The international press reports, “At Climate Talks, Danger to Free Trade Mounts.”
The Copenhagen negotiations have essentially failed to include, among the many topics covered, one that will be critical in the coming years: the question of import tariffs or other trade penalties that individual countries apply against the products of other countries that they deem too carbon-intensive. Such border measures are already in EU and US legislation (the Waxman-Markey bill, not yet passed by the Senate). Properly designed, they could turn out to be the missing instrument needed to get each country to cut emissions without fear of others taking unfair advantage, via leakage. More likely, national politics will turn them into protectionist barriers.
Actions taken multilaterally would probably make the difference as to whether border measures are used for good or ill. Here is my personal ranking of five possible scenarios.
- Best choice — a system of multilateral sanctions as part of a new “Copenhagen Protocol” or other treaty, following the precedent of trade sanctions in the Montreal Protocol on Stratospheric Ozone Depletion.
2. Next-best choice — national import penalties adopted under multilateral guidelines:
- (i) Measures can only be applied by participants in good standing.
- (ii) Judgments to be made by technical experts, not politicians.
- (iii) Interventions in only a ½ dozen of the most relevant sectors.
3. Third-best choice — no border measures at all.
4. Fourth choice — each country chooses trade barriers as it sees fit.
5. Worst choice: national measures are subsidies to adversely affected firms, which may take the form of free emission permits (as is contemplated in EU provisions). These do nothing to limit carbon leakage. They function simply as bribes to those industries lucky enough to receive them, in return for political support.