European steel plan shows Biden’s willingness to merge climate and trade policy

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WASHINGTON – President Biden has pledged to use trade policy as a tool to mitigate climate change. Over the weekend, the administration gave its first glimpse of how it plans to reconcile those political goals, saying the United States and the European Union will try to cut carbon emissions as part of a deal. commercial covering steel and aluminum.

The deal, which U.S. and European leaders aim to introduce by 2024, would use tariffs or other tools to encourage the production and trade of metals made with lower carbon emissions in places like the United States. United and the European Union, and would block the dirtier steel and aluminum products. in countries including China.

If finalized, it would be the first time a U.S. trade deal has included specific carbon emissions targets, said Ben Beachy, director of the Sierra Club’s Living Economy program.

“No US trade agreement to date has even mentioned climate change, let alone included binding climate standards,” Beachy said.

The announcement lacked details, and negotiations with EU leaders are likely to run into multiple obstacles. But he gave a glimpse of how the Biden administration hopes to reconcile its trade and climate concerns and work with its allies to confront a recalcitrant China, at a time when the progress of multi-country trade negotiations at the World Organization trade are at a standstill.

“The United States is the world leader in our clean steel technology,” Commerce Secretary Gina Raimondo said in an interview on Monday. She said the United States would work with its allies “to push for cleaner steel, which will spur more investment in technology,” resulting in fewer carbon emissions and more jobs.

In the same interview, Katherine Tai, U.S. Trade Representative, said the potential deal would restrict market access for countries that fail to meet certain carbon standards, or engage in practices not traders and contribute to global overcapacity in the steel sector – accusations that are often levied in China.

The effort would aim to build “a global agreement that promotes not only fair trade in steel, but also pro-climate and responsible steel trade,” Tai said.

Kevin Dempsey, president of the American Iron and Steel Institute, told an industry forum in Washington on Tuesday that the deal would be “positive for US industry,” which has the lowest carbon intensity by ton of steel from the main steel producers. producing countries.

China accounts for nearly 60% of world steel production. Its use of a common method of producing steel causes more than twice as much climate pollution as the same technology in the United States, according to estimates by Global Efficiency Intelligence.

In its announcement on Saturday, the Biden administration also said it had reached a deal to ease tariffs former President Donald J. Trump imposed on European metals while governments worked on the carbon deal. .

The United States would replace the 25% tariff on European steel and a 10% tariff on European aluminum with a so-called tariff quota. In return, the European Union would drop the retaliatory tariffs it imposed on other American products, such as bourbon and motorcycles.

Under the new conditions, 3.3 million metric tonnes of European steel would be allowed to enter the United States duty-free each year, with any steel above that being subject to a 25% tariff.

European producers would be allowed to ship 18,000 tonnes of raw aluminum, which often comes in ingot form, and 366,000 tonnes of wrought or semi-finished aluminum to the United States each year, while higher volumes would be billed. 10%. , said the commerce department.

To qualify for zero tariffs, the steel must be made entirely in the European Union – a provision designed to prevent cheaper steel from countries like China and Russia from finding a backdoor in the United States via the ‘Europe.

Free trade supporters have criticized the Biden administration for relying on the same protectionist trade measures used by the Trump administration, which rolled out both tariffs and quotas to protect domestic metal makers.

Jake Colvin, chairman of the National Council for Foreign Trade, said the announcement would reduce trade tensions between the United States and Europe. But he called trade barriers an “undesirable form of managed commerce” that would increase costs and undermine US competitiveness.

Ms Tai said the administration made the deliberate choice to ignore calls “for the president to reverse everything the Trump administration has done on trade.”

Mr. Biden’s plan, she said, “is for us to formulate a worker-centered trade policy. And that means not actually going back to how things were in 2015 and 2016, challenging us to trade in a different way than how we did earlier, but also in a way. critical, to challenge ourselves to trade in a different way than the Trump administration did.

The focus on carbon emissions differs from that of the Trump administration, which rejected any attempt to negotiate carbon mitigation and pulled the United States out of the Paris Agreement on climate change .

But negotiations with Europe will face challenges, including the development of a common methodology to measure the amount of carbon emitted during the manufacture of certain products. Still, the announcement suggests that the United States and Europe may be ready to work towards a collaborative approach to reducing carbon emissions, despite past differences over how the problem should be approached.

European leaders have long advocated an explicit price on the carbon dioxide that companies emit when manufacturing their products. In July, the European Union proposed a carbon border adjustment mechanism that would require companies to pay for carbon emissions produced outside Europe, to discourage manufacturers from evading European restrictions on pollution. by settling abroad.

An explicit carbon tax has met more resistance in the United States, where some politicians want to update regulatory requirements or force companies to invest in cleaner production technologies.

Todd Tucker, director of governance studies at the Roosevelt Institute, said the latest announcement suggested the European Union could be “a little more flexible” on how the United States and other partners go about it. to reduce emissions. Mr. Biden’s reconciliation bill, for example, contains a “green bank” proposal that could provide financing for businesses to switch to cleaner technologies, he said.

“If the United States ends up achieving decarbonization through a more investment and industrial policy-oriented approach, it seems they are okay with that,” Tucker said.

Although the first negotiations on carbon emissions in the steel sector involve the European Union, the Biden administration says it wants to quickly expand the partnership to other countries.

In twin announcements on Sunday, the Commerce Department said it had entered into close consultations with Japan and the UK “on bilateral and multilateral issues relating to steel and aluminum,” highlighting the ’emphasis on “the need for like-minded countries to take collective action”. action.”

Japan and the UK still face a 25% tariff on steel exports to the US imposed by Mr. Trump.

The talks suggest a model for how the Biden administration will try to engage allies to counter China’s growing economic clout and make progress on goals like climate and workers’ rights.

The administration has rejected Mr. Trump’s “America First” trade approach, saying the United States must work with like-minded countries. But they also recognized the ineffectiveness of negotiations at the World Trade Organization and moved away from broader multinational trade agreements, such as the Trans-Pacific Partnership.

The announcements suggest that the Biden administration may not view comprehensive trade deals as the most effective way to achieve many of its goals, but rather industry-specific deals between a limited number of democratic countries and free market. This approach is similar to the cooperation announced by the United States with the European Union for the civil aviation industry in June.

Ms Raimondo said the deal to ease tariffs on the European Union was a “very important achievement” that would help alleviate supply chain problems and lower prices for companies that use steel and aluminum to make other products.

“It’s sort of a setting up of a global agreement, whereby we are working with our allies all over the world over the next two years,” she said.


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