0:03

There is a very fundamental rethinking going

0:05

on now about what the trade system

0:07

needs to look like, what

0:10

it needs to focus on, how it needs

0:12

to balance the push toward

0:14

economic progress with attention

0:16

to other important policy goals. And

0:19

I think the inattention to those other

0:21

policy goals is one of the reasons

0:23

the trade system has come under such

0:25

criticism. Around the world,

0:27

new policies like the Inflation Reduction

0:29

Act or the European Union's carbon

0:32

border adjustment mechanism aim

0:34

to accelerate the pace of decarbonization.

0:36

But these same policies have also

0:38

fueled trade tensions and raised

0:40

concerns about protectionism. A

0:42

successful clean energy transition means much

0:44

more trade in clean energy technologies

0:46

and products, according to the International

0:48

Energy Agency. The

0:51

rules-based global trading system underpins much

0:53

of that trade, but increasingly

0:55

the World Trade Organization has faced challenges

0:57

and calls for reform, particularly

0:59

around issues of sustainability and

1:01

climate change. So what

1:04

reforms are needed to align the global trade

1:06

framework with climate goals and policies around the

1:08

world? How can the

1:10

WTO support both economic progress and

1:13

sustainable development? And

1:15

what does a completely reimagined global trading

1:17

system look like that is

1:19

aligned with accelerated decarbonization? This

1:25

is Columbia Energy Exchange, the weekly podcast

1:28

from the Center on Global Energy Policy

1:30

at Columbia University. I'm Jason

1:32

Bordoff. Today

1:41

on the show, Dan Esti. Dan

1:43

is the Hill House professor at Yale University

1:46

and director of the Yale Center for Environmental

1:48

Law and Policy. He just

1:50

finished public service leave working at the

1:52

World Trade Organization and is co-leading the

1:54

remaking global trade for a sustainable future

1:56

project. Dan has written numerous

1:59

books on environmental trade. The responsibility and

2:01

economic progress including green to

2:03

gold and greening begat. He

2:06

previously served in a number of leadership

2:08

roles at the Environmental Protection Agency, including

2:10

his work on the Us delegation that

2:13

negotiated the Nineteen Ninety Two Framework Convention

2:15

on Climate Change. stand also served as

2:17

the Commissioner of Connecticut's Department of Energy

2:19

and Environmental Protection. from two thousand and

2:22

Eleven to two thousand and fourteen. Dan

2:24

join me to talk about his work

2:26

at the W T O and how

2:28

climate policy and trade policy intersect. I

2:31

hope you enjoy our conversation. And

2:33

se welcome to Columbia Energy Exchange. It's great to see

2:35

you again and thanks to make and time to be

2:37

on the South. Pleasure. Be with you.

2:40

So. There's so many things I could

2:42

talk to you about. Given your extraordinary

2:44

career in public service and government of

2:47

the state and federal levels in academia,

2:49

of course I want to focus the

2:51

conversation on something that is getting an

2:53

increasing amount of attention, but you've been

2:55

focused on for many decades, which is

2:57

that connections between climate and trade policy.

3:00

This was the first cop cop

3:02

twenty eight in Dubai to have

3:04

a trade day. Just are people

3:06

who are kind of broadly unfamiliar

3:08

and thinking about climate change and

3:10

the effects of his and they

3:12

accelerated clean energy transition. Solar electric

3:14

vehicles. Why why sir?

3:17

Trade Day at Cop Twenty Eight. And

3:19

why should we be spending time talking

3:21

about trade policy, which may seem like

3:24

a real unrelated topic of international economics?

3:26

Why are we talking about in the

3:28

context of Climate change? The

3:31

I think there's a a quick answer

3:33

which is that the United Arab Emirates

3:35

as the host of Top Twenty Eight

3:37

wanted to put an imprint on the

3:40

structure of their to weeklong gathering and

3:42

argued themselves as a trading nation and

3:44

a trading center for many centuries and

3:46

thought this would be an interesting additional

3:49

piece of the story to bring to

3:51

bear. But of course the yeah the

3:53

bigger answer. The more important answer is

3:55

that the the centerpiece of Top Twenty

3:58

Eight was the global stock to. And

4:00

or that as we all know revealed

4:02

quite clearly that emissions are still rising

4:04

and even in countries where they're coming

4:06

down, they're not coming down in almost

4:08

all cases fast enough to hit the

4:10

Glasgow Climate Pac target of net zero

4:12

emissions by midcentury, an outlet every one

4:14

of the cop, and of course before

4:16

and after to ask a big question

4:18

needed we going to do differently than

4:20

we do a better to get ourselves

4:22

on a trajectory we need to be

4:25

on. And that's where I think trade

4:27

emerged are. We already knew that there

4:29

needed to be more finance. That was

4:31

of course the topic of discussion. When

4:33

you there needed to be corporate social

4:35

responsibility and and companies taking on sustainability

4:37

as a Us as a core part

4:39

of strategies are, We knew that sustainability

4:41

minded investors could help us steer the

4:43

world towards a sustainable future. But I

4:45

think for the first time people began

4:47

to say all that were been doing

4:49

and it's still not enough what new

4:51

And that's where Trade came to the

4:53

fourth. And. I do think

4:55

get ah it helped that the World

4:57

Trade Organization has a very dynamic leader

5:00

er, doctor and goes your conjure. We

5:02

were lox ah who really made the

5:04

case of starting with a recognition that

5:07

trade does contribute to a missions to

5:09

the extensive goods are moving across the

5:11

world, end up and largely in ships

5:14

but with significant emissions in total but

5:16

also with the idea Jason as you

5:18

hinted at that the key to success

5:20

here is a move. The necessary clean

5:23

energy technologies are. Technologies Products, Services,

5:25

infrastructure around the world at speed

5:27

and scale, and that's where trade

5:30

really can play a big role.

5:33

And again you even thinking about this

5:35

for a long time. Going back to

5:38

the creation of the World Trade Organization

5:40

roughly three decades ago and and wrote

5:42

a book at the time Greening The

5:44

got the rules of the global trading

5:46

system. The General Agreement on Tariffs and

5:48

Trade. Talk about. What the initial

5:50

motivation was what you were focused on

5:53

back then and sent similar different how

5:55

has this issue evolved in that time

5:57

period? So I did come to that

5:59

the moment of writing a book and

6:02

Ninety Ninety Four after a service in

6:04

the Us government or at the Environmental

6:06

Protection Agency, I was one of the

6:08

Us government negotiators of the original Ninety

6:11

Ninety Two Framework Convention on Climate Change

6:13

Said began thinking at that moment if

6:15

needed to be done in and out

6:17

where we would get leverage to try

6:20

to drive the world toward a sustainable

6:22

future more broadly about toward a climate

6:24

Change real Action Programs more specifically and

6:26

done in. I also was called upon

6:29

at that moment. To help negotiate

6:31

the environmental provisions of Us.

6:33

Have a trade agreement that was emerging

6:35

between the United States are among the

6:37

United States, Canada and Mexico and I

6:39

didn't factor or leave the efforts of

6:41

from the he be a sides develop

6:43

an environmental dimension of that trade agreement

6:45

for the first time ever and frankly

6:47

I you know a lot of it.

6:49

We were having a figure out as

6:51

we were going but I think it

6:53

stands up over time in a pretty

6:55

good way. And when I came out

6:57

of government and Ninety Ninety Four I

6:59

was asked to or write a book

7:01

about all of this and that's. When

7:03

the screening the jackpot came together and the

7:05

argument I made was a simple one other

7:08

one has taken a long time to sort

7:10

of come into sharp focus. And

7:12

that was the claim that a

7:14

trade world was it. It was

7:16

gonna ways social welfare by increasing

7:18

economic activity and an economic integration.

7:20

Trade liberalization would a lift countries

7:22

all around the world and improve

7:24

love development prospects for all and

7:26

I mean the case it and

7:29

last one focused on the harm

7:31

that was awesome are rising the

7:33

emissions associated with traded goods store

7:35

was a risk if these on

7:37

internalized externalities as economists would call

7:39

them or pollution from the everyday

7:41

point of view. Was going to

7:43

pretend silly offset the games from economic

7:45

growth driven by trade and a that

7:47

argument was quite jarring at the time.

7:50

Ninety nine for up when this book

7:52

came out. Ah, jarring to the trade

7:54

world for sure. jarring more broadly, but

7:56

I think over time has come to

7:58

be recognized as. Correct are in

8:01

fact, when the W T O

8:03

was launched in Ninety Ninety Five

8:05

of the World Trade Organization has

8:07

in his first paragraph of what's

8:09

known as the America Agreement to

8:11

set this organization up or something

8:13

as says I'm paraphrasing, you know

8:15

trade liberalization is not the ultimate

8:17

end of disagreement or of the

8:20

trade system broadly. or the end

8:22

is sustainable development. Trade. Is

8:24

simply a means to get there. And I think

8:26

it took a long time for the world to

8:28

come around to recognizing that more needs to be

8:30

done. To. Really figure out

8:32

how to make sure the trade system

8:34

is aligned with that commitment to sustainable

8:37

development in the broadest sense, but the

8:39

climate change action, most specifically. Taco.

8:42

Little bit about the World Trade Organization

8:44

how it is addressing. I'm thinking about

8:46

this issue of climate, clean, energy, transition,

8:48

and trade and in particular, what you

8:50

did in the last two years. On

8:52

secondment to that organization, you're inside the

8:54

W T O for the last year's

8:56

What was your experience? What was your

8:59

role? Where are you working on. Why?

9:02

Was invited to come to the W

9:04

T O and moved to the back

9:06

to Geneva on public service leave from

9:08

Yale at the request of a doctor

9:10

and goes yeah, she calls herself the

9:12

head of the organization Shortly after she

9:14

arrived and she had heard about a

9:16

project I was running at Yale with

9:18

colleagues around the world. While the remains

9:20

in global trade for sustainable future projects

9:22

and the ass to be briefed on

9:24

what this team of some. Kind.

9:26

Of legal experts, policy experts Environmental experts

9:29

was doing or in taking a look

9:31

at the trade system, really trying to

9:33

answer the same fashion I had looked

9:35

at in Ninety Nineties, which is how

9:37

do we get better along and between

9:39

the trade system and are other important

9:42

policy goals notably environmental goals now we

9:44

might call them sustainability efforts. and

9:46

that i told doctor and goes

9:48

the and this said conversation in

9:50

the early i just was late

9:53

twenties when he wants that i

9:55

thought her organization was in some

9:57

silencing places are that there was

9:59

a the trade system was being

10:01

neglected and pushed aside, seen as

10:03

peripheral to global governance. I

10:06

told her that I thought the underlying

10:08

economics had moved from where

10:10

it launched really in the 1940s in

10:13

the wake of World War II, where

10:15

the trade system was one of three pillars

10:17

of the Bretton Woods structure that was created

10:19

to kind of knit the world together after

10:21

World War II. And that

10:23

original trade system was very

10:26

much focused on bringing down tariffs, bringing everyone

10:28

a chance to find a sense of

10:31

common economic opportunity by working together.

10:33

But it also left a fair

10:35

bit of policy space to pursue

10:37

other agendas, including environmental agendas. And

10:40

over time, I think that vision

10:42

got distorted, I would call

10:44

it particularly in the 1980s, 90s, by

10:47

what some would describe as neoliberalism, others

10:49

would call it market fundamentalism. I

10:52

myself think that there was a deregulatory

10:54

focus in a number of countries, in

10:57

the United States, of course, and in Britain and some

10:59

other places, all coming from the

11:01

same kind of University of Chicago view

11:03

that markets could solve all problems. A

11:05

view which I take strong issue with

11:07

over many, many years and

11:09

believe that one needs an economic system

11:12

broadly, but a trade system in particular,

11:15

that provides boundaries and

11:17

basically does not permit people

11:19

to have market opportunity to

11:21

get competitive advantage from

11:23

causing harm to others, spilling

11:26

over pollution or other externalities.

11:29

And so it was that argument that I brought

11:31

to Dr. Ngozi and she was, instead of being

11:33

upset, and dedicated, and

11:35

she said, Dan, that's really what the trade system

11:37

needs. It's a new foundation, rebuilt to

11:39

be fit for purpose in the 21st century

11:41

going forward. We need to have

11:44

new rules, new procedures. And

11:46

she basically said, would you come and help me figure

11:49

this out? There's a great

11:51

team in Geneva at the WTO, talented,

11:53

hardworking people, but a lot of them are paying

11:56

attention to things that are part of a mandate that

11:58

was given to them at some prior. gathering

12:00

some other ministerial conference that the

12:02

WTO holds on occasion every couple

12:05

of years, and didn't have

12:07

time to think sort of strategically. And so

12:09

that's what I ended up doing, really helping

12:11

to decide to find a

12:14

path forward for the trade system,

12:16

working with one foot inside

12:18

the WTO and supporting Dr. Ngozi

12:20

and her efforts. And she

12:22

asked me to keep my Yale hat on as

12:25

well, and continue to work with this team of

12:27

scholars around the world and policy thinkers. And

12:30

together we over the last couple

12:32

of years hosted 10 workshops

12:34

looking at various ways, the trade system

12:37

and the sustainability agenda connected

12:40

or sometimes clashed. And

12:42

from those 10 workshops, each of which

12:44

involved 30 to 40, sometimes 50 thought

12:46

leaders specific to the topic at hand,

12:48

which included things like climate change and

12:51

trade, just transition to a

12:53

clean energy future and trade, food

12:55

systems and sustainable agriculture and trade.

12:57

And from each of those conversations,

12:59

we extracted elements of

13:02

what became a trade system reform agenda

13:04

that we released this past September, took

13:07

to a gathering a high level summit of

13:09

110 leaders in

13:12

the Swiss mountain town of Villar. And

13:14

from which we've now released the

13:17

Villar framework for a sustainable trade

13:19

system, a comprehensive reform agenda that

13:21

allows a conversation to begin about

13:24

how to make the trade system work

13:26

to support a sustainable future

13:28

rather than being seen as undermining it. Yeah,

13:31

and this is an audio, not a video

13:33

podcast, but you can attest

13:35

that I'm holding the Villar framework in my hand

13:37

and I'm going to ask you about it. But

13:40

just help people understand in your mind where the

13:42

conversation about trade stands today, again, sort of

13:45

three decades after you did a lot of

13:47

that work on Greening the

13:49

GATT, as you said, unfettered market

13:51

forces alone don't necessarily

13:53

deliver the results we want, don't account

13:55

for negative externalities like pollution. And

13:58

So you need rules and play. To

14:00

do that, Policies in place to do

14:02

that. But but I think there are

14:04

is and. Is

14:06

it the case that we've gone

14:09

well beyond that? Now where some

14:11

of the fundamental. Principles.

14:13

That allowed a relatively broad segment of

14:15

the policy world to support more free

14:18

and open trade is on the backfoot

14:20

now you sort of, I think on

14:22

both sides of the aisle and Washington

14:24

hear. More skepticism about trade

14:26

or rise of so called industrial policy

14:28

are connected to requirements that lots of

14:31

goods for tax credits be made in

14:33

the Usa or free trade agreement countries.

14:35

Ah, we've heard the takes Alabama Nasa

14:37

Scared he buys a sort of comment

14:39

how mile be assumptions we may Thirty

14:41

years ago many to be rethought because

14:43

China's not playing by those rules. Are

14:45

we thinking differently about free trade? Today's

14:47

that a good thing or a bad

14:49

things broadly. And then for the energy

14:51

transition particular. So you've

14:53

put a lot into that question. I'll

14:56

try to unpack and on piece by

14:58

piece at the answer for sure is

15:00

that there is a very fundamental rethinking

15:02

going all allow about what the trade

15:05

system needs to look like, what it

15:07

needs to focus on how it needs

15:09

to balance the push toward our economic

15:11

progress with the attention to other important

15:14

policy goals. And I think the in

15:16

attention to those other policy goals is

15:18

one of the reasons the trade system

15:21

has come under such criticism of. Course

15:23

in the United States by both parties

15:25

as you point out or it was

15:27

the driving force behind the the U

15:29

K's decision to exit the European Union

15:32

the famous black Set vote but it's

15:34

also have a more broadly a concern

15:36

all across the world and developed and

15:38

developing countries and I think this is

15:40

the difficulty Again I would pinpoints as

15:43

or narrowness of focus of the trade

15:45

world and there is kind of a

15:47

community in Geneva that is. Been.

15:50

There in many regards you you see the.

15:52

W. T O ambassadors from the It's

15:54

Hundred and Sixty Four member countries often

15:56

spent prior tours of duty in Geneva

15:59

or as lower. Level officials in

16:01

their country missions and a sort

16:03

of view of the trade system

16:05

as a thing to protect and

16:07

and to really drive trade liberalization

16:10

often at the expense of other

16:12

important policy choices I think is

16:14

now discredited and at what we

16:16

we see is a need to

16:19

rebalance and ensure that the economic

16:21

opportunities which remain important. And let's

16:23

not forget that if we look

16:25

back over the last fifty years

16:28

the gross across the developing. World

16:30

is in many cases are attributed

16:32

to export orientation of countries, so

16:35

it remains an important driver of

16:37

developments. The key however is to

16:39

make sure. That. Those

16:41

economic opportunities are consistent with this preamble

16:44

paragraph of the Wtf when it was

16:46

set up that says let's make sure

16:48

it's sustainable development and I think that's

16:51

what we're working on now. How do

16:53

we make this system nibble? And in

16:55

that regard there are. There is a

16:58

good bit of work to be done

17:00

and I would argue I'm there is

17:02

a an opportunity in the upcoming. World

17:05

Trade Organization Ministerial Conference that will

17:07

take place in the last week

17:10

of February or in Abu Dhabi.

17:12

For. The global Community the hundred

17:14

and sixty four member nations of

17:16

the W T O to come

17:19

together and without a path forward

17:21

that will ensure this crater alignment

17:23

of the other trade world is

17:25

in effect of the rules of

17:27

international commerce of global economic activity

17:29

with the need to move the

17:31

society we all live in. Toward.

17:34

A sustainable Future A low carbon

17:36

future of a one of addresses

17:38

pollution and other or sustainability issues

17:40

as well. So

17:43

is the right way to think about

17:45

this sort of risks and opportunities. We

17:47

for the reasons you said a moment

17:50

ago. We.

17:52

need we need trade it lowers

17:55

costs said accounting making sure you

17:57

account for human rights issues and

17:59

environment issues and all the caveats around

18:01

that. If we're going to have

18:03

a clean energy transition at the pace and

18:05

scale we need, we're going to need to

18:08

scale clean energy, solar panels, electric vehicles, on

18:10

and on, green steel so quickly that can't

18:12

happen if everybody tries to do this within

18:14

their own domestic borders. And so

18:16

we're going to need more trade in clean energy

18:18

components and technologies, not

18:20

fewer, and a rise of protectionism. If

18:22

I can just jump in. Yeah. It's

18:25

more of that. It's at

18:27

greater speed of dissemination across the world. So it's

18:30

not enough just to have these technologies in a

18:32

few countries that are at the cutting edge. We

18:34

need to move it all across the world. And

18:37

you said something very important that people

18:39

forget, which is when you drive this

18:41

process, you drive scale economies that

18:43

bring down costs. And with limited

18:45

budgets, the ability to really move at speed

18:47

and scale depends on bringing down costs. And

18:50

you also spread ideas and

18:52

drive innovation, which is going to be critical.

18:54

So it's really a four part argument that

18:57

trade is at the center of what it's

18:59

going to take to deliver success on climate

19:01

change. And I think that's really the key

19:03

argument here. And where I was

19:05

going with that was the idea that sort of

19:07

broad forces of economic fragmentation, protectionism

19:10

for a variety of reasons pose

19:12

a potential serious headwind that

19:15

could slow the pace of the energy transition.

19:17

Is that the right way to think

19:19

about one of the issues of trade and climate? And I

19:21

want to come back in a minute to some others. You're

19:24

absolutely right. And I think what we

19:26

have run into is in addition to

19:28

fears that the trade

19:31

system was not delivering as

19:33

it needed to a balance between

19:35

economic growth opportunities and other values

19:37

like protection of the environment, supporting

19:40

sustainability, but also things like worker

19:43

protections, human rights.

19:46

And the trade system has been, I think,

19:48

inattentive to some of those issues. This is,

19:50

again, an argument I've been making for 30

19:52

years. And what we need is a trade

19:55

system rebuilt, restructured with new

19:57

rules and new processes that ensure

19:59

that we're workers are not

20:01

forgotten. It turns out that the

20:04

everyday citizen of the United States

20:06

or any other country has benefited

20:08

enormously from lower cost goods as

20:10

a result of trade. But

20:12

we've also paid a price. Workers in

20:14

particular, when jobs have

20:17

been relocated and sometimes not

20:19

based on trade advantages but

20:22

on trade policy manipulation. And

20:25

that does require attention now. And

20:27

I think the Biden administration is on this issue.

20:31

One could argue that it's on it in

20:33

too big a way, neglecting for, in

20:36

some regards, the opportunities and the

20:38

gains that we just highlighted. But there

20:40

is no doubt that the trade system needs to

20:43

make sure that the success in

20:45

the global marketplace is not coming at

20:48

the expense of workers, at the expense of the

20:50

environment, or in other ways that might be judged.

20:53

Not the logic of markets

20:55

operating around the world, rather

20:57

manipulation of the global

20:59

marketplace by some countries and some industries and

21:02

some companies. Do you

21:04

share that concern you just

21:06

articulated that while there does need to

21:08

be a rethinking of the rules and

21:10

making sure that we're accounting for labor,

21:14

human rights standards, environmental standards,

21:16

that the conversation today in

21:19

this administration, maybe on both sides of the aisle,

21:21

has sort of lost sight of

21:24

how significant the gains from trade are. I

21:28

fear that that is correct. I do

21:30

think we have lost sight of the gains.

21:32

I think we've lost sight of these multiple

21:34

reasons why trade has been so significant over

21:36

so many decades. We've lost sight of the

21:38

original vision of the

21:40

Bretton Woods structure that was set up,

21:42

going back, by the way, to the

21:44

work of a heroic American Secretary of

21:47

State, Cordell Hull, longest

21:49

serving Secretary of State ever, who made

21:51

the case for this

21:53

trade system, not so much for

21:55

economic efficiency, although that was

21:58

part of his argument, but really as a way to hold.

22:00

countries together to give them the sense

22:02

of common economic destiny and as a

22:04

result his argument was largely an argument

22:07

of peace and security and I do

22:09

think that is a fundamental reason to

22:11

have a trade system that accepts some

22:13

differences holds people to account

22:15

for meeting standards that are commonly agreed

22:18

upon but let's not let the world

22:20

fragment and break apart I

22:22

think it would be extremely difficult to

22:24

succeed in the climate change challenge if

22:26

the trade system is allowed to fragment

22:29

and particularly if it were to

22:31

break into two competing blocks I

22:34

see it almost impossible to achieve

22:36

cooperation on climate change in the

22:38

face of economic fragmentation

22:41

and even ongoing trade disputes

22:43

and wars at the

22:45

same time so I mentioned

22:47

is the right way to think about those sort

22:49

of risks and opportunities you just articulated well the

22:51

risk to the clean energy transition again at the

22:54

scale and speed we need if trade

22:56

is on the back foot you've also

22:58

talked about the opportunities and I heard dr.

23:00

and goes you talk about this at COP

23:02

28 in Dubai as well when the rules

23:05

of trade and trade policy might be

23:07

used to accelerate the pace of the

23:09

clean energy transition and that can come

23:11

with its own risks the idea of

23:14

climate clubs and you set standards for

23:16

green steel or cement or whatever your product is

23:19

and people get more favorable terms if they're part

23:21

of the club than if they're not can you

23:23

talk about that is there a way in which

23:25

you see trade being used

23:27

as a positive tool to accelerate

23:29

the transition and what risks might

23:31

come along with that idea so

23:34

let's look at three things I think the

23:37

trade system could do beginning

23:39

in the next couple of

23:41

months that would I think help drive

23:43

us towards climate change policy

23:45

success and again I

23:47

don't think we're doing terribly on climate

23:49

change but I think the fundamental reality

23:51

is we're not at the speed and

23:53

scale required for what I would call

23:56

real success and in

23:58

that regard let's imagine In

24:00

that the Trade minister as gather

24:02

and Dubai in the end of

24:05

February issue a declaration that says

24:07

that the trade system should be

24:09

managed to reinforce and support. The.

24:12

Nationally determine contributions of each country to

24:14

climate change policy progress that the all

24:16

one hundred and sixty four members of

24:18

the Wtf committed to or this wouldn't

24:20

is at an art meeting of W.

24:22

This is the doubled Your Ministerial you're

24:24

talking about what a comedian in February

24:26

Exactly the Ministerial concerts it happens to

24:28

be the Things He Says Ministerial Conference

24:31

held every two or three years there

24:33

by the W T O Films or

24:35

Scissors Top Twenty Eight and the Climate

24:37

Change world. This is called M C

24:39

Through Seen in a Trade World and

24:41

I think. This could be one of

24:43

the real outcomes of them. See Thirteen

24:45

is a commitment that the trade system

24:47

will operate it's and move toward being

24:49

seen as outlined with and supporting the

24:51

climate change efforts of each every member.

24:53

The W T O, One hundred Sixty

24:55

Four out of one hundred sixty four

24:57

of those members has signed up to

25:00

the two thousand and Fifteen Paris Agreement

25:02

or and have committed to the Glasgow

25:04

Climate Pact and Twenty Twenty One target

25:06

of Nasir of Essence by midcentury. So

25:08

we really need to trade system to

25:10

be seen as supporting a not. Undermining

25:12

stand progress. And. What would

25:14

that another to everything's whether to come to But what would

25:16

that mean in terms of. How that

25:19

would play out of that mean for

25:21

them for the rules of the global

25:23

trading system but with a look like

25:25

actually implement that kind of commitment. So

25:27

the first thing it's going to require

25:30

is I'm help to establish the terms

25:32

on which trade going forward are going

25:34

be conducted and those terms as you

25:36

are starting to hit said say since

25:38

tap to begin with a question of

25:41

standards and am I do think there

25:43

is an opportunity to help those nations

25:45

and blocks of nations that are trying

25:47

to create. A clean energy

25:49

Future and one in when sure

25:52

that their companies operating within their

25:54

jurisdiction are not disadvantaged by adhering

25:56

to tough climate change standards. That,

26:00

of course I'm referencing the European

26:02

Union. And the effort

26:04

within the European Union to produce

26:07

something called a border Carbon Adjustments

26:09

and that's the idea that good.

26:11

Coming into the European Union, I

26:13

should be tested as to whether

26:15

they were produced and of conditions

26:17

that have the same degree of

26:19

commitment the climate change action as

26:21

producers insurance costs. My think the

26:23

European Union has says to do

26:25

this in a rather superficial was

26:27

simply asking what's the carbon tax

26:29

or carbon charge in the producing

26:31

nations How does that compare with

26:33

the European. Union's Carbon Charge and then

26:35

we invoke this a European Union version

26:37

of border Carbon Adjustment which they called

26:40

a C Bam are poor but core

26:42

of carbon border adjustment mechanism and that

26:44

doesn't is going to suggest that if

26:46

there is a hundred dollar a ton

26:49

are now about one hundred and ten

26:51

dollar return price in Europe and a

26:53

ten dollar price in the producing countries.

26:55

The difference or hundred dollars per tonne

26:58

will be a special tariff imposed on

27:00

those imported goods. Now.

27:02

The Problems: So I'd like

27:04

to say about the European

27:07

Union's effort to use trade

27:09

policy to dry climate change

27:11

progress that it is conceptually

27:13

correct And by that I

27:15

mean it should not be

27:17

that any company gets competitive

27:19

advantage in the global marketplace,

27:21

both underperforming against agreed upon

27:23

environmental commitments and standards including.

27:25

The. Qualities commitments that all W T O

27:28

members of need for as much as

27:30

conceptually correct. I think it's actually. From.

27:32

A policy point of view essential because

27:34

this is the one case and into

27:36

really do have grip on the global

27:39

economy. The trade system and a rules

27:41

it imposes is how you actually get

27:43

people to move from where they are

27:45

now to these hall or standards and

27:48

toward a clean energy future. Magic

27:50

said that it's conceptually correct, policy

27:52

wise essential. I tell you that

27:55

from my perspective, European Union specific

27:57

mechanism, the way it's set this

27:59

up. Is seriously flawed and that's

28:01

where I think the W T O

28:03

in the trade system more broadly could

28:05

help set the standards. What is needs

28:07

to look like. Rather,

28:09

Than having the European Union try

28:11

to establish this on it's own

28:13

or or as we say, unilaterally

28:16

an Rgb for quick things that

28:18

I think the European Union nice

28:20

to first, it needs to measure.

28:22

The. Greenhouse gas emissions and traded goods

28:24

according to agreed upon protocols. Not declaring

28:27

that the European Union approach alone will

28:29

be used a number two, it needs

28:31

to establish an agreed upon price to

28:33

a flies are you know in doing

28:36

as Border Carbon Adjustment, not declaring the

28:38

European Union price unilaterally as the one

28:40

to be used. Number Three:

28:42

It really needs to ensure

28:45

that there is some recognition

28:47

of how this plays out

28:49

in practice and that it

28:51

requires on the structure of

28:54

measurement, a structure of pricing.

28:56

And eight is agreed upon process by

28:59

which the supplies. I think the final

29:01

point here. There. Needs to be

29:03

some recognition of how equity considerations

29:06

will play and. That's. A

29:08

fundamental principle: Climate change. The common

29:10

but differentiated responsibility. It's it's a

29:12

long time principle in the trade

29:14

world where there's a concept of

29:16

special and differential treatment for developing

29:18

nations. In. The European Union

29:20

has systematically not explained how it's

29:22

going to apply those principles of

29:24

equity in the context of this

29:26

see them and I do think

29:28

that needs to be taken much

29:30

more seriously and for example, European

29:32

Union couldn't commit to recycling some

29:34

of that special terror of revenue to

29:37

the developing countries that are paying

29:39

it or at least for a

29:41

certain period of time to help

29:43

them need for higher standards. Otherwise,

29:45

there's an ongoing risk that this

29:48

European Union push is seen by

29:50

many as protectionism or green mercantilism,

29:52

and it needs to be very

29:55

clear that what you're doing is

29:57

eagerly moving people to meet standards.

30:00

Not trying to block them from access to

30:02

the European market. The

30:05

I think I've said before that whoa.

30:07

There are many good reasons to rethink

30:09

some of the assumptions of the last

30:11

three decades on trade. It is sort

30:13

of easy to see how ah, you

30:16

could bleed and the direction of protectionism

30:18

in the name of goals like security

30:20

and resilience of supply chains. And maybe

30:22

that's the risk your identifying skinny tussle

30:25

others. Something I could hear often and

30:27

we serve. but I'm sure both her

30:29

and it kept Twenty Eight from leaders

30:31

from the developing world and emerging markets.

30:34

A sort of growing sense of

30:36

resentment and hypocrisy at how the

30:39

transition is unfolding and the idea

30:41

of that wealthier countries which historically

30:43

cause this problem with the cumulative

30:45

emissions have not so filled. Financial

30:47

commitments that were made to help

30:49

countries ah developing a cleaner way

30:51

or cope with the impacts of

30:53

climate change. And

30:56

now we're talking about. You. Know restricting

30:58

access to markets. Ah, that's how

31:00

it's perceived with things like carbon.

31:02

border adjustments of the exports from

31:04

these countries are not low carbon.

31:06

Analysis on there seems like to

31:08

me something quite valid in those

31:11

concerns. And so how do you

31:13

know and navigate? Just say more

31:15

about how you navigate that. How

31:17

you balance those equity and development

31:19

considerations with the opportunities to use

31:21

trade rules to accelerate faster transition.

31:24

So I think the I'm. Treating. The

31:27

matter is dead. It is. Really?

31:30

Going to be essential. That.

31:32

There is a mechanism of fairness

31:34

in both how the climate change

31:36

transition slows and how the trade

31:38

structure to reinforce it is implemented.

31:40

And in that regard, I do

31:42

think some of it is just

31:44

following through on a financial commitments

31:47

that have been made. But frankly,

31:49

I just as you and I

31:51

both know, Even. the

31:53

hundred billion dollars per year targets

31:55

that was identified some now

31:57

decades ago is not sufficient The

32:00

vast bulk of the funds have

32:03

to be private capital at

32:05

an even greater scale, at a trillion dollar a

32:07

year scale, not a hundred billion dollar a year

32:09

scale. So what would get that money

32:11

to flow? A recognition that

32:14

everybody is moving in this direction,

32:16

and that the investments that that

32:19

money is being put into, building

32:21

out clean energy infrastructure, transforming transport

32:23

systems, remaking the global food system

32:26

to be on a more sustainable

32:28

trajectory. If all of those

32:30

had a market promise of return, the

32:32

capital would flow. Now

32:35

how do we provide the guarantee of that

32:37

market promise? Well, this is, I think, if

32:39

you dig beneath the surface of COP 28,

32:41

the issue everyone was struggling with. You

32:44

and I were both there. We saw

32:46

an amazing array of interesting ideas emerging

32:48

about how this transition could move from

32:51

green hydrogen to new plants,

32:53

to better ways to manage forests,

32:56

to new ideas around the blue

32:58

ocean economy. So there's

33:00

an incredible diversity of ideas emerging.

33:03

And a lot of companies coming forward to say,

33:05

we want to be part of this, except when

33:07

you get them after the session over

33:10

a beer, the CEO says, of

33:13

course, I can't go forward alone

33:15

and out in front of my

33:18

competition and bear costs that they're

33:20

not bearing without putting at fundamental

33:22

risk the viability of my business.

33:25

The real question, Jason, and this is, again,

33:28

why I come back to the trade system

33:30

as fundamental to the progress we

33:32

need on climate change and sustainability more broadly,

33:34

is this is the mechanism that

33:37

assures that the companies that are

33:39

doing the right thing, whether they're

33:41

financing or whether they're actually taking

33:43

those investments and redoing their business

33:45

models to be sustainable, that they

33:47

are not disadvantaged when they do

33:49

so, and that they are, in

33:51

effect, going to help lead the

33:53

way to this transformed economy. And

33:56

so I think that's the essence here of

33:58

what the trade system can provide. is

34:00

the mechanism of enforcement that

34:03

holds everybody on the

34:05

clean energy future trajectory. Again,

34:08

to go back to what an economist would call this,

34:11

we need to avoid the risk that

34:13

free riders are going to

34:16

undermine the push towards this clean energy

34:18

future. I don't

34:20

see a better mechanism for getting the

34:22

free riders held in check and ensuring

34:24

that those that are pushing us forward

34:27

are able to do so without fear

34:29

of competitive disadvantage. I'm

34:32

not sure if I cut you off before I know

34:34

when I asked you about how trade could be used

34:36

as an opportunity to move faster on the transition. You

34:38

said you want to make three points, and I can't

34:40

tell if we're still talking about the first one. We

34:42

still are on the first one. So let me give you... So

34:45

I think this alignment with climate change

34:47

helping to flesh out the standards so

34:49

that countries or economic groups like the

34:51

European Union that are trying to ensure

34:53

that everyone adheres to the standards to

34:55

which everyone's committed, I do

34:58

think working those through in a coordinated

35:00

fashion is important. Number

35:02

two, I do think that

35:04

the trade system of the 20th century

35:07

was focused first on bringing down tariffs,

35:09

which it did very successfully. Second,

35:11

and this is the problem area,

35:14

it evolved in the 1980s and

35:16

90s towards taking down non-tariff barriers.

35:20

Now some of those non-tariff

35:22

barriers were in fact disguised

35:24

protectionism, people doing things in

35:26

ways that insisted on their

35:28

approach at the expense

35:30

of others, or even to protect

35:32

domestic industries. Famously, Ontario for a

35:35

while says all beer had to

35:37

be sold in glass bottles. Why?

35:40

Because the Canadian brewers, Molson's

35:42

Labats, were putting their beer into

35:44

glass bottles. Budweiser and Miller wanted

35:46

to have you drink it out of aluminum cans.

35:49

From an environmental point of view, there was actually

35:51

no good argument for using glass bottles, especially in

35:53

a climate change era where they had to be

35:55

washed using hot water. This

35:57

was just outright protectionism. The

36:00

problem, but there is a whole lot

36:02

of other non tariff barriers stuff it

36:04

was going on with a darn tariff.

36:06

Barriers were countries choices about worker protections

36:09

or environmental protections that was being cleared

36:11

away by a trade system that was

36:13

narrowly focused on economic gain and this

36:15

idea of our trade liberalization at any

36:18

point in and every point being a

36:20

good thing. So that's the past. The

36:22

future has to be Gary as of

36:24

opportunity, so this is points to and

36:26

three on by list of critical areas

36:29

for the W T O to move

36:31

into. So

36:33

climate change is number one. Number

36:35

two is standards generally. How do

36:37

we set sustainability standards in non

36:40

protectionist ways, in non unilateral ways?

36:42

And this is where it's important

36:44

to get people to sit together.

36:46

Ah, and without a scientific grounding.

36:48

with analytic rigor. Develop standards. They're

36:51

transparent and can be fairly and

36:53

forced in a way that will

36:55

be seen as legitimate. And number

36:57

three. And very fundamental

36:59

to the moment we're in is

37:01

there needs to be a new

37:04

trade system approach to subsidies on

37:06

historically. The. W T

37:08

O Or and before the gap

37:10

when it was even a Pre

37:12

W T O S Only one

37:14

question whenever someone accused of subsidizing

37:16

an industry for their own protection

37:18

and advantage and that was is

37:20

this Government money The statement said.

37:23

Of producing trade distortion.

37:26

Of my view, in the twenty first century

37:28

going forward, that's not the right question to

37:30

start with. and it's really can't be the

37:32

only question you asked. The question really has

37:34

to be. What's. The purpose of

37:36

the Sim city. Suggest

37:38

that subsidy and this is the

37:41

question is should be asked. His

37:43

Sustainability enhancing. One. needs to

37:45

have a very different attitude toward

37:47

it ah compared to a subsidy

37:49

that is sustainability diminishing and dot

37:52

and we can then ask after

37:54

we've asked the question about sustainability

37:56

plus are suspended sustainability minus what

37:58

the trade effect is And

38:01

in this regard, you'll have some subsidies that are

38:03

promoting sustainability and have no

38:06

serious trade impact. And those should get a green

38:09

light and go forward. Now, there'll

38:11

be some other subsidies that are sustainability

38:13

positive, but do have a trade effect.

38:16

And I think those should be subject

38:18

to some questions about whether the trade

38:20

effect can be minimized. Are

38:22

we taking out elements that

38:25

aggravate trade partners gratuitously, unfairly?

38:29

So there should be some set of disciplines around

38:31

sustainability-minded subsidies. But

38:34

in general, that should be a yellow light,

38:36

not a red light, which is to say

38:38

the presumption of the trade system should be if

38:41

you're promoting sustainability, you're promoting what,

38:43

in that opening paragraph of the

38:45

Marrakesh Agreement, was said to

38:47

be the system's goal, and that's sustainable

38:49

development. You end up

38:52

then with some number of

38:54

subsidies that are sustainability negative,

38:57

but not much trade effect. The

38:59

old WTO would say, well, no trade effect, we

39:01

have nothing to say. And that's wrong, too.

39:04

If it's a sustainability-damaging subsidy, fossil-till

39:06

subsidies, for example, you should say,

39:08

no, we're against this. You should

39:11

stop it. And then, of course,

39:13

there's the category that is sustainability-damaging

39:16

and trade-disruptive. And

39:19

in that case, there should be a very

39:21

significant WTO push for people to stop that.

39:24

And in that category would be things like fossil-fuel

39:27

subsidies, production-based agriculture,

39:30

fisheries subsidies that lead to overcapacity

39:32

and overfishing and damage to natural

39:34

resources. So that

39:37

is a new structure, I think, that would be transformative.

39:40

And of course, what's interesting here is how it

39:43

would treat the US, and

39:45

particularly the Inflation Reduction Act

39:47

elements of subsidization for

39:49

the transition to clean energy. And

39:52

frankly, it would go in that quadrant

39:55

that is a yellow light, sustainability-positive, with

39:57

some trade effects. And I

39:59

think that's a good thing. what the bi-domestration could

40:01

figure out is with minor modifications

40:03

to the existing framework that

40:06

minimize the impact on trade partners, this

40:09

would be within the scope of the

40:11

system I've just defined. And

40:13

I think it's fundamental to the trade

40:15

system being seen as sustainability oriented

40:18

going forward, that there be this

40:20

sort of yellow light going green

40:22

with the right limitations on

40:25

sustainability oriented subsidies. And

40:28

you're much more of an expert on WTO rules than I, and

40:30

I want to, we only have a few minutes left, but I

40:32

want to go super down a

40:34

technical rabbit hole. But just so I understand,

40:37

my understanding of the way the rules were set

40:39

up is what you described. And then when a

40:41

violation was found, there is this sort of so-called

40:44

list of Article 20 exceptions that say, yes, we

40:46

violated the rules, but we did it for good

40:48

reason, it's for the environment. That's

40:51

not sufficient for the sort of world you're

40:53

talking about. And how would the WTO, what

40:55

kind of reforms would be needed to get to what you're talking

40:57

about? So I think you could

41:00

do in practice what I've sketched out in

41:02

principle, which is that subsidies should be

41:04

tested against their purpose in

41:06

a variety of ways. And one would be to

41:09

open up this so-called Article 20, referring

41:13

to the global agreement on tariffs and trade,

41:15

Article 20, open that up

41:17

to a more clear acceptance of

41:21

sustainability-minded subsidies and make

41:23

that a principle of how that article

41:25

will be implemented. I think it would be

41:27

better for the trade system to be more

41:29

front and center behind the idea that it's

41:32

promoting sustainable development. And

41:34

in that regard, there is going to be

41:36

some subsidization of that path towards the clean

41:39

energy future, towards other ways

41:41

of evolving. And I do think

41:44

this is where the United States should fix

41:47

the system and not let the system

41:49

fall apart. The U.S.

41:51

actually would benefit from a system

41:53

that allows some

41:56

degree of clean energy subsidization.

41:59

I think the U.S. has every reason to

42:01

want to move away from production-based agriculture

42:03

subsidies, which doesn't mean you forget your

42:05

farmers. It just means you shift your

42:07

subsidies to support

42:09

their efforts to become good,

42:12

sustainable agriculture farmers. I

42:15

do think this is where the US has

42:18

got a system near at hand that would

42:20

very much strengthen how

42:22

the US engages in international

42:24

commerce. My worry about the

42:26

Biden administration is

42:28

that if it walks away from the WTO, which

42:30

at times it has seemed like it's ready to

42:32

do, it loses

42:34

all the benefits we sketched out earlier

42:36

and risks breaking a

42:39

system that the US spent decades

42:41

putting together. Fundamentally, and

42:43

I think this has proven over and

42:45

over again in international relations, it

42:48

is extremely difficult to build institutions

42:50

from scratch. Much easier

42:53

to fix a reform,

42:55

refine a flawed system than to

42:57

break it apart and try to start again. And

43:00

are we talking about... I'm just

43:02

wondering if this conversation is taking place in

43:05

a vacuum that is divorced,

43:07

in your view, from the reality of

43:10

where we are right now in

43:12

discussion of the WTO and

43:14

the global trading rules. I can imagine some people

43:17

listening to this are saying, well, this conversation may

43:19

have made sense 10 or 20 years ago, but

43:22

there's a set of practices now

43:24

that are becoming increasingly accepted, motivated

43:27

by industrial policy

43:29

objectives and concerns

43:31

that these violate WTO rules.

43:35

Maybe people used to be concerned about that, but

43:37

they're not too concerned today. And

43:39

the WTO, to put

43:41

it starkly, is perceived by some to

43:43

be more hollow or be a shadow of what

43:45

it used to be. Is that an

43:48

accurate concern and how big a concern is

43:50

that, if true, and what needs to be

43:53

done to change that? So

43:55

I think this is the stark choice

43:57

posed for the United States going forward.

44:00

And I think if you walk away from the

44:02

WTO, you give up on it, you declare it

44:04

to be toothless, as you're suggesting, you

44:07

give up the chance to hold other people

44:09

and other producers from other countries in check.

44:12

And I think that is a dramatic

44:14

problem for the United States going forward.

44:16

Now I also think that there have

44:18

been some serious policy errors made in

44:21

the United States over the past 20

44:23

years that allowed practices

44:25

that we should not have allowed to

44:27

go forward to go

44:30

relatively unchallenged and undisciplined. And

44:32

I'm thinking in particular of

44:34

the way China has massively

44:36

subsidized a whole

44:38

set of industries to get into the global

44:40

marketplace in a leadership posture. And

44:43

by the way, in some regards, we've all

44:45

benefited by the price of wind turbines coming

44:47

down, the price of solar arrays coming down,

44:50

the batteries that make it possible for electric

44:52

vehicles to really go to scale. All

44:55

of that have had positive elements.

44:57

But there's also been predatory practices

44:59

associated with those subsidies. And

45:01

I think if you walk away from

45:03

the trade system, you walk away from

45:05

the opportunity to discipline those predatory practices.

45:08

And my view is that China is ready to

45:10

do things in a different way. But

45:13

we can't accept that on faith. We

45:16

need a structure of rules and

45:18

an actual process of WTO enforcement

45:20

by strong WTO, not a weak

45:23

WTO, that would help ensure that

45:25

we get the results that we're

45:27

bargaining for. And so this

45:29

is, I think, the choice. You want a system that can

45:31

hold others in check, but you're going to have to play

45:33

by the rules as well. You're going

45:36

to have to have the US limiting

45:38

its burden on its trade

45:40

partners. But I think that trade off

45:42

is a good one. And I think it can be done in

45:44

a way that protects workers, protects the

45:46

environment, pushes the world toward a

45:48

sustainable future more quickly than we would otherwise

45:50

get there, and frankly does so

45:53

in a way that produces a sustainable

45:55

world and sustainable development Across,

45:59

particularly. The developing countries in

46:01

a way where the U S is

46:03

seen as a leader and helping everyone

46:05

rise to new levels of prosperity of

46:07

a sustainable development basis were otherwise were

46:10

at risk of being seen as having

46:12

help people back. Ah, and

46:14

protected ourselves, but at the expense

46:16

of others. So.

46:18

As a policy matter, now, so

46:21

much climate Clean Energy Policy Policy

46:23

more broadly is motivated by deep

46:25

concern about China by forces of

46:27

economic competition. Ah, with China interview.

46:29

You know if if solar panels

46:31

are keeping as a forced labor

46:33

because of human rights violations because

46:36

of low environmental standards, when we

46:38

can probably agree that's a problem.

46:40

We wanna raise those standards. But

46:42

if once you've accounted for things

46:44

like that, it is the case

46:46

that. China is able to

46:48

produce things more cheaply or up to

46:50

what you said a moment ago is.

46:53

Through. Government investment maybe for industrial

46:55

strategy may be for concern about

46:57

climate. Whatever the motivation is putting

46:59

a lot of government's support behind

47:01

clean energy. And as you said,

47:03

maybe there should be some acceptance

47:05

of subsidies of they're motivated by

47:07

decarbonisation. And then it turns out

47:09

that. They dominate supply chains

47:11

and you know they can build better and cheaper

47:13

electric cars than some other companies can. And so

47:16

we see below. Most of the electric car sold

47:18

in Europe are gonna be imported from China. Most

47:20

of the solar panels in the Us are going

47:22

to be imported from China. Is

47:24

that? Is. That it and is that

47:26

a good thing or a bad thing? How

47:29

should policymakers react to that development? So

47:31

I think this raises a question about.

47:35

Whether. The way those subsidies

47:37

inside out or unfold. Is

47:40

simply producing. Positive results

47:42

from a point of view and it's again

47:44

a bit of a term of art or

47:46

from the point of view of global public

47:48

goods or what we all need to do.

47:51

And if we are seeing the Chinese

47:53

subsidize global public goods. Are some

47:55

of that should be seen as positive? But.

47:57

I think when we look at the practice it was

47:59

no. just that. There was also predatory

48:01

pricing. And so one can say on the

48:04

one hand there was a good thing being

48:06

done, but on another something that was quite

48:08

unacceptable. And I think we should

48:10

be willing to take the first piece and

48:12

say it's okay, and then come down very

48:15

hard on the predatory

48:17

practices and frankly, the

48:19

use of workers

48:22

who are not treated properly or

48:25

of slave labor or any number of other

48:28

accusations, and frankly, not only in China,

48:30

but in other places and say,

48:32

no, that is unacceptable. We cannot

48:34

have progress towards a sustainable future

48:36

come at that price. So

48:38

it is a question of defining a set

48:41

of values that are going to structure

48:44

international commerce going forward.

48:46

I think the US does better driving

48:48

that process, being at the center of

48:50

building that system, of creating

48:53

the global commerce we think is

48:55

going to help deliver

48:57

a sustainable future broadly, but also

48:59

ensure the United States is given

49:02

a fair opportunity to compete and

49:04

sees its workers protected in

49:07

this world that is being remade

49:10

to deliver sustainability, but also reflect

49:12

a broader set of values, even

49:14

beyond the environment and economic growth, the

49:17

values you're highlighting of human

49:19

rights, worker fair treatment, public

49:23

health protection, and one could list a number

49:25

of others. Can you

49:27

just say a word about the carbon border

49:29

adjustment mechanism in the European Union, how it's

49:32

being developed, and also legislative proposals in the

49:34

US for a similar kind of border tariff

49:36

here? Are these positive things to

49:38

try to get behind or are you concerned

49:41

about where they're headed? So as I

49:44

mentioned, I do think that

49:47

border carbon adjustment, which is the

49:49

generic category that the

49:51

European Union's carbon border adjustment mechanism

49:54

or CBAM fits within, is

49:57

Conceptually correct. There Really cannot

49:59

be. The a global commerce

50:01

structure that allows people to get

50:03

a competitive advantage by an effect

50:05

not performing against agreed upon environmental

50:07

standards including greenhouse gas emissions controls.

50:10

say I think we should celebrate

50:12

the European Union for running out

50:14

in front on this. I think

50:16

we need to have the United

50:18

States adopt legislation. ah, that does

50:20

a similar kind of thing. But

50:23

as I said, while conceptually correct

50:25

from a policy point of view

50:27

essential odd, the details matter. And

50:29

the European. Union is not where it

50:31

needs to be. In terms of the

50:33

existing structure of the proposal. they're moving

50:35

forward and I think what we need

50:38

to be very careful in the kind

50:40

of legislation that Merck moves to the

50:42

Us Congress. We need to again be

50:44

careful to not unilaterally a define how

50:46

greenhouse gas emissions are going to be

50:48

measured. We need to not unilaterally set

50:50

prices, but rather have agreed upon global

50:52

Social Cost of Carbon and by the

50:54

way, even countries that are never going

50:56

to use carbon pricing as their dominate

50:59

climate change policy strategy. Is.

51:01

Like the United States might well want

51:03

to have a social Costs a Carbon.

51:05

In fact, as you know, Jason the

51:08

Us does have a lot I social

51:10

Cost of carbon carefully structured and used

51:12

in a whole variety of policymaking settings

51:14

very effectively. So when agreed upon global

51:17

social costs and carbon would be a

51:19

good, not a bad thing. And you

51:21

know I do think I having a

51:24

structure within which countries movies policies for

51:26

it. again referencing our earlier discussion around

51:28

fairness and equity or one needs to.

51:30

Have a a thought about that wr

51:33

framework that you mentioned earlier has a

51:35

proposal this regard by the way, Which.

51:38

is that we read purpose or one

51:40

of the other elements of the international

51:43

trade system and organization called the international

51:45

trade center which has been set up

51:47

to help lob small and midsize enterprises

51:50

in the developing world to compete in

51:52

the world of trade or i would

51:54

like to see that reaper best as

51:56

a sustainable trade center with new resources

51:59

and fused to help those small

52:01

and mid-sized enterprises across the developing

52:03

world to compete in the sustainable

52:05

standard-setting world that they're facing going

52:08

forward. And this is if the

52:10

European Union were to inject some

52:12

tens of millions of euros into

52:14

this entity, this ITC, and make

52:16

it into a sustainable trade center

52:18

with a goal of helping those

52:21

enterprises meet the European requirements. And

52:23

by the way, it's not just

52:26

the greenhouse gas emissions requirement of

52:28

the CBAM. There's forestry standards and

52:30

other things that are becoming trade obstacles. This

52:33

would help the European Union demonstrate that

52:35

its commitment is to high standards and

52:37

a sustainable future and not to market

52:40

obstacles. So I think there

52:42

is reason to want to move with

52:45

the European Union towards a world

52:47

where baseline environmental standards are an

52:49

obligation, a kind

52:52

of business requirement to be engaged in

52:54

trade in the 21st century going forward.

52:56

But it needs to be done on a fair

52:58

and appropriate and transparent basis. And

53:02

that point you made about different countries

53:04

using different policy mechanisms, some subsidies, some

53:06

carbon price, that's creating some tensions between

53:08

the U.S. and Europe, where one of

53:11

the motivations for a border adjustment might

53:13

be to encourage other countries to move

53:15

faster on climate. Another might

53:17

be to so-called level the playing field. And so

53:20

you have companies in Europe that are paying a

53:22

carbon price and say, well, we don't want to

53:24

be disadvantaged. And companies in the

53:26

U.S. are receiving government subsidies. So they

53:28

feel like they're not that that's not

53:30

leveling the playing field. Is that is

53:33

that a fair concern on the European side?

53:35

And how do we overcome that? It is

53:38

a very fair concern. And another topic I

53:40

would add to my list of concerns that

53:42

should be addressed and where the WTO might

53:44

be a forum is what does

53:46

climate change policy equivalence look

53:48

like? I think there

53:51

needs to be some credit

53:53

given for rough comparability of

53:55

policy commitments and direction that

53:58

account for the fact that we live in a different. diverse world,

54:00

the policy choices that countries are making are

54:02

going to be diverse, and the

54:04

trade system needs to be able to

54:06

accommodate those diverse policy choices and

54:09

not have them become a point of friction. Because

54:11

the system here would be terribly

54:13

disserved if the result

54:16

of the European Union's CBAM

54:18

was an exhausting list

54:20

of trade cases emerging as soon

54:22

as they begin to launch it.

54:24

And I can imagine a scenario

54:26

where by their challenge, not once

54:28

or twice, but a dozen, 15,

54:32

20, 30, 40 times within the first six months

54:34

of this being really put into action where duties

54:36

are actually being paid. So I

54:38

think getting the world focused on how to make the

54:41

system work fairly,

54:43

be seen as legitimate and

54:45

yet lift everyone towards this commitment

54:47

to higher standards is an

54:50

essential element of what policy success on

54:52

climate change looks like out over the

54:54

next couple of years. Dan

54:57

Esti, these are really difficult and complicated issues, a

54:59

big priority for the work we're doing here at

55:01

the Center on Global Energy Policy, and I'm really

55:03

glad for your being willing to take the time

55:06

to help us understand it, all the work you've

55:08

done over a very long period of time, your

55:10

service at the WTO, as well

55:12

as in US government. So

55:15

just thanks for making so much time available to help

55:17

all of us understand these issues a little

55:19

bit more deeply and for all the work you're doing. Jason,

55:22

a pleasure to be with you and thank

55:24

you for the center you lead and your

55:26

contribution on this topic and so many others

55:28

that are related to it. Thank

55:34

you again, Dan Esti, and thank you for

55:36

listening to this week's episode of Columbia Energy

55:38

Exchange. The show is brought

55:40

to you by the Center on Global Energy

55:42

Policy at Columbia University School of International and

55:44

Public Affairs. The show is hosted by

55:46

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55:49

show is produced by Aaron Hardick from Latitude Studios.

55:52

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55:55

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56:17

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