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Sung Chang: Cleannovation — From Free Trade to Clean Trade

U.S. trade policy can be leveraged to help clean up the world — whether it’s protecting the environment, combating corruption or keeping the Internet open.


Trade seems to have no shortage of critics in the U.S. these days. The once-bipartisan issue of free trade is now just one more wedge in an already divided Congress, which has been gridlocked and unable to pass any significant legislation in recent memory. Still, there are three issues that both sides of the aisle should be able to find agreement on: selling more environmentally friendly goods, ridding corruption and ensuring unfettered access to an Internet that is free of governmental control.

Until now, trade has opened up borders and facilitated the free exchange of goods and services. In doing so, trade has contributed mightily to global prosperity and development.

Now the future of free trade is clean trade. Trade has the leverage to make a difference in supporting the environment, tackling corruption and promoting an open Internet. This is “cleannovation.”

Clean Environment: Environmental Goods and Services

Most of us care about the environment. While some of the environmental concerns are not completely unfounded, international trade initiatives are critical tools for raising the bar on environmental protection and tackling pressing challenges. Trade acts as leverage for engagement and is key to unlocking a freer flow of and green goods.

The World Trade Organization (WTO), often dismissed as irrelevant after the collapse of the Doha Round and the nearly stalled Trade Facilitation Agreement, is doing something useful to address climate change. WTO members are negotiating the Environmental Goods Agreement (EGA), which would eliminate all tariffs on “environmental” goods. Negotiations are moving swiftly, and product categories under discussion are broad enough to incorporate “energy efficient” products in addition to renewable energy technologies. This is giving the WTO new life.

The WTO is not the only relevant vehicle. The Trans-Pacific Partnership (TPP), a trade agreement being negotiated between the U.S. and eleven other countries, will contain strong environmental protection standards. Environmental protection has been a staple issue in U.S.-led FTAs, which have provisions that ensure more effective enforcement and promote public discourse and participation.

Not only that, the language in the recently re-introduced Trade Promotion Authority (TPA) legislation — whose renewal is now a hot topic of debate in Congress — made the promotion of environmentally sound goods and services a main negotiating objective for trade deals. This means that, as new trade deals are negotiated, the president must prioritize trade in products that help make the world cleaner and greener.

Clean Public Procurement: Eradicating Corruption

Public procurement is a huge market, and thus is a petri dish for temptation. About 10 to 25 percent on average of a government contract’s overall value “may disappear into the pockets of the corrupt,” according to Transparency International. The European Commission’s anti-corruption report estimates that around $163 billion is lost each year to corruption.

While procurement was largely left out of the General Agreement on Tariffs and Trade (GATT) originally negotiated in 1947, as well as the Uruguay Round agreement that established the WTO in 1994, corruption is a significant barrier to trade — especially at a time of economic recovery, when competition for business is fierce. As GE’s former general counsel states in Foreign Affairs: “The true impact of corruption is now widely acknowledged: corruption distorts markets and competition, breeds cynicism among citizens, undermines the rule of law, damages government legitimacy and corrodes the integrity of the private sector.” Fortunately, there are a number of trade tools that can help strengthen transparency and good governance today.

First, a wider adoption of the WTO Government Procurement Agreement (GPA) will help clean up the procurement process, through transparency and anti-corruption requirements. Yet only 43 WTO members are part of the GPA, with China in the process of joining. Among TPP partner countries, only the U.S., Japan and Singapore are GPA members. More countries need to join the procurement agreement to ensure anti-corruption is a trade priority across the board.

Government procurement provisions in the TPP and other U.S.-led trade agreements, which will adopt the GPA’s stance against corrupt practices, will supplement this effort. Countries that want to join the TPP after the conclusion of negotiations, including China, would be subject to the agreement’s procurement provisions and, consequently, to the GPA’s anti-corruption provisions.

GPA-level language should be a negotiating priority for any trade agreement to help rid global society of the cancer of corruption. The new TPA bill does not include this — but any future bilateral or plurilateral trade agreements should include robust language addressing corruption.

Clean Internet: Promoting Open Information Flows

The Internet inevitably touches everything we do, and — now more than ever — it affects global commerce. An open, accessible Internet, free of government control and censorship, is critical. When countries block services or censor information on the Internet, these actions act as significant barriers to Internet-related trade.

Trade policy can help ensure the Internet remains open by addressing a couple of key issues. First, Internet governance should remain in the hands of multiple stakeholders, consistent with the bottom-up approach through which it was created — with no government or international organization control.

Right now, the Commerce Department’s National Telecommunications and Information Administration (NTIA) is responsible for key Internet domain name functions. NTIA’s gig expires in September 2015, when it will hand over its functions to the “global multi-stakeholder community.”

As Rob Atkinson has noted, some countries (perhaps Russia and China) are advocating for more governmental control over the Internet, citing security concerns. Atkinson warns that NTIA’s weakened role could “have far-reaching negative implications for the freedom and security of the Internet.”

The U.S. government was never the sole “bodyguard” of the Internet, which was shaped and maintained from the bottom up, by its users. Trade policy can help ensure this remains the case. Future bilateral and regional agreements should include provisions to ensure that the Internet will remain free of undue government influence that hinders freedom of expression and equal access to information.

The second issue is safeguarding the free flow of data. Modern trade agreements are designed to tackle “data protectionism,” such as data storage requirements or limits to cross-border data flow. The TPP and any future TPA bill should include strong language against any forced localization of data servers, sharing of intellectual property as a condition of doing business, or regulations that block the flow of information across borders.

Trade policy can also help address exceptions to free flow, such as cyber-security measures or privacy concerns. Two critical test cases for the U.S. involve Europe and China.

The Trans-Atlantic Trade and Investment Partnership (T-TIP) negotiations with the EU represent a clash of two “fundamental” rights: privacy and freedom of expression. Privacy issues are trade issues. To Americans, free speech is sacred. To Europeans, the right to personal privacy is sacred.

Concerned with the volume of data the U.S. collects under various counterterrorism programs, EU officials have asserted that any T-TIP provisions must not undermine EU data protection standards. On the contrary, the U.S. has argued that such demands could restrict cross-border data flows and act as localization barriers to trade. The T-TIP negotiations provide a window on how these conflicting values will play out in the trade arena.

Meanwhile, China has proposed regulations requiring tech companies to submit to invasive audits and create back doors into hardware and software. The Chinese say the rules are a matter of national security, necessary to protect state and business secrets, while the Obama administration and U.S. industry say the rules amount to protectionism and favoring Chinese companies — in violation of China’s trade commitments. One solution to the problem would be to tie it to broader trade talks, such as the U.S.-China Bilateral Investment Treaty. If China wants to join the TPP at some point, such standards will be crucial.

The global trade agenda is transforming — from simple market access to global sustainability and growth. We want to grow and be competitive, but do so in an environmentally and ethically sustainable way. Trade is no longer a simple trade of goods. It is now the brush to draw a mutually beneficial world economy for years to come. Trade is cleannovation.

(Top image: Courtesy of Thinkstock)

This piece also appears in Republic 3.0.


Sung Chang is an international trade lawyer and R. Michael Gadbaw International Law and Policy Fellow at GE.




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