What can we do to save the multilateral trade systems that brought peace and prosperity to our world over the last 80 years? Environmentalists are all too familiar with the downsides of globalisation, the unsustainable consumption in some parts of the globe and consistent poverty in so many others. Nevertheless, the truth is we were starting to achieve many of our development goals, and a retreat to protectionism will only undo this good work. Equally worrying, trade wars will also hinder the green transition we so desperately need to make.
But there is a better path. Instead of going down the protectionist road, we should use this moment to reform our institutions so they can find ways to lower tariffs and other trade barriers on goods and services which help deliver sustainable development through climate adaptation and mitigation. Such a clean and green trade agreement would be the best response to what is happening in Washington, allowing everyone else to advance and Americans to join later when they have come back to their senses.
Diplomats have been working on such a trade deal for years, but have not yet even been able to agree what products might be included. That has to change now. We need to act fast – not just because tariffs are rising, but because development aid budgets are being cut at the same time. The development model has to evolve, to get better returns from overseas aid and to improve capital markets and trading conditions, so developing countries can rise on their own initiative.
We also need this new trading model to expand climate investment. We are not on track to raise the $1.3 trillion needed to be spent each year in developing countries. Africa gets less than 2 per cent of global renewable investment, despite having 60 per cent of the global solar resource. In many vulnerable countries capital outflows are larger than inward investment, interest rates are a multiple of elsewhere and debt burdens, poverty and malnutrition are again on the rise.
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This agreement needs to be designed in a way which not only increases the export of basic raw materials but also boosts the processing, manufacturing and consumption of products in developing countries. That will reduce their currency risk and help allay fears in Europe about China being able to corner any market in critical minerals or battery technologies.
The agreement needs to be advanced by existing United Nations institutions, rather than us trying to create a whole new regime.
The first task should be to contract publicly owned data sets, which keep a detailed record of all mineral extraction, processing, transportation, manufacturing and waste management activities. That should come with a detailed audit of every clean energy investment and related cash and energy flows. With such enhanced transparency will come increased trust and confidence for investment.
This new mapping and auditing system will require the widespread use of AI and other digital technologies. Setting the standards for the shared use of such technologies in this context would help ensure they can be a force for good elsewhere. Such clarity should also reduce interest rates in every country where lenders find it hard to price in risks.
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As to what products should be targeted for lower tariffs, we could start with the electricity system, its grid, energy efficiency equipment, renewables, battery storage, and – yes – even some nuclear. An equal priority should go to promoting trade and investment in nature-based solutions. They will have a vital role in reducing emissions, restoring biodiversity and helping us adapt to the climate change that is already here, costing us all a fortune.
The European Union has just launched a new Clean Trade and Investment Partnership agreement with South Africa, which could provide a useful way forward – but we need to go beyond bilateral arrangements and start thinking of deals between continents. The co-operation has to go East-West as well as North-South and South-South.
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At the same time we need to rethink how we can tax carbon on an international basis. Developing countries have opposed the Carbon Border Adjustment Mechanism, which taxes certain carbon-intensive imports into our union. That might change if we accept the original advice of the European Parliament and set aside some of the resulting revenues for capital investment in some of the most vulnerable countries.
Brave leadership matters in these crisis times. Politicians including Gordon Brown, Christine Lagarde, Timothy Geithner, Mario Draghi and Brian Lenihan showed such mettle during the financial crisis. We now need a similar “whatever it takes” moment to avert the trade wars that threaten everyone.
Ireland could propose a clean and green trade agreement on the international stage. As one of the most globalised trading countries in the world, which is home to so many Europe, Middle East and Africa (EMEA) headquarters, it is our duty to get trade and development and climate right – not just to protect our economic system, but to help save the world.
