International Trade Policy Expert Robert Lawrence Voices Concerns for Climate Solutions in Newest Episode of “Environmental Insights”

CAMBRIDGE MA. – The rise of political populism and economic protectionism are serious barriers impeding efforts to combat global climate change. Robert Lawrence, the Albert Williams Professor of International Trade and Investment at Harvard Kennedy School, expressed those concerns in the newest episode of “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program.”

The podcast is produced by the Harvard Environmental Economics Program. Listen to the interview here.

Hosted by Robert N. Stavins, A.J. Meyer Professor of Energy and Economic Development at Harvard Kennedy School and director of the Harvard Environmental Economics Program and the Harvard Project on Climate Agreements, Environmental Insights is intended to promote public discourse on important issues at the intersection of economics and environmental policy.

Lawrence, who served on the White House Council of Economic Advisers during the Clinton Administration and currently serves as a Research Associate at the National Bureau of Economic Research, remarked that public policies purportedly designed to protect the U.S. economy and labor force often have deleterious impacts on the economy and on climate policy, particularly in the case of tariffs initially imposed on China by the Trump Administration.

“As part of our trade war with China, we imposed a 25 percent tariff on electric vehicles. We already have a two and a half percent tariff on automobiles. So, that's a 27 and a half percent tariff on electric vehicles. And that was before [President] Biden has now raised those tariffs even further to 50 percent. So, in effect, we've closed the US market for electric vehicles and have taken similar measures when it comes to solar panels,” he argued.

“We also have broad tariffs on steel and aluminum, which are key inputs if you want to make wind turbines. So, what we've done is in the name of… national security and also to have our own domestic production of these products, is to severely, in my view, slow down the pace of de-carbonization.”

Lawrence acknowledged that the Inflation Reduction Act (IRA), passed by Congress and signed into law in 2022, was a fairly successful attempt to address climate change in a bi-partisan way.

“The IRA, in using subsidies, is essentially dealing with a political reality that the first best, in the minds of most economists, [which is] raising the price of CO₂ emissions, proved to be impractical within the American political system. And so, we got what I think of a second-best approach, but nonetheless, it is an approach moving us in the right direction,” he explained. “And so, I think we see the constraints of politics leading us to do what's feasible in our political system.”

Lawrence stated that the recent domestic shift toward protectionist trade policies has coincided with the decline of American manufacturing, but it has not had the effect of restoring the sector to the significant stature it once held.

“I think both the Biden Administration and the Trump Administration for that matter, get it wrong because they don't understand the reality… They think you could restore the middle class by restoring manufacturing's role in the economy, and I think basically we're way past the peak where this is feasible,” he said. “It's not that manufacturing isn't important. It has a role to play in providing us with the hardware for de-carbonization, for the digital economy, but it's not a driver of the opportunity that it once was for people who are relatively less skilled.”

The author of various books on trade policy, including the soon-to-be-released Behind the Curve: Can Manufacturing Still Provide Inclusive Growth?, Lawrence explained that while he is a proponent of free trade, he believes such policies must be crafted carefully.

“There is a very strong argument for an open trading economy and an open trading system. At the same time, I also think, and increasingly we're aware, there are different kinds of risks,” he said. “There's an optimal pace of change from a political standpoint. Even if eventually a country would be better off putting its workers in areas where it can compete, the transition requires paying attention to some of the political consequences of doing that. And so, a lot of my work has been devoted to thinking about how you can move towards freer trade, but also deal with the labor market consequences of doing that.”

Lawrence’s interview is the fifth episode of 2024 in the Environmental Insights series, with future episodes scheduled to drop each month.

“Environmental Insights is intended to inform and educate listeners about important issues relating to an economic perspective on developments in environmental policy, including the design and implementation of market-based approaches to environmental protection,” said Stavins. “We speak with accomplished Harvard colleagues, other academics, and practitioners who are working on solving some of the most challenging public problems we face.”

Environmental Insights is hosted on SoundCloud and is also available on Amazon Music, Apple Podcasts, Pocket Casts, Podcast Addict, and Spotify.

LINK TO PODCAST: https://on.soundcloud.com/EPjDrWfHjDyad6ak6