Green Goods Tariffs Could Disappear Between OECD Nations, China

A deal being worked out to encourage China's agreement to steep emission cuts at the Copenhagen negotiations by eliminating tariffs on green goods [1] among all the OECD countries and China may end up worsening the market for American made goods, but not inevitably.

Though the remark was retracted, a Chinese solar panel manufacturer admitted to dumping solar panels below the cost of production [2] this year. Even the relatively robust German solar industry [3] has been unable to entirely stave off the onslaught of lower cost products, though the German government does not intend to let them collapse [4]. It's unclear that US manufacturers can expect that kind of support.

With an elimination of tariffs, will American solar panel manufacturers, and other manufacturers of green products be locked out of the market? Not necessarily.

As Rob Spiegel writes at EDN, manufacturing in China isn't a silver bullet for winning in the marketplace [5]. There have been problems with quality controls, shipping costs have increased in the energy crunch, intellectual property theft is rampant and wage costs are going up thanks to unionization (one bright spot which is likely to create more of a consumer market there.)

In addition, a commitment to emission reductions may reduce China's pollution cost advantage [6]. If they make an effort to clean up their act, and indications are that they've been pushing in that direction, Chinese cost savings based on ignoring pollution may gradually recede.

Labor advocates in the US have long been calling for a level playing field, where overseas industry had to compete under the same standards of labor and environmental protection as US industry. Though it sounds worrying to eliminate the tariffs, if China commits to serious pollution controls (and they need a lot of nudging on that score [7]), that might mitigate the impact. If their homegrown trend towards unionization picks up steam, they may start pulling up the floor of the global race to the bottom and grow a middle class that can help boost global demand.

As worrying as short term happenings may be, there are encouraging long term trends that may develop beyond the lip service stage. Increases in wages and living standards, and presumably air quality, are going to have to be part of China's planning if they're to stave off further civil unrest.

While labor advocates should continue to push for a level playing field for US workers in any time scale, there are positive trends in this news that should be encouraged.