Smog in Chinese cities is providing unexpected momentum for a global deal on trade in environmental goods because China urgently needs access to cheaper, cleaner energy, Denmark’s trade minister said on Thursday following a visit to Beijing.
China last month joined a campaign by major trading powers, including the United States and the European Union, to remove barriers on trade in green goods, ranging from solar panels to wind turbines, a market worth US$1 trillion a year.
Any doubts that China – considered protectionist by some Western governments – is not serious about cutting tariffs on green goods are allayed by the choking pollution seen in Beijing this week, said Danish trade minister Mogens Jensen, the EU’s leading campaigner.
“I just came back from China where I met the trade minister and he said ‘Just look out the window, we need this agreement,” Jensen told reporters before he briefed EU trade ministers in Athens. “Chinese families want green solutions, they want clear blue sky and fresh air for their children.”
Jensen was in Beijing this week when the city issued its second-highest warning level, an ‘amber alert’, as pollution levels climbed far higher than the World Health Organisation’s recommended upper limit.
Fourteen trading powers including China, the United States and the European Union said in Davos in January that they would build on a plan launched by Asia-Pacific nations in 2011 to cut tariffs on green goods to 5 per cent or less by the end of next year.
With China’s support, Jensen believes other countries could be encouraged to join and allow negotiations to start around the middle of this year at the WTO in Geneva. Few developing countries have shown much enthusiasm.
So far, countries involved in the green goods initiative, including China, represent 86 per cent of trade in environmental goods, just short of the 90 per cent minimum the World Trade Organisation requires to launch negotiations on a trade deal.
“When a huge country like China gets involved, then it will be in the interest of others to do so as well,” Jensen said. “Those who lose the most from climate change are the world’s poorer countries. They need access to water, electricity and the solution is often through wind and solar technology.”
‘Coalition of the willing’
Jensen describes the approach as a “coalition of the willing”. The initiative is in line with new WTO chief Roberto Azevedo’s drive to break the deadlock in world trade negotiations by tackling the most promising areas for agreement.
Import duties on green goods can be as high as 35 per cent in some countries, making solar panels and equipment for water treatment plants much more costly, especially for developing nations that need them most.
In Asia, air pollution control technologies, such as soot removers and catalytic converters, must pay tariffs of up to 20 per cent, according to US data. Some countries also require green projects to hire only local experts and use only locally produced goods, pushing up the cost of building infrastructure.
Limits on environmental services could be removed too, said Jensen, whose has become the EU’s point man because of Denmark’s green credentials as the world leader in wind power, generating a fifth of its power from wind turbines.
In December, the WTO reached its first ever trade deal at talks in Bali, agreeing rules to lower trade barriers and speed up the passage of goods through customs, which could add hundreds of billions of dollars to the global economy.
But the other obstacle to a free-trade agreement on green goods is deciding which products no longer carry tariffs.
Asia-Pacific nations proposed a list of 54 products.
Environment groups say including products like incinerators, steam generators and centrifuges could do more harm than good because they can also be used to produce polluting fossil fuels.
“I have a very pragmatic approach to that,” Jensen said. “I think it is more important to get an agreement and not necessarily include everything. One option is to revise the list over the lifetime of the agreement.”