Climate Summit

USTR speech on trade and the environment

Ambassador Katherine Tai spoke on April 15, 2021 at an event sponsored by the Center for American Progress (“CAP”). Her speech provided a glimpse into the Biden Administration’s expectation for the role trade can play in addressing climate change.

While the speech does not include any reference to a carbon tax or border adjustment mechanism to help address carbon leakage or call for a resumption of the Environmental Goods Agreement negotiations, it nonetheless provides an identification of some of the issues of pressing concern including illegal logging, over fishing (tied in large part to fisheries subsidies), and pollution of oceans (including massive amounts of plastic dumped in the oceans), air and water.

Amb. Tai’s speech also reviews the active engagement by the Biden Administration in pushing for greater ambition among trading partners in reducing emissions, including next weeks Summit on Climate. Special Envoy for Climate John Kerry has been meeting with world leaders ahead of the Summit to seek more aggressive action by major emitters. For the United States, legislation enacted to date and being pursued by the Biden Administration has the ability to make major contributions to reduced emissions by the United States.

Amb. Tai reviews the historic failure to include strong environmental protections in trade agreements and the need to change that going forward as well as reflecting on progress in the United States over the last fifteen years in addressing environmental issues in trade agreements. The world needs to do better. “Going forward, trade has a role to play in discouraging the race to the bottom and incentivizing a race to the top. We must conserve the resources we do have – and work with our trading partners to do the same – to both mitigate and adapt to climate pressures.” See USTR, Remarks from Ambassador Katherine Tai on Trade Policy, the Environment and Climate Change, April 15, 2021, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/april/remarks-ambassador-katherine-tai-trade-policy-environment-and-climate-change. Ambassador Tai’s full speech is copied below.

“Thank you, John, for that very kind introduction. You have worked tirelessly to protect the environment and stop climate change throughout your career. 

“Your leadership, and the great work of so many brilliant leaders here at the Center for American Progress, has fundamentally changed how our country, and the world thinks about these issues. 

“We owe you a debt of gratitude, and I know that we can count on your vocal advocacy in the days ahead.

“It’s an honor to join you today and lay out my vision for using trade policy to address one of the biggest challenges we face.  

“The science indicates that, the window of opportunity to prevent a catastrophic environmental chain reaction on our planet is closing fast. And the United States must be a leader in the collective effort to work toward a global solution. 

“From his first days in office, President Biden has taken action to restore American leadership. He and Vice President Harris have made clear that protecting our environment and addressing climate change are core pillars of the Administration’s Build Back Better agenda. 

“The President immediately rejoined the Paris Agreement and signed a sweeping Executive Order to begin tackling the climate crisis. The President made it abundantly clear that we will take a ‘whole-of-government’ approach to address this challenge – and that we’re going to re-engage the world from a position of strength. 

“As we do so, we will be mindful of our commitment to environmental justice in addressing climate change, recognizing that this collective challenge requires a collective solution. What we do here at home must be reflected in what we do abroad. Our domestic efforts cannot lead to the exportation of polluting industries to countries with lower standards.

“The historic investments in the American Rescue Plan are already helping to stabilize the economy and bring the pandemic to an end. The American Jobs Plan is the next step in our effort to reimagine and rebuild a new economy. 

“It will invest in our infrastructure, create good paying jobs, and position the United States to out-compete any other nation.  The President’s plan recognizes the critical nexus between these investments and the climate crisis, and it would support the innovation and technological breakthroughs that will make our country the leader in clean energy technology and jobs.

“These plans are only one part of our strategy. 

“Next week, the President will welcome 40 world leaders to a Summit on Climate to underscore the urgency – and economic benefits – of taking collective action.  The United States will also announce an ambitious 2030 emissions target as our new Nationally Determined Contribution under the Paris Agreement.  

“President Biden has urged leaders to use the Summit as an opportunity to announce even bolder ambitions.  Comprehensive action is the only way forward, and this challenge must be at the center of U.S. foreign policy, national security, and economic policy. 

“USTR sits at the intersection of all three areas, and I am honored to lead this agency and the dedicated public servants who will answer the call.  

“During my confirmation hearing, I made clear that protecting our planet would be a top priority. 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. 

“But 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. 

“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. 

“This is what people mean when they say the rules of trade promote a race to the bottom. 

“Fortunately, the investing community is demanding more information about companies’ climate and other environmental risks. CAP knows this issue well, having hosted Acting SEC Chair Allison Herren Lee just last month, as the Commission steps up its work on corporate disclosures around environmental and social governance. 

“Even as investors take a greater interest in companies’ environmental risk exposure, the multilateral trading system has no rules to address the corporate incentive to participate in the race to the bottom. Rather, the environmental protection measures of WTO members are exposed to challenge. 

“While countries can avail themselves of what amounts to an affirmative defense, that defense has proven difficult to invoke successfully. This is part of the reason why, today, the WTO is considered by many as an institution that not only has no solutions to offer on environmental concerns, but is part of the problem. 

“For many decades, efforts to integrate environmental concerns through trade agreements were largely dismissed as wrongheaded, bleeding heart attempts to incorporate “social issues” in the trading system. According to this line of thinking, environmental issues are either irrelevant, or tangentially related, to economics or trade.  

“The view that environmental issues are not an inherent part of trade ignores the reality that the existing rules of globalization incentivize downward pressure on environmental protection. This puts countries with higher environmental standards at a competitive disadvantage. That is not a social issue: it is an economic incentive. 

“It doesn’t have to be this way. 

“For nearly fifteen years, the United States has enjoyed bipartisan support for including basic, enforceable labor and environmental rules in bilateral and regional trade agreements. This bipartisan support exists precisely because these issues are economic, not social. 

“The goal is to ensure that we and our trading partners are engaged in fair competition that does not suppress environmental protection. The United States has been, and remains, the leader in rewriting trade rules so that they move us toward this model of fair competition. 

“USMCA is the most recent example of our own evolution. The updated agreement now includes the most comprehensive environmental standards of any U.S. trade agreement – and, I would argue, any trade agreement. Critical environmental provisions reflected in the USMCA include strong rules to address:

“•    wildlife trafficking, 
“•    illegal logging and fishing, 
“•    fisheries subsidies 
“•    marine litter, and
“•    air and water pollution

“I am all too aware that however laudable the rules, they must actually be enforced. 

“Environmental groups have complained for years that chronic lack of enforcement of these rules fundamentally undermines the effort. They are right. 

“I am committed to enforcing the rules of USMCA and our other agreements to ensure not only that we follow through on our promises to protect the planet, but that we protect workers against this kind of unfair competition. 

“And while I think the United States, Mexico, and Canada should be proud of USMCA’s progress, I know that the agreement does not go nearly far enough in addressing the economic costs of our environmental challenges through trade.  The most glaring omission is the failure to explicitly acknowledge climate change.

“Going forward, trade has a role to play in discouraging the race to the bottom and incentivizing a race to the top. We must conserve the resources we do have – and work with our trading partners to do the same – to both mitigate and adapt to climate pressures. 

“Based on years of experience pushing forward with environment rules in trade, there are two practical issues that immediately come to mind: putting a stop to illegal logging, and addressing overfishing that is destroying the marine ecosystem. 

“We have made some progress on illegal logging and the associated trade in illegally harvested timber products in previous trade agreements and through various regional dialogues. We can do more. 

“The forests are our planet’s lungs, and we should use trade policies and trade enforcement actions to protect them. But we have to be mindful that we will only truly address the global scale of this problem through global rules. 

“We have also started to address fisheries and our oceans in our trade agreements, whether through disciplines on the massive subsidies that promote overfishing, or through provisions that address the millions of tons of plastic and other forms of pollution that are destroying the marine environment. But again, we will only truly address the global scale of the problem through global rules. This is why the fisheries negotiations at the WTO are so critical.

“Beyond disciplines that discourage harmful behaviors, we can also create rules that promote positive ones. 

“For climate mitigation, 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.

“We need a strong, diversified, and resilient supply chain of electric vehicle batteries in America to meet the growing global demand and to expand U.S. manufacturing of clean energy vehicles. This settlement puts the country in a stronger position to drive innovation and growth of clean energy technology.
 
“As we consider strategically devised supply chains and trade in environmental goods, we must also be mindful that using clean energy throughout the supply chain is an essential, and perhaps underappreciated, element of delivering on our commitment to address the full range of practices that compromise the climate.

“For too long, the traditional trade community has resisted the view that trade policy is a legitimate tool in helping to solve the climate crisis. As we have so often seen with labor issues, there is a certain refuge in arguing that this is all a question of domestic policy, and that we need not tackle the daunting task of building international consensus around new rules. 

“But that dated line of thinking only perpetuates the chasm that exists between the lived experiences – and expectations – of real people on the one hand, and trade experts on the other. My job is to bridge that chasm and push for trade reforms that translate into meaningful change in the lives of farmers, ranchers, factory workers, parents, children – not just in the United States, but around the world.

“Many of these people – and many of our businesses – realize that tackling climate change and our future prosperity are connected. 

“For example, climate-friendly and sustainable agricultural production is essential to meeting our climate and sustainability goals. Our farmers and ranchers can lead the world with innovative carbon conservation practices. Secretary Vilsack has proposed ambitious ideas, including expanding the use of cover crops and making carbon capture a mainstream conservation practice. I am eager to work with him to help make these practices the new global standard. 

“I am also fortunate to be working with a strong Biden-Harris team of visionary leaders charting this course on climate change. Special Envoy Kerry, Gina McCarthy, the President’s National Climate Advisor, EPA Administrator Regan, Energy Secretary Granholm, Commerce Secretary Raimondo – and many more dedicated public servants across the administration are committed to making a difference. 

“CAP research has highlighted many of the ideas these colleagues have brought to national climate policy from innovative state governments– North Carolina, Michigan, Connecticut, and more.

“But as I close my remarks I cannot forget arguably the most important voice in this effort. You. 

“From day one, I made it clear that we are not going to do business as usual.  I’ve challenged my team to be thoughtful and innovative in building trusted relationships with stakeholders who haven’t had an established seat at the table or been at the table at all.

“We want a robust dialogue.  We expect justice and equity to be on everyone’s agenda, and we welcome creative solutions to the massive challenges we face with the environment, with climate change, and trade as a whole.  

“Your voice, your perspectives, your priorities, and your values matter. We need to hear from you. We need to lean on your expertise, and we want your ideas.  

“By engaging new – and all too frequently silenced – voices and encouraging fresh, collaborative thinking, we can forge consensus and find solutions that we never knew existed.  Together, we can foster U.S. innovation and the production of new technology, while promoting resilient renewable energy supply chains.

“This work has the potential to unlock new opportunities for U.S. companies who can help reduce emissions and adapt to climate change.

“Our bold, collective action can create enormous new economic opportunities and good paying jobs for all Americans while building the industries of the future.  And we will not overlook our obligation to take on centuries of discrimination, oppression and bigotry. Racial justice and equity must be central to the conversation. 

“The intersection of environment, climate change, labor, and trade are key to our collective ability to compete, innovate, and create livable wage jobs that will provide hope and opportunity for future generations and underserved communities.  This is why I believe that trade policy is an essential and strategic part of the solution to these huge challenges.  

“I look forward to working with all of you in the days ahead to meet the moment.  I’m ready, and I hope you are too.

“Thank you.”

Conclusion

The Biden Administration is making a major effort to improve the U.S. environmental performance and help lead the global effort to save the planet from global warming. The Administration approaches major issues from a “whole of government” view point. The U.S. Trade Representative yesterday presented a glimpse of how the U.S. will seek to use trade agreements and trade negotiations to support environmental sustainability.

Having watched GATT Contracting Parties and the business community dismiss the need to address labor and environmental aspects of trade during and after the Uruguay Round, I can only say “it is about time for meaningful action”. Trade can and must be examined through an environmental sustainability lens. The world having let climate change spin out of control has a limited time to make the changes needed to ensure a sustainable environment for future generations. It will take a whole-of-the-world focus and engagement to make a difference.