We've had a few discussions on this blog about the possibility of the EU imposing trade restrictions on countries that are not doing enough to clean up the environment (see here, here and here). According to the FT, EU Trade Commissioner Peter Mandelson has rejected the idea:
The European Union’s trade commissioner will on Monday dismiss French proposals for a “green” tax on goods from countries that have not ratified the Kyoto treaty as not only a probable breach of trade rules but also “not good politics”.
Peter Mandelson says that the levy, aiming to cancel the competitive advantage of countries that are not cutting carbon emissions to fight global warming, would be “highly problematic under World Trade Organisation rules and almost impossible to implement in practice”.
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“Not participating in the Kyoto process is not illegal. Nor is it a subsidy under WTO rules,” Mr Mandelson will warn in a podcast speech to 50,000 subscribers. “How would we choose what goods to target? China has ratified Kyoto but has no Kyoto targets because of its developing country status. The US has not ratified but states like California have ambitious climate change policies.”
Instead, Mandelson will propose the following approach:
In contrast, Mr Mandelson backs a plan, to be unveiled this week, to include in the EU’s carbon emissions trading scheme all airlines landing or taking off in the EU, even though it is likely to antagonise the US and Asian countries.
Mr Mandelson, who favours a positive rather than punitive approach, is also writing to Pascal Lamy, WTO director-general, to suggest talks on scrapping tariffs on renewable energy and clean power generation equipment worldwide.
He also wants extra incentives for companies using environmentally sustainable methods to be built into a new generation of bilateral deals the EU is negotiating. Mr Mandelson says the rich world has “an historical environmental debt”, having contributed to 80 per cent of carbon emissions worldwide to date, and must lead the way.
The Stiglitz suggestion would have made for an interesting case, but it is probably best for the system that we will not see it.
UPDATE: The Economist comments on this issue on their Free Exchange blog:
PETER MANDELSON, the EU trade commissioner, is putting the kibosh on a French idea to slap tariffs on
American goodsproducts from countries that don't comply with Kyoto.It doesn't strike me as an obviously daft idea. After all, countries that don't comply with Kyoto are arguably gaining competitive advantage through their failure to be a good world citizen. And a tariff is the first credible mechanism I've heard of to overcome the commons problem that plagues attempts to fight global warming.
But what is good in theory is often appalling in practice. As Mr Mandelson points out:
“Not participating in the Kyoto process is not illegal. Nor is it a subsidy under WTO rules,” Mr Mandelson will warn in a podcast speech to 50,000 subscribers. “How would we choose what goods to target? China has ratified Kyoto but has no Kyoto targets because of its developing country status. The US has not ratified but states like California have ambitious climate change policies.”
When standards are not clear, environmental restrictions often become tools for protectionists to wall off local markets from competition. The purpose of the WTO is to prevent fungible standards from impeding world trade—and a very fine purpose it is, too. These sorts of manoeuvres are sure to cause a huge row, and thereby arguably do more damage to the world's poor than climate change will.
