Tuesday, April 20, 2010

Surprising (Almost) No One, Obama Reverses Stance and Announces Support for Carbon Tariffs

National Review's Jim Geraghty has a long-running joke that all promises issued by President Obama come with an implicit expiration date.  Geraghty's well-documented thesis gets another footnote today, as the New York Times reports that the Obama Administration has officially reversed course and now supports the inclusion of carbon tariffs in the soon-to-be-released Senate cap-and-trade energy green jobs legislation:
A top White House adviser confirmed today that President Obama is open to helping energy-intensive industries cope with the costs of climate legislation, including use of controversial border tariffs he had previously warned could spark a global trade war.

Energy and climate adviser Carol Browner said the administration recognizes Congress' interest in using trade language as it works on climate legislation that addresses concerns from some of the country's industries that are most vulnerable to cheap foreign imports, including steel, cement, glass, pulp and paper.

"There's going to have to be mechanisms that recognize they compete in a global market," Browner said during an event hosted by National Journal. "I think it's fair to say a final bill will be very mindful of the needs of these particular sectors of the economy."

Obama prompted an outcry from moderate Senate Democrats last summer after he questioned a section of the House-passed climate bill H.R. 2454 that punishes developing countries with trade sanctions if they don't do enough to curb their greenhouse gas emissions.

"At a time when the economy worldwide is still deep in recession and we've seen a significant drop in global trade, I think we have to be very careful about sending any protectionist signals out there," the president told reporters the day after the House's 218-212 vote.

The Senate climate bill's lead authors have sent signals that they will address the concerns of senators from states with trade-sensitive industries, though details on what John Kerry (D-Mass.), Lindsey Graham (R-S.C.) and Joe Lieberman (I-Conn.) will say in their legislation remains unclear. The trio are planning to release their bill Monday.

Ten Senate Democrats, led by Sherrod Brown of Ohio and Debbie Stabenow of Michigan, called last week for a border adjustment that is automatically slapped on imports from countries that do not have greenhouse gas requirements comparable to the U.S. law (E&ENews PM, April 15).

"A border adjustment measure is critical to ensuring that climate change legislation will be trade neutral and environmentally effective," the senators wrote to Kerry, Graham and Lieberman.

But Graham said last week he didn't agree with an automatic trigger for trade sanctions. Instead, he said he supported a provision setting a roughly four-year deadline for conclusion of an international climate agreement; otherwise, Congress would need to revisit the issue.

"We don't need to create a trade war," Graham said. "We need to be WTO-compliant. But let me just say this, on behalf of manufacturing, if we don't have an international agreement covering these countries that can put us at a competitive disadvantage, then we'll have to revisit this thing. My approach has always been that you start off with business-friendly language when it comes to border adjustments that's clearly WTO-compliant, but you'd have a provision in there: If not an international agreement by a certain point in time, Congress has to revisit this."

Senate Finance Committee Chairman Max Baucus (D-Mont.) has also indicated he will weigh in on the trade issue as part of a broader plan spelled out by Majority Leader Harry Reid (D-Nev.) before any climate bill comes to the floor....
Sigh.  I have consistently maintained that the chances of any American cap-and-whatever legislation becoming law in 2010 are tiny, and I continue to believe that's the case (especially after Ways & Means Chair Sandy Levin just yesterday said that "this will probably not be the year" for the bill).  However, today's news of Obama's shift on carbon tariffs is still noteworthy for several reasons:
  • First, Obama's change of heart is not as drastic as the NYT would have you believe and, quite frankly, was all-but inevitable given the partisan makeup in the Senate and the resolute support for carbon tariffs from a large gaggle of protectionist senators.  Indeed, anyone paying attention saw this change-of-heart coming months ago when the White House first started waffling on the issue.  So maybe this is "big news" for the White House's cheerleaders at the NYT, but it really shouldn't be for the rest of us.
  • Second, it appears that the Obama administration and Senator Graham did not get the super-secret memo from Sen. Sherrod Brown that, for WTO-consistency reasons, US politicians and officials had to couch all discussions of carbon tariffs in terms of environmental effects (e.g., preventing "carbon leakage"), as opposed to more obvious concerns over the loss of domestic manufacturing "competitiveness."  As I noted a couple days ago, justifying border measures on competitiveness grounds appears to be a surefire way to violate WTO rules (despite what Paul Krugman would have you believe), so US politicians have uniformly modified their talking points to discuss carbon tariffs solely in terms of saving Mother Gaia.  Thus, the "competitiveness" comments of Czarina Browner and Senator Graham appear to be a major snafu and, like, so 2009.  (You know, with all the advances in modern communications technology, you'd think that America's protectionists would be able to keep their fake-messaging straight.  I'd be willing to bet that China's protectionists don't have this archaic problem.  Alas.) 
  • Finally, Obama's change of tune on carbon tariffs is still troubling, despite point #1, because its further proof that he'll sacrifice free trade and the health of the multilateral trading system for whatever domestic priority is next on his plate.  Last year, the White House's concerns over passing health care caused FTAs and WTO negotiations to stall, and numerous US violations of global trade rules to go unresolved.  Now, Obama's openly disregarding ample legal analysis on carbon tariffs' WTO problems - as well as the strong public concerns/threats from India, China and other countries - because he needs to buy Senate votes for his new priority: cap-and-trade.  Indeed, as the NYT notes above, it was these very concerns that caused "2009 Obama" to explicitly oppose carbon tariffs or any other "protectionist signals."  But that was 2009, baby.  "2010 Obama" is now totally open to carbon tariffs because he needs 60 Senate votes for his last-ditch effort to control the American energy sector.  So damn-the-international-obligation-torpedoes!  And speaking of those obligations, how many more times will this President ignore them before his supporters finally drop the whole "new embrace of multilateralism and respect for other nations" nonsense?  I'd say it's about time, wouldn't you?
And with that diatribe complete, it's time to once again update the ol' carbon tariffs scorecard:

Pro carbon tariffs - President Barack Obama, Sen. Max Baucus (D-MT); Sen. Ben Cardin (D-MD), Sens. Lindsay Graham (R-SC) and John Kerry (D-MA); Sens. Amy Klobuchar (D-MN), Arlen Specter (D-PA), Carl Levin (D-MI), Claire McCaskill (D-MO), Debbie Stabenow (D-MI), Kay Hagan (D-NC), Mark Begich (D-AK), Sherrod Brown (D-OH), Tim Johnson (D-SD), Al Franken (D-MN), Evan Bayh (D-IN), John Rockefeller (D-WV), Robert Byrd (D-WV), Robert Casey (D-PA) and Russ Feingold (D-WI); Sen. Mark Warner (D-VA); the US House of Representatives (in Waxman-Markey); France; Italy and Paul Krugman.

Voting present - the White House.

Anti carbon tariffs - the rest of the world.

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