Earlier in the week a handful of senior Democratic Senators announced that they would be changing a provision in a bill recently passed by the House of Representatives that imposes carbon taxes on imports. According to FT.com, the original bill contained “tough provisions to impose carbon tariffs, aimed at protecting American companies’ competitiveness against imports from countries without equivalent carbon emission controls.” Both leaders in the Senate, and the Obama administration have warned that such a provision could spark a global trade war, and Chinese officials have already spoken out about it.
Senator John Kerry, who is helping to write the senate’s version of the bill, said in a hearing on the issue on Wednesday: “We have already come to the conclusion in working on the Senate bill that we’re going to try and change that provision . . . we haven’t landed yet completely on where we come out”.
Max Baucus, the Democrat senator who chairs the senate finance committee, said any provisions that “provoke retaliation from our trading partners will only hurt the same industries we’re trying to help”, adding that he was “confident we can craft legislation that strikes the right balance”.
Differences in the two versions of the bill will eventually have to be reconciled before passing into law.
President Barack Obama has warned the House’s carbon tariffs plan could send the wrong signal to trading partners. India called the measures “pernicious” while China said they would violate World Trade Organization principles and amounted to “trade protectionism in the disguise of environmental protection”.
A recent report from the WTO said that such “border tax adjustments” could in theory be made consistent with WTO rules, but trade lawyers stress that crafting such laws is likely to be very difficult in practice.
