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Cap and Trade, Obama takes cautionary stance on implementing tariffs
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President Barack Obama, and Energy Secretary Steven Chu
(AP Photo - Pablo Martinez Monsivais).jpg
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In a press briefing on Sunday, President Barrack Obama cautioned house and senate members to consider removing a provision in the Cap and Trade bill that allows the government to impose tariffs on countries that don’t example systems for global warming pollution control.
The president warned of the “protectionist” segment in the legislation, still feeling the sting from the “Buy American” provision in his stimulus package that touched off an unfavorable exchange between the US and Canada.
The president told reporters that, although he is very aware of wanting to guarantee a “level playing field internationally”, congress would be wise to reconsider the tariffs in favor of a less restrictive policy.
The provision was designed as a way to keep a level playing field between the United States and any country that has not mandated limits and reductions in carbon emissions and economically promotes clean energy production.
The president continued; “At a time when the worldwide economy is still in deep 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.” He also expressed that “careful analysis” was needed to determine whether tariffs were indeed necessary.
This reiterates the massage the President delivered in Ottawa, when meeting with the Canadian Prime Minister, Stephen Harper in February, President Obama cautioned against a "strong impulse" toward protectionism while the world suffers a global economic recession and made the statement at that time that efforts to renegotiate NAFTA would have to wait.
In At that time, President Obama said he wanted to find a way to keep his campaign pledge to add labor and environmental standards to the continent's trade agreements without disrupting trade.
The president’s current cautionary statement specifying his issues with Cap and Trade legislation further show his belief that mandated protectionism at this economically sensitive point in time will be counterproductive for America.
Congressman Sander Levin (D-Mich.), pushed the bill’s author Henry Waxman (D-Calif.) to include the trade provision in the Cap and Trade legislation now being debated in the Senate. Congressman Levin expressed Friday that the measure was needed to protect domestic jobs here in the United States.
During a house debate, Representative Levin said: "As we act, we can and must ensure that the U.S. energy-intensive industries are not placed at a competitive disadvantage by nations that have not made a similar commitment to reduce greenhouse gases."
Bravo to President Obama! The president remembers his econ classes about the 1930s. exhaustive study and analysis of tariffs has shown that they are counterproductive for any free-market economy. Realize that tariffs are not initially harmful for everyone affected, as they offer a distributive effect to industries generally lacking in some way. Upon inception, some industries gain when a tariff is enacted and others lose.
In the over-all, levying of tariffs offer initial help in weaker economic segments, but in the longer term, promote a negative impact by weakening the means of production, in a similar fashion to steroids having short term performance benefits for athletes, but longer term deleterious effects to those who use them – in the long run it weakens the respective industry segment.
We’ve got lessons to learn from the great depression of the 1930s with regard to inception of tariffs. What happened in the great depression can be seen as valid, comparative and relevant to domestic economic woes here in the United States.
Most economists agree that the depression was “triggered” (not caused) by the Smoot-Hawley tariff of 1929/1930, which imposed confiscatory taxes on literally thousands of imports. The result was that other countries retaliated in like fashion, enacting tariffs of their own. This immediately threw the global trading system and successively the global marketplace into a state of collapse. The flow of capital between countries slowed and ceased and global purchases and sales dried up.
So, I again offer a hearty Bravo to President Obama for not falling into a protectionist trap that could potentially facilitate a deeper economic crises. And after all, if we do impose tariffs on non-environmentally compliant countries, from where will we be able to buy the energy our country needs to for it to function?
Just like subcontracting help-lines to kuala Lumpur, Costa Rica or India, we sure won’t be producing it ourselves – it’ll be too expensive with Cap and Trade enacted.
Let me know your take on Cap and Trade. Do you agree or disagree with implementation of tariffs on non-compliant countries?
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