Fran Smith

Today the Washington Post carried a follow-up article on CEI’s release of Treasury’s estimates — through a FOIA request –  on the cost of cap-and-trade legislation.  The article by Steven Mufson was quick to find and quote those who said CEI’s interpretation of those costs – an extra $1,761 each year for each American household – were built on false assumptions.  What was more interesting about the article, however, is the subtle slant the reporter gave in his depiction of both CEI and Declan McCullagh, who broke the story.

First, in its only description of CEI, the article states:  “. . . Competitive Enterprise Institute, which questions whether human and industrial activity is linked to global warming. . . .”  That certainly doesn’t describe CEI and the many issues it works on nor its approach to global warming.  Why didn’t the reporter depict it as “a free market policy group” and then go on to describe its global warming position accurately?

Second, the article disparagingly referred to Declan McCullagh as “A CBS News blogger named Declan McCullagh.”  Now, McCullagh is a respected and accomplished journalist, and he is listed on the article referenced by WaPo as “a correspondent for CBSNews.com.” Here’s what his bio says:

Declan McCullagh is a senior correspondent for CBS News’ Web site. He became the chief political correspondent for CNET News in 2002, where he remains a frequent contributor, and lives in the San Francisco area after spending over a decade in Washington, DC.

An award-winning journalist, McCullagh writes and speaks frequently about technology, law, and politics. From 1998 to 2002, he was Wired’s Washington bureau chief. Previously he was a reporter for Time Magazine, Time Digital Daily, and The Netly News, as well as a correspondent for HotWired. At CBS, McCullagh writes for the Taking Liberties section, the successor to a weekly column he started in October 2008 titled Other People’s Money.

Guess straight-forward descriptions didn’t fit what Mufson and the Post wanted to get across.

Leading trade lawyer Gary Horlick testified yesterday on carbon tariffs before the Senate Finance Committee.  As the Senate prepares an energy suppression/global warming bill, it is attempting to find ways to soften the “border adjustment” provisions in the House-passed bill (H.R. 2454).

Horlick points out some of the practical problems of setting up a carbon tariff system and cautions about the potential effects of such measures on the international trading system.  As he notes, if the production method rather than the end-product is focused on, such processes as agricultural biotechnology may face increased challenges in the World Trade Organization:

It is tempting to say that we can re-interpret existing WTO rules to permit whatever measures are necessary to protect our environment. But do we really want to change those existing rules? The key to the U.S. economy is constant innovation.

One of the important fields where we lead the world of innovation is biotechnology, which is revolutionizing medicine, agriculture, and even many of the environmental concerns dealt with in proposed legislation (such as environmental remediation and renewable fuels). So far the United States has resisted efforts in Europe and elsewhere to limit our market access for our products because of how they are produced – from biotech means. But if we re-interpret WTO rules to allow trade barriers based on how things are made, we open up a can of worms – and might permit other countries to block our biotech exports, including major items such as corn, soybeans, and other crops.

Talk about creating chaos in the world trading system!

Noted atmospheric scientist and Nobel Prize winner in Physics, Paul Krugman, has a rant in the New York Times today saying that House members — the “deniers” who voted against the pork-filled energy bill — were guilty of “treason against the planet.”

As Krugman wrote:

And as I watched the deniers make their arguments, I couldn’t help thinking that I was watching a form of treason — treason against the planet.

He must have been watching a different debate. I was most taken with the fact that the Democrats didn’t seem at all perturbed about voting on a bill with 300 pages of amendments missing. But the Republicans were, and repeatedly asked how they were supposed to vote on a bill that no one had read in its entirety.

But no, Krugman didn’t think that the Dems were acting irresponsibly in blatantly bribing recalcitrant Members to vote “aye” to get the necessary votes for a bill that would drastically restrict energy use, increase energy prices, subsidize every remote technology favored by Dems’ constituents, and, incidentally, would have a negligible effect on the earth’s temperature.

He was too busy ranting about “the irresponsibility and immorality of climate-change denial.” In his apocalyptic view:

. . . the deniers are choosing, willfully, to ignore that threat, placing future generations of Americans in grave danger, simply because it’s in their political interest to pretend that there’s nothing to worry about. If that’s not betrayal, I don’t know what is.

Note: Krugman is not an atmospheric scientist and did not receive a Nobel Prize for Physics.

Today, the World Trade Organization, together with the UN Environment Programme posted a report on trade and climate change that outlines how carbon border taxes may be consistent with WTO rules. It is a very careful discussion of relevant articles, their intent and interpretation, and related WTO cases (though no case has specifically dealt with climate change).

In some cases, the WTO-UNEP discussion reads like “on the one hand, and on the other.” The report is bound to provide environmental groups with ammunition to argue that CO2 border taxes are WTO-compliant. However, the issues and their legal precedents are not that clear-cut. What’s more likely is that the introduction of border taxes or similar measures will open up a flood of retaliatory actions and disputes.

Here’s a summary from the report of the relevant GATT and WTO rules:

If a particular measure is inconsistent with one of the core provisions of the GATT (e.g. Articles I, III or XI), it could still be justified under Article XX. Article XX lays out a number of specific instances in which WTO members may be exempted from GATT rules. Two exceptions are of particular relevance to the protection of the environment: paragraphs (b) and (g) of Article XX. According to these two paragraphs, WTO members may adopt policy measures that are inconsistent with GATT disciplines, but necessary to protect human, animal or plant life or health (paragraph (b)), or relating to the conservation of exhaustible natural resources (paragraph (g)).

The report was issued just as the U.S. House of Representatives was to begin consideration of the Waxman-Markey energy bill, which, according to Inside Trade (subscription required), will include a Ways and Means Manager’s Amendment with provisions for carbon border adjustments to address competitive and so-called leakage issues.

At the Bonn, Germany, UN meetings on global warming issues, India urged rich countries not to use “green” protectionism by imposing carbon tariffs on carbon-intensive products from poor countries.  India’s special envoy to the talks, Shyam Saran, was quoted as saying:

“That is simply not acceptable, that is protectionism.”

“We should be very careful that we don’t start going in that direction. We welcome any kind of arrangement … where there can be a sharing of experience or best practices for any of these energy-intensive sectors.”

Earlier, China’s top climate change official had warned about possible retaliation if carbon tariffs were assessed, as was suggested by the U.S. Secretary of Energy.  Sounds like this issue is shaping up as the rich against the poor, i.e., already industrialized and developed countries attempting to penalize those emerging economies dependent on energy use for their continued economic growth.

In the wake of the release of the Waxman-Markey energy bill, many commenters have pointed to the drastic restrictions on domestic energy use to address greenhouse gas emissions, while some, like CEI, have pointed to the huge economic costs that would result — costs that would be paid for by consumers and in terms of reduced manufacturing and jobs.  Few have noted a further economic consequence — the possible disruption of the world trading system because of the bill’s endorsement of carbon border taxes on imports from countries that don’t have an energy-repressive regime.  Here’s what CEI’s Iain Murray has to say about that:

The bill as drafted clears the way for carbon protectionism.  It envisages “rebates” to companies that have to pay higher costs than their international competitors, which amounts to illegal state aid under WTO rules.  Further, it directs the President to institute what is laughably called a ‘border adjustment’ program requiring foreign companies to pay for the cost of carbon.  This is nothing more than a tariff aimed at eliminating the competitive advantage of other nations.  Taken together, these provisions represent the first shot in what is likely to prove a disastrous carbon trade war.

Margo Thorning of the American Council for Capital Formation and Bill Kovacs of the U.S. Chamber of Commerce provide hard and realistic criticism of carbon border taxes in National Journal’s Experts Blogs this week.