Do global warming fears justify protectionism?

Ever since the United States decided to push for “sustainable development” concepts to limiit free trade under the Shrimp-Turtle decision (for internal political reason – the traditional Baptist and Bootlegger phenomenon that Bruce Yandle long ago developed), thoughtful proponents of free trade have been aware that the WTO (World Trade Organization) rules were open to a form of pernicious green protectionism. The Shrimp-Turtle Case (see, for example, here ) was a dispute between the United States and several southeastern Asian nations regarding our desire to limit imports of shrimp from these nations. Our “case” was that their shrimp harvesting practices (their “failure” to use TEDs, turtle exclusion devices) were endangering “endangered” sea turtles (absent property rights, everything moves toward the tragedy of the commons) threatening “sustainability” (a factor mentioned in the prologue of the WTO treaty). We lost the case but appealed and the Appelate Board decided that, although the US was wrong on their specific approach, that had they been more creative, based their case more specifically on environmental grounds, they might well have prevailed. Thus, the US is on the record as favorably inclined toward protectionist arguments —when such protectionism can be justified on “sustainable development” or “precautionary principle” grounds.

Move forward to the ongoing global warming debate and the EU’s desperate attempt to explain away their failure to fulfill their commitments to the Kyoto Treaty they signed and ratified. In fact, as almost all observers have noted, that failure reflects the very real cost of rationing carbon based energy. European businesses complained to their national governments and those governments responded by very generous allocations of emission credits to these same industries. In effect, Europe promised to go on a carbon-energy diet – but decided that the standard would be set so low that no real changes would be necessary. (Fred: I’m putting you on a diet! You will not be permitted to eat more than 8000 calories a day!) On such a diet (duh!) there was no real reduction in carbon based energy use — emissions in Europe increased at normal rates – rates in many cases higher than in the United States which signed but did not ratify Kyoto. Europe could have realized that it would have to impose real pain on itself — pain that all politicians in Europe (and many in the United States) rhetorically agree are critical (Consider Al Gore’s view that we must undergo a radical transformation). But, that would expose the fad-diet nature of Kyoto and the global warming alarmists. Far easier to blame the United States for this problem. If only the US had also introduced higher energy taxes — or the equivalent in energy rationing quotas — Europe would have had an easier time. European businesses already experience in many cases higher energy taxes; they find it hard to compete in a global market less eager to cripple economic growth through crippling carbon based energy.

But, if Europe were able to argue that lower energy prices constitute a form of non-sustainable ecological subsidies, then they would be justified (under the ruling of the Appelate Board in Shrimp-Turtle) to sanction US goods based on their energy intensity. And European nations are now beginning to discuss this option. Nothing could be more threatening to free trade — a policy already on the ropes because of traditional protectionist pressures. The risk is that adding the environmental argument to the economic one will make protectionism more acceptable, more moral! We should not be surprised that this course would be recommended by those sceptical of globalization (see, the comments of Joseph Stiglitz, here)

Tragically, some free market spokesmen seem eager to endorse this position. See the posting by Ronald Bailey of Reason:

Is there an alternative to greenhouse gas emissions markets? One suggestion is a global carbon tax. In his 2005 study, “Life After Kyoto: Alternative Approaches to Global Warming Policies” Yale University economist William Nordhaus outlines the advantages that such tax offers over Kyoto style trading schemes. Of course, a carbon tax is not a goody, but the pain it causes is more easily administered and monitored. First, the tax offers stability; governments, industries and consumers all see what the price of carbon based fuels will be. Second, it can be far more transparently administered across the globe. If a country fails to charge the agreed upon tax, other countries can boost their tariffs on exports from that country as a way to encourage it to join the global climate tax regime. Third, the tax can be adjusted over time to meet agreed upon global goals such as ultimate level to which to greenhouse gases should be allowed to accumulate in the atmosphere. And fourth, poor countries could be made exempt from the tax until the average incomes of their citizens reach some agreed upon level.

When even libertarians seem willing to sacrifice the wealth-enhancing value of free trade to environmental fears, the future of the world is in trouble. Whatever risks may be associated with global warming, it should be clear that protectionism poses a much greater threat. One colleague suggested that this view could lead to the Mother of All Trade Wars.

The need to counter this latest threat motivated CEI to organize a conference at the University of Francisco Marequin dealing with a number of such MEAs (Multilateral Environmental Agreements) including Kyoto. Other groups should move quiickly to join this effort. As we all know, if goods cease to cross national borders, armies soon will.

The Global Warming debate, as most realize, has become a highly politicized and highly emotional policy issue. Many from all ideological perspectives have been convinced that mankind is contributing — to some degree – to climate change (indeed, we at CEI believe that). Many have leaped from that fact to the view that we must take steps immediately to slow our contribution to change – not asking whether the risks of such change are more or less than the risks of imposing some form of global carbon-based energy rationing. That, of course, is their prerogative but proponents of that position should consider whether joining forces with European protectionists is the appropriate course. Shouldn’t they instead call for higher energy taxes here in the United States? That policy recommendation would bring to the fore CEI’s point that making energy less affordable today because of fears that something adverse might happen in the distant future is a bad deal. An All Pain, No Gain diet seems without merit.