China should lead in creating new sustainable international development model

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Doug Woodring, winner of the HSH Prince Albert II of Monaco Award for Innovative Philanthropy 2018.

Ed Note: While Harbour Times normally only looks at Hong Kong policy, our author here anticipates Hong Kong officials participating in mainland governance bodies will take note and use their platform to constructively influence mainland and global thinking on this important issue. 

Free trade, and the economic expansion that goes along with it on a global scale, is arguably under threat by the leader of the U.S. who wants to try to reverse the hollowing out of U.S. manufacturing which has taken place over the past 30 years, as factories and production moved to cheaper locations overseas.  This was mainly driven by the factors of capitalism that push for growth, earnings and profits, almost at all costs.  The business owners may have won along the way, but as the world can see with growing earning gaps, and disparity in social and environmental equity, it is not hard to witness that this development model is not sustainable.   The headlong quest for growth, consumption and profits has meant that some countries have seen many of their natural resources being depleted, while suffering the associated environmental devastation along the way. Traditional jobs are disrupted and often followed by social instability.  


President Trump’s move to impose tariffs on trade from China and other countries is but a desperate and irrational bid for the return of America’s heyday of roaring production lines which thrives under an economic model of a bygone era. The world has moved on, along with many American jobs which re-emerged in foreign lands with lower overheads and more efficient production lines.  The economics of such domestic manufacturing revival simply do not exist, unless the U.S. government is prepared to inject massive treasury draining subsidies  under the guise of social impact programs.  Though many investors might claim to want to improve the communities they serve via Environment and Social Governance (ESG) guidelines, not many have yet voted with their investment wallets at scale. They have not been willing to place large discount rates on their potential investment earnings for the good of the nation by bringing back industry for on-shoring. 


With new tariffs being imposed on a Chinese materials, consumers in the U.S. who have survived, or thrived, on low cost products from abroad would all of a sudden see the erosion of their tax cut gains in the form of higher product costs for previously imported items now made back in the U.S.  Opportunities for new jobs in innovative industries, including renewable energy where smart-money is being placed in larger volumes by the day, as a long-term, safe asset class, is where the focus on economic expansion should be.  In contrast, the solar industry, with some of the highest job growth in the country, has now been hijacked, again by U.S. leadership dreaming that cheap solar panels can be made competitively in the U.S. The burgeoning industry for domestic installation and servicing of renewable, efficient, energy options that China is providing in the form of solar panels, now has to pay more for these products, slowing the workforce that has been innovating and rapidly expanding in this sector. 


U.S. tariff actions now put China in an advantageous and opportune position to negotiate against such duties with much of the world by its side, and with the environment as a concurrent beneficiary.  If retaliatory threats are to be made anyway in the act of negotiation, substantial positive goodwill and awareness will be raised by imposing “environmental or carbon” tariffs on goods from the U.S. which do not meet proper environmental standards.  This may sound counter-intuitive to free trade, but if tit-for-tat threats are to be made, the environment, the Paris Agreements, all of the countries who supported the agreement to reduce carbon emissions, would gain from increased exposure and focus on this space, and the innovations and opportunities that go along with it.   All of the countries that signed onto the Paris Accord will likely be in full support of China’s leadership role and momentum on this topic, to the detriment of the country that seems to have chosen to go its own, greedy, self-promoting way as it tries to rectify the negative consequences of its ill-conceived economic model of its past baby boom decades.  


To take it one step further, President Xi can begin to build dialogue and international endorsement for global, borderless barrier-free clean capital markets which will greatly increase cross-border liquidity for environmental technologies, products and infrastructure development.   Such barrier free options will expand access to funds where needed, bring investment opportunities to the rapidly growing market for clean, long-term investments from asset managers and pension funds who are fueling the assets under management in the Environmental and Social Governance (ESG) products, create jobs, and allow for the proliferation of environmentally sustainable products and services.  The creation of a Clean Asset Bond (CAB) class, with tax-free corporate and government bonds which finance the deployment of pre-qualified clean assets, will be tax-exempt for investors in any participating nation, state or jurisdiction.  Each government that participates will also commit to identifying and removing other barriers to participation in the zero-waste economy, including tariffs and taxes investors pay on pre-qualified clean products that reduce pollution and environmental externalities.  The commitment to pioneer the use of CABs by China can be made with little risk of adverse economic results because CABs are merely an improvement on the well-implemented Private Activity Bonds (PABs) used successfully in the United States since 1914 to finance industrial development and infrastructure.  Clean capital markets, without barriers, would accelerate clean infrastructure deployment and prosperity locally, but would also spread economic freedom, participation and essential market structures globally.


If one assumes that the art of negotiations will lead to compromise, with so much at stake for all countries involved, then at least during the negotiating process, the world would gain from some needed exposure and momentum for the environment in terms of focus, dialogue and new collaborations that may result in proposals that are a positive by-product of tariff-related threats.  China can lead in the innovation of barrier-free clean capital markets as part of this U.S. driven rhetoric, giving an incredible opportunity for the rest of the world to thrive in a new path of thoughtful, engaged economic stewardship for our environment and the communities that survive on it. 


The author is the winner of the 2018 Prince’s Prize for Innovative Philanthropy by awarded by Prince Albert II of Monaco. He is a Global expert on plastic pollution issues and solutions.  He is the Founder of Ocean Recovery Alliance, with an MBA from The Wharton School, and an MA in Int’l Relations from Johns Hopkins University.

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