For three quarters of a century, the growth of world trade—which has spread prosperity to much of the planet, including hundreds of millions of people in the developing world—has been underpinned by a simple commandment: Thou shalt not discriminate. In the years after World War II, most nations agreed, for the first time in history, they would treat foreign-made goods the same from almost every country. The United States would, for example, charge the same tariff on a sweater imported from Italy as on one imported from Bangladesh and impose no additional discriminatory regulations. First, this powerful principle allowed many poor countries, such as Bangladesh, to grow by exporting goods. Later, when advances in communications and logistics pushed globalization forward, it allowed companies to spread production around the globe, confident they could make goods in almost any country and export them to any other under identical rules.
But the nondiscrimination principle is now under the most sustained assault it has ever faced. On issues from national security to labor rights to the environment, the world’s largest economies are deciding that nondiscrimination—the bedrock principle of free trade and globalization—must take a back seat to more pressing concerns. The most dramatic abandonment is about to hit: Last week, the European Union unveiled its “Fit for 55” plan to reduce carbon emissions by 55 percent from 1990 levels by the end of this decade and to reach carbon neutrality by 2050—which will require the most sustained economic upheaval since the Industrial Revolution. Central to the EU’s plan is a carbon border tax, under which Europe plans to charge higher tariffs on imports of products made in ways that generate higher emissions than European producers will be permitted to generate for the same goods. The scheme will start by targeting carbon-intensive sectors such as concrete, steel, aluminum, and fertilizer. The U.S. Congress is developing a similar plan to tax carbon-intensive imports as part of the coming budget reconciliation package—although the details are still murky. Other new trade restrictions being imposed or considered on both sides of the Atlantic Ocean are based on compliance with labor protections, human rights, and other criteria. For many traded goods, nondiscrimination will become a quaint relic.
