Going Green Gets Dirty

Jayati Ghosh

Periods of economic recession are known to foster protectionist tendencies. This has been especially marked after the global crisis, when trade openness has become a useful battering ram in the developed world, skillfully used by policy makers and employers to pass the buck on to the threat posed by foreign producers. The significantly increased threat of unemployment is then seen – even by Northern workers – not as the result of domestic macroeconomic policies that prevent employment from rising as it feasibly could, but as something determined by trade patterns, especially exports from the developing world.

Even so, the recent trade wars over the use of “green” technologies are surprising in how extreme and openly self-contradictory the positions have been. And what is most surprising – and even alarming and distressing – is how such thinking has permeated to the working classes in the North, who now openly identify their own interests with those of their employers rather than with workers in developing countries.

The most egregious example of this is probably the petition that has just been filed by the United Steelworkers Union of the US under Section 301 of the US trade laws, against the WTO-inconsistent policies that it argues that China has employed to move ahead of the United States as a leading producer and exporter of green technologies. A more striking example of false consciousness among the working class (the result of the systematic misrepresentation of dominant social relations in the consciousness of subordinate classes under capitalism) would be hard to find.

Consider first of all the context. There is little doubt in the minds of most of those who have thought about it, that green technologies are necessarily the way of the future. Not only that, they have been sought to be actively encouraged and even imposed upon developing countries by the developed world through treaties such as the Kyoto Protocol and more recent negotiations around global warming. These all insist on the need for developing countries to cut carbon emissions not just in future but even at present, even though their per capita emissions and overall resource consumption still remain a tiny fraction of the emissions and consumption in the developed world.

Given such insistence, it might be expected that everyone, including people in the developed countries, would welcome proactive policies in developing countries that encourage patterns of production that are “greener” and less carbon-intensive. Since China has so often been identified as the single most important player in the developing world in this regard, and its growing carbon emissions and use of resources have been seen as the big problem, it might also be thought that if the Chinese government employed strategies designed to reduce such emission per unit of production, it would be particularly welcome.

Unfortunately, that is very far from the case. It turns out that such policies are not just under-appreciated, they are even being attacked. And the attack is coming not just from industry lobbies and governments influenced by them, which is relatively predictable, but from trade unions that really should know better.

The steelworkers’ petition makes several points, only a few of which are valid, such as the point that China is increasingly seeking to retain the critical raw materials derived from rare earth elements and other minerals, for which it happens to dominate 90 per cent of global supply. This is clearly undesirable and should be changed for the benefit of all.

But other arguments made in the petition seem to reflect more unhappiness that similar strategies are not being followed by their own government, and therefore end up attacking the Chinese government for being more sensible than the US government is currently. It complains that “In its economic stimulus package, for example, China gave more than $216 billion to subsidize green technologies – more than twice as much as the US spent in the sector and nearly half of the total “green” stimulus spent worldwide.” Surely that should lead to an argument for more such spending in other countries, for what is clearly a critical and necessary form of public expenditure, rather than a completely invalid demand for its reduction in China!

Similarly, the petition argues that China provides export credits (incidentally the US is the leading global provider of subsidies in the form of export credits) that are not permitted under the OECD rules. But China is not a member of the OECD and has not acceded to these rules, so why should that be a valid complaint?

The charge that China provides low interest rates to green producers is also surprising, coming as it dies from a trade union. Surely that is a good thing, which the same union should be demanding from the US government, to enable more green production in the US? In any case, the critical issue is not even the rate so much as the provision of credit. Since the crisis, US interest rates have also been very low, and close to zero – the problem is that credit in the US has not been forthcoming. That reflects a failure of the US banking system, which the union should demand that its own government should address.

The steelworkers’ petition cites the example of Evergreen Solar, a US company that had difficulty raising funds to open its own plant in China, and so secured financing from a provincial government fund to enter into a joint venture agreement in 2009, which requires the company to license solar wafer technology to the new venture. As a result, Evergreen is now shifting solar panel production from its Massachusetts facility to China. But what the petition does not mention is that the company struggled for three years to raise money in the US and could not do so, but had no trouble doing so in China. According to the company’s Chief Financial Officer, quoted in the New York Times (“China skirts the rules”, Keith Bradshaw, September 8 2010), “you can’t get a penny in the United States, it doesn’t matter who you call — banks, government. It’s awful,” he said. “Therein lies the hidden advantage of being in China.”

Obviously, therefore, what the union and its friends should be fighting for is greater access to credit for their green companies, not reduced credit access for activities in China which is not just unfair but globally unproductive and undesirable.

But the very worst part of the petition by the steelworkers’ union relates to the complaints about local content rules and technology transfer. The petition actually objects to the exclusion of foreign firms in China from getting carbon credits and protests against the technology transfer requirements placed on foreign firms operating in China. But the essential stated purpose of the Clean Development Mechanism of the Kyoto Protocol was the transfer of technology to the South, and indeed this is the only way that developing countries can hope to have a cleaner and greener pattern of development.

The monopoly of technology that is deeply entrenched in the current system of intellectual property rights is not just against development and a more equitable world – it is also fundamentally against the interest of workers in the North. So it is quite bizarre to see a workers’ union actually try and enforce it. And of course, the complete absence of a basic sense of fair play and economic justice in this argument is absolutely breathtaking.

Clearly, the onslaught of rightwing media has combined with more insecure economic circumstances to create great confusion about the real best interests of workers in the North. All the more reason, then, for progressive economists in the North to join in calling this ridiculous bluff.

4 Responses to “Going Green Gets Dirty”

  1. Bartosz Bartkowski says:

    Unfortunately it seems to be a powerful characteristic of human beings to seek the fault abroad (or, more generally, in the doings of other people), instead of looking at the misdeeds in the own country (in one’s own doings).

  2. Kevin P. Gallagher says:

    It is ironic that its the USA that is making the move to take China to the WTO over its green industrial policy. First, as Dr. Ghosh points out, it is also the USA and its congress that says the USA (which in large part has caused climate change) will not take significant action on global climate change unless China does. Now, China has deployed a serious green industrial policy and the USA takes issue.

    Second, it was the USA that worked so hard at the WTO to see to it that nations could subsidize efforts related to research and development, regional inequality, and environmental protection. Mexican economist Francisco Aguayo and I wrote a paper on this titled “Preserving Policy Space for Sustainable Development: The Subsidies Agreement at the WTO, (see: http://www.ase.tufts.edu/gdae/policy_research/TKN.htm). Here is a short summary of our piece:

    “This report argues that nations should reserve the right to use subsidies to correct distortions in the world trading system that act against the goal of sustainable development. Such subsidies are justified in economic theory, and can be essential tools for creating economic growth that is socially and environmentally sustainable. The Article 8 “green light” subsidies of the SCM provided interesting cover for such subsidies. However, their potential could not be fully realized before the subsidies expired in 2000. Nonetheless, numerous countries recognized their potential, and have since called for their reinstatement and expansion. Rather than letting green light subsidies expire, they should be expanded so that a larger range of countries can take advantage of them. Indeed, the Doha round leaves ample room to not only reinstate Article 8 subsidies, but to expand on them.

    In the Doha declaration, space has been created for the negotiation of subsidies that support “legitimate development goals.” The documents state clearly that such subsidies could include support for regional growth, technology research and development, product diversification, and the development and implementation of environmentally sound methods of production. These categories evoke the green light subsidies, but provide room for them to be expanded in ways that will be even more beneficial for sustainable development.

    However, given the vast controversy concerning such issues as agricultural support in the North, services liberalization, and manufacturing tariffs, the SCM has received relatively little attention during the current round of negotiations. This is a mistake. Adjusting the SCM is a relatively easy task, and some of the major players who were against reinstatement have now come around. Both Northern and Southern nations use these subsidies, and more are needed as global economic integration accentuates the many distortions that plague today’s economies and impede progress toward sustainable development.”

    So, the USA carved out the policy space at the WTO to do what China is doing but is letting that space go by the wayside at the WTO. This is a pity. According to a new report by the Political Economy Research Institute (PERI) at the University of Massachusetts titled Green Recovery: A Programme to Create Good Jobs and Start Building a Low-Carbon Economy (link: http://www.peri.umass.edu/green_recovery/), close to 17 jobs could be created for every $1m in green industry outlays (as opposed to 5.5 jobs per $1m in spending for the oil and coal industries). Thus, $100bn in green recovery outlays would not only stimulate the economy, revive industry, help slash pollution, and decrease our dependence on foreign oil, but would also create 1.7 million jobs.

    Don’t beat China, join them.

  3. […] development and transfer of clean technologies is also a laudable goal. Until going green gets dirty. Recent trade rows over subsidies to clean technologies and supply restrictions to strategic rare […]

  4. Ashish says:

    Dear Kevin

    Very Nice analysis. however both the links provided by you are not working. Could you kindly provide the correct links.

    Thanks in advance…….