Green protectionism vs. growth

International climate talks in Bonn last weekend were trying to salvage December's failed Copenhagen summit.

But some rich countries are imposing their own carbon limits anyway, and threatening to curb imports from poor countries that are not. We believe this will cripple the rich economies and harm the poor countries without doing much about emissions.

A number of governments want such green protection, including taxes on carbon-intensive imports, or all imports, from countries that do not cut emissions, especially the main targets, China and India.

US climate legislation before the Senate calls these policies "a border measure".

But these ideas threaten international trade, growth and recovery. Industries in rich countries face punitive and expensive measures against climate change. Many fear they will be unable to compete with countries that do not have such emissions restrictions, and fear manufacturing and jobs will move away to them.

The EU wants to cut emissions by 20 per cent by 2020, while proposed US legislation aims for 80 per cent by 2050. Other large emitters of greenhouse gases, such as India and China, are more worried about sustaining growth and tackling poverty.

Carbon restrictions on trade will do little to reduce emissions. Taxing carbon-intensive imports from China, for example, would have negligible impact because the majority of its emissions-laden exports go to other developing countries.

Carbon barriers to trade make even less sense considering the nature of global production. "The extensive foot-printing of so many products with components across so many international boundaries makes this exercise nigh on impossible," Australia's Department of Climate Change stated in 2008.

Rich countries import about a third of their CO2 emissions (meaning the amount of CO2 released in making the imported goods), often from developing countries. The production of a single good often involves trading components between many countries. Complex supply chains have brought cheaper and better goods and high-paying jobs to rich countries, and infrastructure, new jobs and higher incomes to developing countries.

More than a quarter of all global trade in manufacturing is in intermediate components, not finished goods. The value of component trade rose from $US404 billion in 2002 to $US1258bn in 2004. Rich countries cannot restrict imports without damaging their own production and growth. They would just protect their inefficient companies that are vulnerable to competition at the expense of globally competitive companies.

A few months ago, the EU extended tariffs on shoe imports from East Asia at the request of its domestic shoe producers. Yet such tariffs harm EU shoe companies that have invested heavily in manufacturing in Asia: they provide EU consumers with cheap shoes and support high-value jobs in Europe in marketing, innovation and design.

Barriers to trade for the sake of climate control would have the same effect, and would push up prices everywhere.

US President Barack Obama warned during the global recession last year: "We have to be very careful about sending any protectionist signals out there." Yet the US joined Australia, the EU and Japan in rejecting demands at Copenhagen by India, China and other developing countries that rich nations "not resort to any form of unilateral measures against goods and services imported from developing countries on grounds of protection and stabilisation of climate".

One World Bank model estimated that EU and US Green protectionism could cut Chinese and Indian exports by 20%. Kerry-Boxer could affect some 25 developing countries.