotes, to have a first-hand feel for what the WTO is all about, to understand its importance and its shortcomings, and to join with it in celebrating its successes. The look to the future includes in these pages some ideas upon which to start a discussion of how to obtain the oft-pledged “WTO reform.”

Inadequate consideration was given by the founders of the WTO to the institutions that would be needed to govern the rules-based trading system that they were seeking to create. This chapter introduces a WTO Reform Quartet, proposals for WTO reform to make the rule-making, adjudication, and executive functions of the WTO more effective, including providing for the gathering of trade intelligence.

Chapter 8 summarises the main findings from the preceding chapters, and discusses the best way to deal with the China challenge. Contrary to those who prefer unilateral and plurilateral approaches, we argue that the potential of multilateralism has yet been fully explored. As we have documented, it was the desire to normalise its trade relations within the multilateral framework that prompted China’s initial decision to return to the multilateral trading system. While China did pursue unprecedented market-oriented reform, the potential of the multilateral rules in taming China’s state capitalism has not been fully unleashed since China’s accession. Of course, recognising the potential of multilateralism does not mean that multilateralism is perfect. Instead, we believe that multilateralism is the most promising compared with unilateral measures and bilateral and plurilateral negotiations outlined above. In addition to making fuller use of the existing rules under the WTO, this book has also put forward some approaches for the negotiation of new rules at the multilateral level where such rules are needed and suggested ways to engage China in a more constructive manner.

Chapter 1 introduces the main theme of the book, that is, challenging the conventional wisdom that the existing WTO rules are inadequate to address China’s state capitalism and demonstrating that China’s WTO-plus obligations, coupled with the general rules on subsidies, do provide ways to address the problem. It also provides summaries of the chapters to explain the structure of the arguments in the book.

Chapter 7 is dedicated to a more focused discussion of how to tackle China’s state capitalism in the WTO. The first option is utilising existing WTO rules, especially those China-specific provisions, to bring cases against China, which so far has not happened. This is partly due to the perception that WTO litigation does not work against China, an argument which we refute by referring to China’s good compliance record with WTO decisions. At the same time, we do agree that a more strategic approach should be taken in bringing such cases and proceed to suggest the types of cases that should be brought and how the evidentiary burden could be met. The second option is through trade negotiations. While bilateral negotiations such as the US–China Phase One deal do not really work, there is great potential in multilateral negotiations. Here, we caution against those advocating the exclusion of China in such rule-making efforts and argue that China should be engaged to make the negotiation fruitful. To make the discussions more productive, we also suggest certain guidelines to make sure that China will be more constructively engaged.