Joe Biden’s push for sustainable trade will be a delicate balancing act

The president-elect is under pressure from Democratic Party progressives to adopt more stringent policies but must avoid erecting so many barriers for less-developed countries that trade liberalisation is stymied

Stephen Olson

Published: 1:30am, 5 Dec, 2020

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Based on what United States President-elect Joe Biden has said about his approach to trade, and what policies we know his party’s progressive wing will push him to adopt, it is reasonable to wonder: will Biden be the first sustainable trade president?

Sustainable trade stipulates that trade needs to be pursued not only on the basis of economic gains; it must also strengthen social capital – for example, by ensuring high labour standards – and bolster environmental stewardship.

Biden’s position clearly tilts 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 be a carbon tariff would be an unprecedented fusion of trade and environmental policy.

Biden administration negotiators would also apparently seek to embed emission reduction commitments into trade agreements. Countries that fail to live up to their climate obligations could be 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 party.

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There is a battle for pre-eminence within the Democratic Party between the more traditional centrist wing and the energised progressive wing. The desire to defeat Donald Trump was so strong that this battle was suspended to unify behind Biden, who was judged to have the best shot.

With the election over, expect the progressive wing to push aggressively to see their proposals adopted and enacted by Biden’s 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 with 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 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 labour violations in other countries.

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If these commissions concluded that any violations existed, the US government would be obliged 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 and the more extreme proposals will be watered down or dropped.

But given the dynamism of the progressives and their growing influence within the party (the loss of Democratic seats in the House will strengthen their hand – the ousted Democrats were by and large moderates), it is more than likely that Biden will take a few steps in their direction on trade.

While a more progressive approach to trade might give proponents of sustainability reason to celebrate, several practical downsides would soon become apparent. Too stringent sustainability preconditions would substantially limit the number of countries able to even commence trade negotiations with the US.

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For many countries, especially in the developing world, a prohibition on fossil fuel subsidies, for instance, would effectively paralyse their economies and is a non-starter.

Once commenced, these provisions would limit the ability to successfully conclude negotiations. The 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 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 ratify the agreement. We have seen civil society groups up in arms over the impact of far-reaching progressive provisions in existing agreements.

Such concerns have been enough to derail, at least so far, what was expected to be Thailand’s quick and easy accession to the Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP).

The implementation of certain progressive sustainable trade policies could also lead to further instability in the 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 another round of retaliatory tariffs.

The pandemic has served to heighten awareness of the need for sustainable trade. Support for the principles of sustainability is broad and rising. And Biden consistently weaves sustainability themes into his policy pronouncements.

While all this is encouraging, we need to recognise 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 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 among contradictory needs and the acceptance that uncomfortable trade-offs are sometimes necessary, at least in the short term. Less-developed countries need to be given 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 liberalisation.

Stephen Olson is a research fellow at the Hinrich Foundation

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