How Will the Green New Deal Affect US Trade?

How Will the Green New Deal Affect US Trade?

by Daniel Freeman, Zahir Ladhani, Shondell France, Laroushka Reddy and Neri Martinez

Editor’s Note: This article was edited from its original version for web publication.

The Green New Deal Resolution was introduced to the 116thUS Congress on Feb 7, 2019. It aims to bring sweeping economic, social, and environmental change to the United States and is designed to emulate President Franklin Roosevelt’s New Deal of the 1930s. While there are numerous questions surrounding practicality, political appetite and funding for the Green New Deal (GND), those issues will not be discussed here. This article instead seeks to assess how the GND seeks to affect the environment and how the GND may potentially impact US trade. 

The GND is designed to reduce carbon emissions in the United States over the next ten years and seeks to reach “net zero” emissions by 2050. Signatories to the resolution believe that these measures are necessary based on US findings on climate change. The resolution, quoting the Intergovernmental Panel on Climate Change’s (IPCC) 2018 report, states that human activity is the dominant cause of observed climate change over the past century; a changing climate is causing extreme weather events that threaten human life, healthy communities, and critical infrastructure; and global warming at or above 2 degrees Celsius beyond pre-industrialized levels will cause…” a litany of negative results upon the world. 

As the United States is disproportionately responsible for global greenhouse gas emissions, proponents of the GND seek to address this by becoming the global leader in the fight against both carbon emissions and climate change. They view it as “the duty of the Federal Government to create a Green New Deal to secure for all people of the Unites States for generations to come clean air and water, climate and community resiliency, healthy food, access to nature and a sustainable environment.” Their stated goals to meet these ends are building resiliency against climate change-related disasters, such as extreme weather; meeting 100 percent of the power demand in the United States through clean, renewable, and zero-emission energy sources;  building or upgrading to energy-efficient, distributed, and “smart” power grids, and ensuring affordable access to electricity; and upgrading all existing buildings in the United States and building new buildings to achieve maximum energy efficiency and water efficiency. (Note: this is a broad summation of the GND Resolution, which can be found here.)

The proposals within the GND would have significant implications for US trade. One of the major factors this bill addresses concerns the methodology used in the calculation of “carbon emissions” in trade agreements. Due to competitive advantages in labor, trade agreements have shifted factories from the West to China, India and other Asian countries which, generally speaking, have weak environmental standards and less transparency relative to the West. This off-shoring of production has made China and India two of the biggest offenders of carbon emissions as a result of their robust and heavily polluting export manufacturing sectors. Concurrently, the US is one of the largest importers of Chinese and Indian-made goods and therefore, the consumers of products with a large carbon footprint. Proponents of the GND argue that the trade agreements should calculate carbon footprints on an “emissions-based” vs. “consumption-based” model since the US is providing a market for goods that require pollutants to produce. The calculation of carbon emissions to the debt of the country where products are consumed would radically alter the language around this environmental standard prevalent in trade agreements. This is what is meant when the bill calls for the US to “[enact and enforce] trade rules, procurement standards, and border adjustments with strong labor and environmental protectionsto stop the transfer of jobs and pollution overseas.”Thus, if enacted into law, the Green New Deal would likely decrease US demand for goods that require carbon-intensive production.

A second factor that would dramatically alter the current US economic model is the tradeoffs inherent in the implementation of GND proposals. Because fossil fuels are still the most cost-efficient energy source in the world, competitors such as China, India, Russia, and OPEC would likely overtake the market, costing the US the significant economic advantage of energy independence that it currently enjoys as the world’s largest oil producer. Additionally, the US could lose an estimated $10 million in jobs related to the fossil fuels, steel and manufacturing industries that it would phase out, necessitating a short-term redistribution of labor and altering US trade outputs.

On the other hand, as the world shifts to renewable energy, US leadership could fulfill and moral and ethical obligations to save the planet from irreparable damage while also positioning itself to benefit economically. Because a low-carbon futureis where the world is headed, the US could accelerate technological development in domestic industries around a GND vision.Utilizing a limited infant industry model, the US could position itself as a leader in trading transformational and cutting-edge clean technology.

On March 26, the Green New Deal Resolution failed to receive any votes in the US Senate, confirming its almost nil chance of full adoption. Nevertheless, its true purpose was to serve as an intentionally provocative resolutiondesigned to prompt debate and even force a watershed moment in progress toward a sustainable environment through US leadership. Although the resolution is dead in its current form, its introduction may steer conversation, resources and action toward a drastic reduction in carbon emissions with the goal of avoiding irreversible, catastrophic damage to the environment. This paper finds that the GND, if enacted, would significantly affect US trade and has laid out three broad areas of potential impact. As the resolution is refined and reintroduced in different forms, the scope of those impacts will become clearer.

Photo: A Grand Scale

Courtesy of Ingrid Taylar / Flickr

The authors are all graduate candidates in The Fletcher School's Global Master of Arts Program (GMAP) Class of 2019: 

Zahir Ladhani is the Managing Director of Velocity Strategic Consulting. He resides in Atlanta, GA. 

Shondell France is the Special Assistant to the Minister of Natural Resources of Guyana. She resides in Georgetown, Guyana.

Laroushka Reddy is a diplomat of the Department of International Relations and Cooperation of South Africa residing in New York City.

Neri Martinez is the Executive Director of the Future Majority Project of the Republican State Leadership Committee. She resides in Washington, DC.

Daniel Freeman is a United States Air Force officer residing in Honolulu, HI.

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