US-China Trade Dispute: Three Ways Trade Deals Can Impact the Environment

In the past months, China and the United States have been locked in a trade war, where the two countries attempt to negotiate tariffs that have been placed on goods traded between them. This dispute essentially originates from a dislike of China’s political economy system, which is seen by the US to discriminate against non-Chinese companies and give preferential advantage to local ones, and whose laws allow China to undermine international standards for patents and copyrights. The US also claims that local Chinese law allows companies to copy technologies and ideas from abroad. Because of this, in July President Trump began to impose steep tariffs on China to curb the alleged unfair trading practices.

Meanwhile, UN Environment Programme chief Erik Solheim has claimed that this dispute may end up harming the environment. But how does this situation relate to the environment?

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Put simply, trade can affect the environment in three ways.

First, the widespread and timely diffusion of environmental technologies is widely known to be a core element of sustainable development. Policies that promote open trade can help environmentally-friendly technologies reach a larger market, helping to combat climate change in additional countries. However, when barriers to trade are implemented, there can be a reduction in the timeliness and rate of adoption of environmental technology.

Second, protective policies – the taxation of imports to protect a country’s domestic industries, which is currently the case between the US and China – means that resources are used less effectively, as there is less knowledge sharing and technology transfer between countries. Protectionism can also lead to a global economic slowdown as a result of slowed trade, which on the other hand is reported to have had beneficial impacts on the environment, according Harro van Asselt, Senior Fellow at the Stockholm Environment Institute. This is because when wages are decreased, people have less disposable income to spend on consumerism. However, in low wage countries, this could encourage illegal resource extraction, leading to worse environmental practices. The relationship between economic slowdown and its effect on the environment remains complicated to predict and is therefore better determined on a case-by-case basis.

As well as this, if trade deals go badly and trade wars ensue, this can erode the trust between countries that is needed in order to pursue environmental agreements and cooperation. Trust is an especially crucial tenant of any environmental agreement. Trump has already backed out of the Paris agreement and Iran’s nuclear deal, and if trust between China and the US degrades further, this can have an impact on current and future agreements. Reversely, countries can also exert a certain amount of pressure to join an environmental agreement as a prerequisite to trade, as done by the French Foreign Minister, who has promised the US that there will be no trade agreement with the European Union unless the country reaffirms its commitment to the Paris agreement.

The irresponsible attempts of President Trump to destabilize global trade may soothe the qualms of those who believe that China is executing unfair trading practices at the expense of America’s home market. However, the very audience who believed in his populist policies and celebrated the break from a neoliberal history, may indeed find that Trump is nothing but ‘a neoliberal president in populist clothing’.

In the end, it is ‘the wise who build bridges, and the foolish who build walls’. In the words of Chinese President Ji Xinping, ‘Everyone is free to build up big walls, build a house and turn off the lights in that house and go dark, but that will not benefit yourself and the biggest loser will be those who do it.

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