A new multilateral green trade pact is the antidote to growing economic nationalism

Pressing challenges like climate change require a coordinated, multilateral response. So too does the trend of economic nationalism spreading around the world. A multilateral green trade pact focused on decarbonising heavy industries and bringing prosperity to working people would provide an important counterpoint to the Trump administration’s country-specific tariffs, and a creeping unilateralism that sees trade as a zero-sum game. Importantly, it would also demonstrate that a renewed commitment to international cooperation can align climate, trade, and industrial policy to meet the challenges of the 21st century.

Such an arrangement would require bold creativity and innovative new systems. Traditional free trade agreements are not designed to reward low-carbon producers with better market access; to encourage state investment in industrial modernisation; or to support diverse and resilient supply chains. World leaders must therefore consider what a positive, alternative vision of international trade could entail, recognising that the earlier trade paradigm won’t return – not only because of the Trump administration’s flouting of global norms, but because urgent challenges like climate change, global inequality, deeply integrated supply chains, and the need to maintain fair and open global markets require a different approach.

A multilateral green trade pact – open to any ambitious country capable of meeting firm requirements for climate action, worker empowerment, and fair pricing – provides a useful example of what a different, more sustainable future could entail. Take, for instance, the steel and aluminium industries. Together, these sectors account for roughly 11% of global CO2 emissions, meaning there’s an urgent climate need to modernise them. And, because they’re greatly exposed to world trade, high-standard producers often feel the impact of carbon-intensive competition more directly, creating an economic need to support them as well.

Imagine a world where multiple countries agree to a pact with four pillars.

• First, preconditions that partners must meet before their exporters can enjoy the agreement’s best terms – things like a commitment to economy-wide decarbonisation, labour and human rights standards, and an agreement to abide by pricing arrangements that support, rather than stifle, global competition.
• Second, a tiered tariff structure that eliminates duties on low-carbon products imported from partners; a larger duty on higher-carbon imports from partner markets; and even increased duties on imports from markets outside the agreement.
• Third, clear carbon-based benchmarks to determine which exports qualify for zero-tariff trade – benchmarks that grow more stringent over time to encourage ongoing investments in sustainability.
• Fourth, a coordinated investment strategy to ensure that each participant decarbonises its own domestic industry in a manner that reinforces investments made by partners in their market.

For Australia, a collaborative green trade pact like this would ensure strong global demand for low-carbon metals, backstopping new state investments in green iron ore and green aluminium. It would also provide an opportunity for the Albanese government to demonstrate global leadership, utilising the country’s immense natural resources to reinforce multilateralism in a way that benefits Australian industry and the world’s climate.

Many of Australia’s partners would stand to benefit as well. For countries like Japan and South Korea, whose steel and aluminium sectors are heavily export-driven and closely tied with their respective governments, common carbon-based tariffs across a range of markets would provide clear guideposts to shape industrial policy decisions moving forward. In the United Kingdom, a green trade pact would amplify efforts to resurrect a domestic steel industry. In developing countries such as South Africa and Brazil, a multilateral pact would create new opportunities for nascent green metals producers to find foreign buyers, as well as an incentive to improve conditions for their workers – particularly if the pact created a guaranteed market for low-carbon metals produced in developing countries. And for trade officials in Europe, where steel safeguards are set to expire in 2026, a multilateral agreement would offer a way of supporting the domestic metals industry in a manner complementary to the continent’s already significant climate action.

A climate, trade, and industrial policy agreement of this kind would provide a true market advantage for the cleanest and highest standard exporters, rewarding private investments in sustainability and worker empowerment with better trade terms. It would also provide a level of policy certainty that stands in stark contrast to the Trump administration’s unpredictability. And, importantly, it could knit together – and even amplify – individual country programs to link climate and trade policy in a mutually beneficial way.

No one should undersell the difficulty of reaching such an innovative agreement. Questions about carbon accounting, tariff levels, and exemptions will need to be answered – and investments coordinated. Every country will have its own constraints, its own domestic politics, and its own approach to operationalising commitments. Successful implementation will require managing the peculiarities of different systems. That is not a reason to avoid multilateralism; it’s how cooperation amongst equal partners should work.

Global trade is not going back to the way things were. But simply lamenting the economic nationalism of others – or allowing unilateral actions to slow climate progress elsewhere – isn’t a strategy that will win the future. A multilateral green trade pact offers a different, more forward-looking path for global trade. It is the type of renewed multilateralism the world needs now more than ever.