Both the Senate and the House of Representatives are working toward possible floor votes by the end of this year on climate change legislation that could include new import taxes. Some observers are warning, however, that such measures could violate WTO rules and open the U.S. up to trade retaliation from other countries.
The Senate Environment and Public Works Committee approved Dec. 5 a climate change bill (S. 2191) sponsored by Sens. Joseph Lieberman, I-Conn., and John Warner, R-Va. Michael Morris, president and CEO of American Electric Power, told a March 5 hearing of the House Energy and Commerce Subcommittee on Energy and Air Quality that this bill would “require importers to submit international reserve allowances to cover the emissions attributable to greenhouse gas intensive goods they are importing” from countries that have not taken action comparable to that of the U.S. to limit their greenhouse gas emissions. If the allowances are not submitted, the covered goods would be barred from entry into the U.S. Morris emphasized, however, that this requirement “would only apply as a measure of last resort.” The full Senate is expected to take up this bill after returning from the Memorial Day recess June 2.
In the House, Energy and Commerce Committee Chairman John Dingell, D-Mich., and Energy and Air Quality Subcommittee Chairman Richard Boucher, D-Va., are drafting a bill they hope will pass the House this summer and be reconciled with the Senate measure by the end of the year. Dingell said he expects that a similar import restriction provision will have to be included in this bill to address concerns that imposing tough emissions requirements on domestic producers could drive manufacturing operations and jobs overseas where standards are not as high. He added that lawmakers can expect a WTO case against any such provision and that it should therefore be “crafted in a manner that is reasonably certain to withstand” such a challenge.
But U.S. Trade Representative Susan Schwab warned in a March 4 letter to House Energy and Commerce Committee Ranking Member Joe Barton, R-Texas, that the Bush administration has “serious concerns” about “the enthusiasm for using import provisions that might be perceived as unilateral trade restrictions directed against other countries to push them to move rapidly to reduce their emissions of greenhouse gases.” She said such an approach “could be a blunt and imprecise instrument of fear” and runs the risk of “an all-out trade war where no one wins and everyone loses.” In addition, she said, discussion of the trade effects of climate change legislation has been “framed far too narrowly” around whether such a bill would be consistent with WTO rules. While this is a “critical question,” the greater risk, and one that has already proven realistic in light of comments from European Union officials, is that other countries will respond with restrictions of their own that could target U.S. exports. This scenario “could unfold long before any potential disputes were concluded in the WTO” and could threaten particular harm to sensitive carbon-intensive sectors such as steel, cement, aluminum and paper.
Panelists at the March 5 House subcommittee hearing echoed Schwab’s warning. “If the United States enacts its own unique brand of import bans, border taxes, and comparability mechanisms” that violate WTO rules “the probable consequence will be a drawn-out period of trade skirmishes and even trade wars,” said Gary Hufbauer, a senior fellow at the Peterson Institute of International Economics. “During these battles, some countries will become more fixated on winning legal cases than fighting the common enemy, climate change. Global cooperation in limiting emissions could be the first casualty of a unilateral approach that ignores the basic” WTO rules. Christopher Wenk, senior director for international policy at the U.S. Chamber of Commerce, added that “domestic environmental policy that forces America’s trading partners to comply with U.S. requirements and protect our domestic industry will face a significant backlash for American manufacturers and businesses.”
World Trade/Interactive
