Trade, Growth, and Green


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DCFR issues brief about trade, growth, and green topics as related to 21st century challenges.

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Trade, Growth, and Green

  1. 1. ‘‘ Global Themes an issues brief series of the Dallas Committee on Foreign Relations DCFR Dallas Committee on Foreign Relations Issue No. 2 June 21, 2011 Trade, Growth, and Green Rising to 21st Century Challenges “We are the leading trading nation in world, and therefore we stand to profit the most from a successful conclusion to the Doha Development Round. We need Globe Trade Advances Under Doha to make a successful conclusion a much higher priority.” The Doha Development Round is the JW: What should the U.S. be doing With respect to Colombia, for current trade-negotiation round of the with regard to the Doha Development example, ninety percent of World Trade Organization(WTO), Round? Colombian shipments are already which began in November 2001. duty free with current trade As of 2008, talks have stalled over Bacchus: What we are missing most agreements. However, what we sell a divide on major issues, such as of all is political will, in the United to the Colombians now faces many agriculture, industrial tariffs and States and elsewhere, to make Doha tariff and non-tariff barriers. Many non-tariff barriers, services, and the global priority it ought to be. of these barriers will be eliminated trade remedies. The most significant Countries should make the national over time if we conclude the pending differences are between developed decisions necessary within an agreement. While the U.S. dithers nations led by the European Union, international context to put together politically, Canada, Europe and the U.S., and Japan and the major a global deal. The rest of the world others are concluding trade deals is looking to the U.S. for leadership. with a country that is a strong ally developing countries led and It’s not clear whether we will be and long-standing trading partner of represented mainly by Brazil, China, able to summon the political will ours. Right now China is building India, South Korea, and South needed to lead. Before proceeding a railroad from the Pacific to the Africa. The Doha Round began with with Doha, given our domestic Caribbean in cooperation with the a ministerial-level meeting in Doha, politics, we need to clear from our Colombians to facilitate trade Qatar in 2001. Subsequent ministerial agenda three long-delayed pending between Colombia and China. meetings took place in Cancun, free-trade agreements, the Korean, Mexico (2003), and Hong Kong Colombian and Panamanian free- (2005). Related negotiations took trade agreements. They would all add place in Geneva, Switzerland (2004, significantly to growth of the U.S. 2006, 2008); Paris, France (2005); economy at a time when we much On June 8th, DCFR President Jennifer and Potsdam, Germany (2007). The need it. Approving these agreements Warren interviewed former chairman of most recent round of negotiations in would produce jobs in the U.S. that the appellate body of the WTO, James would pay more and last longer than Bacchus. He currently leads the global July 2008 broke down after failing to jobs not involved in international practice at Greenberg Traurig. The reach a compromise on agricultural trade. brief’s content is predominantly based import rules. on his comments. 4925 Greenville Ave, Suite 1025 | Dallas, Texas 75206 | 214.750.1271 |
  2. 2. 2Once we conclude these pending We are the leading trading nation Africa, for the next round of climatefree-trade agreements, we can in world, and therefore we stand to change negotiations in December.focus politically in the U.S. on the profit the most from a successful One of our recommendations is tomultilateral negotiations that have conclusion to the Doha Development enact climate measures nationallybeen at an impasse for years. Our Round. We need to make a that are consistent with WTOeconomic opportunities are much successful conclusion a much higher obligations to avoid a collisiongreater multilaterally than bilaterally priority. course between trade and climateto produce jobs and economic change in WTO dispute settlement.growth. Under the rules of WTO, We also consider how the tradingany concessions that are negotiated system can be used affirmativelyby one country are then multi- Trade and Greenery to combat climate change andlateralized. This “multilateralizing” promote green growth worldwide.multiplies the opportunity to lower New thinking suggests that WTO One important recommendationtrade barriers and is by far the best rules can be used proactively to is to lower and eliminate tradeway to increase the overall volume allow for more green trade. By barriers on environmental goods andof trade, thus expanding the potential using WTO rules, climate-friendly services globally. This is already anfor global prosperity. This potential technologies can be made more important item on the Doha agenda.cannot be underestimated. Over accessible to developing countries Additionally, we look at ways tothe past half a century, by lowering for energy efficiency and to adapt to protect intellectual property and howbarriers to trade and investment, we and mitigate climate change effects. to encourage its dissemination tohave added $1 trillion annually to Areas that are at-risk for negative help developing countries combatthe U.S. economy. If we eliminated climate change effects include energy,all remaining barriers to trade andinvestment world-wide, we wouldadd another $500 billion per year tothe U.S. economy.Where do we find the political will?The rest of the world is willingto make additional concessionsto the U.S. to lower barriers tomanufacturing trade and tradein services. We also want tradefacilitation to eliminate red tape. Allthis is rightly on our agenda.Other countries are willing to giveus more, but we must be willing togive them more in return. They wantmarket access in the U.S. wherethey have a comparative advantage. water, agriculture, and infrastructure. climate change while also ensuringMany countries around the world Lowering or eliminating barriers to the continued protection of IPhave a comparative advantage in green goods and services would help rights. Another recommendationagriculture. They want us to reduce in their being diffused globally. suggests creating an exception inour agricultural subsidies that distort JW: What is at the top of the agenda WTO rules for green subsidies.and protect our markets. But it’s for the Davos working group on trade Such an exception existed in WTOpolitically difficult to reduce these and climate change for which you rules initially but lapsed when WTOin the U.S. They want us to redress chair? members failed to extend it in we deal with imports and WTO Members should revisit thishow we apply trade remedies more JB: We produced a report with a issue to reach consensus to allow newextensively than we should. This number of specific recommendations. green subsidies without distortingconcession too would be politically These recommendations are acquiring trade worldwide. This means drawingdifficult for us. But if we want more some currency in the councils a line; we must draw it in a way thatfrom Doha, we must give more. The of the WTO and in discussions is compatible with continuing tradebiggest hurdles are our inabilitiesto make concessions on agriculture among climate negotiators who and also with addressing climatesubsidies and trade remedies. will be heading to Durban, South change.
  3. 3. 3Climate Change, Forests, and “The rest of world is baffled that the US—a scientific society invested in the sci-Green Trade entific method and in the application of scientific findings to new technologies— is somehow resisting scientific evidence on this critical human issue.”Reducing Emissions fromDeforestation and Forest Degradation emerging economies in part because law and in the potential for the(REDD) is a set of steps designed we remain significantly more energy international rule of law for helpingto use market/financial incentives efficient than they are. But we can’t us address concerns that can onlyin order to reduce the emissions of be content with that. We need to be resolved globally. Foremost ofgreenhouse gases from deforestation find better ways to become more concern to me is climate change. Itand forest degradation. The initiative energy efficient. We won’t find those is inherently a global issue requiringalso can deliver “co-benefits” such as methods and innovations unless we global actions, and thus we needbiodiversity conservation and poverty proceed from the necessary premise global rules. From Copenhagen’salleviation. that climate change is real, it is man- outcome, it is apparent we will made, and we have to deal with it not magically and suddenly haveREDD is presented as an “offset” on those terms. The vast majority a comprehensive global treaty onscheme of the carbon markets and of major America businesses that climate change. We have to buildthus, will produce carbon credits. do not have a stake in the status an architecture over time to addressCarbon offsets are “emissions-saving quo have already acknowledged climate change on a global basis.projects” that in theory “compensate” and internalized this and are acting REDD is one very good practical wayfor the polluters’ emissions. The on this premise. It is imperative to do so.“carbon credits” generated by these our politicians do the same. It isprojects can be used by industrialized So I have focused on forest issues especially imperative that they do sogovernments and corporations to in a shared global effort with many because around the world countriesmeet their targets and/or to be traded others of like mind to begin to build and citizens everywhere else arewithin the carbon markets. from the forests up the global legal doing so. The rest of world is baffled that the US—a scientific society architecture we need to address“Between 15% and 20% of all invested in the scientific method climate change. We hope we cangreenhouse gases worldwide result and in the application of scientific build on the REDD and other similarfrom deforestation -- an amount equal findings to new technologies— is initiatives to create a comprehensiveto the emissions of all the world’s somehow resisting scientific evidence global effort to address climatecars, trucks, trains, ships, and planes on this critical human issue. change over time. This is a practicalcombined,” writes Bacchus in a approach, and an incrementalrecent article. REDD is expected JW: Can REDD be a building block approach. It took us half a centuryto play a crucial role in a future for a comprehensive climate change to evolve GATT (the Generalsuccessor agreement to the Kyoto treaty? How? Agreement on Tariffs and Trade) intoProtocol, the soon-to-expire global the WTO. The world trading systemclimate change treaty. JB: I went to the WTO for two is still not where it ought to be. We reasons. First, I believe in the are continuing to build incrementallyJW: How can the U.S., or its potential of trade for promoting in trade. An all-too-real challengepoliticians, ignore the fact that freedom globally. There is a is that we don’t have a lot of time forNorway will spend $1 billion for connection between free trade, incrementalism in climate change; soIndonesian forest conservation freedom, and advancing prosperity. we have to get to work yesterday.efforts? What are the dynamics Second, I believe in the rule ofhampering U.S. adoption ofprogressive climate changeinitiatives?JB: We need to ensure our energysupplies and improve our energyefficiency if we hope to be morecompetitive in this new world inwhich we find ourselves. Essentiallythis is an issue of environmentalprotection but also economiccompetition. It’s a jobs issue. Wehave a significant comparativeadvantage over China and other
  4. 4. 4 June 21, 2011JW: Is there a country or group of Food insecurity is creating the The Smith and Ricardo views of thecountries that can most effectively increasing trend of many countries world remain accurate. It is importantfurther and encourage a green trade imposing restrictions on exports. to keep this in mind as the world’sagenda at this point? This is shortsighted, self-defeating countries confront the reality that we and ultimately suicidal economics. do have limited natural resources. WeJB: My view is that all countries must But there is a political temptation must find greater efficiencies and thebe engaged, but clearly the biggest to impose these export restrictions fairest ways to allocate our resourcesemitters are the ones that can make all over the world. It’s happening in to feed, sustain and advance a globalthe biggest difference. If the top food, commodities, raw materials, population that will soon number nineemitters could get working on this and rare earths. billion.and reach consensus it would advanceus further. We are not quite there yet China is imposing restrictions on JW: How do you see this tensionon the biggest emitters [laughs of exports of rare earth elements, between population growth andirony]. which are the basic ingredients of finding balance in prosperity? our technological society. It makes no sense for them to do this because JB: I am not a Malthusian. Human the Chinese are heavily dependent ingenuity can create all kinds of waysFood Security to serve a growing population. The on exports from other countries toFood insecurity has proven to fuel their continued growth. If China Green Revolution in agriculture in thehave potentially destabilizing restricts exports that are needed post-war era is one such example. Iconsequences. It played a role in elsewhere, what is to stop China’s have faith in our ability to make thethe uprisings in Tunisia, Egypt trading partners from reciprocating? global pie larger in a world in whichand elsewhere. Food is now a geo- It is ultimately self-defeating because resource constraints will becomepolitical issue like never before. no one country is self-sufficient in ever more a factor; but we have to beRising food prices push citizens of everything. smart about doing it. We will have adeveloping countries further toward brighter economic future only if wepoverty. Domestically, rising prices The opportunities in global growth have a sustainable approach to thecatalyze leaders to take protective come from dividing and sub-dividing future. We must protect and make themeasures that have unintended the division of labor that creates the most of our limited natural resources.consequences domestically and wealth of nations. This is not me We must be smart about how weglobally as interconnected trade saying this; it is Adam Smith. The apply our technologies. I don’t thinkand markets become distorted. best way forward is for each country we are doing that in all the ways weAgriculture trade is one of the most to pursue its comparative advantage should.contentious issues in the WTO. in what it does relatively better than other countries. Again, this is notJW: What do you think is the best path me; this is David Ricardo talking.forward for addressing food securityissues?JB: Increasingly I’m working withothers around the world of like mindon the nexus of trade, climate change,food, energy, agriculture and a varietyof other issues related to the reality ofour all-too-limited natural resources.One such area of our concern iswater. Water is simultaneously aclimate, food, energy, agriculture, andtrade issue. Soaring food prices andvolatility have all kinds of societalconsequences. They played a role inthe Arab spring and are driving upinflation globally even as we speak.They contribute to a dangerousand self-destructive trend towardeconomic nationalism globally.
  5. 5. 5Chinese Rare Earths and Trade JW: With regards to China’s China, however, could do much more restrictions of rare earths exports, is to be consistent and comply withChina began restricting its export of this a sign of the times or will China WTO rules, particularly in the arearare-earth elements, partially after reverse it course? of intellectual property. The U.S.a row with Japan last year. These International Trade Commissionrestrictions are said to be in violation JB: China has acted responsibly as a released a study recently, which WTO member. Domestically, it has concluded that we could create 2.1of WTO rules. China holds about competing interests. The Chinese million more jobs in the United Stateshalf of the world’s supply of rare have complied with WTO obligations if China complied fully with all ofearths and produces about 93% of when they have been found violating its existing WTO obligations relatingthe world’s supply. It has created them. This cannot always be said to patents, copyrights, trademarks,vulnerability for those countries and about other countries, including our and other IP rights. So I encouragefirms importing rare earths that are own. This week the Chinese decided the U.S. to be more aggressive inessential in many high-tech products to eliminate some discriminatory insisting on compliance by China,such as mobile phones and batteries subsidies in their wind power including continued and increasedfor hybrid cars. A recent article cites: industry, in response to a complaint use of WTO dispute settlement. This“However, rising prices fit neatly by the United States. is one part of meeting the overallwith China’s ambition to end its role challenge of finding ways to advanceas supplier of cheap rare earths to the I personally represented the U.S. the cause of trade without resorting to entertainment industry in two WTO the false promise of As Mr. Lin of the Rare Earths cases brought by the United StatesSociety says: “Prices of gold, oil and against China that involved Chinese Written by Jennifer Warren, President of DCFRother commodities are all high. Why copyright piracy of music, moviesshould the cost of rare earths not be and books. We won those two cases,high, too?” and now the Chinese are complying with their WTO obligations. GeoEdge The Dallas Committee on Foreign Relations takes no institutional positions on policy issues. The views ex- BLOG pressed and facts presented in DCFR publications are the responsibility of the author or authors. Exploring the frontlines of For additional information about DCFR, please visit our website foreign affairs at Dallas Committee on Foreign Relations is a non-profit organization focused on explor- ing leading-edge developments in foreign affairs. Our mission is to promote knowledge of global affairs and a better understanding of the people and events impacting impor- tant policy choices of the future.For more information contact:Dallas Committee on Foreign Relations4925 Greenville Ave, Suite 1025 Dallas, Texas 75206(email) (tel) 214.750.1271