Toward a Sustainable Global Economy
Climate change, loss of biodiversity, pandemics, widening economic inequalities and poverty, high debt and shrinking fiscal space, financial system instability, wars, and an increasingly conflictual geopolitical and geoeconomic environment—the world is struggling with an array of severe, long-term, systemic challenges that constitute a true “global polycrisis." Given the severity of the situation, business as usual is not the way forward. Rather, a rethinking is necessary to put the global economy on a more sustainable path—an economy which “provides a good quality of life for people, stays within the limits of the planet and helps keep global warming well below the 2°C threshold.” Three pillars of sustainability and their interconnectedness thus have to be regarded: environmental, social, and economic.
The United States and the EU are key actors in the transition of the global economy. The transatlantic partners not only share many of the same challenges and goals in this transition (e.g. sustainabile and resilient supply chains, climate change mitigation and adaptation, fight against human rights violations); they are economic super weights and share a historic responsibility to the planet and its people. The green transition is thus one of the top priorities on the agendas of the presidency of Joe Biden and the European Commission under President Ursula von der Leyen. “The United States seeks a more secure, more prosperous, more equitable world for all people because we know our future is bound to yours. (…) no nation can meet the challenges of today alone,” U.S. President Biden underlined in his speech before the 78th Session of the United Nations General Assembly in late September 2023. Addressing the conference “Beyond Growth” in the European Parliament on May 15, 2023, President of the European Commission Ursula von der Leyen argued: “Economic growth is not an end in itself and it must not destroy its own foundations. Growth must serve people and future generations. (…) only a sustainable economy can be a strong economy. Only a sustainable economy has the resources to invest in a healthier and in a fairer tomorrow.
Consequently, the green transition is high on the agenda of the U.S.-EU Trade and Technology Council (TTC), through which the transatlantic partners launched the Clean Energy Incentives Dialogue and the Transatlantic Initiative on Sustainable Trade. Unilateral or bilateral initiatives, however, will not be sufficient. The transatlantic partners are therefore cooperating in various plurilateral and multilateral institutions as well as clubs on climate change issues. Given these initiatives, the question arises: How promising are existing plurilateral initiatives to drive forward the transition of the global economy? And what role do the EU and the United States play in them?
This study will take a closer look at the following initiatives: The Climate Club of the G7, the G20, the Structured Discussions of the World Trade Organization (WTO), and the Indo-Pacific Economic Framework for Prosperity (IPEF). Both the United States and the EU are members of most of these initiatives. So far, the United States has not taken part in the WTO’s Fossil Fuel Subsidy Reform Initiative, and the EU is not a member of IPEF. As the EU-U.S. Global Arrangement on Sustainable Steel and Aluminum has not come into being yet, it will not be analyzed in this study. While the G20 differs from the other selected plurilaterals (longer in existence, more institutionalized, more formal, much broader topics coverage), it is included in this study because of its importance for cooperation between the Global North and the Global South. There are other plurilateral intergovernmental initiatives that would be worth studying, of which neither the United States nor the EU are currently members. One of them is the Agreement on Climate Change, Trade and Sustainability (ACCTS). Individual EU member states and the United States also take part in some plurilateral public-private partnership initiatives.
In the following, each of the selected initiatives will be briefly described before analyzing the member and interest constellation with a closer focus on the United States and the EU. Subsequently, two questions will be answered: How well does the initiative address the interplay between the three dimensions of sustainability? How legitimate and effective is the initiative? As such, a focus will be placed on membership and openness. Effectiveness is to be understood as the degree to which a plurilateral initiative is successful in producing a desired result. A word of caution is in order here: many of these initiatives have not been fully implemented yet. Thus, their evaluation is a work in progress. The paper ends with some recommendations to the transatlantic partners.
Read the full policy brief, first published by the American German Institute on November 22, 2023, here.