Economic Policy Economic Policy
by Anthony Berick on February 24, 2021

EU and US might be joining hands for the better trading ecosystem

For four years, trade irritants mounted as we lived under the threat of a fully-fledged transatlantic trade war – never more than a late-night tweet away. A rare moment is here at last to rejuvenate the way global trade operates, writes Cathy Novelli.

The Euroatlantic war has been ongoing for ages, and despite many different integrations and many different strategies, there has not been a single thing to help to sort things out. The compromise is the necessity that comes together with successful negotiations and trading. It is one of the most essential things to underline.

Cathy Novelli is a senior adviser at Shearwater. She is a former U.S. Under Secretary of State for Economic Growth, Energy and the Environment, Assistant US Trade Representative for Europe and serves on the Board of the National Wildlife Federation.

Now once again, in Europe as in the US, we have governments that are fully committed to rules-based trade. That’s not to underplay the points of difference on both sides of the Atlantic. National interests and opposing approaches won’t magically disappear.

But we should not be distracted from the big opportunity – to reform and strengthen trade cooperation and dialogue in Washington, Brussels and London. China is one example. So is digital policy.

One area mentioned less often, but arguably more important than any other is climate change. President Biden’s decision to re-join the Paris agreement and appoint Secretary John Kerry as International Climate Envoy are important first steps, signaling to Europe and the world that the US is again ready to address this issue.

But there is a vital new front that now needs to be opened up in the drive to tackle climate change – international trade policy.

We all know that both open trade and the environment are critically important to human wellbeing. Yet they are often seen as adversaries. Environmentalists view trade, and trade agreements in particular, as facilitating environmental degradation on a global scale.

Proponents of open markets see environmental protection measures as a Trojan horse for economic protectionism. Both camps eye each other with suspicion. The time has come to unite trade and environmental policy in a deep, mutually reinforcing way. New international trade rules need to be developed. Policymakers need to start working across silos and be ready to challenge taboos.

Above all, we need robust and open-minded participation of trade and sustainability experts in the development of trade policy, as well as the private sector, NGOs and development officials. It’s eminently possible. But the meeting of minds needs to be borne out of conviction rather than convenience.

The US and Europe have always been the drivers of the system of international trade. Now they should jointly take the initiative to make this system sustainable and future-proof.

The creation of the World Trade Organization (WTO) and the United Nations Framework Convention on Climate Change (UNFCCC) are among the most important achievements of transatlantic cooperation.

They can be used as building blocks to develop new norms that enable international trade and the environment to operate together.

Two specific areas can be tackled immediately

Firstly, how do we ensure that countries committed to tough climate change rules at home don’t simply import carbon-intensive goods from overseas? There are numerous carbon border adjustment proposals on the table, ranging from a new system for trading carbon to market access incentives for goods and services that lower the world’s carbon footprint.

The US and the EU should take these proposals as their starting point and use them to hammer out a common transatlantic position on how to merge WTO rules with legitimate actions to increase environmental sustainability and reduce Co2 emissions. The incoming WTO director-general must also be ready to roll up his or her sleeves and think creatively to get this done.

Second, international development banks need to play a much more active role in tackling environmental sustainability. The US and the EU remain big players in most of these institutions, both regionally and globally. By joining hands, they can do more to establish better governance norms.

Development banks must do a much better job of evaluating the environmental impact of the infrastructure projects they fund. The US and Europe should establish the principle that proposals with innovative and sustainable approaches to development projects will be rewarded.

Infrastructure development and environmental sustainability can be fostered simultaneously. A true marriage between open trade and environmental sustainability is not only possible, it is essential to the survival of the planet and the future of mankind. The moment to arrange the nuptials is now.

By Anthony Berick

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