November 24, 2009 / 8:45 PM / 10 years ago

ANALYSIS-U.S. tariffs would chill climate pact and trade

This is part of a package of stories ahead of climate talks in Copenhagen in December. For other stories linked to the Copenhagen meeting click on [ID:nLL527527]

* US climate bill hard to pass without protection measures

* Tariffs could spark tit-for-tat trade spats

* Trade guidelines should be developed by big emitters

By Timothy Gardner

WASHINGTON, Nov 24 (Reuters) - Any threat by the United States to slap fees on imports from countries it perceives as weak on cutting carbon emissions could hamper trade relations and delay international efforts to combat global warming.

Lawmakers in states that produce cement, chemicals, steel and other energy-intensive products have called for such tariffs in climate legislation. They fear those industries looking to cut regulation costs could pull up stakes and move to countries that don’t have strong climate plans.

But experts say the tariffs may do more harm than good.

"One of the big problems is retaliation," said Jeffrey Frankel, professor of capital formation at Harvard University’s Kennedy School of Government. "Other countries will say ‘If the U.S. is doing it, we’ll put up our own trade barriers.’"

The manufacturers and labor unions are urging the U.S. Congress to include carbon tariffs, also known as border adjustments, in the long-delayed climate bill.

Under the version of the bill passed narrowly by the House of Representatives in June, fees would be levied on such goods from countries that do not adopt plans to curb emissions by 2018. Leaders in the Senate also see the tariffs as important if the bill is to win the required 60 votes.

Kenneth Green, a scholar at the American Enterprise Institute, said trade spats could put U.S. agricultural and high-tech exports at risk.

At issue is the chance that climate could add yet another layer of contention into already complicated U.S. trade relations with China and other developing countries. China and the United States are already at odds on trade over Chinese tires and U.S. exports of poultry and auto products.


Another potential problem under the measure is Congress could have a say in determining when a developing country is not matching the United States on future commitments to cut emissions. Those decisions could be subject to influence from industry.

"All you need to start a trade war is a perception of unfairness," said Michael Levi, a climate expert at the Council on Foreign Relations.

Indeed, poorer countries are balking at the threat of fees placed on their exports.

China and other developing countries have called for a ban on carbon tariffs, which have also been mulled by France. The issue could help keep rich and poor nations at odds beyond the U.N. climate talks next month in Copenhagen.

The United States, which has spewed more heat-trapping carbon dioxide from tailpipes and smokestacks over time than any other country, should worry about cutting its own emissions before laying down demands, some experts said.

And in some measures China, which leads the world in overall greenhouse gas emissions but emits a very low amount per capita, is doing more on climate than the United States.

"Amid this face-off, the danger is that arguments over border taxes could make (an international climate) agreement even more difficult to negotiate," Angel Gurria, secretary general of the Organization for Economic Co-operation and Development, wrote in an opinion piece in the Financial Times this month.

Experts have said China could get around any U.S. carbon tariffs by imposing its own carbon tax on energy intensive goods. [ID:nPEK83604]

But one way for the United States to reduce uncertainties about global reactions to carbon tariffs would be to negotiate with trading partners on deciding when to penalize others for not taking enough action on climate.

"At least have a multilateral agreement as to what the rules are guiding when you can impose border measures," Frankel said.

In addition, international efforts to reduce global tariffs on shipments of clean energy products like wind and solar power could be an effective way of addressing climate and trade.

"Rather than devoting time and energy to devising effective border measures against goods, major economies could better spend their collective energy and political will in liberalizing trade in those goods and services that will make a positive contribution to climate change," said Dan Price, who was assistant for international economic affairs to former President George W. Bush and practices law at Sidley Austin. (Editing by Jeffrey Jones and Christian Wiessner) ((; RM:; 202-898-8360)) ((For help: Click "Contact Us" in your desk top, click here [HELP] or call 1-800-738-8377 for Reuters Products and 1-888-463-3383 for Thomson products; For client training:; +1 646-223-5546))

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