A survey was conducted to assess non-trade barriers and their practical impact on the transfer of environmental technologies and goods and services to China, focusing on Australian vendors. The highest priority barriers, which are most likely to limit Australian vendors of environmental goods and services in their technology transfers to China, were protection of intellectual property, limitations of the rule of law, fragmentation and bureaucracy of the Chinese government; and establishing appropriate level of ownership (of these vendors). Examples of Australian experiences that confirmed these barriers to providing the needed technology and innovation to manage China's increasing environmental impacts were also examined. These barriers are discussed in relation to a pending free trade agreement between Australia and China. The perceived impacts of such a free trade agreement on corporate environmental managers and environmental consultants are also discussed. The barriers identified do not appear to be unique to transfer of environmental goods and services, but generic to the transfer and adoption of Australian technology into China.

1. What is limiting Australian vendors transferring
environmental goods and services into China?
T.F. Guerin *
A
survey was conducted to assess non-trade
barriers and their practical impact on the
transfer ofenvironmental technologies and goods
and services to China, focusing on Australian vendors.
The highest priority barriers, which are most likely to
limit Australian vendors of environmental goods and
services in their technology transfers to China, were
protection of intellectual property, limitations of the rule
of law, fragmentation and bureaucracy of the Chinese
government; and establishing appropriate level of
ownership (of these vendors). Examples of Australian
experiences that confirmed these barriers to providing
the needed technology and innovation to manage China's
increasing environmental impacts were also examined.
These barriers are discussed in relation to a pending free
trade agreement between Australia and China. The
perceived impacts of such a free trade agreement on
corporate environmental managers and environmental
consultants are also discussed. The barriers identified do
not appear to be unique to transfer of environmental
goods and services, but generic to the transfer and
adoption ofAustralian technology into China.
Keywords: technology transfer, China, environmental
goods and services, business, purchasing
Introduction
China is the world's most important economy in relation
to negative impacts on the environment (Guerin 200la;
China orders cleanup of 20 chemical plants 2006;
McDonough 2006; Wyatt 2007). These environmental
impacts are now recognised as major threats and of
central importance for businesses to manage when doing
business in China. They include water shortages and
contamination, energy demands, soil erosion and
pollution. For foreign companies doing business in
* Turlough Guerin was formerly with Shell Commercial Fuels (Australia), and
is now with Tclstra Corporation Ltd, L33/242 Exhibition Street, Melbourne.
Email: turlough.guerin@hotmail.com
This article presents the views of the author only and does not necessarily
reflect those of his employer or former employer.
250
China, these impacts play out as impacts on reputation,
the existence of faulty supply chains, transportation
accidents, lost productivity from health impacts,
collusion between government officials and political
instability at a local level (Economy and Lieberthal
2007). With long-term growth rates in China of 8-10 per
cent, it is unlikely that the negative environmental
consequences of this growth will be off-set by adoption
of local remedial technologies and innovation. China will
therefore require an aggressive acquisition program for
procuring the necessary environmental goods and
services to manage air, water and soil pollution, from
both a preventative and treatment perspective (Watson
2005). There is mounting evidence China is prepared to
acquire this technology (Shanley 1995; McDonough
2006).
Direct technology transfer is the imparting of knowledge,
skills and methodologies from one location to another.
This process also includes disseminating information on
the end-use and adoption of the transferred technologies
(Guerin 1999). The introduction, through exports, of a
technology or service into a developing country such as
China, is not technology transfer per se, where the client
or end user is then left to implement it. Licensing, in
addition to direct technology transfer, can also be used to
transfer technology. A licence is a contract between a
holder of a technology and an end-user or distributor
(licensee) of a particular technology. A licence allows the
licensee to manufacture, market or use that technology
(or intellectual property), while the owner or vendor
maintains the ownership of the technology. With direct
technology transfer, the transferor does not necessarily
maintain ownership of the technology.
Regardless of the type of technology or service, there are
fundamental barriers to technology transfer such as local
capacity, priorities of the vendor, funding and trade
arrangements and attributes of the end-users and
adopters. From the extensive literature, it is evident that
there are numerous barriers to western countries,
including Australia, to transferring or licensing their
technologies and services to China. In particular these
include loss of intellectual property, ineffectual laws and
intercultural barriers (Li 1996; Guerin 1998; Martinson
and Tseng 1998; Tackaberry 1998; Tse 1998; Guerin
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2. 200la; Jagersma and van Gorp 2003; AIG 2004; Zhu
and Sarkis 2004; Liu 2005; Watson 2005; Austrade
2007).
The aim of this article is to examine the non-trade
barriers to transferring environmental goods and services
to China, and how these may be overcome, using data
gathered from a survey of individuals including
corporate environmental managers and environmental
consultants. The article attempts to prioritise the barriers
and to identify any that are unique to the transfer of
environmental goods and services compared with non-
environmental goods and services.
This article describes the methods used in the survey, the
results and discussion, and a brief review of their
implications for corporate environmental managers and
environmental consultants, and for the establishment of a
free trade agreement between Australia and China.
Method
Survey design
A review of literature on barriers to transferring
technologies to China (Li 1996; Guerin 1998; Martinson
and Tseng 1998; Tackaberry 1998; Tse 1998; Guerin
2001a; Jagersma and van Gorp 2003; AIG 2004; Zhu
and Sarkis 2004; Liu 2005; Watson 2005; Austrade
2007) revealed 39 separate barriers. These were
clustered into six themes: for each of these the
questionnaire included a series of questions with
responses able to be ranked on a three-point Likert scale,
as well as open ended questions.
Sampling
The types of organisations sampled and represented in
the survey were predominantly Australian-based or
operated companies (including individuals, small to
medium sized enterprises and corporations), many of
which were listed on the Australian Stock Exchange.
The sample was constructed in two stages, targeted then
open. First, a targeted sample of 200 Australian-based
respondents (or respondents operating in Australia)
considered likely to be involved in export of
environmental goods and services comprised I00
companies located on publicly available databases which
contained company email addresses (including
www .environmentdirectory .com.au), and I 00
individuals from companies and organisations either
known by the author or otherwise identified from
internet searches and professional networks. Second, to
ensure the widest possible set of respondents was
located, a link to the survey was posted on several active
December 2007
internet listservers which were selected based on the
range of topics that they covered and their level of
activity as described by Guerin (Guerin and Schaffner
2000; Guerin 200 Ib). The listservers chosen covered soil
and groundwater treatment, climate change, and general
corporate environmental management and sustainability.
These represented a population of approximately 2000
potential respondents.
Description of respondents
Because some respondents did not identify themselves, it
was not always clear whether a respondent was from the
targeted sample of 200 organisations and individuals, or
from the listserver populations. In total there were 57
survey respondents. A third of these (33 per cent) were
obviously in response to the author's posting on the
listservers as they were from outside Australia. These
included corporations, private consultants/individuals,
small and medium sized enterprises, and universities. The
majority (55 per cent) of respondents were either
Australian-based or operating in Australia, including
small and medium sized enterprises, corporations and
universities. The remaining 12 per cent of respondents
were Australian government organisations.
Of the 57 respondents, 47 per cent exported to China at
the time of the survey and 32 per cent of these
organisations exported from Australia. Of the goods and
services being exported, 37 per cent were environmental
goods and services, representing environmental education
and training, consulting, water supply and treatment
technologies, energy management and waste management
(Table I). The most common role of respondents (28 per
cent) was environmental consultant or manager of an
environmental consultancy, followed by: health, safety
and environment advisors or managers and corporate
environmental managers (19 per cent); people in sales
and marketing (10 per cent); government representatives
(9 per cent); export coordinators or managers (5 per
cent); researchers (5 per cent); technology developers (3
per cent); and miscellaneous people including students,
retired individuals, individual business owners,
professional architect, strategic planner, business
executive, chief executive officer, company director,
sustainability manager, safety director and management
consultant (20 per cent).
Survey administration
The survey was conducted from August to October 2005.
It was administered by sending an introductory email to
the targeted recipients (n=200) as well as posting the
same introduction email on environment-related
listservers. The email contained a direct link to the
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3. Table I Adescription of environmental goods and services transferred to China by
survey respondents
from Australia, are presented in Table 2.
The remainder of the survey questions,
which contained the items forming each
theme. are provided below. For each item,
respondents were required to state whether
it was ·A Significant Barrier', 'A Potential
Barrier' or 'Not a Barrier'.
Rule of law: How would you rate the
following barriers related to limitations of
the rule of law in China?
• Lack of transparency of legal systems in
China
• Inconsistent interpretation of laws and
regulations across provincial boundaries
• Absence of policing of laws and
regulations in a consistent manner across
China
Protection of intellectual property (IP):
questionnaire. The questionnaire, which was written for
completion in an online-only format, was prepared using
the online survey program, SurveyMonkey
(www.surveymonkey.com).
How would you rate the following which
relate to problems in the protection of
intellectual property?
• Ineffective IP laws in China
• Potential rapid illegal reproduction of goods imported
or concepts/ideas introduced into China (i.e. pirating)
Survey questions
The survey questions asking for demographic
information, perceptions on the role of a free trade
agreement (in environmental goods and services transfer
to China) and the relative importance of Australian
environmental goods and services vendors, and examples
• Absence of exporting organisation's safeguards against
IP loss when they introduce their goods or services to
China
• Health safety or environmental consequences of pirated
goods when exported from China (e.g. which do not
meet original manufacturer's intended standards)
Table 2 Additional questions asked in the survey
Demographics
Free Trade Agreement
(FTAl
Australian Examples
(case studies)
Relative advantage of
Australian EGS
vendors
252
Does your organisation currently export any goods and/or provide services to China'
Does your organisation currently export any goods and/or provide services to China from Australia''
Does your organisation export environmental goods (e.g. technologies) or provide environmental services (e.g. consulting or advice) from
Australia to China?
Have you or your organisation had any indirect involvement in the exporting of environmental goods (e.g. technologies) or providing
environmental services (e.g. consulting or advice) fi·om Australia to China?
If your organisation does export environmental goods (e.g. technologies) or provide environmental services (e.g. consulting or advice) to China
how would you best describe these?
How would you best describe your organisation? How would you best describe your role?
What impact do you think an FTA between Australia and China will have on the roles of corporate environmental managers in Australia' Please
describe why you gave the answer you did above
What impact do you think an FTA between Australia and China will have on Australian-based or operated environmental consultancies? Please
describe why you gave the answer you did above
What was the environmental good or service involved? What was the value (estimate) in USIJ of the activity? When did the activity occur? Was
the overall outcome of the activity a success (in terms of goods or services provided and payment received)?
Regardless of whether the activity was successful, as defined above, or not what were the main harriers that were faced in exporting the goods or
providing the services'' If the activity was successful, as detined above. how were the barriers mercome'
Do you think Australian organisations have an advantage (in any way) over any other countries in providing environmental goods and services to
China'' Ifyou answered yes to the previous question. in what way are Australian organisations likely to have an advantage (over either Chinese
or other international organisations)?
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4. Modernisation of state-owned enterprises (SOEs): How
would you rate barriers related to the modernisation of
state-owned enterprises in China?
• The process itself of modernisation of Chinese SOEs
(which is now occurring at a fast rate in China)
• Loss of local jobs of employees employed in China
• The increasing trend of small scale of local capacity in
China
• High debt levels among state-owned enterprises
Fragmentation and bureaucracy of the Chinese
government: How would you rate the following barriers
related to fragmentation and bureaucracy of the Chinese
government?
• Inconsistent requirements at each level of Chinese
government
• Lack of transparency in the application of taxes across
China
• Difficulties in repatriating profits from China
• Different bureaucratic rulings within and beyond
provinces
• Different customs requirements at different ports in
China
• Inconsistent enforcement of import duties across China
• Unclear and conflicting standards across provinces in
China
• Conflicting Chinese importing guidelines
• Difficulty in finding decision makers at the appropriate
location and level in the Chinese government
Establishing the appropriate level of ownership: How
would you rate the following barriers related to
establishing the appropriate level of ownership (for an
Australian-based or operated company planning to do
business in China)?
• Foreign investment restrictions for companies doing
business in China
• Difficulty in finding reliable business partners in
China
• Level of foreign capital investment is not necessarily
proportional to the profits shared by partners (under
Chinese legal framework)
• A lack of control over Chinese interest in the business
Intercultural barriers: How would you rate each of the
following intercultural aspects in terms of their potential
December 2007
to be a barrier? (i.e. if they were not recognised and acted
upon/embraced they could be a significant barrier)?
• Basic understanding of the language
• Harnessing the interpersonal networks in China ('Social
networks' rather than 'markets')
• Speaking and questioning so as to ensure understanding
• Group setting and group context in training
• Flexible in your dealings with the Chinese
• Developing an alliance with the Chinese customer (over
a long period)
• The 'work unit' (as opposed to the individual worker)
in China
• Being non-judgmental
• Tolerance for ambiguity
• The capacity to communicate respect
• The capacity to personalise one's knowledge and
perceptions
• The capacity to display empathy
• The capacity for taking turns (in conversation)
• Establishing trust
• Autocratic control of information
A further question that was open-ended was asked: 'What
other significant trade or non-trade barriers do you think
there are for Australian-based or operated companies
exporting environmental goods and services to China?'
Respondent were also asked to rate the importance of
trade barriers when transferring environmental goods and
services to China. This question was asked so that
respondents were aware of the difference between trade
and non-trade barriers. These questions, and the results of
these questions, are not included in the survey results.
Results and discussion
Analysis of variance (ANOVA) tests were conducted with
respect to each of the six themes of barriers to the transfer
of environmental goods and services to China. These
analyses were conducted on the responses identifying
each of the items within those themes in turn as 'a
significant barrier' to the transfer of environmental goods
and services. The probability values that were obtained
from the outputs from the ANOVA tests between each of
the barrier themes (Table 3) showed statistically
significant differences between two sets of themes:
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5. Table 3 Results of ANOVA comparing non-trade barriersI
• Protection of intellectual property; rule of law;
fragmentation and bureaucracy of the Chinese
government; and establishing the appropriate level of
ownership (identified by 30-50 per cent of
respondents)
• Intercultural barriers and modernisation of state-owned
enterprises (noted by fewer than 25 per cent of
respondents.
The results are discussed in the following section.
Non-trade barriers
Protection of intellectual property
Three of the four items relating to intellectual property
protection (health, safety, environment and security
concerns from pirated goods; absence of safeguards
against intellectual property loss when exporting to
China; and the illegal reproduction of goods imported
into China) were perceived to be 'a significant barrier' by
58 per cent of respondents (Figure I). Only 27 per cent of
all respondents considered that the fourth item,
ineffective intellectual property laws in China, was a
significant barrier.
As expected, respondents strongly expressed their
concerns with intellectual property protection. One
stated: 'The major issue is lack of confidence in the
intellectual property protection system. We are
technology providers. We have no confidence our
technology rights will be protected'. While there are laws
in place, enforcement of these represents a greater
concern. Of critical concern are the health, safety and
environmental problems posed by pirated goods. These
results are not surprising. China is plagued by a history of
lax enforcement of laws on intellectual property rights
(Guerin 2001; Liu 2005). The risk of technology or
intellectual property 'leakage' is greatest when the
Chinese partner is in the same line of business as the
Australian technology vendor (Guerin 1998; 200lb).
Foreign vendors must be ready for this and take
appropriate protective action.
Enforcement of intellectual property
rights is largely the preserve of an
administrative, rather than a judicial,
system in China, and this is reflected
in the high incidence of intellectual
property infringements. Of the 43 000
infringement claims in China during
2003-2004, over 40 000 were
processed by the State Administration
for Industry and Commerce. This
leaves foreign companies at risk of
'home town' determinations
especially at local levels of
government (McCubbin 2004).
McCubbin (2004) states that China is
Figure I Frequency of problems noted as significant or potential barriers in the
protection of intellectual property
serious, however, about reform of
intellectual property protection, not
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6. Figure 2 Frequency oflimitations noted in the rule of law
necessarily because of its WTO commitments, but rather
because China now produces more than 350 000
technologically trained engineers annually. According to
the OECD, it is third in the world in gross expenditure on
R&D at over US$1 00 billion. It also has 750 000
researchers, which is second only to the US. China is
therefore rapidly learning the value of technology, and
the need to protect it. Companies which previously
moved their manufacturing operations to China to take
advantage of a low cost base are now moving their R&D
operations to China also to take advantage of this skill
base (McCubbin 2004; O'Connell 2007). The Chinese
government is promulgating new laws to combat the
intellectual property protection problem (McCubbin
2004), but this is a 'deep-seated' cultural issue that will
not be changed easily, even with training of the local
Chinese partners or the wider Chinese markets (von
Krogh and Haefliger 2007). The Chinese do not
necessarily see protection of intellectual property as a
problem so change is only likely to occur when the
Chinese become victims of such intellectual property loss
themselves, causing economic loss.
This constraint, in conjunction with that of the rule of law
(discussed in the following sub-section), is of critical
importance in the licensing of technologies in China and
therefore to environmental goods and services transfer. In
China there is limited evidence that intellectual property
rights of individuals or organisations are enforced and
Australian organisations are clearly concerned that
Chinese end users of the technology, even under licence,
may not co-operate with the terms of the licence. This is
a fundamental issue survey respondents are concerned
about.
Rule of law
This constraint was also identified as a significant or high
priority barrier by 44 per cent of respondents (Figure 2).
Specifically, it includes the items of absence of policing
December 2007
of laws, lack of transparency of the legal system,
and inconsistent interpretation of laws. A
consequence of the weak laws, including those
designed to protect the environment, is unfair
competition in the environmental goods and
services markets. The major problem is
protectionism in local Chinese markets, largely by
the actions of various government departments.
Municipal and provincial authorities protect local
markets for local firms and may not enforce
environmental protection measures (Economy and
Lieberthal 2007). Obsolete products, technologies
and services are then protected with a consequent
loss to the environmental protection industry and to
the economy (Guerin 1998; Tackaberry 1998; Doing
Environment Business With China 1998a; Guerin 200lb;
AIG 2004; Liu 2005). While there are laws prohibiting
anti-monopolistic and anti-competitive behaviour, the
existing laws require consolidation to remove
inconsistencies (McCubbin 2004). Anti-monopoly law is
now approved in principle by the Chinese Cabinet.
China, however, lacks an anti-competitive authority
charged with the responsibility of making the law operate
effectively and equipped with the power to impose
sanctions. In effect, the lack of competition policy means
that the introduction of new, eco-efficient technologies is
limited. Environmental laws are also likely to become
more stringent, but the inconsistent policing of existing
laws will act to limit foreign companies or organisations
attempting to transfer environmental goods and services
to China. This constraint is likely to have a direct impact
on environmental protection in China. Overall, the
combination of local protection of obsolete and polluting
production, the flouting of environmental laws, and a
lack of effective competition policy could be a significant
barrier for Australian and other foreign environmental
goods and services suppliers.
The Chinese government's fragmentation and bureaucracy
This constraint was grouped with the 'significant
barriers' group by 35 per cent of respondents (Figure 3).
One respondent indicated, however, the ubiquity of this
problem in stating: 'This matter is a barrier in Australia
let alone China. Government owned enterprises world
wide are hard to do business with for these and related
reasons.'
In China, the State Environmental Protection Agency
(SEPA) has overall responsibility for environmental
management, though its influence is relatively weak
(Economy and Lieberthal 2007). Typically, there will be
more than one agency involved in decision making for
any particular environmental program. Interacting with
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7. Figure 3 Frequency of responses concerning the Chinese Government's fragmentation and bureaucracy
the Chinese government can therefore be complex. Under
the former command system, the State Planning
Commission in Beijing issued directives to its branches
throughout the country, usually based on State Council
rulings. Regulation was 'top down'. In most industries,
the implementation of regulation is now devolved to
provinces and municipalities (Economy and Lieberthal
2007). In effect this means that local government
authorities regulate environmental protection according
to their own interpretation. A consequence of the current
arrangements is that problems arise on major projects
which require central government approval. It is common
to find that, having negotiated the bureaucratic maze of
local and provincial authorities successfully, the National
Development and Reform Commission (which
supersedes the State Planning Commission) in Beijing
then declines to approve a project (McCubbin 2004).
Although these delays can limit technology transfer,
central government approval may lead to more stringent
environmental requirements for a project (even if it
delays a particular proposal). In addition, devolved power
to local governments means inconsistent policing of the
environmental laws.
Environmental goods and services vendors must be
flexible and open minded to the bureaucratic and often
unpredictable changes in the Chinese Government. It is
important the Australian or other foreign vendors develop
strong relationships with both the Chinese partners and
the local Chinese government so trust can be built
between all parties. Furthermore, vendors need to
256
recognise that there are only very loose connections
between government departments, and this inevitably
leads to lack of communication between government
departments.
Establishing an appropriate level of ownership
This barrier was grouped with the most significant group
of barriers by 32 per cent of respondents, and it has the
potential to impact foreign investment (Figure 4). The
importance of this constraint was reflected in the
commentary provided by one respondent who stated:
'You need reliable joint-venture partners that you can
trust to look after your interests as well as their own, and
these are very hard to find (in China)'.
Establishing the right level of ownership in a joint
venture is important, but of equal importance is not
assuming that forming a joint venture with Chinese
partners is the best strategy. Many multinational
corporations remain in 'unhappy marriages' as the
majority of joint ventures in China continue to lose
money. Since the 1990s, there has been a steady decline
in foreign direct investment in China through joint
ventures (Guerin 2001 b). One of the reasons is that many
foreign managers have come to perceive their local
partner as a disabler rather than as an enabler, while the
Chinese are disappointed about unfulfilled expectations
in these ventures.
A fundamental requirement for any environmental goods
and services technology transfer to China is for vendors
to establish a local presence. A first step is to establish a
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8. Figure 4 The problem of establishing appropriate level of ownership
partnership with a local organisation well established in
China. Further, an effective sales and distribution system
for environmental goods and services needs to be
developed commensurate with the geographical region
and the client base aiming to be served. This sales and
distribution system must be closely aligned with the
vendor's networks in the Chinese market place for
environmental goods and services.
Figure 5 The need for intercultural sensitivity
December 2007
Intercultural sensitivity
A lack of intercultural sensitivity
on the part of environmental
goods and services providers was
considered to be a significant
barrier by 23 per cent of
respondents (Figure 5).
Intercultural sensitivity is
therefore less often recognised as
a significant constraint than other
factors. One explanation is that
Australians (67 per cent of the
respondents) are able to manage
the intercultural issues so they do
not become barriers. This is also
demonstrated in the 'Examples of
Australian Experience' section of
this article. The findings may also mean that there was a
lack of appreciation of this constraint by respondents.
Given that technology transfer is more than exporting a
technology or service into China, but rather a sustained
implementation, Watson (2005) describes the term
'absorptive capacity' of the technology recipients.
Intercultural issues, and how these are managed, will
directly impact on the absorptive capacity of the Chinese
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9. have a substantial impact on both the
implementation and the compliance with
the terms of any Australia-China free
trade agreement (McCubbin 2004). This is
also an opportunity for companies from
Australia and other developed nations to
purchase environmental goods and
services.
The role of Australia in environmental
goods and services transfer to China and
the potential impact of afree trade
agreement
Figure 6 The implications of modernisation of state owned enterprises This section focuses on Australia's role
and experience in environmental goods
and services transfer to China. Australian
recipients and should be considered in any proposed
environmental goods and services transfer.
An implication for transferring technology to China is
that training and inductions should focus on skill
development of the Chinese end-users. A major reason is
that the high availability of labour means less emphasis
by the Chinese in applying technology efficiently. Also,
given the importance of gaunxi1
(Guerin 2001b) to the
Chinese, it is likely that changes in technologies that
negatively impact the end-users or decision makers or
their immediate family or friends, are less likely to be
adopted.
Modernisation of state-owned enterprises
Only 14 per cent of the survey respondents considered
modernisation of the state-owned enterprises to be a
significant non-trade barrier (Figure 6). Indeed, forty two
percent indicated that this was not a barrier; the highest
such response compared to the other five themes
surveyed. Notwithstanding China's rapidly expanding
private sector, the reality is that most of the transactions
undertaken between Australia and China involve state-
owned enterprises. To provide an indication of the
significance of this activity, every year in China the
reform of these organisations creates 14 million
unemployed workers (McCubbin 2004).
It is conceivable that the modernisation process will open
many opportunities for foreign environmental goods and
services vendors to meet the needs of these organisations
as they are transformed. The reform process of the state-
owned enterprises is likely to reshape China's economy
and its environmental performance (Watson 2005). More
importantly, the behaviour of the state-owned enterprises
will drive market behaviour so significantly that it will
organisations were perceived to have an advantage in
providing environmental goods and services to China (56
per cent of respondents). Respondents suggested this is
likely to be due to attributes of the intercultural
sensitivity of Australians. This has implications for
Australian organisations planning to enter China.
Australian organisations can overcome these intercultural
barriers through their awareness of them and by
proactively managing the relationship with their Chinese
counterparts.
The respondents perceive that a free trade agreement
between Australia and China will have at least some
impact on corporate environmental managers and
environmental consultants in Australia, both positive and
negative (Table 4). A free trade agreement would create a
favourable context for environmental goods and services
transfer, and ultimately enhancing profits of Australian
companies. However, Australian corporate environmental
managers are concerned about lower operating standards
in China (than Australia) and the likelihood of the further
diminution of Australian-based manufacturing.
The barriers presented in this article, in particular those
related to the Chinese regulatory system, will act in effect
as a non-tariff barrier to market access which a traditional
free trade agreement between Australia and China is
unlikely to resolve. Any free trade agreement between
these two countries will need to incorporate measures
that address the less tangible non-trade barriers.
It is likely that Australia (and other developed countries)
have under-estimated China's technological capacity.
Australian manufacturers will need sustained reliance on
their innovative skills if they are to remain competitive,
with or without a free trade agreement with China.
I. describes the basic force that holds the personalised networks of influence among Chinese.
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10. Table 4 Perceived impacts of a free trade agreement between Australia and China
Corporate
environmental
managers
Increase the responsibilities of Australian environmental managers to manage
facilities in China, which will be quite difficult to do to a standard acceptable
in Australia, primarily due to cultural differences
supply or treatment
technologies or advice,
internal environmental
consulting or corporate
environmental advice, and
renewable energy
technologies and advice.
Lower the standards that Australian companies work to, in order for the
Australia to stay competitive (with China)
Easier to develop business in China and make more profit
Provide short term hope (for Australian businesses)
Create a positive context for trade
It will become necessary to export best practice to collaborative enterprises in
China
The value of environmental
goods and services transfer
activity ranged from
US$! 0 000 to over US$!
million for each of the
More Australian manufacturing businesses will diminish as they have done
over recent years under the reduction oftariffbarriers but at a far greater rate
While the free trade agreement provides a rules-based framework for
engagement, cultural issues will still dominate
Australian examples. Of
these, 15 were va! ued at
US$50 000 and over.Environmental
consultants
It sets a scenario that there is a special relationship between Australia and
China, which is the basis for developing the required personal and
professional relationships
Seventy five percent of
environmental goods and
services transfers occurred
Provide Australian consultancies with more business opportunities'
I. This was stated by two consultants.
Regardless, progress towards effective intellectual
property protection will still be perceived by Australian
companies as an important consideration in determining
whether a free trade agreement can deliver real market
access in China.
Examples of Australian experience
Nineteen of the survey respondents (30 per cent)
identified themselves as having been directly or
indirectly involved in the transfer of an environmental
good or services to China. The majority of the activity
(65 per cent) was in provision of environmental
consulting services provided to other companies, water
during 1996-98, though 20
per cent were either in
progress or completed in 2005. The examples of the
Australian experience reported were most prevalent
between 8-10 years ago; however, the total value of the
environmental goods and services transferred across all
the Australian examples represents a total value of over
US$! 0 million, indicating they are likely to be
representative of the range of environmental goods and
services transfers to China. Of the successful examples of
environmental goods and services transfer, 80 per cent
were from Australia, representing over US$2.5 million,
indicating the Australia to China transfer activity was
well represented. The responses describing the Australian
experience suggest that Australia has an important role in
assisting China to meet its demand for environmental
Table 5 Barriers faced in transferring environmental good and services in the
Australian examples'
goods and services.
The range of environmental goods and
services transferred in the Australian
examples is consistent with the needs
of China as it expands and its
economy continues to grow,
particularly general environmental
consulting services which include soil
and groundwater assessment. The
demand for 'end-of-pipe' treatment
technologies for wastewaters from
manufacturing processes, as well as
contaminated site management, and
for reducing greenhouse gas
emissions, is expected to continue to
increase as environmental legislation
in China eventually becomes more
Getting the Chinese to understand what the technology could and could not do
Lack of educated persons on the ground that could service the equipment2
Availability ofskilled Australian personnel in China
Seeking capital for the technology transfer
Graft and corruption
The Chinese essentially wanted monetary input
Differences in expectation of work processes between the Chinese and foreigners
Competition from local providers [in China] of notionally similar technology that was
markedly inferior but much cheaper
Internal and local politics in China
Understanding the legal processes in China
Language problems
Lack of cultural understanding by both parties
'·Respondents were not asked to distinguish between trade and non-trade or non-tariff barriers. These are not
ranked as they are individual responses.
"·This was stated by 2 consultants.
December 2007
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11. effective. As the Australian examples showed, it is
apparent that renewable energy technologies and advice
are also likely to become increasingly important in the
mix of environmental goods and services being exported
to China from Australia. This is important as Australia
has these technologies and experience with them,
including solar, wind, geothermal, and biofuels. Other
successful environmental goods and services transfers to
China were in environmental education and training,
advice to companies in the area of corporate social
responsibility, energy management, sustainable
agriculture, air pollution control and the development of
an environment investment program.
The most common barriers observed from the Australian
examples were the absence of skilled personnel where
environmental goods and services were being used, local
protectionism, legal, financial, and intercultural barriers
(Table 5). Respondents overcame the barriers when
common aims for the project were established with the
Chinese, communication between the Australian and
Chinese team members was effective, trust and goodwill
was present, and when the Australians demonstrated
intercultural sensitivity (Table 6). Despite the lower
emphasis given to this factor in the survey, these findings
suggest that intercultural sensitivity is important in
ensuring technology transfer occurs effectively and
should not be overlooked by vendors.
Conclusions
This survey confirms that Australian companies (and
companies from other developed countries) have
concerns with: China's lack of safeguards to protect
intellectual property; the lack of policing of laws across
China; the fragmentation and bureaucracy of the Chinese
government; and the importance of establishing the
appropriate level of ownership of new businesses (for
transferring environmental goods and services to China).
Intellectual property loss may be overcome at least to
some extent by only transferring those environmental
goods and services that are difficult to replicate, such as
those involving the provision of high quality consulting
and advisory services, and the product of strategic
alliances (i.e. synergy generated between collaborating
vendors or partners in a supply chain). Training and
awareness in intellectual property rights will be critical
for long-term changes in attitudes to intellectual property
rights in China; and Australian and other western
organisations will have a vested interest in seeing that a
proportion of China-derived profits are put back into this
activity locally in China. A reliable source of legal advice
on the changing legal landscape in China will also be
critical, as will knowing the key players in both the
industry and within the relevant Chinese government
authorities (regulating that industry). Establishing the
appropriate level of ownership is important, and ensuring
that skilled operators are available at the point of use of
the technology. These barriers present high priority areas
for Australian and other western vendors to consider
when planning their market entry into China, and for the
Australian Government to consider when establishing the
terms of the pending free trade agreement.
Intercultural issues and modernisation of state-owned
enterprises were rated as medium priority barriers. A
reason for this ranking is that Australians sense the
importance of intercultural sensitivity and manage these
barriers as part of their technology transfer activity to
China. However, it was evident that absence of effective
training of both the Australian team involved in the
technology transfer activity and of the local Chinese
organisation co-ordinating distribution, sales or
implementation of the environmental goods and services,
is likely to be a potential constraint in the ongoing
success of environmental goods and services transfers.
This issue of intercultural sensitivity was not examined in
depth in the survey and therefore is not dealt with further
here. Modernisation of state-owned enterprises was not
considered by respondents to be a significant barrier.
Potentially this transformation in China is perceived as
opening a new area for marketing of Australian and other
foreign environmental goods and services.
Table 6 How barriers to transfer of environmental goods and services were
The study showed no unique aspects in
the constraints to environmental goods
overcome in the Australian examples
Establishing common aims for the project
By good communication in English and a visit to the customer in China
Good communication, testing assumptions and establishing trust with the Chinese
Spending time and putting the effort in at the grass roots level
Good will demonstrated by all parties
Demonstrations of the equipment to the Chinese
Lack ofcultural 'arrogance' from the Australian team and awareness (within the
Australian team) ofthe need to be sensitive to different nuances (in the Chinese culture)
and services technology transfer to
China: the barriers identified appear to be
generic to a wide range of types of goods
and services transferred to China. Further
research would be required to ascertain if
there are any unique attributes of the
transfer of environmental goods and
services compared with that of
technologies in general.
260 AUSTRALASIAN JOURNAL OF ENVIRONMENTAL MANAGEMENT-Volume 14
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12. Apart from weak laws leading to unfair competition, the
impact of the constraints identified on actual
environmental protection in China is unclear. If there
were any effects of constraints on environmental
performance (including rate, extent and/or type of
environmental goods and services adopted), making this
assessment was beyond the scope of the study.
Modernisation of state-owned enterprises is another
barrier that may have a direct impact on environmental
protection in China, as the economic incentive to improve
the business performance of state-owned enterprises is
also likely to improve environmental performance of the
same organisations if low or non-polluting technologies
and services can be implemented as the state-owned
enterprise facilities are upgraded. Similarly, intercultural
issues and in particular the perception by the Chinese that
environmental problems are only of minor concern
(Harris 2006) are also likely to limit transfer and
adoption of environmental goods and services in China.
Further research is required to establish to what extent
the identified constraints are impacting the protection of
the environment.
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