Trade and Sustainable Supply Chains

A number of recent external developments at the intersection of trade, supply chains, and sustainability will impact China. For instance, new international trade policies are putting a price on carbon and tackling deforestation. New international agreements are requiring signatories (including China) to improve the sustainability of its economic (including trade) activities. Accelerating corporate trends are signaling that companies and financial institutions will increasingly focus on reducing greenhouse gas emissions from their global supply chains. Finally, trends indicate that domestic Chinese consumers are increasingly desiring products (whether domestically sourced or imported) to be sustainably produced.

These developments will particularly impact Chinese trade in a handful of commodities, most notably soybeans, beef, palm oil, and industrial goods (e.g., electrical equipment, machinery, textile products). For China to successfully respond in a manner that meets China’s aspirations for trade security and carbon neutrality, we propose five policy recommendations:

China could integrate sustainability or “green” criteria into all its global supply chain arrangements.

• China could negotiate and sign a trade agreement with Brazil to secure long-term supplies of legal and sustainable soy and beef.
• China could negotiate and sign a trade agreement with Indonesia and Malaysia to secure long-term supplies of legal and sustainable palm oil.
• China could leverage the power of both market and policies to drive the low-carbon transformation of trade patterns of industries.
• China could develop incentives for green products in the regional trade agreements.

Task Force: Sustainable Production and Consumption Topic: Trade, International Cooperation, and South-South Partnerships Year: 2023 Phase: Phase VII (2022-2027) Concluded