Why Advancing Trade Freedom Is Key to Cleaner Environment

COMMENTARY Trade

Why Advancing Trade Freedom Is Key to Cleaner Environment

Apr 29th, 2021 3 min read
COMMENTARY BY
Anthony B. Kim

Research Fellow and Editor of the Index of Economic Freedom

Anthony B. Kim researches international economic issues at The Heritage Foundation, with a focus on economic freedom and free trade.
U.S. Trade Representative Tai at the conclusion of the Senate Appropriations subcommittee hearing on the proposed budget for fiscal year 2022 on April 28, 2021 in Washington, D.C. Bill O'Leary-Pool / Getty Images

Key Takeaways

The proven, right way to ensure a cleaner and more sustainable environment lies on the path of greater trade freedom.

Over the past decades, the most outstanding improvements in clean energy use and energy efficiency have occurred because of advances in market openness.

Policymakers shouldn’t snub the importance of free trade that unleashes innovations to solve climate problems in a pragmatic and measurable way.

At last week’s climate summit, U.S. Trade Representative Katherine Tai underscored that “trade policy can be a powerful tool to create incentives for positive competition” as countries explored domestic measures for how best to handle environmental challenges.  

Indeed, advancing free trade is a key policy action for effectively facilitating a healthy environment. The proven, right way to ensure a cleaner and more sustainable environment lies on the path of greater trade freedom, which leads to dynamic, competitive innovation. 

Free market principles that have proven to be the key to economic success also can deliver environmental success.

Around the globe, economic freedom, reinforced by freer trade, has been shown to increase the capacity for environmentally friendly innovation.

More often than not, progressive policymakers and activists claim that capitalism is bad for the environment. Yet, far from being the problem, capitalism is the real, practical solution.

As a recent report by the Conservative Coalition for Climate Solutions reminds us, the proven way to lessen carbon emissions at a global scale is to implement policies that promote trade freedom around the world, through which policymakers can bring the less-developed countries up the economic ladder “by rejecting socialism (i.e., shared misery) and embracing the proven principles of free market capitalism.”

In reality, big-government climate policies tend to generate economic pain, instead of sustainable environmental gain.

The Heritage Foundation’s recently released annual Index of Economic Freedom shows that there is a far more desirable way than the command-and-control approach. Policymakers should focus on keeping the economy strong by advancing the freedom to trade, while reducing taxes and eliminating damaging regulatory barriers to energy innovation.  

Over the past decades, the most outstanding improvements in clean energy use and energy efficiency have occurred not as a result of government command and control, but because of advances in market openness and regulatory efficiency.

Those advances included enhanced trade freedom best utilized and reinforced by the private sector.

Some advancement in clean energy technology may have benefited from government support in the U.S. and around the world. Unfortunately, government mandates largely fail to spur lasting innovation, as business models built around taxpayer-funded subsidies tend to distort the incentive that drives viable invention.

More practical ways to generate dynamic innovation in the energy and environmental sector is to allow the private sector to innovate cleaner and more efficient ways to produce, distribute, and use energy.

The World Trade Organization, a multinational trade body that “provides a framework of disciplines to facilitate global trade and serves as a forum to negotiate further trade openness,” notes: 

[T]rade openness can help efforts to mitigate and adapt to climate change, for example by promoting an efficient allocation of the world’s resources (including natural resources), raising standards of living (and hence the demand for better environmental quality) and improving access to environmental goods and services.

Indeed, around the globe, economic freedom—reinforced by freer trade—has been shown to increase the capacity for environmentally friendly innovation. The positive link between economic freedom and higher levels of innovation ensures greater capacity to cope with environmental challenges.

As Heritage’s Index of Economic Freedom has highlighted since 1995, nations that embrace the rule of law, fiscal responsibility, regulatory efficiency, and market openness are capable of implementing and benefiting from more pragmatic measures of environmental health and ecosystem vitality.

The welcome outcome from this vital interplay is a virtuous cycle of investment, innovation (including in greener technologies), and more dynamic, inclusive economic growth.

It’s clear that in crafting practical and real solutions, policymakers shouldn’t snub the importance of free trade that unleashes innovations to solve climate problems in a pragmatic and measurable way.

In her climate summit remarks, Tai made the case that the world can build “a future that is cleaner and brighter, with new market opportunities and high-paying, quality jobs.” 

That’s exactly why, as the U.S. trade representative—whose task is to “open markets throughout the world to create new opportunities”—Tai’s priority should be to advance the freedom to trade, not limit it. 

This piece originally appeared in The Daily Signal.