Climate change, Competitiveness and Trade Restrictive Measures:

A Chinese Perspective

Jiahua Pan and Laihui XieResearch Center for Sustainable Development (R

CSD), Chinese Academy of Social Sciences (CASS)

China Dialogue, Geneva, 28th NOV, 2008China Dialogue, Geneva, 28th NOV, 2008

Outline

Three questions discussed: Is the competitiveness concern a real problem? Why is the trade restrictive measure proposed

as tool for addressing this problem? Is it really effective and necessary?

1. Is the competitiveness concern a real problem?

The competitiveness concerns and carbon

leakage have been exaggerated.

1. There has been no evidence that carbon leakage is taking place.

2. It is difficult to single out climate policies as causes of carbon leakage.

3. Related sectors under regulation always have the incentive to exaggerate the competitiveness concerns for self-interests.

2. Why is the trade restrictive measures proposed?

2.1 Why not use domestic tools?

Cost increase is an inevitable part of any regulation for mitigation.

Tools for double dividend should be proposed. such as free allocation of carbon credits; giving transit assistance; reducing corporate tax or employment tax. It may require considerable institutional change

and courage, as there are many political risks and obstacles.

2.2 The role of Trade restrictive measure

As tool to shift domestic conflicts to the international level:

Protect Competitiveness; Reduce Carbon leakage; As a leverage, to promote participation of d

eveloping countries.

3. Will the Trade restrictive measures be effective?

3.1 The cost for import countries

The trade measures will not benefit for the national economy as a whole.

It protects the benefits of some sectors at the expense of other downstream sectors.

After all, the domestic cost for climate regulation will be overtaken domestically.

3.2 The cost for Taxed Export Countries

Worsening terms of trade, as cost increase much. “Best available technology” regulation will hurt

innovation incentive. Maybe more political calls rise against

international cooperation for mitigation. Developing countries governments may lose

flexibility and room for participation.

3.3 The asymmetry of climate treaty Justified

The common but differentiated principle underlined by the UNFCCC.

According to Bali Action Plan, it will last in the future.

3.4 Role in international cooperation

The uncertainty of BTAs legitimacy in the WTO context.

It will challenge the trade system, and most importantly poison the atmosphere of the UNFCCC negotiation for post 2012 agreement.

Developing countries are unlikely to concede in participation as a result of trade restriction.

Conclusion Positive incentives rather than the negative

incentives.

The developed countries should take a good lead. to balance the mitigation and prosperity. to give support of funds and technology for

developing countries.

Thank you!