Free Trade: Obstacle to Emissions Regimes?

As Copenhagen kicks off to muted expectations and a pervasive pessimism over its likelihood to achieve a binding treaty, the United States finds itself in a paradoxical situation. For over two decades successive U.S. presidents and policymakers have steadily expanded the concept and application of free trade with allies near and far. Free trade agreements in force or awaiting ratification cover much of the Western hemisphere and countries throughout the Middle East, Asia and Australia.  Whether their rationale was American competitiveness or foreign development, these agreements now pose a significant obstacle to U.S. climate change efforts.

The core of free trade states that U.S. trade authorities must treat identical goods equally, without favor or import tariff. As such, a widget made at a carbon-neutral plant in Boise, Idaho is not differentiated from one made at a carbon-spewing factory in Cuidad Juarez, Mexico. Since many of the proposed climate bills employ just this sort of prioritization—including the Waxman-Markey legislation making its way through Congress—many analysts now foresee clashes with the World Trade Organization if such a bill were to pass.

Several speakers at a recent event on climate change and trade at the Washington International Trade Association raised just these concerns. By providing so-called “allocations” to U.S. businesses to limit end-use CO₂ output, the U.S. risks legal action at the WTO. Although, as some point out, the WTO has exemptions for actions that are “necessary to protect human, animal or plant life or health,” or “relating to the conservation of exhaustible natural resources,” it’s unclear that a de facto tariff system against high-carbon imports would satisfy these requirements.

Ultimately, there may be a showdown between climate legislators and free trade advocates. Although some workarounds have been proposed, such as a “Code of Good WTO Practice” that addresses emissions, would-be climate regulators once again find themselves battling entrenched interests. Unless a compromise can be reached, one of them is going to have to yield.

The possibilities and pitfalls of strategic cooperation between Southeast Asia and China

China is not a ‘status quo’ power but one that would like to alter Asia’s balance of power in its own favor – Condoleezza Rice, 2000

As the 14th  ASEAN summit gets ready to kick off in Pattaya, Thailand this week, climate change may be an unlikely source of debate. The role of climate action in ASEAN nations is intricately linked to the looming presence of China, and lately China-ASEAN cooperation has bloomed. Chinese sources in particular stress the importance of “mutually beneficial cooperation” with ASEAN on economic and climate issues. In fact, the ASEAN secretariat and China’s environment ministry recently inked a draft environmental protection strategy (see sidebar) focusing heavily on climate change. Moreover, last September ASEAN secretary general Surin Pitsuwan praised a memorandum of understanding between ASEAN and China’s Guangdong province.

However, what these innocuous news clips are masking is a fiery debate about China’s influence over Southeast Asia. Since China and Thailand composed a free-trade agreement in 2003, bilateral trade has risen 35.8% between the two countries. Why Thailand? Many claim that this is Thailand’s reward for acquiescing to China’s expansionist aims and bullying tactics among ASEAN nations. Will China’s size and influence enrich economic growth in ASEAN nations and foster partnerships on environmental protection and climate change? Or, as Chinese general Liu Chengjun believes, are territorial disputes more likely as the effects of climate change  coupled with economic crisis increase competition for resources?

“The tendency for China to offer economic incentives for smaller states to fall in line with Chinese strategic thinking (and economically punish those that do not)” is a far-reaching source of contention and no doubt intimately linked with climate change efforts. Unnervingly, China has openly stated that environmental action will not come “at the expense of economic development.” With the full economic power of China enveloping Southeast Asia and its forging ever more close-knit ties with Chinese markets, what realistic opportunities will there be for ASEAN nations to embark on meaningful climate remediation programs free of Chinese pressure to develop? Furthermore, if ASEAN leaders begin answering only to China, what will be ASEAN’s relevance for Southeast Asian countries?