Europe can and should use its trade muscle for the green cause

June 20, 2013

Suddenly Karel de Gucht is the most talked-about figure in Brussels. The Belgian trade commissioner is very busy. He is trying to finish a free trade deal with Canada; his boss and Obama are pressing for a deal with the US to be next.  And then there is China – where the direction is towards less, not more, free trade. The EU has just imposed an anti-dumping 12% tariff on Chinese solar panels, with a threat to go to 47%. In its response, China is trying to play the usual divide-and-rule tactic by threatening tariffs on wine (annoying for the French), and luxury cars (annoying for the Germans).

But why, you will ask, is all this so important to environmentalists?

First, because free trade deals, if done badly, can hamper the EU’s ability to have its own environmental policy. The EU’s green laws often have impacts around the world. For instance: Europe’s ETS (slightly) affects Chinese carriers as well as European ones; Europe’s fuel quality directive can affect Canadian tar sands as well as Estonian oil shale; car fuel economy standards affect Japanese carmakers as well as European ones; Europe’s biofuel sustainability standards affect American farmers and European ones, and the list goes on.

A prime example why free trade deals can make such policies more difficult is ‘investor-state dispute settlement’ (ISDS) procedures that the Canadian and American governments are adamant should be included in the deal with Europe. These procedures enable a corporation to sue a government (i.e. taxpayers) for damages if the corporation feels disadvantaged by the government’s policy change. Originally intended to inject trust in deals with countries with poor legal systems, Australia found out the consequences the hard way when Philip Morris sued the country under an ISDS for its ground-breaking cigarette plain-packaging law. Unsurprisingly, Australia refused to include an ISDS in its deal with the US, arguing that “both countries have robust, developed legal systems for resolving disputes between foreign investors and government”. If Australia can agree this with the US, the EU, with its much larger economy, certainly could and should too.

And second, because Europe might not be spending its political capital on trade issues in the right way.  As mentioned above, Europe is picking a fight with China by levying tariffs on their solar panels. Without suggesting that this move is wrong, the bottom line is that if they work, they will – at least in the short term – make solar electricity more expensive, at a time when it is becoming cost-competitive in many places in Europe. At this point we can only hope that Europe will be just as tough when it comes to making polluters, including foreign ones, pay: Chinese airlines for their pollution in flights from and/or to Europe through the ETS, and tar sands for their pollution during production through the Fuel Quality Directive. 

Let’s face it: North America and Europe are drifting apart both economically and environmentally. North America has vast fossil energy reserves and is keen to exploit them – Europe far less so. It would be great if the US would clean up its energy system fast, but it is in the EU’s own self-interest to lead, and we should do so proudly. It is a real ‘unique selling point’ of Europe.

Therefore we should not bend over backwards to accommodate North American demands on free trade; that will imply a race to the bottom, not to the top, on environmental standards. We will only end up trying to follow their high-energy consumption economic model, and we will fail. We can do ourselves, and the planet, a far better service if we really prioritise green issues in forthcoming deals – and certainly avoid special ‘investor-state dispute settlement’ provisions.

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