Could free trade be good for the environment?

The past few weeks have produced good news and bad news for global “clean technology” markets, economic growth, and sustainable development.

On the negative side, a looming trade war threatens to undermine industry progress towards lower costs and expansion in the use of solar technologies. Last week, China threatened retaliation after the US and EU launched “anti-dumping” cases against Chinese solar energy products.

Without wishing to comment either way on the merits of these cases, the World Economic Forum’s Climate Change and Green Growth Initiatives group urges all sides to avoid escalating the situation. Negotiation is always better than litigation.

The good news is that leaders at the Asia-Pacific Economic Cooperation (APEC) meeting in Vladivostok, Russia, agreed to cap tariffs affecting trade for green goods and services at 5%.

When fully implemented, tariffs will be reduced from as much as 35% to the maximum 5%. They also produced a specific list of goods and services covered by the measure – a crucial step toward definitively lowering tariff rates.

These tariff reductions should have a significant positive impact in terms of increasing trade in green goods and services – and protecting the environment – in the Asia-Pacific region, which currently accounts for more than 50% of world trade.

However, while the APEC decision is welcome, the rising tide of green import tariffs, local content requirements, and other non-tariff barriers, demonstrates that more action is needed: a truly global initiative to lower the barriers to green free trade.

The information and communications technology (ICT) industry faced similar challenges in the 1990s and successfully developed a ground-breaking Information Technology Agreement that led to the elimination of tariffs.

The result was substantial growth in the ICT sector, with total trade rising from US$ 1.2 trillion to US$ 4 trillion between 1996 and 2008, an annual growth rate of 10%. This is a promising model to follow.

There should not be a “North vs South” agenda. Leading “clean-tech” companies come from large emerging economies as well as industrialized countries. We all lose, and the environment loses, when we face trade barriers that prevent free movement of sustainable technologies.

Working with the Green Growth Action Alliance, the World Economic Forum’s Climate Change and Green Growth Initiatives group is encouraging leading companies in the sector to work with governments and civil society organizations in developing a green free-trade strategy that delivers economic growth and preserves environmental prosperity.

Companies that have signed up to this approach so far include, Wal-Mart Stores, Inc., Applied Materials, Bank of America Merrill Lynch, Barclays, Canadian Solar, General Electric, Yingli Solar, Novozymes, SEMI PV Group, Solar Energy Industries Association, Suntech, Suzlon Group, Trina Solar, Vestas Wind Systems and  Welspun Energy.

We are also urging national leaders to engage with multilateral trade organizations and liberalize trade in clean technologies.

The threat to the environment affects us all, so we should all work together to find a solution.

Author: Thomas Kerr is director, Climate Change and Green Growth Initiatives at the World Economic Forum.

Image: A man fishes in front of a cargo ship in Japan. REUTERS/Yuriko Nakao