USTR Says Globalization Leads to Race to Bottom in Environmental Standards
U.S. Trade Representative Katherine Tai said the U.S. has made progress on combating illegally trafficked timber in trade agreements and regional dialogues, and that global rules on that issue and on subsidies that lead to overfishing can be achieved. She also suggested that she could help negotiate global rules for agriculture related to carbon capture and the use of cover crops.
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But Tai, who was speaking to the Center for American Progress think tank about trade policy's role in advancing environmental goals, did not offer any solutions to what she called a “race to the bottom” in manufacturing goods in countries that don't curb pollution. It was her first speech since becoming USTR. “Many companies make sourcing decisions based on these artificially low costs, creating pressure on competing countries to ask if they, too, should suppress environmental protection to attract investment,” she said, but did not say how the goods produced in those factories should be treated at the border.
In a CAP panel after Tai's April 15 speech, the Sierra Club's Ben Beachy said no other country in the world imports as much embodied carbon as the U.S., with half our industrial emissions attributable to imported goods. He said there should be a carbon dumping fee on imports, but said it might be more workable for those to be imposed on the five most energy-intensive raw materials -- iron and steel, aluminum, cement, paper and pulp and chemicals and petrochemicals. He gave an example of how it could work: start with a calculation on how much carbon a ton of U.S.-made steel produces, and how much a ton imported from China produces, and the difference should be taxed. He said the European Union will have a different approach to its carbon border adjustment tax, and the two should be aligned as much as possible. “I think it's going to be complicated,” he said.
Aside from the complex issues of how to calculate carbon cost -- even domestic plants vary widely -- there's the question of how to treat finished goods that have aluminum content, for instance, cars. He said the U.S. and the EU are in conversations now on how far down the supply chain to impose the fees, but he argued you could address the lion's share of carbon leakage just through taxing raw materials.
During Tai's speech, she said the World Trade Organization is considered by many to be “part of the problem” of globalization increasing pollution, as members that try to protect their environment, they're challenged at the WTO. “While countries can avail themselves of what amounts to an affirmative defense, that defense has proven difficult to invoke successfully,” she said.
She did not say the U.S. would like to reopen negotiations for an environmental goods agreement in Geneva, but said, “developing innovative environmental technologies, goods, and services and cultivating strategic international supply chains for trade will be key. From clean energy, to low-emission vehicles, and other technologies, reliable access to these goods and services will be essential for our transition to net zero by 2050.
“That’s why I was so committed to helping resolve a big trade dispute between SK Innovation and LG Energy Solutions, two South Korean companies who make electric batteries here in the United States. The settlement, reached last weekend after significant engagement with a range of stakeholders, was a big win for American workers, the environment, and our competitive future.”