THE PROGRESSIVE CONSERVATIVE, USA
An Online Journal of Political Commentary & Analysis
Volume XI, Issue # 137, June 7, 2009
Dr. Almon Leroy Way, Jr., Editor
Government Committed to & Acting in Accord with Conservative Principles
Ensures a Nation's Strength, Progress, & Prosperity
OBAMA HAS LAUNCHED THE GREEN TRADE WAR
By Dennis T. Avery
BIOFUELS, DAIRY EXPORT SUBSIDIES, & THE GLOBAL WARMING TRADE WAR: THE IMPACT OF U.S. GOVERNMENT
ETHANOL MANDATES ON AMERICAN FEED GRAIN PRICES -- HOW & WHY U.S. & EU DAIRY EXPORT SUBSIDIES WILL
ADVERSELY AFFECT THE NEW ZEALAND ECONOMY -- THE U.S.A. & THE EUROPEAN UNION FALLING INTO THE OLD TRAP
OF PUNISHING THE TRADE OF INNOCENT COUNTRIES -- THE RATIONALE FOR CARBON TAXES ON IMPORTS -- THE LIKELY
ECONOMIC CONSEQUENCES OF SUCH TAXES
FULL STORY:
The global warming trade war has started — quietly, but just as surely as we knew it would. The Obama administration
is now subsidizing U.S. milk and cheese exports in a way that will punish New Zealand, which depends on its efficient
grass-fed dairy exports for close to one-third of its total income. The reason? U.S. corn ethanol mandates have pushed
American feed grain prices so high that the Obama administration felt it had to “give something” to U.S. dairy farmers.
Unfortunately, the dairy export subsidies will make little difference to American dairymen, but they could have harsh
impacts on New Zealand’s farm-dominated economy. Thus far, New Zealand has escaped the higher grain prices
because they feed their cows mainly grass and turnips.
Our excuse on dairy export subsidies is that the European Union did it first. But the real dairy problem is that both the
EU and the U.S.A. have jacked up their own dairy production costs by diverting corn and rapeseed from feeding
livestock to making biofuels. The ethanol and biodiesel games have doubled world feed grain prices and caused food
riots in Mexico and Egypt.
The dairy export payments should be a huge red flag to the world. When push came to shove, the U.S.A and the EU
immediately fell into the old trap of punishing trade from innocent countries. That’s actually how we launched the
Great Depression, with the infamous Smoot-Hawley tariffs of 1930.
People have actually been predicting the “green trade wars” for years because developing countries have no
obligations under the Kyoto Protocol. All the affluent countries are thus terrified that their carbon-emitting industries
will flee to less-developed countries. U.S. Energy Secretary Stephen Chu told a congressional committee in March,
2008, that America might well consider a “carbon tariff” on imports from China, India, and other developing countries,
if they “undercut” U.S. manufacturers. .
Gary Huffbauer, of the Peterson Institute for International Economics, recently told National Public Radio:
“Countries say, well, if we’re going to take measures
[to combat global warming] we have to do something
at the border to prevent the same product being
produced abroad and just imported by our country.
So those thoughts trigger potential for trade wars. So
lawmakers here have added a provision to the
greenhouse gas legislation that echoes the EU
approach. It gives energy intensive companies like
steelmakers, chemical plants, and paper mills the right
to demand tariffs on imports, if, after five years, they
can prove unfair carbon competition”
Environmentalists say the worries about China and India picking up high-carbon jobs are exaggerated, that most of
America’s energy-intensive imports come from Canada or the EU. But they’re saying that today, before the carbon
taxes have been imposed. With carbon taxes in place, the developing countries will look more attractive, Canada
and the EU less so.
Without low-cost imports from China and Colombia, meanwhile, the cost of shopping at Wal-Mart will escalate —
even as U.S. exports are increasingly barred from both Kyoto member and non-member countries. Our investments in
productive assets will be wasted, even as the U.S. jobs totals decline.
A carbon tariff would conflict with a U.S. pledge not to violate international trade rules, but Obama’s promise to cut
greenhouse emissions might easily override the vague “no trade war” commitment.
LINKS TO RELATED TOPICS:
Political Economy -- Philosophies, Systems, & Public Policies:
Government, the Economy, & Economic Prosperity
Political Environmentalism Versus Human Progress & Prosperity:
Policy Issues Relating to Energy, Environment,
& Natural Resources
Dennis T. Avery is an environmental economist, and a senior fellow for the Hudson Institute in Washington, D.C.
He was formerly a senior analyst for the U.S. Department of State. He is co-author, with S. Fred Singer, of
Unstoppable Global Warming Every 1500 Hundred Years. Readers may write him at PO Box 202, Churchville,
Virginia, 24421, or send him email at cgfi@hughes.net.
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THE PROGRESSIVE CONSERVATIVE, USA
An Online Journal of Political Commentary & Analysis
Dr. Almon Leroy Way, Jr., Editor
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Conservative Government Ensures a Nation's Strength, Progress, & Prosperity