AUTHOR: Antoine Oger
Trade and investments are pivotal to to meet our climate obligations. The IPCC 6th report confirmed once again that climate change is causing widespread impacts to ecosystems, people, and infrastructure throughout the planet, and is arguably the single most important cost that our economies will be facing in the coming decades.
In the face of such risks, Green Trade Network members are convinced that trade and investment are parts of the solution as key accelerator between partners benefiting from additional market opportunities and better access to potentially crucial environmental goods and services. Trade and investments are two faces of the same coin to foster our mitigation efforts through the decarbonisation of our economies and facilitate our adaptation to a new, potentially more challenging world.
Now, the key question is, what do we facilitate through trade and investments, what sector, what goods, what services? We must leverage trade and investments where they support our climate mitigation and adaptation efforts. On the other hand we should not be afraid of hindering trade and financial flows when their accelerator qualities fuel detrimental activities for the climate and other sustainability-related challenges such as biodiversity loss or high pollution levels.
Some concrete results?
The 4th Ministerial meeting of the Trade and Technology Council (TTC) yielded more positive developments than its predecessors on the objective to upscale the transatlantic marketplace for green goods. The EU and the US agreed on a full work programme for the Transatlantic Initiative on Sustainable Trade (TIST) which was launched back in December 2022 but without any meaningful progress until now. This work programme is organised in ‘building blocks, each of which can be linked to concrete (albeit limited) developments:
- Business environment issues (aka regulatory cooperation and alignment): the EU and US aim to deepen their regulatory cooperation to integrate the transatlantic market in a growing number of areas and sectors through common standards, Mutual Recognition Agreements (MRAs) and/or Conformity Assessments (CAs). Specific deals were made before or during the TTC, on a common standard for electric charge points for trucks for instance or through MRAs on maritime equipment and veterinary medicines. The debate continues on new tech issues such as artificial intelligence, 3D printing, smart grids, semiconductors or quantum technologies. Discussions also continued (without any concrete milestone so far) on the adoption of relevant methods and standards on measuring embedded emissions, a crucial tool for meaningful decarbonisation efforts between EU and US and eventually globally.
- Workers and consumer benefits: the TTC hosted the second principal-level session of the Trade and Labour Dialogue (TALD) to build up on the TTC WG10 Report on the importance of carrying out due diligence on responsible business conduct in supply chains and in the context of the EU policy development process of its own DD legislation. EU-US alignment for ambitious legal provisions on such issues is crucial to mitigate the negative externalities of our consumption models.
- External dimension: both partners discussed how they can best contribute to the work of the Coalition of Trade Ministers on Climate.
What’s missing?
Both parties failed to reach a deal yet on critical minerals as it seems to require the involvement of EU Member States, to reach a full Free Trade Agreement status that is required by the US Congress. There was an announcement by European Commissioner Dombrovskis to seek EU Member States approval to pursue an agreement of a sufficient legal strength as required by the US Congress, yet getting Member States to agree on such sensitive matters can be challenging. A deal is still expected within the year, building on progress achieved so far on common standards and MRAs for ‘green’ goods as discussed above.
Discussion on the Global Arrangement on Sustainable Steel and Aluminium (GASSA) have also been progressing with the hopes of a deal by October, thus removing a friction in EU-US relations since 2017. The objective of such agreements should also be to scale-up adequate standards to ensure decarbonisation of heavily carbon bearing industries.
In general, the absence of EU-US Nationally Determined Contributions of these TTC discussion is a concerning sign. Analysis by GTN members of NDCs revealed that a great number of them contained policy measures on trade and external investment. However, the disconnection between trade and climate policy communities persists. Countries engaged in trade negotiations, and to some extent the EU and the US, should consider each other’s NDCs and identify the aspects that are useful to the partnership and weave obligations into their cooperation agreements.
Plan for TTC5
Part of the work plan for the TIST identified the next session of the TTC to yield further results, and most notably the launch of a transatlantic circular economy initiative to facilitate the conditions for bilateral trade in reusable, repairable, refurbished, or remanufactured products. This is a crucial element for the just transition as we currently extract and process 100 billion tonnes of natural resources globally every year which contribute to half of all carbon emissions and 90 per cent of all terrestrial biodiversity loss.
Circular trade has grown strongly in value over the past two decades, yet is not nearly at scale to address our sustainability challenges. Furthermore, inequities in power relations, digital trade capabilities, trade infrastructure, access to finance, and industrial and innovation capabilities mean that countries in the Global North, and in particular the EU and the US are better positioned to reap the benefits of international trade than those in the Global South. This divide in circular trade is already evident in that around 45 per cent of the total global value of trade in secondary goods and materials, waste and scrap occurs solely between high-income countries, compared with only about 1 per cent between low-income countries and middle- to high-income countries.
The proposed EU-US circular economy initiative must therefore consider carefully these aspects and work toward a framework for inclusive circular trade, intended to enable a pathway through which circular trade helps to promote fair, inclusive and circular societies. Incidentally, IEEP and the Chatham House proposed such a framework recently.
This effort must be embedded in a more general approach toward strengthening global cooperation for the EU and the US rather than alienating international partners. Acknowledging sustainable development ambitions of Global South partners would boost the EU and the US credibility as a responsible partner in a tumultuous time and eventually support our global decarbonisation efforts.
Conclusion
The EU and the US, by their sheer economic weight and diplomatic influence globally, must be at the forefront of our fight against climate change. This 4th TTC demonstrated that concrete results can be achieved efficiently between both partners in that setting. Their willingness to open new areas of cooperation on key issues for sustainability worldwide such as trade in secondary goods also points toward the potential for more ambitious results. IEEP and the Green Trade Network will continue to support these initiatives when they are geared toward advancing sustainability globally.
The 4th Ministerial meeting of the Trade and Technology Council (“TTC”) which gathers EU and US officials to discuss transatlantic cooperation matters took place in Luleå, Sweden, on 31 May 2023. It was hosted by the Swedish Presidency of the Council of the European Union and attended by EC commissioners for trade, competition and internal market Valdis Dombrovskis, Margrethe Vestager and Thierry Breton, as well as by US Secretary of State Antony Blinken, Secretary of Commerce Gina Raimondo, and Trade Representative Katherine Tai. The EU-US joint statement can be found here.
IEEP Head of the Global and SDGs programme, Antoine Oger, author of this blog, attended the 4th Ministerial meeting of the Trade and Technology Council as coordinator of the Green Trade Network (GTN).
Photo by Ian Taylor on Unsplash
