WTO Documents • Volume 8 • Number 10 • 30th May 2008

Review of China at WTO Highlights Energy, Natural Resource Use


A recent review of China’s economy conducted at the WTO focused, among other, on policy issues in the area of environment and natural resource management. The Trade Policy Review (TPR) recommended the country to implement policies that require polluters to take on their environmental costs.

China has enjoyed impressive economic growth since 2006, but faces challenges in the form of rising income inequality, a widening gap between savings and investment, as well as other economic imbalances, according to the review (for a full account of the review, see Bridges Weekly, 28 May 2008, http://www.ictsd.org/weekly/08-05-28/story4.htm).

One of the issues highlighted in the China TPR was its use of export taxes, reduced VAT rebates, licensing requirements, and other trade measures to restrain, if not prohibit, exports of a considerable and growing number of products that use large amounts of natural resources and energy. A good example is China’s recent increase in interim duty rates on 142 tariff lines with a view to reducing exports of highly energy- and pollution-intensive products as well as those that consume large amounts of raw materials.

While the large size of China’s industrial sector is partly responsible for the energy intensity of the country’s economy, the report also pointed out that price mechanisms for oil, coal, electricity and natural gas have artificially lowered prices, causing an overconsumption of energy. The second-largest energy user in the world, China is also the second-largest greenhouse gas emitter, thanks in large part to the fact that 70 percent of the country’s energy production comes from coal.

Therefore, the report outlined a number of potential areas for reform. It called for a gradual dismantling of price controls and other impediments to the efficient allocation of land, energy, water, and other natural resources. Such changes would promote stronger environmental protection, especially if supplemented by market-based instruments that require polluters to pay for the damages they cause, according to the report.

The documents related to the China Trade Policy Review http://www.wto.org/english/tratop_e/tpr_e/tp299_e.htm.

ICTSD reporting.