Sallie James of the Cato Institute’s Center for Trade Policy Studies examines climate change’s effect on international trade in her recent article, A Harsh Climate for Trade: How Climate Change Proposals Threaten Global Commerce. The article was published in the Center for Trade Policy Studies newsletter on September 9, 2009.
James makes the point clear in her article that if climate change is indeed anthropogenic (a man-made phenomenon), then it is an international problem, and United States environmental policy cannot make a difference. She points out that “U.S. [greenhouse gas] emissions amounted to about 20 percent of global emissions in 2006, and are forecast to fall to about 10 percent by 2050, even without any active emissions policy.” If the world must be saved from anthropogenic climate change, she argues, the United States taking a stance will not make very much of a difference with new climate change policies.
Specifically, James discusses the problems with the climate change bill the United States is currently considering to address the climate change issue. The climate change bill James specifically refers to is the Waxman-Markey “cap-and-trade” bill, which includes far more than just cap-and-trade. Rep. Henry Waxman (D-CA), has been called “the congressman from Beverly Hills.” Ed Markey (D-MA), represents an equally left-wing district. James covers a number of inconsistencies in the bill; for example, the bill would place disincentives on environmentally unsound production of goods, but the disincentives would decrease as output from those industries increased. Essentially, the more environmentally unsound products an industry made, the more tax credits they would receive from the government.
James goes on to explain the issues with the bill’s proposed import barriers: namely, that “the key targets of the proposed import barriers, India and China, are relatively minor sources of important of energy-intensive goods.” According to James, “most carbon-intensive imports to the United States come from other developed countries that … will therefore likely escape import penalties.” In other words, the import barriers would not be very effective. More importantly, though, James argued “the trade provisions may be counterproductive,” perhaps undermining both work to prevent climate change and international stability. James revisits the inconsistencies of the environmental aspect of this bill, and also points out that the new trade rules may cause a backlash from nations affected by the penalties.
Instead, James suggests that a freer trade system would lead to a cleaner environment. “Insofar as trade leads to growth, and growth leads to an increased willingness and ability to pay for a cleaner environment, freer trade and investment flows will enable countries to adapt better to any adverse effects of climate change,” James wrote. She goes on to examine the link between open trade and prosperity, which she believes has been well documented.
“To the extent that global warming is a real problem warranting action, it needs to be addressed globally rather than through unilateral efforts,” James concludes. “A freer, more prosperous economy is a more auspicious path to ensuring a more rapid spread of environmental technology and the global consensus needed to combat climate change.”