Cap And Don't Trade: Obama May Set Off Trade War With Climate Policy

As anyone who followed the Kyoto Protocols back in the 1990s can tell you, even if you believe that government action to stem carbon emissions would be desirable, Kyoto wasn’t a genuine effort to get a worldwide agreement on limiting emissions: it exempted seven of the world’s eight most populous nations (the U.S. being the lone exception) from its provisions, including rapidly growing economies like China (now the world’s number one carbon emitter) and India. And neither of those countries, with more than a billion inhabitants each, has any intention of being subject to the kinds of restrictions that President Obama’s carbon emissions “cap-and-trade” plan would impose on U.S. industries, much less during a global recession. Including industries that employ lots of the blue-collar union workers the Democrats purport to represent.

Those industries’ and unions’ solution, naturally, is even more government taxes and regulations: use trade barriers to try to inflict the same harm on foreign manufacturers as on American ones. Hey, why not start a trade war? Just remember, one thing, though: Senator Smoot and Congressman Hawley both lost their bids for re-election in 1932.

Bloomberg fills us in on how this is unfolding:

U.S. Steel Corp., American Electric Power Co. and the AFL- CIO, the largest U.S. federation of labor unions, are all pressing lawmakers for protection against imports from countries that won’t have to bear the costs of any new measures to curb global warming.

The companies say fees might be needed to prevent price-undercutting by manufacturers in countries that won’t match U.S. climate-change standards. Lobbying groups for exporters such as Microsoft Corp. counter that imposing penalties on imports may violate World Trade Organization rules and spark retaliation by China and other nations.

Industry and the unions are awake now to the danger the Administration poses to U.S. industries that are already on the ropes, although they seem to reognize that with the Obama team, they are better off pleading for special-interest favors for themselves rather than standing up for free and open competition:

If China and India don’t agree to pollution-reduction targets, their companies would have a pricing advantage over U.S. manufacturers that take on the added costs of emissions targets, said Tom Conway, vice president of the United Steelworkers union.

New greenhouse-gas limits might also prompt U.S. manufacturers to move operations to China and continue emitting pollution, hurting the American economy and “undermining the purpose of the legislation,” he said. Without levying fees on carbon-intensive imports, the U.S. might lose 1 million factory jobs, said John Surma, chief executive officer of Pittsburgh-based U.S. Steel.

“The issue of global competition is huge,” Surma told the Congressional Steel Caucus on Feb. 4. “If you don’t take care of the international aspect, you put us out of business.”

Even Democrats in Congress who represent people with industrial jobs are starting to realize the problem:

Democrat Mike Doyle of Pennsylvania, a member of the House Energy and Commerce Committee, told steelmakers this month that he would set up private meetings with that panel’s chairman, Democrat Henry Waxman of California, to make sure climate legislation doesn’t harm them.

“If the actions we take simply transfer manufacturing to Brazil and China, then we haven’t accomplished much,” Doyle said.

Of course, if we start a 1930-style trade war, we’ll have accomplished even less.