Category Archives: trade

Carbon tariffs

Free-trader though I generally am, I’m forced to agree with the Toronto Star‘s editorial board that some kind of carbon tariff is in order. Once we have a carbon-taxing regime of our own in place, anyway. Here’s the Star:

With the growing realization in the West that the economy and the environment are but two sides of the same coin, a consensus is emerging that the only sure way to halt climate change is to put a realistic price on carbon that captures the environmental damage it is doing. This view, however, is being fiercely resisted on the other side of the planet, where carbon emissions are surpassing those of the West.

But putting a carbon price on goods produced in the West, through either a carbon tax or a cap-and-trade system, will raise the price of those goods and thus lead to the export of even more jobs to countries that refuse to impose a price on the carbon that goes into the goods they produce. The net effect would be an economic loss in the West without any gain on the global climate change front.

When the link between trade and climate change are viewed from that perspective, the solutions become obvious. If developing countries are not willing to incorporate the price of carbon into the prices of the goods they produce, the industrialized world will have no choice but to impose a carbon tariff on imports from those countries.

The Edmonton Journal has some more technical details.

It’s become pretty clear by now that treating the atmosphere like a dump with infinite capacity isn’t going to work — that it amounts to a subsidy for wasteful industrial production. Now, often the thing to do with subsidies is to not permit them yourself, but take advantage of the other guy’s, so that you get cheap goods at the expense of your trading partner’s taxpayers.

Unfortunately, it’s everybody’s atmosphere. So if you put a carbon tax on your own economy, but allow free imports of goods from countries that don’t follow suit, you just end up transferring production elsewhere while doing nothing constructive at all for the environment, precisely as Canada’s Conservative government has warned:

“Our position internationally has been clear — while Canada is doing its part at home, we still need action on the world stage from countries like China, India, and the U.S., rowing together in the same direction,” said [Environment Minister John Baird’s spokesman Eric] Richer.

“Otherwise we won’t reduce greenhouse gases at all.”

So Canadians would get to pay some of the subsidy, by supporting damage to our own atmosphere with our own trade dollars. That’s a bad deal.

From one perspective, this is an argument for doing nothing, or very little, until everybody’s on board. From another, it’s an argument for playing rough with the competition, slapping a carbon tax on imports as well as your own domestic production. Given the amount we import from places like China, this could prove damned expensive, all the more so since the import tariff would have to apply to fuel used to transport things across an ocean, too.

Is it ideal? No. But if you think climate change is an urgent problem, it’s better than the alternative.

Wal-Mart’s big incentive

First, via Greenthinkers, Wal-Mart saves money by going green:

Some of the biggest savings come from reclaiming so-called waste heat from the refrigeration equipment that keeps groceries cold. The stores also have a new system for keeping refrigerated food cold that lowers the use of refrigerant by 90 percent and in turn reduces greenhouse gas emissions.

Other whistles and bells include motion-sensitive light-emitting diodes (LED) in refrigerator and freezer cases that turn on only when a shopper walks by, doors in the meat and dairy refrigerated sections instead of open refrigerator shelves, a white roof that keeps the building cool in summer and roughly 200 skylights that allow electric lights to go down when the sun comes out.

In all, this design is supposed to save 25 per cent on a store’s energy consumption.

Wal-Mart may be the single company with the most invested in the existing — dying — system of acquiring, moving and selling merchandise. It sources things manufactured inexpensively abroad, hauls them enormous distances, sells them in very large stores often located in box-store complexes pretty far removed from residential areas.  Expensive energy, in any form, hits Wal-Mart hard. So naturally the company has the most incentive to cut waste as much as possible as quickly as possible.

Whether the business model is sustainable with $100-a-barrel oil, even in heavily modified form, we’ll have to see.

Trade might not mean exporting pollution

It’s a constant fear that strengthening environmental protections in the developed world will just offload pollution into the Third World, along with a whole lot of manufacturing jobs. The deepening environmental hell of China suggests some anecdotal support.

But maybe not.

What is the bottom line? Increased net imports of polluting goods account for about 70 percent of the composition-related decline in US manufacturing pollution. The composition effect in turn explains about 40 percent of the overall decline in pollution from US manufacturing. Putting these two findings together, international trade can explain at most 28 percent of the clean-up of US manufacturing.

If the 75% reduction in pollution from US manufacturing resulted from increased international trade, the pundits and protestors might have a case. Environmental improvements might be said to have imposed large, unmeasured environmental costs on the countries from which those goods are imported. And more importantly, the improvements in the US would not be replicable by all countries indefinitely, because the poorest countries in the world will never have even poorer countries from which to import their pollution-intensive goods. The US clean-up would simply have been the result of the US coming out ahead in an environmental zero-sum game, merely shifting pollution to different locations. However, if the US pollution reductions come from technology, nothing suggests those improvements cannot continue indefinitely and be repeated around the world. The analyses here suggest that most the pollution reductions have come from improved technology, that the environmental concerns of antiglobalization protesters have been overblown, and that the pollution reduction achieved by US manufacturing will replicable by other countries in the future.

(Via Economist’s View.)

Fairer trade

CoffeeCup

Photo credit: “Coffee Beans,” Flickr/Refracted_Moments

It’s impossible not to be amused by the Fair Trade coffee people, who got together to present an alternative to the big coffee combines that paid prices for coffee that the Fair Trade people considered to low … uh, finding themselves splintered by people saying the Fair Trade prices are too low. Reports the National Post:

Coffee drinkers who prefer a shot of social justice with their morning java might be surprised to learn that the minimum price paid to fair trade coffee-growers hasn’t changed in 10 years.

“It’s like not taking a raise in 10 years,” said Monika Firl, producer relations manager for Cooperative Coffees — a group of 22 small coffee roasters in Canada and the U.S. who import only organic fair trade coffees.

In principle, Fair Trade seems to make a lot of sense. It’s essentially a way for consumers to pass judgment on the business practices of the people they buy coffee from — coffee-drinkers who want to push more profits down the chain from the big roasters and packagers to the farmers have a voluntary certification organization they can count on to arrange just that.

Don’t care? Buy coffee the way you always have. Eventually the growers will get the hint and find something else to do, one hopes. But if you do care, you’ve got an easy way to show it.

Now, if the Fair Trade organization isn’t fair enough for some buyers’ tastes … well, maybe it’s time for a new Fairer Trade group.

Eating local is hard, even in B.C.

Buy BC logoIf there’s anywhere in Canada you’d think you could make a whole meal out of locally grown and raised food, you’d think it’d be Vancouver. Possibly Niagara, at harvest time.

Well, the crown is Niagara’s to lose, this story from the Vancouver Sun‘s Chantal Eustace suggests:

“It was just too expensive to do for a group of 100 people,” said Heather Harrison, one of the organizers of Sunday’s community workshop, Eating Locally, Thinking Globally, held at the University of B.C.

The event attracted more than 100 people — including professors, farmers, activists and concerned shoppers — to discuss how eating locally can help save the planet.

Harrison said she tried contacting numerous caterers for the lunch but couldn’t find any that met the 100-mile specifications at a reasonable price.

Instead, people paid $15 each for sandwiches, chips and vegetables, provided by UBC’s campus caterers. While the tomatoes, cucumbers and sprouts were local, Harrison acknowledged the lettuce and the sandwich bread didn’t fall within the diet’s guidelines.

Of course, it’s a lot more difficult to feed 100 people with food from less than 100 miles away than it is to feed a single family. Realistically, I’d think the only way to source most things locally, given today’s long-distance economy, is grow them yourself.

One person’s vegetable garden isn’t going to cut it for the produce, let alone the salt and yeast and sugar and flour going into the bread. You need stuff in bulk, and it’s a real niche market: even for sandwiches and salads, you’re not likely to find someone who can provide you with 20 loaves of bread and cold cuts and tofu and hummus for the vegans and 100 tomatoes and 15 heads of lettuce and so on, and be able to guarantee that not one of the ingredients in any of the more complex items comes from a processing plant in Nebraska.

I’d also expect this sort of thing will get easier with time, particularly if the price of fuel to ship things continues to rise. Local agricultural economies will diversify to take up the slack if it’s no longer possible to get Mexican tomatoes in early spring for $3.69 a pound. Easier, but not cheaper, mind you, since it’ll only be economical to try growing the stuff locally once the prices of the distant foodstuffs rises out of sight.

Or, possibly, if we get properly freaked out by what’s going on in some of the places where today’s cheap food comes from. Also in the Sun, from columnist Jonathan Manthorpe, there’s an assessment of all the stuff that’s, well, potentially poisonous coming out of China these days.

(Incidentally, before we get to Manthorpe, there’s a mild line from the Reuters story, the second link in that last paragraph, that I think is worth repeating: “The Chinese authorities say they have toughened their customs rules to try to stop contaminated products reaching world markets.” In domestic markets, apparently, you takes your chances.)

Manthorpe’s found some perturbing cases:

U.S. officials especially have become alarmed because imports of food from China are growing at a phenomenal rate. In the first three months of this year, for example, imports of fresh fruit from China grew 279 per cent over the same period last year.

Yet Food and Drug Administration inspectors are able to test less than one per cent of the traffic. But even with this almost non-existent testing regime FDA inspectors turned back 257 shipments of food from China in April, far more than from any other country.

A high proportion of these rejected shipments were fish and seafood such as shrimp, mahi-mahi, eel, tilapia and yellowfin tuna. In Alabama alone the discovery of banned antibiotics in catfish from China led to the seizing of over 300,000 kilograms of the fish.

Aside from seafood, FDA inspectors found contaminated dried apples, dried peaches, candy, bean curd and herbal teas. Non-food items found to be too dangerous for humans to be allowed on the shelves included lip gloss and medical catheters.

His conclusion: Chinese manufacturers are dangerous because they’re cheap. He dismisses a conspiracy theory that has China sending contaminated goods to countries that have ticked Chinese leaders off, by supporting Taiwan for instance.

No, Manthorpe figures, the basic problem is that it’s only barely worthwhile to grow and make things in China and ship it to the rest of the world, so they really can’t afford quality and safety standards. If they had ’em, their stuff wouldn’t sell. This bodes ill, if you expect shipping costs to keep rising.

E-waste photo essay

Boing Boing points to a photo essay in the latest issue of Foreign Policy, documenting dumps/processing sites handling technology waste mostly from the West. When you hand off a cellphone or an old VCR or laptop to an e-waste recycler with less than impeccable bona fides, most of it probably ends up in a place like this.

I have mixed feelings. Foreign Policy points out that some processing sites in China employ as many as 100,000 people, in — to judge by the pictures — conditions nothing like as wretched as those in, say, a Bangladeshi shipbreaking yard. A big part of what they do in China is physically separate fine components from each other, extracting metals and plastics by hand at a wage that’s adequate there but that you couldn’t find anyone to do the job for in North America or Europe or Australia. Their economic advantage is cheap labour, and they’re using it; if the alternative is that the junk would go into landfills here and the Chinese workers would be unemployed or doing worse work for less money, our current arrangement is preferable.

And then there are images like this one, and the sure knowledge that cheap labour in China is only part of the equation — low environmental and worker-safety standards are the other. It’s one thing to offload work nobody here would choose to do at an economically viable rate, something else to offload work that nobody here would be allowed to do for reasons unrelated to the wage.

Measuring Canada’s groundwater

waterfallSurface water — rivers and lakes — we more or less know where those are. But aquifers, particularly those Canada shares across the border with the United States, are not as well documented.

According to CanWest’s Mike de Souza:

“In the future, (water) will become more and more at risk,” said Alfonso Rivera, the chief hydrogeologist of the Geological Survey of Canada. “We have to invest for the future, and the future is tomorrow. It’s not 2007, but who knows? In 2010, 2012, as these things change, yes, then (water supplies) will be at stake. But for the moment, there’s still time to go on.”

Mr. Rivera also confirmed that the limited knowledge of groundwater resources means that scientists cannot estimate the supply or figure out how much is left. International treaties protect Canada’s surface water in lakes and rivers from any deliberate attempts to drain the resource south, but he said that underground supplies are at risk.

“In the case of surface water, there are treaties, and we can more or less manage on a friendly way,” he said. “But when it comes to groundwater, we are just discovering now what are the aquifers that cross the boundaries between the two countries.”

Mind you, we manage surface water more or less in a friendly way in part because nobody’s seriously threatened it yet, and also because the U.S. states that border on the Great Lakes don’t have much more interest than Canadian provinces do in seeing all that water shipped off somewhere else. Just wait.

Nevertheless, before anybody can propose a sensible way to manage this resource, we ought to know how much of it there is.

Obama proposes $10-billion subsidy for U.S.-based automakers

Stop signDemocratic presidential candidate and Illinois senator Barack Obama wants America’s Big Three automakers to crank up their fuel efficiency standards … and he’s willing to pay them $10 billion in taxpayers’ dollars to do it. The money would be handed over in subsidies to retool plants ($3 billion) and in federal help for the companies’ troubled health-care plans for retirees (up to $7 billion).

The health-plan help is probably partly a ploy to get these three enormous employers to support federally-funded health care for all Americans.

America’s Big Three — Ford, General Motors and Chrysler, though it’s still German-owned at least for now — gambled huge on a strategy of producing big, high-margin vehicles like SUVs and pickups, and they lost huge as the price of gasoline climbed starting a few years ago. No informed consumer would buy one of these now without a good and specific reason (working in construction or agriculture, say) or a million dollars in the bank. The era of big-truck-as-declaration-of-manhood might not be over, but it’s no longer within reach of most customers, even with generous financing plans. Even if the price of gasoline dips again, the writing’s on the wall.

Asian and European automakers make small cars and lots of them, so they’re perfectly placed to take advantage of a consumer trend toward such vehicles. And, indeed, they make a fair number of their vehicles in North America. (Here’s a summary of Toyota’s operations, for instance.) But now a major presidential candidate wants to subsidize their competitors’ recovery from what was, simply, a lousy business decision.

These are like agriculture subsidies: they distort the market and force other governments (such as Ontario’s; the undated story is from 2004) to match the subsidies just to keep the playing field level.

Does anyone seriously believe there won’t be enough cars to buy if governments don’t spend tax money to keep three failing manufacturers from suffering too badly from their mistake?

(Via the Wall Street Journal’s Energy Blog.)

B.C. signs on to cap-and-trade

B.C. mapBritish Columbia today signed onto a regional agreement with five western U.S. states to cut its greenhouse-gas emissions using a cap-and-trade system.

The news release on the Western Regional Climate Action Initiative is here. The short (at this point) Canadian Press wire story is here.

The memorandum of understanding among Oregon, California, Arizona, New Mexico, Washington, and now B.C. is here in PDF form (it’s actually a PDF of a what appears to be a scan of a fax, which is a strange way to present a government document, suggesting this was done in a hurry). The key promises are:

  • Setting an overall regional goal, by August of this year, to reduce emissions from the states and province involved collectively, consistent with state-by-state goals. B.C. has promised to cut its emissions to 10 per cent below 1990 levels by 2020 (the Kyoto Accord calls for cutting them to 6 per cent below 1990 levels by 2008), so B.C.’s goals are, overall, less ambitious than Kyoto but a lot more ambitious than any other part of Canada’s.
  • Developing, by August 2008, some sort of cap-and-trade system for achieving the overall regional emissions-reduction goal.
  • Setting up a registry to enable tracking, management and crediting for entities that reduce greenhouse-gas emissions.

This is a very big deal, with subnational jurisdictions simply sidelining their national governments to do an international deal in an area where the Canadian and U.S. governments have simply refused to move.

If you believe that emissions-trading markets are the best system we have available for rewarding greenhouse-gas cuts and punishing profligacy (as I do, with some reservations and openness to persuasion otherwise), a wider market can only be a good thing, for the same reason that free trade and efficient capital markets are. It offers would-be emissions-cutters access to more capital to fund their improvements and gives them access to more expertise. It should increase the value of the credits created by cutters (increasing the punishment for laggards).

Also, in the interests of the planet, it lets carbon-credit investors across all the jurisdictions involved access to the lowest-hanging fruit — the quickest and cheapest options for reducing emissions, which are what we’re all trying to find.

Of course, the low-hanging fruit doesn’t last forever, and if these cap-and-trade markets “take,” jurisdictions that don’t join early will find they’ve harmed their own interests, exactly as if they’d decided not to let companies within their boundaries sell shares on an exchange, while other states and provinces steamed ahead.

Ontario has mused about joining the WRCA, too; consider the pressure cranked up.

Wolfville, Nova Scotia: Brand Champion!

GreenThinkers praises Wolfville, Nova Scotia, for declaring itself a “Fair Trade Town,” the first in Canada, but I’m skeptical. The most complete information I’ve been able to find on the declaration is in the town’s own news release, supplemented by material from the certifying body, TransFair Canada. It seems to me that Fair Trade(TM) certification is something a government ought not to pursue.

Fair trade,” if you’re not familiar with the concept, is in practice about buying imported goods through non-profits, with the aim being to send money to smaller, more traditional producers rather than into the coffers of for-profit corporations. The canonical example is coffee, in which fair-trade principles favour boutique farmer-owners following traditional sustainable practices over big-time agribusinesses that plant vast tracts of monocultures and employ locals as labourers.

Done properly, the extra cost to the consumer for fair-trade goods should be negligible, and choosing to buy fair-trade goods strikes me as a perfectly defensible individual choice. The certification process for fair-trade goods is well-established and can generally be counted on to mean that the original producers haven’t been cheated, lied to, or otherwise abused by buyers throwing their economic weight around, or taking advantage of savvy about the world that a small-time Third World farmer doesn’t have.

Now, Fair Trade certification for a town is a different thing. TransFair offers this certification if a municipality meets certain criteria that don’t seem that difficult to achieve. Wolfville, population about 4,000 (plus 3,000 students at Acadia University), needed a town council committed to serving Fair Trade coffee and tea and whatnot when it offers refreshments at meetings, an unspecified number of other local institutions (schools, churches, and so on) doing the same, and one coffee shop and one grocery selling Fair Trade goods.

Also, and here’s where I take issue, a fairly major commitment from the town to promote the cause, by passing a resolution, assigning a staff member, convening a “steering group” to organize Fair Trade events and develop more Fair Trade-oriented projects, and seeking media coverage of the Fair Trade effort.

Fair Trade is a morally pleasing idea but it’s also an owned brand — hence all my uses of capital letters in this post. TransFair even offers tips on the proper use of terms in municipal promotional materials:

Please attempt to use proper Fair Trade terminology when creating Fair Trade Town materials
Fair Trade capital F, capital T
Fair Trade Certified capital F, capital T, capital C
Fair Trade certification capital F, capital T, lower case c
fairly traded all lower case
fair trade (non-certified) all lower case
Fair Trade Certified products capital F, capital T, capital C, lower case p

In 2004-05, the last fiscal year for which TransFair makes an annual report (PDF) available on its website, it pulled in nearly $290,000 in licence fees, and its operations netted the organization $20,000. Not a fortune, by any means, but still. It might be duty of a town government to make ethical choices, but not to promote a particular organization’s seal of approval.

The CBC reported on Wolfville’s certification a few days ago, quoting Mayor Bob Stead:

“I think the spin that becomes the local attraction is in fact the extension of the concept of fair trade to buy local and a fair return to the producer locally — that’s where the rubber hits the road in terms of the concept,” he said. “Other than that, it’s the conscience of the community speaking when it says that we will in fact support the notion or the concept of fair trade.”

It’s a little hard to say just what Mayor Stead means, but he appears to favour municipal purchasing policies favouring local producers, too. This poses an additional ethical problem for a government: if the local alternative provides less value for money than a supplier from far away, is it an appropriate use of limited tax dollars to support an uncompetitive local enterprise? A government doesn’t create wealth by funnelling into a business that offers a worse deal than another, otherwise we could take all our tax money and hand it to corporations and we’d all be filthy rich. Isn’t the money better left in the hands of the taxpayers, to use as they see fit for themselves?