Environmental Goods Negotiations Might Be More Fruitful Outside WTO, Panelists, Congresswoman Say

Rep. Suzan DelBene, chair of the generally pro-trade New Democrat Coalition, told a webinar audience that reaching an international agreement to lower tariffs on environmental goods and services would be good for U.S. companies, since the U.S. has lower tariffs on these goods than the European Union and China. She said that the European Union and China both export more environmental goods than the U.S. does.

DelBene, D-Wash., was speaking before a Cato Institute panel on the prospects for renewing Environmental Goods Agreement negotiations at the World Trade Organization. She said the administration needs to evaluate why the EGA negotiations failed five years ago, and what can be learned by that. She suggested one lesson could be to start building consensus in the G-7, at the Organization for Economic Cooperation and Development or even just between the EU and the U.S., since she said the collapse of EGA talks "was orchestrated by China," even though it is the largest exporter of these goods.

Moderator and Cato trade analyst Inu Manak asked DelBene if, after her resolution on the negotiations (see 2104080050), the administration was interested in following through in Geneva. She said she has not seen a clear commitment to restart the negotiations, but that she was encouraged that there is a climate and clean tech working group as part of the EU-U.S. trade and technology council. The administration said that working group is looking "to identify opportunities, measures and incentives to support technology development, transatlantic trade and investment in climate-neutral technologies, products and services, including collaboration in third countries, research and innovation, and to jointly explore the methodologies, tools, and technologies for calculating embedded greenhouse gas emissions in global trade."

Maureen Hinman, a former negotiator on the EGA when she was director for the Environment and Natural Resources division at the office of the U.S. Trade Representative, said she agrees with DelBene that it makes sense to start the work in other fora, and that the U.S. can work with like-minded countries to define what goods and services should be on the list.

"One thing that I have proposed is for governments, the U.S. in particular, to start doing some analysis of what the impact of trade is on the environment," she said. For instance, if a product, such as a heat pump, is more affordable than a natural gas furnace, will it be adopted more, and thereby lower greenhouse gas emissions? She said that bicycles, which were on the EGA list in the past, probably would not reduce emissions even if tariffs were dropped on them, because the price of bicycles is not the barrier to getting more people to bike to work.

She said such an analysis would not only make the list more justifiable, it would also give the "trade community opportunities to point out the environmental benefits of [liberalizing] trade."

Agreeing to lower tariffs on environmental goods, as out of reach as that has been, is simple compared with the intersection of trade and climate represented by the carbon border adjustment taxes, she said. Hinman said that carbon border adjustment measures present a number of new challenges for trade policy -- how to measure carbon, how to measure the benefits to the environment from regulation, or the savings for businesses in the absence of regulation, and how to compare all of that to a price on carbon. "I think those are really complicated questions," she said.

She said the WTO is not the best place to tackle it. "GATT started out as just a few countries," she reminded listeners. She said that the urgency of climate change means countries can't spend 20 years arguing over it. That's a reference to the fact that an agreement on curtailing government subsidies that encourage overfishing has been debated in Geneva for 20 years without a resolution.

Panelist James Bacchus, a former U.S. representative and a former WTO Appellate Body chairman, disagreed, saying that border adjustments should be resolved within the WTO "instead of ignoring the WTO." Bacchus noted that China's president said a few days ago that he is open to negotiations about industrial subsidies and state-owned enterprises. Nikkei Asia quoted Xi Jinping as saying at an import expo: "China will take an active and open attitude in negotiations on issues such as the digital economy, trade and the environment, industrial subsidies and state-owned enterprises. [This is to] uphold the position of the multilateral trading regime as the main channel for international rules-setting, and safeguard the stability of global industrial and supply chains."

So Bacchus said China should ask for a three-year moratorium on climate tariffs while it negotiates on subsidies and state-owned enterprises. He said the Chinese are right to be distressed over the aggressive use of trade remedies in the U.S., but he said that the U.S. and others are right to be disturbed that a WTO Appellate Body ruling defined a "public body" that can be responsible for subsidies very narrowly.