It is strongly supported, however, by favor-seeking companies that produce high-priced, eco-friendly alternative refrigerants and equipment, particularly Honeywell and Chemours. Since President Trump has not yet decided whether he will submit the Kigali Amendment to the Senate for the required ratification vote, the lobbyists for these companies have tried to make a conservative case for it, and some conservative pundits have taken the bait and echoed their message.
One of their more ridiculous claims is that the Kigali Amendment will give America an advantage over China, when the very terms of the treaty provision show the opposite to be the case. I spelled this out in a blog post that was the subject of a hit piece in the Daily Caller from a self-described conservative. I would like to take this opportunity to again make the case that the Kigali Amendment spells big trouble for America and unfair advantage for China.
The Daily Caller piece notes, correctly, that global demand for air-conditioning and refrigeration is likely to grow rapidly in the years ahead, especially in developing countries. But it disagrees with me by asserting that American-made products would dominate the world market if only the Kigali Amendment is ratified. This claim is nonsense. Developing nations have made clear that they have little interest in expensive eco-friendly cooling and prefer the cheapest air-conditioning and refrigeration available—the very products American-based manufacturers will be moving away from if the Senate ratifies Kigali. But China, which demanded, and received, more lenient treatment from the United Nations under Kigali, will still be able to mass produce the cheapest systems long after America. The bottom line is that the Kigali Amendment gives China a big edge over the U.S. in serving the growing world market for air-conditioning and refrigeration.
The article has little to say about the cost of these new refrigerants for which Honeywell and Chemours hold patents, as well as the equipment required to use them. But the fact is that Kigali-compliant products already on the market cost considerably more than their conventional counterparts. And the sky could be the limit if the Senate makes the mistake of ratifying Kigali and giving these products a captive market by eliminating the cheaper options now available. Indeed, if the new stuff truly was cost competitive, its manufacturers wouldn’t need the Kigali Amendment.
The piece also emphasizes that the refrigerants to be restricted under the Kigali Amendment are currently produced in China and exported in large quantity to the U.S., concluding that Kigali would help stem the trade imbalance. In reality, China is also producing the new Kigali-compliant products. With or without the Kigali Amendment, China will be making refrigerants and equipment and exporting them to the U.S.—the only difference is that with Kigali in place, they will be able to charge American consumers more for them.
Perhaps most significantly, the author’s myth of Kigali creating a U.S. manufacturing renaissance in this sector is negated by the fact that the American companies making these claims have been building much of their production capacity in China and other countries. Indeed, if there is one misstatement in the piece that stands out above the others, it is the suggestion that Honeywell and Chemours are focused on producing their Kigali-compliant products in the U.S. As I linked in my blog post (the author ignores this link and misleadingly uses another quoting Chemours’ CEO) and link again here, both companies have massive facilities in China making the very products for which they are now basing their patriotic appeals to Trump. I did not, as the piece asserts, merely speculate that these companies “will just manufacture new products in China anyway,” I demonstrated that they are already doing so. On this point, the misrepresentations and hypocrisy of Honeywell and Chemours—as well as the author of the Daily Caller piece—cannot be overstated.
The reality is that many of the jobs—and all of the technological know-how—have already been outsourced to the Chinese by these companies. While some production is occurring in the U.S., the number of jobs created here will very likely be small compared to those created abroad, and likely not even enough to replace the American jobs killed at plants currently making the products that would be restricted under Kigali.
The very reason these companies want Kigali so badly is the reason President Trump should refuse to submit this Obama-era UN treaty provision to the Senate for ratification. It will jack up air-conditioning and refrigeration equipment costs for American homeowners, car owners, and many small businesses like the nation’s one million restaurant owners, and thereby destroy jobs. There is no doubt that manufacturing these products cheaply abroad and selling them for high prices to a captive U.S. market will be a big money maker for the companies lobbying for the Kigali Amendment, but the rest of us, as well as the American economy overall, would be worse off.
Read the Competitive Enterprise Institute Web Memo “The Kigali Amendment to the Montreal Protocol: Myth vs. Fact” here.