Tariffs and the Environment: Are We Ready For A Trade War?
Well, it has begun.
The posturing that one would expect before an important environmental conference like the United Nations Framework Convention on Climate Change in Copenhagen is in full swing. To date, China and India have made it clear that they are not going to accept mandated targets to reduce greenhouse gas emissions. Their arguments are:
- They are new to the industrial scene and they should have the same opportunity as the other industrialized nations (i.e. the United States) to pollute their way to prosperity;
- Their per capita emissions are, and will remain, well below those of the U.S.;
- Their "dirty" products are consumed primarily by industrialized nations so those nations should pay for the added costs of the emissions.
Politically speaking, these are pretty strong arguments. The only real response is "Well, yes, but we're in a desperate situation and we need everybody to join in." That response isn't very effective if you don't believe that global warming is in a "desperate situation" or, more importantly, you don't care.
So what happens if China and India refuse to agree to any limits? The practical impact is that
if the industrialized nations agree to limits but China and India won't come along, then China and India will have the ability to sell their products cheaper than the U.S. Jobs will shift to those countries and imports of cheaper products will increase, while greenhouse gas emissions from China and India will presumably continue to increase.
Since the U.S. has little power to push around the mountains that are China and India, we will need to look to what we can control -- tariffs on goods coming into the country (though the World Trade Organization could limit that control). By adding tariffs to the products, we would discourage movement of jobs overseas and the importing of cheap products. The tariffs could be adjusted as the country ramps up environmental compliance. Once the country is in compliance with whatever environmental limits are agreed upon, we could eliminate the tariffs and all goods would be back on an even playing field. Simple, right? The only problem is that most countries get very upset when tariffs are imposed on their goods.
China and India have been watching the Congressional climate change debates closely and saw the tariff issue coming. They have been warning that tariffs are unacceptable. Ten swing-vote Democrats are now posturing to require that the U.S. insist on full participation by all countries or the imposition of tariffs on the non-conforming countries. If this is done, China and India may retaliate by imposing their own tariffs and we'll be off to the races. Relatively smart people have come down on both sides of the issue.
So, like so many other things environmental, it comes down to money. The new environmental question is likely to become, can we afford a trade war? I don't have the answer but I remember the words of my father before our first camping trip (paraphrased slightly): "If you are going to poke a bear with a stick, you'd better have a really good backup plan." I told him, "I wouldn't poke the bear." His reply, "That's a pretty good plan, got any others?"
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the first move isn’t the end of the world, and an offer is made, and then countered, and on it goes until a resolution is reached. That first offer can take five minutes or five hours. It doesn’t matter too much to the mediator – he/she is being paid by the hour. And the mediator knows something the other two parties don’t; that is, sooner or later, someone will make the first offer.