A Leading Expert on International Trade Talks About Climate Change

In my podcast series, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” I’ve had the opportunity of engaging in interesting conversations over the past five years with a significant number of outstanding academic economists who have carried out work that is relevant for environmental, energy, and resource policy, including by serving in important government positions.  My most recent guest is no exception.  Robert Lawrence, the Albert Williams Professor of International Trade and Investment at the John F. Kennedy School of Government at Harvard University, served as a Member of President Clinton’s Council of Economic Advisers from 1999 to 2001.  A prominent theme of our conversation is that the rise of political populism and economic protectionism are serious barriers impeding efforts to combat global climate change.  You can listen to our complete conversation here.

Robert Lawrence notes that public policies 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 and more recently by the Biden administration.

“As part of our trade war with China, Trump imposed a 25 percent tariff on electric vehicles. We already had 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 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 argues.

“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 achieve and protect our own domestic production of these products, but [an impact] is to severely, in my view, slow down the pace of decarbonization.”

Lawrence acknowledges 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 bipartisan 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 as a second-best approach, but nonetheless, it is an approach moving us in the right direction,” he explaines. “And so, I think we see the constraints of politics leading us to do what’s feasible.”

Robert goes on to say 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, got it wrong because they don’t understand the reality … They think you can 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 says. “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 several books on trade policy, including the soon-to-be-published Behind the Curve: Can Manufacturing Still Provide Inclusive Growth?, Lawrence explains 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, that there are different kinds of risks,” he says. “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.”

For this and much more, please listen to my podcast conversation with Robert Lawrence, the 61st episode over the past five years of the Environmental Insights series, with future episodes scheduled to drop each month.  You can find a transcript of our conversation at the website of the Harvard Environmental Economics Program.  Previous episodes have featured conversations with:

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunesPocket CastsSpotify, and Stitcher.


Author: Robert Stavins

Robert N. Stavins is the A.J. Meyer Professor of Energy & Economic Development, John F. Kennedy School of Government, Harvard University, Director of the Harvard Environmental Economics Program, Director of Graduate Studies for the Doctoral Program in Public Policy and the Doctoral Program in Political Economy and Government, Co-Chair of the Harvard Business School-Kennedy School Joint Degree Programs, and Director of the Harvard Project on Climate Agreements.