In a speech yesterday at George Washington University, Baucus called on President Obama to begin negotiations to join the Trans-Pacific Partnership (TPP) FTA, which presently includes Singapore, Chile, New Zealand and Brunei. As President Obama arrives in Asia for a two-week tour of the region, the public encouragement by the Senate's most influential member on US trade policy (Finance controls the fate of all trade legislation) is a strong message that the White House needs to get its free trade act in gear, particularly in Asia. (Sounds familiar, eh?)
But in the very same speech, Baucus appeared to dramatically reverse course when he strongly advocated the inclusion of carbon tariffs in any future Senate climate change legislation. As I've noted repeatedly, such "border measures" - intended to offset the competitive disadvantages that climate change policies have on domestic manufacturers by imposing at the border a tariff on imports of like products from countries do not have similar regulations - are highly controversial because of their questionable WTO-consistency and strong opposition among developed and developing countries who see them as "green protectionism." Indeed, China has repeatedly warned that the unilateral imposition of carbon tariffs would lead to an all-out trade war.
So what gives? Is Max Baucus still a "free trader," or is he growing his protectionist wings? Or is he just suffering from a wicked case of multiple personality disorder?
I see two possible theories:
(1) He's posturing for Copenhagen. Baucus knows that Cap and Trade is dead in the Senate (for 2009, at least), and is faking his "strong support" for carbon tariffs in an attempt to pressure China, India and other developing countries to stop opposing emissions caps and agree to concrete cuts during December's UN Conference on Climate Change. Threatening unilateral protectionism in order to push developing countries into caving on a multilateral agreement would not be new for Baucus. Indeed, he and his longtime Republican cohort, Sen. Charles Grassley, made similar plays over the last few years when they openly threatened to revoke duty-free access to the U.S. market for India and Brazil under the Generalized System of Preferences (GSP) because of those countries' resistance during the WTO's Doha Round of multilateral trade negotiations. (Those countries remain covered by GSP to this day.) So under this theory, Baucus is still a free trader deep-down; he's just faking the carbon tariffs protectionism to get a Copenhagen deal.
(2) He's just a good ol' fashioned mercantilist. If you look closely at Baucus' TPP comments, you'll see that they reflect a pretty mercantilist worldview (i.e., "imports are bad; exports are good") straight out of the 18th century. For example:
"It is particularly important for us when it comes to Asia as a whole to recognize that in the absence of a more robust export strategy it is going to be hard for us to rebuild our manufacturing base and employment base in this country," he said....
[H]e said the United States could not afford to stand still while it develops a new approach, since boosting exports is vital to future U.S. economic growth.
"We must trade or fade," Baucus said, invoking a line used by former President John F. Kennedy, who called for an expansion of U.S. exports in the early 1960s....
Baucus, whose home state Montana is a major cattle producer, said South Korea must open its market to all cuts of U.S. beef from all ages of cattle and address concerns about access to its auto market before Congress will vote on that pact.
As you can see, conspicuously missing from Baucus' statements is any mention of the critical import benefits that FTAs, or of free trade more generally, provide American families and businesses. And his export-only focus is evident in pretty much all of his "free trade statements" (see, e.g., here and here). Viewed through a mercantilist lens, Baucus' statements on TPP and carbon tariffs aren't contradictory at all: the TPP FTA would boost US exports (particularly of the Montana beef that's very popular in Asia these days), and the carbon tariffs would protect domestic manufacturers from nasty ol' imports from developing countries. It's a two-fer that would make even James Denham-Steuart proud.
So which one is it? Is Baucus just posturing on carbon tariffs now that the Senate's Cap and Trade bill is on ice, or does he really support them (you know, deep-down in places you don't talk about at parties)? Or is it both? Well, only the good Senator and his staff know for sure, but I think it's probably a little of both. The truth is that if Cap and Trade were on the verge of passage, I highly doubt that Baucus would be so supportive of carbon tariffs (if at all). However, I don't think that his resistance would be out of a loving devotion to Adam Smith. Instead, I bet that Baucus understands all-too-well that a trade war with India, China, and other developing countries could have dire consequences for US Beef exports, and that carbon tariffs are pretty much the quickest way these days to start such a war. So it's Baucus' own mercantilism that would force him to resist carbon tariffs if there were even a snowball's chance that the Senate were going to vote on final Cap and Trade legislation this year. But since they aren't, Baucus probably sees this as a great opportunity to make loud-yet-consequence-free statements about carbon tariffs in a last-ditch attempt to get developing countries to sign on to Copenhagen. (Fat chance of that, but I guess you gotta give the guy credit for trying.)
That said, Baucus statement of support for carbon tariffs is undeniable, and I'm hardly qualified to deny him his rightful place on the ol' carbon tariffs scorecard (which is getting depressing these days, btw), so:
Pro carbon tariffs - Sen. Max Baucus, Sen. Ben Cardin, Senators Lindsay Graham and John Kerry, ten protectionist Senators, the US House of Representatives (in Waxman-Markey), France, and Paul Krugman.
Voting present - the White House.
Anti carbon tariffs - the rest of the world.
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