A REGIME UPENDED

The US and EU have finally come on board on green industrial policy, but they are kicking away that ladder for other countries

THE CLIMATE-FOCUSSED trade measures introduced by the US and European countries in recent months mark a huge reversal of their approach to global trade governance. In the past three decades, these rich countries have often joined forces through the World Trade Organization (WTO) and tried to knock down trade barriers and encourage countries to treat one another's products equally to boost global commerce and, in their estimation, to bring about stability of the global economy.

To understand this dynamic, you have to view how the free trade regime came about, says Sunita Narain, director-general of the Centre for Science and Environment (CSE), Delhi. In the 1990s, the rich world found that it would be cheaper for its industries to set up shop in parts of the world, like in China, where labour was cheap, labour conditions were weak and environmental safeguards could be ignored. As a result, the rich world "exported" their emissions to the balance sheet of "other" countries and continued to consume goods at cheaper rates, while not reducing their domestic emissions, Narain explains.

According to Sanjay Reddy, chair of the Department of Economics at the New School for Social Research, US, measures like CBAM are being imposed in an already uneven context, due to the prior failure of rich countries to make good on their promises to make green technologies more accessible to developing countries through extending knowledge or providing financing. One way to implement such compensation would be, suggests Reddy, to operationalise cbam but to remit all of the taxes collected to exporting countries, which could then choose to transfer some of these funds to affected industries and firms as grants to aid in the implementation of clean technologies.