Chinese Trade and Environmental Sustainability: The Potential Imposition of Border Tax Adjustments
2 Pages Posted: 23 Jun 2011
Date Written: June, 22 2011
Abstract
The environmental challenges facing China are well know. Less recognised are the steps China is taking to confront those challenges. The second Trade Policy Review of China, completed by the World Trade Organisation (WTO) Secretariat in April 2008, included an examination of China’s environmental policies, with some reference to its use of tax-based trade policy measures to protect the environment. These included the granting of variable VAT rebates based partly on environmental considerations and a 5-15 percent export tax on energy-intensive goods.
Since then, China has pledged significant reductions in its emissions intensity and proposed the introduction of a carbon tax in 2012. These are hopeful signs but, as with all signals at the intersection of the economy and the environment, there can be no certainty that reality will match the promise.
While the introduction and effectiveness of these measures is uncertain, they point to the need for a broader examination of border taxation measures in the context of Chinese trade. Authoritative voices around the world are making dark warnings of the trade barriers likely to confront countries that fail to move to a low-carbon economy. As both a major polluter and exporter, China’s products are particularly vulnerable to the imposition of border tax adjustments (BTAs) by importing countries. This paper considers the likelihood and legitimacy of such measures, specifically those based on environmental taxes, in light of the WTO’s BTA rules.
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