Is Climate Change a Threat to the International Trade System?
In a report issued by the Intergovernmental Panel on Climate Change last year, experts asserted that governments were not doing enough to avert the disastrous impending effects of climate change. These experts push for transformational change throughout the globe in hopes of preventing a climate catastrophe. One instance of transformational change could be implemented within the global trade systems: The long-standing status-quo of free trade and international governance by the World Trade Organization (WTO) could be amended to knock down trade barriers and equally treat foreign and domestic products to promote commerce. Now, however, world powers like the United States and Europe have departed from the norms of free trade by proposing subsidies, tariffs and other policies aimed at hastening the transition to green energy. While these policies and goals aim to limit emissions and help avoid global climate catastrophe, they have the potential to upend international trade systems and possibly do more harm than good.
The Biden administration’s new policy to subsidize green energy in the United States is a poignant example of how domestic climate policies can produce accidental consequences: the policy introduces tax credits for consumers who purchase American made electric vehicles and companies who purchase green energy equipment. However, officials from the EU claim that the American policy will destroy jobs in Europe and cause Europe to lose out on new investments in several industries. Therefore, in response, the EU has begun introducing its own taxes and tariffs to counter the American policies and protect their own industries. The fear that the American policy will harm industries domestically for other states is not only felt by the EU, but also by several other U.S. allies around the world. Despite international protest the policy has already been made and cannot be changed by the Biden Administration.
While the World Trade Organization was created to govern international trade systems and set international norms of free trade without discrimination, these policies enacted by the Biden Administration go directly against its charter, and the organization does not have the power to change them. Previously, the U.S. has snubbed the WTO’s ruling that the Trump era steel and aluminum tariffs violate WTO obligations and refused to repeal them, thus continuing policies that protect American domestic steel and aluminum industries. The Biden administration’s flouting of international trade laws presents an impasse to those seeking to avert climate change but also support their domestic industries' worldwide position in international trade. The United States’ ignorance towards global governance of trade does not bode well for the global trading system that has been in place for decades, as it shows clear indications of a departure from the promotion of free trade globally and a step towards protectionism supported by the issue of climate change.
In an effort to avert the impending climate disaster, states have begun to implement trade policies around green energy and carbon emissions that challenge WTO trade regimes and international trade norms. While helpful to domestic industries, individual states’ policies may be harmful to foreign allies and mark a departure from the global lowering trade barriers the WTO has supported over the past decades. Thus, this departure poses a threat to the today’s global trading system and could lead to greater protectionism, which may ultimately harm industries around the world.
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The views and opinions expressed in this article are those of the author and do not necessarily reflect those of the wider St. Andrews Foreign Affairs Review team.
