We Can Do Right By The Planet And The Economy

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Author: Orit Frenkel

As printed in The Hill, June 18, 2019

Most of the Democrats now running for president are embracing policies to address climate change, a welcome change from an administration that is digging its head in the proverbial sand on this issue. 

Candidates have debated the merits of the proposed Green New Deal. But if the U.S. wants to move toward limiting carbon emissions, both domestically and globally, and restore this nation’s position as the international leader in thwarting climate change, we should embrace a "Green Trade Deal." 

We should use our quest to create new markets to simultaneously drive toward our goal of eliminating carbon emissions. This isn’t some idea descending from the ether but rather the continuation of efforts that began several years ago.

The U.S. initiated the negotiation of the Environmental Goods Agreement (EGA) in 2014 under the auspices of the World Trade Organization (WTO), with 44 countries accounting for nearly 90 percent of global exports in environmental goods. The goal of the agreement: Eliminate tariffs on hundreds of environmentally friendly goods.

The EGA negotiations had picked up on the momentum started in 2012 by the 21 countries in the Asia Pacific Economic Cooperation (APEC), which agreed to lower tariffs to below 5 percent on 54 environmental technologies by 2015.

These 54 products were folded into the more expansive EGA negotiations, then into the Trans-Pacific Partnership (TPP) negotiations and were slated to go to zero once TPP went into effect.

These efforts abruptly ended in 2016 with the election of Donald Trump, as the new administration quickly signaled no interest in pursuing either environmentally friendly policies, or WTO negotiations.

Democrats should embrace restarting these negotiations, which would be a win for the U.S. economy, American workers and the planet. Here’s why: In 2015, the global market for environmental goods reached $1 trillion.

American industries, which lead this sector, yielded nearly $330 billion in revenue in 2016. U.S. companies exported $47.8 billion worth of goods and services, employing about 1.6 million people in 2015.

In 2013, the United States exported $238 billion of environmental goods, and these exports have been growing at an annual rate of 6 percent since 2012. Indeed, all signs point to a robust and expanding market.

The EGA is a win-win-win proposition: increasing U.S. exports and jobs, promoting energy-efficient and clean technologies and addressing climate change. This agreement would lower costs and provide easier access to wind turbines, solar panels, solar water heaters, water treatment filters and other environmentally friendly goods.

Cultivating this market will accelerate the movement of these important energy-efficient technologies to businesses and consumers, as well as spur additional research and development in environmental technologies.

The EGA would put the United States at the mantel of global leadership on this issue while giving the U.S. a leg up on innovation in this sector. 

Tackling these tariffs will serve as an accelerant in bringing forward environmental technologies, because tariffs remain a substantial and limiting barrier to trade in this sector.

Tariffs on wind and solar energy products can be as high as 35 percent, as high as 26 percent on air pollution control equipment and as high as 50 percent on water- and waste-treatment equipment, according to the Office of the United States Trade Representative. These pose substantial barriers to trade.

China, which participated in the EGA negotiations, is the largest and fastest-growing emerging market for environmental technologies — valued at $65.78 billion in 2017.  

Lowering China’s significant barriers in this sector would open China’s booming market to U.S. companies. Given the current bilateral tensions, it may be challenging to get China to rejoin the negotiations.

But if the EGA gets a second chance, the negotiations should be more ambitious, reaching beyond just tariffs. A more comprehensive Green Trade Deal should tackle the elimination or reduction of non-tariff barriers that inhibit trade in environmental goods, as well as the barriers to trade in environmental services.

These efforts should aim to open up digital trade, too, given that many environmental technologies are software-enabled. 

A more ambitious EGA should include other countries, particularly those in the developing world. Their inclusion would make these technologies cheaper for poorer countries whose rapidly growing energy needs are today being met by coal and other high-carbon solutions.

The major global players lament the rapidly expanding carbon footprint of developing countries but have done little to address the problem. These efforts would change that, making it easier for these countries to go green.

In fact, the U.S. should take it one step further by pairing an environmental goods trade deal with a substantial green foreign assistance package. This support would help poor countries buy environmental technologies as well as the technical assistance needed to train local workers to install and manage the equipment.

If the United States implemented a carbon tax to discourage emissions, a comprehensive environmental goods agreement could also incorporate necessary border adjustments (rebates for exports and a charge on imports) for such a system.

The U.S. has forfeited its global leadership position on environmental stewardship, standing alone in opposition to the Paris Agreement, among other affronts to the planet being carried out domestically.

To be sure, we must re-engage our friends in that comprehensive global effort, but we should also embrace a Green Trade Deal — a smart and future-forward initiative that makes sense for the U.S. economy, American workers and a planet that is desperately craving new solutions.

Orit Frenkel is executive director of the American Leadership Initiative. She is the president of Frenkel Strategies, a consulting firm specializing in trade and Asia. Frenkel was previously the senior manager for international trade and investment for General Electric.