Thoughts of Connecting Energy, Climate Issues with the Commercial, Trade Rules of WTO as Fair Conditions for Global Trade and Industrial Competitiveness

-This blog was posted on website on Apr 26th, 2009.-

There has been news about Republicans and some Democrats’ skepticism about current Energy Proposal that emphasizes the increasing supply of renewable energy and “cap-and-trade” measure to control CO2 emission. Their claim of opposition is that these measures “increase costs for consumers, send jobs overseas, and hurt businesses.”

I also read, the administration reportedly intends that the energy bill does not conflict with international trade rules to prevent any disruption on US exports. And there has been the suggestion of negotiating a new “international climate change agreement” to obtain nations’ long term commitment to control emission. As President is scheduled to meet the world leaders of major economies to discuss the energy crisis, “EU calls on US to help lead global fight for climate change”, and small nations ask for more drastic measure from industrialized economies to control extreme weather changes including flood, rising sea levels, and extreme weather changes, there seems to be a increasingly better chance to get international agreements and support on energy and climate issues.

As I observe the changing international and domestic politics, and as the current opposition to the energy legislation is labeling this bill as a potential source of increasing energy costs and taxes, and weakening US industrial and trade competitiveness of, I would say, “tradable goods” in both world and domestic markets along with domestic jobs, I would like to discuss the alternative ways of dealing with these problems.

I am not certain about the practicability of this suggestion, and I don’t have specific information on how costly or cheap these new energy sources from wind, sun, waves or other renewable sources can be, especially in the beginning stages of their industrial or commercial applications. Common knowledge has been that new technologies, inventions, developments, and prototypes of newly developed products usually tend to be relatively expensive in their initial stages of development and introduction to market / commercial usages. It usually takes time for industries and markets to get accustomed to new types of technologies and products and refine / reshape their production methods / technologies into commercially cheaper and cost efficient mass production system.

Assuming that these renewable energy sources and technologies may need a bit of transitional period to mature and become mass, standardized, cost-effective energy sources to consumers and industries, and to reduce the possible disadvantage of US manufacturing of tradable goods in the initial stages of switching to these new energy sources if the administration governmental consumption of renewable energy sources, the administration may continues to pursue US consumer, industries, and government to switch to renewable energy sources, I would like to suggest the followings:

1.      In the beginning stage of pushing the consumption of renewable energy to consumer, industrial, and federal and state governments, it may be useful to differentiate and wisely choose the proper target groups with different time schedule of adopting renewable energy sources. In the beginning stage of implementing this energy legislation, the administration may choose individual consumer, industries of non-tradable-goods (such as retailing, medical industry, tourism, other service industries), and federate and state governments as the primary target groups to switch from traditional energy sources to renewable energies. And it would be less hurtful for US manufacturing if the administration provides longer, gradual, flexible time schedules for US industries of tradable goods to switch to renewable energy sources so that they gradually adapt to new energy sources. This flexible adjustment period will reduce the chance that the shift to renewable energy sources partially contributes to deteriorating weakening the global and domestic competitiveness of industries of tradable goods.

2.       During the process of implementing (1) as mentioned above, it would be productive to seek international agreements on harmonizing, equalizing global industrial and trade competitive conditions. This effort may include the phased time schedule of incorporating renewable energy sources and emission control worldwide. Requiring these conditions as the prerequisites or fair conditions for global industrial and trade competitions, negotiating memberships, rules, or terms of World Trade Organization (WTO), regional / multilateral trade agreements, foreign market access / investments / bidding for foreign government contracts or procurements, and serving global common cause of fighting climate crisis could prevent from penalizing the manufacturing competitiveness of countries, who actively pursue the fight for global climate crises, because they adopt these measures to protect environments. It is critical to make nations face the same sets of underlying rules and conditions of international industrial and trade competition including energy and pollution issues, and to prevent from disadvantaging, penalizing specific nations’ manufacturing that adopt climate-friendly production methods are critical.

According to political history of negating regional and/or multilateral trade agreements, dealing with labor or environmental standards have proven to be difficult issues as imposing these standards to economies of different GDP sizes have been tough challenges. And multilateral negotiations have been inefficient, time consuming, and often difficult to reach resolutions / agreements. However, recent international political scenes have shown some positive signs regarding climate issues. For example, there have been news reports such as

“European Union environment ministers called on the United States to help the EU lead and finance the battle against climate change.”

“The EU has been the leader of the international debate. We want to keep on and to offer a co-leadership to the US.”

“We need to build a coalition. It cannot be done unilaterally on the EU side,” “It is not only an obligation of the EU to come with fundings and figures… the United States, Japan and all the developed countries should contribute.”

Although EU showed passive attitude toward the “Global Fight with Terrorism” at NATO meeting, the bloc is showing a positive attitude toward dealing with Global Climate Crisis. When both the US and EU, the largest world markets and have strong leverages in world politics and commerce, are so enthusiastic on working together on climate issues, and many small nations are anxious about taking drastic measures to tame climate crisis as natural disasters such as flood, rising sea level, and drought are threatening their nations’ survival, I believe there is better than ever favorable chance of getting international cooperation on adopting renewable energies and emission issues, along with other environmental issues, to their economies and manufacturing.

I also believe, it would be more effective to get international agreements on climate issues if these issues are negotiated along with commercial / trade issues, later of which have been regulated by WTO and regional trade negotiations and have been major economic concerns to both developed and developing countries. I expect that this combination of issues is more likely to motivate both developed and developing countries whose economies are keenly related to exports. Although current global economic downturn may have negative effects on this endeavor and consensus is often tough to reach, the timing and international political environments for negotiating energy / climate issue are more favorable than before.

5 Responses to Thoughts of Connecting Energy, Climate Issues with the Commercial, Trade Rules of WTO as Fair Conditions for Global Trade and Industrial Competitiveness

  1. Pingback: Copenhagen: Clash between Developing and Developed Countries in Reducing Emission Levels « Mikyung Lim's Blog

  2. Waldo Eden says:

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