Hong Kong traders dealing in environmentally-friendly products or environmental goods will be interested to learn that the EU, together with the United States, is currently negotiating a pact whereby the Chinese mainland and OECD members (including, among others, both the EU and US, as well as Japan, Australia and Canada) would eliminate tariffs on “green goods”. It is hoped that such a deal, if adopted, will create a major incentive for the global trade in technologies that inhibit climate change.

According to diplomats, “this deal would save Chinese exporters billions of euros and dollars and could form a large part of the overall package offered to Beijing to cut emissions”. The Chinese mainland is about to become the world’s largest producer of wind turbines and is already a major manufacturer of solar products. As a result, the Chinese economy would largely benefit from an agreement exempting environmental products from import duties. 

Hong Kong traders keen to invest in this novel market should be aware that the deal’s success largely hinges on the composition of the product list. Indeed, it is very difficult to find an objective, non-discriminatory definition of what constitutes an environmental product. To be sure, such a list would include products such as solar panels, wind turbines, containers for liquid and solid waste, and refrigeration equipment.

On the other hand, extending the scope of environmental goods to include environmentally friendly consumer products, for example, would have negative implications for developing countries, especially if production processes (rather than the product’s functioning) fall under scrutiny. The mainland and others like India will certainly be careful before accepting such an option. In the same vein, observers reckon that hybrid cars will not be included in the deal.

These political disagreements put aside, Hong Kong businesses should be aware that the impact on the environment of many products is difficult to assess. Two products illustrate this difficulty. Chlorine, a chemical, is used for water purification and therefore can be considered to fall within the realm of environmental goods. Yet, chlorine may also pose risks to the environment. Another example is polystyrene, which is used to insulate houses and thereby save energy; but it is also used to make disposable cups, which are environmentally questionable unless they are recycled. When the polystyrene is imported it would be impossible to identify for what purpose the polystyrene will be used.

The EU and US hope that formal negotiations with the OECD and mainland China could kick off very soon and are exhorting the Chinese mainland to agree on the global climate deal which will be discussed in Copenhagen this December. Hong Kong traders keen to delve deeper into the green goods arena will be particularly pleased with a determination to quickly close a deal that is seen by some trade analysts as “win-win”. While trade opportunities increase (with zero tariffs), benefits to the environment can also be substantial.