Climate change and environmental protection will be top priorities for Katherine Tai, the head of the USTR said this week during a conference with the Center for American Progress called “Greening U.S. Trade Policy”.
Tai said that Biden campaigned on making “protecting our planet” a top priority. She did not, however, touch on any plan for building renewable industries and creating millions of “green jobs” in the U.S.; a missed opportunity.
“For too long, we believed that trade liberalization would lead to a gradual improvement in environmental protection as countries grew wealthier from increased trade flows,” she said. “The reality is that the system itself creates an incentive to compete by maintaining lower standards. Or worse yet, by lowering those standards even further,” she said, presumably talking about environmental standards upheld by the U.S. and Europe.
She took a swipe at big, outsourcing companies, saying they “make sourcing decisions based on these artificially low costs, creating pressure on competing countries to…suppress environmental protection to attract investment. This is what people mean when they say the rules of trade promote a race to the bottom.”
President Biden will host some 40 world leaders next week a Climate Summit as part of his pledge to “work with allies” on issues deemed pressing and global. Biden is expected to announce an ambitious 2030 emissions target as our new Nationally Determined Contribution under the Paris Agreement.
Tai said the climate challenge “must be at the center of U.S. foreign policy, national security, and economic policy.”
CPA intends to hold the Biden administration to this promise. As it stands now, the U.S. outsources most of its pollution to Asia, led by China.
Tai said she believed investment funds would put pressure on companies, demanding more information on their climate and environmental risks. Most of this action comes from European sovereign wealth funds and a handful of others in the Environmental, Social and Governance fund category, best known by the acronym ESG. There are no real ESG standards. A wind turbine manufacturer in China is as likely to be in an ESG fund as Apple, which outsources nearly all of its manufacturing to Asia, where pollution levels are much worse than they are in the United States.
Here’s a Quick Solution
Tai specifically calls out over-fishing. Fishing is heavily subsidized in China and India.
We believe this is a problem that could be solved quickly through tariffs because we’re the leading global seafood consumer.
There is no sense waiting for allies on this environmental disaster waiting to happen. World Trade Organization talks on this subject have been going on for 18 years.
The U.S. could use the Generalized System of Preferences to selectively import seafood from countries that do not practice overfishing. One thing not to do would be to trade away manufacturing tariffs on India for a promise to cut fishing subsidies. CPA believes that would harm domestic manufacturers and drive seafood production out of the U.S., leading to overfishing in other parts of Asia to meet demand.
One thing notably missing from her comments this week was the placement of a carbon tariff on goods from polluting countries. If environmentalists are ever to be considered truly ascendant in trade policy circles, then carbon tariffs would be front and center. They are compatible with WTO law.
But if carbon tariffs are not part of the discussion, then we know the businesses most dependent on Asian supply chains (all of the major American multinationals) are still in the driver’s seat on environmental policy as it relates to trade.
“Nothing makes things happen like unilateral trade action,” said Michael Stumo, CEO of CPA. “It is more immediate than interminable diplomatic negotiations that last for years and require 160 countries to all agree. Greening American trade is fine, but the Biden administration needs to tell us what are his specific job goals and strategies for doing so?”