[Reposted from PC News May/June 2023]
By Chandlee Crawford
This article appeared in the May/June 2023 edition of Public Citizen News. Download the full edition here.
Too often, corporations — and governments acting on their behalf — invoke international trade rules to block progressive domestic policy making, a direct blow to democracy and sovereignty. In many cases, corporations aim to prop up the dying fossil fuel industry or weaken consumer protections.
In April, the European Union (EU) threatened legal action against the U.S. over certain provisions of the historic Inflation Reduction Act (IRA), the largest investment (at a whopping $369 billion) that the U.S. has ever made in domestic green energy infrastructure and projects. A major function of the law, which is already boosting domestic manufacturing jobs, is to incentivize domestic sourcing of critical clean energy materials and manufacturing. One incentive is the electric vehicle (EV) tax credit, designed to boost domestic manufacturing and bring some key supply chains back to the U.S.
The EU, Japan, and other countries have complained that the IRA’s tax credit system incentivizes resourcing minerals for electric batteries from the U.S. or its “free trade agreement” partners.
The U.S. government has embarked on an effort to appease these governments in the face of these trade threats. The Treasury Department has been redefining the definition of “free trade agreement” in order to expand the countries that qualify for the EV tax credit. The recently signed U.S.-Japan Critical Minerals Agreement sets a dangerous precedent for the resolution of these trade-related complaints: that so-called “free trade agreements” can be concocted out of thin air, with no public or congressional scrutiny, to appease other countries unhappy with U.S. domestic legislation.
The labor rights and environmental “protections” in the Japan agreement are completely unenforceable. The process of extracting the minerals needed for EV batteries is dangerous and dirty, with frequent human rights abuses including child and forced labor. This deal would make it possible for corporations mining under such conditions in a third country to “launder” their minerals in Japan before shipping to the U.S. consumers at a government-subsidized reduced price.
The U.S. and EU are expected to announce their own Critical Minerals Agreement soon. It remains to be seen if it will have any meaningful standards to ensure that the green transition in the Global North is not advanced at the expense of workers and downstream communities in the Global South.
Protecting a Fair Energy Transition
It’s not just federal policies like the IRA that are impacted by international trade rules; state and local laws are, too. In 2019, India successfully challenged a dozen programs in eight U.S. states through the World Trade Organization (WTO) that were implemented to make purchasing and installation of renewable energy systems more affordable. That was after the U.S. won its own WTO case against India’s solar program. These outdated trade rules affect all of us in ways we may never know.
That’s why Public Citizen’s Global Trade Watch worked with more than 190 state legislators from all 50 states and two territories who sent a letter to President Biden earlier this year: to help ensure that jobs and projects created as a part of state and national climate policies are not threatened by outdated trade rules. The letter was sponsored by the National Caucus of Environmental Legislators (NCEL) and spearheaded by U.S. Sen. Andrea Olsen. It sent a strong message to the Biden administration that protecting climate in trade deals is not only feasible, but critical for the success of future policy. To combat harmful trade litigations against initiatives like the IRA, the letter specifically asked the Biden administration to utilize a “climate peace clause” in further trade negotiations with foreign countries. Such a clause would be a binding commitment among governments to refrain from attacking each other’s climate policies. Not only does this protect domestic economies, but it also will boost the adoption of fair and renewable energy.
What to Watch for Climate and Trade
All eyes will shift to the U.S.’ future trade agreements to see if climate action will be prioritized as the U.S. hosts the next Indo-Pacific Economic Framework ministerial in Detroit at the end of May. The administration has been negotiating IPEF with more than a dozen trade partners. Due to secrecy pacts forced by the U.S., it’s unclear if substantive rules promoting climate policies will be included, or if IPEF will uphold the status quo and continue to leave the U.S. and its partners vulnerable.
There’s certainly a lot to keep track of, but Public Citizen’s Global Trade Watch will be following these critical negotiations and continuing to protect jobs and the climate from destructive trade policies.