Is climate change an emergency at the WTO?

Delivered every Monday by 10 a.m., Weekly Trade examines the latest news in global trade politics and policy.

Jun 03, 2024 View in browser   By Ari Hawkins QUICK FIX — A dispute between China and the United States centering on President Joe Biden’s Inflation Reduction Act could fundamentally change how countries consider environmental concerns and trade restrictions. — Advisers for the Export-Import Bank of the United States hit back at a report that said the agency lacks a clear strategy to expand commerce in Sub-Saharan Africa. — An official from the Coalition for a Prosperous America said new measures from the U.S. Customs and Border Protection fail to address exploitation of the de minimis threshold, and called on the president to take executive action. It’s Monday, June 3. Welcome to Morning Trade, where it's (finally) your host's favorite month of the year, huzzah! Send us your trade news. Reach us at: ahawkins@politico.com, gbade@politico.com and dpalmer@politico.com. You can also follow us on X: @_AriHawkins, @GavinBade and @tradereporter.   JOIN US ON 6/12 FOR A TALK ON THE AIRLINE INDUSTRY: As air travel soars again, policymakers and airlines are grappling with a series of contemporary challenges to the industry's future. Join POLITICO on June 12 for a topical and timely conversation with government leaders and aviation stakeholders about the state of the airline industry. From what passengers want to what airlines need amid the high demand for air traffic, workers and technology solutions. What can Washington do to ensure passengers and providers are equipped to fly right? REGISTER HERE.     Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You’ll also receive daily policy news and other intelligence you need to act on the day’s biggest stories. Driving the day Ngozi Okonjo-Iweala, director-general of the World Trade Organization, speaks during an event in Washington, DC. | Samuel Corum/Bloomberg via Getty Images CLIMATE CONCERNS MOUNT: A World Trade Organization panel could, in the coming months, determine whether climate change amounts to an emergency that justifies countries taking trade actions, a potential overhaul of global norms. The decision could reshape the bounds of new restrictions — especially as tension rises between China and the U.S. over the Biden administration’s Inflation Reduction Act of 2022, which subsidizes green industries and aims to ease U.S. dependence on China. Timetable: In late March, China took the first step in the dispute settlement process by asking USTR for talks on the IRA legislation. A mandatory 60-day consultation period has now expired with no sign of a negotiated settlement. Other major economies, like the European Union, have also raised concerns about the U.S. law. China, at the WTO’s Dispute Settlement Body’s next meeting on June 24, could request a panel to hear its complaint. The United States, under WTO rules, could block the formation of a panel at that meeting. But it could not block the panel a second time if China makes another request in July. Context: The dispute puts a spotlight on Article 21 of the General Agreement on Tariffs and Trade, one of the WTO’s foundational documents. It allows countries to justify what otherwise would be a violation of the global trade rules by invoking national security. With the IRA, United States officials could argue that climate change amounts to an international emergency that justifies countries taking actions outside the bounds of certain norms of global trade — such as subsidizing green industries as the U.S. law has done. If validated by a WTO dispute settlement panel, such an approach would broaden the scope of when countries can invoke a national security exception from trade rules far beyond what was imagined when the rules were written decades ago. And that could open the door to countries imposing a number of trade-distorting measures to reduce carbon emissions without fear of the WTO striking them down. Outside voice: Some legal experts believe the Article 21 language appears to be flexible enough to encompass climate change. “I don't think it'll be too difficult to establish that climate change constitutes an emergency in international relations,” Matt Porterfield, vice president of policy and research for the Climate Leadership Council, said during a discussion hosted by Georgetown Law School. Doug has more here (for Pros!). DOUBTS PILE UP: Representatives from major business associations are pouring cold water over the Biden administration’s Indo-Pacific Economic Framework as Commerce chief Gina Raimondo kicks off a trip to Singapore to sign two agreements. More here. Around the World IN AFRICA, EXIM ON THE DEFENSE: Members of an African advisory committee for U.S. ExIm defended the agency’s record last week, on the heels of an inspector general report claiming the agency lacked a clear regional strategy. Five members of the committee argued in a note published by AllAfrica the report’s conclusions “do not provide a fulsome or particularly up-to-date picture of the work ExImbank is engaged in across Africa.” “We believe that the Bank is largely living up to those intentions, even as it acknowledges inherent and historic challenges,” they wrote. Authors of the note include former assistant USTR for Africa Florie Liser, and Harry Thomas, a fellow at Yale University's Jackson School of Global Affairs and a former ambassador to Zimbabwe. Context needed: The inspector general report, published last month, assessed ExIm’s financial commitments in Sub-Saharan Africa and found that the agency had not successfully expanded its performance to achieve its African mandate. Board quorum woes: The authors point out that the IG report covers fiscal years 2014-2023, a period of time during which the bank’s operations were “severely” impacted by a lack of authorizations and funding. ON DISPUTE REFORM: WTO members are pushing for changes to the body’s ruptured dispute settlement system. But during the first meeting last week convened by the newly appointed facilitator, they said they are willing to compromise to replace the Appellate Body. Ambassador Usha Dwarka-Canabady of Mauritius “acknowledged a strong interest by almost all members in maintaining a two-tiered dispute settlement system to build credibility for the system,” per a WTO readout of the meeting. REGULATORY REVIEW ON CBP'S CRACK DOWN: A senior official from the Coalition for a Prosperous America, an advocacy group that supports protectionist measures, panned new efforts from CBP to crack down on the exploitation of the de minimis threshold. One step back: The CBP in a statement on Friday said it would be taking new action to ensure compliance under the Entry Type 86 Test — a pilot program used for electronic processing for certain packages eligible for tariff exemptions under the de minimis process. “CBP’s evaluation and suspension of non-compliant Entry Type 86 Test participants is part of a multi-layered enforcement approach to prevent abuse of the de minimis process,” the agency said. Not so fast: Nick Iacovella, senior vice president of public affairs and communications for CPA, told Morning Trade the announcement is “less than insignificant.” “I don't think we should be celebrating the fact that CBP simply suspended them. And now that they're suspended, of course CBP has a process to reinstate them,” Iacovella said. Context: The so-called de minimis "loophole" enables firms to import certain shipments into the United States duty-free so long as the value of a package is under $800. The system has faced criticism for supposedly allowing the passage of illicit goods such as fentanyl. Lawmakers on both sides of the aisle have called for a permanent solution. “If the Biden administration is serious about addressing exploitation of the de minimis loophole, it would close it using executive authority,” Iacovella added. STIP TALKS INCH FORWARD: USTR released new summaries on Friday of U.S-proposed texts in trade talks with Kenya, detailing chapters that cover avenues to strengthen environmental protections, customs automation and transparency.   JOIN US ON 6/13 FOR A TALK ON THE FUTURE OF HEALTH CARE: As Congress and the White House work to strengthen health care affordability and access, innovative technologies and treatments are increasingly important for patient health and lower costs. What barriers are appearing as new tech emerges? Is the Medicare payment process keeping up with new technologies and procedures? Join us on June 13 as POLITICO convenes a panel of lawmakers, officials and experts to discuss what policy solutions could expand access to innovative therapies and tech. REGISTER HERE.     TRADE OVERNIGHT — The president announced on Friday that he intends to appoint Shawn Fain, president of the United Auto Workers, and Brian Bryant, international president of the International Association of Machinists and Aerospace Workers, to join the President’s Export Council. — Why the U.S. needs $10,000 Chinese electric vehicles, per POLITICO Pro. — EU puts Chinese e-commerce app Temu on its watchlist, per POLITICO Pro. — How China would tackle a second Trump term, writes the Brookings Institution. — Biden has extended a Section 232 tariff waiver for Ukrainian steel for another year, according to the White House. THAT’S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: dpalmer@politico.com, gbade@politico.com and ahawkins@politico.com. Follow us @POLITICOPro and @Morning_Trade.   Follow us on Twitter Ari Hawkins @_AriHawkins Doug Palmer @tradereporter Gavin Bade @GavinBade Adam Behsudi @ABehsudi Emily Cadei @emilycadei   Follow us

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