EXECUTIVE SUMMARY
Recent external developments at the intersection of trade, supply chains, and sustainability are likely to significantly impact China's trade. These include new international trade policies that put a price on carbon and tackle deforestation, new international agreements requiring improved sustainability, and accelerating corporate trends focusing on reducing greenhouse gas emissions from supply chains. Additionally, there is a growing desire among domestic Chinese consumers for sustainably produced products.
These developments will particularly affect China's trade in several key commodities, including soybeans, beef, palm oil, and industrial goods such as electrical equipment, machinery, and textiles.
To address these changes and meet China's aspirations for trade security and carbon neutrality, the following policy recommendations are proposed:
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Integrate Sustainability Criteria: China could integrate sustainability or "green" criteria into all its global supply chain arrangements. A good starting point would be signing a green value chain partnership with ASEAN countries, which is scheduled for September/October 2023 at the China-ASEAN Environment Collaboration Forum.
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Secure Soy and Beef Supplies: China could negotiate and sign a trade agreement with Brazil to secure long-term supplies of legal and sustainable soy and beef. Such an agreement should be announced at a high-profile event, such as the G20 Ministerial Meeting on Agriculture in Brazil in mid-2024 or the 30th Conference of the Parties to the UNFCCC in Belem, Brazil in late-2025. This agreement would build upon the historic meeting between Chinese President Xi Jinping and Brazilian President Lula in mid-April 2023.
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Secure Palm Oil Supplies: China could negotiate and sign a trade agreement with Indonesia and Malaysia to secure long-term supplies of legal and sustainable palm oil. The trade agreement would naturally follow up on existing efforts and collaborations.
These recommendations aim to enhance both the security and sustainability of China's trade in critical commodities.
