Tuesday, December 8, 2009

Dumbest. Idea. Ever?

Ok, maybe not ever, but this is pretty darn dumb. From the braintrust over at the progressive "think tank" Demos comes a brilliant way to encourage economic development and growth in the developing world. And by "encourage" I of course mean "completely undermine." (Oh, and it might just harm the very environmental objectives they're looking to promote.)

In their op-ed in The Hill, authors David Callahan and Cristina Vasile argue, among other things, that the United States Generalized System of Preferences should be updated to eliminate tariff benefits for developing countries that fail to implement and enforce any new multilateral climate treaty:
If the Obama administration and congressional leaders want public backing for a climate treaty, along with Senate ratification, they need to start thinking harder about how to enforce the deal. Realistically, there is only one way to achieve this goal: Use trade rules to penalize countries that violate a new climate treaty.

[An] important step would be to include environmental criteria in trade preference programs, particularly the Generalized System of Preferences, which cut tariffs for developing nations that meet various eligibility criteria.

In 2008, developing countries imported just over $30 billion worth of products into the United States duty-free under GSP. This amounted to over $850 million in savings for countries like Brazil, India, and Indonesia. Nations in Africa, South America, and the Caribbean also realized millions in savings thanks to regional trade preference programs....

Specifically, the GSP should be amended to stipulate that beneficiary countries enforce all global environmental treaties they are party to, as well as uphold their domestic environmental laws.

Congress has a chance to act immediately to make this change because the current version of the GSP is set to expire at the end of this month. By voting to include environmental criteria in the GSP, Congress can send a message — both to the U.S. public and to the world — that the United States is serious about enforcing a climate treaty.

Forging a new linkage between trade and the environment need not mean that poor countries lose their access to U.S. markets. A period of transition would be needed as the new rules take effect. After that, steps would be taken to address violations over time, with the United States providing financial and technical assistance to help countries live up to their environmental obligations — not just to a climate treaty but to other pacts designed to protect the planet.

Developing countries have their own reasons to go green, of course, and new trade rules can help empower environmentalists in those countries.

Studies show that poorer regions will be hurt most by climate change, and many people in these places are already suffering from unchecked air pollution, contaminated drinking water, and deforestation. Meanwhile, the development benefits of such steps as investing in renewable energy or preserving biodiversity are becoming ever more evident.

Too often, environmentalists in places like Asia and South America find themselves impotent in the face of powerful interests who argue that nothing should stand in the way of economic growth. New U.S. trade rules would help change that balance of power and foster more sustainable patterns of development....
Ok. Let me tick off a few of the many, many problems with this silly idea:

1) The purpose of GSP and other unilateral preference programs is to encourage economic growth and development in the world's poorest countries by offering them duty-free access to the US market. Today, the only way for poor countries to develop their economies and become rich (i.e., able to afford fancy alternative fuels and climate mitigation technologies) is to burn fossil fuels. This is why developing countries at Copenhagen are demanding bazillions of dollars from the US, EU and others (who, you know, developed using traditional energy and thus are responsible for the lion's share of historic carbon emissions) - they simply can't develop without emitting tons of carbon unless they get that cash (or so the theory goes). To implement a rule under GSP and other preference programs that essentially removes tariff benefits - a key avenue for economic growth - for countries that actually pursue and begin to achieve such growth both defies basic logic and completely undermines the programs' primary development objectives. In other words, it's stupid.

2) The authors' tacitly recognize problem #1 (hence, the "transition period") but think that more foreign subsidies ("financial and technical assistance") can solve it (helping developing countries "live up to their environmental obligations"). Such a "solution" is the height of naivete: in many of these countries - especially sub-saharan African ones - corruption is so bad that a vast majority of such aid will end up in the pockets of the ruling class, rather than spent on complying with global climate treaties or enforcing domestic environmental regulations. The result: fat dictators, bankrupt companies AND a still-dirty country. Awesome.

3) The authors are certainly right that "developing countries have their own reasons to go green." Yet they utterly fail to realize that if rich countries simply help developing countries, you know, DEVELOP, such countries will go green on their own once they're rich enough to do so. (Everybody wants clean air and water - they just want food, shelter and security first.) Policies like GSP - by encouraging private sector growth through free trade - accelerate developing countries' economic growth (and subsequent environmental improvement). So why on earth would we want to take that away? Indeed, even the threat of taking it away can retard development - a prime reason why GSP supporters have long advocated longer-term extensions of preference programs to increase the reliability of the programs' tariff benefits and encourage long-term contracts.

4) Naturally, the authors also completely fail to recognize that the primary beneficiary of that "$850 million" in tariff savings isn't the developing country exporters, but rather US consumers that purchased the subject products. Indeed, under US law, exporters don't pay tariffs - importers (and then consumers) do. So the Demos "plan" might actually result in a billion-dollar tax increase for American families and businesses (while also discouraging economic development in poor nation, of course). Perfect medicine for the ailing domestic and global economies, huh?

5) Most ridiculously, the Demos strategy could actually discourage developing countries from entering into multilateral climate treaties. Think about it: if you're a a developing country, and you're told that all of these billions of juicy tariff benefits could disappear if you fail to implement a global climate treaty (based, of course, on the United States' own definition of what qualifies as "proper implementation"), would you take that risk? Or would you refuse to sign on or - even smarter - try to sandbag the entire treaty altogether? I dunno about you, but that's a pretty easy call for me. Now, the authors might argue that the new GSP provisions could automatically apply to all countries that refused to join the treaty (although they didn't say that), but then the United States is essentially attempting to force developing countries to sign on to an agreement. Something tells me that such an encroachment on these countries' national sovereignty wouldn't be too well-received by progressives' cherished "global community."

I could go on, but you get the idea. This is a wretched proposal. Of course, I normally would've ignored the op-ed altogether, except for three things: (i) it was in The Hill (and thus might actually be read by an aspiring staffer); (ii) GSP re-authorization is up this month; and (iii) according to Wikipedia, Demos' "...first group of fellows and board members included... Barack Obama, then a state senator in Illinois." So this outfit might actually have a voice somewhere in the administration.

Shudder to think.

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