The CleanTech sector is being built on efforts to reduce the carbon intensity of modern society. As governments around the world support this sector, many are concentrating efforts on developing a CleanTech manufacturing base. While green job creation plans may excite voters, they risk creating conflicts that could lead to larger trade disputes.
A good example is Ontario’s Feed-in Tariff (FIT) program for renewable energy (implemented in 2009), which has garnered world attention and investment in the province. However, the program’s domestic content requirements, which mandate a minimum amount of local component manufacture and assembly, has caused consternation in certain world capitals. Japan filed a complaint with the World Trade Organization (WTO) in September, 2010, and the resulting process has been joined by the US and EU. (The accusation is that the Ontario policy discriminates against foreign products.)
The Finnish Foreign Ministry has identified over 400 international green trade or investment barriers, including technical restrictions, tariffs and fees, customs procedures, taxes and restriction on movement of persons. CleanTech companies encounter frequent problems with product certification, high duties, domestic content requirements and trademark infringement.
The United States is a good example of a country with a diverse base of CleanTech companies selling products globally. The US government has objected to the alleged dumping of Chinese-manufactured wind turbines and solar panels onto its markets, as it moves forward with another “Buy American” program. However, according to a recent article by Robert F. Kennedy, Jr., a considerable amount of the installed equipment in most renewable energy projects is manufactured in the US, whether subcomponents for solar panels or mounting equipment for turbines. A trade war with China or other low-cost manufacturing jurisdictions is not in the interest of the US, or the world.
Canada is a trading nation and its wealth has increased significantly with the reduction of global trade barriers — something our governments must keep in mind as we wade into the murky waters of incentivizing the growth of a developing industry.
Aaron Atcheson, Chair of National CleanTech Group, is a Partner with Miller Thomson LLP in London, Ontario. Contact Aaron at firstname.lastname@example.org