Paris Pact Pullout May Complicate U.S. Trade Efforts

By William Mauldin Features Dow Jones Newswires

President Donald Trump's move to withdraw from a global climate accord runs the risk of creating new irritants between the U.S. and its trading partners on a number of negotiating fronts, including any efforts to rekindle stalled talks over a major trans-Atlantic trading agreement, experts said Friday.

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Few expect outright tariffs from Europe or other trading partners, at least initially, as retaliation against the U.S. pullout from the Paris climate accord. The European Union's climate and energy commissioner, Miguel Arias Canete, ruled out a carbon tax or tariff against U.S. firms to retaliate against Mr. Trump's move, saying it would be breach of World Trade Organization rules and undermine the EU's efforts to bolster its emissions-trading market. Global firms, including major American companies, are already committing to business plans focused on sustainable and clean energy, he said.

Still, the issue of climate change is front-and-center for many U.S. trading partners, led by the EU, where Mr. Trump's position is bringing new tensions. A leading German politician on Thursday said the EU shouldn't negotiate a stalled trade framework with the U.S. if Washington doesn't play by the climate rules.

Andrew Light, a former State Department official involved in the Paris climate talks, said the consequences will be indirect, but real. "Having the president make the U.S. such an outlier -- this is going to make it different in the negotiating room," said Mr. Light, now a senior fellow at the World Resources Institute, an environmental think tank.

Mr. Trump made it clear in announcing his decision Thursday that he rejected the Paris climate accord because it would dent economic growth, at least in the near term. The new administration has charted an "America First" strategy that aims to back U.S. industries and workers over international priorities. Because of the agreement's structure it is unlikely the U.S. will formally exit the pact before November 2020.

A U.S. official said it is "highly doubtful" that members of the Paris accord would be able to impose trade barriers consistent with the WTO since the climate pact wasn't concluded under the auspices of the Geneva-based body that regulates global trade.

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Backers of the Paris deal, however, noted that Mr. Trump's move to exit -- and champion traditional energy sources such as coal and petroleum -- could hurt Washington's ability to lift barriers that other countries have placed on products related to less-carbon-intensive types of energy.

"The Trump administration is putting a bull's-eye on American exporters and the jobs they support," said Sen. Ron Wyden of Oregon, the top Democrat on the Senate committee that oversees trade.

For three years the U.S. has been working with a handful of countries -- including the EU, China and Japan -- to reduce or eliminate tariffs on dozens of environmentally friendly goods ranging from wind turbines to solar cells. The proposed Environmental Goods Agreement, being negotiated through the WTO umbrella, could facilitate global trade in green goods of $1 trillion annually, depending on which products are included.

Negotiating environmental deals and the energy components of broad trade deals could be more difficult when the president's message on traditional energy differs from industry priorities on promoting newer technologies, former officials say.

In Europe, climate change is such a big concern that the Paris deal withdrawal could hinder the resumption of negotiations on a broad trade agreement -- the Transatlantic Trade and Investment Partnership. U.S. Commerce Secretary Wilbur Ross has expressed interest in the stalled negotiations, but the deal has increasingly faced opposition by the German public and in other EU member states.

Outside of formal trade talks, some Democratic lawmakers worry U.S. companies will face discrimination in procurement when other countries in the Paris deal ramp up their renewable energy capacity. Besides the U.S., Syria and Nicaragua have rejected the Paris climate pact, and some other countries haven't ratified it.

General Electric Co., with a multibillion-dollar renewable energy business, backed staying in the Paris agreement.

Emre Peker in Paris contributed to this article.

Write to William Mauldin at william.mauldin@wsj.com

(END) Dow Jones Newswires

June 02, 2017 17:55 ET (21:55 GMT)