Bridges Weekly Trade News Digest • Volume 13 • Number 28 • 29th July 2009

US, France Face Criticism on Border Tariff Proposals

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The US and Europe are struggling to flesh out their respective climate change strategies ahead of an international climate summit in Copenhagen at the end of the year. Carbon tariffs - duties that countries would place on imports from nations that do not sign on to a global climate deal - have emerged as a particularly contentious point in debates on both sides of the Atlantic.

In a letter to the Senate leadership last week, US business groups warned that such border tariffs, which were included in a climate bill passed by the House of Representatives last month, could alienate US trading partners and ultimately trigger a ‘green trade war’. The Emergency Committee for American Trade, the National Foreign Trade Council, the United States Chamber of Commerce, and the United States Council for International Business penned the letter, which comes as the Senate prepares to vote on its own bill to regulate US GHG emissions.

“We are concerned that some provisions contained in [the bill], such as those creating the international reserve allowance program and permitting tariffs or ‘border measures’ on carbon-intensive imports, are highly inflexible, and likely to conflict with obligations the United States has undertaken in international trade agreements,” the letter read.

The ‘border measures’ written into the House bill would allow the president to place duties on manufactured goods from countries that fail to regulate GHGs by 2020. Some US lawmakers say that the tariffs are necessary to protect domestic industry, which will likely take a hit from the new emissions regulations. But countries like China and India say the proposed duties are nothing more than a thinly disguised form of protectionism (see Bridges Weekly, 15 July 2009, http://ictsd.net/i/news/bridgesweekly/50636/).

Europe is also sensitive to accusations of trade protectionism in the context of climate change. EU environment ministers meeting in Stockholm, Sweden this week attacked a French proposal for the EU to adopt similar carbon tariffs.

Swedish Environment Minister Andreas Carlgren criticised the proposal and called on his fellow EU ministers to reject it. “We are absolutely against each try to make use of green protectionism,” Carlgren told Reuters. “There should be no threat of borders, of walls or barriers for imports from developing countries.”

Germany’s State Secretary for the Environment, Matthias Machnig, also denounced the French proposal, calling it “a new form of eco-imperialism.”

“We are closing our markets for their products, and I don’t think this is a very helpful signal for the international negotiations,” he added.

But France believes the border tariff provisions could help level the playing field for European companies that compete with goods manufactured in countries without carbon restrictions, according to a statement from French President Nicolas Sarkozy’s office last month. Paris proposed the idea as mechanism to control GHG emissions if parties fail to reach an agreement in Copenhagen. The ministers are trying to develop a common strategy on global warming ahead of the summit in Copenhagen in December.

The US and EU expect to butt heads with emerging economies like China and India, who have strongly indicated that they will not accept hard limits on GHG emissions.

“We have to have something in place if there is a need,” France’s environment minister told AFP.

ICTSD reporting; “Germany Calls Carbon Tariffs ‘Eco-Imperialism,’” REUTERS, 27 July 2009; “Carbon Tariff Provisions Stoke Debate in the U.S. and Europe,” CBS NEWS, 27 July 2009; “EU ministers shun French carbon tariff proposal,” AGENCE-FRANCE PRESSE, 24 July 2009; “Energy Companies Opened Wallets Wide to Sway House Climate Bill,” THE NEW YORK TIMES, 23 July 2009.