Wednesday, March 18, 2009

Daddy, What Did You Do in the Trade Wars?

On Monday the AP reported (via the San Francisco Chronicle) "Mexico retaliates with tariffs on 90 US products":

Mexico said Monday it will increase tariffs on about 90 U.S. products in retaliation for last week's decision to end a pilot program that allowed some Mexican trucks to transport goods in the United States.

Economy Secretary Gerardo Ruiz Mateos said the U.S. decision violates a provision of the North American Free Trade Agreement that was supposed to have opened cross-border trucking by January 2000.

"We consider this U.S. action to be wrong, protectionist and a clear violation of the treaty," Ruiz Mateos told reporters. "By deciding to protect their trucking industry, they have decided to affect other countries and the region.">>>MORE

Today the WSJ says:

Energy Chief Says U.S. Is Open to Carbon Tariff

Energy Secretary Steven Chu on Tuesday advocated adjusting trade duties as a "weapon" to protect U.S. manufacturing, just a day after one of China's top climate envoys warned of a trade war if developed countries impose tariffs on carbon-intensive imports.

Mr. Chu, speaking before a House science panel, said establishing a carbon tariff would help "level the playing field" if other countries haven't imposed greenhouse-gas-reduction mandates similar to the one President Barack Obama plans to implement over the next couple of years. It is the first time the Obama administration has made public its view on the issue.

"If other countries don't impose a cost on carbon, then we will be at a disadvantage...[and] we would look at considering perhaps duties that would offset that cost," Mr. Chu said.

Li Gao, a senior Chinese negotiator from the National Development and Reform Commission, told Dow Jones Newswires Monday that a carbon tariff would be a "disaster," would prompt a trade war and wouldn't be legal under World Trade Organization agreements

"It does not abide by the rule of [the] WTO and, secondly, it's not fair," Mr. Gao said, adding that his delegation would relate China's concerns to U.S. officials....MORE

HT: Environmental Capital, who has some clear eyed thinking on the idea.

As long ago as June, 2007 we thought "What the hell?":

Is it ethical to buy goods from China and India?

... I linked to Greenpeace's response to the announcement that China is the largest CO2 emitter in the world:

"Responsibility for China's soaring emissions lies not just in Beijing but also in Washington, Brussels and Tokyo. All we've done is export a great slice of the West's carbon footprint to China, and today we see the result. Let us not forget that the average Chinese emits just 3.5 tonnes of CO2 per year, whereas Britons emit nearly 10 tonnes and North Americans 20 tonnes."
I ended the post by saying I didn't know what to think. I still don't but I've been kicking this idea around for the last day or so: Trade War! (or toga party!).

Stop the exports.

I can figure out a few of the effects, inflation in the U.S., depression in China, four standard-deviation events bankrupting the hedge funds (screw 'em), a race to the bottom in the rest of the world.

But think of all the CO2 we'd save!...
...Toga Party!