Mistrust between nations hits green trade

With international trade one of the most prominent victims of the global slowdown, economic stimulus spent on green goods and services ought to be good for globalisation as well as the environment.

Many of the cutting-edge technologies in areas such as wind and solar power and waste treatment have been developed by rich world scientists and companies in Europe and the US, and many of the most fertile places for their adoption are in emerging markets such as China and India. European and American science combined with efficient and cheap Chinese manufacturing should be a powerful combination.

But experts say that, with the issue of trade in environmental goods and services mired in mistrust between rich countries and poor, much potential is being lost. And though traditional trade barriers such as import tariffs are not having a huge effect in blocking such international commerce, suspicion over the protection of intellectual property certainly is.

Bernice Lee, head of the energy, environment and development programme at Chatham House, the London think-tank, says: "Recently there has been a shift within the EU and the US from a more defensive stance on climate change to a more entrepreneurial one. But what is missing is the impetus to carry these technologies round the world to help meet the climate goals."

The Bali international climate change conference at the end of 2007 saw a rancorous stand-off between rich and poor nations as to what should count as an "environmental good". The European Union and US suggested cutting to zero the trade tariffs on a range of goods such as solar panels and solar-driven boilers and concluding a wider agreement on environmental goods and services.

But emerging markets such as Brazil countered that this was export promotion unconvincingly masquerading as greenery, pointing at notorious examples of the rich countries failing to practise what they preach when it comes to harnessing trade to help the environment. The EU, for example, slapped so-called "anti-dumping" import tariffs on energy-saving lightbulbs from China in 2001 at the behest of European manufacturers and kept them for seven years. The US continues to levy a steep tariff on imported ethanol, which benefits the relatively carbon-intensive domestic corn ethanol at the expense of more environmentally friendly imported Brazilian sugarcane ethanol.

In reality, according to a paper by Veena Jha published by the International Centre for Trade and Sustainable Development in Geneva, tariffs are not a particularly big barrier to the dissemination of environmental technologies. By far the biggest importer of environmental goods in the world, China has an average import tariff of just 8 per cent on such products.

More important in determining whether such countries imported environmental goods, Ms Jha found, were overall levels of commitment to protect the environment and whether or not they received technical assistance from rich countries - often regarded as a hidden form of export promotion.

And others point out that the intellectual property underlying the technologies has been a more important barrier to globalising the response to climate change. European companies expert in areas such as wind power, for example, have been highly reluctant to license their technologies to manufacturing plants in China in spite of much lower costs for fear that the intellectual property will be stolen.

"Many of these technologies will not become economically viable until China becomes part of the equation from the manufacturing and the purchasing side," Ms Lee says. But for the moment, much of that move has been slow and halting.

Copyright The Financial Times Limited 2009