In terms of world trade, U.S. global warming policy and its eco-tariffs are Smoot-Hawley on steroids
Canada’s Minister of State for Science and Technology, Gary Goodyear, became the centre of a media kerfuffle this week over whether being an Evangelical Christian — and whether or not he believed in evolution — made him a threat to Canadian science policy. In fact, the story, which started as an ambush by The Globe and Mail, seemed to have been engineered by those with a fundamentalist faith in government funding.
Coincidentally, however, evidence that shining scientific credentials can accompany outright policy lunacy was appearing south of the border in a much more substantive issue. U.S. Energy Secretary Steven Chu, a Nobel Prize-winning physicist, speaking before a House science panel, suggested that trade duties might be imposed as a “weapon” to protect U.S. manufacturing from the United States’ own climate policies!
Under the perverse logic of global warming policy — which is being doggedly pursued despite the disappearance of global warming — economic self-mutilation inevitably leads to demands that others self-mutilate too. “If other countries don’t impose a cost on carbon,” said Mr. Chu, “then we will be at a disadvantage ... [and] we would look at considering perhaps duties that would offset that cost.”
President Obama is threatening a cap-and-trade — or more appropriately cap-and-tax — system that will force manufacturers to buy allowances to emit carbon dioxide. But this obviously puts U.S. manufacturers at a competitive disadvantage if other countries refuse to shackle their own manufacturers. So shackles would have to be applied to those countries’ exports at the U.S. border.
The term “weapon” is entirely appropriate because such a policy would not “level the playing field,” as Mr. Chu seems to imagine, but bomb it. Carbon tariffs have been lurking like Somali pirates on the policy horizon for quite a while, and “carbon equivalency fees” for imports were part of the climate change bill introduced by President Obama last week in Congress.
Protectionist sentiments are already an enormous threat to world trade, as a report from the World Bank this week confirmed. William Watson noted in this space yesterday that the bank held out hopes that the protectionist urge might be constrained by such factors as more closely interlinked supply chains, the increased power of exporters and 50 years of experience with increasingly open markets promoted by the GATT and the WTO. Unfortunately, since economics is filled with counterintuitive notions, and the vast majority of people — including politicians — aren’t economists, this view may be over-optimistic.
What makes the present situation more dangerous is that global warming policy threatens the world with Smoot-Hawley — the disastrous U.S. anti-trade policy that deepened and lengthened the Depression — on steroids. The disaster that would be unleashed by Mr. Chu and the Obama administration’s anti-growth policies was adumbrated on Monday when one of China’s “climate envoys” asserted that carbon-intensive tariffs could lead to a trade war. Li Gao noted that such a tariff, which would be illegal under the WTO, threatened “disaster.” Mr. Chu’s remarks were followed by an even stronger reiteration from China’s top climate negotiator, Xie Zhenhua, who said that carbon duties were “an excuse to impose trade restrictions.”
But then — typical of the Alice-in-Climateland quality of this whole issue — Mr. Xie called upon the U.S. Congress to pass Mr. Obama’s climate change bill! China does in fact like some parts of this vast UN-led policy fandango, specifically the bits about Western nations funding Chinese “clean development” and shipping off billions of dollars to China to buy hot air credits. (Mr. Xie meanwhile took a passing shot at Canada’s lack of “progress” in the policy self-immolation stakes, noting “there is just talk but no action.” Way to go, Stephen Harper!)
There is already considerable concern among the United States’ trading partners, including Mexico, over U.S. Protectionism. No trading partner is historically more important than Canada, which is worried about “Buy American” policies. But carbon tariffs, which would require a nightmarish amount of paperwork for manufacturers but myriad man-years of employment for bureaucrats, take protectionism to a whole new level.
Such uncreative destruction is certainly not in any way opposed to the fundamental objectives of the radical environmentalists who push man-made global warming theory as the rationale for “de-development.” The EU too is considering carbon tariffs, although this week its legislators were having second thoughts about shipping off billions in clean development funds to the Third World while its own unemployment rates were soaring. Inevitably, protectionism has its industry cheerleaders. Instead of standing up to pointless climate policies, some companies seek to take advantage of them. Those that can’t simply say “Well, just as long as my competitors are crippled too.” Bomb that playing field!
China wants importers to foot the bill if carbon tariffs are introduced, on the basis that it is consumers who are “to blame” for the industrial emissions of CO2. But apart from the craziness of making job- and wealth-creation blameworthy, the price will inevitably have to be paid by consumers of Chinese goods, thus reducing both demand for Chinese exports, and the welfare of consumers.
Like so many of President Obama’s other choices for his cabinet, Mr. Chu is turning out to be a disaster, both for his quasi-religious belief in global warming pseudo-science and for his Do-It-Yourself economics. Meanwhile he doesn’t seem to know much about energy beyond his own research cul-de-sac of solar, wind and biofuels. And we Canadians getting heated about whether our science minister believes in Adam and Eve.