Similarly, any country should be able to ban timber resulting from deforestation, or credits provided by undercapitalized banks, provided the same rules apply to domestic and foreign firms. Transactions would remain free, but national standards would apply across the board.
This is a sound principle. But while application to products is straightforward and is actually in place, doing the same for processes is notoriously difficult. A given good or service ultimately incorporates all the standards in force along its value chain. True, multinationals nowadays are compelled to trace and end reliance on any child labor among their direct or indirect suppliers. But it would be challenging to proceed in the same way with regard to working conditions, union rights, local environmental damage, or access to subsidized credit.
Moreover, attempting to do this would stir up fierce opposition among developing countries, whose leaders argue that subjecting them to advanced-economy standards is the surest way to make them uncompetitive. Previous attempts to include social clauses in international trade deals failed in the early 2000s.
A major test will come in July, when the EU is set to announce its plans for a mechanism that will require importers of carbon-intensive products to buy corresponding credits in the EU’s market for emissions permits. As long as decarbonization does not proceed everywhere at the same pace, the economic case for such a border-adjustment system is impeccable: the EU wants to prevent producers from evading its emissions limits by moving elsewhere. But it is bound to be controversial. The US has already indicated its concerns about the idea, China is wary, and developing countries are sharpening their arguments against it.
The upcoming negotiations on the issue will be hugely important. At stake is not just whether and how the EU can move ahead with its decarbonization plans. The more fundamental question is whether the world can find a way out of the tension between scattered national and regional preferences and the increasingly urgent need for collective action. Climate has become the testing ground for it.
The outcome will eventually indicate whether the dual agendas of rebuilding economic belonging and managing the global commons can be reconciled. It will take time to learn the answer. The old globalization is dying, but the new one has yet to be born.
Jean Pisani-Ferry, a senior fellow at Brussels-based think tank Bruegel and a Senior Non-Resident Fellow at the Peterson Institute for International Economics, holds the Tommaso Padoa-Schioppa chair at the European University Institute.