Fran Smith

It’s got a good lede that should have won at least a front-page Metro slot.  Instead, buried in Saturday’s Washington Post’s Metro Section amid the obituaries on p. B5 was this startling weather note:  On Friday, October 16, 2009, in Washington, DC, the high temperature was the lowest temperature recorded for that date in 138 years! Friday’s high was a low 45 degrees. Here’s the Post:

Something happened in Washington on Friday that had not occurred in 138 years of weather history: For the first time since the National Weather Service began compiling daily data here, the high temperature for Oct. 16 was below 50 degrees.

Now, just imagine if October 16 was the warmest in 138 years – where do you think the Post would have placed the article? Surely not buried in obituaries.

It’s about time that business groups started defending free enterprise, and the U. S. Chamber of Commerce is off to a good start – a bit belatedly – with its “American Free Enterprise. Dream Big” campaign. Launched on October 14, the campaign features national TV and print ad campaigns, a video contest, small business awards, and other outreach.

Here’s the underlying message, as shown on their website:

At the U.S. Chamber, we believe that the values of individual initiative, hard work, freedom of choice, and the free exchange of trade, capital, and ideas can lead America back to prosperity. Only free enterprise will create the innovation, the opportunities, and the jobs our nation needs. That is why we are launching this campaign.

The Chamber has been under a lot of pressure recently to cave in to the rent-seekers on global warming policy.  Some members of the Climate Action Partnership seeking to profit from cap-and-trade legislation  –  the utilities Pacific Gas & Electric, PNM Resources and Exelon — bowed out of their Chamber membership. Then, Nike and Apple sanctimoniously dropped their membership.  But as the Wall Street Journal noted today, both of those companies would escape onerous energy taxes from global warming legislation because most of their manufacturing is done in countries that don’t yet suppress energy use.

The WSJ points out how short-sighted these companies are:

If companies are going to dump the Chamber over a single dispute, then the overall influence of business in Washington is likely to decline. The Chamber’s job isn’t to favor one company’s agenda over another but to stand broadly for free trade, low taxes and limited regulation-principles that help U.S. business as a whole.

Having abandoned their business allies on climate change, Apple and Nike might wake up one day to discover they need those friends on one of their crucial issues. It will serve them right if they find themselves alone in the Beltway square.

The Chamber deserves kudos for standing firm on principle and coming out loud and clear in its support of free enterprise.

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” 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.

Well.  The Congressional Budget Office has finally caught up with what CEI has been saying for years –  misguided ethanol policies cause higher food prices without providing significant environmental benefits.  In a report released yesterday, CBO noted this about food prices:

CBO estimates that the increased use of ethanol accounted for about 10 percent to 15 percent of the rise in food prices between April 2007 and April 2008.

And what about ethanol’s highly touted reduction of  greenhouse-gas emissions? Here’s what CBO found:

Last year the use of ethanol reduced gasoline usage in the United States by about 4 percent and greenhouse-gas emissions from the transportation sector by less than 1 percent.

In the long run, if increases in the production of ethanol led to a large amount of forests or grasslands being converted into new cropland, those changes in land use could more than offset any reduction in greenhouse-gas emissions—because forests and grasslands naturally absorb more carbon from the atmosphere than cropland absorbs.

Dennis Avery in a 2006 CEI study pointed this out,  as did this CEI 2007 report on unintended consequences of ethanol policy.  Also see CEI’s website on ethanol.

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.

Yesterday Ranking Members of both two House committees and two subcommittees wrote to the new U.S. Trade Representative Ron Kirk and asked him to clarify the Administration’s position on the issue of carbon tariffs.  The letter was sparked by recent remarks of Energy Secretary Steven Chu that the U.S. was considering levying tariffs against countries that haven’t taken steps to reduce carbon emissions.

In their letter Congressmen Joe Barton, Ralph Hall, Greg Walden, and Paul Brown cautioned:

Any emissions-related trade policy will be extremely complicated.  Careful consideration of the pros and cons — and legality — of any such policy is critical.  Poor decisions can lead to destructive trade wars that could put tens of thousands of U.S. workers out of a job, and severely harm our economy.

As Congress moves on proposals for mandated reductions in carbon emissions — such as a cap-and-trade scheme — the notion is gaining that “something has to be done,” such as carbon tariffs, so that the U.S. can compete with countries that haven’t committed to emission reductions.  The Republican lawmakers — all on committees that have some jurisdiction on global warming issues — presented a list of hard and focused questions to USTR Kirk on what the Administration is planning and whether some of the serious downside risks of border measures have been considered. (The congressmen are Ranking Members on the Committee on Energy and Commerce and its Subcommittee on Oversight and Investigations and the Committee on Science and Technology and its Subcommittee on Investigations and Oversight.)

The letter is a formal request, and the USTR is obligated to respond to the policymakers’ questions.  Maybe this will take some of the wind out of the carbon tariff sails, especially since climate negotiators from nearly 190 countries will be meeting in Bonn, Germany starting March 29 to come up with concrete plans for what they hope will be an agreement in December.

So, in the midst of a deep worldwide recession, countries will be planning to make energy less affordable, to force some major emitters out of business, and maybe start a trade war over border tariffs.  Don’t we already have enough economic problems to contend with?

(Hat-tip: Iain Murray)