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!