27 October 2020
Will Biden be the first sustainable trade president?
Published 07 December 2020
Pressure from progressive Democrats would perhaps compel President-elect Biden to adopt more stringent policies on trade sustainability. While on the surface, a more progressive approach to trade should give proponents of sustainability reason to celebrate, several practical downsides would soon become apparent.
Article originally published in the South China Morning Post.
Based on what President-elect Biden has already said about his approach to trade – along with what we know about the policies that the progressive wing of his party will push him to adopt – it is reasonable to wonder: will Joe Biden be the first sustainable trade president of the United States?
The concept of sustainable trade stipulates that trade needs to be pursued not only on the basis of economic gains. It must be conducted in a way that also strengthens social capital – for example by ensuring high labor standards – as well as by bolstering environmental stewardship. These three pillars – economic, social, and environmental – define sustainability.
A tilt towards sustainable trade?
The positions Biden has staked out clearly tilt towards greater sustainability in trade policy. He is considering, for instance, imposing a carbon border fee on imports from countries deemed to have insufficiently robust climate policies. The potential scale and scope of what would essentially amount to a carbon tariff would be an unprecedented fusion of trade and environmental policy. Biden administration negotiators would also seek to embed emission reduction commitments into trade agreements. Countries which fail to live up to their climate obligations could find themselves subject to trade sanctions. Again, an unprecedented move. Of potentially greater importance however are the more stringent policies Biden will be under pressure to adopt from progressive elements within his own party.
Progressives on the rise
As was revealed during the primaries, there is a battle for preeminence underway within the Democratic party between the more traditional centrist wing, personified by Joe Biden, and the energized progressive wing, led by Senators Elizabeth Warren and Bernie Sanders.
The desire to defeat Donald Trump was so strong, this battle was temporarily suspended in order to unify behind Joe Biden, who was judged to have the best shot at winning back the rust belt voters needed to secure electoral victory. This is precisely what happened.
With the election now over, expect the progressive wing to push aggressively to see their proposals adopted and enacted by the incoming Biden administration.
What would these policies look like? As a point of reference, consider some of the trade proposals advocated by progressive Democrats such as Elizabeth Warren: No country which provides domestic fossil fuel subsidies could enter a free trade agreement with the US. Any country desiring a trade agreement with the US must have a national plan in place to meet their commitments under the Paris Climate Accord and this would have to be verified by an independent commission. And multiple commissions would be established to investigate claims of labor violations in other countries. If these commissions concluded that any violations existed, the US Government would be obligated to initiate dispute settlement. These conditions would apply not only to future trade agreements – existing trade agreements would be renegotiated to reflect these requirements.
Obviously, President-elect Biden will not adopt the progressive wing’s policy recommendations across the board. Compromises will be inevitable and expect the more extreme proposals to be watered down or dropped entirely. But given the dynamism of the progressives and their growing influence within the party (the loss of Democratic seats in the House will actually strengthen the hand of the progressives – the Democrats who were ousted were by and large moderates) it’s more than likely that Biden will be compelled to take a few steps in their direction on trade.
Be careful what you wish for
While on the surface, a more progressive approach to trade should give proponents of sustainability reason to celebrate, several practical downsides would soon become apparent. Overly stringent sustainability pre-conditions would substantially limit the number of countries able to even commence trade negotiations with the US. For many countries, especially in the developing world, a prohibition on fossil fuel subsidies, for instance, would effectively paralyze their economy and obviously constitute a non-starter. This would certainly be true of the ASEAN giant, Indonesia.
Once commenced, these provisions would limit the ability to successfully conclude negotiations. The current trade agenda is already jam-packed with complex issues – ranging from digital trade, to industrial subsidies and state-owned enterprises – which make it immensely difficult and time-consuming to reach agreement. Adding a host of challenging and progressive new provisions would only further diminish prospects for success.
And once concluded, such provisions would limit the ability of the respective participants to actually ratify and implement the agreement. We’ve already seen civil society groups and average citizens up in arms over the impact of these more far-reaching progressive provisions in existing agreements. Such concerns have been enough to derail, at least thus far, what was expected to be Thailand’s quick and easy accession to the most progressive current trade deal, the CPTPP.
More broadly speaking, implementation of certain progressive sustainable trade policies would likely lead to further instability in the already teetering global trade system. Implementation of a carbon border fee, for example, would be challenged in the World Trade Organization by the leading oil producing countries, potentially resulting in yet another round of retaliatory tariffs.
Striking a balance
The pandemic has served to heighten awareness of the need for sustainable trade. Support for the principles of sustainability is broad-based and rising. And President-elect Biden has already made it clear that there will be no return to “business as usual” on trade under his administration as he weaves sustainability themes into his policy pronouncements.
While all this is encouraging, one should proceed with caution. We need to first recognize that not every problem in the world can be solved by a trade agreement. Be prudent about what you push to include. What is embraced from one perspective as a responsible sustainable trade policy is rejected from another perspective as nothing other than green protectionism – a cynical way for rich countries to use faux-environmentalism to throw up barriers to less developed countries. Such an approach is unlikely to whet the appetite of developing countries for trade agreements.
How then to proceed? The concept of sustainable trade is all about striking a balance amongst contradictory needs and the acceptance that uncomfortable trade-offs are sometimes necessary, at least in the short term. Less developed countries need to be provided with adequate policy space to make these judgments. Rigid criteria and one-size-fits-all requirements will backfire. Unrealistic expectations serve no one’s best interests and will only discourage participation in trade agreements. As the Biden administration pursues a more sustainable trade policy, it will be important not to let the perfect become the enemy of the good. It would be a sad irony if the first sustainable trade presidency resulted in a big step backwards on trade liberalization.