[ Interview with Eberhard Jochem, German Council for Sustainable Development ]

“The trade in used capital goods must be regulated”

Professor Jochem, how important are used capital goods for the developing countries?
They have great economic significance because most developing countries lack capital for new equipment or vehicles. An extreme example is India, where the ratio of used goods is about 75 per cent of all capital goods imports.

The German Council for Sustainable Development warns that used capital goods could also put development at risk. Why is that so?
That applies to goods, which are relatively intensive in environmental terms or sensitive in terms of safety. In Mexico, for instance, we once discovered a dry-cleaning plant from the USA which dated from the 1950s and was run with volatile petrol in an open process – and was operated by workers who were smoking. Many used goods for basic industries are dubious because they seriously pollute the environment. In the case of capital goods and vehicles, we also worry about the safety and health of the people who operate them.

The Federation of German Industry argues that used capital goods from industrialised nations are safe because usually they more than meet the environmental and safety standards of poor countries.
On the one hand, that is correct, but on the other there arises the fundamental question of how technical progress in the developing countries is to take place. For an incremental approach, used capital goods are perhaps the right choice. But very old capital goods are more harmful than beneficial in certain sectors if bigger development steps are to be taken, in the sense of replacing outdated equipment with modern technology that is as efficient and clean as possible.

But poor countries do not have the money for modern technologies. Who is to pay for replacing the questionable capital goods?
That is a task, which, for instance, the World Bank and the regional development banks should address much more. In addition, the issue of replacing out-of-date technologies in the developing countries should play a greater role in granting export credit securities.

How important is the used capital goods trade for the exporters?
The selling of equipment that has already been written down can earn good money. Also, its export is often coupled with a service contract. And if the buyer should want to reinvest, the exporter can take advantage of the business relationship and offer new technology.

What measures would contribute to a used capital goods trade that was friendlier to development and environment?
It is important that the exporters provide full information on the technical specifications of old capital goods concerning, for instance, energy requirements or emissions. Secondly, there must be well-trained people in the recipient countries who can evaluate and interpret this information correctly. It would be good if exporting companies would commit themselves to certain standards – such as scrapping or upgrading machinery. For their part, the developing countries should think about criteria governing the import of used capital goods. In a number of countries, for instance, motor vehicles above a certain age may no longer be imported.
Questions by Tillmann Elliesen.

Further information:
German Council for Sustainable Development (Ed.): The Export of Second-Hand Goods and the Transfer of Technology – An Obstacle to Sustainable Development in Developing and Emerging Markets? Berlin, 2003. On the web:
www.nachhaltigkeitsrat.de/documents/studies/index.html