The outskirts of Beijing.

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Windmills and World Trade

Michael Froman is the U.S. trade representative.
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When the winds of change blow, a Chinese proverb says, some people build walls and others build windmills. Given the tremendous environmental challenges the world faces, it’s not enough just to build windmills. We need to develop a range of innovative environmental technologies, and we need to break down barriers to trading them worldwide.

Global trade in wind turbines, water filters and other environmental goods amounts to nearly $1 trillion annually, and it’s growing fast. But high tariffs across the world’s clean-tech market limit many countries’ access to these technologies. Removing unnecessary taxes would not only make green technology solutions more affordable, it would be a triple win: boosting trade, spurring innovation and protecting the environment.

The good news is that all this is within our reach. Forty-four countries under the World Trade Organization are working toward an Environmental Goods Agreement (EGA) that would eliminate tariffs on environmentally friendly goods such as solar and wind technologies, water filtration systems, and air-pollution control equipment. This effort is among the top issues the U.S. and China will discuss next week during our annual Strategic and Economic Dialogue in Beijing.

Further progress in the EGA negotiations hinges on constructive Chinese engagement. Such engagement would align with China’s global stature, its self-interest and its ability to achieve cost-effective environmental solutions. It’s time to put serious offers on the table and demonstrate environmental leadership.

As the world’s largest consumers and producers of clean technologies, the U.S. and China have a responsibility to make the most of this opportunity. Last year, the United States exported $130 billion worth of green goods, supporting an estimated 676,000 U.S. jobs. According to a new private-sector study, an EGA could boost global exports of environmental technologies by up to $119 billion annually. A separate study by the European Union projects a potential reduction of nearly 10 million tons of carbon dioxide by 2030 as a result of an ambitious EGA that eliminates tariffs on clean energy technologies.

The large-scale environmental challenges faced by countries around the world make clean-tech development and trade a major market opportunity for innovative businesses everywhere. In the U.S., aging wastewater and drinking water infrastructure across the country will need more than $635 billion in repairs, replacements and upgrades over the next 20 years.

In China, where 9 out of 10 major cities don’t meet the national standards for clean air, major investments will be needed to address outdoor air pollution that is estimated to have contributed to 1.2 million premature deaths in 2010. China’s water challenges are equally urgent; new data show that 80 percent of China’s underground water is unfit for human contact.

Meeting these environmental challenges will require the use of advanced environmental technology, and an ambitious and credible EGA would help pave the way for those innovations.

The world wins when high-standard trade agreements create jobs and protect our planet. But it remains to be seen if China is ready to embrace those high standards. As chair of the G-20 this year, China has a historic opportunity to show leadership in concluding a high-standard EGA.

Environmental protection should take precedence over protectionism. China must join other EGA members in putting serious offers on the table, identifying its priorities and responding to others’, and helping find solutions to the tough issues.

With China’s full engagement, we can lower the costs of building those windmills.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the editor responsible for this story:
David Shipley at davidshipley@bloomberg.net