Protectionism (Trade)

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    US Proposes Global Green Steel Club That Would Put Tariffs on China

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    A concept paper sent to the European Union suggests a new trade approach to tax metal made with higher carbon emissions in countries like China.WASHINGTON — The Biden administration on Wednesday sent a proposal to the European Union suggesting the creation of an international consortium that would promote trade in metals produced with less carbon emissions, while imposing tariffs on steel and aluminum from China and elsewhere, according to a copy viewed by The New York Times.The document, a concept paper drafted by the Office of the United States Trade Representative, provides the first concrete look at a new type of trade arrangement that the Biden administration views as a cornerstone of its approach to trade policy.The proposed group, known as the Global Arrangement on Sustainable Steel and Aluminum, would wield the power of American and European markets to try to bolster domestic industries in a way that also mitigated climate change. To do so, member countries would jointly impose a series of tariffs against metals produced in environmentally harmful ways.The levies would be aimed at China and other countries that did not join the group. Countries that did join would enjoy more favorable trade terms among themselves, especially for steel and aluminum produced more cleanly.To join the arrangement, countries would have to ensure that their steel and aluminum industries met certain emissions standards, according to the document. Governments would also have to commit to not overproduce steel and aluminum, which has pushed down global metal prices, and to limit activity by state-owned enterprises, which are often used to funnel subsidies to foreign metal makers. While the concept paper does not mention China, these requirements appear likely to bar it from becoming a member.The United States and European Union have been in talks about a climate-related trade deal for the steel and aluminum industries since last year. No U.S. trade agreement has ever included specific targets on carbon emissions, and negotiators have had much ground to cover to try to reconcile the varying U.S. and E.U. economic approaches to mitigating climate change.It is unclear what type of reception the proposal, which is still in its early stages, will receive from European leaders, as well as whether U.S. industry and politicians will support the idea. An E.U. official declined to comment on Wednesday on the details of an active negotiation, but said the two sides were discussing ways to continue and deepen their work on the arrangement.In recent weeks, trade tensions between the United States and Europe have risen to their highest levels since President Biden entered office, with leaders sparring over U.S. legislation aimed at encouraging the production of electric vehicles in North America. European leaders say the measures will put their industries at a disadvantage and have demanded changes that they say unfairly exclude European firms.A senior trade official, who spoke on the condition of anonymity because the paper was not yet public, said that the spat over electric vehicles was unlikely to spill over into negotiations over steel and aluminum, and that the governments were closely aligned on the goal of taking carbon intensity into account when it came to trade.After a meeting with European officials outside Washington this week, Katherine Tai, the U.S. trade representative, called the steel and aluminum effort “one of the most consequential things that we’re working on between the U.S. and the E.U. with respect to trade.” She said it was “on track” to meet a previous goal of completion by next year.“It is an important part of the track record that we have, Washington to Brussels, in terms of taking some of the most challenging issues of our time, some of the things that have been really challenging between us, and demonstrating that we can exercise leadership with a vision for the future,” Ms. Tai said during a news conference Monday.Valdis Dombrovskis, the European commissioner for trade, said the methods that the United States and Europe were developing to measure the carbon footprint of steel and aluminum could be expanded to other products, as part of a new trans-Atlantic initiative on sustainable trade that the governments had agreed to launch.“It will provide a common language for understanding many things,” he said.It’s also unclear how much support the plan will have from domestic makers of steel and aluminum. While some have voiced support for the broader strategy, company executives and labor union leaders are still reviewing the plans, and say the potential impact on U.S. industry would hinge on details that had yet to be determined..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}What we consider before using anonymous sources. Do the sources know the information? What’s their motivation for telling us? Have they proved reliable in the past? Can we corroborate the information? Even with these questions satisfied, The Times uses anonymous sources as a last resort. The reporter and at least one editor know the identity of the source.Learn more about our process.The U.S. steel industry is already among the cleanest in the world, as a result of the country’s stronger environmental standards and a focus on recycling scrap metal. The agreement is designed to capitalize on those advantages and help American companies withstand competition from heavily subsidized steel and aluminum manufacturers in China and elsewhere.But the United States is also home to many industries that buy foreign steel and aluminum to make into other products. They could object that the move would increase their costs.If the United States and Europe move forward with the structure, there is likely to be an intense fight over where tariffs are set and how carbon emissions are measured.The development of a method for figuring out the amount of greenhouse gas emissions in the production of any particular product is still in the early stages, and much more data would need to be gathered at the level of specific products and companies, people familiar with the plans said.Both the United States and Europe have expressed interest in expanding the consortium’s membership to any country that can meet its high standards. But the arrangement could rankle American allies in the short term, if countries like Japan and South Korea are initially left out.The measure could also trigger retaliation from China, or be challenged at the World Trade Organization, which includes China and requires its members to treat one another equally in trade.It’s also still unclear what legal authority the Biden administration would use to impose the tariffs. The senior trade official said the Biden administration hoped to involve Congress in setting up the policy. But analysts speculated that the administration could also resort to the same national security-related executive authority that the Trump administration used in imposing its steel and aluminum tariffs.And while it will please the administration’s allies in labor unions and environmental advocacy groups, the proposal is likely to disappoint advocates of freer trade, who had hoped the Biden administration would reject the more protectionist approach of the Trump administration. Instead of getting rid of the global levies on steel and aluminum that the Trump administration introduced in 2018, this effort would replace them with a new global system of tariffs structured around climate concerns.The concept paper proposes a tiered system of tariffs that would rise with the level of carbon emitted in the production of a particular steel or aluminum good. Additional tariffs would be levied on any product coming from countries outside the consortium.The tariff rate would start at 0 for the cleanest products from member countries. Beyond that, the paper does not specify rates, instead representing them as X, Y or Z.The proposal to impose tariffs on steel from China and other countries as part of the arrangement was previously reported by Bloomberg.The thresholds for the tariff rates, and for membership in the consortium, are designed to increase over time to encourage countries to continue cleaning up their industries. The arrangement would “incentivize industry globally to decarbonize as a condition of market access,” the paper says.Todd Tucker, the director of industrial policy and trade at the Roosevelt Institute, compared the approach to “a carbon tariff imposed on countries that are outside the carbon club.”The United States and European Union appear to be going for “a higher-ambition route” to address global steel trade, Mr. Tucker said. “What that means is leveraging the power of the U.S. and European markets to drive decarbonization in the global steel market.” More

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    Biden Weighs Tariff Rollback to Ease Inflation, Even a Little Bit

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    While lifting some levies on China is unlikely to put a large dent in inflation, administration officials concede they have few other options to address surging prices.WASHINGTON — President Biden is weighing whether to roll back some of the tariffs that former President Donald J. Trump imposed on Chinese goods, in hopes of mitigating the most rapid price gains in 40 years, according to senior administration officials.Business groups and some outside economists have been pressuring the administration to relax at least a portion of the taxes on imports, saying it would be a significant step that the president could take to immediately cut costs for consumers.Yet any action by the administration to lift the tariffs is unlikely to put a large dent in an inflation rate that hit 8.6 percent in May — while the political ramifications could be severe. An influential study this year predicted that a move to lift tariffs could save households $797 a year, but administration officials say the actual effect would most likely be far smaller, in part because there is no chance Mr. Biden will roll back all of the federal government’s tariffs and other protectionist trade measures.The tariff discussion comes at a precarious time for the economy. Persistent inflation has shattered consumer confidence, driven stock markets into bear territory — down 20 percent from their January high — and inflamed fears of a recession as the Federal Reserve moves quickly to raise interest rates.Some administration economists privately estimate the tariff reductions that Mr. Biden is considering would reduce the overall inflation rate by as little as a quarter of a percentage point. Still, in a sign of how big a political problem inflation has become, officials are weighing at least a partial relaxation anyway, in part because the president has few other options.The China tariffs are raising the price of goods for American consumers by essentially adding a tax on top of what they already pay for imported goods. In theory, removing the tariffs could reduce inflation if companies cut — or stopped raising — prices on those products.Mr. Biden has said taming inflation rests mainly with the Federal Reserve, which is trying to cool demand by making money more expensive to borrow and spend. The Fed is expected to raise interest rates on Wednesday, possibly making its biggest increase since 1994, as it tries to get persistent inflation under control. The prospect of big rate increases has spooked Wall Street, which entered bear market territory on Monday before steadying on Tuesday.Any move to tweak the tariffs could carry significant trade-offs. It could encourage companies to keep their supply chains in China, undercutting another White House priority to bring jobs back to America. And it could expose Mr. Biden — and his Democratic allies in Congress — to attacks that he is letting Beijing off the hook when America’s economic relationship with China has become openly hostile, deepening a wedge issue for the midterm elections and the next presidential race.China has yet to live up to the commitments it made as part of the U.S.-China trade deal that Mr. Trump negotiated, including failing to purchase significant amounts of natural gas, Boeing airplanes and other American products. Mr. Trump imposed tariffs on the bulk of products the United States imports from China as part of a pressure campaign aimed at forcing China to change its economic practices. More than two years later, the United States retains a 25 percent tariff on about $160 billion of Chinese products, while another $105 billion, mostly consumer goods, are taxed at 7.5 percent.While Mr. Biden has criticized the way in which Mr. Trump wielded tariffs, he has also acknowledged that China’s economic practices pose a threat to America.Understand Inflation and How It Impacts YouInflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Greedflation: Some experts contend that big corporations are supercharging inflation by jacking up prices. We take a closer look at the issue. Inflation Calculator: How you experience inflation can vary greatly depending on your spending habits. Answer these seven questions to estimate your personal inflation rate.For Investors: At last, interest rates for money market funds have started to rise. But inflation means that in real terms, you’re still losing money.Business groups like the U.S. Chamber of Commerce and economists like Lawrence H. Summers, a Treasury secretary under President Bill Clinton, have urged the White House to repeal as many tariffs as possible, saying it would help consumers deal with rising prices.Mr. Summers and others have approvingly cited the March study on the issue from economists at the Peterson Institute for International Economics, who argued that a “feasible package” of tariff removal — which includes repealing a range of levies and trade programs, not just those applied to China — could cause a one-time reduction in the Consumer Price Index of 1.3 percentage points, amounting to a gain of $797 per American household.In an interview, Mr. Summers said reducing tariffs was “probably the most potent microeconomic or structural action the administration can take to reduce prices and inflationary pressure relatively rapidly.”But even those inside the administration who support easing the tariffs are skeptical that the move would produce anywhere close to the amount of relief that Mr. Summers and others have predicted.“I think some reductions may be warranted and could help to bring down prices of things that people buy that are burdensome,” Janet L. Yellen, the Treasury secretary and an advocate of some tariff rollbacks, told a House committee last week. “I want to make clear, I honestly don’t think tariff policy is a panacea with respect to inflation.”Ms. Yellen met on Tuesday with the board of directors of the National Retail Federation, which has long argued against the tariffs and recently made the case that eliminating them would ease inflation.One key question is whether companies that are given tariff relief would actually pass those savings on in the form of lower prices or choose to absorb them as profits. Consumers have so far continued to pay more for everyday items, a fact that corporations have cited in earnings calls with investors as a reason they can charge more.David French, senior vice president of government relations at the National Retail Federation, said the administration had been trying to understand how quickly tariff cuts would translate into pricing changes, and seeking assurances from retailers that any savings would be passed along to American consumers.“I think in the administration’s mind, there’s going to be a price rollback and money is going to come off the price tag,” he said. “I’m not sure you’re going to see a dramatic change like that.”Instead of price decreases, for example, stores may choose to hold off on increasing prices even more. Retailers “will do as much as they can to demonstrate dramatic changes in pricing where possible,” but they still face pent-up pressures in the supply chain in terms of cost, he said.Rising prices have socked Americans across the economy, draining families’ purchasing power and contributing to a steady decline in Mr. Biden’s approval ratings. The Consumer Price Index was up 8.6 percent in May from a year earlier, its fastest growth rate in 40 years. Mr. Biden says he has made fighting inflation his top economic priority.Unloading cargo at the Port of Los Angeles in March. The United States still has a 25 percent tariff on about $160 billion of Chinese products that was imposed by the Trump administration.Coley Brown for The New York TimesLast week, Mr. Biden announced a two-year pause on tariffs on imported solar panels, which could reduce costs for domestic consumers but which effectively pre-empted a Commerce Department investigation into illegal trade practices by Chinese manufacturers.Domestic trade groups, labor leaders and populist Democrats like Representative Tim Ryan of Ohio, who is locked in a competitive Senate race, have pushed Mr. Biden to keep the tariffs. Mr. Ryan held a news conference on Tuesday urging Mr. Biden not to yield any economic ground to Beijing.Economists disagree on how much inflation relief the administration could get by removing the tariffs.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Pakistan Raises Fuel Prices in Effort to Stabilize Economy

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    The interim government’s move was seen as a bid to revive a $6 billion bailout from the International Monetary Fund.ISLAMABAD, Pakistan — Pakistan’s government on Friday sharply increased fuel prices for consumers, paving the way to revive a $6 billion bailout package from the International Monetary Fund and stabilize the country’s cratering economy amid deepening political turmoil.The move raising gasoline and diesel prices by about 20 percent — or about 15 cents — a liter staved off concerns that Pakistan, which already faces double-digit inflation, would join a wave of global defaults as the financial shocks from the pandemic, the war in Ukraine and rising interest rates batter many poorer nations.But the decision may cost the new coalition government popular support, analysts say, adding to the political uncertainty that has embroiled the country since Prime Minister Imran Khan was ousted in a no-confidence vote in Parliament early last month.“The price hike signals that the government has decided to bite the bullet and make choices that are necessary, even if they cost near-term political capital,” said Uzair Younus, the director of the Pakistan Initiative at the Atlantic Council. “The hike will ease markets and reduce uncertainty. It will be critical for the government to maintain momentum and continue making decisions that get Pakistan out of the current crisis.”Since his ouster, Mr. Khan has held a series of political rallies, drawing huge crowds and heavily criticizing the current coalition government and the military, blaming them for his removal from office. Some officials now fear that the government’s move to appease the I.M.F. could hand Mr. Khan a wave of public outrage that he could manipulate on the streets.Former Prime Minister Imran Khan, at top center in dark vest, leading an antigovernment rally in Islamabad on Thursday.Aamir Qureshi/Agence France-Presse — Getty ImagesDiscussions between the I.M.F. and the new interim government, led by Shehbaz Sharif, had been deadlocked for weeks over the terms of reviving the bailout, which was announced in 2019 and later suspended after Pakistan’s previous government failed to meet some loan conditions, like cutting energy subsidies.Pakistan has hoped for a release of a roughly $900 million seventh tranche of the $6 billion I.M.F. bailout package. Earlier this week, a fresh round of talks between the I.M.F. and the new Pakistani government in Doha, Qatar, appeared to fail after fund officials declined to accept the Pakistani request to delay the ending of government subsidies.Mr. Sharif had been reluctant to end government energy subsidies and roll back unfunded subsidies to oil and power sectors — a key I.M.F. demand — fearing public backlash that could diminish his party’s chance of success in the next general elections.Those elections are scheduled to be held next year, but the new government has come under mounting public pressure from Mr. Khan’s supporters to hold them earlier.On Thursday, Mr. Khan warned the government to announce the next elections and dissolve Parliament within six days. The warning came just after he led thousands of supporters to the capital Wednesday evening. Angry supporters clashed with the police in the capital and several other Pakistani cities. At least 1,700 protesters were arrested by the police in Punjab, the country’s most populous province.That political pressure has added to the new government’s reluctance to embark on meaningful economic reforms that, while important to stabilize the economy in the years to come, would cause immediate pain to Pakistanis’ wallets, analysts say.The interim government, led by Shehbaz Sharif, center, has been deadlocked in talks with the International Monetary Fund.Saiyna Bashir for The New York TimesLate Thursday night, drivers desperate to fill their tanks before the price increase went into effect after midnight flocked to gas stations across major cities. Many drivers’ incomes have already been squeezed by soaring inflation in recent years that has pushed up the price of basic goods.“There is no rise in our income proportional to the rise in the price of fuel and other essential items,” said Saleem Khan, 44, as he waited to fill his motorcycle’s tank at a gas station in the port city of Karachi.Mr. Khan makes around 18,000 rupees, or about $90, a month working in a restaurant in the city. In previous months, he could send nearly 10,000 rupees every month to his relatives in Bajaur, a tribal district bordering Afghanistan.“This month, it seems I’ll be able to send barely 7,000 rupees to my family,” he said.Nearby, Rasheed Ahmed, a garment factory worker, sat on his motorcycle, worrying how he would pay for basics like food and rent with the fuel price increase.“We thought the ousting of Imran Khan will help the country in decreasing the fuel prices, but the current rulers are crueler than the previous government,” Mr. Ahmed, 34, said.The new coalition government has struggled to find its bearings since coming to power in early April and is in a particularly precarious position. It has no electoral mandate, but was chosen by Parliament to take over after Mr. Khan’s ouster. And it is a tenuous coalition of political parties that previously clashed frequently and only came together around the singular aim of removing Mr. Khan from office. Mr. Sharif’s party also faces internal divisions over policy decisions.A market in Islamabad last month. Many Pakistanis are worried about their ability to afford basic necessities as inflation rises.Saiyna Bashir for The New York TimesMr. Khan’s government, before its removal from office, was also facing increasing public discontent over rising inflation. Mr. Khan claims that the economy was improving under his government, but in order to soothe the public’s flaring tempers, he announced he was cutting petroleum and energy prices — a move that eased public discontent but added to the country’s fiscal deficit.Understand the Political and Economic Turmoil in PakistanCard 1 of 5A chaotic time. More

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    Governments Tighten Grip on Global Food Stocks, Sending Prices Higher

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    Dozens of countries have thrown up trade barriers in the past two months to protect scarce supplies of food and commodities, but experts say the policies will only exacerbate a global food crisis.WASHINGTON — Ukraine has limited exports of sunflower oil, wheat, oats and cattle in an attempt to protect its war-torn economy. Russia has banned sales of fertilizer, sugar and grains to other nations.Indonesia, which produces more than half the world’s palm oil, has halted outgoing shipments. Turkey has stopped exports of butter, beef, lamb, goats, maize and vegetable oils.Russia’s invasion of Ukraine has unleashed a new wave of protectionism as governments, desperate to secure food and other commodities for their citizens amid shortages and rising prices, erect new barriers to stop exports at their borders.The measures are often well intended. But like the panic-buying that stripped grocery store shelves at various moments of the pandemic, the current wave of protectionism will only compound the problems that governments are trying to mitigate, trade experts warn.Export restrictions are making grains, oils, meat and fertilizer — already at record prices — more expensive and even harder to come by. That is placing an even greater burden on the world’s poor, who are paying an ever-larger share of their income for food, increasing the risk of social unrest in poorer countries struggling with food insecurity.Since the beginning of the year, countries have imposed a total of 47 export curbs on food and fertilizers — with 43 of those put in place since the invasion of Ukraine in late February, according to tracking by Simon Evenett, a professor of international trade and economic development at the University of St. Gallen.“Before the invasion, there’s a very small number of attempts to try and restrict exports of food and fertilizers,” Mr. Evenett said. “After the invasion you see a huge uptick.”The cascade of new trade barriers comes as the war in Ukraine, and the sanctions imposed by the West on Russia, are further straining supply chains that were already in disarray from the pandemic. Russia is the world’s largest exporter of wheat, pig iron, nickel and natural gas, and a major supplier of coal, crude oil and fertilizer. Ukraine is the world’s largest exporter of sunflower seed oil and a significant exporter of wheat, pig iron, maize and barley.With countries facing severe threats to supplies of basic goods, many policymakers have quickly dropped the language of open markets and begun advocating a more protective approach. Recommendations range from creating secure supply chains for certain critical materials in friendly countries to blocking exports and “reshoring” foreign factories, bringing operations back to their home countries.In a speech last week, Janet L. Yellen, the Treasury secretary, said the pandemic and the war had revealed that American supply chains, while efficient, were neither secure nor resilient. While cautioning against “a fully protectionist direction,” she said the United States should work to reorient its trade relationships toward a large group of “trusted partners,” even if it meant somewhat higher costs for businesses and consumers.Ngozi Okonjo-Iweala, the director general of the World Trade Organization, said in a speech on Wednesday that the war had “justifiably” added to questions about economic interdependence. But she urged countries not to draw the wrong conclusions about the global trading system, saying it had helped drive global growth and provided countries with important goods even during the pandemic.“While it is true that global supply chains can be prone to disruptions, trade is also a source of resilience,” she said.The W.T.O. has argued against export bans since the early days of the pandemic, when countries including the United States began throwing up restrictions on exporting masks and medical goods and removed them only gradually.Now, the Russian invasion of Ukraine has triggered a similar wave of bans focused on food. “It’s like déjà vu all over again,” Mr. Evenett said.Protectionist measures have cascaded from country to country in a manner that is particularly evident when it comes to wheat. Russia and Ukraine export more than a quarter of the world’s wheat, feeding billions of people in the form of bread, pasta and packaged foods.Mr. Evenett said the current wave of trade barriers on wheat had begun as the war’s protagonists, Russia and Belarus, clamped down on exports. The countries that lie along a major trading route for Ukrainian wheat, including Moldova, Serbia and Hungary, then began restricting their wheat exports. Finally, major importers with food security concerns, like Lebanon, Algeria and Egypt, put their own bans into effect.Mr. Evenett said the dynamic was “still unfolding” and likely to get worse in the months to come. Ukraine’s summer growing season for wheat is being disrupted as fighting keeps farmers away from their fields and pulls workers off to war. And grocery stores in Spain, Greece and Britain are already introducing restrictions on the amount of cereals or oil people can buy.“We’re already feeling the pinch in Europe of limited supplies of these key crops,” he said.Several other consequential export bans on food are unrelated to the war, but they will still play into the global dynamic of rising prices.A palm oil processing plant in Indonesia’s Riau Province. The country has halted outgoing shipments of palm oil, a key ingredient in packaged food.Kemal Jufri for The New York TimesChina began ordering its firms to stop selling fertilizer to other countries last summer, in order to preserve supplies at home, Chad Bown, a senior fellow at the Peterson Institute for International Economics, and Yilin Wang, a research analyst at the institute, wrote in a recent blog post. Now that Russia has also cut off exports of fertilizer, China’s ban will be even more harmful.“China’s decision to take fertilizer supplies off world markets to ensure its own food security only pushes the problem onto others,” they wrote, adding that “China’s ongoing export restrictions could hardly come at a worse time.”Indonesia’s restrictions on palm oil, a key ingredient in packaged foods, detergent and cosmetics, are in line with similar bans the country placed on exporting the product before the war in an attempt to keep the price of oil affordable for Indonesian households.Those measures will add to skyrocketing prices for vegetable oils, driven by a disruption in the supply from Ukraine, the world’s largest producer of sunflower oil.Governments that put these restrictions in place often argue that their duty is to put the needs of their own citizens first, and the W.T.O.’s rules allow countries to impose temporary measures for national security or safety. But the measures can easily backfire, helping to push up global prices further.Price increases for food have been felt particularly keenly in poorer countries in the Middle East and sub-Saharan Africa, which depend on imported food.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

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    For Clean Energy, Buy American or Buy It Quick and Cheap?

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    President Biden says slowing climate change will create jobs. Tension between unions and environmentalists shows it’s not so simple.Patricia Fahy, a New York State legislator, celebrated when a new development project for the Port of Albany — the country’s first assembly plant dedicated to building offshore wind towers — was approved in January.“I was doing cartwheels,” said Ms. Fahy, who represents the area. But she was soon caught in a political bind.A powerful union informed her that most of the equipment for New York’s big investment in offshore windmills would not be built by American workers but would come from abroad. Yet when Ms. Fahy proposed legislation to press developers to use locally made parts, she met opposition from environmentalists and wind industry officials. “They were like, ‘Oh, God, don’t cause us any problems,’” she recalled.Since President Biden’s election, Democrats have extolled the win-win allure of the transition from fossil fuels, saying it can help avert a climate crisis while putting millions to work. “For too long we’ve failed to use the most important word when it comes to meeting the climate crisis: jobs, jobs, jobs,” Mr. Biden told Congress last month.On Tuesday, his administration gave final approval to the nation’s first large-scale offshore wind project, off Martha’s Vineyard in Massachusetts, again emphasizing the jobs potential.But there is a tension between the goals of industrial workers and those of environmentalists — groups that Democrats count as politically crucial. The greater the emphasis on domestic manufacturing, the more expensive renewable energy will be, at least initially, and the longer it could take to meet renewable-energy targets.That tension could become apparent as the White House fleshes out its climate agenda.“It’s a classic trade-off,” said Anne Reynolds, who heads the Alliance for Clean Energy New York, a coalition of environmental and industry groups. “It would be better if we manufactured more solar panels in the U.S. But other countries invested public money for a decade. That’s why it’s cheaper to build them there.”There is some data to support the contention that climate goals can create jobs. The consulting firm Wood Mackenzie expects tens of thousands of new jobs per year later this decade just in offshore wind, an industry that barely exists in the United States today.And labor unions — even those whose members are most threatened by the shift to green energy, like mineworkers — increasingly accept this logic. In recent years, many unions have joined forces with supporters of renewable energy to create groups with names like the BlueGreen Alliance that press for ambitious jobs and climate legislation, in the vein of the $2.3 trillion proposal that Mr. Biden is calling the American Jobs Plan.But much of the supply chain for renewable energy and other clean technologies is in fact abroad. Nearly 70 percent of the value of a typical solar panel assembled in the United States accrues to firms in China or Chinese firms operating across Southeast Asia, according to a recent report by the Center for Strategic and International Studies and BloombergNEF, an energy research group.Batteries for electric vehicles, their most valuable component, follow a similar pattern, the report found. And there is virtually no domestic supply chain specifically for offshore wind, an industry that Mr. Biden hopes to see grow from roughly a half-dozen turbines in the water today to thousands over the next decade. That supply chain is largely in Europe.Many proponents of a greener economy say that importing equipment is not a problem but a benefit — and that insisting on domestic production could raise the price of renewable energy and slow the transition from fossil fuels.“It is valuable to have flexible global supply chains that let us move fast,” said Craig Cornelius, who once managed the Energy Department’s solar program and is now chief executive of Clearway Energy Group, which develops solar and wind projects.Those emphasizing speed over sourcing argue that most of the jobs in renewable energy will be in the construction of solar and wind plants, not making equipment, because the manufacturing is increasingly automated.But labor groups worry that construction and installation jobs will be low paying and temporary. They say only manufacturing has traditionally offered higher pay and benefits and can sustain a work force for years.Partisans of manufacturing also point out that it often leads to jobs in new industries. Researchers have shown that the migration of consumer electronics to Asia in the 1960s and ’70s helped those countries become hubs for future technologies, like advanced batteries.As a result, labor leaders are pressing the administration to attach strict conditions to the subsidies it provides for green equipment. “We’re going to be demanding that the domestic content on this stuff has to be really high,” said Thomas M. Conway, the president of the United Steelworkers union and a close Biden ally.The experience of New York reveals how delicate these debates can be once specific jobs and projects are at stake.Patricia Fahy, a New York State legislator, met opposition from environmentalists and wind industry officials over efforts to press developers to use locally made parts.Mohamed Sadek for The New York TimesA slip at the Port of Albany was created for ships with oversize cargo from overseas, including components for the wind industry.Mohamed Sadek for The New York TimesLate last year, the Communications Workers of America began considering ways to revive employment at a General Electric factory that the union represents in Schenectady, N.Y., near Albany. The factory has shed thousands of employees in recent decades.Around the same time, the state was close to approving bids for two major offshore wind projects. The eventual winner, a Norwegian developer, Equinor, promised to help bring a wind-tower assembly plant to New York and upgrade a port in Brooklyn.“All of a sudden I focus on the fact that we’re talking about wind manufacturing,” said Bob Master, the communications workers official who contacted Ms. Fahy, the state legislator. “G.E. makes turbines — there could be a New York supply chain. Let’s give it a try.”In early February, the union produced a draft of a bill that would ask developers like Equinor to buy their wind equipment from manufacturers in New York State “to the maximum extent feasible” — not just towers but other components, like blades and nacelles, which house the mechanical guts of a turbine. Ms. Fahy, a member of the Assembly, and State Senator Neil Breslin, a fellow Democrat from the Albany area, signed on as sponsors.Environmentalists and industry officials quickly raised concerns that the measure could discourage developers from coming to the state.“So far, Equinor has gone above and beyond what any other company has done,” said Lisa Dix, who led the Sierra Club’s campaign for renewable energy in New York until recently. “Why do we need more onerous requirements on companies given what we got?”Ms. Dix and other clean-energy advocates had worked with labor unions to persuade the state that construction jobs in offshore wind should offer union-scale wages and representation. And New York’s system for evaluating clean-energy bids already awarded points to developers that promised local economic benefits.Ms. Reynolds, the head of the environmental and industry coalition in New York, worried that going beyond the existing arrangement could make the cost of renewable energy unsustainable.“If it became bigger and more noticeable on electric bills, the common expectation is that political support for New York’s clean-energy programs would erode,” she said.The communications workers sought to offer reassurance, not entirely successfully. “I said to them, ‘We’re trade unionists: We ask for everything, the boss offers us nothing, and then we make a deal,’” Mr. Master said. “‘But I do think there’s no reason why turbines should be coming from France as opposed to Schenectady.’”The final language, a compromise negotiated with the state’s building trades council and passed by the Legislature in April, allows the state to award additional points in the bidding process to developers that pledge to create manufacturing jobs in the state, a slight refinement of the current approach. (It also effectively requires that workers who build, operate or maintain wind and solar plants either receive union-scale wages or can benefit from union representation.)While the law included a “buy American” provision for iron and steel, the state’s energy research and development agency, known as NYSERDA, can waive the requirement.The agency’s chief executive, Doreen Harris, said she was generally pleased that the existing approach remained intact and predicted that the state would have blade and nacelle factories within a few years.Some analysts agreed, arguing that most offshore wind equipment is so bulky — often hundreds of feet long — that it becomes impractical to ship across the Atlantic.“There’s a point at which importation of all goods and services doesn’t make economic sense,” said Jeff Tingley, an expert on the offshore wind supply chain at the consulting firm Xodus.Importing parts has made economic sense for Britain, which had installed more offshore wind turbines than any other country by the start of this year but had made little of the equipment.Suzie Howell for The New York TimesBut that has not always reflected the experience of the United Kingdom, which had installed more offshore wind turbines than any other country by the start of this year but had manufactured only a small portion of the equipment.“Even with the U.K. being the biggest market, the logistics costs weren’t big enough to justify new factories,” said Alun Roberts, an expert on offshore wind with the British-based consulting firm BVG Associates.A 2017 report indicated that the country manufactured well below 30 percent of its offshore wind equipment, and Mr. Roberts said the percentage had probably increased slightly since then. The country currently manufactures blades but no nacelles.All of which leaves the Biden administration with a difficult choice: If it genuinely wants to shift manufacturing to the United States, doing so could require some aggressive prodding. A senior White House official said the administration was exploring ways of requiring that a portion of wind and solar equipment be American-made when federal money was involved.But some current and former Democratic economic officials are skeptical of the idea, as are clean-energy advocates.“I worry about local content requirements for offshore wind from the federal government right now,” said Kathleen Theoharides, the Massachusetts secretary of energy and environmental affairs. “I don’t think adding anything that could potentially raise the cost of clean energy to the ratepayer is necessarily the right strategy.”Mr. Master said the recent legislation in New York was a victory given the difficulty of enacting stronger domestic content policies at the state level, but acknowledged that it fell short of his union’s goals. Both he and Ms. Fahy vowed to keep pressing to bring more offshore wind manufacturing jobs to New York.“I could be the queen of lost causes, but we want to get some energy around this,” Ms. Fahy said. “We need this here. I’m not just saying New York. This is a national conversation.” More