By Philip Blenkinsop

BRUSSELS (Reuters) – The European Union put reform of the World Trade Organization at the heart of its trade strategy for the next decade on Thursday, saying global rules on commerce must be greener, take more account of state subsidies and be enforced.

The 27-nation bloc’s executive body also said it would seek to work with President Joe Biden’s U.S. administration to address a crisis of confidence in the WTO, where settlement of trade conflicts and negotiations are deadlocked.

“A key driver of the crisis is that China’s accession to the WTO has not led to its transformation into a market economy,” the European Commission said in a communication. “The WTO has not been able to negotiate new rules to tackle this.”

The Commission, which oversees EU trade policy, is making combating climate change a central part of its new “open, sustainable and assertive” strategy. It wants to incorporate green action into trade deals and also wants a more environmentally conscious WTO.

This could include liberalisation of trade in certain green goods and services, or agreements to reduce fossil fuel subsidies.

The Commission said it was encouraged by Monday’s appointment of Nigerian Ngozi Okonjo-Iweala as the first woman and the first African to head the WTO.

The EU executive said it would propose a set of WTO reforms focusing on sustainable development, which also includes gender and labour rights, and launch negotiations on new rules to avoid distortions to trade from state-owned enterprises.

It would also seek to restore the WTO’s Appellate Body, the ultimate arbiter on global trade, which was paralysed by the previous U.S. administration.

It said it hoped for an early signal from the United States that it wished to enter negotiations in good faith, which could restore confidence and lead to an agreement.

The EU’s “Trade for All” review of 2015, when critics focused on the planned EU-US Transatlantic Trade and Investment Partnership (TTIP), sought to show that free trade benefits consumers, workers and small companies, and to address the concerns of those who feel they are losing out from globalisation.

The new policy is largely a response to U.S. President Donald Trump’s retreat from globalisation into an “America First” approach.

The EU itself feels bruised by trade wars, Brexit and what it sees as unfair competition from China, which it perceives as a “systemic rival”, and is taking more assertive measures to enforce global trade rules and ensure a level playing field.

(Reporting by Philip Blenkinsop and Jan Strupczewski; Editing by Kevin Liffey)