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Over the past years of escalating trade disputes between China and the US, the latter has repeatedly highlighted a practice it considers anathema: technology transfers that US companies need to offer to their Chinese collaborators if they want to do business in the country. Donald Trump railed against them and Joe Biden branded them “unfair.” Across the other side of the Atlantic, European Commission President Ursula von der Leyen explained that such practices by China threaten Europe’s “economic and national security” and necessitate multipronged “de-risking” measures to unlink the two economies. In this framework, technology transfers are being “forced” by a major competitor.
But the demand that foreign investors help lower-income countries move closer to the technological frontier in exchange for facility siting or accessing their labor markets is nothing new. In fact, most now-industrialized countries employed precisely such policies when they were at lower levels of industrialization.
The indiscriminate criticisms of technology transfers are especially misguided in the current juncture, when the world is attempting, however haphazardly, to change economic practices in order to curb climate change. In the global North, the new consensus on climate action has meant developing industrial policy packages—mainly consisting of subsidies and incentives—to spur the technological development and production needed to decarbonize the economy.
Most countries in the global South do not have enough financial firepower to pursue this kind of industrial agenda. Instead, they have to rely on a regulatory approach to welcome foreign investment and ensure that such investment transfers the knowledge necessary for Southern economic actors to innovate and move up the value chain. This was precisely the approach used by Japan, Korea, and Taiwan, some of the twentieth century’s fastest developing economies, when they regulated the activities of multinational companies to ensure the transfer of technologies and the creation of domestic virtuous cycles of technological spillovers.
The global North’s case against technology transfers takes issue with such a state of affairs. By opening themselves up to international trade through joining the World Trade Organization (WTO) and signing trade treaties, global South countries—the argument goes—have committed to respecting intellectual property rights, which are there to ensure that innovators benefit from their inventions, and so promote technological development. For this reason, “forcing” any technology transfer is seen as “uncompetitive” behavior that should be penalized. The current regime of intellectual property rights thereby enshrines a system that prevents development, rather than fostering it.
Intellectual property rights and the limits to technological development
Countries in the global South have criticized the strict trading regime that prohibits their technological advancement. This regime originates in the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, signed in 1995 and enforced by the WTO. The agreement set out an ambitious agenda of aligning national intellectual property protections with global benchmarks. This system—backed by countries in the global North—has been broadly successful at diffusing these protections around the world. But it has also stifled technological upgrading in the global South by increasing the costs of technological acquisition. For these reasons, developing countries waged challenges to intellectual property rights restrictions, demanding equitable access to transformative innovations.
The “access to medicine” campaign was perhaps the most important—and successful—instance of such a challenge. The rapid spread of HIV/AIDS in Sub-Saharan Africa in the late 1990s and early 2000s pointed to how the intellectual property rights regime effectively prevented access to very expensive, patented antiretroviral drugs. Multiple campaigns by states and civil society took issue with this state of affairs and started mobilizing to promote access to medicines for all. Challengers leveraged the flexibility allowed by international trade laws for the promotion of public health. Compulsory licensing mechanisms, whereby a government can compel a copyright holder to license their intellectual property, enabled challengers to allow the manufacture of patented medicines. Developing countries still make use of this tool: as recently as April 2024, Colombia issued its first-ever compulsory license for HIV treatment medication.
The benefits of the relaxation of intellectual property rights and technology for global South countries went beyond deaths prevented and money saved. These exemptions also contributed to the rise of domestic innovation and industrial development. For example, India used its phase-in period for compliance with trade law to become a global generic drug manufacturing powerhouse, thereby spurring subsequent investments and innovations even after this period ended. The pharmaceutical industry in East Africa relied on the same flexibilities of international trade law to manufacture generics and become globally competitive.
The criticisms waged against the TRIPS system and the effective resistance exhibited by the access to medicine campaign have a renewed significance in light of the existential threat of climate change. The 2023 Havana Declaration of the Group of 77 developing countries and China noted that “technological barriers […] limit adaptation to climate change and the implementation of the National Determined Contributions (NDCs) of developing countries,” and called for the urgent scaling up of technology transfers and the exploitation of “flexibilities” in the intellectual property rights regime.
Just as life-saving medicines were deemed essential for public health, green technologies are vital for environmental sustainability and global public welfare. Knowledge to manufacture battery cells, electric vehicles, solar photovoltaic cells and wind turbines, should be understood as critical to green industrialization pathways. The principle of lifting intellectual property rights to facilitate access to essential goods can be extended to green technologies to support the green transition in the global South.
Technology transfers at the climate technological frontier
Climate change presents distinct challenges for how to think about the role of technology in development. The urgent call to reduce carbon emissions requires the rapid scaling of technologies that do so—in this sense, climate change has pushed the technological frontier of the contemporary global economy outwards. The consequence is that every country is now a developing country, playing “catch-up” to the technological cutting edge.
The assumptions of comparative advantage in mainstream, neoclassical economics imply a neutral attitude toward the location of the production of such green technologies. Given this view, which has dominated global debate over climate policy, the most important policy lever to pull is that of prices. Under this logic, manipulating prices through a tax on the consumption of carbon-emitting technologies will generate sufficient supply of green technologies to replace them.
But the recent rise of industrial policies, particularly in the global North, is born of a recognition that critical technologies for decarbonization cannot be scaled merely by nudging consumer preferences. For Northern nations, this has not meant a turn to full-scale industrial planning, but new regimes of tariffs and subsidies are, however, being used to aid new and often unproven technologies in reaching market maturity. There is an emerging agreement among Northern governments that this is part of their role in the task of decarbonization.
And yet, even the development of some of the key green energy technologies shows the limits of the emergent, quasi-protectionist policy toolkit—and demonstrates the critical importance of flexible intellectual property rights and technology transfers for their scaling.
Perhaps most prominent is the rise of China’s solar photovoltaic panel production, which now accounts for more than four-fifths of the global total. While other technologically advanced economies in the global North increasingly see this development as a threat, it is, in many ways, a success story of global cooperation. Jonas Nahm, a political scientist and former member of the White House Council of Economic Advisers, found that while much of the research and development of solar photovoltaic technology was conducted in the United States, this research was translated into modular production techniques by German firms, and ultimately, it was Chinese firms that were able to take both this basic research and modular production know-how to mass production. Similarly, energy scholar Joanna Lewis has documented the role of research partnerships between US and Chinese institutions to enable such scaling dynamics for renewable energy technologies. A key consequence of this process of technology sharing is that China has now been able to localize basic research and development around critical technologies for decarbonization.
The Chinese experience of rapid economic growth is seen as a model for developing countries. The longstanding demand for development in global climate politics was once codified by the UN Framework Convention on Climate Change, which articulated the principle of “common, but differentiated responsibilities.” Countries in the global South will be the site of the majority of the flow of future carbon emissions, especially if they want to grow their economies and incomes. The longstanding goal of development through upgrading one’s position in global value chains has deeper relevance as value chains are being reshaped by the rise of mass production for green technologies.
The model of transnational green technology research and joint venture partnerships that enable China’s continued economic dynamism are therefore justifiably attractive to much of the world. Further, the higher value components of global supply chains are located in the knowledge components of these technologies; precisely the research, development, and design competencies that China has been able to localize through strategic partnerships with rich countries like the US and Germany. Taken together, this suggests a critical role for green technology transfer to shape a meaningful global development agenda. Credible partnerships for development in an era of green industrial policy will necessitate corporate joint ventures and research cooperation.
Cutting off the technological frontier means cutting off development
Prior to China, nearly every case of rapid development has relied on knowledge partnerships to move up global value chains. The experiences of Korean and Taiwanese engineers in European and US firms are a critical part of the “Asian tiger” development story. These cases all suggest that active state intervention targeting growth in the scale of production is critical for exponentially expanding markets for goods that enable a rapid energy transition.
The growth of Chinese firm BYD, one of the world’s largest sellers of electric vehicles (the largest, depending on the financial quarter), is among the most high profile and politically explosive instances of this today. The firm has become the poster child of new tariff schedules raised by the US and the European Union over the past two months, in anticipation of its low-cost, high quality electric vehicles that are being produced at seemingly unmatched capacity.
BYD’s success is rooted in technology transfers for decarbonization. As shown by sociologist Kyle Chan, who documented the story of Tesla’s Shanghai factory, the US firm worked with a Chinese equipment manufacturing firm and an Italian casting machine maker to produce the world’s largest “casting” machine—one which enables Tesla “to make an auto component as a single, large continuous piece instead of dozens of smaller pieces welded together.” The collaboration generated an ecosystem of firms that spread this innovation to all the major Chinese EV makers.
Some of the most successful Chinese electric vehicle firms are themselves now going abroad. For example, BYD is at various stages of completion in establishing major manufacturing operations in Brazil, Indonesia, Mexico, and Hungary. At a groundbreaking ceremony for its new factory in the state of Bahia in Brazil’s impoverished northeast, the company’s CEO for the Americas, Stella Li, emphasized its intention to create “Brazil’s silicon valley” through founding a research and development center in the state. By March of this year, Li had announced further investments in the Bahia factory complex to ensure that at least 25 percent of components for the vehicles would be produced in Brazil. The symbolism of the moment was striking: BYD’s manufacturing complex in Bahia will take over a space that was built and previously operated by the US firm Ford, before it left the country in 2021.
Developing nations with strong manufacturing potential are looking for access to the high-value-added knowledge components of green technologies. In areas where China is establishing a lead in green technology, such as electric vehicles, the country’s firms are at least taking some tentative steps toward enabling local production as they expand into key developing-country markets.
The turn in the US and EU toward establishing prohibitive tariffs on Chinese EVs suggests a potential perversion of their own green industrial policy goals. If Chinese firms are further ahead of the technological frontier for these critical goods, then the US and EU may even be impeding access to cutting-edge green technology at home. Zhu Min, a member of China’s Five-Year plan committee and former IMF deputy director, recently put the Chinese agenda on green technologies in stark terms. “It is time for China to export technology,” he told the Financial Times, citing electric vehicles and batteries, where the country has a lead, as examples.
The road ahead
Because global technology transfers are about redistributing knowledge, their implementation is highly political. Countries in the global North want to protect the intellectual property of their companies that, in turn, lobby extensively to secure such high-level support. But the politics of preventing technology transfers clash with the stated objective of most countries in the world, whether high-income or developing ones: introducing and diffusing green transition policies to ensure a decarbonizing global economy.
Green technology transfers can help spur the adoption of cleaner innovations and production processes around the world. Yet, they are systematically blocked by an intellectual property rights regime that does not recognize climate change as an existential threat, and through the resistance of global North governments that want to maintain a competitive edge against would-be competitor countries. The ensuing zero-sum “equilibrium” becomes one of limited transfers, trade wars, and recriminations that degrade global governing institutions and increase global conflict.
In terms of green technological upgrading, the needs of the global South are largely ignored. Washington has increasingly come to recognize this pattern. For example, former National Economic Council Director Brian Deese recently wrote about the need for a “Green Marshall Plan” to spur global development. Green technology transfers can simultaneously aid the spread of knowledge that will facilitate decarbonization, introduce climate change mitigation policies, spur industrial development and thereby reduce international inequalities, and reduce prices for green technologies around the world.
Under the Biden administration in the United States, the greening of industrial policy was rife with the parochial and contradictory impulse to make the country globally competitive while preaching emissions reductions to poorer countries abroad. The return of Trump to the White House will likely preserve the general orientation toward industrial policy that his first term inaugurated, with a more explicit disregard for the developmental prospects for the rest of the world—while dropping much of the green emphasis. But amid the current period of rethinking the global trading system, an extension of already present flexibilities—such as compulsory licensing mechanisms—to the case of environmental policy is one step toward ensuring that green technology transfers are institutionalized and contribute to positive-sum solutions on climate.
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