Table of Contents

List of Figures, Tables and Appendices………………………….

Abbreviation List……………………………………….

1. INTRODUCTION……………………………………

1.1 Problem Statement………………………………………..

1.2 Significance of the Research…………………………………..

1.3 Structure……………………………………………….

1.4 Research Design…………………………………………..

2. METHODOLOGICAL CONSIDERATIONS…………………..

2.1 Case Study Research………………………………………..

2.2 Research Approach…………………………………………

2.3 Data Collection……………………………………………

2.3.1 Qualitative Content Analysis………………………….

2.3.2 Secondary Analysis of Data………………………….

2.4 Theory Selection…………………………………………..

2.5 Structure of the Analysis……………………………………..

2.6 Structure of the Discussion……………………………………

2.7 Core Concepts……………………………………………

2.8 Limitations………………………………………………

3. THEORETICAL FRAMEWORK………………………….

3.1 Social Constructivism……………………………………….

3.2 International Trade Theories…………………………………..

3.2.1 Mercantilist Theories: Green Mercantilism…………………

3.2.2 Classical Liberal Trade Theories……………………….

4. BACKGROUND…………………………………….

4.1 EU-China Trade Relations: An Overview……………………………

4.2 China accession to the WTO…………………………………..

4.2.1 China’s Non-Market Economy Status…………………….

5. ANALYSIS……………………………………….

5.1 EU attitude towards China……………………………………

5.2 Strategic Partnerships……………………………………….

5.3 Trade of Environmental Goods…………………………………

5.4 Case Study: Solar Panel Disputes………………………………..

5.5 Case Study: Wind Power……………………………………..

6. DISCUSSION………………………………………

7. CONCLUSION……………………………………..

REFERENCES………………………………………..

List of Figures, Tables and Appendices

List of Figures

Figure 1: Research Design

Figure 2: China exports by destination (2015)

Figure 3:China imports by main origin (2015)

Figure 4:EU Members State trade in goods balance with China, 2015

Figure 5:EU Member States attitude toward China

Figure 6:China-EU development trends of trade in environmental goods

Figure 7: Annual Solar Photovoltaics Module Production in China, 2007-2013, with Projecton to 2017

Figure 8: Cumulative Installed Solar Photovoltaics Capacity in Leading Countries, 2000-2013

Figure 9: Solar PV Generation Capacity, 2015

Figure 10: Top 10 Cumulative Capacity December 2016

Figure 11: Wind Capacity – Gigawatts, cumulative installed capacity, 2006-2015

Figure 12: Domestic and foreign shares in newly installed wind capacity in China, 2004-2009

Figure 13:China’s Top Import Partners for Wind Technology 2004-2011

List of Tables

Table 1: Classification of policies

Table 2: Green Mercantilism: Protectionist measures

Table 3: EU Top trading partners: Total goods, 2016

Table 4: Renewable Energy Industry Support Measures, by Country

Table 5: Estimated Direct And Indirect Jobs In the PVs Sector, By Industry, 2016

Table 6: Estimated Direct And Indirect Jobs In the Wind Power Sector, By Industry 2016

Abbreviation List

1.  INTRODUCTION

M

1.1  Problem Statement

The subject of this paper will be the contradictory relationship between the European Union and China in the clean energy sector. For this reason, the following problem statement has been chosen:

Furthermore, following this main study question the following sub-questions have been considered relevant to investigate the main question:

• How does the EU long term goal set the pace to tackle the climate change issues?
• Why did the EU attitude change towards China’s exports?
• What are the reasons for the EU to implement protectionist measures?

1.2 Significance of the Research

The significance of the research stands in China’s growing role in the international arena. Its ongoing economic growth and development has led to enhance closer ties with the European Union in a wide range of field. Specifically, the focus of this thesis will be on the Sino-European cooperation in tackling climate change issues and the development of trade of green technologies between the two trade blocks. At a time when the world is facing both an economic and an environment crisis, the debate on the contradictory interdependency between the two sides cannot be avoided. The EU has long taken the lead in international climate diplomacy, committing to the development of a low-carbon economy. A growing number of European companies have shifted towards the development of green industry, aware of the potential economic opportunities in developing this green economy such as job creation and a higher competitiveness (Graaf, 2013). China is the largest producer of emissions in the world in absolute term (Guo & Sharples, 2015) but has also assumed a leadership role in the production of green technologies. This development requires that China really get involved in climate action in the international arena, enhancing its cooperation with foreign actors. From this point of you, the Sino-European cooperation has gained more importance, but has also opened door for frictions. Nowadays, disputes involving China-EU bilateral trade are a widely discussed topic amongst academics.  On the other hand, China and the EU are critically important actors in the transition towards climate-friendly energy technologies. This paper seeks to understand whether the Sino-European relationship in climate change actions is conflictive or cooperative. Besides the analysis of the strategic partnership between China and EU, the paper will focus on two relevant renewable energy industries which have been promoted by both the sides: wind and solar. Both Beijing and the Union have claimed the urgent need of tackling climate change issues, but the current disputes and concern in renewable energy technologies create a contradictory situation, making the problem statement relevant to understand the current relationship between them.

1.3 Structure

This paper is organized as follow. In the Introduction section the outline of the study is presented, along with the problem statement and the sub-questions. The aim is to introduce the topic of the paper and the significance of the research.

Following the Introduction will be the Methodological Considerations, which provides the methods and methodology applied for this research. In this section, the choice of the theoretical framework and the structure of the analysis and discussion will be included. These elements are all vitally important to answer the problem statement and to build scientific knowledge.

The Theoretical Framework section will follow the Methodological Considerations chapter, with an introduction of the theories contextually used in the analysis of this paper. Specifically, the chapter introduces the Social Constructivism Theory and the International Trade Theories. Two different view on trade will be discussed: The Green Mercantilist Theory and the Classical Liberal Trade Theories.

Next, a Background section will provide a much needed context. The chapter offers a description of the China-EU bilateral trade and presents the implications of China accession to the WTO and its Non-Market Economy Status, from a European standpoint.

Analysis, the main part of the paper, will follow the Background section. The chapter provides the analysis of the data collected, testing them through the theories provided earlier in the paper. The analysis will be broken into two parts, one regarding the sociopolitical cooperation between China and the EU in tackling climate change issues and the other focusing on two specific climate-friendly energy sector. Specifically, the solar photovoltaic sector and the wind power sector will be analyzed.

Following the Analysis chapter, a discussion will take place, wherein more personal take on the issues presented and analyzed earlier in the paper will be discussed. The chapter will focus on whether the Sino-European relationship in clean energy is cooperative or conflictive and try to seek the reasons of this contradictory relationship.

A Conclusions will close this academic paper, where findings from the analysis will be provided and an answer to the problem statement will be presented.

1.4  Research Design

The model below (see Figure 1) displays the structure of the thesis that will be employed in this specific research to answer the problem formulation and to accomplish the goal of the investigation. The aim of the research design is “to ensure that the evidence obtained enables us to answer the initial question as unambiguously as possible” (de Vaus, 2011, p. 9). Presenting the structure, the goal is to enhance transparency of the research process.

Source: Author

2.  METHODOLOGICAL CONSIDERATIONS

This chapter shows the basic understanding behind this research. By presenting the analytical procedure of this paper used throughout the research process, the aim is to provide an overview on how the research has been conducted. Furthermore, the methods employed in order to answer the problem statement will be presented. By describing the process of data collection and their analysis, the attempt is to give an overview of the procedure used to reach reliable and valid conclusions in a scientific manner.

2.1  Case Study Research

This project examines why the European Union is cooperating with China in climate change issues, whilst using protectionist measures against China’s green industry. In doing so, a case study research will be applied in order to better understand the current situation regarding the ambiguous relationship between EU and China in climate-friendly energy technologies. Despite a high interdependence between the two trade blocks, recent trade frictions have questioned whether the Sino-European relationship in clean energy is cooperative or conflictive.

A research design refers to the strategy used to links the collected data to the initial problem formulation, in order to accomplish the goal of the research (Yin, 2009, p. 24). According to Yin,

“…a research design is an action plan for getting from here to there, where here may be defined as the initial set of questions to be answered, and there is some set of conclusions (answers) about these questions.”

(Yin, 2009, p. 19)

Under this perspective, the case study is one of the several ways of doing social science research, and  refers to the in-depth analysis of a particular case (Yin, 2009, p. 1). Based on Yin’s definition (2009),

“A case study is an empirical inquiry that

• investigates a contemporary phenomenon within its real-life context, especially when
• the boundaries between phenomenon and context are not clearly evident”

(Yin, 2009, p. 13) 

This research will analyze two particular industries: wind and solar. The choice of this case has not been casual, but rather logical. Specifically, the analysis of the former will focus on the photovoltaic solar panels due to the relevance on the matter, since these have generated the most trade frictions between China and the EU. Nonetheless, the wind power sector has been selected as second case study. The choice of these cases have been made due to the growing investments in these sector by both China and the EU (Hill D. , 2016).

Depending on the specific problem statement, each research strategy may be used for different purposes –   explanatory, descriptive or exploratory – and so does the case study research (Yin, 2009, p. 7-8). Focusing on a why question, this paper will employ an explanatory research which involves developing causal explanation (Yin, 2009, p. 8-10) (de Vaus, 2011, p. 2). As presented by de Vaus (2011, p. 2) “causal explanations argue that phenomenon Y is affected by factor X”. Under this perspective, by analyzing the solar panel disputes between China and the EU, the attempt is to understand which factors lead to greater mutual cooperation or conflicts. A full picture of the reasons why Europe and China have developed this contradictory relationship in the clean energy sector will be developed. In order to answer our problem formulation, the analysis will be divided into two main sections. Through the use of the selected theories, both major strategic partnerships in green technologies as well as the specific cases of solar and wind industries will be presented and analyzed.

In order to answer our problem statement, the historical background of the trade between Europe and China will be taken into consideration, both presenting the liberal positions of the EU and the protectionist actions in general. Considering the international arena, an overview of the implications of China’s WTO accession will be provided, and its meaning for EU-China trade relations. The analysis will span across several years, specifically after the entry of China in the WTO which led to the implementation of trade barriers by the EU. Therefore, longitudinal aspects will be considered. The effort is to develop a full picture of the phenomenon, looking at the issue from different angles and not focusing on a specific year.

2.2 Research Approach

As presented by Bryman (2008, p. 24), two broad methods of reasoning may be employed whilst doing social research: a deductive approach and inductive approach. By analyzing the researched phenomenon from different perspectives, the relationship between theories and research itself change. On the one hand, the deductive strategy involves beginning with the theory, developing hypotheses, collecting data and testing the selected hypotheses through the existing theory. Moreover, this practice employs mainly quantitative data (Bryman, 2008, p. 24) (Asaka, 2016, p. 82). The inductive strategy, on the other hand, begins with empirical observations, seeks patterns in those observations and then theorizes about those patterns (Asaka, 2016, p. 82).

However, in order to overcome the disadvantages of research-then-theory and theory-then-research approaches, a third option is available. Deductive and inductive strategies may be used complementary for a more complete understanding of the phenomenon (Asaka, 2016, p. 82), as in this investigation. As presented by Asaka (2016, p. 82), inductive approaches  may begin with a broad base theory, and then develop new concepts throughout the research process. Based on this principle,

“researchers should enter the field with the deepest and broadest theoretical base possible and develop their theoretical repertoires throughout the research process […] instead of theories emerging from data, new concepts are developed to account for puzzling empirical materials”

(Timmermans & Tavory 2012 cit. in Asaka, 2016, p.82)

Therefore, a hybrid approach will be the foundation of the analysis of this paper. The attempt is to understand the contradictory relationship between the EU and China. Indeed, whilst the EU is pushing for strengthening the cooperation with China in the environmental field, it is then using protectionist measures against China’s green industry. Starting by a broad theoretical framework, collecting data, the goal of this strategy is both testing them through the initial theory as well as develop new concepts which may help to answer the problem formulation.

2.3 Data Collection

Throughout the research process, a substantial amount of data will be analyzed. The focus of the investigation will be on the bilateral relations between China and the EU to promote the clean energy sector and the protectionist measures against China’s green industry, particularly the solar photovoltaic sector and the wind power industry will be analyzed.

The collection of document is based on a selective sampling technique, in order to be able to select data with the most relevant information. As presented by Bryman (2008, p. 418),

Purposive sampling is a non-probability form of sampling. The researcher does not seek to sample research participants on a random basis. The goal of purposive sampling is to sample cases/participants in a strategic way, so that those sampled are relevant to the research questions that are being posed.

(Bryman, 2008, p. 418)

Under this perspective, the selection of documents will be made based on a document review. In doing so, the tools to identify those documents that are suitable for the research goals will be provided. Thus, a documentary research method will be employed, analyzing those documents that contain information about the researched phenomenon.

As presented by Bryman (2008, p. 543), documents may be distinguished in personal documents and official documents. For the purpose of this research only the latter ones will be taken into consideration. Indeed, the attempt is to comprehend the reasons of the ambiguous relationship between the EU and China in the green sector. In doing so, both an economic and diplomatic stance will be taken. Thus, statistics and official documents, such as academic papers, report, and articles, will be considered. By using data from different sources and collected through quantitative and qualitative methods, a triangulation approach will be applied in this project to provide reliable data and to produce valid conclusions (2008, p. 644).

The greatest critic of the case study research argues a lack of rigor of this research design. To fill this gap, several criteria will be considered in order to answer the research question and to reach the conclusion of this inquiry in a scientific manner. Specifically, four criteria which assess the quality of documents will be taken into consideration: authenticity, credibility, meaning and representativeness (Scott 1990 cit. in Mogalakwe, 2006, p. 224).

Firstly, anonymous sources, paper including biased comments and personal blogs will be excluded by our analysis. This allow the researcher to control authenticity and credibility of the documents. A careful control on the authorship and reputation of the documents collected will be employed. To name but a few,

A third criterion for assessing the quality of the documents is made up by meaning. Based on this principle the importance of the comprehensibility and intelligibility of the collected documents is emphasized. ()

Finally, representativeness refers to “whether the documents consulted are representative of the totality of the relevant documents” (Mogalakwe, 2006, p. 225). Being this a sensitive and recent topic, data on the topic are often not published or available. Furthermore, due to the contradictory relationship, the Chinese and European views on the phenomenon may differ. However, the use of different sources will be able to fill this gap.

In this paper, both qualitative and quantitative methods will be applied. Therefore, to investigate the problem statement different methods will be used. Specifically, quantitative content analysis and secondary analysis of existing data.

2.3.1                 Qualitative Content Analysis

Qualitative content analysis has been considered as a suitable method to reach the conclusions of this research. According to Bryman (2008, p. 214), this methods emphasizes the role of the researcher in the process of construction of meaning. From this point of view, the researcher plays a bigger role in the documents’ interpretation, maintaining anyway a scientific stance on the phenomenon. The core of this method is the use of different categories (Flick, 2009, p. 323-324) (Flick, 2014, p. 170) which will set up the guidelines for the investigation.

Since the aim of this paper is to investigate whether the Sino-European relationship in the green sector is cooperative or conflictive and the reasons of this contradiction, the focus will follow different paths. The first part of the analysis will emphasize the strategic partnerships between the two parties, in order to understand the reasons why China and the EU cooperate. Particularly, the analysis will span across the last two decades.

The second section of the analysis will focus on the Sino-European trade of PVs technologies and wind power products, and will try to answer the question “why does the European Union use protectionist measures against China”. In this specific section, the attempt is to analyze the document collected based on specific categories: the protectionist measures used against this sector and the implications. An analysis of the development of the green trade relations is necessary.

In both the sections, the emphasize will be both on the European beliefs and ideology as well as the liberal and protectionist attitude towards trade.

By using different categories, the goal is to focus only on some aspects of meaning of the documents, namely the one related to the analytical concepts mentioned above, and to the overall research question (Flick, 2014, p. 170-171).

2.3.2                 Secondary Analysis of Data

In order to analyze the development of the green trade and disputes, the investigation will take into consideration quantitative data as well. Hence, in this paper, a secondary analysis of data will be employed. According to Vartanian(2011, p. 3), “secondary data can include any data that are examined to answer a research question other than the question(s) for which the data were initially collected”. This research will be based both on official database as well as data collected by other researchers. To name but a few, statistics available on the website of the European Commission, World Trade Organization, International Monetary Fund will be used as main sources.

As already mentioned longitudinal aspects will be taken into consideration. Indeed, in order to understand the development of the use of these protectionist measures against China, different data measured across several years will be considered, starting by China’s accession to the WTO.

2.4  Theory Selection

Due to the dual nature of the research itself, both representative theories in the field of international relations and international business will be employed. By approaching the topic from different perspectives the aim is to develop a full picture of the phenomenon and to answer the problem formulation “Why does the European Union cooperate with China in environment, but then using protectionist measures towards China’s green industry?”. Despite in some instances the identities and interests of the European member states will be analyzed, the project will mainly consider as the EU as a single actor. Throughout the analysis, social constructivism will be employed. The goal is to understand how the European ideology and beliefs influence the relationship with China in climate-friendly energy technologies. This theory has been chosen based on the idea that the reality is social constructed. As presented by Jackson & Sørensen (2013),

“The international system is not something ‘out there’ like the solar system. It does not exist on its own. It exists only as an intersubjective awareness, or a common understanding, among people; in that sense the system is constituted by ideas, not by material forces. It is a human invention or creation not of a physical or material kind but of a purely intellectual and ideational kind. It is a set of ideas, a body of thought, a system of norms, which has been arranged by certain people at a particular time and place.”

(Jackson & Sørensen, 2013, p. 209) 

Therefore, social constructivism may explain how thoughts, ideas and practices of the actors coexist with the system of international relations, influencing the world affairs.

Furthermore, the international trade theories may explain the reasons of the use of protectionist measures against China in green technologies. The effort is to understand whether these measures benefit or harm the European economy and its trade strategy. A core point is the idea that international trade theories have influenced the global economic policymaking and the competitive environment in which international businesses competes (Hill C. W., 2011, p. 159). Two different views on trade have been chosen as theoretical framework of this research. On the one side, theories claiming free trade as best practice based on the European ideology will be employed. On the other side, mercantilist theories will present a different approach to trade. As the research focuses on the development of the Sino-European relationship in environment and green trade, the green mercantilist theory will be highlighted.

By using these theories, the collected data will be tested and a frame of the investigation is provided. As the research is limited by the theoretical approaches, results will be limited within. Thus, by using different theories or employing them in a different way may lead to different results.

2.5  Structure of the Analysis

2.6  Structure of the Discussion

2.7 Core Concepts

2.8 Limitations

The topic of this research may be considered as the main limitation due to the significant complexity of the environmental governance between and within China and the EU. Only the bilateral relations between the two parties are taken into consideration, thus influences from major countries in the international arena are not considered. This means that we only consider information regarding the Sino-European relationships and some implications about their membership into the WTO, which has been considered highly relevant. No matter the outcome of this research, other factors that are not considered here influence the Sino-European relations on the green sector. Furthermore, the choice of the case study research has limited the inquiry. Indeed, only the solar and wind sectors will be taken into account. Furthermore, aware of the wide range of partnerships and agreements, just some of them will be analyzed, based on their relevance. Particularly, the analysis will consider the EU-China Comprehensive Strategic Partnership, the 2006 Global Europe and the EU-China 2020 Strategic Agenda. The goal of this research is not to describe a definite actual scenario, but to understand why the ambiguous relationship in regards of climate-friendly strategies and technologies.

Next, as non-Chinese speakers, the possibility of reading Chinese material has been excluded. This will limit us in the use of potentially relevant material and knowledge, due to language barriers.

Further, the collection of documents and the choice of methods represent another limitation. The purposive sampling may cause the loss of relevant materials and the use of a different method may lead to different results. However, in the selective process, an objective stance has been taken – as much as possible –, avoiding individual interpretations.

3.  THEORETICAL FRAMEWORK

This chapter presents the theories that are applied in the analysis of this thesis in order to provide a theoretical foundation for the paper. Theories are a set of assumptions, propositions and/or accepted facts that “try to go beyond the phenomena to seek general principles and logical frameworks which can serve as a guide to the understanding of actual events”(Gandolfo, 2014, p. 4).

Due to the dual nature of this paper, the use of several theories will be required. The chapter will first introduce the theory of social constructivism, and thereafter international trade theories relevant for this topic will be undertaken. In the research process, social constructivism has been chosen as a representative theory to explain the states’ action in the international arena, both at an economic and political level.  As fundamental concepts in this paper, several theories of international trade will be presented in order to gain a thorough insight on the matter. The goal is to give a general overview of the political-economic doctrine of global free trade and protectionism, presenting both arguments in favor as well as against the two different approaches to the policymaking process.

3.1  Social Constructivism

This section provides an overview of the concept of social constructivism from an international relations standpoint. This term refers to a set of assumptions on how to study a social science, and thus international relations. As presented by Jackson & Sørensen (Jackson & Sørensen, 2013, p. 229), differently than realism, constructivism argues against a materialist view of the world, and emphasize the social construction of reality. Under this perspective, human relations as well as international relations are not based on material forces, but otherwise on ideals and identities (Jackson & Sørensen, 2013, p. 229). However, constructivists do not totally reject the importance of the material reality. Rather, the theory introduces the idea that materialist concepts and categories result from social processes and interactions, which contribute to the social construction of meaning (Hurd, 2008, p. 313).

According to Barkin (2010, p. 26), intersubjectivity and co-constitution are the two fundamental components of this approach. The former term refers to “collective knowledge and understandings”, thus conventions widely accepted that exist beyond the individuals and contribute to build the reality (Barkin, 2010, p. 26). This research focuses on the neoclassical variant of constructivism, which address intersubjectivity meanings to social sciences, considering both philosophical and empirical issues before inaccessible. Co-constitution, on the other hand, means that “people and  society construct, or constitute, each other” (Barkin, 2010, p. 28). In other words, constructivists believe that agents and structures need to be seen as a whole in the study of politics, and not as separate parts. As presented by Jackson & Sørensen (2013, p. 210),the concept structuration is a starting point of the constructivist paradigm.

Structures do constrain actors, but actors can also transform structures by thinking about them and acting on them in new ways. The notion of structuration therefore leads to a less rigid and more dynamic view of the relationship between structure and actors.

(Jackson & Sørensen, 2013, p. 210) 

Thus, a mutual relationship exists between agents and structures. As structures exist due to the reciprocal interaction between actors, actors may change them over time through social practices (Jackson & Sørensen, 2013, p. 217). According to constructivists view, people build the social world, thus the reality cannot be considered as given and independently of the ideas of men and women (Jackson & Sørensen, 2013, p. 211).

Several approaches to constructivism exist. On the one hand, systemic constructivists emphasis the role of the international environment in shaping state identities. Other constructivists, on the other hand, believe that the domestic environment is responsible of the national identities (Jackson & Sørensen, 2013, p. 223). In this research, the latter approach has been considered appropriate to answer the problem statement. From this point of view, identities, interests, practices and ideas of individuals shape the international agora: “They include ideas that are intersubjective (that is, shared among people) and institutionalized (that is, expressed as practices and identities)” (Hurd, 2008, p. 301). As intersubjective and institutionalized, ideas cannot be merely attribute to individual minds (Hurd, 2008, p. 301). In the international systems, the theory explains that shared meanings by people and states need to be understand in order to gain a whole understanding of the arena of international relations. Specifically,

It means beginning from the assumption that how people and states think and behave in world politics is premised on their understanding of the world around them, which includes their own beliefs about the world, the identities they hold about themselves and others, the shared and the shared understandings and practices in which they participate.

(Hurd, 2008) 

Constructivism has been criticized on various grounds. The main intellectual opponent of social constructivism may be considered realism which stress the misleading importance given to norms by constructivists, at an international level as well. From a realist point of view, these norms exist but continually change based on the interests of powerful states (Jackson & Sørensen, 2013, p. 225). The analysis of change, however, may be considered as a strength due to the given possibility to have a view on the whole social processes and reality.

Constructivism has been here selected as the main suitable theory due to its nature and to the goal of this research. Particularly, the belief is that history, culture and national identity of any state influences its actions, interests and foreign policy, at a political, diplomatic and economic level. The frame of the analysis, thus, is based on the idea that the world of international affairs is socially constructed and influences the way that international relations are carried forward.

3.2 International Trade Theories

As presented by Irwin (2001), the theory of international trade is one of the oldest branches of international economics. An ongoing debate is whether international trade benefits or harms nations. Through centuries, intellectuals have developed a dual view on the topic: on the one hand, some proponents claim the desirability of free trade between countries; on the other hand, others advocate trade protectionism and/or economic isolationism as a better course of action for nations.

“Depending upon the weights put on the overall gains from trade or on the losses of those harmed by imports, different analysts have arrived at different conclusions about the desirability of having free trade.”

(Irwin, 2001)

Therefore, the economic arguments surrounding the advantages and disadvantages of adopting free trade or protectionist measures are primarily based on gains and losses of the productivity of domestic industries and the welfare of consumers (Irwin, 2001).

In the next sections, an overview of international trade theories will be explored and defined, presenting the ideological continuum of free trade and protectionism.

3.2.1                 Mercantilist Theories: Green Mercantilism

Starting in the late Middle Ages, international trade has played a central role in shaping the global economy. During the seventeenth and early eighteenth, the growth in global trade led to the development of the first economic philosophy on international trade: mercantilism. This doctrine was a non-systematic set of thoughts which favored state regulations and centralization of economic activities, including foreign trade. Mercantilist argued for close government regulations of international trade in order to maintain a surplus status of gold and silver in the country, precious metals also known as specie (Hill C. W., 2011, p. 162). The principle assertion of mercantilism was that gold and silver reserves were the measure of a country’s wealth, prestige and power, and were essential to vigorous commerce (Hill C. W., 2011, p. 162) (Krugman, Obstfeld, & Melitz, 2012, p. 514). Through government intervention, the aim was to both restrict the quantity of imports into the domestic market as well as maximize net exports and income, producing many things as possible within its own country’s borders (Hill C. W., 2011, p. 162) (Krugman, Obstfeld, & Melitz, 2012, p. 514). In its book England’s Treasure by Foreign Trade (1664), the mercantilist Thomas Mun well describes the core idea behind mercantilism:

“The ordinary means therefore to increase our wealth and treasure is by foreign trade, wherein we must ever observe this rule: to sell more to strangers yearly than we consume of theirs in value.”

(Mun, cited in Hill, 2011, p. 162)

In order to exercise control over foreign trade and to achieve maximum trade surplus, mercantilists advocates the use of different policy instruments by governments: import regulations such as quotas and tariffs to protect domestic markets, and export subsidies to support foreign exchanges. Through the use by states of forms of interventionism, the goal was to discourage foreign manufactories from competing with local players. Based on this doctrine, trade was a zero-sum game, meaning that a country’s gain results necessarily in a loss by another (Hill C. W., 2011, p. 163). Some mercantilists advocated economic autarky, meaning economic self-sufficiency and almost totally independence in trade. However, the Industrial

Revolution brought structural changes both at socio-economic level, which reduced governments power and influence on foreign trade (Czinkota, Ronkainen, & Moffett, 2011, p. 64). Despite the development of a liberal approach to trade, protectionist measures are on rise across the world. The 20^st century saw a worldwide return to protectionism, and many nations have adopted neo-mercantilism as trade strategy. As the ancestor, neo-mercantilism aims to increase national wealth and foreign reserves, boosting exports and reducing to an absolute minimum any reliance on foreign imports (Hill C. W., 2011, p. 163). The new class of mercantilism argues that barriers must again increase, trying to make everything within a country’s borders in order to achieve the goal of increasing a nation’s wealth. The purpose of trade barriers, in this view, is to protect domestic industries by foreign competition, which challenges and impacts local competitiveness.

Under this perspective, during the last decade a new form of mercantilism concerning the clean energy economy developed, also known as green mercantilism. According to Stepp & Atkinson (2012, p. 1),

“Green mercantilism” – the adoption of policies that give countries an unfair advantage to boost exports and limit imports of clean energy technologies – is a major departure from rules-based clean technology trade. It’s represented by “beggar-thy-neighbor” policies, including lax IP enforcement, forced technology transfer, export subsidies, discriminatory standards, barriers to imports, and preferential treatment of domestic firms by their parent governments”

(Stepp & Atkinson, 2012, p. 1)

Therefore, green mercantilism may be defined as a discriminatory and unfair strategy employed by governments in order to boost domestic production of clean energy goods, especially in the short-term, hurting otherwise other nations (Stepp & Atkinson, 2012, p. 3).  As presented by Stepp & Atkinson (2012, p. 3-4) governments may implement four different type of policies which may have different impacts on both the world and the country itself (see Table 2). “Good policies” benefit both the world and the country. “Self-destructive” policies harm the country but benefit the rest of the world. The green shading categories denotes instead green mercantilist policies, namely “ugly” and “bad” policies. Based on this classification, green mercantilist measures benefit the country but damage the rest of the world (bad “policies”) or harm both of them (“ugly” policies) (Stepp & Atkinson, 2012, p. 4).

Table 1: Classification of policies

Source: (Stepp & Atkinson, 2012, p. 4)

As mercantilism, green mercantilist policies advocates thus government intervention through the use of several protectionist measures. The aim is to incentives the domestic production, whilst reducing imports, in order to gain from the clean energy economy.

Next paragraph will briefly introduce protectionist measures used in international trade, from a mercantilist standpoint.

Green Mercantilism: International Trade Measures

The governments can adopt several instruments to conduct international trade. Particularly, protectionist measures may be broken down into two main categories: tariffs and non-tariff measures (NTMs), also known as non-tariff barriers (NTBs). As tariffs, NTMs are measures which aim at restricting trade among countries. As presented by the WTO (2017), using tariffs a country imposes customs duties on import services and goods. Doing so, the nation give a price advantage to domestic producers whilst rising the government revenues as well. With the decrease of use of tariffs at a global level due to several round of negotiations in the WTO, NTMs have gained importance as measure of protection in international trade tools (WTO, 2017).  The table below shows Stepp and Atkinson’s categorization of green mercantilist measures employed by nations in international trade  (see Table 3) (Stepp & Atkinson, 2012).

Table 2: Green Mercantilism: Protectionist measures