International Economic Law and Policy Blog

Comments by WTO Members on the First Article 25 Arbitration Appeal (Plus Some U.S. Domestic Politics)

The Turkey - Pharmaceutical Products Article 25 arbitration award, which functioned as an alternative appellate review mechanism while Appellate Body appointments are still blocked, was discussed at the August 29 DSB meeting. Here's how the WTO web site summary of the meeting described comments from WTO Members on the systemic issues related to using Article 25 in this way:

The EU said it was particularly pleased with the appellate review proceedings, which demonstrated that there is a functional and efficient alternative to preserve the right of appeal for the parties, which is very similar to the Multi-Party Interim Appeal Arbitration Arrangement (MPIA). The EU said it expects that Türkiye will take the necessary steps to implement the arbitrators' findings promptly and stands ready to discuss and agree on a reasonable period of time for implementation.

The United States said it welcomed the agreement of the parties on a way forward in this dispute, which led to Türkiye’s announcement of its intention to comply with the panel’s and arbitrators' recommendations.  The aim of dispute settlement is to facilitate the prompt settlement of a dispute between members, the US said, and it does not object to members utilizing Article 25 of the DSU or other procedures to help resolve disputes.

Under a separate item, Japan said it welcomed members' use of the Article 25-based arbitration as a means of dispute settlement under the current situation. The arbitration has played a provisional complementary role to review the appealed findings of the panel report during the time of the Appellate Body dysfunction, Japan said. Moreover, the arbitration award was issued within the prescribed 90-day period, contributing to the prompt resolution of the dispute.

And here is the full reaction by the U.S. in its statement to the DSB:

The United States welcomes the agreement of the parties on a way forward in this dispute, which led to Türkiye’s announcement today with respect to implementation of the arbitrator Award.

The aim of dispute settlement is to facilitate the prompt settlement of a dispute between Members.

Members have a variety of means under the DSU through which they can achieve a resolution, including pursuant to Article 4, “Consultations”; Article 5, “Good Offices, Conciliation, and Mediation”; Article 6, “Establishment of Panels”; and Article 25, “Arbitration.”

The United States does not object to Members utilizing Article 25 or other procedures to help resolve disputes. If any Member considers that use of the arbitration provision may assist it in securing a positive solution, then the United States in principle supports such efforts.

In this instance, the parties entered into “Agreed Procedures for Arbitration under Article 25 of the DSU.” The agreement provided for an arbitration that incorporated many of the most troubling practices of appellate review under the Appellate Body.

The U.S. concerns with certain practices of the Appellate Body are well known. We encourage Members to consider different approaches to resolving a dispute, rather than furthering the Appellate Body’s problematic interpretations or conduct. If a Member supports dispute settlement reform, then a bilateral arrangement presents a unique opportunity to explore alternative approaches.

Nevertheless, we welcome the engagement between the parties to this dispute that led to the agreement.

We also want to draw attention to another issue of systemic importance. In accordance with the parties’ agreed procedures, and consistent with Article 25.3 of the DSU, the arbitration award has not been adopted by the DSB.

Accordingly, the arbitration award does not contain “adopted recommendations or rulings” within the meaning of the DSU.

The United States therefore takes note of Türkiye’s statement today with respect to implementation of the arbitrator award, although we do not consider such statement of intentions as required under Article 21.3 of the DSU. 

How should we take the U.S. statement? Does it mean that the U.S. is unlikely to use Article 25 arbitration appeals because they look too much like appellate review as practiced by the Appellate Body? Or does it mean the U.S. might consider using Article 25 arbitration appeals if they avoided certain practices of the Appellate Body? It's worth noting that the Article 25 arbitrators in this case did circulate the award within 90 days, so that addresses one of the U.S. concerns about the Appellate Body. What other process changes might the U.S. insist on in order to agree to use Article 25 arbitration as an appeals process for one of its disputes? I'm looking at the list of ongoing WTO disputes, and I'm not sure I see any disputes for which it is likely that another WTO Member will ask the U.S. to use Article 25, but you never know.

Just to be clear, while that last paragraph might have made it sound like I thought there was a decent chance the U.S. would use Article 25 arbitration some day, I don't really have high hopes for that. I just thought I'd put the idea out there and see if anyone picked it up. One reason (of many) for my skepticism is where U.S. politics is right now on the issue of the WTO and the Appellate Body. Take a look at this letter from Senators Cotton, Grassley and Rubio to Ambassador Tai. When I say "take a look," I don't mean read and consider the substance, because it will just irritate you. I could take it apart sentence by sentence, but I don't think it's worth the effort. The key point is a political one, which is that some Republicans are pushing Tai not to allow Appellate Body appointments to go through (not that we even saw many hints that she would do so). That means any U.S. compromise on these issues could get caught up in U.S. domestic politics, which is a mess right now. (Establishing whether a consensus exists for a particular Appellate Body nominee could be subject to court challenges, recounts, and calls for election integrity! That's a joke. I think).

It's one thing to hear this from Senators Cotton and Rubio, who are both fairly "nationalist" in some sense of that word, but Grassley has traditionally been a promoter of agriculture exports who supports trade agreements. If he loses interest in using trade agreements and enforcement of those agreements to promote exports, that's a real problem for the trading system in general and also for getting WTO dispute settlement fully operational again. To be fair, the letter does say this: "to the extent Members want to agree to truly binding dispute settlement, they have numerous options to do so – including, for example, an agreement not to appeal the results of a panel decision." That is certainly an option, but I think if someone is citing it in this way, they should advocate for it rather than just mentioning it as an aside. If agreements not to appeal panel reports are Grassley's solution, that's fine, but he should say this directly and clearly and flesh out the details. And what does he think about Article 25 arbitration appeals? The absence of any mention of this possibility is telling.

Meet the New Industrial Policy, Same as the Old Industrial Policy

Here is a piece I published last week on the Baker Institute blog:

MEET THE NEW INDUSTRIAL POLICY, SAME AS THE OLD INDUSTRIAL POLICY?

With the recent enactment of the CHIPS and Science Act, longtime advocates of industrial policy are feeling a sense of triumph, and proclaiming that U.S. economic policy has entered a new era. The old “laissez-faire” approach is dead, they say, and state-directed economic policies are back in favor. While this new legislation is clearly significant, portraying it as transformational may be overstating its impact, and big questions remain: How much has actually changed in U.S. economic policy? And will the new initiatives work?

Let’s start with whether there really is a big shift in policy here. It is fair to say that “industrial policy” has long been looked down upon by many leading economists. Nonetheless, a wide range of actual U.S. economic policy falls squarely within it: ethanol subsidies, high tariffs on steel and aluminum imports, very long copyright terms, and price supports for sugar are just a few examples of how the U.S. government has tried to support specific U.S. industries. Whether or not people referred to this as “industrial policy,” that’s what it is. Thus, regardless of what leading policy thinkers had to say about industrial policy, policy makers have been very willing to adopt it (often at the behest of the corporations that benefited).

But now people are using the term “industrial policy” more, and expanding the scope of industries covered, with semiconductors the most prominent one. That is a shift, although not an unprecedented one. In the beginning of Bill Clinton’s first term, industrial policy was also a hot topic. And in the 1980s, the Reagan administration pushed its own version of support for the semiconductor industry.

Longtime advocates of industrial policy such as Dani Rodrik say the new CHIPS Act is significant “because it is a sign that we have moved well beyond market fundamentalism and because it shows there is now bipartisan support for industrial policies.” Of course, the idea that we were ever in a place of “market fundamentalism” is contradicted by the facts of actual U.S. economic policy, as noted above, which involved a wide range of economic interventions by the government. Industrial policy advocates are looking to spin these new developments in a triumphalist way, in an effort to demonstrate that their policies are in vogue. But the degree of change is less clear, and it will likely take a few years to gather enough evidence on past and current U.S. government economic interventions to do a proper comparison and make an assessment of how big a shift we are seeing.

The second question is whether new initiatives such as the CHIPS Act will be successful. This law offers more than $50 billion in subsidies to semiconductor companies to build new production facilities in the United States. Will this work? This depends in part on how we define “work.”

One problem is that these companies might just be trying to extract government money for projects they would undertake anyway. Such efforts are fairly common, as companies play governments off one another to extract financial concessions for already planned investments. (This is why Bernie Sanders and others worry that these subsidies are just “corporate welfare.”) So we might see new semiconductor investment in the United States in the coming years, but it will be hard to determine whether it is more than what would have happened without the subsidies.

Assuming that these subsidies do increase investment beyond what we would have seen otherwise, we then run the risk that the industry has been distorted in ways that are unsustainable in the market in the long run. If we incentivize companies so much that they over-produce, it could lead to some companies becoming unprofitable, and then demanding a new round of subsidies to keep then afloat. Once companies become dependent on government support, it is hard to wean them off it.

Underlying all of this is a fundamental question: Is there a problem with U.S. semiconductor production being too low right now? Surely there are some sectors (e.g., military aircraft) where we would not want to be too dependent on other countries. But is semiconductors in that situation at the moment? It can be hard to answer this, because some of the data being used as a justification for the subsidies is misleading. For example, a Washington Post article titled “A new era of industrial policy kicks off with signing of the Chips Act” noted that: “About 37 percent of the world’s semiconductors were manufactured in the United States in 1990 versus about 12 percent in 2020.” But in 1990, China was not an economic powerhouse, and as its consumption of semiconductors in domestic manufacturing sectors grew, it was sure to increase its share of global semiconductor production. It may be that the U.S. industry is performing badly, but commonly cited figures such as these are not convincing evidence of that. The public debate needs an objective assessment of just how many semiconductors the United States needs to produce domestically or buy from friendly countries in order to be secure.

There are many questions about the future of U.S. industrial policy, and it could take years to answer them. Will the CHIPS Act’s semiconductor subsidies have their intended effect? Will these types of economic interventions be extended to other industries? Will the current enthusiasm for industrial policy fade away as it did after an early burst in the Clinton years? And could the sudden prominence of the issue lead to a rethink of any of the long-standing industrial policies in sectors that are much less strategically important? The conversation over industrial policy has started up again, but it remains to be seen where we end up.

Constructing an effective industrial policy is a challenge, because of (1) inherent limitations in policymakers' ability to direct the economy in a positive way and (2) lobbying by interest groups. The ethanol subsidies I mentioned in the piece are a good illustration of both. Note that these subsidies are not only industrial policy, but some people used to argue that switching to ethanol was a good way to reduce carbon emissions: "research conducted at Argonne National Laboratory (ANL) compared the greenhouse-gas emissions of ethanol and gasoline. That research, which has been widely accepted by federal agencies, found that the use of corn ethanol as it is currently produced—using coal-fired and natural gas-fired plants—reduces life-cycle greenhouse-gas emissions by about 20 percent when compared with the use of gasoline." I'm not sure many people believe this anymore, but despite this and all the other flaws with this policy, ethanol subsidies are still around.

How Will Authors React if Software Can Identify Authorship of WTO Dispute Rulings?

Back in 2019, I wrote about a paper by Joost Pauwelyn and Krzysztof Pelc on the role of the Secretariat in WTO disputes, following up on Joost's own post about the paper. As Joost put it, this is what they did and what they found:

We begin by comparing the textual similarity of rulings on the basis of their potential authors. We then collect external texts written by all the potential authors of WTO rulings to create stylometric profiles for each. Using computational authorship-attribution tools, we then apply these profiles to determine who the more likely author of a given ruling is. The findings are unambiguous: the WTO Secretariat appears to exert significantly more influence over the writing of WTO panel reports than the adjudicators themselves. 

Joost and Krzysztof have continued their work on this issue, and have two EJIL blog posts, an EJIL article (free version here), and an AJIL article. Their EJIL article also discusses the identification of authors of dissents:

The WTO is the only major international tribunal to allow dissenting opinions but require that they be anonymous. The ostensible purpose of anonymity is to provide cover from political retribution to individual adjudicators wishing to express a minority opinion. ... We use text analysis to confirm just how thin this veil of anonymity currently is. To demonstrate the point empirically, we analyse the most recent AB dissenting opinion, issued in a politically sensitive case brought by China against the United States, US—Countervailing Measures. Using external texts by all the candidate authors, we build a stylometric profile for each one, and compare it to the text of the opinion, which allows us to identify the likely author of the dissent—the Appellate Body member from the United States—with a great level of certainty. Our intent in doing so is merely to demonstrate that given the current design of three-member-divisions, the veil of de jure anonymity is insufficient to protect the identity of individual opinions from the scrutiny of Member-states.

Starting with the role of the Secretariat, now that it is more widely known -- and has been clearly established with evidence rather than just something insiders talk about -- that the Secretariat folks play such an important role in writing panel reports, Joost and Krzysztof have offered some suggestions for reforms that will maintain the appropriate "equilibrium." For example, they propose "disclosing the names of staff involved in a proceeding and circulating the 'issues papers' and any econometric advice provided by Secretariat staff to the parties to a dispute, and then publishing these memos alongside the final ruling, would prove significant"; and they suggest that "[t]erm limits could be imposed on the number of years that specific individuals can work for the Legal Affairs or Rules Divisions or for the AB Secretariat."

While I'm curious what governments and others think of these suggestions, for now I'm thinking more about the reaction to Joost and Krzysztof putting this information out there. They have shown that, in many cases, software can be used to identify the authors of WTO dispute rulings. How will these authors react?

If I were a Secretariat official assisting on these cases, I would consider it important not to be identifiable as the writer of an opinion. The point of that job is to assist the actual adjudicators. In doing so, it's possible that the Secretariat could have some substantive influence here and there. Maybe on occasion a Secretariat official would come up with a good argument that the adjudicator adopts. In my view, though, if I as a Secretariat official am so involved that my writing style comes through in the ruling, I'm probably playing too big a role and I should step back a bit. If I were asked to draft part of a ruling, my goal would be to emulate the voice of the person who asked me to write it, and if software demonstrated that my own voice was coming through, I would make some adjustments.

Turning to adjudicators writing dissents, the issues here are slightly different. The rules may require anonymous opinions, but it is not clear that anonymity can always be preserved. In most AB dissents, I think many close observers of WTO dispute settlement can make a pretty good guess without the benefit of software (panel dissents are probably more difficult). If it were me in this position, I might try not to use too personal a style, and my dissent from a majority opinion would not read like, say, my blog posts. But other people may be less worried about this, and thus they wouldn't make efforts to avoid being detected by software or just people's intuition.

So what will happen now? With Joost and Krzysztof having demonstrated the capability of the software, and people at the WTO Secretariat now on notice that their writing is being scrutinized, how will the officials who work on WTO disputes react? We may find out soon whether the authors of these rulings have the same view as I do. Will they adjust their writing? Will the WTO purchase a copy of the text analysis software to help authors avoid detection? In three years or so, will Joost and Krzysztof still be able to identify the authors of WTO rulings? I encourage them to revisit the issue and see if there have been changes in the capability of their software.

Regardless of what happens here, the role of the Secretariat is an important question and we should discuss it, and I'm curious what WTO Members think. What might be helpful is if they had a better understanding of the Secretariat's role at present. Some government officials already have a sense of this because they have worked on cases, but others may not. A survey-based study of what goes on behind the scenes, and the range of approaches that panelists and the Secretariat take, could be useful here.

Forced Labor in International Economic Law: U.S. and Chinese Initiatives, and the Persistent Silence of the Exploited

In the United States, August is the time of year when professors and students scramble to get their affairs in order before the academic term. I should be doing those things. Instead (I’m not procrastinating, you’re procrastinating), I’ve decided to share my thoughts on the recent forced labor initiatives in international economic law. I do so not (just) to procrastinate but to draw attention to misconceptions about forced labor and how those misconceptions risk further silencing exploited workers.

First of all, why has forced labor become such a buzz term in trade? Trade agreements in the United States and Europe require trade partners to agree to four fundamental labor rights, one of which is forced labor. The other three are: freedom of association and collective bargaining, child labor, and non-discrimination in employment (the International Labor Organization (ILO) recently added a fifth, occupational safety and health, but that’s a different story). Why silo those rights by adopting initiatives that target only forced labor?

The answer is straightforward. Some of those rights, including freedom of association and collective bargaining, are politically fraught and difficult to achieve. Rights associated with trade union activities implicate concerns about political opposition and, in some countries, trigger suspicions of color revolutions. The right concerning non-discrimination in employment is also cumbersome. Many countries remain unwilling or unable to require parity in the treatment of women and men’s labor. If governments and trade negotiators prioritize these rights, they risk undermining their broader economic goals and trade negotiations.

Contrary to those problematic and politically-charged rights, who’s going to protest protecting innocent children or eradicating the vestiges of slavery, even if it means curtailing liberalized trade and regulatory space?

Not the United States. Recent events demonstrate the burgeoning popularity of efforts in trade to eradicate forced labor, particularly in global supply chains. A New York Times article exposed the brutal conditions in Xinjiang detention camps, resulting in global calls to protect vulnerable ethnic and religious minorities and the recent passage of the Uyghur Forced Labor Prevention Act. A 2016 revision to the Customs and Border Protection (CBP) mandate expanded its regulatory reach to prohibit goods made in whole or in part by forced labor. Negotiated text in the U.S.-Mexico-Canada trade agreement identifies forced labor, specifically, as a cooperative and regulatory priority. As Steve’s great post the other day reminds us, the Office of the US Trade Representative (USTR) recently requested public input into its forced labor strategy (while remaining silent on the other fundamental labor rights).

We can probably all agree that prohibiting forced labor has become en vogue.

So, what’s the problem with that? While forced labor prohibitions have become a recent political mantra, the ILO and the United Nations (UN) have always devoted resources and priorities to this right, given the nexus between forced labor, slavery, and post-colonial labor exploitation. The longstanding cultural, religious, and political ideologies embedded in labor exploitation warrant a special place in the trade agenda, and USTR’s concentrated efforts should be applauded.

The problem, however, is that while we now acknowledge the importance of prohibiting forced labor, we ignore the ILO’s longstanding lessons on how to do so. Of course, the ILO’s governance system suffers from its own drawbacks. It nevertheless offers over a century of experience, including voluminous documents on forced labor and governments’ reactions to the same types of reputational and financial threats that are now subject to international economic law’s experimentation. Through trial and error, the ILO has already made the mistakes we are currently making. It has learned how to improve its approach, and we should take notice.

I’ll give you an example. As mentioned, current efforts, particularly in the global supply chain discourse, prioritize forced labor over the others, including workers’ associational rights. Conversations among policymakers and corporations center on how progress has stalled because we lack data. If only we had data, they complain, due diligence programs would better identify and redress exploitative labor practices. Proposed solutions inevitably shift to DNA sprays, auditing programs, and blockchain programs to better identify labor practices throughout the chain of production. We have reduced forced labor to a question of technology. We have forgotten the human faces behind the forced labor phenomenon.

The ILO’s lessons strongly suggest that those policies will continue to be ineffective. It takes a holistic approach to fundamental labor rights, foregrounding the rights concerning freedom of association and collective bargaining. If workers have no way to organize and countervail the conditions placed on them by employers and enabled by governments, the ILO has discovered, their exploitation is bound to continue. Under this approach, workers are the data. Rather than identifying obstacles to accessing technology, international economic law must identify obstacles to accessing the workers.

That approach bodes ominously for current initiatives in China, where independent and grassroots trade unions are non-existent. Historically, when it came to committing to fundamental labor rights in its trade instruments, China bucked the trend. However, its days of doing so may be numbered. Its neighbors increasingly commit to the ILO’s labor rights in their trade instruments. China’s trade partners have begun to require it to commit to those rights, including eradicating forced labor.

This past Friday (Aug. 12, 2022), China ratified the ILO’s two forced labor conventions. Many will assume that China did so purely for the optics. Having witnessed nearly a decade of governments’ stark inability to implement their ratified conventions at the ILO, I, too, am deeply skeptical. Nevertheless, by deciding to participate in the ILO’s forced labor system, even if just to check the box in its trade negotiations, the Chinese government may now be vulnerable to repercussions.

In exactly one year, the ILO’s supervisory bodies will review China’s forced labor practices under those newly ratified conventions. Given the Chinese government’s severe restrictions on independent trade unions and its use of detention camps in Xinjiang, the supervisory bodies are poised to rebuke the government for failing to implement the conventions effectively. Those conventions prohibit governments from imposing prison labor “as a means of labor discipline,” such as engaging in strike activities, especially to criticize governmental economic or social policies. They also prohibit governments from imposing prison labor or “as a means of racial, social, national or religious discrimination.” History suggests that the Chinese government will not take these public admonishments lightly. Irrespective of the Chinese government’s reactions, those public comments will further arm its trade counterparts with objective information on how China implements fundamental rights commitments on the ground.

In the meantime, we, as policymakers, advocates, and researchers, play a role in global efforts to eradicate the vestiges of slavery and exploitation of workers in our markets. Whether we hope to bolster CBP’s investigations, U.S. trade agreements, or Xinjiang cotton bans, our efforts will only be successful if we shift our mindset. The problem is not solely about forced labor, and it is certainly not about technology. It is that vulnerable workers and children face harrowing conditions while making and producing our goods. A forced labor strategy must center on strengthening the collective voices of the vulnerable rather than accepting their silence.

Electric Vehicle Tax Credits and Non-Discrimination under the Inflation Reduction Act

The Inflation Reduction Act (IRA) that was recently passed by the Senate has a complex set of assembly and content requirements for its electric vehicle (EV) tax credits. This post offers a few thoughts on domestic content requirements as a matter of policy, possible U.S. justifications under WTO law for those requirements as they are set out in the IRA EV tax credit provisions, and the practical effect of this measure given the strictness of these requirements.

The full text of the legislation is here, but since reading legislative text is often a nightmare, I'm going to rely on this overview from U.S. trade policy expert Tori Smith:

Regional Content Requirements

In addition, the bill adds production requirements for automakers to have their vehicles qualify for the tax credits. For a vehicle to qualify, it must undergo final assembly in North America. This provision is less restrictive than a previous version of the policy, which required American production and favored unionized factories to manufacture these vehicles. Because of the integrated automotive supply chains in North America, neighboring countries were very concerned with the original proposal. Canada even suggested that the previous version would violate the United States-Mexico-Canada Agreement. The Inflation Reduction Act avoids that issue, but it could still be viewed as discriminatory against other foreign automakers, namely those based in the United Kingdom, the European Union, Japan, and South Korea. Automakers have diverse global supply chains, and some may not be as present in North America.

Starting in 2024, under the Inflation Reduction Act, EVs would need to have at least 40 percent of their critical minerals sourced for batteries from countries with which the United States has a free trade agreement (FTA).[4] Critical minerals can also be made from materials recycled in North America. The required percentage of content for critical minerals would then increase over the following two years and by 2026 the regional content for critical minerals would rise to 80 percent.

The bill also specifies that no vehicle produced after 2024 can have a battery with critical minerals that were “extracted, processed, or recycled by a foreign entity of concern.” A “foreign entity of concern” is defined very broadly and could feasibly apply to China.[5] That China performs an estimated 80 percent of global mineral processing and refining makes this particular provision problematic.[6]

Under the bill, the battery of an EV would be required to have at least 50 percent North American content by 2024 and be of 100 percent North American origin by 2028. In 2020, the United States was home to 70 percent of battery cell capacity, meaning an overwhelming portion of the end process to make a battery takes place domestically. The raw materials in a lithium-ion battery, however, represent most of the total cost of the battery. The cost of cathodes and anodes, the positive and negative electrodes in a battery, alone are estimated to represent 40 percent of the total cost of a lithium-ion battery.

In terms of the consistency of the IRA provisions with WTO law, I'm going to focus on the WTO's non-discrimination obligations as applied to the assembly/content requirements, but there is also an issue with how the tax credit itself would be examined under the subsidy provisions. (And let me note that my thinking here has been informed by discussions with David Kleimann and Jesse Kreier, but of course all errors are my own).

As a general matter, domestic content requirements will violate GATT Article III:4. The law is clear on this, and in my view the policy is a good one. The WTO doesn't prohibit protectionism entirely, but it does try to steer it towards more transparent methods such as tariffs. If governments want to protect their domestic EV industry from competition, they are allowed to do so, but they have to negotiate for that ability as part of an exchange of tariff concessions. If governments undermine the carefully crafted balance of tariffs by using domestic content requirements in national and local laws and regulations, the system could quickly fall apart. If one government does it, others are likely to respond with their own content requirements, and we could get into a protectionist spiral. A core purpose of trade agreements is to prevent this sort of thing from happening.

In addition, large wealthy countries would have a general advantage in a system without rules, but also a specific advantage in a system with complex domestic content requirements, because implementation of such measures is more technical than tariffs and requires more resources.

As a result, there is broad agreement that domestic content requirements are a bad idea, and they should be, and are, prohibited by WTO and FTA rules. Obviously, there are some protectionists (and perhaps a few others) who disagree, but I'm just saying the consensus is pretty clear on this.

Of course, this consensus doesn't mean that governments never use these measures. It just means that when they do, a WTO complaint is brought in response, and there have been several WTO disputes over the past few years reaffirming all of this.

In the case of these new IRA EV tax credits, however, things get a little complicated. I'm not sure I have all the answers at this point, but I'm going to set out two key issues here and offer a few thoughts.

First, a "final assembly" requirement strikes me as different than a content requirement in ways that could be important. In theory, final assembly can take place with 100% foreign parts, and as a result, maybe it does not actually require that inputs be from any particular place. Thus, perhaps it is not the same thing as a "domestic content" requirement. Now, in practice, such a requirement might steer the assembler to use local or regional inputs, because those inputs are physically close to where the assembly has to take place. But that ends up being a de facto content requirement rather than a de jure one, and those can be difficult to prove.

Second, there is a question that comes up under all three of the aspects of the IRA EV tax credit measure (final assembly, critical minerals, batteries): Could these requirements be justified under GATT Article XXIV as measures related to a free trade area? Each of the three requirements works a little differently, but all of them are tied to the North American region (and thus perhaps to the USMCA) or to U.S. FTAs. I don't see how else the U.S. can justify these measures under WTO law, so I'm wondering if at least someone involved in the creation of this measure had in mind an Article XXIV defense (others may not have been concerned about WTO law). 

It's important to think about what WTO obligations we are talking about, and the obligations that come to mind here are GATT Articles I:1 and III:4, as well as SCM Agreement Article 3.1(b). With 3.1(b), there is a question about whether Article XXIV could apply at all to a non-GATT agreement. But putting that aside, does Article XXIV even work here? How do these requirements fit under GATT Article XXIV:8(b), which states:

(b) A free-trade area shall be understood to mean a group of two or more customs territories in which the duties and other restrictive regulations of commerce (except, where necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX) are eliminated on substantially all the trade between the constituent territories in products originating in such territories.

Are these North America/FTA assembly/content requirements just part of the elimination of duties and other restrictive regulations of commerce on substantially all trade in the free trade area, and therefore justified under Article XXIV? At this point, I'm not sure, and I'm reluctant to spend too much time thinking about it until 1) the measure actually becomes law, and 2) the U.S. actually invokes Article XXIV. If the U.S. doesn't invoke Article XXIV, it's not clear to me what they will cite as a justification though. (Obviously there is GATT Article XX(g), but I don't see how these requirements could satisfy the Article XX chapeau).

One other legal point here: The “foreign entity of concern” language probably means that GATT Article XXI (security) would be invoked for that specific provision.

Finally, with regard to the effectiveness of the policy as set out in this statute, Tori raises a point about the difficulty of fulfilling the particular requirements in the IRA:

The regional requirements in the Inflation Reduction Act are likely impossible for automakers to fulfill because they severely reduce the sourcing options for inputs. For example, Argentina is responsible for roughly 10 percent of lithium production, but the United States does not have a free trade agreement with Argentina. Moreover, virtually all cathode and anode production is concentrated in China, Japan, and South Korea. South Korea is the only country with which the United States has a free trade agreement, and it represents only 15 percent of cathode production.[7]

If we want these tax credits to be helpful in encouraging people to buy electric vehicles, fewer restrictions on their use would be better. A version of the measure that did not have assembly/content requirements would lead to more electric vehicles being used, but that is not the version we have right now. It will be interesting to see whether the vehicle-makers and government officials interpreting and applying the rules will find a way to adapt so that consumers can actually make use of them.

UPDATE:

I don't know if I got the assembly requirement analysis quite right. See my discussion with Jesse Kreier in the comments.

Here is a link to the transcript of my July 2022 Podcast on the optimal components of a worker-centered US trade policy. (Thanks to Torres Trade Law)

https://www.torrestradelaw.com/podcast_images/transcript/8528.%20Episode%208%20-%20Worker%20Centered%20Trade.pdf

Using Trade Strategies to Combat Forced Labor

Using Trade Strategies to Combat Forced Labor

Steve Charnovitz

10 August 2022

What is the role of trade strategies in combatting forced labor?

As an international lawyer addressing an international problem, I always begin analysis with international strategies. Since forced labor is inherently a labor issue, one should begin with multilateral labor strategies.

The international community has long recognized forced labor to be a heinous labor practice. The International Labor Organization (ILO) first legislated against forced labor in 1930 in its Forced Labour Convention (No. 29). 179 nationshave ratified this fundamental Convention. But two major economies – the United States (US) and China – have neglected to sign on.

In 2022, China announced its intention to ratify the Forced Labour Convention (No. 29).

When governments violate the Forced Labour Convention (No. 29), the tripartite ILO can investigate and make recommendations. This is what happened in 1981 when ILO worker delegates complained about the use of forced labor by the Dominican Republic (DR). In 1983, the ILO-appointed Commission of Inquiry issued a detailed report regarding defects in the DR's performance under the Forced Labor Convention (No. 29) and three other fundamental ILO conventions.

Coincidentally in 1983, I was tasked to serve on the US trade negotiating team for the Caribbean Basin Initiative (CBI) which was the first national trade preference program to utilize a labor condition. The DR wanted to gain the new CBI trade preferences, and I crafted a strategy for using expanded market access to the US to incentivize the DR to address forced labor. When I discussed the ILO's review with the DR government, the DR officials remarked to me that the ILO had acquired jurisdiction because the DR had ratified the four ILO Conventions. By contrast, the US had not ratified any of the four applicable ILO Conventions, I was reminded.

Nevertheless, because the US was offering valuable trade benefits, the US had leverage to ask the DR government to commit to labor law reforms. This strategy worked and the US able to secure some commitments from the DR to correct some forced labor abuses (see Steve Charnovitz, "Caribbean Basin Initiative: setting labor standards," Monthly Labor Review, Nov. 1984 at 54; Steve Charnovitz, "International Trade and Worker Rights," SAIS Review, Vol. 7, 1987 at 185, 190).

Over the next 37 years, the new US practice of using positive trade conditionality to upgrade foreign labor rights was repeated for many other countries in trade preference programs and bilateral trade agreements. Despite the unprecedented labor-related trade conditionality in the CBI, the US was able to secure a General Agreement on Tariffs and Trade (GATT) waiver for the CBI.

As an exemplary multilateral organization, the ILO constantly updates its legal norms and strengthens programs toimprove national implementation. In 2014, the ILO adopted a Protocol to the Forced Labor Convention (No. 29) to broaden its regulatory strategy (e.g., trafficking).

Because forced labor involves a vile governmental labor policy, perforce the first-best strategies to address such misbehavior is for governments, unions, and employers to use the ILO to improve deficient national government labor regulations and their domestic enforcement.

When a national labor law underregulates as compared to an applicable ILO convention, the most direct remedy of theinternational community is to try to convince the laggard government of the wisdom of adopting the ILO convention and then implementing it. In other words, the ILO seeks to use legalization to upgrade the law and practice of each ILO member country. To give a symbolic example, if Country A is relying on forced labor, then the ILO will try to get A to improve its domestic laws and stop the forced labor for A's workers.

Although the idea of using trade sanctions to remedy a violation of an ILO convention was provided for in the ILO's 1919 constitution, the ILO has maintained its focus on persuasion rather than sanction (Steve Charnovitz, "The Lost History of the ILO's Trade Sanctions," in ILO 100. Law for Social Justice ILO, 2019).

The ILO has also avoided using trade controls as an instrument for implementation (Steve Charnovitz, "Promoting Higher Labor Standards," The Washington Quarterly, Vol. 18, 1995 at 167, 173). That is, the ILO has not asked Countries B, C, and D to ban the importation of A's products that have forced-labor content. In 1956, the ILO began drafting a supplementary and more focused convention against forced labor. During that debate, the US proposed a prohibition of international trade in goods produced by forced labor (Steve Charnovitz, "The Influence of International Labour Standards on the World Trading Regime," International Labour Review, Sept.-Oct. 1987, at 565, 571). This US proposal presented an opportune moment for the ILO to reconsider whether the ILO should add trade controls to its toolbox. For better or worse, the ILO did not accept the US proposal. I've often wondered whether the challenge of forced labor would have been better overcome if the ILO had agreed to the US proposal to add trade controls to the Abolition of Forced Labour Convention (No. 105).

The ILO has extensive, sophisticated mechanisms for treaty implementation. For the Forced Labour Convention (No. 29), as noted above, a complaint by a labor union can trigger an ILO on-site investigation in the respondent country.Even a century after the ILO first offered individuals a right to apply for a Commissions of Inquiry against a scofflaw government to remedy a treaty violation, the inclusive ILO mechanisms are still cutting edge in comparison to the weak inclusivity of other multilateral regimes toward private actors.

For the Forced Labour Convention (No. 29), a government does not entail any liability until it ratifies the Convention.Thus, if a worker organization wants to complain that China is using forced labor in violation of the Convention, the ILO will not undertake an investigation because China has not yet ratified the Convention. The same lack of supervision exists for the US which has not ratified the Forced Labour Convention (No. 29).

If China achieves ratification of No. 29 in 2022, then the ILO would be able to investigate allegations regarding forced labor in Xinjiang. The ensuing international processes could put pressure on China to reveal and correct forced labor.Such an investigation on forced labor could be triggered by a labor union or by a government that has ratified theForced Labour Convention (No. 29). Because the US has not ratified No. 29, the US would not have standing in the ILO to ask for an investigation of China.

In my view, as the international organization with the clearest legal competence over forced labor, the ILO should be the lead agency to tackle this problem. Many countries regularly accused of harboring forced labor, such as Burundi, Cambodia, Cuba, Eritrea, India, Indonesia, Iran, Malaysia, Myanmar, and Pakistan, and the Russian Federation have ratified the Forced Labour Convention (No. 29), and therefore are reviewable by the ILO. Although any forced labor isreprehensible, the ILO should be particularly vigilant in calling out politically-motivated forced labor. (The country that most notoriously uses forced labor, North Korea, is not an ILO member government).

Since 2000, the ILO has only convened two Commissions of Inquiry regarding forced labor: a case against Qatar in 2014 and a new case against Myanmar in 2022. In my view, the ILO should be vastly expanding its efforts to identify and stamp out forced labor by using independent international commissions of inquiry. In recent decades, although the US has provided more project funding to the ILO, US initiative in the ILO is lacking.

For two fundamental ILO Conventions, the ILO decided in 1951 to establish a special mechanism that acceptscomplaints that a respondent government is violating the terms of those Conventions even when the respondentgovernment has not ratified the treaty. This exceptional mechanism is known as the Committee on Freedom of Association (CFA). The CFA has jurisdiction to oversee implementation of the ILO Convention on Freedom of Association and Protection of the Right to Organise (No. 87) and the ILO Convention on the Right to Organise and Collective Bargaining (No. 98). Although both Conventions No. 87 and 98 are widely ratified, several major economies — notably China, India, and the US — have refused to ratify them. Over the decades, there have been many CFA cases filed against large non-party economies such as China, India, and the US.

I have long lamented the shameful US failure to ratify Convention No. 87. See Steve Charnovitz, "The ILO Convention on Freedom of Association and its Future in the United States," American Journal of International Law, 2008, at 90.

The ILO has not established any special mechanisms for individual complaints on forced labor that would apply to respondent governments (like China and US) that are not parties to the Forced Labour Convention (No. 29). The ILO could do so however.

Today, international action against forced labor involves a contesseration of actors including governments, internationalorganizations, civil society, business associations, and companies.

Among the constructive developments is Alliance 8.7 linked to the United Nations Sustainable Development Goals. Yet when I look back to the World Employment Conference of 1976, the moment in which I first got engaged on forced labor as a global problem, I wonder how much net progress has occurred.

In that context, I will offer commentson what new US trade strategy to combat forced labor should be undertaken in 2022.

 

1. What actions could the S. Government pursue with like-minded trade partners and allies to combat forced labor as an unfair trade practice?

 Forced labor is not a trade practice. It is a labor practice.

Forced labor is a violation of basic human rights. What's unfair about the scourge of forced labor is that individuals areensnared into it. The US should focus on better international legal strategies to help these victims escape forced labor and secure decent work.

The key to a successful international effort to combat forced labor is that individual governments, such as the US, should not get distracted by the mythology of unfair trade. Commodifying forced labor can lead to tariffs or imports bans centered on the erroneous notion that merely blocking trade is sufficient to solve the human rights problem.Therefore, the US should refrain from pursuing any activities, alone or with allies, based on the premise that forced labor is an unfair trade practice.

 

2. How can the S. Government bolster the forced labor components of trade agreements and trade preference programs to have greater effect?

1. Multilateral trade agreements

Back in 1977, as a US Department of Labor (USDOL) staffer, I assisted in drafting the US proposal to implementthe Congressional directive in the Trade Act of 1974 to seek a labor clause in the GATT (See Steve Charnovitz"Fair Labor Standards and International Trade," Journal of World Trade Law, Jan.-Feb. 1986 at 61, 65).

The US proposal was for a new GATT rule on Minimum International Labor Standards (MILS), including forced labor.But that effort made no progress in the GATT Tokyo Round negotiations. The historical accounts of the Tokyo Round portray this as a failure of the US to gain support, and while that account is technically correct, what really happened ismore sinister. The efforts by USDOL's Bureau of International Labor Affairs to promote a GATT coalition in support of MILS were subverted by the US Department of State.

Now, 45 years later, I would guess that a US initiative for a WTO rule on forced labor might be pursued with greater bureaucratic cohesion. But given the consensus decisionmaking in World Trade Organization (WTO), the outcome would be the same as it was in the Tokyo Round: TheWTO is not going to adopt a substantive rule against forced labor or mandate that goods in international trade be free of forced labor content.

Unlike the WTO, the ILO is not stymied by a consensus rule. Still, I doubt that the ILO would legislate a ban on trade of goods produced by forced labor. Because any strategy to use trade bans on forced labor will only work if a critical mass of economies participates, I suggest that the US ask the ILO and the WTO to do a joint study of what could be accomplished by a global ban on goods (or services) produced with forced labor. Such a study should also proposesolutions to the central problem of regulating goods made with forced labor which is that there is no easy way to objectively determine the process and production methods (PPMs) used in producing goods.

 

1. Free trade agreements (FTAs)

Contemporary US trade agreements contain provisions on forced labor. The US-Mexico-Canada Agreement (USMCA)commits each party to maintain in its statutes "the elimination of all forms of forced or compulsory labor" and to "prohibit the importation of goods into its territory from other sources produced in whole or in part by forced or compulsory labor, including forced or compulsory child labor" (Art. 23.3(1)(b)). The USMCA provides for cooperation to identify goods produced with forced labor, but I have not yet seen any results of that cooperation.

Ideally, the identification of goods produced with forced labor would be done by an international institution in order to provide the greatest likelihood of objectivity. With unilateral determinations as to whether a foreign-made good is produced with forced labor, there will always be suspicions of indirect protectionism.

The use of US FTAs to combat forced labor runs into two practical problems: First, the US has lost its self-confidence to engage in any new FTA. Second, governments relying upon (or tolerating) forced labor are likely to have many othereconomic and political pathologies that will render them unlikely candidates for new US FTAs.

Recently, the US has promoted a new Indo-Pacific Economic Framework with Australia, Brunei, India, Indonesia,Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam. From what I can tell, this Framework is not meant to include free trade, so is not an FTA. Other than India, Brunei and the US, all of the other countries on this Indo-Pacific list have ratified the Forced Labour Convention (No. 29). The ideal provisions on forced labor for the Indo-Pacific Economic Framework would be:

1. All parties commit to ratifying and faithfully implementing the Forced Labour Convention (No. 29) and its new Protocol.
2. All parties agree not to export any goods produced domestically with forced
3. All parties agree to develop a mechanism within the Indo-Pacific Framework to identify goods in globaltrade made with forced labor and agree not to import any such

Leaving aside the issue of why provisions on forced labor or other worker rights are included in trade agreements, one can clearly see a trend toward such inclusion particularly in US agreements. Since 2000, all US free trade agreements (FTAs) have mentioned forced labor.

Yet in some other countries, chapters on labor are omitted in contemporary FTAs. For example, the world's largest free trade pact, the 2020 Regional Comprehensive Economic Partnership (RCEP), does not contain a labor chapter and does not contain provisions on forced labor.

Some observers had hoped that RCEP would include a forced labor discipline because there had long been allegations about the use of forced labor in Malaysia. Recently, Malaysia ratified the ILO's new Protocol to the Forced Labour Convention (No. 29). Of the 10 RCEP nations, eight have ratified the Forced Labour Convention (No. 29), but two nations, China and Brunei, have not.

In my view, RCEP missed an opportunity to combat forced labor by not requiring all RCEP members to ratify orcommit to ratifying the Forced Labour Convention (No. 29). This type of requirement was included in the new European Union-Canada Comprehensive Economic and Trade Agreement (CETA) which commits parties to "make continued and sustained efforts to ratify the fundamental ILO Conventions if they have not yet done so" (Art. 23.3(4)).

The June 2022 New Zealand-European Union Free Trade Agreement commits the parties to "respect, promote andrealise the principles concerning the fundamental rights at work, which are the subject of the fundamental ILO Conventions," such as "the elimination of all forms of forced or compulsory labour" (Art. X:3(3)(b)). Since the European Union countries and New Zealand are ILO member governments, there is nothing in this fluffy FTA provision that is ILO-plus. Of course, the European Union (EU) is not an ILO member and so the EU's commitment to New Zealand on forced labor might be viewed as an enhancement of the EU's external obligations on labor.

1. Trade preference programs

For many decades, the US Generalized System of Preferences (GSP) has been used by the US to raise concerns about worker rights in beneficiary countries. I was a close observer of the statutory changes made in 1984 that first added the worker rights provisions to the US GSP, and so I was appalled in 1985-86 at how unwilling USTR was at that time to undertake an effective implementation of those provisions. When I joined the Advisory Council of the International Labor Rights Education & Research Fund circa 1987, one of the issues on which we focused was USTR's poorimplementation. A lawsuit against the Executive Branch raised these problems, but was dismissed on jurisdictional grounds (International Labor Rights Educ. & Research Fund v.Bush, 854 F2d 745). As the years went by, USTR began improving its GSP implementation on worker rights.

In 2022, the Congress has allowed the GSP program to expire. Since GSP is designed to help developing countriesthrough trade access, the US Congressional disinterest in maintaining GSP is yet another example of how US isolationism is marginalizing the United States as a global leader.

 

3. What new and innovative trade tools can the S. Government develop and utilize to advance efforts to combat forced labor in traded goods and services?

Open trade and trade liberalization are not a new trade tool, but given how little trade liberalization the US has doneover the past decade, a new round of trade liberalization would be innovative for the US economy that has grown more dependent on unilateralism and protectionism to shelter US companies from foreign competition.

Opening US markets can also provide more leverage for the US to use in bargaining with other countries to achieve thehighest-priority US objectives. Over the years, I have observed that the leverage gainable by the US in granting market access is likely to exceed the leverage gainable by threatening to remove market access.

The forced labor import ban (Section 307) of the Tariff Act of 1930 was an innovative provision in 1930, and has been more effectively implemented in recent years than it had been in the past (See Steve Charnovitz, "Environmental and Labour Standards in Trade," The World Economy, May 1992, at 335, 339).

In my view, the new statutory changes involving Section 307 in Public Law No. 117-78 are a step in the wrong direction because they manifest some of the worst tendencies in US foreign policy: unilateralism and discrimination.By making it more costly to import goods from China, the new US law (UFLPA) may violate WTO rules, undermine sustainable US cooperation with China, and fertilize new vested interests in the US domestic economy that rely on US government tariffs and nontariff barriers.

As with any US unilateral trade sanction, the likelihood of using it successfully to correct foreign government misbehavior is low.

 

4. How can the S. Government make the development of trade policy on forced labor a more inclusive process?

 This notice and comment exercise is an important step in the right direction of inclusivity and I applaud USTR for doing it.

Here are three suggestions:

First, as has always been the case, the membership of the USTR Labor Advisory Committee is imbalanced and does not "accurately represent the composition of the American workforce," particularly in an era when less than 11% of US workers are unionized. Instead, the Labor Advisory Committee should be reconstituted to include self-employed and civil society representatives.

Second, USTR should establish an advisory committee to represent the interests of US consumers.

Third, US trade agreements should feature transnational advisory processes. One model is the Joint Public Advisory Committee of the North American Agreement on Environmental Cooperation (1993). I note that the USMCA labor chapter (Art. 23.16) provides a Public Engagement commitment, but no provisions exist for input of transcontinental interests.

Next generation FTAs should include mechanisms to encourage workers, civil society, and business to find common ground in issuing advice. For example, the USMCA environment chapter (Art. 24.5(3)) calls on parties to establishneeded advisory committees, but no USMCA provision sets up a trinational advisory committee to the USMCA Commission. In converting the North American Free Trade Agreement (NAFTA) to the USMCA, the three governments rendered the treaty more nationalistic with a loss of the North American vision and spirit.

 

5. Do you have additional recommendations for monitoring, tracing, or eliminating forced labor in traded goods and services in supply chains?

Although forced labor is a moral and legal problem whether or not goods flow in international trade, one can imagine a system in which any good entering into the channels of global trade is associated with bar coding in blockchain that would identify validated information regarding the labor or environmental conditions associated with production.There should be constant vigorous experimentation with different monitoring systems tested by region or by sector.

Among the goods sectors where tracing experimentation should be pursued are textiles, extractive industries, fisheries, and agriculture.

This is a corrected version of my filing in USTR-2022-0006.

Can Tariffs Help Bring Down Carbon Emissions? Maybe, But Probably Not Under Current Proposals

Recently, I came across two arguments for the U.S. and EU to use tariffs as penalties designed to bring down carbon emissions:

• Senator Sheldon Whitehouse suggested that "laggards and high polluting countries [will be] forced to step up and comply by virtue of the economic pressure on them to stop having their goods tariffed so heavily";
• And Joseph Stiglitz, Todd Tucker, and Isabel Estevez argued for tariffs that "restrict imports of dirty steel and aluminum—that is, metals produced with a high intensity of carbon emissions—from entering their markets."

For reasons I have set out before on this blog, I think an approach that relies on U.S./EU tariffs to punish other governments for their carbon emissions will be ineffective. In response to the arguments set out above, I offer two additional/supplementary reasons. (I'm going to focus here on the policy as it arises in the U.S. more than the EU, because both of the arguments above come from a U.S. perspective).

The first reason is that many people in the U.S. seem to be operating under the assumption that the U.S. is cleaner than most others in terms of carbon emissions, and as a result the U.S. government has the moral high ground to push others to reach our level. But focusing on the key metric, per capita carbon emissions, this is simply not true. Among larger economies, only Canada, Australia, and Saudi Arabia are worse than the U.S. That leaves the U.S. with low credibility to pressure others here. (Maybe the latest developments in U.S. legislation will make a big dent in these figures, but my sense is that there is a lot of uncertainty about that and the achievements will be modest at best.)

The proponents of this approach focus on manufacturing, where U.S. carbon emissions are relatively low. They want to focus on production because the U.S. is good there, but then ignore consumption, where the U.S. is bad. However, from what I can see based on the per capita figures, it is clear that the U.S. is among the worst overall, and focusing on an area where the U.S. is better can't disguise that. If the U.S. takes the approach of penalizing other countries in areas where they are worse (e.g., manufacturing), there is a good chance these other countries will retaliate in kind, e.g., imposing tariffs on the U.S. for its overall higher per capita emissions in order to induce the U.S. to "step up and comply."

Not surprisingly, the focus of these arguments is often China, as Whitehouse makes clear with this statement: "You know, you can hector and plead and wheedle with the Chinese all day long about trying to do better in terms of pollution, but what's really going to get their attention is when their exports to the US and the EU are being tariffed heavily. They will move much more rapidly to get away from that pressure than they will to try to meet the approval of the West at functions in Davos." Whenever someone brings up China these days, the discussion tends to go off the rails, so let's think about India instead. How would India react if the U.S. imposed tariffs on its steel/aluminum because it is relatively dirty in terms of its carbon emissions? Well, there have already been calls in India for action based on the level of per capita carbon emissions in a country, so no one should be too surprised if that happens. (And then going back to China, we already saw what happened when the U.S. imposed tariffs on China under Section 301: China retaliated with tariffs of its own).

The second reason I'm skeptical about this approach is that the steel and aluminum sectors are particularly bad industries in which to carry it out because of their history with trade remedy tariffs. If the idea behind these tariffs on dirty steel/aluminum proposals is that high tariffs would be imposed on dirty steel/aluminum and low tariffs would be imposed on clean steel/aluminum, so as to give countries an incentive to produce the cleaner variety, I can see how that would work to some extent. (I don't think it's a particularly effective approach to the problem, and a revenue-neutral carbon tax would be better, but I see the logic.)

But it's important to understand that the Global Steel and Aluminum Arrangement under discussion right now will not provide those incentives, because clean steel will not be charged low tariffs. Ordinary U.S. tariffs are not very high on these products, but trade remedy tariffs often are: "As of April 19, 2017, Commerce has 152 antidumping (AD) and countervailing duty (CVD) orders in place on steel from 32 countries." (See also, World Tariff Profiles 2021:  AD, p. 209; CVDs, p. 218; Safeguards, p. 225) The point here is that even if India or China could come up with a way to produce steel that, let's just say for the sake of argument, sucks carbon out of the atmosphere, it would still get hit with high U.S. tariffs. And if you are already subject to 100% AD tariffs, an extra 25% because your products are dirty won't have much impact.

So if these proposals won't accomplish their environmental goals, what might we do instead? One way to have an impact here would be to change the current system so as to charge lower tariffs for clean steel/aluminum. To this end, the U.S. could lead an effort for governments to lower tariffs on clean versions of these products in order to provide an incentive to produce this way. While U.S. ordinary tariffs are low, other countries have higher tariffs, so convincing them to charge lower tariffs on clean steel and aluminum could have an impact. Exempting these goods from anti-dumping tariffs could allow the effort have an impact in the U.S. as well. 

An initiative along these lines is kind of a variation of the negotiations for the Environmental Goods Agreement. The EGA identifies goods that are considered green, and lowers tariffs for them; this initiative would lower tariffs for goods that are not inherently green but have been greened to some extent.

Another possibility is to encourage governments to provide subsidies to upgrade domestic manufacturing facilities to ones that emit less carbon, with part of this effort being a promise not to impose countervailing duties against those subsidies or to challenge them at the WTO (which could lead to authorized tariff retaliation). In effect, there would be an environmental exception applied to these particular subsidies that exempts them from tariffs that might be applied under domestic and international trade law.

To sum up, my basic point is this: If we want to provide incentives to change behavior, we have to offer something substantive in terms of opening markets to clean energy products or otherwise providing incentives to make these products. Unfortunately, under the current "tariffs as penalties" proposals, there does not seem to be much chance of progress. In contrast, a "removing tariffs as an incentive" approach could work.