New Paper on Trade and Climate Change

I've written several blogposts on Cap-and-Trade and carbon tariffs over the last couple months, but a new study by Cato's Sallie James gives the increasingly important issue of climate change and international trade the attention that it really deserves. James concludes:

In principle, domestic efforts to combat climate change are not inherently in conflict with global trade rules. In an attempt to get out of the bind in which they find themselves, however, politicians have proposed a complex array of measures—some trade related—to keep favor with certain energy-intensive and trade-exposed industries that are crying foul at increased energy costs. Those trade-related measures put the United States at risk of retaliation, litigation, or both from its global trading partners.

Any trade-related measures (such as tariffs on goods from noncapped countries) need to be based strictly on the goal of protecting the environment, rather than an attempt to level the playing field for domestic competitors shackled by climate change regulations. Breaking the link between the trade measure and the goal of protecting the environment is a sure invitation to WTO dispute-settlement proceedings. Attempts to coerce other countries into implementing similarly stringent regulations are also problematic. Alienating our trade partners by unilaterally imposing tariffs and subsidies that flout global trade rules will undermine efforts to obtain global cooperation on climate change and inflict unnecessary damage on the U.S. economy.

Read the whole thing here (PDF).