Sky News’s Australian Agenda (which, on first glance, appears to be The Australian Op-Ed page – Live and even more Right Wing!) had an interview with Craig Emerson in which he discussed the trade implications of climate change. Nicholas Stern has noted that long-term, countries that don’t act on climate change could face trade retaliation. Emerson isn’t a particular fan of this, to say the least.
Here’s one of the key sections of the interview – though, unsurprisingly given the interview panel of Kelly, Shanahan, Ackerman, and an Onselen, they kept on coming back to this and the awful threat of the Greens to all that is free-tradey and laissez-faire:
Paul Kelly: One of the big features of the global trade debate is the argument particularly coming from Europe that there should be trade retaliation against those countries that aren’t prepared to price carbon. To what extent do you think this is likely to materialise in coming years? And what’s your response to this sort of threat?
Dr. Craig Emerson: It is an emerging threat, there’s no doubt about it. There are early signs of this already happening. We won’t cop governments cloaking protectionism in this sort of green cloak of respectability, where it’s just old protectionism. It’s just designed in fact to protect their own domestic industries and they say now “but this is all so that we can have a cleaner environment”. Let’s understand what this is and what motivates is. What it actually is is all those old protectionist instincts coming out, and we will use whatever trading rules there are through the WTO to fight against the use of these devices to protect industries in Europe or anywhere else against competition.
Paul Kelly: Is this a serious threat to Australia?
Dr. Craig Emerson: It’s an emerging threat and we are watching it very carefully and we are obviously campaigning against it. You’ve got Martin Ferguson, the Resources, Energy and Tourism Minister, who’s onto this. We will use whatever capacity we have under the World Trade Organisation rules to rail against this, to work against this. Of course we are committed to putting a price on carbon, but let’s not believe that this is all about climate change. There is a very clear European old protectionist instinct under this green cloak of respectability, and we won’t cop it.
I don’t whether it’s true, as the Bolter believes, that Emerson really is a climate change skeptic. But Emerson has a) a long history of outspoken defence of free trade, and b) a long history of deep skepticism towards environmentalism. It is also true that Europe does have a history of sneaking protectionism in through other means – as indeed Australia does through our food quarantine laws. And if you accept that free trade is generally a good idea, it’s perfectly reasonable to be skeptical of anyone proposing new grounds for restricting it.
However, with Emerson, you do rather get the sense that free trade is an end in itself, not a means to a better world. If climate change mitigation gets in the way of free trade, he seems to be perfectly content to discard mitigation.
And that’s been Labor’s problem all along. Whenever climate change mitigation has run into competing policy or political goals, they’ve been happy to ditch mitigation. And not only has that been a bad thing for the climate, it’s been a terrible thing for Labor.
There certainly will be an in-house stoush coming up.
But as for quarantine laws equalling backdoor protectionism – I don’t know whether that’s correct when it comes to food quarantine. But I do know when we got slack about quarantine laws in 2007, in relation to horses, the industry was almost destroyed and is still suffering. This makes me think that food quarantine laws maybe a good idea.
I still have the vision of Emerson as Consumer Affairs/Small Business Minister sheepishly announcing the Rudd Government’s backdown on ‘grocery watch’- a very embarassing sight indeed even if it was a dud from the start.
This time he’s going to pull on ‘Big Marn’ to help tell all those euro protectionists where to get off. Shareholders of coal mining companies heavily into steaming coal should not get too much confidence from ‘Craig’s list’ of early offenders to set the dogs on.
As noted I would need to see some decisive action by Emerson on foodstuffs, particularly kiwi apples/pears as per a WTO ruling, before changing my mind.
{typo} laissez-faire
And just for the amusement, your lassiez-faire could be roughly translated as making weary or perhaps wearying (ed), taxing (ed) in that sense.
And really, you’d want to have a BTA up your sleeve as a weapon against other states going off the reservation on this if Australia took up a robust policy.
The last time I looked 96% of fossil fuel related emissions came from countries with lower per capita emissions than Australia. So Emerson is right to be alarmed. Australia will be a sitting duck if green protectionism ever takes off. Australia would also struggle to argue the case against green protectionism while the government and its alternative continue to favour procrastination over action.
We could of course do some of the easy things to bring our per capita emissions down to levels that would not disadvantage us if the rest of the world suddenly gets serious.
Banks are already talking about the carbon related risks of lending to coal companies and investment targeted blogs like Climate Spectator are continually talking about the business advantages of going green early and the rapidly rising level of green investment – So a strategically aware government should perhaps start thinking outside the “we must support the coal industry” square.
Alan Kohler had an interesting article in the Drum about the problems of trying to run the world using a combination of free markets and currency manipulation. Perhaps it would be smart to have a hard look at what the “markets are the answer what was the question?” mindset has done for Australia.
Emerson doesn’t seem to be at all worried by the big fat trade imbalances that will result when our failure to build a renewable energy infrastructure manufacturing industry (preferring instead to dig up or chop down anything that doesn’t move) results in our having to import even more stuff than we do already.
None so blind as those who will not see.
Like many prior to 2007 I was deceived into thinking that that loose cabal Latham described as the “soft” labor left, including Gillard, Ferguson and Emerson, might at least be rational when offered a chance to deal with problems that defied the narrow logic of the ideological political right.
Not so.
Not with old growth logging and certain types of mining, over decades.
Not even with climate change.
Far from being forces for progressivism, they are the mutated viruses that power post 2007 reactionary capitalism; they are yet to be discredited as were the neo cons after 2007, because there is no underlying belief or principle to be undermined: It’s just cynical opportunism. Because these people, unlike some of their demented tory predecessors, know full-well the truth about global warming and other ecological problems as well as the reality of what neolib “globalisation” is, involving issues of local, national and international social/ redistributive justice.
Australia has tended to get dudded in trade negotiations with people like the Europeans getting access to our markets for manufactured goods while retaining protection for their agriculture business. It would be even harder if our figures are much worse than Europe.
In 2007 our per capita emissions from the burning and flaring of fossil fuels was 2.8 times the European figure.
This does sound like yet another boondoggle for European agriculture, the protection of which causes far more problems for people in developing nations than greenhouse gas emissions in Australia.
If Europe is low carbon emitting at present, much of this is due to the depressed state of many of the economies in the region.
Are you covering the 10:10 debacle on this blog? I can’t see any discussion of this very important issue.
Mary Mary, I presume you’re referring to this?.
Attempt at black comedy unfunny. BFD.
And Robert, I responded to 10:10 as follows:
Not a crime but a blunder
It’s OK Mary, nobody really got blowed up. It was all just special effects.
If Sir Nicholas Stern,
then shouldn’t it be code red for the US who emits 19.91% of the global total CO2 emissions and China who emits 22.30%?
I watched a bit of the show but couldn’t take much more than 10-15 minutes of Emerson seemingly getting on like a house on fire with Paul Kelly, Shamaham & Piers. It was repugnant and clearly the ALP won’t learn their lessons until they’re back in Opposition (sucking up to the Right, trying to be an imitation of the Liberal Party etc).
“However, with Emerson, you do rather get the sense that free trade is an end in itself, not a means to a better world. If climate change mitigation gets in the way of free trade, he seems to be perfectly content to discard mitigation.”
What on earth is the basis of that statement? Craig, lot most other economists’ commitment to free trade is based entirely on the empirical evidence that protection is welfare reducing, and usually has its greatest incidence on the poor. He also thinks that mitigation is important, and is on the record as saying so. He just thinks that protection is an efficient and poorly targeted way of furthering climate goals.
Just take a look at Europe’s poorly designed anti-dumping policies if you doubt that this will just end up as a non-transparent mechanism for Europe to protect some of its inefficient domestic firms from foreign competition. And its worst effect won’t be on Australia, it will be on poor countries like China and India that won’t be pricing carbon for some time.
Jacque de M @ 17,
Cheez! It was bad enough reading the transcript. Here I am eating some delicious chicken and vegetable stockpot, and I almost threw up (metaphorically). And it all sounds so trite on the printed page.
Labor should just tell all these RWDB programmes to fuck off and never appear on them/
Yes, yes, yes. But what if, somewhere down the line, the majority of the world has agreed on a program of climate mitigation, with the exception of a major holdout (which, the way things are going, might well be the United States).
Climate tariffs might be welfare-reducing. But they may become a necessary negotiating tactic if cajolery doesn’t work.
I get the distinct impression that Emerson just doesn’t think climate change is all that important.
Better all these people pretend they are thinking.Paul!And it is everyone else’s coal,coal trucks on rails,power stations with easily piped steam and CO2 into a covered reservoir.Dump strawbale material on top and don’t worry about it.Instead,the rounds of newspaper production,ALP blowhards and endless attempts of greedery are the real problems.
Europe’s real target in all of this is China, which is eating their lunch economically. Australian is completely irrelevant to this conversation.
Why would Craig Emerson support other countries using protectionist measures against Australian exporters? Can you think of any Australian government minister who would?
That’s “welfare-reducing” as defined in economics, which is not quite welfare (well-being) as thought of by most people. But that’s what you get when you reduce social complexities to fairly simple maths.
If the top priority for continued human well-being is close management of a severely-damaged environment, then all the evidence is that local control is an essential – and this is not compatible with untrammelled trade.
There are all shades of Lobby groups – Green, Mining, free Trade, Protectionist etc. Dr Emerson ( and his Department )is under no illusion about the colour of the shades and neither are the protagonists involved.
IMHO this is not about being anti climate change- its about dealing with the the cards you’ve got.
Its like bidding for the World Cup – lobbying takes practice guys – being Green is the new diplomatic meme – the Europeans produced Machievelli after all.
Oh spelling – darn – apologies all.
LO, like most economists – even left wing ones – I reckon free trade is, in the big picture, a Good Thing (Marx, for example, was quite doctrinaire about this). Certainly in labour-intensive countries, its the poor who tend to benefit most of all, and that’s what the empirics show. But that is most certainly not the case in resource-intensive ones, either in theory (google “Stolper-Samuelson”) or empirically (google “resource curse”). Doctrinaire refusal to face the possible problems of free trade does nothing to persuade.
Critics and supporters alike need to distinguish what is from what ought to be here. Whether it is fair or hypocritical of carbon-reducing countries to try and impose sanctions on “free riders” (as they’d characterise it) is one set of arguments. The fact that they WILL, whether fairly or not, is another. And it’s the latter that matters for Australian policy.
I was amused that the Oz headline seemed to have Waldo channeling Donald Rumsfeld, ie referring to “old Europe”. Only closer perusal revealed that this was telescoping two separate phrases in Emerson’s speech – “Europe” and “old-style protectionism”.
Agreed Paul Walter. What Craig Emerson doesn’t understand is that when the neo-libs squeal that ecological barriers to trade will mean the end of civilization as we know it really mean that it will be the end of civilization as they know it from a position of wealth, power and privilege with. Of course trade barriers like tariffs are an obvious step. What other plain tools are there? But of the queenie shock thtat the neolibs go into at the mere thought of interference with what they call free trade. Apparently its impacting negatively already on Indonesian palm oil exports. And lefties who think “good” are cast as baddies who would rob the innocent and deserving third world poor of their chance to take part in global trade (on someone else’s terms, no doubt). And of course those evil, arse rooting, garlic smelling Frenchies are up to their old no-goodnik tricks as are the Krauts, well, what can we say, dirty old Europe playing dirty and all the Greenies in the world just dupes for wanting to preserve life on the planet.
And so on. Capital barks and social democrat politicians, journalists and tame academics in think tanks all over the place start making ideological monkey to the organ grinder trying to organise a phony counter consensus.
Craig Emerson, leading the way to erewhon.
DD – although SS implies that under free trade there will be factor price equalisation, and the relative wages of unskilled workers in high skill countries will decline it does not imply that in absolute terms such workers are worse off as a result of trade liberalisation and that they would be better off if barriers to trade were increased. And there are much more efficient ways of dealing with the distributional implications of trade liberalisation than protection.
The empirical evidence supporting the resource curse is also much weaker than is often made out and to the extent that it exists is most commonly due to poor domestic institutions rather than the resources themselves.
The reasons supporters of free trade get so fed up is precisely because protection is almost always a poorly targeted and inefficient way to deal with the problems free trade sometimes generates. Most of the time protection is simply a way for certain interest groups to collect rents at the expense of others.
Emerson was not asked to comment on a world in which there was a small number of free riders on climate change action. He was asked about Europe doing it now. And even if the US were the only holdout, imposing tariffs on them would lead to a trade war with terrible consequences for global economic welfare. It is an inappropriate policy option.
Also, if the minister for trade isn’t going to speak up for free trade in Australia, who will? There are more than enough protectionists in the Labor party (Kim Il Carr) trying to push policy in the other direction.
I for one am very glad that Emerson is doing what he is doing. Australia has strong interests in a liberalised global trading order.
“Most of the time protection is simply a way for certain interest groups to collect rents at the expense of others”
Like “free trade” isn’t the same sort of thing for multi-national corporations!
If European countries are necessarily increasing their cost of production by introducing more and more renewable energy into their grid, mandating lower emissions and more efficient manufacturing etc why should they let countries like the US and Australia ‘compete’ with their cheaper and dirtier produced products. Why should we benefit at their expense because we won’t do the right thing? It’s cheating.
For those interested, Dr.Gary Sauer-Thompson, at the “Public Opinion” site has also posted fiercely on this issue, in a thread starter entitled, “Labors free trade hypocrisy”.
Like Robert Merkel, Sauer Thompson demonstrates that an intelligent, trained mind is not fooled by the rhetorical stupidness of individuals like Kelly, including on the issue of free trade panels deciding on polluting bigbusiness in locales, at the expense of the interests and preferences of people actually living in these.
Paul Kelly.
Was justing watching QA for a bit and turned off at the sight of him, particularly after he attempted to defend the catholic church on its inaction over priest paedophiles, in the wake of an attack on this disinterest by Geoffrey Robertson.
LO, so many economists seem to have a blind spot. They think you can balance the economy and the environment.
You can’t. If the environment is fucked, that’s it. Game over. No economy, no trade (free or otherwise). Nothing.
Forgot the main point – Emerson is a well-educated fool.
The big problem facing the world economy at the moment has arisen because free trade rules have effectively stopped the US doing anything about its balance of trade crisis. Looks like the US has now reached the point where it is precipitating a currency war and, possibly will move suddenly back to a protection regime.
We need to think about the implications of this.
Btw, Europe won’t in the end be able to get away with it. Unless there is an agreement within the next or future round(s) of global trade negotiations, carbon tariffs will almost certainly be ruled to be against WTO rules. If Europe attempts to impose them in the short-term, the US, Australia and developing countries will all want to bring action against them at the WTO. Besides, Europe’s threats are ridiculous anyway. They already protect EITE industries in a very similar way to what was proposed in the CPRS and have no intention of getting rid of that assistance until at least 2020.
The problem with achieving global cooperation on climate change is that countries always have an incentive to free-ride and not reduce emissions. Linking cooperation on trade with cooperation on climate change is one of the few options that we have to address this. One way that this can be done is to levy ‘border tax adjustments’ on imports of carbon intensive goods in the event that there is a carbon price. A WTO/UNEP report has argued that this is likely to be allowed under the GATT. IMO trade measures are fine, even desirable, but they have to be implemented in a fair and transparant way.
What is more problematic are proposals to ‘shield’ emissions intensive trade exposed industries by giving them an allocation of free permits that is proportional to production. An article by Feaver et al. in the Journal of World Trade argues that such policies would constitute a prohibited subsidy.
If Emerson and Ferguson are worried about the effect on Australian Industry of trade being linked to climate change, they should be ensuring that Australia implements a carbon price rather than opposing climate change trade measures internationally.
In principle I’m with Peter Wood, I think. It’s just that the Europeans tend to see free trade as being for other people and are routinely hypocritical on trade matters, perhaps marginally more so than the US.
On the evidence so far it seems to me that Emerson does favour doing something about mitigation internally.
Peter. There is considerable debate about that paper suggesting that it would be allowable under WTO rules, and as far as I can tell, even if border adjustments were allowed, they would have to take into account other mitigation actions a country is taking. For example, failing to directly price carbon might not make border adjustments allowable if a country is taking actions such as renewable energy targets, etc.
And Russell – trade liberalisation reduces rents overall because generally, it increases competition. It makes markets more contestable. In Australia, multinational car companies have been the loudest protesters against trade liberalisation because tariff reduction reduces their profits.
http://www.piie.com/publications/briefs/hufbauer4280.pdf
I’d recommend the above piece for an examination of the issues surrounding the desirability and feasibility of border tax adjustments by the US. It makes it very clear how complicated it is likely to be for countries to make such adjustments in a WTO compliant way and in the end argues that the WTO rules themselves ought to change to enlarge the space for trade policies supporting mitigation action. Of course, getting agreement on those rules will be as hard as getting an effective agreement on global climate change mitigation.
with Emerson, you do rather get the sense that free trade is an end in itself, not a means to a better world.
To repeat a question already asked by Labour Outsider among others, is there any evidence – as distinct from casual opinion – for this statmenet? Remember that Emerson did his PhD under Garnaut and is probably the most economically rational (in the positive sense of the term) member of the government.
Lots of Free Trade happening on the Afghan border.
@17
Harry Clark is an Australian economist currently teaching in Beijing. In a recent blog post he notes:
Because of the rate at which the Chinese economy is expanding, meeting these targets will not result in an absolute reduction in carbon emissions, but even so it represents a major commitment to action.
Oops. link to Harry’s blog post.
The fact of the matter LO is that as far as the WTO’s policy on BTAs goes, it simply hasn’t been tested and ruling out using BTA’s in some circumstances without any presenting situation to even assess seems nuts.
All one can say with confidence is that a BTA could be compliant with the current WTO regime, and indeed, the wording is highly favourable.
Since the aim would not be general protection, but merely an attempt at protection of the actual and perceived integrity of Australia’s mitigation attempts the BTA could be structured to be
a) modest
b) take account of actual emissions reductions measures in the jurisdiction by using the same benchmarks we would be using (the non-discrimination test)
c) return funds garnered (via an NGO) to some MDG, CDM or other qualifying project in the affected jurisdictions, perhaps in the area from which the trade exposed goods came.
It’s very likely that if it went to Disputes Resolution, this would pass.
Craig had a general spray about environmentalism in 2008 (the Oz)in which he muddles up science, modernity and political liberalism to infer that material advances wrought by improvements in the forces of production are entirely because of the role of political liberalism. Free trade and so on.
Well, I hope that African slaves traded to the US and other parts really appreciated the role of the market in their transition to a free life. He concludes that environmentalists are “dark green barbarians”.
I just love that he is in office and beholden to Bandt.
Here is the reference for the WTO/UNEP report that is being discussed:
Tamiotti, L., Olhoff, A., Teh, R., Simmons, B., Kulaço?lu, V., & Abaza, H. 2009. Trade and Climate Change. Tech. rept. World Trade Organisation and United Nations Environment Programme. http://www.wto.org/english/res_e/publications_e/trade_climate_change_e.htm
I agree with LO that any border tax adjustments should take into account policies that have a cost that could be translated into an ‘implicit’ price on carbon. In the context of addressing free-riding, the ‘threat’ of trade measures matters as much as the measures themselves. The best threats are the ones that don’t have to be followed through.
Peter, how do you think that electorates in countries like the US and Australia (assuming that there was a carbon price in europe but not in the US and Australia) would react to the threat of tariff action on the part of the Europeans? Another concern I have about BTAs is that they could actually make it harder, not easier to price carbon in countries that have not yet done so as the tariff action helps to consolidate support for anti-action parties as those parties are able to add a nationalist element to their opposition to carbon pricing. As such, tariffs could prove counterproductive. For example, I can see the Lib/Nat ad campaign now and how they would try and run the line that the Europeans are trying to dictate policy to us. It would also help to create an environment where there was some demand for retaliatory action on the part of those countries that are affected by BTAs.
So, if they are going to be used, I have a strong preference for them following multilateral negotiations and not unilateral action on the part of small number of countries unhappy about the fact that they can’t persuade the rest of the international community to proceed with the mitigation strategies and timetables that they desire.
Craig Emmerson & Co’s regulatory stance is not reflected within any of labors, green domestic policies, either locally, state wise or federally. So therefore his statements represent a continuing subterfuge, mutton dressed as lamb. Craig Emmerson pretends to stand up and come out from behind the kitchen screen door, but he is only doing the policy fence sitting to best retain the floating vote on labors right and the liberal left.
“Retaliation” and “protectionism” are not proper words in this context. I think the term “sanctions” would be more appropriate.
As I understand it, such sanctions are included in the Waxman-Markey bill in the US. Sanctions are a legitimate means of globalizing locally adopted carbon prices.
The problem with the European ETS, however, is an over-allocation of carbon pollution permits, and the cap has been set too low to be effective; the same thing as would have happened here with Rudd’s weak CPRS, as the Greens have argued.
It should also be noted that India has just adopted a type of carbon tax by imposing a levy on domestic and imported coal. The revenue generated is earmarked for India’s National Clean Energy Fund. This is exactly the sort of thing we should be doing.
Meanwhile this discussion can ended up with some reasonable results there will be no CO2 at all because all sources of fossil fuels would run out…
Nor European or North American countries can work out rules for trade liberalization based on environmental protection. There are no leaders and willingness to prepare such delicate equalisation, unfortunately…
We can count on processes that had been already started to mitigate the impact of CO2 on the Planet…
– LO
Of course we do. That’s exactly why we should be loathe to give the Europeans cause for further protectionism.
Whether that cause is a genuine attempt on their part to save the planet by sanctioning carbon freeloaders or a hypocritical pretext to preserve rents for politically favoured groups is neither here nor there (FWIW I’m sure both elements will be present). The effect on Australia would be the same.
So those European threats are another argument for pricing our carbon. Once again, I urge you to distinguish “is” from “ought”.
DD @ 50
“Whether that cause is a genuine attempt on their part to save the planet by sanctioning carbon freeloaders or a hypocritical pretext to preserve rents for politically favoured groups is neither here nor there.”
Really? On the contrary I would have thought it was pretty much the central point.
Whatever Australia does to reduce greenhouse gas emissions should be done on the basis of the effectiveness of the chosen mechanism in combatting climate change. Not on the basis of being bullied into it by Europeans acting for reasons of agricultural protectionism which are nothing to do with climate change.
Rolling over for European protectionists would certainly give us an even more fucked up world trade system than we now have, and would be scarcely likely to be a basis for a robust and properly constructed – which is to say constructed for maximum effectiveness in combatting climate change, not protecting pampered European farmers – global climate response.
I seem to remember a long previous thread on the legitimacy in WTO terms of trade sanctions of this sort. The conclusion if I recall it correctly was that even if in theory WTO-compliant sanctions could be devised – and even this was debatable – in practice such a system would be so complex as to be unworkable.