A Landmark Trade Deal Could Ensure the Future is Built with Clean American Steel. But Congress Must Also Act.
By Jake Higdon Data for Progress Senior Policy Adviser
For years, conventional wisdom suggested that climate action and quality manufacturing jobs were mutually exclusive. In theory, American manufacturers who invested in reducing greenhouse gases and other pollution would get undercut in the global marketplace, and the associated emissions would simply shift overseas rather than going away. But President Biden — and the labor-environmental coalition that helped to elect him on a pro-jobs, pro-climate platform — are working to end that narrative.
At the G-20 summit in Rome, President Biden announced a landmark new EU-US trade framework for sustainable steel and aluminum, making headlines ahead of the UN Climate Summit in Glasgow (COP26). This trade arrangement would begin to phase out the embattled Trump-era steel tariffs in a targeted manner, easing transatlantic tensions and reducing costs in steel-dependent sectors facing supply chain crunches, such as automakers. It would also enable American and European manufacturers to elbow out cheap but polluting Chinese steelmakers. The agreement complements other announcements at COP26, such as a First Movers Coalition that commits to purchasing low-carbon alternatives in hard-to-abate sectors, including steel.
This trade deal sets a remarkable precedent. For the first time ever, greenhouse gas mitigation is a defining feature of a major U.S. trade deal — and it has won praise from industrial unions and climate hawks alike. The EU’s impending carbon border adjustment mechanism (CBAM), which will penalize all imports for their climate impact regardless of origin, may have spurred the deal along.
However, to ensure that American workers reap the full benefits of the arrangement as the world moves to clean steel, Congress will have to pass legislation to invest in clean domestic manufacturing.
The Build Back Better agenda can boost domestic clean steel
Steel is a massive, multi-trillion dollar market today, which means that clean steel will be a multi-trillion dollar market by 2050. That shift is happening fast. According to the International Energy Agency, by 2030 roughly 10-20% of global primary steel production must become low-carbon to stay on track for a mid-century net-zero goal. And the infrastructure investment needed for economy-wide decarbonization will contribute to aggregate steel demand, which is expected to grow by 12% by 2050.
Last Saturday’s trade announcement will position U.S. manufacturers to capture the emerging markets for low carbon steel and aluminum, but it must be coupled with robust domestic policy to expand and decarbonize U.S. metals production. Today, manufacturers have neither ample funding nor a clear demand signal to enable them to retool their blast furnaces and aluminum smelters — let alone build new, cleaner ones.
Fortunately, Congress is currently considering passing a suite of industrial decarbonization investments in the Build Back Better Act, including $4 billion in grants for manufacturers to reduce greenhouse gas emissions; an expanded 48C tax credit that includes wage standards and prioritization for deindustrialized communities; and a series of clean procurement programs to create a domestic market for low-carbon metals. Meanwhile, the Biden-Harris Administration is making progress through executive action, like standing up a new Clean Energy Manufacturing Institute focused on a clean metals sector. These policies can all work in tandem with each other and with the new EU-US sectoral arrangement, equipping American manufacturers with the tools they need to double-down on clean steel and aluminum while ensuring carbon-intensive products do not continue to dominate the global market.
These interventions form the basis of a broader green industrial policy, prescribed by White House leadership, among others. Polling from Data for Progress’s recent Made Clean in America project shows that direct investments to decarbonize heavy manufacturing are popular across the political aisle and that voters are willing to pay a premium to support clean products and good American jobs. By a +43-point margin, voters support leveraging federal clean procurement to increase domestic production of sustainable goods. And 69 percent of voters support a U.S. carbon border adjustment along the lines of the European Union’s to target dirty imports by placing a direct price on embodied emissions.
Global equity will be key to success
In establishing new sectoral arrangements that push for climate ambition, we cannot turn a blind eye to global equity. These arrangements could enable nations that built their wealth on unabated pollution, like the U.S., to turn around and impose an unfair new standard on developing states, and perhaps run awry of WTO non-discrimination rules. Last week’s deal should increase the pressure on the United States and European Union to deliver on their commitments to international climate finance to support an equitable transition around the world, including in the clean manufacturing sector.
This is a moral imperative for progressives committed to climate justice, but it is also a practical one. If we fail to foster clean manufacturing globally, our domestic actions to fight climate change will fall short. International equity is thus an integral part of a three-pronged approach to clean manufacturing: 1) Build clean manufacturing capacity in the domestic sphere, 2) provide international aid to help less-developed nations follow suit, and 3) make it increasingly hard to sell dirty products on the global market.
Voters support a global trade agenda for clean steel
In a November 2021 national survey, Data for Progress assessed the attitudes of likely voters towards a U.S. global trade agenda that centers the production of more sustainable goods. First, we asked voters whether they would prefer for the U.S. to prioritize trade deals with nations that have similar environmental and labor standards as us, or countries that have the cheapest goods. By a +54-point margin, voters prefer for the U.S. to prioritize deals with nations that emphasize labor standards and environmental impact. A majority of Democrats, Independents, and Republicans all prefer these deals over those with nations that have cheaper goods but weaker standards.
Voters across party lines also widely back U.S. trade deals to increase the production of sustainable industrial materials, such as steel and aluminum. Democrats support these deals by a +72-point margin, Independents by a +46-point margin, and Republicans by a +40-point margin.
Finally, we asked voters whether they support or oppose the U.S. creating more favorable trade deals with countries that produce goods that are less harmful to the environment. By an overwhelming +71-point margin, voters think the U.S. should enact trade deals that take environmental impacts into account. Again, there is significant bipartisan support: Democrats support these types of deals by a +86-point margin, Independents by a +68-point margin, and Republicans by a +57-point margin.
Ultimately, the unforgiving math of the climate crisis demands that we transform the way we produce ubiquitous infrastructure materials, like steel and cement. But cleaning up these industries can and should deliver benefits for American manufacturers and workers. With this trade deal’s focus on clean steel and aluminum, the Biden-Harris Administration has made clear that green industrial policy is more than just rhetoric, laying the first brick in the foundation of a new pro-climate, pro-worker international order. Moreover, voters across the political spectrum widely support U.S. trade deals that center environmental and labor standards. Now it’s up to Congress to do its part to deliver on the domestic side of that agenda.
Survey Methodology
From November 3 to 5, 2021, Data for Progress conducted a survey of 1,135 likely voters nationally using web panel respondents. The sample was weighted to be representative of likely voters by age, gender, education, race, and voting history. The survey was conducted in English. The margin of error is ±3 percentage points.
Jake Higdon (@Jake_Higdon)