What is limiting Australian vendors transferring environmental goods and services into China?

T.F. Guerin *

Asurvey was conducted to assess non-trade barriers and their practical impact on the transfer of environmental technologies and goods

and services to China, focusing on Australian vendors. The highest priority barriers, which are most likely to limit Australian vendors of environmental goods and services in their technology transfers to China, were protection of intellectual property, limitations of the rule of law, fragmentation and bureaucracy of the Chinese government; and establishing appropriate level of ownership (of these vendors). Examples of Australian experiences that confirmed these barriers to providing the needed technology and innovation to manage China's increasing environmental impacts were also examined. These barriers are discussed in relation to a pending free trade agreement between Australia and China. The perceived impacts of such a free trade agreement on corporate environmental managers and environmental consultants are also discussed. The barriers identified do not appear to be unique to transfer of environmental goods and services, but generic to the transfer and adoption of Australian technology into China.

Keywords: technology transfer, China, environmental goods and services, business, purchasing

Introduction China is the world's most important economy in relation to negative impacts on the environment (Guerin 200la; China orders cleanup of 20 chemical plants 2006; McDonough 2006; Wyatt 2007). These environmental impacts are now recognised as major threats and of central importance for businesses to manage when doing business in China. They include water shortages and contamination, energy demands, soil erosion and pollution. For foreign companies doing business in

* Turlough Guerin was formerly with Shell Commercial Fuels (Australia), and

is now with Tclstra Corporation Ltd, L33/242 Exhibition Street, Melbourne.

Email: turlough.guerin@hotmail.com

This article presents the views of the author only and does not necessarily

reflect those of his employer or former employer.

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China, these impacts play out as impacts on reputation, the existence of faulty supply chains, transportation accidents, lost productivity from health impacts, collusion between government officials and political instability at a local level (Economy and Lieberthal 2007). With long-term growth rates in China of 8-10 per cent, it is unlikely that the negative environmental consequences of this growth will be off-set by adoption of local remedial technologies and innovation. China will therefore require an aggressive acquisition program for procuring the necessary environmental goods and services to manage air, water and soil pollution, from both a preventative and treatment perspective (Watson 2005). There is mounting evidence China is prepared to acquire this technology (Shanley 1995; McDonough 2006).

Direct technology transfer is the imparting of knowledge, skills and methodologies from one location to another. This process also includes disseminating information on the end-use and adoption of the transferred technologies (Guerin 1999). The introduction, through exports, of a technology or service into a developing country such as China, is not technology transfer per se, where the client or end user is then left to implement it. Licensing, in addition to direct technology transfer, can also be used to transfer technology. A licence is a contract between a holder of a technology and an end-user or distributor (licensee) of a particular technology. A licence allows the licensee to manufacture, market or use that technology (or intellectual property), while the owner or vendor maintains the ownership of the technology. With direct technology transfer, the transferor does not necessarily maintain ownership of the technology.

Regardless of the type of technology or service, there are fundamental barriers to technology transfer such as local capacity, priorities of the vendor, funding and trade arrangements and attributes of the end-users and adopters. From the extensive literature, it is evident that there are numerous barriers to western countries, including Australia, to transferring or licensing their technologies and services to China. In particular these include loss of intellectual property, ineffectual laws and intercultural barriers (Li 1996; Guerin 1998; Martinson and Tseng 1998; Tackaberry 1998; Tse 1998; Guerin

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200la; Jagersma and van Gorp 2003; AIG 2004; Zhu and Sarkis 2004; Liu 2005; Watson 2005; Austrade 2007).

The aim of this article is to examine the non-trade barriers to transferring environmental goods and services to China, and how these may be overcome, using data gathered from a survey of individuals including corporate environmental managers and environmental consultants. The article attempts to prioritise the barriers and to identify any that are unique to the transfer of environmental goods and services compared with non­environmental goods and services.

This article describes the methods used in the survey, the results and discussion, and a brief review of their implications for corporate environmental managers and environmental consultants, and for the establishment of a free trade agreement between Australia and China.

Method Survey design

A review of literature on barriers to transferring technologies to China (Li 1996; Guerin 1998; Martinson and Tseng 1998; Tackaberry 1998; Tse 1998; Guerin 2001a; Jagersma and van Gorp 2003; AIG 2004; Zhu and Sarkis 2004; Liu 2005; Watson 2005; Austrade 2007) revealed 39 separate barriers. These were clustered into six themes: for each of these the questionnaire included a series of questions with responses able to be ranked on a three-point Likert scale, as well as open ended questions.

Sampling

The types of organisations sampled and represented in the survey were predominantly Australian-based or operated companies (including individuals, small to medium sized enterprises and corporations), many of which were listed on the Australian Stock Exchange. The sample was constructed in two stages, targeted then open. First, a targeted sample of 200 Australian-based respondents (or respondents operating in Australia) considered likely to be involved in export of environmental goods and services comprised I 00 companies located on publicly available databases which contained company email addresses (including www .environmentdirectory .com.au), and I 00 individuals from companies and organisations either known by the author or otherwise identified from internet searches and professional networks. Second, to ensure the widest possible set of respondents was located, a link to the survey was posted on several active

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internet listservers which were selected based on the range of topics that they covered and their level of activity as described by Guerin (Guerin and Schaffner 2000; Guerin 200 I b). The listservers chosen covered soil and groundwater treatment, climate change, and general corporate environmental management and sustainability. These represented a population of approximately 2000 potential respondents.

Description of respondents

Because some respondents did not identify themselves, it was not always clear whether a respondent was from the targeted sample of 200 organisations and individuals, or from the listserver populations. In total there were 57 survey respondents. A third of these (33 per cent) were obviously in response to the author's posting on the listservers as they were from outside Australia. These included corporations, private consultants/individuals, small and medium sized enterprises, and universities. The majority (55 per cent) of respondents were either Australian-based or operating in Australia, including small and medium sized enterprises, corporations and universities. The remaining 12 per cent of respondents were Australian government organisations.

Of the 57 respondents, 47 per cent exported to China at the time of the survey and 32 per cent of these organisations exported from Australia. Of the goods and services being exported, 37 per cent were environmental goods and services, representing environmental education and training, consulting, water supply and treatment technologies, energy management and waste management (Table I). The most common role of respondents (28 per cent) was environmental consultant or manager of an environmental consultancy, followed by: health, safety and environment advisors or managers and corporate environmental managers ( 19 per cent); people in sales and marketing (10 per cent); government representatives (9 per cent); export coordinators or managers (5 per cent); researchers (5 per cent); technology developers (3 per cent); and miscellaneous people including students, retired individuals, individual business owners, professional architect, strategic planner, business executive, chief executive officer, company director, sustainability manager, safety director and management consultant (20 per cent).

Survey administration

The survey was conducted from August to October 2005. It was administered by sending an introductory email to the targeted recipients (n=200) as well as posting the same introduction email on environment-related listservers. The email contained a direct link to the

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Table I A description of environmental goods and services transferred to China by survey respondents

from Australia, are presented in Table 2. The remainder of the survey questions, which contained the items forming each theme. are provided below. For each item, respondents were required to state whether it was ·A Significant Barrier', 'A Potential Barrier' or 'Not a Barrier'.

Rule of law: How would you rate the following barriers related to limitations of the rule of law in China?

• Lack of transparency of legal systems in China

• Inconsistent interpretation of laws and regulations across provincial boundaries

• Absence of policing of laws and regulations in a consistent manner across China

Protection of intellectual property (IP):

questionnaire. The questionnaire, which was written for

completion in an online-only format, was prepared using

the online survey program, SurveyMonkey

(www.surveymonkey.com).

How would you rate the following which relate to problems in the protection of intellectual property?

• Ineffective IP laws in China

• Potential rapid illegal reproduction of goods imported or concepts/ideas introduced into China (i.e. pirating)

Survey questions

The survey questions asking for demographic

information, perceptions on the role of a free trade

agreement (in environmental goods and services transfer

to China) and the relative importance of Australian

environmental goods and services vendors, and examples

• Absence of exporting organisation's safeguards against IP loss when they introduce their goods or services to China

• Health safety or environmental consequences of pirated goods when exported from China (e.g. which do not meet original manufacturer's intended standards)

Table 2 Additional questions asked in the survey

Demographics

Free Trade Agreement (FTAl

Australian Examples (case studies)

Relative advantage of Australian EGS vendors

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Does your organisation currently export any goods and/or provide services to China'

Does your organisation currently export any goods and/or provide services to China from Australia''

Does your organisation export environmental goods (e.g. technologies) or provide environmental services (e.g. consulting or advice) from Australia to China? Have you or your organisation had any indirect involvement in the exporting of environmental goods (e.g. technologies) or providing environmental services (e.g. consulting or advice) fi·om Australia to China? If your organisation does export environmental goods (e.g. technologies) or provide environmental services (e.g. consulting or advice) to China how would you best describe these? How would you best describe your organisation? How would you best describe your role? What impact do you think an FTA between Australia and China will have on the roles of corporate environmental managers in Australia' Please describe why you gave the answer you did above What impact do you think an FTA between Australia and China will have on Australian-based or operated environmental consultancies? Please describe why you gave the answer you did above What was the environmental good or service involved? What was the value (estimate) in USIJ of the activity? When did the activity occur? Was the overall outcome of the activity a success (in terms of goods or services provided and payment received)? Regardless of whether the activity was successful, as defined above, or not what were the main harriers that were faced in exporting the goods or providing the services'' If the activity was successful, as detined above. how were the barriers mercome' Do you think Australian organisations have an advantage (in any way) over any other countries in providing environmental goods and services to China'' If you answered yes to the previous question. in what way are Australian organisations likely to have an advantage (over either Chinese or other international organisations)?

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Modernisation of state-owned enterprises (SOEs): How would you rate barriers related to the modernisation of state-owned enterprises in China?

• The process itself of modernisation of Chinese SOEs (which is now occurring at a fast rate in China)

• Loss of local jobs of employees employed in China

• The increasing trend of small scale of local capacity in China

• High debt levels among state-owned enterprises

Fragmentation and bureaucracy of the Chinese government: How would you rate the following barriers related to fragmentation and bureaucracy of the Chinese government?

• Inconsistent requirements at each level of Chinese government

• Lack of transparency in the application of taxes across China

• Difficulties in repatriating profits from China

• Different bureaucratic rulings within and beyond provinces

• Different customs requirements at different ports in China

• Inconsistent enforcement of import duties across China

• Unclear and conflicting standards across provinces in China

• Conflicting Chinese importing guidelines

• Difficulty in finding decision makers at the appropriate location and level in the Chinese government

Establishing the appropriate level of ownership: How would you rate the following barriers related to establishing the appropriate level of ownership (for an Australian-based or operated company planning to do business in China)?

• Foreign investment restrictions for companies doing business in China

• Difficulty in finding reliable business partners in China

• Level of foreign capital investment is not necessarily proportional to the profits shared by partners (under Chinese legal framework)

• A lack of control over Chinese interest in the business

Intercultural barriers: How would you rate each of the following intercultural aspects in terms of their potential

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to be a barrier? (i.e. if they were not recognised and acted upon/embraced they could be a significant barrier)?

• Basic understanding of the language

• Harnessing the interpersonal networks in China ('Social networks' rather than 'markets')

• Speaking and questioning so as to ensure understanding

• Group setting and group context in training

• Flexible in your dealings with the Chinese

• Developing an alliance with the Chinese customer (over a long period)

• The 'work unit' (as opposed to the individual worker)

in China

• Being non-judgmental

• Tolerance for ambiguity

• The capacity to communicate respect

• The capacity to personalise one's knowledge and perceptions

• The capacity to display empathy

• The capacity for taking turns (in conversation)

• Establishing trust

• Autocratic control of information

A further question that was open-ended was asked: 'What other significant trade or non-trade barriers do you think there are for Australian-based or operated companies exporting environmental goods and services to China?' Respondent were also asked to rate the importance of trade barriers when transferring environmental goods and services to China. This question was asked so that respondents were aware of the difference between trade and non-trade barriers. These questions, and the results of these questions, are not included in the survey results.

Results and discussion Analysis of variance (ANOV A) tests were conducted with respect to each of the six themes of barriers to the transfer of environmental goods and services to China. These analyses were conducted on the responses identifying each of the items within those themes in turn as 'a significant barrier' to the transfer of environmental goods and services. The probability values that were obtained from the outputs from the ANOV A tests between each of the barrier themes (Table 3) showed statistically significant differences between two sets of themes:

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Table 3 Results of ANOV A comparing non-trade barriers I

• Protection of intellectual property; rule of law; fragmentation and bureaucracy of the Chinese government; and establishing the appropriate level of ownership (identified by 30-50 per cent of respondents)

• Intercultural barriers and modernisation of state-owned enterprises (noted by fewer than 25 per cent of respondents.

The results are discussed in the following section.

Non-trade barriers

Protection of intellectual property

Three of the four items relating to intellectual property protection (health, safety, environment and security concerns from pirated goods; absence of safeguards against intellectual property loss when exporting to China; and the illegal reproduction of goods imported into China) were perceived to be 'a significant barrier' by 58 per cent of respondents (Figure I). Only 27 per cent of

all respondents considered that the fourth item, ineffective intellectual property laws in China, was a significant barrier.

As expected, respondents strongly expressed their concerns with intellectual property protection. One stated: 'The major issue is lack of confidence in the intellectual property protection system. We are technology providers. We have no confidence our technology rights will be protected'. While there are laws in place, enforcement of these represents a greater concern. Of critical concern are the health, safety and environmental problems posed by pirated goods. These results are not surprising. China is plagued by a history of lax enforcement of laws on intellectual property rights (Guerin 2001; Liu 2005). The risk of technology or intellectual property 'leakage' is greatest when the Chinese partner is in the same line of business as the Australian technology vendor (Guerin 1998; 200lb). Foreign vendors must be ready for this and take appropriate protective action.

Enforcement of intellectual property rights is largely the preserve of an administrative, rather than a judicial, system in China, and this is reflected in the high incidence of intellectual property infringements. Of the 43 000 infringement claims in China during 2003-2004, over 40 000 were processed by the State Administration for Industry and Commerce. This leaves foreign companies at risk of 'home town' determinations especially at local levels of government (McCubbin 2004). McCubbin (2004) states that China is

Figure I Frequency of problems noted as significant or potential barriers in the protection of intellectual property

serious, however, about reform of intellectual property protection, not

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Figure 2 Frequency oflimitations noted in the rule of law

necessarily because of its WTO commitments, but rather because China now produces more than 350 000 technologically trained engineers annually. According to the OECD, it is third in the world in gross expenditure on R&D at over US$1 00 billion. It also has 750 000 researchers, which is second only to the US. China is therefore rapidly learning the value of technology, and the need to protect it. Companies which previously moved their manufacturing operations to China to take advantage of a low cost base are now moving their R&D operations to China also to take advantage of this skill base (McCubbin 2004; O'Connell 2007). The Chinese government is promulgating new laws to combat the intellectual property protection problem (McCubbin 2004), but this is a 'deep-seated' cultural issue that will not be changed easily, even with training of the local Chinese partners or the wider Chinese markets (von Krogh and Haefliger 2007). The Chinese do not necessarily see protection of intellectual property as a problem so change is only likely to occur when the Chinese become victims of such intellectual property loss themselves, causing economic loss.

This constraint, in conjunction with that of the rule of law (discussed in the following sub-section), is of critical importance in the licensing of technologies in China and therefore to environmental goods and services transfer. In China there is limited evidence that intellectual property rights of individuals or organisations are enforced and Australian organisations are clearly concerned that Chinese end users of the technology, even under licence, may not co-operate with the terms of the licence. This is a fundamental issue survey respondents are concerned about.

Rule of law

This constraint was also identified as a significant or high priority barrier by 44 per cent of respondents (Figure 2). Specifically, it includes the items of absence of policing

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of laws, lack of transparency of the legal system, and inconsistent interpretation of laws. A consequence of the weak laws, including those designed to protect the environment, is unfair competition in the environmental goods and services markets. The major problem is protectionism in local Chinese markets, largely by the actions of various government departments. Municipal and provincial authorities protect local markets for local firms and may not enforce environmental protection measures (Economy and Lieberthal 2007). Obsolete products, technologies and services are then protected with a consequent loss to the environmental protection industry and to

the economy (Guerin 1998; Tackaberry 1998; Doing Environment Business With China 1998a; Guerin 200lb; AIG 2004; Liu 2005). While there are laws prohibiting anti-monopolistic and anti-competitive behaviour, the existing laws require consolidation to remove inconsistencies (McCubbin 2004). Anti-monopoly law is now approved in principle by the Chinese Cabinet. China, however, lacks an anti-competitive authority charged with the responsibility of making the law operate effectively and equipped with the power to impose sanctions. In effect, the lack of competition policy means that the introduction of new, eco-efficient technologies is limited. Environmental laws are also likely to become more stringent, but the inconsistent policing of existing laws will act to limit foreign companies or organisations attempting to transfer environmental goods and services to China. This constraint is likely to have a direct impact on environmental protection in China. Overall, the combination of local protection of obsolete and polluting production, the flouting of environmental laws, and a lack of effective competition policy could be a significant barrier for Australian and other foreign environmental goods and services suppliers.

The Chinese government's fragmentation and bureaucracy

This constraint was grouped with the 'significant barriers' group by 35 per cent of respondents (Figure 3). One respondent indicated, however, the ubiquity of this problem in stating: 'This matter is a barrier in Australia let alone China. Government owned enterprises world wide are hard to do business with for these and related reasons.'

In China, the State Environmental Protection Agency (SEPA) has overall responsibility for environmental management, though its influence is relatively weak (Economy and Lieberthal 2007). Typically, there will be more than one agency involved in decision making for any particular environmental program. Interacting with

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Figure 3 Frequency of responses concerning the Chinese Government's fragmentation and bureaucracy

the Chinese government can therefore be complex. Under the former command system, the State Planning Commission in Beijing issued directives to its branches throughout the country, usually based on State Council rulings. Regulation was 'top down'. In most industries, the implementation of regulation is now devolved to provinces and municipalities (Economy and Lieberthal 2007). In effect this means that local government authorities regulate environmental protection according to their own interpretation. A consequence of the current arrangements is that problems arise on major projects which require central government approval. It is common to find that, having negotiated the bureaucratic maze of local and provincial authorities successfully, the National Development and Reform Commission (which supersedes the State Planning Commission) in Beijing then declines to approve a project (McCubbin 2004). Although these delays can limit technology transfer, central government approval may lead to more stringent environmental requirements for a project (even if it delays a particular proposal). In addition, devolved power to local governments means inconsistent policing of the environmental laws.

Environmental goods and services vendors must be flexible and open minded to the bureaucratic and often unpredictable changes in the Chinese Government. It is important the Australian or other foreign vendors develop strong relationships with both the Chinese partners and the local Chinese government so trust can be built between all parties. Furthermore, vendors need to

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recognise that there are only very loose connections between government departments, and this inevitably leads to lack of communication between government departments.

Establishing an appropriate level of ownership

This barrier was grouped with the most significant group of barriers by 32 per cent of respondents, and it has the potential to impact foreign investment (Figure 4). The importance of this constraint was reflected in the commentary provided by one respondent who stated: 'You need reliable joint-venture partners that you can trust to look after your interests as well as their own, and these are very hard to find (in China)'.

Establishing the right level of ownership in a joint venture is important, but of equal importance is not assuming that forming a joint venture with Chinese partners is the best strategy. Many multinational corporations remain in 'unhappy marriages' as the majority of joint ventures in China continue to lose money. Since the 1990s, there has been a steady decline in foreign direct investment in China through joint ventures (Guerin 2001 b). One of the reasons is that many foreign managers have come to perceive their local partner as a disabler rather than as an enabler, while the Chinese are disappointed about unfulfilled expectations in these ventures.

A fundamental requirement for any environmental goods and services technology transfer to China is for vendors to establish a local presence. A first step is to establish a

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Figure 4 The problem of establishing appropriate level of ownership

partnership with a local organisation well established in China. Further, an effective sales and distribution system for environmental goods and services needs to be developed commensurate with the geographical region and the client base aiming to be served. This sales and distribution system must be closely aligned with the vendor's networks in the Chinese market place for environmental goods and services.

Figure 5 The need for intercultural sensitivity

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Intercultural sensitivity

A lack of intercultural sensitivity on the part of environmental goods and services providers was considered to be a significant barrier by 23 per cent of respondents (Figure 5). Intercultural sensitivity is therefore less often recognised as a significant constraint than other factors. One explanation is that Australians (67 per cent of the respondents) are able to manage the intercultural issues so they do not become barriers. This is also demonstrated in the 'Examples of Australian Experience' section of

this article. The findings may also mean that there was a lack of appreciation of this constraint by respondents.

Given that technology transfer is more than exporting a technology or service into China, but rather a sustained implementation, Watson (2005) describes the term 'absorptive capacity' of the technology recipients. Intercultural issues, and how these are managed, will directly impact on the absorptive capacity of the Chinese

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have a substantial impact on both the implementation and the compliance with the terms of any Australia-China free trade agreement (McCubbin 2004). This is also an opportunity for companies from Australia and other developed nations to purchase environmental goods and services.

The role of Australia in environmental goods and services transfer to China and the potential impact of a free trade agreement

Figure 6 The implications of modernisation of state owned enterprises This section focuses on Australia's role and experience in environmental goods and services transfer to China. Australian

recipients and should be considered in any proposed environmental goods and services transfer.

An implication for transferring technology to China is that training and inductions should focus on skill development of the Chinese end-users. A major reason is that the high availability of labour means less emphasis by the Chinese in applying technology efficiently. Also, given the importance of gaunxi 1 (Guerin 2001b) to the Chinese, it is likely that changes in technologies that negatively impact the end-users or decision makers or their immediate family or friends, are less likely to be adopted.

Modernisation of state-owned enterprises

Only 14 per cent of the survey respondents considered modernisation of the state-owned enterprises to be a significant non-trade barrier (Figure 6). Indeed, forty two percent indicated that this was not a barrier; the highest such response compared to the other five themes surveyed. Notwithstanding China's rapidly expanding private sector, the reality is that most of the transactions undertaken between Australia and China involve state­owned enterprises. To provide an indication of the significance of this activity, every year in China the reform of these organisations creates 14 million unemployed workers (McCubbin 2004).

It is conceivable that the modernisation process will open many opportunities for foreign environmental goods and services vendors to meet the needs of these organisations as they are transformed. The reform process of the state­owned enterprises is likely to reshape China's economy and its environmental performance (Watson 2005). More importantly, the behaviour of the state-owned enterprises will drive market behaviour so significantly that it will

organisations were perceived to have an advantage in providing environmental goods and services to China (56 per cent of respondents). Respondents suggested this is likely to be due to attributes of the intercultural sensitivity of Australians. This has implications for Australian organisations planning to enter China. Australian organisations can overcome these intercultural barriers through their awareness of them and by proactively managing the relationship with their Chinese counterparts.

The respondents perceive that a free trade agreement between Australia and China will have at least some impact on corporate environmental managers and environmental consultants in Australia, both positive and negative (Table 4). A free trade agreement would create a favourable context for environmental goods and services transfer, and ultimately enhancing profits of Australian companies. However, Australian corporate environmental managers are concerned about lower operating standards in China (than Australia) and the likelihood of the further diminution of Australian-based manufacturing.

The barriers presented in this article, in particular those related to the Chinese regulatory system, will act in effect as a non-tariff barrier to market access which a traditional free trade agreement between Australia and China is unlikely to resolve. Any free trade agreement between these two countries will need to incorporate measures that address the less tangible non-trade barriers.

It is likely that Australia (and other developed countries) have under-estimated China's technological capacity. Australian manufacturers will need sustained reliance on their innovative skills if they are to remain competitive, with or without a free trade agreement with China.

I. describes the basic force that holds the personalised networks of influence among Chinese.

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Table 4 Perceived impacts of a free trade agreement between Australia and China

Corporate environmental managers

Increase the responsibilities of Australian environmental managers to manage facilities in China, which will be quite difficult to do to a standard acceptable in Australia, primarily due to cultural differences

supply or treatment technologies or advice, internal environmental consulting or corporate environmental advice, and renewable energy technologies and advice.

Lower the standards that Australian companies work to, in order for the Australia to stay competitive (with China)

Easier to develop business in China and make more profit

Provide short term hope (for Australian businesses)

Create a positive context for trade

It will become necessary to export best practice to collaborative enterprises in China

The value of environmental goods and services transfer activity ranged from US$! 0 000 to over US$! million for each of the

More Australian manufacturing businesses will diminish as they have done over recent years under the reduction oftariffbarriers but at a far greater rate

While the free trade agreement provides a rules-based framework for engagement, cultural issues will still dominate

Australian examples. Of these, 15 were v a! ued at US$50 000 and over. Environmental

consultants It sets a scenario that there is a special relationship between Australia and China, which is the basis for developing the required personal and professional relationships

Seventy five percent of environmental goods and services transfers occurred

Provide Australian consultancies with more business opportunities'

I. This was stated by two consultants.

Regardless, progress towards effective intellectual property protection will still be perceived by Australian companies as an important consideration in determining whether a free trade agreement can deliver real market access in China.

Examples of Australian experience

Nineteen of the survey respondents (30 per cent) identified themselves as having been directly or indirectly involved in the transfer of an environmental good or services to China. The majority of the activity (65 per cent) was in provision of environmental consulting services provided to other companies, water

during 1996-98, though 20 per cent were either in

progress or completed in 2005. The examples of the Australian experience reported were most prevalent between 8-10 years ago; however, the total value of the environmental goods and services transferred across all the Australian examples represents a total value of over US$! 0 million, indicating they are likely to be representative of the range of environmental goods and services transfers to China. Of the successful examples of environmental goods and services transfer, 80 per cent were from Australia, representing over US$2.5 million, indicating the Australia to China transfer activity was well represented. The responses describing the Australian experience suggest that Australia has an important role in assisting China to meet its demand for environmental

Table 5 Barriers faced in transferring environmental good and services in the Australian examples'

goods and services.

The range of environmental goods and services transferred in the Australian examples is consistent with the needs of China as it expands and its economy continues to grow, particularly general environmental consulting services which include soil and groundwater assessment. The demand for 'end-of-pipe' treatment technologies for wastewaters from manufacturing processes, as well as contaminated site management, and for reducing greenhouse gas emissions, is expected to continue to increase as environmental legislation in China eventually becomes more

Getting the Chinese to understand what the technology could and could not do Lack of educated persons on the ground that could service the equipment2

Availability of skilled Australian personnel in China Seeking capital for the technology transfer Graft and corruption

The Chinese essentially wanted monetary input

Differences in expectation of work processes between the Chinese and foreigners Competition from local providers [in China] of notionally similar technology that was markedly inferior but much cheaper Internal and local politics in China

Understanding the legal processes in China Language problems

Lack of cultural understanding by both parties

'·Respondents were not asked to distinguish between trade and non-trade or non-tariff barriers. These are not ranked as they are individual responses.

"·This was stated by 2 consultants.

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effective. As the Australian examples showed, it is apparent that renewable energy technologies and advice are also likely to become increasingly important in the mix of environmental goods and services being exported to China from Australia. This is important as Australia has these technologies and experience with them, including solar, wind, geothermal, and biofuels. Other successful environmental goods and services transfers to China were in environmental education and training, advice to companies in the area of corporate social responsibility, energy management, sustainable agriculture, air pollution control and the development of an environment investment program.

The most common barriers observed from the Australian examples were the absence of skilled personnel where environmental goods and services were being used, local protectionism, legal, financial, and intercultural barriers (Table 5). Respondents overcame the barriers when common aims for the project were established with the Chinese, communication between the Australian and Chinese team members was effective, trust and goodwill was present, and when the Australians demonstrated intercultural sensitivity (Table 6). Despite the lower emphasis given to this factor in the survey, these findings suggest that intercultural sensitivity is important in ensuring technology transfer occurs effectively and should not be overlooked by vendors.

Conclusions This survey confirms that Australian companies (and companies from other developed countries) have concerns with: China's lack of safeguards to protect intellectual property; the lack of policing of laws across China; the fragmentation and bureaucracy of the Chinese government; and the importance of establishing the appropriate level of ownership of new businesses (for transferring environmental goods and services to China). Intellectual property loss may be overcome at least to some extent by only transferring those environmental goods and services that are difficult to replicate, such as

those involving the provision of high quality consulting and advisory services, and the product of strategic alliances (i.e. synergy generated between collaborating vendors or partners in a supply chain). Training and awareness in intellectual property rights will be critical for long-term changes in attitudes to intellectual property rights in China; and Australian and other western organisations will have a vested interest in seeing that a proportion of China-derived profits are put back into this activity locally in China. A reliable source of legal advice on the changing legal landscape in China will also be critical, as will knowing the key players in both the industry and within the relevant Chinese government authorities (regulating that industry). Establishing the appropriate level of ownership is important, and ensuring that skilled operators are available at the point of use of the technology. These barriers present high priority areas for Australian and other western vendors to consider when planning their market entry into China, and for the Australian Government to consider when establishing the terms of the pending free trade agreement.

Intercultural issues and modernisation of state-owned enterprises were rated as medium priority barriers. A reason for this ranking is that Australians sense the importance of intercultural sensitivity and manage these barriers as part of their technology transfer activity to China. However, it was evident that absence of effective training of both the Australian team involved in the technology transfer activity and of the local Chinese organisation co-ordinating distribution, sales or implementation of the environmental goods and services, is likely to be a potential constraint in the ongoing success of environmental goods and services transfers. This issue of intercultural sensitivity was not examined in depth in the survey and therefore is not dealt with further here. Modernisation of state-owned enterprises was not considered by respondents to be a significant barrier. Potentially this transformation in China is perceived as opening a new area for marketing of Australian and other foreign environmental goods and services.

Table 6 How barriers to transfer of environmental goods and services were The study showed no unique aspects in the constraints to environmental goods

overcome in the Australian examples

Establishing common aims for the project

By good communication in English and a visit to the customer in China

Good communication, testing assumptions and establishing trust with the Chinese

Spending time and putting the effort in at the grass roots level

Good will demonstrated by all parties

Demonstrations of the equipment to the Chinese

Lack of cultural 'arrogance' from the Australian team and awareness (within the Australian team) of the need to be sensitive to different nuances (in the Chinese culture)

and services technology transfer to China: the barriers identified appear to be generic to a wide range of types of goods and services transferred to China. Further

research would be required to ascertain if there are any unique attributes of the transfer of environmental goods and services compared with that of technologies in general.

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Apart from weak laws leading to unfair competition, the

impact of the constraints identified on actual

environmental protection in China is unclear. If there

were any effects of constraints on environmental

performance (including rate, extent and/or type of

environmental goods and services adopted), making this

assessment was beyond the scope of the study.

Modernisation of state-owned enterprises is another

barrier that may have a direct impact on environmental

protection in China, as the economic incentive to improve

the business performance of state-owned enterprises is

also likely to improve environmental performance of the

same organisations if low or non-polluting technologies

and services can be implemented as the state-owned

enterprise facilities are upgraded. Similarly, intercultural

issues and in particular the perception by the Chinese that

environmental problems are only of minor concern

(Harris 2006) are also likely to limit transfer and

adoption of environmental goods and services in China.

Further research is required to establish to what extent

the identified constraints are impacting the protection of

the environment.

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