Carbon Tariffs Or Impact On China'S Textile And Other Industrial Exports

China is not only the largest developing country, but also an important exporter of manufacturing industry. According to the current economic development pattern, if the European and American countries implement the carbon tariff policy before and after 2020, they may have a serious impact on the international competitiveness of China's manufacturing industry.

The carbon tariff proposal originated from the European Union. Its intention is to try to impose special carbon dioxide tariffs on imports from countries that failed to implement the Kyoto Protocol to eliminate unfair competition that could be suffered by the EU's carbon intensive products.

The European Union's initial proposal on carbon tariffs was largely directed against countries such as the US and Australia that refused to join the Kyoto Protocol (signed in December 2007 by Australia), but also the major developing countries such as China and India, which do not have binding targets for greenhouse gas emissions.

In June 26, 2009, the 2009 clean energy security act passed by the house of representatives of the United States Congress proposed to impose carbon tariffs from 2020.

The goal of the US carbon tariff bill is very clear, so it is necessary to take trade sanctions against punitive tariffs in major developing countries such as China and India.

In November 24, 2009, the French government put forward that it would impose carbon tariffs on environmental legislation less than the EU's strict imports from developing countries from January 1, 2010, and tried to impose political pressure on developing countries before the arrival of the United Nations Climate Change Conference in Copenhagen.

Although the US bill has not yet been passed, France's proposal has been unanimously opposed by other EU Member States. However, the strong and hard stance of the developed countries in Europe and the United States in order to force the major developing countries such as China and India to undertake binding emission reduction targets and the conclusion that the General Assembly failed to reach a legally binding agreement at the Copenhagen Conference on climate change indicates that the international dispute over the future climate change will become more intense.

The proposal of carbon tariffs in Europe and America means that climate negotiations may lead to more serious international trade disputes in the future.

China is not only the largest developing country, but also an important exporter of manufacturing industry. According to the current economic development pattern, if the European and American countries implement the carbon tariff policy before and after 2020, they may have a serious impact on the international competitiveness of China's manufacturing industry.

To this end, we need to conduct a careful assessment of its possible impact in order to find effective coping strategies.

The pattern of high energy consumption and high emission is facing challenges.

A comprehensive analysis of the proposed or imminent carbon tariff collection plan in Europe and the United States suggests that if developed countries implement carbon tariffs before and after 2020, the level of carbon tariffs will probably be around 30 - 60 US dollars per ton of carbon.

China will be the main target of carbon tariff policy in Europe and America.

It is not optimistic that, from the performance of the Copenhagen conference in Europe and America, the proposal of carbon tariffs may also trigger the trend of follow suit in other countries, like the RMB exchange rate and anti-dumping litigation.

The difficult problem facing China is that China's industrial development has significant characteristics of high energy consumption, high emission, high investment and high export.

Since reform and opening up, China's industrial output value has increased by 11.2% annually, industrial capital stock has increased by 9.2% annually, industrial energy consumption and carbon dioxide emissions have increased by 6% and 6.3% respectively, while industrial GDP accounts for about 40.1% of the total GDP in the country. However, industrial energy consumption accounts for 67.9% of the total national energy consumption, and industrial carbon dioxide accounts for 83.1% of the total carbon dioxide emissions in the whole country.

Research shows that about 23% of China's carbon emissions in 2004 were caused by net exports.

Since carbon tariffs may be aimed at a large number of manufacturing industries with relatively high exports, rather than targeting individual specific products, such as anti-dumping duties, the effect may be more serious than bit protection or anti-dumping.

The estimated results from different sectors showed that the export of communications and electronic equipment, electrical machinery and equipment, textiles, clothing, leather, feather and down products processing and chemical industries accounted for a relatively high proportion, and the implied carbon emissions per 10000 yuan output were in the level of 2.5 to 5.5 tons of carbon.

At a carbon tariff rate of 30 to 60 dollars per ton of carbon, the equivalent of 6% to 14% or 12% to 28% will be added to the value of 10000 yuan per export.

It is worth noting that the carbon tariff rate of US $60 per ton has been close to or even exceeding the anti-dumping duty imposed on some export products.

For example, the EU's anti-dumping duty rate on leather shoes in China in August 2006 was 16.5%, and the anti-dumping duty rate on China's aluminum alloy wheels in June 2009 was the highest. The tariff rate of first years to third years for the first year to third year special tariff scheme proposed by the United States in June 2009 was 55%, 45% and 35% respectively for the 3 year special tariff scheme proposed by the United States for tyre production in China.

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Carbon tariffs may reduce China's industrial exports by 3% - 7%.

The dynamic CGE model was used to simulate the production, export and employment status of 15 industrial production sectors under the 30 and 60 US dollar tariff scenarios. The results showed that under the 30 carbon tariff collection standard, the export of industrial goods decreased by 3.53% in the first year, the total output decreased by 0.62%, the export decreased by 3.01% in second years, and the total output decreased by 0.49%.

Under the standard of US $30, China's manufacturing industry needs more than 5 years to digest the negative impact of carbon tax on output. It will take more than 7 years to eliminate the impact on exports of manufacturing products.

In the 15 industrial production sectors, the five industries with the highest proportion of carbon tariffs affecting the production decline were: office equipment, textile, clothing, leather, down products, electrical machinery and communications and electronic equipment manufacturing industry; among the most severely affected instruments and office machinery manufacturing industries, the output of the office machinery manufacturing industry dropped by 3.50% under the carbon tariff rate of 30 US dollars, while the output decreased by 6.96% at the 60 carbon tariff rate.

The seven industries with the highest proportion of export decline (over the average decline in industrial sectors) were: petroleum processing industry, non-metallic mineral products, metal smelting processing, chemical industry, metal products, electrical machinery and equipment, and instrumentation and office machinery manufacturing industry.

In particular, it is noteworthy that the export of electrical machinery and apparatus and office machinery manufacturing industry, which is generally considered not to be a carbon intensive industry, falls by 3.97% and 3.85% under the circumstances of 30 US carbon tax rate. The export falls by 7.79% and 7.66% in the context of 60 carbon tariff.

Estimates of the impact of employment on the industrial sector show that, at a carbon tax rate of US $30, the number of jobs decreased by 1.22% in the first year and 1.18% in fifth years; at the 60 carbon tariff rate, the number of jobs decreased by 2.39% in the first year and 2.33% in the fifth year.

The five industries with the highest proportion of job losses were: office machinery, communication and electronic equipment, electrical and mechanical equipment, textile industry, clothing and leather down products. At the 60 carbon tariff rate, the first year jobs decreased by 12.14%, 6.14%, 5.41%, 5.48% and 5.10% respectively.

Carbon tariffs will cause greater impact on the industries of electrical machinery and instrumentation, which are not carbon intensive industries. The main reason is that carbon tariffs aim at all carbon emissions of the entire production sector, not just the production process of these products directly.

For example, the carbon dioxide needed for the production of intermediate inputs for manufacturing automobiles is also the target of carbon tariffs when cars are exported.

In this way, due to the high emission of intermediate products, although the final product does not appear to be a carbon intensive product, its total carbon emissions in the whole production process will be relatively high, so the impact of carbon tariffs will be correspondingly greater.

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Speed up structural adjustment and enhance resistance to external shocks

A carbon tariff dispute triggered by global climate change may cause subtle changes in international climate negotiations and international trade in manufacturing products.

The Copenhagen climate change conference failed to reach a legally binding agreement, indicating that the future international debate on climate change will be more intense and more likely to lead to trade disputes.

In view of the policy trend of the United States and other countries attempting to use carbon tariffs to tie up climate change negotiations with international trade, in order to avoid future potential potential shocks, China needs to accelerate economic restructuring and enhance the ability of the economic system to withstand external shocks.

From a long-term perspective, it is quite necessary to adjust foreign trade policies, change the export structure of industrial products, promote the pformation of industrial structure, improve the efficiency of energy utilization, develop new energy sources, improve the utilization of traditional energy, reduce the intensity of energy intensity and intensity of carbon emission in industrial sectors, and advocate and promote sustainable consumption patterns.

In addition, alternative countermeasures should also be considered.

For example, it is possible to try to set up a Chinese style carbon tariff policy based on the per capita form or cumulative per capita consumption of carbon under the WTO rules, and consider the need to start a countering policy on some products in the United States and other related countries when necessary. Or for the US and the European Union to file a lawsuit against WTO on the grounds that China has restricted the export of rare metals, try to design a more stringent policy of export restrictions on strategic resources with the WTO rules under the goal of protecting the environment and non renewable resources.