A Carbon Tariff is Eminently Sensible

I am really glad Stephane Dion supplemented his Green Shift proposal with a call for a carbon tariff.  This is utterly consistent with demands the left has been making for years, namely that the rules of globalization have to be broadened to effectively address the role of environmental, labour, and social standards in determining competitiveness and hence global trade and investment flows.

The line-up of free-trade experts denouncing the idea (including Michael Hart, who brought us NAFTA) was utterly predictable.

But the idea is not ridiculous at all.  The concept of curtailing market access on the basis of unacceptable practices which distort pricing and competitiveness (whether that’s direct subsidies, non-tariff barriers, or the outright oppression of people) has a long and valid history in trade law.  Canada’s existing countervail rules (protected by our NAFTA and WTO commitments) provide plenty of legitimate, legal scope to impose something like a carbon tariff.  It’s the only way to prevent “environmental dumping”: the incentive that hands-off liberalization provides to countries to suppress their environmental standards in order to attract investment and jobs in polluting industries.

I proposed something similar 15 years ago: a tariff to be applied against imports from U.S. right-to-work states, which benefit from the distortion of labour prices resulting from the elimination of the effective right to unionize and collectively bargain in those states.

Suppressing labour rights, or allowing greenhouse gas pollution, is clearly a subsidy to production — as unacceptable and damaging as any of the other practices which are supposedly ruled out of bounds by existing free trade rules.

The only surprising thing about the debate over Dion’s carbon tariff proposal was to see the federal NDP right there, in an unholy marriage of convenience, with the Conservatives and the free trade negotiators, trying to debunk the proposal as “laughable.”  This reveals once again the NDP’s main political focus — attack the Liberals, rather than fighting for progressive ideas.  The labour and left communities have been calling for trade rules (including social and environmental tariffs) which reflect labour and environmental standards for decades.  To see the NDP denouncing this valid, sensible principle in the interests of its short-term political positioning is appalling.  Their claims that the idea is somehow “unfeasible” or “ridiculous” are not remotely valid.

14 comments

  • Glad to see this, Jim. Your last paragraph sums up what a lot of people are thinking concerning the opportunistic, hypocritical positioning of the NDP. What they don’t get is that there strident bombast is turning people toward the very party which they’ve identified as their worst enemy, the Liberals.

  • “The only surprising thing about the debate over Dion’s carbon tariff proposal was to see the federal NDP right there, in an unholy marriage of convenience, with the Conservatives and the free trade negotiators, trying to debunk the proposal as “laughable.” This reveals once again the NDP’s main political focus — attack the Liberals, rather than fighting for progressive ideas. ”

    Of interest, the idea of a carbon tariff was on the agenda for a recent Ontario provincial NDP townhall on combating poverty:

    http://72.14.205.104/search?q=cache:tCIohcfM4HIJ:ontariondp.com/node/node/feed%3Fpage%3D8+NDP+supports+environmental+tariffs&hl=en&ct=clnk&cd=47&gl=ca

    I was really disappointed in Cullen’s reaction, he is generally pretty level headed, but kneejerk Liberal bashing seems to be the order of the day. I honestly smell fear more than anything, a pattern of political transparency is really taking shape.

  • How can the NDP be criticizing the Liberals for protecting Union rights? How hypocritical is that?

    I started dropping my support for the NDP when they failed to speak out on Haiti and towed a weak line on Afghanistan. This is just putting extra nails in the coffin.

  • Wayne Easter has also been critical of the carbon tarriff. Does that put him in league with Harper too? Come on.

    Besides, it’s not the NDP that’s off side with the environmental mainstream. Jack Layton is leading the way towards a regulated cap on pollution, just like most of the premiers and US senators Obama and McCain.

    The only people off side on what Canada has to do to now to reduce its pollution in conjunction with its largest trading partner is Stephane Dion, Stephen Harper, and the right-wing premiers of Saskatchewan and Alberta.

    Wanna call that an “unholy marriage of political convenience” too?

  • “Besides, it’s not the NDP that’s off side with the environmental mainstream. ”

    If that were true, then why the criticism from the environmental mainstream?? Besides, Dion specifically said that cap and trade would ultimately be part of the package, so it isn’t an either/or proposition, as the NDP argues, which is where the criticism from environmentalists come from. It’s a intellectually dishonest argument, and it doesn’t get change, just because people keep repeating it:

    “I have always said that a cap-and-trade system is also a good method of pricing carbon and harnessing the market to reduce emissions, and it would be completely compatible with the green shift. We believe that both are necessary and complementary, but that we can move more quickly on immediately pricing carbon through a Green Shift, while building a real cap-and-trade system with absolute targets over time that will fit with the emerging plans of the next U.S. administration and what is already underway in Europe.”

    Stephen Dion June 19th at Green Shift launch

    The carbon tax works now, everyone acknowledges time is required for cap and trade, Dion allows for that to take hold while simultaneously moving on other fronts.

  • The point about tariffs is that they were designed to replace regulations but to have the same effect: instead of disguised protection, a posted tariff. The tariff says, in effect, this is what we are prepared to charge our citizens to achieve a public purpose, be it revenue, jobs, infant industries, agriculture, etc.
    What has killed me is watching the Canadian free traders turn tariff reduction into liberalization, when trade liberalization was precisely putting a numerical value, a price, in place of a qualitative measure. For example a 50 percent tariff on imported widgets instead of an inspection system that required widgets to be put in a holding pen for two years prior to importation.
    So, of course a carbon tariff makes sense in the context of applying the domestic carbon pricing arrangement to foreign suppliers.
    I am for a multilateral, rather than a bilateral application of such a measure, which of course makes it problematic as a quick fix. However it could be introduced on the understanding it would be codified in WTO round I suppose.
    The NDP has been very good on trade issues. Maybe the environment critic and the trade critic could caucus on this one.
    BTW Linda Diebel’s blog cites an Angus Ried poll, a full seven percent of Canadians think NAFTA most favoured Canada.

  • Excellent article Jim. Agree on all points, as do a lot of greens and reds.

    I don’t think it would be wise for Canada to make it conditional upon being multilateral. The WTO ain’t gonna deliver. And that really would just support the Harper-Bush duet: “we can’t do anything about climate change until everyone else does.”

  • The problem with unilateral application of measures that are not generally accepted is that they invite retaliation. Tit for tat is not a promising game in many instances.

  • True, but it may not result.

    And should we let trade rules create policy chill?

    It should be possible to frame the tariff in a way that it meets National Treatment obligations.

    We know that if we don’t impose a tariff, our carbon-intenstive products would be at a disadvantage. And a tariff would likely help reduce political opposition to domestic carbon pricing.

    If retaliation (which survived WTO) were aimed at Canada’s failures on climate change, that might be a good thing.

  • Perhaps Jim you could comment on whether or not you favour BC Liberal Premier Gordon Campbell’s carbon tax of 2.4 cents a litre on gasoline and other fuels. And also your views on his returning all of the $1.8 billion in revenue raised over three years through tax cuts, with the largest share to corporations. And lastly the $100 per person “Climate Action Dividend” cheques mailed out in June.

  • I’ll offer my thoughts, Bill.

    Yes, I absolutely support a carbon tax of 2.4 cents a litre on gasoline. I wish it were higher.

    Yes, I absolutely support returning revenue raised through tax cuts. We should raise taxes on things we don’t like (e.g. pollution) and cut taxes on things we do like (like employment).

    No, I don’t support corporate tax cuts; I wish it were all going to low and middle income people.

    Yes, I absolutely support the $100 cheque; it makes a bigger difference to low and middle income people than to high income people (who are relatively few in number). Remember universality? Same principal.

    I think it’s a tragic shame that the BC NDP have once again failed to provide environmental leadership. The Liberals jumped out front, and put forward what is frankly a bold plan, and they now own the climate change issue.

    Maybe some of the dinosaurs who were influential in the “environmentalists are the enemies of BC” days are still too influential. Too bad for the NDP; it’s going to lose votes as a result.

  • “Maybe some of the dinosaurs who were influential in the “environmentalists are the enemies of BC” days are still too influential. Too bad for the NDP; it’s going to lose votes as a result.”

    Dave, I don’t think this urban legend is going to go away any day soon, but I thought I should point out that it’s pure invention.

    Perhaps either Dave or Jim could tell me what part of Premier Gordon M. Campbell’s promised $14 billion transit plan will be financed by carbon tax revenues. Just thought I’d ask.

    I notice that your final point Dave has to do with expected electoral outcomes, not fundamental policy merits. Very telling, really, even if I think your political calculation is probably a bit off.

    And if the BC NDP is wrong to say “axe the tax” as regards the carbon tax on gas, … why does Stephane Dion exempt gas? Just thought I’d ask.

  • I came to this site to see what people in BC are going to do about this carbon tax and I find…surprisingly that you are all buying into this nonsense.
    HOW TO PUT THIS?

    A Carbon Tax is not necessary….CO2 does not cause global warming plus there is no global warming man-made or otherwise.

    Also…you are living in the 2nd coldest country on the planet…and you are thanking the government who did this to you??

  • Rod, it wasn’t urban myth; that’s what Premier Glen Clark actually said, to my chagrin: environmentalists are the “enemies of BC.” Are you trying to suggest that did not happen?

    The BC transit plan isn’t going to be funded by carbon tax revenues as far as I know. The idea behind the carbon tax is not to generate revenues for program spending, but rather to change prices so as to influence behaviour. Prices do influence behaviour.

    Personally, I think some of the revenues should be put toward green investments, but that’s not what they decided to do. That doesn’t make a carbon tax into a bad idea.

    Why does Dion exempt gas? Political calculation – probably wise.

    As for the “axe the gas tax” campaign, it isn’t a gas tax, it’s a carbon tax. Is calling it a “gas tax” just a bit honest?

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