The US broke global trade rules to try to fix climate change – to finish the job, it has to fix the trade system
But the law and Biden’s broader “buy American” agenda include measures that discriminate against imports.
- But the law and Biden’s broader “buy American” agenda include measures that discriminate against imports.
- But we believe the law also clearly violates international trade rules.
- Today’s trade rules are ill-suited for the climate crisis.
Building, then violating WTO rules
- The United States has shaped international trade rules more than any other country.
- In the 1940s, the U.S. proposed rules that were eventually largely adopted as the General Agreement on Trade and Tariffs, or GATT, a series of multinational agreements to reduce trade barriers.
- The most ambitious of the GATT agreements was the U.S.-instigated Uruguay Round of the 1990s, which created the World Trade Organization.
- Some WTO rules are vague, but others are crystal clear, including an unambiguous prohibition of subsidies contingent on the use of domestic products instead of imports.
- U.S. leaders might have been justified in begging for forgiveness after passing the legislation rather than asking for permission to violate trade rules.
The real concern: Rising protectionism
- Its promise to reduce global greenhouse gas emissions relies on the rapid diffusion of technologies, knowledge and finance across borders.
- Yet, its domestic subsidies may accelerate the adoption of trade barriers that inhibit these same cross-border flows, thus slowing progress on climate change.
- Indeed, the real concern might not be the opening salvo, but the shootout of growing protectionism that ensues.
An opportunity to modernize international trade
- More proactively, the U.S. can reestablish its commitment to trade rules by instigating a process to develop equitable reforms.
- High-level leadership from the United States would add considerable heft to the ongoing efforts to reform global trade rules.
- Of course, these trade tools would have to be managed carefully to avoid proliferating and exacerbating tensions.
- It may turn out that the United States did the world a favor by throwing off the shackles of outdated trade rules.
- That will depend on whether U.S. leaders take advantage of the opportunity to reframe the discussion around the country’s recent legislation as steps toward a modernized international trade regime that better aligns with the world’s climate goals.