U.S. Trade Representative Mike Froman announced today in Davos that the United States would join others including China, Canada, the EU, and Japan to negotiate freer global trade in environmental goods. An economic sector estimated at over $950 billion annually, the market for such products is already significant and it is only expected to grow. A reduction of tariffs, some as high as 35 percent according to a USTR announcement, would encourage even greater trade in products designed to promote the use of alternative energy and support environmentally-friendly economic growth and development.
It’s an important initiative, consistent with one of the key trade policy recommendations that the Council of the Americas prepared for the then-incoming Obama Administration in 2009. Certainly, working to promote global trade in environmental products makes economic, political and common sense. The only surprise, perhaps, is that it took six years into the administration to launch the initiative.
Nonetheless, the lack of emphasis on Western Hemisphere nations is troubling, particularly since Latin America’s energy profile is the cleanest in the world. At the same time, as the custodian of the Amazon Basin, the “lungs of the earth,” Latin America has both experience and vested interest in promoting increased trade efficiencies in environmental goods and services. Only three of the 13 listed parties to the negotiation, however, are from the Western Hemisphere, and two of those are Canada and the United States itself. The other? Costa Rica, an environmentally-friendly nation but hardly a global trade giant.
Two nations prominent by their omission include Mexico and Brazil. In the 20th year of NAFTA, with North American supply chains predominant and Mexico undergoing exciting political and economic reforms, it’s remarkable that Mexico would not be at the table right from the very beginning. We just went through this exercise for the Trans-Pacific Partnership (TPP); The Transatlantic Trade and Investment Partnership (TTIP) remains an open issue. NAFTA itself was the first agreement that included environmental protections which have been expanded and refined in subsequent U.S. trade agreements. At the same time, the long-desired opening of Mexico’s energy sector will unleash significant new supplies of cleaner natural gas—which will rely on imports of U.S. clean energy technology goods and services to develop effectively. Should not Mexico be present at the creation?
Likewise, Brazil has a significant stake in promoting trade in environmental goods, including clean energy such as ethanol where Brazilian production offers a case study for development of a clean energy sector. Trade relations between the United States and Brazil have not always been smooth and working together to promote environmental trade would be an obvious area of congruent interests.
Other Latin American nations, too, should be considered, particularly the countries of the Pacific Alliance.
Yet, even as the new negotiations are launched, the United States should do several things right away to promote environmentally-friendlier trade policies. The first would be to approve the KXL pipeline from Canada, an environmentally-friendlier way to bring oil into the United States than by rail. It would also reduce U.S. demand for Venezuelan crude shipped by sea, while similarly reducing the likelihood that Canadian crude would be sent by tanker to China. Second, the Department of Energy should speed up the process to permit the export of cleaner natural gas to the hemisphere, thus substituting for dirty diesel or coal in much of the region especially the Caribbean Basin. Third, the border trucking issue with Mexico should be resolved once and for all, because the current system that requires trucks to idle endlessly at the border and change trucks to travel inland creates significant unnecessary carbon emissions. Fourth, creation of a true global market in ethanol, based on common standards and regulations, would do much to promote the use of this cleaner burning, renewable fuel. Additional steps could be considered, and none of them require conclusion of a global agreement on environmental products.
An effort to promote freer trade in environmental goods is a solid step, which I’ve advocated for years. But we run the risk of missing important gains that an agreement might otherwise unlock unless we move quickly to bring Mexico, Brazil, and other Latin American nations into the process. And in the meantime, other steps can and should be taken unilaterally by the Obama Administration that will promote a cleaner environment through actions that also streamline and encourage broader international trade.