It seems every day the climate catastrophe inches closer to us. Last week, dense smoke from wildfires in Canada led to severe air quality alerts across the East coast of the United States, with a stinking yellow haze coating the skies. Those fires are both a result of climate change and a contributor, as they release tons of carbon stored in the trees back into the atmosphere.
Deforestation around the world is a major contributor to greenhouse gas emissions. The Intergovernmental Panel on Climate Change (IPCC) estimates that almost one-quarter of global emissions result from agriculture, forestry and land use, and a big part of that is related to farming systems and trade flows. Forest Trends estimates that some 60% of tropical deforestation is driven by commercial agriculture (not logging or subsistence farming), at least 69% of that in violation of local laws. Those goods include meat, soy, palm oil and other commodities, 31% of them exported to other countries.
This is a complex issue, driven by economic imperatives, consolidated corporate supply chains, consumer demand and, often, weak enforcement of national environmental rules. The Biden administration issued Executive Order 14072 on Strengthening the Nation’s Forests, Communities, and Local Economies last year, which addresses both domestic and international actions. Last December IATP submitted comments to the State Department on the options for combating international deforestation associated with commodity production. IATP called for regulations to reduce incentives for deforestation, aid in a transition to more sustainable agriculture and for governments to avoid the distraction of carbon markets as a solution.
Within the U.S., the U.S. Department of Agriculture and the Department of the Interior recommended on April 20 that USDA inventory and protect old growth forests, “setting reforestation targets on federally managed lands, and analyzing reforestation opportunities on state, Tribal and private lands.”
On May 31, the State Department issued recommendations on the international dimensions of the issue. The report addresses much needed changes in foreign assistance, support for research and concerted actions among international organizations to address deforestation. It also weighs restrictions on imports of commodities associated with deforestation. This seems like a significant development, especially in light of the administration’s commitment to rethink trade policies.
These ideas are taking hold in several countries. Australia, China, European Union, Japan, Republic of Korea and the United Kingdom have each adopted varying kinds of regulations to halt the import of illegal forest products. The EU’s recent Deforestation Free Supply Chain initiative focuses on imports of palm oil, beef, coffee, soy, cocoa and wood. Importing companies are required to conduct due diligence to demonstrate that, as of December 31, 2020, goods in these supply chains are not the result of deforestation. Member State authorities will inspect those claims and their adherence to EU regulations. The regulations are currently being developed and are expected to take effect within 18 months. These rules apply to all deforestation, not just illegal deforestation, associated with the defined set of commodities.
In the U.S., policy proposals have focused on prohibiting imports of goods produced as a result of illegal deforestation. The Fostering Overseas Rule of Law and Environmentally Sound Trade (the FOREST Act) would ban imports of goods linked to illegal deforestation, building on the Lacey Act, which prohibits illegal timber and wildlife from entering the country. It would also establish funding to aid countries transition from goods produced with illegal deforestation. That legislation is backed by a coalition of more than 40 environmental and other civil society groups, which also press for changes in other forums.
Trade plays several distinct roles in deforestation. The EU and U.S. legislation would establish permanent and enforceable rules on the trade flows. In this case, the State Department report notes that the U.S. imports less of many of the targeted goods than some other countries. Brazilian exports of meat and soy, for example, are directed much more to China than the U.S. Still, as noted in the FOREST Act, the U.S. imports $500 million worth of cattle products from Brazil and $1.2 billion in palm oil-related commodities from Indonesia. On the other hand, many of the corporations driving those exports and imports are U.S. based (Cargill, ADM and Bunge, for example) or have significant operations in the U.S. Measures such as the FOREST Act and the EU initiative would put the responsibility on corporations to document that goods produced in their supply chains are not the result of deforestation. These rules would condition those imports.
Trade polices also condition the extent to which communities and countries can enact the measures they need to transform agricultural production so that it feeds communities, protects biodiversity and lowers emissions. In addition to reporting on the links between climate change and deforestation, the IPCC highlighted that “Trade rules have the potential to stimulate international adoption of mitigation technologies and policies but may also limit countries’ ability to adopt trade-related climate policies.”
The State Department report describes some lessons from the U.S.-Peru FTA, which includes an annex addressing illegal logging. That agreement resulted in a long process leading to enforcement actions and, ultimately, the establishment of forest governance structures. But a deeper examination is needed to look at the ways existing FTAs and WTO rules create incentives that drive deforestation, and how some of these provisions could be changed or eliminated. This could start with reforms including:
- Eliminating Investor State Dispute Settlement, which grants foreign investors the right to sue governments for compensation over losses of expected profits when rules change, from existing trade agreements. Many of these cases have involved environmental restrictions over mining and resource extraction. For example, under the expiring NAFTA, a subsidiary of Amway is suing the Mexican government for $3 billion over its action to restore land rights to local communities.
- Restoring Country of Origin Labeling (COOL) for meat. After the U.S. lost a WTO dispute on the issue, Congress went well beyond what was required to justify eliminating that rule altogether. COOL gives consumers more information about where, and potentially how, their food is produced. USDA is developing rules for voluntary COOL, which is a great step forward, but binding, enforceable rules are needed. As the U.S. cattle herd has shrunk to its lowest level in 60 years due to drought, it is expected that beef imports could rise.
- Strengthening the environment chapters and related provisions in existing and pending trade deals to make it crystal clear that countries’ commitments under a broad range of Multilateral Environment Agreements (MEAs) supersede trade commitments. The U.S.-Mexico-Canada Trade Agreement (USMCA) took a step forward. Article 1.3 states that when there is an inconsistency between a party’s obligations under a set of MEAs (as listed in the environment chapter) “a Party’s obligations under this Agreement shall not preclude the Party from taking a particular measure to comply with its obligations under the covered agreement, provided that the primary purpose of the measure is not to impose a disguised restriction on trade.” Even stronger language along those lines should be included in other trade agreements or initiatives like the Indo-Pacific Economic Framework (IPEF) or the Americas Partnership for Economic Prosperity (APEP), along with an expansion of the covered MEAs, starting with the Paris Accord. The point is not only to head off potential disputes but to vigorously affirm the imperative to take actions to reduce deforestation or achieve other climate goals over trade commitments. It should also address cases in which some countries have ratified agreements that others have not, such as the Convention on Biological Diversity, which has been ratified by many trading partners, but not the U.S. No country should be pressured to violate its multilateral environmental (or human rights) commitments because of a bilateral or regional trade agreement.
The State Department reports also flag the proposed IPEF as a possible forum to develop new approaches. The 14 governments involved in that process recently announced the substantial completion of the IPEF negotiations on supply chains. While the text is not available, the summary issued by the Commerce Department does not mention deforestation. However, the USTR press statement on the other pillars says that the countries “are exploring ways to pursue their respective climate goals.” The Sierra Club has issued recommendations on how they might start to do that. In any case, that exploration should include commitments in the Trade Pillar.
In addition to these specific fixes to existing or pending agreements, it’s time to think outside the box on new ways to develop consensus among countries on climate change and trade. The governments of New Zealand with Costa Rica, Fiji, Iceland, Norway and Switzerland have launched plurilateral negotiations on an Agreement on Climate Change, Trade and Sustainability (ACCTS), with the hope that other countries will join in the future. That agreement would commit member countries to enhance trade in environmental goods and services, develop voluntary standards for eco-labeling and, even more ambitiously, to enact disciplines to phase out fossil fuel subsidies. While the ACCTS does not deal with deforestation, it could offer some lessons on ways to gather support among countries willing to commit to high standards initiatives to reduce deforestation from commodity production and trade. Some of the elements of such an understanding could emerge from the Forest and Climate Leaders Partnership at the UNFCCC, a voluntary declaration and work program involving 26 countries.
These trade policies must be coupled with financial support. Earlier this year President Biden and Brazilian President Luiz Inácio Lula da Silva agreed to work together to restart the Amazon Fund, which had been suspended during the Trump and Bolsonaro administrations. President Biden recently announced that he will request $500 million toward the Amazon Fund, which is mainly funding conservation and deforestation efforts in Brazil, as well as $1 billion towards the broader Green Climate Fund. Since the Lula administration took office, it has initiated several important programs to reduce deforestation, in many cases resuming programs that were dismantled under the Bolsonaro administration. If approved by Congress, financial support for those initiatives would be important steps toward the U.S. fulfilling its international climate commitments.
The State Department reports call for a series of interagency meetings to develop further recommendations, putting off any real commitments for at least another year. Fine. But those talks must include serious consultations with indigenous peoples, farmers and ranchers, environmentalists and other civil society actors in the U.S. and other countries on the ways existing trade policies drive the kinds of problems the proposed restrictions on trade flows are supposed to address.
