Thursday, November 5, 2009

Did the US Chamber of Commerce Just Signal Support for Carbon Tariffs? (UPDATE: No)

In a November 3 public letter to Senators Barbara Boxer (D-CA) and James Inhofe (R-OK) - Chair and Ranking Member, respectively, of the Senate Environment & Public Works Committee - the United States Chamber of Commerce indicated its support for bipartisan legislation that addresses climate change in a manner that "recognizes regional differences, the state of the technology, and the compelling need for a solution that minimizes overall economic impact."

The letter explicitly takes its lead from an October 10 op-ed in the New York Times by Senators John Kerry (D-MA) and Lindsey Graham (R-SC) setting forth a "framework for climate legislation to pass Congress and the blueprint for a clean-energy future that will revitalize our economy, protect current jobs and create new ones, safeguard our national security and reduce pollution."  Metaphorical orgy aside, I described the Senators' plan as "merg[ing] the GOP's drilling/nuclear/clean-coal proposals with the Democrats' emissions-caps/wind/solar proposals."  And it also included carbon tariffs - measures intended to offset the competitive disadvantages that climate change policies have on domestic manufacturers by imposing at the border a "charge" (or "tax" or "tariff" or "adjustment") on imports of like products from countries that have chosen not to burden their manufacturers with such regulations.

As I've noted repeatedly, carbon tariffs are highly controversial - questionable under WTO rules and opposed by both developing and developed countries alike because they can easily devolve into "green protectionism."  But they are included in the House climate change legislation ("Waxman-Markey") and have some support by Senate protectionists (and Paul Krugman).

The Chamber, however, is a longstanding and vocal supporter of free trade that openly opposed carbon tariffs only a few months ago (see below), so for it to support the measures would be a pretty big shock.  That said, their letter glowingly advocates the Kerry-Graham "framework," a key component of which is carbon tariffs, and it contains some very suspicious "code language" that seems to signal Chamber support for the "border measures."

First, the key passages of the Chamber letter (emphasis mine):
The Chamber agrees with a great deal of the principles set forth by Senators Kerry and Graham, in particular that legislation should: minimize the impact on major emitters; reduce price volatility for consumers; protect global competitiveness; invest in renewable energy sources; take advantage of nuclear power; streamline the permit system; make us the "Saudi Arabia of clean coal" by fostering carbon capture and sequestration technology; commit to increased environmentally responsible onshore and offshore oil and gas exploration; contain consumer and intellectual property protections; protect against agency regulation under existing laws not written for greenhouse gases; strengthen the hand of our international negotiators; and increase our own energy security and energy efficiency....

Shaping a bill the Chamber, the broader business community, and a bipartisan majority in the House and Senate approve of will take significant effort. The Chamber will continue to oppose bad policies that resemble the failed climate proposals of the past, such as bills that jeopardize American jobs, create trade inequalities, leave open the Clean Air Act, open the door to CO2-based mass tort litigation, and further hamper the permitting process for clean energy.
Now, the Kerry-Graham op-ed (again, emphasis mine):
Fourth, we cannot sacrifice another job to competitors overseas. China and India are among the many countries investing heavily in clean-energy technologies that will produce millions of jobs. There is no reason we should surrender our marketplace to countries that do not accept environmental standards. For this reason, we should consider a border tax on items produced in countries that avoid these standards. This is consistent with our obligations under the World Trade Organization and creates strong incentives for other countries to adopt tough environmental protections.
I don't think I'm crazy when I say that the bolded language in the Chamber's letter is strikingly similar to the bolded language in the Kerry-Graham op-ed.  And while the Chamber isn't dumb enough to come out and vocally advocate eco-protectionism (especially considering their pro-trade stance), the new letter's support for "protecting global competitiveness" and "strengthening the hand of our international negotiators," as well as its opposition to bills that "create trade inequalities," seems to make it pretty clear that the Chamber not only condones, but actually insists upon, final US climate change legislation that includes carbon tariffs.  And, of course, their letter never expressly rejects carbon tariffs either.

For the time being, however, I will not (yet) update my running "carbon tariffs scorecard" to include the Chamber as a "supporter" of carbon tariffs for three reasons: (i) the Chamber's letter does not expressly advocate carbon tariffs; (ii) because of the Chamber's free trade positions, I'll tepidly give it the benefit of the doubt (for now); and (iii) such advocacy would directly contradict earlier Chamber opposition to carbon tariffs.  For example, a recent Chamber statement on Waxman-Markey notes: "We opposed this specific legislation because it would not reduce the global level of greenhouse gases in the atmosphere. It is neither comprehensive nor international, and it falls short on moving renewable and alternative technologies into the marketplace and enabling our transition to a lower carbon future. It would also impose carbon tariffs on goods imported into the U.S., a move that would almost certainly spur retaliation from global trading partners."  That can't really get any clearer, can it?

So what's going on here? Am I nuts, or did the US Chamber of Commerce just completely - albeit quietly - switch its position on carbon tariffs from one of blatant opposition to tacit support?  If so, this does not bode well for free trade advocates, or our trading partners, who have vocally pushed for the exclusion of eco-protectionism from any current or future climate change legislation.  I sure hope I'm nuts.

Stay tuned (and cross your fingers).

UPDATEJohn Murphy from the Chamber has sent me the following email.  I'm happy to report that the Chamber still opposes carbon tariffs in any current or future climate change bill.  Good.  [Note: the Dow Jones story mentioned is linked below, instead of attached as John says.]

From: "Murphy, John"
To: xxxxx
Date: Fri, 6 Nov 2009 11:56:29 -0500


I hope this finds you well. Regarding your recent blog post, I am pleased to set the record straight. The Chamber letter of November 3 that you cite notes that we agree with “a great deal” of what Senators Kerry and Graham presented in a recent op-ed, and we “commend” them for writing it. However, it would be an over-interpretation of the letter to conclude we agree with them on every point they make.

The attached Dow Jones story, which reports on the letter but also an interview with the Chamber’s Bruce Josten, concludes with this paragraph: “The one concept the Chamber objected to in the Kerry-Graham editorial was a proposed tariff on emission-intensive imports, a measure they say could provoke major trade retaliations. It's also a provision the Obama Administration has criticized for the same reason.”

For a full account of the Chamber’s position on the trade aspects of climate change legislation, please see the attached coalition letter issued in July (drafted and spearheaded by Chamber staff), from which our position has not changed at all. Also, I attach one of our International Policy Backgrounders on the topic.

Best regards,


John Murphy
Vice President, International Affairs
U.S. Chamber of Commerce

UPDATE2: Here's the Chamber's new blog entry on the issue.  Again, good for them (and us).  And I forgot to say earlier that the lesson, as always, is: I'm nuts.

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