Trade deals have glaring omission: Environmental standards
Nearly 200 countries just announced a deal to implement the Paris Agreement – 2015’s multilateral effort to cut greenhouse gas emissions. It’s welcome news given recent reports that total carbon dioxide (CO2) emissions will reach record highs in 2018.
Unfortunately, cooperation on the environment still lags in other areas. The international agreements that govern free trade still fail to adequately address climate change.
Trade plays an important role in global greenhouse gas (GHG) emissions. To start, there are the emissions associated with production. Emissions from industry account for around 20 percent of GHG output in both the United States and the European Union.
And, as production has moved out of the OECD to elsewhere in the world, GHG output has increased in emerging markets. The European Commission reports that, between 2000 and 2015, emissions grew by 45 percent in Brazil and 130 percent in India.
The spread of production around the world also increases emissions from transportation. Parts and components cross borders multiple times before a finished product appears on our shelves. Each step in that process contributes a little more to overall emissions.
What are recent trade agreements doing to confront these trends? The answer appears to be: not enough.
Trade deals suffer from two main shortcomings. First, they fail to recognize that climate change is a problem. The Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU probably scores best on this front.
But CETA shares a trait with other recent deals, including the revised Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and the U.S.-Mexico-Canada Agreement (USMCA). Despite lengthy passages about the environment, these deals never say the words “climate change,” and they are largely silent on the issue of GHG emissions.
Silence on this issue isn’t just a point of principle. Failing to recognize climate change has a policy implication, namely, the world’s trade deals do not lock members into more responsible practices.
Rather than binding commitments, there are only general aspirations, such as CPTPP’s call for “low emissions technologies.” That’s not a very significant step beyond the promises made decades ago in Rio.
For all the talk of reforming trade rules, precious little attention has been paid to strengthening environmental provisions. As a result, we are missing an important opportunity to embed regulations in international economic law.
At an absolute minimum, trade deals need to start acknowledging members’ commitments under the Paris Agreement. Countries’ trade practices must be viewed in light of their obligations to cut emissions.
Once there’s some formal recognition built into these deals, progress can be made on enforcement. Take CETA as one example. The problem, according to critics, is that the provisions CETA includes on sustainability lack legal teeth. This leaves agreements open to allegations that trade agreements are simply paying lip service to environmental issues.
On top of that, exceptions — or “carve-outs” — are needed to allow countries time and space to adapt. Under some trade agreements, countries that limit market access in the interest of environmental reform could be sued for trade discrimination.
This is partly why there has been so much opposition to investor-state dispute settlement. It prioritizes liberalization over regulation.
Of course, some will say trade agreements are the wrong place to look for meaningful environmental regulations. But that argument can’t explain why USMCA already includes specific mention of countries’ obligations under the Montreal Protocol, and the Food and Agriculture Organization’s rules on responsible fishing.
Clearly, the problem isn’t legal. It’s political.
In the U.S., there is sentiment among both parties that trade agreements need to be rolled back. President Trump has lobbied for weaker enforcement and looser obligations abroad while slashing regulations — many relating to the environment — at home.
And it’s not just Trump. Other countries, despite their stronger commitments to the Paris Agreement, have failed to make meaningful progress, as evidenced by CPTPP, CETA and other recent deals. The net result is that there’s been very little advancement on the environment in recent years.
The marriage between the environment and markets has always beenrocky. However, they are tied to one another for better or worse. And, as the latest climate data shows, they will need reconciliation soon.