EU Ahead of US in Linking Climate Change, Trade, Panelists Say

PHILADELPHIA -- While the intersection of trade and climate change isn't yet massive in terms of policy, a CBP green trade official noted that climate change is already affecting the transport of goods.

The low water levels of the Panama Canal, the Rhine and the Mississippi River due to climate-exacerbated droughts is a cautionary tale about why green trade matters, said Lea-Ann Bigelow, director of green trade at CBP. She said the agency wants both to strengthen environmental enforcement by stopping wildlife trafficking, the import of illegally harvested timber and the import of illegally mined metals, and to incentivize green trade through "meaningful trade facilitation benefits."

Other panelists at a March 28 discussion of the global outlook for green trade at the CBP Trade Facilitation and Cargo Security Summit were looking for even more basic advances -- a global harmonization of definitions. Jason Bernstein, director of global affairs at the American Chemistry Council, said the ACC is hoping countries around the world can develop common definitions of "waste" and "feedstock" to help plastics manufacturers and recyclers.

The failed environmental goods agreement at the World Trade Organization was on the minds of panelists. Bernstein said countries have moved away from reducing tariffs on environmental goods.

The EU is the most advanced in terms of trying to link tariffs and the environmental impact of imports, and it's using a carbon border adjustment mechanism to hike tariffs on certain goods with high carbon footprints (see 2310020037).

Peter Young, deputy head of the trade and agriculture section at the EU Embassy in Washington, said that while U.S. stakeholders are watching CBAM closely, the mechanism shouldn't change trade flows much between the U.S. and the EU because the commercial impact is smaller than in the EU's new deforestation regulation. There is "very little trans-Atlantic trade" in the sectors where CBAM applies, such as steel and fertilizers.

The EU is requiring exporters of goods made from wood to document that the wood didn't contribute to deforestation, a requirement that concerns advocates for the American industry. A quarter of the Senate signed a letter saying that 42% of the wood fiber used by U.S. pulp and paper mills comes from wood chips, forest residuals and sawmill manufacturing residues -- wood sources that cannot be traced back to an individual forest plot (see 2403180054).

Young said the EU is hearing from soybean farmers and paper manufacturers with concerns about the deforestation certification for exports to the bloc.

After the panel, he told International Trade Today: "Basically we are open to dialogue with industry, with business, to understand what problems, if any, they have. We have the regulation coming into force. The message to stakeholders is: come and talk to us ... if you can't deliver the traceability that the regulation expects, then explain to us where the problem is, and we'll see what, if anything, can be done."

When asked if CBAM might expand to chemicals, a sector in which American exporters have more market share in Europe, he said "it's certainly a possibility, but it would have to be decided by the legislators." He said there is a review mechanism to consider adding more products to CBAM, and some politicians want it to expand to chemicals, "but it's not something you could say is already a part of a master plan."