Copernican Revolution or Green Protectionism?

Abstract

Contemporary trade agreements include an ever-expanding set of environmental and sustainability commitments which, if violated, can lead to the imposition of trade barriers. Likewise, the world’s leading developed economies have begun rolling out green trade barriers in the form of product bans, border adjustments, and discriminatory subsidies. This chapter argues that the growth of sustainable trade policies reflects two phenomenon. First, it reflects the ordinary historical ebb and flow of unilateralism and multilateralism. While at some points in history multilateral institutions have taken the lead in shaping trade policy, at other times unilateralism has played a more important role. We are in the latter moment, but that does not mean that the former’s time has passed. Second, like all policies, green trade policies usually pursue multiple objectives. The fact that green trade policies often have mixed motives means that assessing their effects through a Puritan lens is a fool’s errand. The quest nations are on today is not for trade policies that promote sustainability in the least trade restrictive way possible. Instead, they are looking for policies that can generate the political support to address urgent environmental crises while still promoting economic growth.

Part I describes the growth of environmental provisions within trade agreements themselves, and compares that trend to the growth of domestic trade measures designed to address environmental problems in ways that arguably violate international trade agreements. Part II argues that, at least in the short term, this second kind of measures is likely to be more influential than trade and sustainability (TSD) provisions in trade agreements. This influence occurs in large part by shaping subsequent multilateral negotiations, as well as the implementation and interpretation of existing multilateral provisions. Part III argues that trade agreements and unilateral measures that raise (or authorize raising) trade barriers to tackle environmental problems are a key ingredient of addressing environmental problems and ultimately of preserving the system of liberalized trade.

Keywords: international trade, trade agreements, industrial policy, carbon border adjustments, deforestation, sustainability

JEL Classification: K32, K33