Here in Washington, Congress is still mostly focused on getting a health care bill passed. But after a narrow victory for climate change legislation in the House this summer, things are starting to move again with the introduction of the Kerry-Boxer bill in the Senate.
Climate change doesn’t feel like a trade issue, but in many ways it is. Trade can play a powerful role in the global fight to mitigate climate change through the exchange of green goods and services. But there is also a concern that climate change could be used instead as an opportunity to build new protectionist barriers to trade.
I am referring to something called a Border Adjustment Mechanism (which has a fantastic acronym). In essence, a BAM is a tariff levied at the border on goods made in countries which do not account for carbon intensity during production. BAMs are seen by some as a way to level the playing field in regards to competitiveness.
Instinctively this may sound reasonable. But BAMs are a blunt instrument to solve what is actually a fairly small problem. They would be very tough to administer and they would have to be structured very carefully to pass muster in the WTO.
From a trade angle, the UK Government worries about the protectionist signal that BAMs could send. We need free and open markets to really tackle climate change, and we don’t want to risk sending the wrong message to our global trading partners. We agree with the statement that President Obama made about BAM provisions in the House legislation that passed in June:
At a time when the economy worldwide is still deep in recession and we've seen a significant drop in global trade, I think we have to be very careful about sending any protectionist signals out there.[…] There are going to be a series of negotiations around this and I am very mindful of wanting to make sure that there's a level playing field internationally. I think there may be other ways of doing it than with a tariff approach.
Nick Bridge has been doing an excellent job covering the wider climate change debate from the Embassy. Businesses and think tanks are engaging too - Jake Colvin of the National Foreign Trade Council and Matt Yglesias have both recently written thoughtful posts on BAMs, which I encourage you to read. This will be an ongoing debate as the Senate considers climate change legislation, and BAMs, in the coming months. I hope to write more about this subject in the future.
Posted at 09:34 19 October 2009 by Patrick Thomas | Comments[0]
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