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escaping the clean tech lock down

BT's Dinah McLeod argues that using green stimulus packages as a cover for protectionist measures threatens to give the entire clean tech industry a bad name

In the build up to the G20 conference at the start of April, fear was spreading that, as the economic downturn hit home, countries would retreat into protectionism and inward dialogue, leaving world trade to sputter and economic growth to stall.

As the G8 conference in L'Aquila, Italy, approaches, it seems that protectionism has largely been kept at bay, but it is sure to be an agenda topping item for the world's most powerful leaders. Alarmingly, there have been suggestions that "green" regulations and investments could be used as a neat cloak for protectionist policies - talk that could seriously tarnish the reputation of green business practices and damage preparations for the Copenhagen Climate Conference in December.

As reported at the time of the G20 meeting, the final communiqué from the conference included a pledge to "build an inclusive, green, and sustainable recovery". An earlier leaked draft, however, made less reference to climate change, prompting some to suggest that countries are hesitant to dedicate parts of a global stimulus package to green projects for fear that they could provide an excuse for protectionism.

The first question to consider is, from an economic point of view, do we really need fear a protectionist retreat? The World Trade Organisation calculates that global trade will fall by nine per cent this year, the biggest decline since the Second World War, and as a recent Lex column in the Financial Times pointed out, much of this is related not to protectionism but is rather the direct result of credit lines drying up and the economy slowing.

Moreover, while the global financial meltdown is hitting everyone hard, it is the most open economies that seem to be losing the most. Singapore, where exports are crucial to the city-state's economy, fears its economy could contract by up to two per cent this year. France and Germany, both export-dependent, have also been badly affected: France's economy shrank by 1.2 per cent in the last quarter of 2008, and Germany's by 2.1 per cent.

It is perhaps inevitable that this slow down in world trade and its impact on export-led nations willl prompt governments to consider more protectionist policies. And there is also evidence that this is exactly what is happening. Following a recent injection of cash from the French government, Renault immediately moved production of the Clio 2 from Slovenia to France, while the recent US Treasury automotive bail-out plan included a "buy American" clause.

There are some signs that the clean tech sector could have caught the protectionist bug. There is no doubt a number of factors were inherent in Spanish operator Iberdrola Renewables decision to cut its investment in Britain by nearly 40 per cent, but some will worry that this move is influenced by protectionist sentiment. Meanwhile, the Chinese government has reportedly included a "buy Chinese" clause for its new wind farm developments.

Luckily, most political reactions to the slowdown so far have been relatively benign. There were few concrete anti-trade measures proposed in the "Buy American" clause, for example, and here in the UK, protests and strikes have not yet reached the levels seen in previous recessions. It seems that resistance to the concept of global trade - recent G20 protests notwithstanding - is less endemic than in previous decades.

This is not to say that more subtle protectionist policies, such as currency devaluation or selectively-applied trade rules, may not perhaps be deployed. And sadly, it is not possible to dismiss fears that sustainability considerations may be used as a form of protectionism through, for example, introduction of environmental regulations that foreign suppliers find it difficult to adhere to. Anything from responsible sourcing legislation to efforts to reduce food air miles might appear well intentioned from one perspective, but could also be seen as a means of reducing imports and bolstering domestic industries at the expense of superior foreign competitors.

The biodiesel industry in Europe, for example, has for some time complained that it is unable to compete with US imports as a result of what it regards as illegal US subsidies. Last month, the EU responded by introducing an " anti-dumping" and "anti-subsidy" tariff on US biodiesel for a four month period while it investigates.

In November, eight developing countries also wrote to the EU to warn that they were considering a complaint to the WTO about proposed legislation designed to improve the sustainability of biofuels, arguing that it would place restrictions on their produce. There is a serious risk of tit-for-tat accusations of "green protectionism" in these and other cases.

Many of these legislative measures may be well intentioned, but if the sustainability agenda is used - or is seen to be used - for the purposes of curbing competition, it will be harmful to the movement in the long run. A recent article by economists Richard Baldwin and Simon J Everett raises the possibility of developing country governments blocking any agreement in Copenhagen should they feel that developed nations have used environmental initiatives to favour domestic firms. It will be essential over the coming months to show that green initiatives are not being used as an alibi for protectionism.

It will be interesting, therefore, to watch how "green" financing is deployed to tackle the economic crisis. Recent analysis by HSBC shows that 16 per cent of President Obama's economic recovery plan is earmarked for sustainability-related spending, and 14 per cent of the EU's. In China, 34 per cent of economic recovery spending will go towards sustainability, and South Korea has devoted a whopping two thirds of its recovery package to green investment. In the UK, nine per cent of stimulus spending will be "green", and political support for sustainability across all parties is strong. The challenge will be to ensure that these new investment programmes are global in perspective, measurably improving the world's environmental outlook while also promoting domestic employment.

On the latter issue, many politicians have spoken out on one form of environmental "protectionism" that should remain: that of "green" workforce training and skills development. Ban Ki-Moon, UN Secretary-General, has called for "green jobs" as part of any global stimulus plan and, writing in the Financial Times in February, Alistair Darling, UK Chancellor of the Exchequer, suggested that the UK can lead the green recovery by employing millions in "green-collar jobs". The Center for American Progress recently calculated that a $100 billion in green investment could generate two million jobs in the US compared with just 500,000 jobs should the money be invested in the domestic oil industry. Through building a workforce with a comparative advantage in green technologies, countries will be better-able to compete in one of the biggest potential industries of the 21st century.

The key will be for companies and governments to invest in developing domestic talent, rather than barring foreign workers and awarding jobs to less skilled domestic workers. We in the telecommunications and information technology industry depend heavily on a globally-sourced talent pool for the best minds in our businesses, regardless of their nationality. And to stay competitive, we need to source parts and supplies from around the world, using quality and price, not location, as the buying determinant. If talent and resources are not allowed to flow across geographical borders, then competition and innovation - including in emerging green industries - could be severely stunted.

Governments and businesses must concentrate resources on getting the best out of their workers, so that they are world-beaters at business development and ideas creation. It is to the benefit of all global economies to engage in a " fair fight" of this nature.

So where does this leave sustainability and global trade? The protectionist sentiment is no doubt boiling under the surface in many countries. In his defence of the global business model published in The Economist, General Electric Chief Executive Jeff Immelt confessed that "if you put globalisation to a vote in America, Europe - pretty much anywhere - the general public would probably vote it down."

Lord Mandelson, writing in The Sunday Times on 7th June, similarly suggested that "popular support for globalisation, free trade and open markets was vulnerable". The success of Eurosceptic parties in the European Parliament elections could also be seen as symptomatic of this wider trend.

Faced with these challenges the G8 leaders must use the up-coming conference to present convincing arguments as to the true merits and benefits of globalisation and its vital role in our future prosperity and to further strengthen the consensus on trade. It will then be up to sustainability professionals and legislators to ensure that green business initiatives do not deliberately favour local suppliers in order to protect domestic interests.

Climate change can only successfully be addressed at a supranational level: a retrenchment towards domestic interests will only set us back even further.

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