In a recent study conducted by the German Economic Institute (IW), it has been suggested that the European Union (EU) should collaborate with African countries to revamp the World Trade Organization's (WTO) subsidy regulations. This strategic move aims to counteract market distortions caused by China's subsidies and its diplomatic influence.
The IW, a respected institution with financial backing from prominent German business associations, unveiled this proposal ahead of an important EU-China summit held in Beijing. The primary focus of this summit was addressing issues related to unfair competition, which has gained heightened attention since the European Commission initiated an anti-subsidy investigation into Chinese electric vehicle practices.
Reforming WTO regulations is slated to be a central topic of discussion at the upcoming 13th ministerial conference (MC13) in February. However, achieving meaningful reform necessitates a unanimous consensus among member nations.
The WTO's Africa negotiating group has introduced a proposal to reform the existing subsidy rules, with a particular emphasis on enhancing support for developing nations. This includes provisions for local content requirements and subsidies for environmental protection.
The IW's argument, presented in a paper reviewed by Reuters before publication, proposes that the EU should broaden this initiative to encompass stricter subsidy regulations for the world's leading trading nations. The determination of these major players would be based on their share of global trade or income levels, thereby encompassing countries such as China, despite its classification as a developing nation by the WTO.
Such a collaborative effort between the EU and African nations could exert pressure on China to endorse the proposed reforms. Furthermore, it would serve to mitigate the escalating global subsidy competition.
Authors of the IW paper, Juergen Matthes and Samina Sultan, highlighted the potential impact of this joint initiative. They stated, "In addition, the EU could counter China’s attempt to present itself as the supporter of developing countries’ interests in Geneva. If China blocked the reform, it would also block the vital interests of the African Group and other developing countries in gaining more policy space for development."
In conclusion, the call for EU-African cooperation in reforming WTO subsidy regulations represents a significant step toward addressing the market distortions caused by China's state capitalism and safeguarding the interests of developing nations in international trade.