Global Warming Laws Could Sabotage Free Trade

Washington, D.C., March 24, 2009—Today members of the House Ways and Means Committee gathered for a
hearing on how future legislation on global warming could end up affecting
international trade. The Competitive Enterprise Institute urges the committee
members to look closely at the inevitable trade conflicts that would result
from a carbon-constrained economy. 

“Carbon tariffs are no mere quirk of this or that
administration, political party, or government agency,” said CEI Senior Fellow Marlo Lewis. “Protectionism is
an inherent feature of carbon suppression policies.” 

Companies and labor unions in countries that have adopted carbon
limits will demand tariffs to “level the playing field” with firms in
non-carbon constrained countries. Without the promise of carbon tariffs,
domestic industry and labor in the U.S. will not support cap-and-trade
or carbon taxes. 

Carbon suppression programs also create a classic “collective action” problem. It will
always be in the individual interest of each nation to
free-ride on the sacrifices of others, leaving everyone else to make real
cuts in carbon emissions. Unless credibly deterred and punished, cheating will
be widespread and the system will collapse. Absent the threat or use of
military force, trade sanctions – in the form of carbon tariffs – are the only
way to enforce such agreements. 

“This process may already have begun,” said Adjunct Analyst Fran Smith. “Just as the World Bank
is reporting on increased trade protectionism in the world, U.S. Energy
Secretary Steven Chu has come out in favor of using carbon tariffs as a ‘weapon’
against countries that aren’t reducing their carbon emissions. He seems not to have
noticed that Chinese officials have already warned that carbon tariffs imposed
on developing countries would be a ‘disaster’ and perhaps start a trade war.” 

CEI is a non-profit, non-partisan
public policy group dedicated to the principles of free enterprise and limited
government.  For more information about
CEI, please visit our website at www.cei.org.