We must call for an end to the deregulatory ‘free trade’ and tax policies that make practices like re-importation and redundant trade profitable.
The future of trade policy in the UK has come under renewed scrutiny as Brexit dominates the headlines. Boris Johnson is clearly treating the UK’s exit from the European Union as an opportunity to form a new trade pact with the United States.
But civil society groups fear that such an agreement would undermine food standards, push the NHS further towards privatisation, and prevent the UK from taking necessary steps to combat the climate crisis – all without requiring approval from Parliament. Meanwhile, Parliament’s International Trade Committee recently launched an inquiry into how trade policy can support “positive environmental outcomes” – an admirable goal, to be sure, but one which would require a drastic change of attitudes towards trade among politicians of all parties.
As of yet, that change of attitudes has yet to occur. The connection between trade and the climate crisis runs deeper than practically any prominent politician has been willing to acknowledge.
Imagine a world where food routinely gets shipped thousands of miles away to be processed, then shipped back to be sold right where it started.
Imagine cows from Mexico being fed corn imported from the United States, then being exported to the United States for butchering, and the resulting meat being shipped back to Mexico, one last time, to be sold. Imagine a world in which, in most years since 2005, China has somehow managed to import more goods from itself than from the USA, one of its largest trading partners.
This may sound like the premise of some darkly comic, faintly dystopian film, but it’s no joke – in fact, it is the daily reality of international trade in our global economy.
The above examples are all instances of ‘re-importation’ – that is, countries shipping their own goods overseas only to ship them back again at a later stage in the production chain. And these are far from the only instances of this head-scratching phenomenon.
In the waters off the coast of Norway, cod arrive every year after an impressive migratory journey, having swum thousands of miles around the Arctic Circle in search of spawning grounds.
Yet this migration pales in comparison to the one the fish undertake after being caught: they’re sent to China to be fileted before returning to supermarkets in Scandinavia to be sold. This globalisation of the seafood supply chain extends to the US as well; more than half of the seafood caught in Alaska is processed in China, and much of it gets sent right back to American grocery store shelves.
Compounding the insanity of re-importation is the equally baffling phenomenon of redundant trade. This is a common practice whereby countries both import and export huge quantities of identical products in a given year.
To take a particularly striking example, in 2007, Britain imported 15,000 tons of chocolate-covered waffles, while exporting 14,000 tons. In 2017, the US both imported and exported nearly 1.5 million tons of beef, and nearly half a million tons of potatoes. In 2016, 213,000 tons of liquid milk arrived in the UK – a windfall, had not 545,000 tons of milk also left the UK over the course of that same year.
On the face of it, this kind of trade makes no economic sense. Why would it be worth the immense cost – in money as well as fuel – of sending perfectly good food abroad only to bring it right back again? The answer lies in the way the global economy is structured.
‘Free trade’ agreements allow transnational corporations to access labour and resources almost anywhere, enabling them to take advantage of tax loopholes and national differences in labour and environmental standards.
Meanwhile, direct and indirect subsidies for fossil fuels, on the order of $5 trillion per year worldwide, allow the costs of shipping to be largely borne by taxpayers and the environment instead of the businesses that actually engage in it. In combination, these structural forces lead to insane levels of international transport that serve no purpose other than boosting corporate profits. The consequences of this bad behavior are already severe, and set to become worse in the coming decades. Small farmers around the world have seen their livelihoods undermined by influxes of cheap imported food, or forced to export their food instead of selling locally. Meanwhile, their climate-resilient agricultural practices are actively discouraged by the WTO and ‘free trade’ agreements. Food processing and packaging – both critical for food that’s going to be shipped a long way from where it was produced – account for a significant proportion of the global food system’s greenhouse gas emissions. And even after that packaging has been thrown into the nearest recycling bin, it typically undergoes yet another long-distance journey before being processed. Before China stopped allowing foreign waste imports in 2018, British companies alone had shipped more than 2.7m tons of plastic wasteto China and Hong Kong since 2012 – two-thirds of the UK’s total waste plastic exports. With the ban now in place, most of Britain’s plastic waste is simply being shipped elsewhere.
Accruing unnecessary miles of shipping is not a feature unique to food or plastic waste. The components of a typical smartphone, for example, have traveled a collective half-million miles
– touching down on three continents – before landing in your pocket.
This sprawling globalisation of the supply chain has grown alongside trade liberalization, to the point where now roughly 30 percent of the value of global exports comes from foreign inputs – up from 25 percent in 1990. This kind of excessive trade in materials is why carbon emissions from international transport are growing nearly three times faster than emissions from other sources. At current rates of growth, international trade by sea and air will, by 2050, emit about as much CO2 as the entire European Union does today. The link between liberalised trade policies and carbon emissions is clear and straightforward. A recent study from Japan’s Kyushu University found that when countries reduce or eliminate their tariffs – particularly on resource-intensive industries like mining and manufacturing – they see corresponding increases in the amount of carbon emissions associated with imported goods. This is due in large part to the carbon cost of global transport, but there are other factors at play as well, tied to the trade and investment treaties that have been a prominent feature of the global economy since the mid-20thcentury.
These treaties often include Investor-State Dispute Settlement (ISDS) provisions, which give corporations the right to sue national governments for, among other things, introducing environmental regulations that might curb future expected profits. For example, the UK-based fossil fuel company Rockhopper is currently suing Italy for US$350 million in damages and “lost future profits”, because Italy banned new offshore drilling operations in 2015 due to sustained public pressure.
Essentially, ISDS clauses in trade treaties have created a parallel court system in which conflicts of interest are rife, arbitrators are heavily incentivised to side with corporations (including fossil fuel companies) over the public interest, and decision-making happens largely outside the public view.
But in addition to producing corporate-friendly rulings, the ISDS system contributes to climate chaos in an even more sinister way, through what’s called ‘regulatory chill
’. Countries that have signed treaties containing ISDS clauses often feel pressured not to implement new environmental laws and regulations, simply because of the threat of being sued in an ISDS tribunal.
For example, a proposed law that would have phased out oil and gas extraction in France was watered down beyond recognition after a Canadian fossil fuel company threatened to sue France in an ISDS court. And in a story that broke during the writing of this piece, German company Uniper threatened to bring an ISDS case against the Netherlands for deciding to phase out coal-fired power plants by 2030.
In this way, the number of cases brought before ISDS tribunals actually understates the impact of trade treaties on climate policy. Who knows how many potential regulations have never seen the light of day due to the threat of Big Oil taking countries to court?
With climate policy still largely in its infancy – with many necessary regulations not yet ‘on the books’ worldwide – the chilling effect of ISDS is a serious obstacle.
The upshot of all this is that if countries are going to effectively combat the climate crisis, they will have to pay close attention to trade policy. Specifically, they’ll need to change it so that unrestricted, unlimited ‘free trade’ is no longer an option.
But policymakers currently have little incentive to reduce international trade because, bizarrely, emissions from global trade do not appear in any nation’s carbon accounting. There are plenty of ways to fix this
– for example, emissions from trade could be assigned to countries on the basis of where goods start out, where they end up, or where the ships and planes transporting them are registered.
All that countries would have to do is agree on a standard. But at the moment no country is assigned responsibility for these floating emissions. The result is a situation in which policymakers promise to reduce carbon emissions while simultaneously working to expand global trade through treaties and liberalisation – even though these two goals are wholly incompatible.
With policymakers continuing to drag their feet, the impetus for real change in the way we conduct global trade will have to come from peoples’ movements working together to make their voices heard. We must call for an end to the deregulatory ‘free trade’ and tax policies that make practices like re-importation and redundant trade profitable.
One of the most critical steps towards sanity would be the removal of subsidies for fossil fuels. When taxpayers stop paying part of the cost of global transport, transnational corporations will have to radically reconsider the way they operate.
These changes will be vigorously opposed by big global businesses, which means that generating momentum for trade policies that promote community health and ecological stability won’t happen overnight.
But the first step is raising awareness of trade as a climate issue, and overcoming the unwillingness of most major media outlets, politicians, and think-tanks to discuss it critically.
We hope they can help draw attention to the absurdity of the current system, point to healthier alternatives, and make the issue of global trade approachable and understandable for a wide audience. So please, share them with people you know, and start a conversation around this critical topic.
Sean Keller is a member of the Local Futures core team.