Trade policy is linked to environmental and climate change policy in various ways. The idea that trade liberalization could negatively affect environmental protection efforts has gained popularity in public discourse, especially since the negotiation of the North American Free Trade Agreement (NAFTA) in the 1990s. Environmental groups, but also labor unions and parts of academia, have voiced concerns that trade liberalization, without specific safeguards in place, could induce a race to the bottom with regard to environmental standards. In addition, by advantaging producers facing lower environmental standards trade liberalization could generate a surge in imported goods that could crowd out demand for products subject to stricter environmental requirements thereby leading to pollution offshoring.
In contrast, proponents of trade liberalization argue that the opposite might occur. Trade liberalization could produce ‘trading-up’ effects, generating incentives for less strongly regulated markets to tighten their environmental standards in order to sell their products abroad. Disputes over these dynamics come into play both during the negotiation of trade agreements as well as during their implementation and application. For example, such considerations have been evident in public debates throughout the entire negotiation process of the EU-Canada Comprehensive Economic and Trade Agreement, CETA), signed in 2016, and are still ongoing in various EU Member States with regard to ratification. Controversy has also erupted in both the European Parliament and several national parliaments about the role of environmental standards in the EU-Mercosur agreement, which was agreed in principle in 2019. Future trade negotiations between the US and the EU will likely be marked by similar controversies.
This module discusses and analyzes the nexus between trade and the environment, with a special focus on climate change:
- First, it will examine the role of environmental concerns in the negotiation and implementation of transatlantic trade agreements and in trade-related political mobilization and contestation, drawing on a number of key examples;
- Second, it will look at policy challenges raised by the EU’s ambition to integrate the European Green Deal into EU trade policy (for instance through the mechanism of carbon border taxes);
- Third, it will consider how the new US presidential administration can and will advance climate change policy in its trade policy and how the US approach might interface with the EU’s approach and how it might affect other North American countries, notably Canada and Mexico. Potential implications of the different approaches will be discussed.
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