Trade partners see red over Europe’s green agenda

“The EU’s carbon border levy is the latest, and most symbolic, measure to upset the EU’s trade partners. The idea is that producers importing carbon-intensive products into the bloc will have to buy permits to account for the difference between their domestic carbon price and the price paid by EU producers.

The goal of the levy, called the Carbon Border Adjustment Mechanism (CBAM), was to level the playing field for EU producers and avoid companies moving their production over lower climate standards — so-called carbon leakage. For Brussels, the sense of climate urgency is too high to wait for others to follow suit, or to reach a deal at the multilateral or global level.”

“Brazil, South Africa, India and China have jointly expressed their “grave concern regarding the proposal for introducing trade barriers, such as unilateral carbon border adjustment, that are discriminatory.” The measure is likely to be challenged at the World Trade Organization.”

“The carbon border levy is far from the only measure to make exporting to the world’s biggest trading bloc harder.
Brussels’ Farm to Fork strategy seeks to prioritize sustainability in agriculture by slashing pesticide risk and use in half by 2030. A plan announced last September to ban imports of products containing residues of harmful neonicotinoid insecticides from 2026 has drawn “unprecedented” criticism from other countries, according to a senior European Commission official.

As the Green Deal tightens rules on pesticide use in the EU, new trade barriers are going up, said Koen Dekeyser of the European Centre for Development Policy Management (ECDPM). “Certain farmers can make those investments. Other, more small-scale farmers are likely to seek other markets, for example in Asia,” said Dekeyser.

The EU’s effort to stop deforestation is likely to have similar results.

Under new rules, it will be illegal to sell or export certain commodities if they’ve been produced on deforested land.”

What to know about the $60 price cap, the plan to limit Russia’s oil revenues

“These are some of the biggest sanctions to date, as Europe — once the destination for about half of Russia’s oil exports — further weans itself off Russian energy. And Europe, along with the United States and other major economies, like the United Kingdom, Japan, Canada, and Australia, have agreed to a maximum of $60 per barrel on Russian seaborne oil, which means anyone who still wants to buy Russian oil has to pay that price or less, if it wants to ship cargo through operators or insurers based in the EU or other countries who signed on to this price cap.”

“There are a lot of unknowns, but this is a dramatic and unprecedented move by the US and its partners — especially given how dependent Europe was on Russian energy. “If anyone told you a year ago that the EU is going to effectively eliminate its dependence on fossil fuel imports from Russia, over a period of a year, you would have thought they’re a complete lunatic,” said Lauri Myllyvirta, lead analyst at the Centre for Research on Energy and Clean Air.
It’s true that Europe continued to buy a lot of Russian oil and gas in the first half of the year, even after Russia invaded Ukraine. It’s also true that Moscow itself cut off supplies of natural gas, giving Europe little choice but to find alternatives. But even so, it’s a real and rapid scrambling of a relationship, and the EU has largely (if not perfectly) been decreasing its Russian fossil fuel imports with the expectation of the ban and other measures. Starting in February, the EU will also ban oil product imports from Russia.”

“There are already caveats. Though Russia isn’t exactly going to be transparent about this, the $60 price cap appears to be about what Russia is already selling its oil for, which means Russia’s oil revenues are unlikely to nosedive immediately. Some countries, like Poland, pushed for a much lower cap, and Ukraine has also said this doesn’t go far enough. There are also some questions around enforcement, as shippers have to attest they are abiding by the price cap, and negotiators ended up weakening some of the penalties for violators.

But the US and its allies were trying to strike a balance through a mechanism that hasn’t been attempted before. They wanted to avoid completely disrupting global oil markets while applying more pressure to Russia’s oil profits. The cap is not firmly set, and is subject to a review every two months. That means it — and its enforcement mechanisms — are likely to be tinkered with depending on how this all plays out.

“This is about balance. It was never about not having any Russian oil on the market. It was about balancing supply and demand but also balancing the need to limit Mr. Putin’s ability to profit. And again, we think that $60 per barrel will do that,” National Security Council coordinator for strategic communications John Kirby said on a press call Monday.

“It doesn’t mean that that cap can’t be adjusted going forward as we see the way it’s being implemented, and as we see how the Russians might react to it,” Kirby added.”

“Here’s how it’s supposed to work in practice: Any actor in a jurisdiction of the price-cap coalition that transports, insures, or finances the shipment of Russian oil by sea, can only do so if the price per barrel is $60 or less.

The reason the coalition thinks it could work is because a lot of maritime operators, insurers, and reinsurers are based in Europe and the United Kingdom — or as Myllyvirta put it: “The two big things are Greek ships and UK insurers.” That market domination would make it costly and cumbersome to insure your ship against an oil spill, say, or find an available tanker that doesn’t fall under a jurisdiction that’s adopted the price cap.”

“Russia has said it will not sell oil subject to the price cap, even if it has to scale back production. But this is easier said than done because Russia still needs oil buyers, like China and India, who now have a lot of leverage. “Am I going to buy [oil] at anything above 60 bucks, knowing that’s the only option Russia has? Are you going to do Putin a solid and say, ‘No, I’ll pay you $65, I’ll pay you $70.’ I’m not sure why they would, especially because they have all the cards,” Smith said.”

“Russia is under unprecedented financial and energy sanctions, especially for an economy of its size. Russia has weathered a lot of that pressure so far, and its energy and resource exports are a huge reason why. Still, sanctions are undoubtedly having an effect. Russia’s economy has shrunk. Import bans on advanced technology are forcing Russian manufacturers to scale back features — no airbags in cars, for example — because they can’t get parts. That is also affecting Russia’s ability to make advanced weapons. And even if Russia was buoyed by its oil and gas sales, those are declining, and Russia has been heavily taxing some of its oil and gas industries to try to raise more revenues. That can’t work forever, either.”

“there are still more sanctions to impose on Russia — we’re not at the level of an Iran or a North Korea yet — but that would come with repercussions for the United States, Europe, and the rest of the world, all of which is struggling with inflation and rising food and fuel prices.”

Buy American Falls Short on U.S. EV Production and Risks a European Trade War

“The Buy American program created by the Inflation Reduction Act gives Americans tax credits for purchasing electric vehicles (EVs) manufactured in the United States, Canada, or Mexico. However, these tax credits will not only be paid for by taxpayer dollars, they also stand to ignite a trade war with the European Union.
The majority of EVs are manufactured in China, followed by Germany and the United States. Regarding the minerals used in lithium batteries, the U.S. is at a disadvantage. In 2020, the U.S. ranked 15th in supplying battery materials, with the top three countries being China, Australia, and Brazil. The International Energy Agency notes that “the top three producing nations control well over three-quarters of global output.” Biden’s corporate welfare policy requires batteries to derive 40 percent of their mineral components from a mine in the U.S. or a country with which the U.S. has a free trade agreement. However, only five countries among the top 25 producers of minerals used in EV batteries have a free trade agreement with the U.S.

The U.S. could conceivably increase its mineral output with regulatory reform, says Scott Lincicome, director of general economics and trade policy at the Cato Institute. “The big problem is on the regulatory side, particularly on the permitting side of state-level equivalents….this makes mining and processing rare-earth materials here very difficult.”

The Buy American program also risks trade conflicts. E.U. French President Emmanuel Macron went so far as to say, “We need a Buy European Act like the Americans. We need to reserve [our subsidies] for our European manufacturers.” With the U.S. and Europe trending towards protectionism, Lincicome says restrictions will inherently “reduce adoption and consumption of whatever is targeted.”

Another fear that comes with protectionism is the retaliatory environment it creates. “Protectionism gets nasty, it gets political, and it spirals, and it’s very difficult to stop the cycle,” says Lincicome. Should a trade war begin over EVs, it could expand to other products, driving up prices.”

How Tariffs Are Making Summer Fun More Expensive, Less Safe

“Tariffs aren’t merely making summer fun more expensive—they are also making it potentially more dangerous too.

“Life Saver is not a misnomer,” writes Neil Mooney, an attorney representing Life Saver Pool Fence Systems, Inc., in testimony submitted earlier this month to the U.S. International Trade Commission (USITC), which later this week will hold a hearing on the economic impact of the multitude of tariffs imposed by the Trump administration in 2018.

For a company like Life Saver, which manufactures fencing meant to keep children away from unsupervised pools where they might accidentally drown, the tariffs have hiked the cost of raw materials imported from China. In his written testimony, Mooney estimates that the company has paid about $1.2 million in tariffs over the past four years—and has twice had to raise prices “specifically because of the tariffs.”

“The imposition of the Section 301 tariffs has forced Life Saver to raise its prices which inevitably has led to lower sales volume and therefore fewer protected pools,” writes Mooney. “The economic impact of the Section 301 tariffs is not only felt by Life Saver and other similar businesses and their employees, but also by the end consumers—American families.”

Are higher taxes on Chinese-made imports worth leaving American children marginally less safe?

Apparently so, at least for the past two presidential administrations. Former President Donald Trump used Section 301 of the Trade Expansion Act of 1974 to impose tariffs on a wide range of goods imported from China in several phases during 2018 and 2019. As a result, the average tariff rate applied to goods from China effectively doubled. Cumulatively, Americans have paid about $136 billion in higher costs as a result of those import taxes—that’s about $1,000 per household, according to research by the National Taxpayers Union, a nonprofit that opposes the tariffs.

Tariffs are adding to inflation, too. A study by the Peterson Institute for International Economics, a trade-focused think tank, found that repealing tariffs could reduce overall inflation by about 1 percentage point. Despite that, the Biden administration has so far been unwilling to do more than talk about repealing the tariffs imposed by Trump.”

America’s Fishing Industry Is Getting Caught Up in the Trade War

“Tariffs on seafood have hit Alaska in particular, Alaska’s fishing industry generates over $5 billion dollars in economic activity and creates nearly 70,000 jobs in the state, making it a vital lifeline for the state. Over 40 percent of U.S.-caught Alaskan salmon and one-third of all seafood from Alaska is exported to China each year. Much of it is processed in China and then re-imported to the United States for sale in grocery stores.

As the National Fisheries Institute points out, this split processing stream has contributed to rising seafood costs for U.S. consumers, as China’s retaliatory tariffs hit seafood when imported for processing and the original U.S. tariffs hit products upon their return to American shores.”

“For consumers, meanwhile, these costs are discouraging consumption of fish, according to a February study published by data analytics firms IRI and 210 Analytics. That month alone, sales of frozen seafood products decreased by 9.4 percent, while fresh seafood sales decreased by 12 percent.”

My Baby Needed Special Formula From Europe. U.S. Trade Policy Made It Almost Unobtainable.

“My son was born with severe heartburn and cried constantly—and the baby formula on the shelves only caused him more pain. At the suggestion of our pediatrician, we turned to a European goat milk formula that we hoped could soothe my son’s stomach until he grew out of his condition. But recently our orders were canceled, thanks to the Food and Drug Administration (FDA).

America’s baby formulas are incredibly standardized. The FDA claims that that’s safer, but those regulations mean that most formulas have multiple ingredients that could be allergens or irritants. Milk-based formulas in the U.S. also have soy ingredients like soy oil, as well as palm oil. And most American formulas have higher than average levels of iron, which can cause constipation. While many European brands are similar to American ones, you can find brands there that don’t contain so many possible irritants to a child’s sensitive stomach. We used Nannycare, and my son found it much more tolerable than its stateside competitors.

It’s impossible to say for sure why my English supplier suddenly decided not to sell formulas to a buyer in the U.S. But the timing of the cancellation provides a clue: It happened shortly after the FDA blocked a large amount of European formula from being sold, declaring that they did not meet the agency’s standards.

We are far from the only family that relies on European baby formula. Yet the free flow of perfectly safe goods into the United States is still extremely restricted. The agency’s strict rules about how formulas can be made limit options for children with medical issues and leaves parents with products that can cause their little ones pain.

Worse yet, these regulations are more driven by bureaucratic and political interests than by science. These products, after all, have not caused a wave of problems for European babies.”

How Trump’s Tariffs on Chinese Chemical Products Backfired

“When the Trump administration implemented tariffs on Chinese chemical companies in 2018, administration officials said tariffs would make American chemical companies more competitive. But industry groups told regulators last week that it’s had the opposite effect.

At a Thursday hearing on the impact of the Trump administration’s tariffs against China, the American Chemistry Council (ACC), an industry group representing over 190 U.S. chemical companies, informed the International Trade Commission that imports of Chinese chemical products have instead grown continuously since the tariffs took effect in June 2018. Over $35 billion worth of chemicals were imported from China in 2021, and Chinese companies now make up a larger share of U.S. chemical imports than they did when former President Donald Trump took office in 2017.

Per the ACC, the Trump administration failed to account for American manufacturers’ reliance on intermediate products exclusively produced in China. “China is the primary source of many valuable inputs to U.S. chemical manufacturing processes, and for which few or no alternatives exist,” an ACC representative said. “It would take years, and billions of dollars, to build manufacturing capabilities for these inputs in the United States or other countries.”

Dyes stand out as some of the most notable examples of vital Chinese imports impacted by chemical tariffs. For U.S. manufacturers to produce Red 57, a red pigment commonly found in many cosmetic products, they must import 3-hydroxy-2-naphthoic acid, also known as BONA, from China. BONA is exclusively produced in China, forcing American manufacturers to bear the higher costs associated with importing these critical Chinese-made inputs for their final products.”

“Despite the attention given to the industry by the federal government in recent years, chemical companies are warning that tariffs are hurting their ability to invest new capital in their supply chains and innovate on issues like climate change. They also worry that it will slow job growth and hinder the Biden administration’s broader efforts toward restoring resilience in the supply chain while only contributing to higher costs for consumers.

“[T]ariffs are clearly not working for the chemicals and plastics sector,” the ACC said in their testimony. “[They] are making the United States a less attractive place for jobs, innovation, and plant expansion.””

Biden moves to ease trade turmoil threatening his solar energy ambitions

“President Joe Biden won’t impose new tariffs on imports of solar power equipment for two years to help ease the fears that have slowed the growth in the renewable energy sector, and will invoke the Defense Production Act to spur domestic manufacturing of critical clean energy technologies, including solar panel parts.

The moves come as the solar energy industry has been roiled by a Commerce Department probe into whether companies in four Southeast Asian countries have circumvented the tariffs on Chinese shipments of solar equipment to the U.S. Those fears have slowed the development of large projects that are crucial to meeting the Biden administration’s goal of eliminating carbon emissions from the power sector by 2035.”