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PRI's Environmental News Magazine

Cap On Trade

Air Date: Week of July 3, 2009

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The United States emits five times as much C02 per capita as China, though the quickly-developing nation recently became the world's largest source of greenhouse gases. (Courtesy of the EPA)

Cap and trade isn't the only novel economic policy in the climate change bill that's headed for the Senate. A last minute addition to the Clean Energy and Security Act calls for mandatory "carbon tariffs" on imports from countries that won't commit to significant greenhouse gas cuts. While some argue the provision will help keep jobs at home and reduce emissions abroad, others say the fees would complicate U.S. efforts to negotiate an international treaty to address climate change. Host Jeff Young talks with George Washington University law professor Steve Charnovitz about what's at stake.

Transcript

CURWOOD: From the Jennifer and Ted Stanley studios in Somerville, Massachusetts, this is Living on Earth. I’m Steve Curwood.

YOUNG: And I’m Jeff Young.

The U.S. Senate will soon start work on the historic global warming bill that narrowly passed the House of Representatives. Democratic leaders say they hope action in Congress will improve the odds of getting a climate change treaty later this year.


Congressmen Henry Waxman (left) and Ed Markey (right) passed the first legislation that would limit the country’s heat-trapping pollutants.

CURWOOD: But a controversial section of the bill limiting free trade could make it harder to get an international agreement. A last-minute deal with industrial state Democrats added what are essentially carbon tariffs on some products imported from countries that do not take steps to cut emissions. That appeased some industry and labor interests who fear a carbon cap could cost jobs. Here’s how United Steelworkers President Leo Gerard explained it.

GERARD: The is about making sure that as we move to the green economy that we’re not putting our jobs up for bid to China where for every unit of production they create one, two, three or four times as much carbon. And we're not going to be a part of giving away our economic future.

YOUNG: The tariff wouldn’t kick in until 2020, but still, President Barack Obama calls it Protectionism, and wants it out of the climate bill. And China’s Department of Climate Change Director, Li Gao, warns carbon tariffs would violate world trade rules and could
spark a trade war.

LI GAO: If developed countries set barriers, in the name of climate change set barriers for trade I think it’s a disaster. It’s not fair.

YOUNG: Associate Professor Steve Charnovitz studies the links between trade and the environment at George Washington University’s law school, and he’s with us now. Professor Charnovitz says the Chinese official makes a good point.

CHARNOVITZ: It’s not fair for a lot of reasons. It’s not fair to Americans because it was written a few hours before the House passed the bill and no one had time to see it. And internationally I think it’s unfair because the United States unilaterally prescribes a certain formula that other countries have to meet. You know, there’s a multilateral process in the climate negotiations that’s been going on since 1992 to devise an international agreement to deal with climate. And for, you know, most of the last eight years, the United States was not a productive part of that process. So for us to come in--in 2009 and start threatening other countries I think is unfair.

YOUNG: So what might this mean for the efforts to craft some international agreement that would necessarily have to bring in the Chinas, the India’s, the Brazils of the world.

CHARNOVITZ: Well it’s not going to be helpful – I think getting them to cooperate is going to be hard in any event. But, if we’re threatening trade measures against them that are unilaterally prescribed simply by the United States, then I think it makes it much harder.


The President in a meeting with Chinese Foreign Minister Yang Jiechi in March. (Courtesy of the White House)

YOUNG: But what about the arguments that industry and labor groups make here that say essentially, “hey, why should we risk losing our jobs just to have the same products made only with a lot more carbon emissions overseas?’

CHARNOVITZ: Well that’s a legitimate concern. If some countries don’t participate in reducing greenhouse gases, then those like the United States that do participate will have higher costs and that will lead to some disadvantage in particular industries. But, it’s not clear what the overall impact of the bill is gonna be on the U.S. economy. I don’t know if I’d call it a trade war, but it could also lead to other countries doing the exact same thing. I mean, they could pass bills like the Waxman bill applying to U.S. imports based on their own idiosyncratic formulas for what they consider to be appropriate action by the United States.

YOUNG: Well, the President has spoken out against this trade aspect of the bill, while endorsing much of the rest of the bill. Now the Senate’s going to take whack at things. Where do you think things are headed here with climate change and free trade?

CHARNOVITZ: I would guess the Senate, if they’re able to pass the bill, it will contain some trade measure. The bill the Senate was considering last year, the so-called Lieberman-Warner bill did have trade measures. So I think that’s probably part of the formula. But it’s possible they would water down the House bill. The way the bill was written the President is really mandated to take these trade measures and that would be challengeable in the World Trade Organization, that is, China could bring a lawsuit against the United States.

YOUNG: And what do you think the World Trade Organization might rule if this case were brought.

CHARNOVITZ: I think it’s clear the bill violates the general agreement on tariffs and trade, and if the United States were to claim a defense under the environment exception, that defense by the United States would fail, because the way it’s written by the House, it’s aimed at promoting a level playing field, and trying to level producer costs is not a legitimate grounds for invoking the environment exception in the World Trade Organization. So the smart approach is to try to negotiate with China on not only on getting them within the system, which we’ve been doing of course, but also on questions of how are we going to deal with competitiveness problems with countries that don’t participate.

YOUNG: Does it not help though to negotiate softly but have that big stick of the carbon tariff if they don’t get on board?


(Courtesy of the EPA)

CHARNOVITZ: I wouldn’t rule out in the long run the use of potential trade measures against countries that persist in being free riders, but to threaten with a stick this early in the negotiations is clearly wrong. The United States basically was not participating seriously in negotiatings over the past eight years. And now this administration says we’re back, but if we come back with saying, “we’re back and we have trade sanctions against others,” it looks so hypocritical.

YOUNG: So this might be an appropriate tool to have in the toolbox, but it’s not the one you should pull out at the first.

CHARNOVITZ: Absolutely, we should not. The United States has a long history of threatening unilateral measures against other countries that don’t conform to what we think they should do. And the United States got away with it for a long time, because we were the most powerful country economically in the world. But we’re a lot less powerful than we used to be. And China’s getting more powerful by the year. And in order for climate change to be addressed, you’ve gotta have cooperation of all the major emitters. It’s a global environmental problem and if it’s gonna be solved, it’s gonna require a global environmental solution.

YOUNG: Professor Steve Charnovitz researches the links between trade and the environment as part of his work at the George Washington University Law School. Thanks very much for joining us.

CHARNOVITZ: Okay, thank you very much.

[MUSIC: Erik Truffaz “The Mask” from The Mask (Blue Note records 2000)]

 

Links

For a different take on “carbon tariffs,” check out Nobel-Prize-winning columnist Paul Krugman’s blog.

For more on Steve Charnovitz, click here.

For more on the Clean Energy and Security Act, click here.

Read the President’s reaction to the Waxman-Markey bill here.

 

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