November 08, 2011

On the Agenda: Pacific Rim Nations Meet at APEC to Discuss Green Energy Technologies

The annual Asia Pacific Economic Cooperation (APEC) summit is
underway in Honolulu. Trade representatives from the United States, China and
19 other countries will meet this week to discuss, among other things, a U.S. proposal
for a Trans-Pacific Partnership, a free trade plan touted as the largest plan
since the 1994 North America Free Trade Agreement. While most eyes will be
focused on the TPP, another important agenda item worth following is the U.S.
proposal for APEC countries to pledge to reduce tariffs on environmental goods –
including green technologies like solar panels and wind and hydroelectric turbines
– to 5 percent.

Supporters of the U.S. proposal have praised the Obama administration’s
efforts to push the plan as a positive step in helping promote U.S. green
economic growth. According to Reuters,
an environmental plan for the Asia-Pacific region that even President Barack
Obama's harshest Republican critic could love: cut taxes paid by corporations
and reduce market-distorting regulation

Despite slow economic recovery, the
global green energy market continues to grow, with foreign markets offering
significant opportunities for U.S. green energy companies. “A
2010 Commerce Department report said the global market for environmental
technologies was $782.4 billion in 2008 and the United States was by far the
largest single market, accounting for $299.5 billion of the total
reported Reuters. That same Commerce
Department report found that “foreign
markets, particularly those of developing countries, continue to grow at a
higher rate and offer the most opportunities for U.S. companies

Yet the U.S. proposal to reduce
tariffs on environmental goods has met expected push-back from China, which is
emerging quickly as a leader in green energy technologies with its domestic
investments in solar and the like. For example, in September The New York Times reported that China
has been using feed-in tariffs to promote domestic solar technology development,
which is essentially a long-term contract that guarantees companies “a
payback time in a matter of seven years and cash yields for nearly another two
.” The U.S. proposal could therefore be a setback for an important
domestic industry that the Chinese have been carefully cultivating. China’s Assistant
Minister of Commerce Yu Jianhua told Reuters
that, “The
problem is, if we set a goal of 5 percent, the U.S. doesn't need to do
anything. We are the ones that need to do all the work
.” According to Reuters, “Average
U.S. tariffs on the 153 green products proposed for cuts by the United States
are 1.4 percent, compared to China's average of nearly 7 percent
, Yu told

The question for some is whether or not APEC members need a
binding agreement to reduce tariffs on environmental goods to 5 percent in
order to achieve the effect the United States is looking for. Ambassador Karan
Bhatia, former deputy U.S. trade representative and now vice president of
global government affairs and policy at General Electric (one of the
world’s largest wind energy producers), told Reuters that even a non-binding pledge would be a “significant
.” Nevertheless, U.S trade representatives are likely to make the push
for a binding tariff reduction agreement in order to provide U.S. companies more
stable access to foreign markets.

There are many important benefits that come with an
agreement for freer trade of green energy technologies, not least of which is
that developing states would have access to cheaper forms of green energy
solutions at a time when many states – including
– are calling on developing countries to make concrete proposals to
reduce their greenhouse gas emissions, which contribute to global climate
change. Indeed, freer trade of green energy technology is the kind of science
and technology cooperation that developed and developing states need to embrace
if the international community is serious about preventing a climate tipping

In the near term, too, freer trade of green energy
technologies could provide the competitive environment that U.S. businesses traditionally
thrive in, promoting U.S. green economic growth, including job creation. Thus, promoting
development and trade of green energy technology could be a means to achieving important
domestic and international ends. We’ll see what happens at APEC. The APEC
Economic Leaders’ meeting will be held this Saturday and Sunday, where world
leaders will close the annual summit.

For more on green
energy technology trade disputes, read
this brief primer
published yesterday by
The Christian Science Monitor.