Taken out of context, this argument sounds almost like a right-wing or corporatist knock against the climate change bill that’s pending in the Senate: The bill that was introduced this week by Sens. John Kerry and Barbara Boxer could put at risk 4 million American jobs unless it’s amended to help American manufacturers.
But it’s anything but. Here’s why.
As Democratic Sen. Sherrod Brown of Ohio and Leo Gerard of the United Steelworkers explained in a conference call with reporters Thursday, it doesn’t matter how good climate change legislation is in the United States if corporations can get out from under it by moving production to other countries that don’t have the same regulations. In fact, we could end up making the greenhouse gas problem worse.
The solution is to extend the principle of imposing a price on pollution that’s at the heart of the climate change legislation to imports whose production results in high carbon pollution.
That’s the idea behind the “border adjustment mechanism” that Brown is trying to get written into the climate change legislation with the support of several other Midwest senators. The basic idea, as Brown explained it, is to impose a tax on the pollution produced by the imported item that parallels the tax imposed on domestically produced goods that cause pollution. The effect would be that in order for imported goods to be competitive in the American market, they would have to employ green manufacturing processes.
According to a report released Thursday by the Economic Policy Institute:
If the United States develops climate change policies that only apply to domestic companies without regard for their effects on trade, two outcomes are likely. Production of energy-intensive manufactured goods, especially price-sensitive manufactured products that already face high levels of import competition, could rapidly be outsourced to countries like China and India that do not restrict GHG emissions. This could lead to loss of jobs in manufacturing and related industries, and to a growing trade deficit.
Worse yet, increased production of energy-intensive goods such as iron and steel, pulp and paper, basic chemicals, and glass products in developing countries would be likely to increase net global GHG emissions.
That’s already happening in the steel industry. Steel production outsourced to China produces twice the volume of greenhouse gas emissions—2.5 tons per ton of steel produced—than does steel produced in the United States, according to the American Iron and Steel Institute. China’s failure to comply with the same environmental rules that American manufacturers do, and not labor costs as it is often believed, is a key reason Chinese suppliers can undercut American producers on price.
Gerard said that a climate change bill without border adjustment protections would not do the greatest harm to Rust Belt states but to states like California and Texas, based on EPI’s findings. Those are the two states that have the highest dependence on the industries that would be most directly affected by climate change legislation.
“A border adjustment mechanism and allowances are by no means protectionism,” said Scott Paul, director of the Alliance for American Manufacturing. “They are permitted by World Trade Organization rules. The Nobel laureate Paul Krugman, who is one of the fathers of modern free trade theories, recognizes that border adjustment is the most effective way to have a global solution on this.”
He added that in order to get a meaningful global agreement at the climate change summit in Copenhagen in December, “we need to have all sorts of tools in our toolbox.” One of those tools, Brown agrees, is technical assistance to other countries to help them meet pollution-lowering goals.
While the Senate Environment and Public Works Committee prepares for hearings on the climate change legislation, the Alliance for American Manufacturing on Monday will host in Philadelphia a “Keep it Made in America” town hall meeting with Sen. Bob Casey, D-Pa., who is one of the supporters of a border adjustment provision.
The usual coalition of businesses and conservative ideologues will be fighting this with doomsday scenarios of protectionism, but blue-collar workers have lost too much already as a result of the policies borne out of the Chamber of Commerce-Heritage Foundation axis to reject the simple, elegant argument of a level and fair playing field.