Protectionism: But what is it being protected?

March 19th, 2009

Posted by: Roger Pielke, Jr.

The WSJ discusses Energy Secretary Steven Chu’s warning that, in the future under a domestic cap and trade program, the US may levy tariffs on foreign goods to protect American companies from foreign competition not subject to carbon pricing. Is this “climate protection” or “economic protectionism” or both? One point seems clear: regardless of the reasoning a trade war means higher prices for the American consumer, a point sure to be front and center in the cap and trade debate. Here is an excerpt:

Energy Secretary Steven Chu on Tuesday advocated adjusting trade duties as a “weapon” to protect U.S. manufacturing, just a day after one of China’s top climate envoys warned of a trade war if developed countries impose tariffs on carbon-intensive imports.

Mr. Chu, speaking before a House science panel, said establishing a carbon tariff would help “level the playing field” if other countries haven’t imposed greenhouse-gas-reduction mandates similar to the one President Barack Obama plans to implement over the next couple of years. It is the first time the Obama administration has made public its view on the issue.

“If other countries don’t impose a cost on carbon, then we will be at a disadvantage…[and] we would look at considering perhaps duties that would offset that cost,” Mr. Chu said.

Li Gao, a senior Chinese negotiator from the National Development and Reform Commission, told Dow Jones Newswires Monday that a carbon tariff would be a “disaster,” would prompt a trade war and wouldn’t be legal under World Trade Organization agreements

“It does not abide by the rule of [the] WTO and, secondly, it’s not fair,” Mr. Gao said, adding that his delegation would relate China’s concerns to U.S. officials.

Mr. Chu’s comments came amid other signs of concern among U.S. trading partners about protectionist rhetoric and legislation from Washington.

5 Responses to “Protectionism: But what is it being protected?”

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  1. jae Says:

    Obama needs a new slogan: “Economic Chaos For All!”

    Didn’t he hire ANYONE with an understanding of economics?

  2. 2
  3. Maurice Garoutte Says:

    Jae,
    No such luck for the working folk.

    “There are no former CEOs in the Obama Cabinet. And among the people who make up his daily inner circle, there is only a dollop or two of top-level private sector experience.” http://www.politico.com/news/stories/0209/19066.html

    This morning the Obama administration in one place in the Capital was pleading for more financial help from private investors while in another place private investors were being demonized. What could go wrong?

    In this case motive doesn’t matter. When the result is a trade war during a global recession pleading “good intentions” won’t go far with me.

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  5. bend Says:

    Gao is right. Such tariffs would be cutting off your nose to spite your face. And whether the intentions are honorable or not, it certainly appears as a pretense to pacify populist antagonism towards the world market.
    It is a terribly unfortunate situation that President Obama has turned into John Edwards on trade. And this despite his characterization of bitter western Pennsylvanians as clinging to “anti-trade sentiments.”
    I miss Bill Clinton.

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  7. Sylvain Says:

    Maybe Canada should sought out a new market for its oil. I hear China is interested.

    After all if our product can’t be competitive in the US why should it be any different for our oil.

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  9. It’s Just Another Tax, Folks – NearWalden Says:

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