At an EXIM bank event yesterday, U.S. Trade Representative Katherine Tai said the following about the proposed Global Arrangement on Sustainable Steel and Aluminum:
And the concept would be for the US and the EU to join our markets, and to use access to our markets to leverage fair trade and clean trade in these industries. Again, taking the strength of our shared values and then trying to create a new paradigm for trade that is going to incentivize raised standards, both in terms of fair trade, and also in terms of moving to a clean energy future.
Apparently there is a "Concept Paper" floating around out there in which the proposal is explained in detail, and if anyone wants to leak it to me I would be most obliged!
As the substance of the policy, as I have said before, the difficulty I see with this proposal is that by combining clean and fair trade together like this, I'm not sure how you end up with significant incentives for foreign steel and aluminum producers to produce more cleanly. There are two categories of issues here.
First, cleanly produced steel and aluminum can still be hit with tariffs such as safeguards and anti-dumping duties even if it is traded "fairly." Yes, anti-dumping duties are marketed as targeting "unfair trade," but given the way these laws are applied in practice, they can be imposed on imported products that are not "unfairly" traded. Thus, if foreign producers find a way to make their steel and aluminum products in a squeaky clean manner, there is no guarantee they will be able to sell it in the U.S. market (or the EU market for that matter, assuming the EU goes along with this).
Second, with regard to countervailing duties, you can certainly make the case that subsidized products constitute unfair trade, and therefore it's appropriate to impose countervailing duties on these products (I would prefer an "adverse effects" complaint at the WTO, but let's put that aside for now). However, if your goal is to get foreign producers to make their products in a way that generates lower carbon emissions, a likely way for them to achieve this is with the help of government subsidies (otherwise, the costs of modifying their production methods could make their products less competitive), and if you are going to impose tariffs on their imports based on those subsidies, they will lose their incentive to change the production methods.
So, just to repeat what I've said in earlier posts, I don't see how this plan would lead any producers to reduce their emissions. While I do understand that the foreign steel and aluminum producers might avoid some higher tariffs imposed on dirty steel and aluminum through this Arrangement, how big a deal will that be given the other tariffs that are out there waiting to be applied if they have any success selling their low emissions products in the U.S./EU markets?
Now, if you separated out the "clean" from the "fair" to some extent, you could probably have a big impact on reducing carbon emissions. For example, steel and aluminum below a certain carbon emissions threshold could be exempt from anti-dumping duties and safeguards, and from countervailing duties in relation to subsidies designed to reduce carbon emissions. But for obvious reasons, it's hard to imagine many people going for that.
And finally, there is the issue of retaliation, as many countries, especially those with lower per capita carbon emissions than the U.S. and the EU, are likely to object to this approach and could retaliate with tariffs on U.S./EU products.
